Document:

KWESST Micro Systems Inc.: Exhibit 10.10 - Filed by newsfilecorp.com

    

    THIS LOAN AGREEMENT dated as of                                            , 2022

    	BETWEEN:           
	KWESST MICRO SYSTEMS INC., as Borrower;
	 	 
	AND:	                                                                    , as Lender;

    WITNESSETH:

    WHEREAS the Borrower wishes to borrow certain monies from multiple lenders, and the Lender is prepared to lend a portion of such monies to the Borrower upon the terms and subject to the conditions herein contained;

    NOW THEREFORE in consideration of the premises, the mutual covenants contained herein and for other consideration, the receipt and sufficiency of which are acknowledged, the parties hereto have agreed as follows:

    ARTICLE 1

INTERPRETATION

    1.1 General Definitions 

    The capitalized words and expressions, wherever used in this Agreement or in any agreement ancillary hereto, unless there be something in the subject or the context inconsistent therewith, shall have the meaning ascribed thereto in Schedule "A".

    1.2 References to Agreements

    Each reference in this Agreement to any agreement (including this Agreement and any other defined term that is an agreement) shall be construed so as to include such agreement (including any attached schedules) and each amendment, supplement, amendment and restatement, novation and other modification made to it at or before the time in question.  The terms "this Agreement", "this Loan Agreement", "hereof", "hereunder" and similar expressions refer to this agreement and not to any particular Article, Section, subsection, paragraph, subparagraph, clause or other portion of this agreement.

    1.3 Headings, etc.

    The division of this Agreement into Articles, Sections and subsections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement.

    

    
        Loan Agreement - Page 2

    

    1.4 Number and Gender

    In this Agreement, words in the singular (including defined terms) include the plural and vice versa (the necessary changes being made to fit the context) and words in one gender include all genders.

    ARTICLE 2

THE LOAN

    2.1 Loan

    The Lender agrees, upon the terms and subject to the conditions of this Agreement, to lend to the Borrower, an amount of CDN$ , on an unsecured basis.

    2.2 Purpose of the Loan

    The Loan shall be used by the Borrower for general corporate purposes.

    2.3 Loan Maturity

    The Loan and interest accrued thereon must be repaid on the earlier of (i) the date that is thirteen (13) months from the Closing Date and (ii) the acceleration of the Loan pursuant to Section 12.1 below (such date, the "Maturity Date").

    2.4 Voluntary Repayment of Loan

    The Borrower may, at any time prior to the close of business on the Maturity Date, voluntarily repay the whole or any part of the Loan, without penalty or premium, by issuing a Repayment Notice to the Lender. Any Repayment Notice shall be delivered to the Lender at least three (3) Business Days prior to the effective date of the relevant voluntary repayment. In the event that the Borrower raises funds by way of a Subsequent Offering, the Borrower may use ten percent (10%) of the proceeds of the Subsequent Offering to repay the whole or any part of the Total Loan Amount on a pro rata basis amongst the Lenders.

    ARTICLE 3

INTEREST AND BONUS SHARES

    3.1 Interest on Loan

    The Borrower shall pay the Lender interest on the outstanding balance of the Loan at a rate per annum equal to 9.0%, compounded monthly and not in advance.

    3.2 Computation of Interest

    3.2.1 Interest in respect of the Loan shall be computed on the basis of a 365-day year for the actual number of days elapsed;

    

    
        Loan Agreement - Page 3

    

    3.2.2 Interest payable on the Loan is calculated upon the daily outstanding balance of the Loan from and including the date it is advanced until, but excluding, the date it is repaid in full.

    3.3 Annual Equivalents

    For the purposes of the Interest Act (Canada), the annual rates of interest to which are equivalent the rate determined in accordance with the provisions of Section 3.1 are the following rate: (the quoted rate) x (number of days in the year) ÷ 365 = % per annum.

    3.4 Payment of Interest

    3.4.1 Interest shall be paid in cash by the Borrower at the end of each month  (each, an "Interest Payment Date") with the first payment of interest being on March 31 , 2022. Interest shall accrue from the most recent date to which interest has been paid for or, if no interest has been paid, from the date of the Closing Date. 

    3.5 Bonus Shares

    On the Closing Date, the Borrower will issue in favour of the Lender an aggregate number of common shares (collectively, the "Bonus Shares"). In connection therewith, the Lender acknowledges and recognizes the following:

    3.5.1 the Lender shall receive the number of Bonus Shares as is equal to twenty percent (20%) of the total dollar amount of the Loan divided by the Market Price of the common shares of the Borrower on the Exchange on the date that is immediately prior to the date of the news release the Borrower announcing the Loan; and

    3.5.2 the Bonus Shares will be subject to a four (4) month and one (1) day hold period from the date of issuance as required under Applicable Laws.

    ARTICLE 4

MANNER OF PAYMENTS

    4.1 Currency of Payments

    All payments or repayments, as the case may be, of principal under the Loan or any part thereof or of interest shall be made in Canadian Dollars only.

    4.2 Payment on Any Business Day by 3:00 P.M. (Eastern time)

    Whenever any payment or repayment falls due on a day which is not a Business Day, such payment or repayment shall be made on the next following Business Day. Furthermore, any amount received after 3:00 P.M. (Eastern time) on any Business Day shall be applied to the appropriate payment or repayment which was required to be made on such Business Day, on the next following Business Day. Until so applied, interest shall continue to accrue as provided in this Agreement on the amount of such payment or repayment.

    

    
        Loan Agreement - Page 4

    

    ARTICLE 5

CONDITIONS PRECEDENT

    5.1 Closing Conditions

    Closing shall occur upon the following conditions precedent being met to the satisfaction of the Lender or, as the case may be, waived by the Lender (the date on which such conditions precedent shall be met shall be referred to herein as the "Closing Date"):

    5.1.1 the Parties shall have received satisfactory evidence that the board of directors of the Borrower has approved the transactions contemplated in this Agreement;

    5.1.2 the Parties shall have received an executed copy of this Agreement;

    5.1.3 the Lender shall have received satisfactory evidence that the Borrower has received all necessary third-party acknowledgements and consents in connection with this Agreement and the other Loan Documents;

    5.1.4 the Lender shall have received a certificate or a direct registration statement evidencing the Bonus Shares and the issue thereof;

    5.1.5 the Lender shall have received satisfactory evidence that the Borrower has received all required regulatory approvals including the approval of the Exchange;

    5.1.6 no Default or Event of Default shall have occurred and be continuing;

    5.1.7 the representations and warranties made by the Borrower under this Agreement, are true and correct in all material respects as of the Closing Date;

    5.1.8 no Material Adverse Effect, as determined by the Lender in its reasonable discretion, shall have occurred and be continuing; and

    5.1.9 the Borrower shall have received a completed and executed certificate, and any other supporting documentation requested by the Borrower, as required under Section 10.5.

    

    
        Loan Agreement - Page 5

    

    ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF
THE BORROWER

    To induce the Lender to make the Loan available to the Borrower, the Borrower represents and warrants to and in favour of the Lender as follows:

    6.1 Existence 

    The Borrower is a corporation duly and validly incorporated or formed, organized, existing and in good standing under the Laws of its jurisdiction of organization.

    6.2 Authority

    The Borrower has the legal capacity to (i) enter into this Agreement and the other Loan Documents, (ii) own and hold under lease its property, and (iii) conduct business substantially as presently conducted.

    6.3 Due Authorization

    The Borrower has taken all necessary action to authorize the execution and delivery of this Agreement and the other Loan Documents, the creation and performance of its obligations hereunder and thereunder, and the consummation of the transactions contemplated herein and therein. The Borrower has duly executed and delivered this Agreement and the other Loan Documents.

    6.4 Enforceability

    Each of the Loan Documents constitutes legal, valid and binding obligations of the Lender, enforceable against it in accordance with its terms, subject only to those provisions of applicable laws relating to bankruptcy, insolvency, winding-up, dissolution, administration, reorganization, arrangement or other statutes or judicial decisions affecting the enforcement of creditors' rights in general and to general principles of equity under which specific performance and injunctive relief may be refused by a court in its discretion.

    6.5 Authorizations from Governmental Authorities and other Persons

    The Borrower has obtained all Authorizations of or from all Governmental Authorities or other Persons which are necessary or required to authorize the execution and delivery of this Agreement, the other Loan Documents and to execute its obligations hereunder and thereunder.

    6.6 Accuracy of Information

    No information furnished by the Borrower to the Lender in connection with any of the Loan Documents contains any material misstatement of fact or omits to state a material fact necessary to make the statements contained therein not misleading in light of the circumstances in which they were made and as of the date made. No undisclosed fact or liability is currently known to the Borrower which, in the Lender's reasonable discretion, has or could be expected to have a Material Adverse Effect.

    

    
        Loan Agreement - Page 6

    

    6.7 Validity of Loan Documents - Non-Conflict

    None of the authorization, execution, delivery or performance of the Loan Documents by the Borrower, nor the consummation of any of the transactions contemplated in the Loan Documents to which Borrower is a party conflicts with, contravenes or gives rise to any default under the provisions of any indenture, instrument, agreement or undertaking to which the Borrower is a party or by which the Borrower may be, or any of its Business Assets are or may become bound or any Applicable Law.

    6.8 No Material Adverse Effect

    Since September 30, 2021 (being the date of the last audited financial statements of the Borrower), there has been no undisclosed change and no undisclosed event has occurred which could reasonably be expected to have a Material Adverse Effect.

    6.9 No Default

    No Default has occurred which has not been disclosed to the Lender and either remedied or expressly waived by the Lender in writing.

    6.10 Taxes

    The Borrower has paid and discharged, and has caused its Material Subsidiaries to pay and discharge, all Taxes payable by it or its Material Subsidiaries when due except with respect to any such Tax which is being contested in good faith by appropriate proceedings and which is not required, by Applicable Law, to be paid prior to such contestation and for which appropriate reserves have been provided in its books and as to which neither any Lien has attached nor any foreclosure, distraint, seizure, attachment, sale or similar proceedings shall have been commenced, and the charges, accruals and reserves on its books in respect of Taxes are adequate, in its judgment.

    ARTICLE 7

POSITIVE COVENANTS OF
THE BORROWER

    So long as the Loan or any other amount payable hereunder is outstanding and unpaid, and unless the Lender shall otherwise consent in writing, the Borrower hereby covenants that:

    7.1 Payment of Principal, etc.

    The Borrower will pay when due any amount owed to the Lender under this Agreement or any other Loan Document in principal, interest and fees.

    

    
        Loan Agreement - Page 7

    

    7.2 Preservation of Existence, etc.

    The Borrower will preserve and maintain its existence and preserve and maintain all Authorizations and registrations necessary or required in the normal conduct of its business and qualify and remain qualified and authorized to do business in each jurisdiction in which it carries on business or owns or leases material Business Assets.

    7.3 Listing on the Exchange

    The Borrower's common shares shall remain listed on the Exchange and the Borrower shall comply in all material respects with the rules and policies of such exchange and all applicable securities laws, rules and regulations.

    7.4 Operations ran in the Normal Course of Business/Subsidiaries

    The Borrower will run its operations in the normal course of business as currently operated by the Borrower. The Borrower shall cause its Material Subsidiaries to abide by all the covenants set forth in Article 7 and Article 8 of this Agreement.

    7.5 Use of Loan

    The Borrower shall use the Loan exclusively for the purposes set out in Section 2.2.

    7.6 Authorizations

    The Borrower will maintain, and take all actions necessary to maintain, in full force and effect the action taken by it to authorize the execution, delivery and performance in accordance with their respective terms of this Agreement, of the other Loan Documents and the consummation of the transactions contemplated herein and therein. The Borrower will obtain and maintain any Authorization of or from any Governmental Authority necessary or required under Applicable Law in order to carry on its business.

    7.7 Compliance with Applicable Law

    The Borrower will comply with Applicable Law in all material respects.

    7.8 Payment of Taxes and Claims

    The Borrower will pay and discharge all Taxes imposed upon it or upon its income, capital or profits or upon any properties belonging to it prior to the date on which penalties attach thereto, and all lawful claims for rents, labour, materials and supplies which, if unpaid, might become a Lien upon any of its properties; provided, however, that, no such Tax need be paid which is being contested in good faith by appropriate proceedings and for which appropriate reserves shall have been set aside on the appropriate books, but only so long as such Tax does not become a Lien, and no foreclosure, distraint, seizure, attachment, sale or similar proceedings shall have been commenced.

    

    
        Loan Agreement - Page 8

    

    ARTICLE 8

NEGATIVE COVENANTS OF
THE BORROWER 

    So long as the Loan or any other amount payable hereunder is outstanding and unpaid and unless the Lender shall otherwise consent in writing, which consent shall not be unreasonably withheld, the Borrower hereby covenants that:

    8.1 Liens

    Other than any Liens existing on the Closing Date and Liens securing Indebtedness incurred in respect of equipment financed by way of conditional sales contracts or capital lease agreements, the Borrower shall not grant or permit to exist any Lien of any kind with respect to any of the Borrower's or any of its Material Subsidiaries' Business Assets.

    8.2 Change in Business

    The Borrower will not change the nature of its business in any material respect.

    8.3 Affiliate Transactions

    The Borrower shall not (i) create any new Material Subsidiary not consistent with the Borrower's normal course of business or (ii) enter into or be a party to any transaction with any Material Subsidiary or director, officer, or employee of the Borrower or its Material Subsidiaries, except for routine employment and consulting transactions between the Borrower or its Material Subsidiaries and any of their respective directors, officers or employees regarding base salaries and customary employee benefits, consulting fees and equity incentive compensation made in the ordinary course of business.

    ARTICLE 9

INFORMATION COVENANTS OF THE BORROWER

    So long as the Loan or any other amount payable hereunder is outstanding and unpaid and unless the Lender shall otherwise consent in writing, the Borrower covenants and agrees that:

    9.1 Notice of Litigation and Other Matters

    The Borrower shall furnish to the Lender prompt notice of the following events after the Borrower has become aware thereof and has made a reasonable determination with respect thereto:

    9.1.1 the commencement of all litigations against the Borrower, or in any other way relating adversely to the Borrower or any of its Business Assets which, if adversely determined, singly or when aggregated with all other such litigations, could, in the Lender's reasonable discretion, have a Material Adverse Effect;

    

    
        Loan Agreement - Page 9

    

    9.1.2 any event or events which, singly or in the aggregate, could, in the Lender's reasonable discretion, reasonably be expected to have a Material Adverse Effect; and

    9.1.3 any Default or Event of Default.

    ARTICLE 10

REPRESENTATIONS AND WARRANTIES
OF THE LENDER

    The Lender hereby represents and warrants to and in favour of the Borrower as follows:

    10.1 Existence

    If the Lender is a corporation, it has been duly and validly incorporated or formed, organized, existing and in good standing under the Laws of its jurisdiction of organization.

    10.2 Authority and Enforceability

    The Lender has the legal capacity to enter into this Agreement and as applicable, the other Loan Documents.

    10.3 Due Authorization

    If the Lender is a corporation, it has taken all necessary action to authorize the execution and delivery of this Agreement and the other Loan Documents, the creation and performance of its obligations hereunder and thereunder, and the consummation of the transactions contemplated herein and therein. The Lender has duly executed and delivered this Agreement and the other Loan Documents.

    10.4 Enforceability

    This Agreement constitutes legal, valid and binding obligations of the Lender, enforceable against it in accordance with its terms, subject only to laws relating to bankruptcy, insolvency, winding-up, dissolution, administration, reorganization, arrangement or other statutes or judicial decisions affecting the enforcement of creditors' rights in general and to general principles of equity under which specific performance and injunctive relief may be refused by a court in its discretion.

    10.5 Prospectus Exemption

    The Lender is acquiring the Bonus Shares as principal pursuant to an exemption from the prospectus requirements under NI 45-106, and the Lender shall complete and execute on the Closing Date a certificate to that effect, in a form satisfactory to the Borrower along with any other document which the Borrower may reasonably request to confirm the Lender's eligibility under the applicable prospectus exemption.

    

    
        Loan Agreement - Page 10

    

    10.6 Source of Funds

    The funds representing the Loan do not represent proceeds of crime for the purposes of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) (the "PCMLA") and the Lender acknowledges that the Borrower may in the future be required by law to disclose the Lender's name and other information relating to this Agreement and the Lender's Loan hereunder, on a confidential basis, pursuant to the PCMLA. To the best of the Lender's knowledge, none of the funds to be paid by the Lender: (i) have been or will be derived from or related to any activity that is deemed criminal under the laws of Canada, the United States or any other jurisdiction; or (ii) are being tendered on behalf of a person or entity who has not been identified to the Lender, and the Lender shall promptly notify the Borrower if the Lender discovers that any of such representations ceases to be true, and shall provide the Borrower with appropriate information in connection therewith.

    10.7 Counsel

    The Lender is solely responsible for obtaining such tax, investment, legal and other professional advice as it considers appropriate in connection with the execution, delivery and performance by it of this Agreement, any other Loan Document and the transactions contemplated hereunder.

    ARTICLE 11

EVENTS OF DEFAULT

    The occurrence of any one or more of the following events shall constitute an Event of Default (each such event being herein referred to as an "Event of Default"):

    11.1 Non-Payment

    The Borrower fails to pay when due (i) any amount of principal owed by it and outstanding hereunder or under any Similar Loan Document or (ii) any amount of interest, fees and accessories outstanding hereunder or under any Similar Loan Document, and such Default referred to in clause (ii) shall not be remedied within five (5) Business Days following written notice of such Default by the Lender to the Borrower.

    11.2 Misrepresentation/Notice Failure

    Any representation or warranty made or deemed made by the Borrower under this Agreement or under any other Loan Document or any Similar Loan Agreement, is found to have been, when made or deemed made, either incorrect or inaccurate in any material respect, or, Borrower fails to provide the Similar Loan Default Notice as required under Section 14.1 hereunder.

    11.3 Covenants

    The Borrower fails to perform, observe or comply with any other term, covenant or agreement contained in this Agreement or in any Similar Loan Agreement, and such failure remains unremedied for thirty (30) days following written notice of such failure by the Lender.

    

    
        Loan Agreement - Page 11

    

    11.4 Insolvency

    An Insolvency Event shall have occurred.

    11.5 Material Adverse Effect

    An event or series of events occurs that, in the Lender's reasonable discretion, results or could reasonably be expected to result in a Material Adverse Effect.

    11.6 Unsatisfied Awards

    Any one or more judgments are entered against the Borrower which judgments are not vacated, discharged, stayed or bonded pending appeal within thirty (30) days of the entry thereof or shall not have been vacated or discharged prior to the expiration of any such stay and involve a liability (not paid or fully covered by insurance) the amount of which, singly or when aggregated with all such liabilities of the Borrower exceeds CDN$1,000,000.

    ARTICLE 12

REMEDIES

    12.1 Termination and Acceleration

    If an Event of Default shall have occurred and be continuing, the Lender may declare the Loan to be cancelled and accelerated (other than with respect to any Event of Default pursuant to Section 11.1 hereunder, in which case, the Loan shall be automatically and immediately due and payable without need of any Lender action) or take any other action, commence any other suit, action or proceeding or exercise such other rights as may be permitted by Applicable Law (whether or not provided for under this Agreement) at such times and in such manner as the Lender may consider expedient, all without any additional notice, demand, presentment for payment, protest, noting of protest, dishonour, notice of dishonour or any other action being required.

    12.2 Compensation and Set-Off

    12.2.1 In addition to any rights now or hereafter granted under Applicable Law and not by way of limitation of any such rights, after the occurrence of an Event of Default, the Lender is hereby authorized by the Borrower, at any time and from time to time, without notice to the Borrower or to any other Person, any such notice being hereby expressly waived, to effect compensation, to set-off and to appropriate and to apply any and all deposits (general or special, time or demand, including Indebtedness evidenced by certificates of deposit, in each case whether matured or unmatured), and any other Indebtedness at any time held or owing by the Lender to or for the credit or the account of the Borrower against and on account of the obligations and liabilities of the Borrower to the Lender hereunder, although said obligations and liabilities, or any of them, shall be contingent or unmatured.

    

    
        Loan Agreement - Page 12

    

    12.2.2 For the purposes of the application of this Section, the Parties agree that the benefit of any term applicable to any Lender's deposit, credit indebtedness, liability or obligation referred to in this Section shall be lost immediately before the time when the Lender shall exercise its rights under this Section in respect of such deposit, credit indebtedness, liability or obligation of the Lender.

    12.2.3 Furthermore, in the exercise of its rights under this Section, where any Indebtedness of the Lender to the Borrower is not outstanding in the same currency as the Indebtedness of the Borrower to the Lender, then the Lender may effect all currency conversions with respect to any such Indebtedness as it considers appropriate in accordance with its normal practices by using its own rate of exchange in effect on the Business Day preceding that on which it exercised its rights under this Section.

    ARTICLE 13

TAXES AND OTHER CHARGES

    13.1 No Payment of Additional Amounts

    To the best of the knowledge of the parties hereto, as of the date of this Agreement, the Borrower is not required by Law to make any deduction or withholding in respect of any Taxes imposed on the Lender from any amount payable under this Agreement (the "Withholding Taxes"). However, if the Borrower, after the date hereof, becomes aware of circumstances giving rise to Withholding Taxes (including pursuant to a change in Law), then the Borrower shall inform the Lender in writing of the reasons giving rise to such Withholding Taxes and remit to the relevant Governmental Authority such Withholding Taxes. To the extent the Borrower deducts or retains any amount otherwise due and payable hereunder to the Lender to cover any Withholding Taxes, such amount shall be increased so that the Lender receives an amount equal to the total amount the Lender would have received had no amount been deducted or retained by the Borrower for such Withholding Taxes.

    ARTICLE 14

MISCELLANEOUS

    14.1 Notices

    Except as otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been duly given or made to the Party to which such notice, request, demand or other communication is required or permitted to be given or made under this Agreement, when delivered to such Party (by certified mail, postage prepaid, hand delivered, telecopier, email or other acceptable form of electronic communication) at its address and attention set forth with its signature below or at such other address as any of the parties hereto may hereafter notify the others in writing. The Borrower shall be required to provide written notice to Lender of any default with respect to any Similar Loan Agreement within five (5) days of the occurrence of such default (any such notice, a "Similar Loan Default Notice"). This Agreement and any other Loan Document may not be amended or otherwise modified without the prior written consent of the Lender.

    

    
        Loan Agreement - Page 13

    

    14.2 Rights and Recourses Cumulative

    The rights and remedies of the Parties under this Agreement shall be cumulative and not exclusive of any right or remedy which the Parties would otherwise have and no failure or delay by the Parties in exercising any right shall operate as a waiver thereof, nor shall any single or partial exercise of any power or right preclude its other or further exercise or the exercise of any other power or right.

    14.3 Assignments by the Borrower

    The rights of the Borrower hereunder are declared to be purely personal and may therefore not be assigned or transferred, nor can the Borrower assign or transfer any of its obligations, any such assignment being null and void insofar as the Lender is concerned and rendering any balance then outstanding of the Loan immediately due and payable at the option of the Lender.

    14.4 Assignment by the Lender

    The Lender may at any time assign all or any portion of the Loan with the prior written consent of the Borrower, which shall not be unreasonably withheld.

    14.5 Counterparts

    This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument.

    14.6 Severability

    Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction.

    14.7 Replacement of Previous Agreements

    This Agreement replaces and supersedes all verbal or oral agreements, understandings and undertakings between the Lender and the Borrower relating to the Loan.

    14.8 Obligation to Pay Absolute

    The obligations of the Borrower to make payments on the Loan as and when due in accordance with this Agreement shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances without any right of compensation or set-off and notwithstanding any defence, right of action or claim of any nature whatsoever which the Borrower may at any time have or have had against the Lender, whether in connection with this Agreement or otherwise.

    

    
        Loan Agreement - Page 14

    

    14.9 Governing Law

    This Agreement and the interpretation and enforcement thereof shall be governed by and in accordance with the Laws of the Province of Ontario and the federal Laws of Canada applicable therein.

    

    
        Loan Agreement – Signature Page

    

    IN WITNESS WHEREOF, the Parties hereto have signed this Agreement on the date and in the place first herein above mentioned.

    	 	KWESST MICRO SYSTEMS INC.,
as Borrower 
	 	 
	Per:	 
	 	

	Address:	155 Terence Matthews Cr., Unit#1,
Ottawa, ON K2M 2A8
	 	 
	Attention:	Steve Archambault, Chief Financial Officer
	 	 
	Email:	archambault@kwesst.com

    

    

    
        Loan Agreement – Signature Page

    

    

    	 	 
	 	  as Lender 
	 	 
	Per:	 
	 	 
	Number of KWESST common
shares currently held (1) required
under TSX Venture Exchange rules	
 
	 
 
Address:	 
	 	 
 
	 	 
 
	 	 
	Attention:	 
	 	 
	Telephone:	 
	 	 
	Email:	 

    

    

    SCHEDULE "A"

DEFINITIONS

    "Affiliate" has the meaning ascribed to it from time to time in the Business Corporations Act (British Columbia);

    "Applicable Law" means, with respect to any Person, any Law applicable to such Person or its properties or assets and any judgment or award binding on such Person or its properties or assets;

    "Authorization" means any authorization, approval, consent, exemption, licence, permit, franchise or no-action letter from any Governmental Authority having jurisdiction with respect to any specified Person, property, transaction or event, or with respect to any of such Person's properties or assets;

    "Bonus Shares" has the meaning ascribed thereto in Section 3.5;

    "Borrower" refers to KWESST Micro Systems Inc. and includes any successor thereto;

    "Business Assets" means the property and assets, tangible and intangible, corporeal and incorporeal, movable and immovable, of a specified Person;

    "Business Day" means any day excluding Saturday, Sunday or any other day which in Ottawa, Ontario is a legal holiday or a day on which banks are authorized by law or by local proclamation to close;

    "Canadian Dollars" or "CDN$" means the lawful currency of Canada;

    "Capital Stock" means common shares, preferred shares or other equivalent equity interests (howsoever designated) of capital stock of a body corporate, equity preferred or common interests in a limited liability company, limited or general partnership interests in a partnership or any other equivalent such ownership interest;

    "Closing Date" has the meaning ascribed thereto in Section 5.1;

    "Control" has the meaning ascribed to it from time to time in the Business Corporations Act (British Columbia), and "Controls" and "Controlled" shall have the correlative meanings;

    "Default" means any Event of Default or any default, breach, failure, event, state or condition which, unless remedied or waived, with the lapse of time or giving of notice, or both, would constitute an Event of Default;

    "Distribution", with respect to any Person, means the payment or declaration of any dividend or the making of any distribution of any kind or character (whether in cash or property but expressly excluding any such distribution by way of the payment of dividends by the issuance of Capital Stock) in respect of any class of the Capital Stock of such Person or to the holders of any class of its Capital Stock;

    
        A - 1

    

    

    "Event of Default" means any of the events described in Article 11;

    "Exchange" means the TSX Venture Exchange;

    "Governmental Authority" means Canada, the Provinces thereof, any other sovereign country and any other regional, municipal, state, provincial, local or other subdivision of any jurisdiction, and any other governmental entity of any such jurisdiction and includes any agency, department, commission, office, régie, ministry, tribunal, central bank or other Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government;

    "Indebtedness" of any Person means: (a) all obligations of such Person, contingent or otherwise for borrowed money, including obligations for borrowed money evidenced by bonds, debentures, notes or similar instruments, (b) all obligations of such Person, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and banker's acceptances issued for the account of such Person, (c) all capitalized lease liabilities and purchase money obligations of such Person, (d) net hedging obligations of such Person, (e) all obligations of such Person to pay the deferred purchase price of property or services to the extent such obligations bear interest (excluding trade accounts payable in the ordinary course of business), and (f) all contingent liabilities of such Person in respect of any of the foregoing;

    "Interest Payment Date" has the meaning ascribed thereto in Section 3.4;

    "Insolvency Event" means the occurrence of any of the following events:

    1. the Borrower applies for, consents to, or acquiesces in the appointment of a receiver, receiver and manager, statutory manager, trustee or similar official for all or substantially all of its assets; or

    2. the Borrower is declared to be insolvent in a final judgment or admits in writing that it is unable to pay its debts generally when they fall due; or

    3. the Borrower takes any steps to obtain or is granted protection from its creditors, under any Applicable Law; or

    4. (a) the commencement of an involuntary proceeding against the Borrower (i) seeking bankruptcy, liquidation, reorganization, dissolution, winding up, a composition or arrangement with creditors, a readjustment of debts, or other relief with respect to it or its debts under any bankruptcy laws or other customary insolvency actions or (ii) seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its assets, the issuance of a writ of attachment, execution, or similar process, or like relief, and such involuntary proceeding shall remain undismissed and unstayed for a period of 30 days, (b) an order for relief is entered against the Borrower under the Bankruptcy and Insolvency Act (Canada), the Companies' Creditors Arrangement Act (Canada) or any other present or future federal bankruptcy or insolvency Laws of Canada, (c) filing by the Borrower of an answer admitting the material allegations of a petition filed against it in any involuntary proceeding commenced against it, or (d) consent by the Borrower to any relief referred to in this paragraph or to the appointment of or taking possession by any such official in any involuntary proceeding commenced against it; or

    
        A - 2

    

    

    5. anything analogous or having a substantially similar effect to any of the events specified above happens under the Law of any applicable jurisdiction, including, without limitation, the Borrower taking steps towards filing any plan of arrangement proceeding seeking to restructure its Indebtedness;

    "Law" means any international treaty or any federal, provincial, territorial, state, municipal, county or local statute, law, ordinance, code, rule, regulation or order (including any consent, decree or administrative order) or any directive, guideline or policy of any Governmental Authority;

    "Lender" means the Person identified as the lender on the first page of this Agreement, and shall include its successors and assigns;

    "Lenders" means the Persons having agreed to loan monies to the Borrower, which for certainty includes the Lender;

    "Lien" means any interest in property securing an obligation owed to, or a claim by, a Person other than the owner (which for the purposes hereof shall include a possessor under a title retention agreement and a lessee under a capital lease) including by way of mortgage, pledge, charge, lien, assignment by way of security, hypothecation, security interest, conditional sale agreement, deposit arrangement, deemed trust, title retention, capital lease, factoring or securitization arrangement;

    "Loan" means, as at any time, the aggregate principal amount which the Lender has agreed to make available to the Borrower pursuant to Section 2.1, any and all interest accruing and owing hereunder and all other moneys which from time to time may be owing and payable to Lender hereunder;

    "Loan Documents" refers collectively to this Agreement, the certificate representing the Bonus Shares and each document, instrument or agreement entered into by or between the Borrower and the Lender in connection with the transactions contemplated herein or therein or which is supplemental hereto or thereto, and "Loan Document" refers to any one thereof;

    "Market Price" has the meaning set forth in Policy 1.1;

    "Material Subsidiary(ies)" means any Person (i) of which the Borrower, directly or indirectly, owns 50% or more of the equity securities of any kind in such Person, and (ii) the book value of the assets of such Person represents more than 50% of the total book value of the Borrower's consolidated assets;

    
        A - 3

    

    

    "Material Adverse Effect" means a material adverse effect upon (i) the business, financial condition, operations or properties of the Borrower, taken as a whole on an unconsolidated basis, (ii) the rights and remedies of the Lender under this Agreement or the other Loan Documents, or (iii) the ability of the Borrower to perform its obligations under this Agreement;

    "Maturity Date" has the meaning ascribed thereto in Section 2.3;

    "NI 45-106" means National Instrument 45-106 - Prospectus Exemptions and in the Province of Québec, Regulation 45-106 respecting Prospectus Exemptions;

    "Parties" refers collectively to the Borrower and the Lender, and "Party" refers to any one of them individually;

    "Person" means any individual, corporation, company, limited liability company, estate, limited or general partnership, trust, joint venture, other legal entity, unincorporated association or Governmental Authority;

    "Policy 1.1" means Policy 1.1 of the Corporate Finance Manual of the Exchange;

    "Repayment Notice" means the notice to be sent to the Lender by the Borrower under Section 2.4;

    "Subsidiary(ies)" of any Person means any Person (i) which is Controlled, directly or indirectly by such first Person or (ii) a majority of whose voting Capital Stock, on a fully diluted basis, is owned directly or indirectly, beneficially or otherwise, by such first Person. A Person shall be deemed to be a Subsidiary of another Person if it is a Subsidiary of a Person that is that other's Subsidiary;

    "Taxes" means all taxes of any kind or nature whatsoever including federal large corporation taxes, provincial capital taxes, realty taxes (including utility charges which are collectible like realty taxes), business taxes, property transfer taxes, income taxes, sales taxes, levies, stamp taxes, royalties, duties, and all fees, deductions, compulsory loans and withholdings imposed, levied, collected, withheld or assessed as of the Closing Date or at any time in the future, by any Governmental Authority having power to tax, together with penalties, fines, additions to tax and interest thereon, and "Tax" shall have a correlative meaning;

    "Total Loan Amount" means the sum of all monies borrowed by the Borrower from the Lenders

    "Withholding Taxes" has the meaning scribed thereto in Section 13.1.

    
        A - 4KWESST Micro Systems Inc.: Exhibit 10.11 - Filed by newsfilecorp.com

    

    PROFESSIONAL SERVICES AGREEMENT

    THIS AGREEMENT is dated 1st October 2019.

    Between:

    KWESST Inc., an Ontario business corporation with an office at ,

    (hereinafter catted the "Corporation")

    AND:

    DEFSEC CORPORATION, a Canada business corporation with an office. at 1100-343 Preston Street, Ottawa, ON K1S 1N4

    (hereinafter called "DEFSEC")

    - and-

    DAVID LUXTON, an individual residing at                                                                                       

    (hereinafter called the "Executive")

    ARTICLE 1
INTERPRETATION

    1.1. Wherever in the Agreement, including the recitals and any Schedule attached hereto, the following terms appear, the following meanings shall be ascribed thereto:

    "Affiliate" has the meaning ascribed to it in the CBCA;

    "Agreement" means this executive services agreement;

    "Annual Fee" has the meaning set out in Article 4.1 or as otherwise established from time to time by the Board and paid or payable by the Corporation;

    "Applicable Privacy Laws" means any and all applicable laws relating to privacy and the collection, use and disclosure of Personal Information in all applicable jurisdictions, including but not limited to the Personal Information Protection and Electronic Documents Act (Canada) and/or any comparable Ontario law;

    "Associate," has the meaning ascribed to it in the CBCA

    "Benefits" has the meaning set out in Article 6.1;

    "Board" or "Board of Directors" means the board of directors of the Corporation;

    

    "Bonus" the amount paid or payable to the Executive by the Corporation pursuant to Article 4.2 hereof.  For the purposes of Article 4.2, "Bonus" shall not exceed 200% of the Annual Fee then in effect;

    "Business Day" means any day on which the banks are open for general banking business in Ottawa, Ontario;

    "CBCA" means the Canada Business Corporations Act

    "Change of Control" shall mean:

    (a) the sale of an or substantially all of the outstanding common shares of the Corporation for cash or securities of an entity not .managed by the Corporation's management team and that are determined by the Board of Directors to be liquid for all shareholders of the Corporation (a "Liquid Unrelated Issuer");

    (b) a merger, amalgamation, arrangement or other similar transaction involving the Corporation where the holders of common shares of the Corporation receive cash or securities of a Liquid Unrelated Issuer, but do not immediately thereafter own securities of the successor corporation which entitle them to cast more than 50% of the votes attaching to alt shares in the capital of the successor corporation;

    (c) the sale of all or substantially all of the Corporation's assets followed by a liquidating distribution to the holders of common shares of the Corporation of cash or securities of a Liquid Unrelated Issuer;

    provided that the Board shall have the right, in its absolute discretion, to deem any transaction not enumerated above to be a Change of Control (other than an initial public offering of the Corporation that does not result in the reduction of the Executive's Duties hereunder).  For greater clarity, a sale or transfer of founders shares between related parties, and/or an initial going public transaction of any kind shall not constitute a change of control.

    "Confidential Information" means information relating to the business or the technology and technical data of a corporation which is of a confidential and proprietary nature, including, but not limited to, non-public information that relates to the actual or anticipated business or research and development of such corporation, trade secrets, know how, inventions, techniques, processes, designs, engineering, formulas, programs, documentation, data, service manuals, technical reports, customer lists, supplies lists and suppliers, financial information and sales and marketing plans.  Confidential Information explicitly excludes a) industry information, technologies and contacts previously known by DEFSEC and the Executive and b} a Low Energy Cartridge ("LEC") munitions technology developed by DEFSEC and the Executive.

    "Developments" has the meaning ascribed to it in Article O hereof;

    "Duties" has the meaning ascribed to it in Article 3.1 hereof;

    
        2

    

    

    "Notice" means any statement, payment, account, notice or other writing required or permitted to be given hereunder;

    "Person" has the meaning ascribed to it in the CBCA and which, for the purposes of this Agreement, shalt include the Corporation;

    "Personal Information" means information about an identifiable individual;

    "President" means the President of the Corporation; and

    "Subsidiary" has the meaning ascribed to it in the CBCA.

    1.2. Except where this context otherwise requires, the term "this Agreement" shall include all terms and provisions of this agreement in writing between the parties hereto, including the recitals and any Schedules attached hereto and made a part hereof.

    1.3. Wherever in this Agreement the masculine, feminine or neuter gender is used, it shall be construed as including all genders, as the context so requires and wherever the singular number is used, it shall be deemed to include the plural and vice versa, where the context so requires.

    1.4. Unless otherwise specifically provided, any period of time required to be measured hereunder shall be exclusive of the date of the giving of Notice or the occurrence of the event from which the period is to be measured and inclusive of the last day of the period.

    1.5. This Agreement contains the entire understanding of the parties with respect to the matters contained herein.  There are no promises, covenants, or understandings by either party hereto to the other, other than those expressly set forth herein.  Except as otherwise expressly provided in this Agreement, this Agreement supersedes and replaces any earlier agreement(s), whether oral or in writing between the parties hereto respecting the subject matter of this Agreement.

    ARTICLE 2
TERM

    2.1. The initial term of this Agreement will be for the period of October 1st, 2019 to 31 December 2022 (the "Initial Term").  Upon the expiry of the Initial Term, this Agreement will automatically renew for a second term of two years.

    ARTICLE 3
SERVICES

    3.1. DEFSEC is hereby engaged to provide personnel, specifically the Executive, who shall be seconded from DEFSEC to the Corporation to carry out the duties of Executive Chairman of the Corporation as are customary and appropriate for an Executive Chairman of such company, including but not limited to:  strategic planning; investor relations; media relations; leadership on strategic transactions; board and management reporting; ail as specified by the Board of the Corporation, and generally described in ANNEX A (the "Duties")

    
        3

    

    

    3.2. DEFSEC and the Executive shall promote the businesses of the Corporation and its subsidiaries and affiliates and act in good faith while performing their respective duties and obligations under this Agreement, at all times in the best interests of the Corporation and its subsidiaries and affiliates.

    3.3. DEFSEC and the Executive shall, in the performance of this-Agreement, comply with all applicable laws, regulations and orders of Canada and of any Province or political territorial subdivision thereof, and where applicable to the business and operations of the Corporation, the applicable laws, regulations and orders of any applicable foreign jurisdiction, including, but not limited to, laws, regulations and orders pertaining to labor, wages:, hours of work and other similar provisions.  The Executive further agrees to read and comply with all' of the Corporation's internal policies and procedures, including those contained in any employee manual, as may be prepared and revised from time to time,

    3.4. DEFSEC and the Executive represent to the Corporation that the Executive has the competence, experience and skill necessary to perform the Duties, Is not subject or a party to any employment agreement, non-competition covenant, non-disclosure agreement or other ,agreement, covenant, understanding or restriction which would prohibit the Executive from executing this Agreement and performing fully the Duties and responsibilities hereunder, or which would in any manner, directly or indirectly, limit or affect the Duties and responsibilities which may now or in the future be assigned to DEFSEC and the Executive by the Corporation or the scope of assistance to which they may now or in the future provide to other Affiliates or divisions of the Corporation.

    3.5. DEFSEC and the Executive acknowledges and agrees that by virtue of this Agreement, they owe the Corporation a fiduciary duty.

    3.6. DEFSEC and the Executive shall provide the services contemplated during normal business hours on normal business days but the Executive shall be entitled to a vacation of up to 30 days during each year of the term hereof.  The Executive may work remotely in the course of performing the Duties under this Agreement, but shall attend at the Corporation's offices as and when necessary.

    3.7. Notwithstanding any other term hereof, the Parties hereto specifically state and agree that DEFSEC and the Executive are each independent contractors and not employees, agents or partners of the Corporation and DEFSEC shall be responsible for payment of all taxes, including federal, provincial and local taxes, arising out of the services provided, activities undertaken and payments made under this Agreement and accordingly, any personnel provided by a corporate Party shall be deemed an employee of such party and shall not, for any purpose, be considered an employee or agent of the other party or have any authority, except as specifically provided herein, to act on behalf of the other party.

    3.8. The Corporation shall at its cost provide Directors and Officer's liability insurance coverage for the Executive typical for a business of this nature.

    
        4

    

    

    ARTICLE 4
REMUNERATION

    4.1. For all of the services rendered (including performance of the Duties) by DEFSEC and the Executive hereunder during the term of this Agreement, the Corporation shall pay DEFSEC an Annual Fee equal to $120,000, plus HST, rising to $150,000 plus HST upon a going public transaction.  The Annual Fee may be increased from time to time, at the sole discretion of the Board, by merit and general increases in amounts determined by the Board.  The Annual Fee shall be paid in semi-monthly instalments, each equal to 1/24th of the Annual Fee.

    4.2. In addition to the foregoing, the Corporation may pay to DEFSEC an annual Bonus in an amount determined as determined by the Board of Directors.

    ARTICLE 5
STOCK OPTIONS AND RSUS

    5.1. Subject to compliance with applicable securities legislation and any obligations of the Corporation pursuant to any agreements by which it is bound, the Corporation may grant to DEFSEC, subject to approval of the Board, stock options and RSUs pursuant to the Corporation's stock option plan entitling DEFSEC to purchase common shares of the Corporation, as the Board may determine from time to time.

    5.2. All stock options and RSUs granted to DEFSEC shall be subject to the terms and provisions of the stock option agreement or RSU agreement pursuant to which same were granted, and all stock options granted to DEFSEC shall be subject to the terms and provisions of the stock option plan of the Corporation which is in effect from time to time, as approved by the Board and, if required, the shareholders of the Corporation.

    ARTICLE 6
EXECUTIVE BENEFITS, LIABILITY INSURANCE

    6.1. In addition to the Annual Fee and the grant of stock options and RSUs set out in ARTICLE 5, the Executive shall be entitled to participate in any benefit plans adopted by the Corporation for its executives, as may be amended from time to time, subject to the terms of the applicable plan documents and policies provided by the relevant carrier.  Additionally, the Corporation shall without delay put in place Directors and Officers liability insurance commensurate with a Corporation of this nature, with DEFSEC and the Executive as a named insured under such coverage.

    ARTICLE 7
EXPENSES

    7.1. The Corporation agrees that during the Term of this Agreement, the Executive shall be reimbursed by the Corporation for all reasonable traveling and other out-of-pocket costs actually and properly incurred by the Executive in connection with the Duties and in accordance with any applicable policies and procedures of the Corporation.  The Executive shall furnish to the Corporation statements and vouchers for all such expenses.  The Corporation agrees that upon execution of this Agreement It shall reimburse DEFSEC for out-of-pocket travel and expenses incurred prior to this Agreement, with supporting receipts, up to a maximum amount of $15,000.

    
        5

    

    

    ARTICLE 8
TERMINATION

    8.1. This Agreement shall terminate as follows:

    (a) automatically upon the death or total incapacity of the Executive.  For the purpose of this provision, the Executive may be deemed to be totally Incapacitated if he or she shall, by reason of accident, sickness, becoming of unsound mind or becoming incapable of managing his own affairs as determined by a court of law, be unable to perform the whole or any part, which is a material part, of the Duties for a continuous period of six (6) months, the total incapacity to be deemed to have occurred upon the expiration of the period of six (6) months aforesaid.  The resumption of the Duties by the Executive for a period of twenty-nine (29) days or less shall not interrupt the continuity of the six (6) month period aforesaid;

    (b) immediately upon Notice of termination served by the Corporation upon DEFSEC for just cause.  Without restricting the generality of the foregoing, "just cause" shall include but not be limited to the following:

    (i) breach of this Agreement;

    (ii) conviction of a criminal offence relating to a breach of trust, dishonesty or fraud, or a crime of violence;

    (iii) fraud, whether civil or criminal, misappropriation of the property or funds of the Corporation, embezzlement, malfeasance, misfeasance or nonfeasance in office which is willfully or grossly negligent on the part of the Executive;

    (iv) refusal to comply with a lawful order or direction of the Corporation;

    (v) neglect or incompetence of the Executive to carry out the Duties and responsibilities of his or her position in a diligent, professional, and efficient manner; and

    (vi) any other act of misconduct harmful to the best interests of the Corporation,

    (c) by DEFSEC giving at least sixty (60) days Notice of termination to the Corporation.

    8.2. The Corporation may elect to, terminate this Agreement upon the expiry of the Initial Term by providing DEFSEC with notice in writing ("Notice") of same on or before a date which is six (6) months prior to expiry of the Initial Term (the "Termination Option").  Should the Corporation elect to exercise the Termination Option, the Corporation will, upon the expiry of the Initial Term, provide a lump sum payment to DEFSEC in the amount of $100,000, which amount will be in addition to any other payments owed by the Corporation to DEFSEC pursuant to this Agreement, and all stock options held by DEFSEC shall immediately become vested.

    
        6

    

    

    8.3. Notwithstanding Article 8.2, if the Corporation terminates this Agreement without cause within 24 months of, or in anticipation within 180 days of, a change of control, the Corporation will pay DEFSEC a lump sum payment equal to 18 months of the Annual Fee then in effect, which amount will be in addition to any other payments owed by the Corporation to DEFSEC pursuant to this agreement, and all stock options held by DEFSEC shall immediately become vested.

    8.4. Notwithstanding Article 8.2, if the Corporation terminates this Agreement without cause the Corporation will pay DEFSEC a lump sum payment equal to 12 months of the Annual Fee then in effect, which amount will be in addition to any other payments owed by the Corporation to DEFSEC pursuant to this agreement, and all stock options held by DEFSEC shall immediately become vested.

    8.5. Notwithstanding any other provision in this Agreement, if the Corporation terminates this Agreement at any time without cause, the Corporation will pay DEFSEC an amount equal to the Annual Fee then in effect, plus accrued unpaid Bonuses and expenses, and all stock options held by DEFSEC shall immediately become vested.

    8.6. Notwithstanding any other term hereof, the Corporation shall not be required to pay all or any part of such amounts outlined in Articles 8.2 and 8.3 above unless and until DEFSEC and the Executive shall each have executed and delivered to the Corporation a release, in form ·and substance as set out in Schedule A.

    8.7. This Agreement shall continue in full force and effect during the Term hereof, unless earlier terminated pursuant to the provisions of ARTICLE 8.

    8.8. Upon termination of this Agreement pursuant to ARTICLE 8, DEFSEC and the Executive shall immediately:

    (a) cease to represent themselves as providing an¥ duties or services, including the Duties, to the Corporation and'/or its Affiliates and shall cease to use any documentation or advertising of the Corporation and/or its Affiliates and shall take all reasonable action as may be necessary to remove such identification as a representative of the Corporation and/or its Affiliates;

    (b) deliver to the Corporation all Confidential Information and Developments described in ARTICLE 9 hereof whether the same is in the Executive's actual possession, charge or custody, or under the Executive's control; and

    (c) deliver to the Corporation any other property of the Corporation.

    8.9. DEFSEC and the Executive acknowledge that the severance amounts provided pursuant to Article 8 of this Agreement supersedes and replaces any rights to reasonable notice of termination that might otherwise have arisen at common law and DEFSEC and the Executive expressly waive any right to such notice or pay in lieu.  DEFSEC and the Executive agree that the severance amount provided pursuant to Article 8.2 and Article 8.3 of this Agreement is deemed conclusively to compensate for any lack of reasonable notice of termination.

    
        7

    

    

    8.10. The Corporation shall give consideration to any reasonable request which DEFSEC may make in respect of payments to be made to DEFSEC for favourable income tax treatment of DEFSEC which does not negatively impact the Corporation or result in any expense or costs to the Corporation.

    ARTICLE 9
CONFIDENTIAL INFORMATION

    9.1. In the course of performing the Duties, DEFSEC and the Executive may obtain Confidential Information relating to the Corporation and its Affiliates or Associates.  During the course of performing the Duties and thereafter, DEFSEC and the Executive shall not make use of the Confidential Information other than as required for the performance of the Duties and responsibilities under this Agreement.

    9.2. DEFSEC and the Executive shall hold the Corporation and its Affiliates or Associates' Confidential Information in strictest confidence and shall not, without the prior written consent of the Corporation, divulge or allow access to the Confidential Information of the Corporation (or any Affiliate or Associate of the Corporation) to any Person, except where:

    (a) such Confidential Information is available to the public and made generally known through no wrongful act of the Executive or of others who were under confidentiality obligations as to the item or items involved generally in the form disclosed; or

    (b) such disclosure of the Confidential Information is compelled by .applicable law.

    9.3. DEFSEC and the Executive shall take reasonable steps to prevent the Confidential Information from being used or acquired by any unauthorized Person.

    9.4. During the term hereof and thereafter, DEFSEC and the Executive shall not improperly use or disclose Confidential Information of any former employer or other person or entity and DEFSEC and the Executive shall not bring onto the premises of the Corporation, any unpublished document or Confidential Information belonging to any such employer, person or entity unless consented to in writing by such employer, Person or entity.

    9.5. The Corporation has received, and in the future will receive, from third parties their Confidential Information subject to a duty on the Corporation's part to maintain the confidentiality of such information and to use it only for certain limited purposes.  DEFSEC and the Executive shall hold all such Confidential Information in the strictest confidence and shall not disclose it to any person, firm or corporation or use it except as necessary in carrying out the Duties, as applicable, consistent with such party's agreement with such third party.

    
        8

    

    

    9.6. All developments, including inventions, whether patentable or otherwise, trade secrets, discoveries, Improvements, ideas and writings, which either directly or indirectly relate to or may be useful in the business of the Corporation or any of its Affiliates, Associates or divisions.  (collectively, the "Developments") and. which DEFSEC or the Executive, either by themselves or in conjunction with any other Person has conceived, made, developed, acquired or acquired knowledge of in the course of the engagement of DEFSEC by and the secondment of the Executive to the Corporation shall become and remain the sole and exclusive property of the Corporation.  DEFSEC and the Executive hereby assigns, transfers and conveys, and agrees to so assign, transfer and convey, all of their right (including moral rights), title and interest in and to any and all such Developments and to disclose fully as soon as practicable, in writing, all such Developments to the Board.  At any time and from time to time, upon the request and at the expense of the Corporation, DEFSEC and the 'Executive wilt execute and deliver any and all instruments, documents and papers, give evidence and do any and all other acts which, in the reasonable opinion of counsel for the Corporation, are or may be necessary or desirable to document such transfer or to enable the Corporation to file and prosecute applications for and to acquire, maintain and enforce any and all patents, trademark registrations or copyrights under Canadian or foreign law with respect to any such Developments or aspect of a Development or to obtain any extension, validation,, re-issue, continuance or renewal of any such patent, trademark or copyright.  The Corporation will be responsible for the preparation of any such instruments, documents and papers and for the prosecution of any such proceedings and will reimburse the Executive for all reasonable expenses Incurred by DEFSEC and the Executive in compliance with the provisions of this Article.

    9.7. Confidential Information explicitly excludes:  (a).Industry information, technologies and contacts previously known to DEFSEC and the Executive; and (b) a low Energy Cartridge ("LEC") munitions technology developed by DEFSEC and the Executive.

    ARTICLE 10
NON-COMPETITION

    10.1. DEFSEC and the Executive hereby acknowledges and agrees that he or she will gain knowledge of and a close working relationship with the Corporation's customers and service providers, which would injure the Corporation if made available to a competitor or used for competitive purposes.

    10.2. DEFSEC and the Executive agree, with and for the benefit of the Corporation, that during the term of this Agreement and for a period of twelve (12) months from the date of termination of this Agreement, whether such termination is occasioned by DEFSEC or the Executive or by the Corporation, with or without cause, or by mutual agreement, DEFSEC and the Executive shall not, for any reason whatsoever, directly or indirectly, solicit or accept business, or be employed by or otherwise retained by any person or company engaged in in direct competition with the business of the Corporation within the largest of the following areas:  (a) networked surveillance and targeting on ground weapon systems and interface with drones; (b) kinetic counter-drone technology; and shotcounter technology.

    
        9

    

    

    10.3. DEFSEC, and the Executive further acknowledge, and, agree that, if requested by the Corporation, the Executive shall enter into a separate agreement with the Corporation giving effect to the foregoing agreement not to compete with the Corporation.

    10.4. DEFSEC and the Executive agree that the limitations of time, geography and scope of activity agreed to in this Article are reasonable because, among other things:  (i) the Corporation is engaged in a highly competitive industry; (ii) DEFSEC and the Executive will have access to confidential information, trade secrets and know-how of the Corporation and its Affiliates; (iii) DEFSEC and the Executive will be able to obtain suitable and satisfactory employment without violation of this Agreement; and (iv) these limitations are necessary to protect the trade secrets, confidential information and goodwill of the Corporation and its Affiliates.

    ARTICLE 11
NON-SOLICITATION

    11.1. DEFSEC and the Executive agree that fora period of twelve (12) months following the termination of this Agreement for any reason, DEFSEC and the Executive shall not, directly or indirectly, solicit, divert, hire, retain, employ or take away any employees, executives or consultants of the Corporation that (a) have not been terminated by the Corporation or (b) resigned from the Corporation following a Change of Control, whether such new employment or retainer Is with or without compensation.

    11.2. DEFSEC and the Executive agree and acknowledge that the time limitations in Article 11.2 are reasonable and properly required for the adequate protection of the exclusive property and business of the Corporation.

    11.3. DEFSEC and the Executive agrees that the limitations of time and scope of activity agreed to in this Article are reasonable because, among other things:  (i) the Corporation is engaged in a highly competitive industry; (ii) DEFSEC and the Executive will have access to confidential' information, trade secrets and' know-how of the Corporation and its Affiliates; (iii) DEFSEC and the Executive will be able to obtain suitable and satisfactory employment without violation of this Agreement; and (iv) these limitations are necessary to protect the trade secrets, confidential information and goodwill of the Corporation and its Affiliates.

    ARTICLE 12
REMEDIES

    12.1. DEFSEC and the Executive acknowledge and agree that the Corporation will suffer irreparable harm if DEFSEC or the Executive breaches any of the obligations under ARTICLE 10 or ARTICLE 11, and that monetary damages would be inadequate to compensate the Corporation for such a breach.  Accordingly, DEFSEC and the Executive agree that in the event of a breach, or a threatened breach, by DEFSEC or the Executive of any of the provisions of ARTICLE 10 or ARTICLE 11, the Corporation shall be entitled to obtain, in addition to any other rights, remedies or damages available to the Corporation.  at law or in equity, an interim and permanent injunction, without having to prove damages, in order to prevent or restrain any such breach, or threatened breach, by DEFSEC or the Executive, and that the Corporation shall be entitled to all of its costs and expenses incurred in obtaining such relief including reasonable solicitor and client legal costs and disbursements on a full indemnity basis.

    
        10

    

    

    12.2. DEFSEC and the Executive hereby agree that all restrictions contained in ARTICLE 10 and ARTICLE 11 are reasonable, valid and :necessary protections of the Corporation's proprietary business interests and hereby waive any and all defenses to the strict enforcement thereof by the Corporation.  If any covenant or provision of ARTICLE 10 or ARTICLE 11 is determined to be void or unenforceable in whole or in part, for any reason, it shall be deemed not to affect or impair the validity of any other covenant or provision of this Agreement, which shall remain in full force and effect.  The provisions of ARTICLE 10 or ARTICLE 11 shall survive and remain in full force and effect notwithstanding the termination of this Agreement for any reason.

    12.3. For the purposes of ARTICLE 10, ARTICLE 11, and ARTICLE 12 •corporation", when referred to therein, shall include any subsidiary, associated, affiliated or successor corporation of the Corporation, provided that ARTICLE 11 shall only apply to the Corporation (including any associated, affiliated or successor corporation of the Corporation) and its partners, employees, executives and consultants at the date of termination of this Agreement.

    ARTICLE 13
PRIVACY

    13.1. DEFSEC and the Executive acknowledge and agree that they will take all necessary steps to protect and maintain Personal Information of the employees, consultants or customers of the Corporation obtained in the course of DEFSEC's engagement by or the Executive's secondment to the Corporation.  DEFSEC and the Executive shall at all times comply, and shall assist the Corporation to comply, with all Applicable Privacy Laws.

    13.2. DEFSEC and the Executive acknowledge and agree that the disclosure of the Executive's Personal Information may be required as part of the ongoing operations of the Corporation, as required by law or regulatory agencies, as part of the audit process of the Corporation, or as part of a potential business or commercial transaction or as part of the Corporation's management obligations, and' the Executive hereby grants consent as may be required by Applicable Privacy Laws to such personal information disclosure.

    13.3. DEFSEC and the Executive acknowledge that the Executive has no expectation of privacy regarding any information, items or material stored at the Corporation's premises, including without limitation any data stored on the Corporation's computers (including any laptops, smartphones or other electronic device provided to the Executive by the Corporation) or network, such as email.  The Corporation reserves the right to disclose and monitor communications made by the Executive using the Corporation's facilities and resources, whether electronic or physical, and reserves the right to search and enter all areas of the Corporation's premises, including any locked desks or drawers.  Without limiting the foregoing, the Executive further acknowledges that the full contents of the Executive's email and stored data may be made known to other Corporation employees as required in the normal course of the Corporation's operations, both during and after the Executive's engagement with the Corporation.

    
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    ARTICLE 14
GENERAL

    14.1. This Agreement along with any indemnity agreement to be entered between the Corporation and the Executive concurrent with execution of this Agreement constitute the entire Agreement between the parties.

    14.2. This Agreement shall not be assigned by the Corporation, DEFSEC or the Executive, in whole or in part, without the prior written consent of the other parties, which consent may be withheld for any reason.

    14.3. DEFSEC and the Executive acknowledge and agree that they are executing this Agreement voluntarily and without any duress or undue influence by the Corporation or anyone else.  Both further acknowledge and agree that they have carefully read this Agreement and that they have asked any questions needed by them to understand the terms, consequences and binding effect of this Agreement and fully understand it.  Finally, DEFSEC and the Executive agree that they have been provided an opportunity to seek the advice of legal counsel of their choice before signing this Agreement.

    14.4. Time shall in all respects be of the essence of this Agreement.

    14.5. The division of this Agreement into Articles, Sections, Subsections and Paragraphs or any other divisions and the inclusion of headings is for convenience only and shall not affect the construction or interpretation of all or any part hereof.

    14.6. All Notices permitted or required to be given hereunder shall be in writing and shall be addressed as follows:

    (a) to the Corporation at:

    (b) 1255 Katherine Street North,-R.:R. #1, West Montrose,. Ontario,.N0B 2V0,

    (c) to DEFSEC and the Executive at:

    1100-343 Preston Street, Ottawa ON K1S 1N4

    Attention:  David Luxton

    14.7. Notices shall be addressed as set forth in Article 14.6 and may be delivered by e-mail, by facsimile, by personal delivery or by first-class mail, postage prepaid.

    14.8. Notices which are personally delivered shall be deemed to be received upon actual receipt thereof.  Notices which are mailed shall be deemed to have been received three (3) Business Days after the posting of such Notices (exclusive of e-mail or the date of posting and exclusive of Saturdays, Sundays and statutory vac).  Notices delivered by e-mail or facsimile shall be deemed to have been given on the date the e-mail or facsimile transmission was sent.

    
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    14.9. Any party may change its address or particulars respecting its address for receipt of Notices by giving Notice as aforesaid.

    14.10. Notwithstanding any other provision of this Agreement, Article 8, Article 9, Article 10, Article 11 and Article 12 shall survive the termination of this Agreement and the restrictions specified therein shall remain a continuing obligation of DEFSEC and the Executive.

    14.11. This Agreement shall ensure to the benefit of and be binding upon the parties hereto and their respective successors and assigns, according to law.

    14.12. This Agreement may be amended only by written instrument signed by each of the parties hereto.

    14.13. No provision hereof shall be deemed waived and no breach excused, unless such waiver or consent excusing the breach shall be in writing and signed by the party to be charged with such waiver or consent.  A waiver by a party of any provision of this Agreement shall not be construed as a waiver of a further breach of the same provision.

    14.14. This Agreement shall be governed by and construed in accordance with the laws in force in the Province of Ontario and the laws of Canada applicable therein and each of the parties hereby attorns to the courts of such Province.

    14.15. In the event that any provisions contained in this Agreement shall be declared invalid, illegal or unenforceable by a court or other lawful authority of competent jurisdiction, this Agreement shall continue in force with respect to the enforceable provisions and all rights and remedies accrued under the enforceable provisions shall survive any such declaration, and any non-enforceable provision shall, to the extent permitted by law, be replaced by a provision which, being valid, comes closest to the intention underlying the invalid, illegal and unenforceable provision.

    14.16. This Agreement may be executed in counterparts, or facsimile counterparts, each of which when executed by either of the parties shall be deemed to be an original' and such counterparts shall together constitute one and the same Agreement.

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

    KWESST Inc.

    Per:  /s/ Jeffrey MacLeod

    DEFSEC CORPORATION

    Per:  /s/ David Luxton

    	DAVID LUXTON	WITNESS
	 	 
	/s/ David Luxton	 /s/ Laura Brown

    

    
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    SCHEDULE "A"

    RELEASE

    [***]

    
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    ANNEX A

    Executive Chairman

    A Key responsibility of the Executive Chairman of the Board of Directors, in addition to his responsibilities as a senior member of the executive management team of the Corporation, is to provide leadership to the Board to enhance Board effectiveness.  The Board has ultimate accountability for supervision of the management of the Company.  Critical to meeting this accountability is the relationship between the Board, management, shareholders and other stakeholders.  The Executive Chairman, as the presiding member, must oversee that these relationships are effective, efficient, and further the best interests of the Corporation.

    The Executive Chairman reports to the Board.  The Executive Chairman Shall:

    • Chair all meetings of the Board of Directors and shareholders;

    • Lead the board in ensuring that the Board assumes its duties and responsibilities for the stewardship of the Corporation as set out in the Corporate Governance Guidelines as approved by the Board, the constating documents of the Corporation and corporate law;

    • Ensure, in cooperation with the CEO and the Board, that there is an effective succession plan in place for the CEO position and the other senior management positions of the Company;

    • Assist the CEO and other members of the senior management team in the short and long range planning activities of the Corporation including acquisition and growth strategies;

    • Ensure the development, on an annual basis, of the corporate objectives with which the CEO is responsible for meeting, for the review and approval of the Board;

    • Establish the agenda for meetings of the Board in conjunction with the CEO and ensures the proper and timely flow of information to the Board sufficiently in advance of the meetings;

    • Act as a liaison between the Corporation's management and the Board where and if required;

    • In conjunction with the CEO, Leads the corporation in Investor Relations, Corporate financing, mergers and acquisition programs, joint ventures and licencing deals,

    • In conjunction with the CEO represent the Corporation before its stakeholders, including the shareholders, managers and employees, the investment community, the industry and the public;

    • Undertake the lead on any corporate governance matter that the Board may request from time to time;

    • Develop and maintain a good working relationship between the Executive Chairman, the President and CEO, and the Board to assure open communications, cooperation, interdependence, mutual trust, respect, and commonality of purpose;

    
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    • Take steps to foster the Board's understanding of its responsibilities and boundaries with management;

    • Establish any other procedures to govern the effective and efficient conduct of the Board's work; and

    • Carry out other duties as requested by the Board.

    
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