Document:

PEMBINA PIPELINE CORPORATION

 

Premium DividendTM and Dividend
Reinvestment Plan

 

Certain capitalized terms in this Premium
DividendTM and Dividend Reinvestment Plan have the meaning assigned to them under "Definitions" below.

 

Overview

 

This Premium DividendTM and Dividend
Reinvestment Plan (the "Plan") provides Eligible Shareholders of Pembina Pipeline Corporation ("Pembina")
with the opportunity to reinvest their Dividends in new Shares at a 5% discount to the Average Market Price on the applicable payment
date, which new Shares will, at the Participant's election, either be (i) credited to the Participant's account under the Dividend
Reinvestment Component of the Plan or (ii) exchanged under the Premium DividendTM Component of the Plan for a cash
payment equal to 102% of the reinvested Dividends. Each component of the Plan, which is explained in greater detail below, is subject
to eligibility restrictions, applicable withholding taxes, prorating as provided herein, and other limitations on the availability
of new Shares in certain events.

 

Eligible Shareholders are not required
to participate in the Plan. An Eligible Shareholder who has not elected to participate in the Plan will continue to receive their
regular Dividends in the normal manner.

 

In order to participate in either the Dividend
Reinvestment Component or the Premium DividendTM Component, an Eligible Shareholder must enroll in the Plan directly
or through the broker, investment dealer, financial institution or other nominee who holds Shares on the Eligible Shareholder's
behalf. See "Enrollment" below.

 

Definitions

 

In this Plan:

 

"Average Market Price",
in respect of a particular Dividend payment date, refers to the arithmetic average (calculated by the Plan Broker to four decimal
places) of the daily volume weighted average trading prices of Shares on the TSX for the trading days on which at least one board
lot of Shares is traded on the TSX during the corresponding Pricing Period, subject to such adjustments as Pembina may, in its
sole discretion, determine to be appropriate to account for (i) a change in the aggregate number of Shares outstanding into a greater
or lesser number of Shares, (ii) a reclassification of the Shares, or (iii) a merger, reorganization or other transaction affecting
the Shares.

 

"Business Day"
refers to any day other than a Saturday, Sunday or statutory holiday in the Province of Ontario.

 

"CDS" refers to
CDS Clearing and Depository Services Inc., which acts as a nominee for certain Canadian brokers, investment dealers, financial
institutions and other nominees, or its nominee, as applicable.

 

"CDS Participants"
refers to brokers, investment dealers, financial institutions or other nominees in their capacity as participants in the CDS depository
service, who hold Shares registered in the name of CDS on behalf of eligible beneficial owners of Shares and who are acting on
behalf of such beneficial owners in respect of the Plan.

 

 

		TM	denotes trademark of Canaccord Genuity Corp.

 

    	 

    	 

    

 

"Depository" means
(i) with respect to the Premium DividendTM Component, CDS, and (ii) with respect to the Dividend Reinvestment Component, CDS
and/or DTC.

 

"Depository Participant"
means (i) with respect to the Premium DividendTM Component, a CDS Participant, and (ii) with respect to the Dividend Reinvestment
Component, a CDS Participant and/or a DTC Participant.

 

"Dividend" refers
to a cash dividend declared payable by Pembina on the outstanding Shares.

 

"Dividend Reinvestment Component"
refers to that component of the Plan, as more particularly described herein under the heading "Plan Components –
Dividend Reinvestment", pursuant to which Shares are purchased on the reinvestment of Dividends under the Plan but are
not exchanged for the Premium DividendTM.

 

"DTC" means The
Depository Trust & Clearing Corporation, which acts as nominee for certain United States brokers, investment dealers, financial
institutions and other nominees, or its nominee, as applicable.

 

"DTC Participants"
refers to brokers, investment dealers, financial institutions or other nominees in their capacity as participants in the DTC depository
service who hold Shares registered in the name of DTC on behalf of eligible beneficial owners of Shares who are acting on behalf
of such beneficial owners in respect of the Plan.

 

"Eligible Shareholders"
refers to Shareholders who are permitted to participate in the Plan as described herein under the heading "Eligibility
Requirements".

 

"Enrollment Form"
refers to the Reinvestment Enrollment – Participant Declaration Form (or similar enrollment form) established by Pembina
and the Plan Agent from time to time for the purpose of enrolling eligible registered holders of Shares (other than a Depository)
in the Plan.

 

"NYSE" means the
New York Stock Exchange.

 

"Participants"
refers to registered holders of Shares who, on the applicable record date for a Dividend, are Eligible Shareholders and are duly
enrolled in the Plan; provided, however, that Depositories, Depository Participants and other brokers, investment dealers, financial
institutions or other nominees, as the case may be, shall be Participants only to the extent that such Depositories, Depository
Participants or nominees, respectively, have enrolled in the Plan on behalf of Shareholders who are Eligible Shareholders.

 

"Plan Agent"
refers to Computershare Trust Company of Canada, or such other party as is appointed by Pembina from time to time to act as "Plan
Agent" under the Plan.

 

"Plan Broker" refers
to Canaccord Genuity Corp., or such other qualified investment dealer as is designated from time to time to act as "Plan Broker"
under the Plan.

 

"Premium DividendTM"
refers to a cash amount equal to 102% of a Dividend or, as the context may require, 102% of the aggregate Dividends payable by
Pembina on a particular Dividend payment date to Participants enrolled in the Premium DividendTM Component, subject to proration
in certain events as described herein.

 

"Premium DividendTM
Component" refers to that component of the Plan, as more particularly described herein under the heading "Plan
Components – Premium DividendTM", pursuant to which Shares are purchased on the reinvestment of Dividends under
the Plan and exchanged for the Premium DividendTM.

 

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"Pricing Period",
in respect of a particular Dividend, refers to the period beginning on the later of the 21st Business Day preceding
the Dividend payment date and the second Business Day following the record date applicable to that Dividend payment date,
and ending on the second Business Day preceding the Dividend payment date.

 

"Shareholders"
refers to holders of Shares.

 

"Shares" refers
to common shares in the capital of Pembina.

 

"TSX" refers to
the Toronto Stock Exchange.

 

Plan Components

 

Dividend Reinvestment

 

Under the Dividend Reinvestment Component,
the Plan Agent will, on each Dividend payment date, on behalf of Participants enrolled in the Dividend Reinvestment Component,
apply the aggregate Dividends payable on the Shares of such Participants (after the deduction of any applicable withholding taxes)
towards the purchase from treasury of Pembina of such number of new Shares (calculated to six decimal places) as is equal to the
aggregate amount of such Dividends divided by 95% of the corresponding Average Market Price. The new Shares so purchased will be
held under the Plan by the Plan Agent for the account of applicable Participants or, in the case of Eligible Shareholders who are
enrolled in the Plan indirectly through a Depository, credited through such Depository to the accounts of appropriate Depository
Participants on behalf of such Eligible Shareholders. Any subsequent Dividends paid in respect of Shares purchased under the Dividend
Reinvestment Component will be subject to reinvestment under the Plan (i) in the case of Shares held under the Plan for the account
of a Participant other than a Depository, pursuant to the Participant's current election as between the Dividend Reinvestment Component
and the Premium DividendTM Component, or (ii) in the case of Shares enrolled in the Plan indirectly through a Depository,
pursuant to instructions provided to the Plan Agent by such Depository in the manner described below under the heading "Enrollment".

 

Premium DividendTM

 

Under the Premium DividendTM Component,
the Plan Agent will, on each Dividend payment date, on behalf of Participants enrolled in the Premium DividendTM Component,
apply the aggregate Dividends payable on the Shares of such Participants (after the deduction of any applicable withholding taxes)
towards the purchase from treasury of Pembina of such number of new Shares (calculated to six decimal places) as is equal to the
aggregate amount of such Dividends divided by 95% of the corresponding Average Market Price. Additionally, a number of Shares approximately
equal to the number of new Shares to be purchased under the Premium DividendTM Component will in turn be pre-sold, through
the Plan Broker, in one or more transactions on the TSX.

 

The new Shares purchased on the reinvestment
of Dividends under the Premium DividendTM Component will not be held under the Plan by the Plan Agent or credited through
CDS to the accounts of appropriate CDS Participants on behalf of Eligible Shareholders who are enrolled in the Premium DividendTM
Component, but will instead be delivered to the Plan Broker in exchange for the Premium DividendTM in an amount equal to 102%
of the reinvested amount. The Plan Agent will in turn remit payment of the Premium DividendTM to Participants enrolled in
the Premium DividendTM Component in the same manner that regular Dividends are paid by Pembina.

 

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At the time Shares are delivered to
the Plan Broker, each Shareholder for whom Dividends are reinvested under the Premium DividendTM Component shall be deemed
to represent and warrant to Pembina, the Plan Agent and the Plan Broker that: (i) it holds good and marketable title to such Shares,
free and clear of all liens, restrictions, charges, encumbrances, claims and rights of others; (ii) such Shares are not subject
to resale restrictions; and (iii) it is an Eligible Shareholder.

 

Pembina and the Plan Agent have a commitment
from the Plan Broker to pay the Premium DividendTM to the Plan Agent against delivery of the corresponding Shares on the applicable
Dividend payment date. Although Pembina and the Plan Agent will, if necessary, make claims on this commitment, neither Pembina
nor the Plan Agent has any liability to Participants enrolled in the Premium DividendTM Component (or to any Shareholder for
which the Participant may be acting) for any failure of the Plan Broker to fulfil its obligation to pay the Premium DividendTM
when required. If the Plan Broker does not deliver sufficient funds to pay the Premium DividendTM on all Shares of Participants
enrolled in the Premium DividendTM Component, Pembina will deliver the full amount of the regular Dividend to the Plan Agent
and such Participants will be entitled to receive the regular Dividend for each such Share in respect of which the Premium DividendTM
is not paid by the Plan Broker. For greater certainty, a Participant who receives the regular Dividend in these circumstances will
not be entitled to receive the corresponding Premium DividendTM.

 

Eligibility Requirements

 

Shareholders who are resident in Canada
or the United States may participate in the Dividend Reinvestment Component. Unless otherwise announced by Pembina, only Shareholders
who are resident in Canada may participate in the Premium DividendTM Component. A Shareholder who is a resident of the
United States or is otherwise a "U.S. person" as that term is defined in Regulation S under the United States Securities
Act of 1933, as amended (including, without limitation, any natural person resident in the United States, any partnership or corporation
organized or incorporated under the laws of the United States, any estate of which any executor or administrator is a U.S. person
and any trust of which any trustee is a U.S. person), may participate in the Dividend Reinvestment Component but may not participate
in the Premium DividendTM Component unless otherwise announced by Pembina. For greater certainty, neither DTC nor beneficial
owners of Shares who hold their Shares through DTC are eligible to participate in the Premium DividendTM Component.

 

Shareholders who are resident in any other
jurisdiction outside of Canada and the United States may participate in the Dividend Reinvestment Component only if their participation
is permitted by the laws of the jurisdiction in which they reside and provided that Pembina is satisfied, in its sole discretion,
that such laws do not subject the Plan or Pembina to additional legal or regulatory requirements. Any such Shareholder wishing
to participate in the Dividend Reinvestment Component should consult legal counsel where they reside to determine their eligibility
to participate. Unless otherwise announced by Pembina, Shareholders not resident in Canada may not participate in the Premium
DividendTM Component.

 

The amount of any Dividends to be reinvested
under the Plan, whether under the Dividend Reinvestment Component or the Premium DividendTM Component, on behalf of Shareholders
who are not residents of Canada will be reduced by the amount of any applicable non-resident withholding tax. See "Withholding
Taxes" below.

 

Pembina and the Plan Agent also reserve
the right to deny participation in the Plan to, or cancel the participation of, any person or agent of any person who appears to
be, or who Pembina or the Plan Agent has reason to believe is, subject to the laws of any jurisdiction which do not permit participation
in the Plan in the manner sought by such person or which will subject the Plan or Pembina to requirements of the jurisdiction not
otherwise applicable to the Plan or Pembina, or whose participation in the Plan is suspected to be part of a scheme to avoid applicable
legal requirements or otherwise engage in unlawful behaviour.

 

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Pembina further reserves the right to determine,
from time to time, a minimum number of Shares that a Shareholder must hold in order to be eligible for, or continue to be enrolled
in, the Plan, subject to any applicable legal or regulatory requirements.

 

Enrollment

 

Indirect Enrollment

 

An Eligible Shareholder whose Shares are
not registered in its own name cannot enroll in the Plan directly but may instead do so indirectly through the broker, investment
dealer, financial institution or other nominee who holds their Shares by providing appropriate enrollment instructions to such
nominee. Where such nominee holds Shares in its own name (and not through a Depository) on behalf of an Eligible Shareholder, the
nominee may enroll in the Plan on behalf of the Eligible Shareholder by delivering to the Plan Agent a duly completed Enrollment
Form. Where the Shares are held indirectly through a Depository, enrollment instructions must be communicated to such Depository
by the applicable nominee and Depository Participant in accordance with the procedures of such Depository's depository system,
and such Depository will in turn provide instructions to the Plan Agent regarding the extent of its participation, on behalf of
Eligible Shareholders, in the Dividend Reinvestment Component and, in the case of CDS, the Premium DividendTM Component. Such
Depository's instructions will advise the Plan Agent of: (i) the aggregate number of Shares held through such Depository in respect
of which Dividends are to be reinvested under the Dividend Reinvestment Component; and (ii) in the case of CDS, the aggregate number
of Shares held through CDS in respect of which Dividends are to be reinvested under the Premium DividendTM Component.

 

Direct Enrollment

 

An Eligible Shareholder whose Shares are
registered in its own name may directly enroll in either the Dividend Reinvestment Component or the Premium DividendTM Component
online through the Plan Agent's self-service web portal at www.investorcentre.com or by delivering to the Plan Agent a duly completed
Enrollment Form. A copy of the Enrollment Form is available from the Plan Agent's website at www.computershare.com or by calling
the Plan Agent at 1-800-564-6253, or from Pembina's website at www.pembina.com.

 

A Participant who delivers an Enrollment
Form will be deemed to thereby direct Pembina to credit the Plan Agent with all Dividends payable in respect of all Shares registered
in the name of the Participant or held under the Plan by the Plan Agent for the Participant's account as of the Dividend record
date, and to direct the Plan Agent to reinvest such Dividends in new Shares in accordance with the Dividend Reinvestment Component
or the Premium DividendTM Component, as applicable, and otherwise upon and subject to the terms and conditions described herein.
See "Deemed Representations, Directions and Authorizations" below.

 

Continued Participation

 

Once a Participant (other than a Depository)
has enrolled in either the Premium DividendTM Component or the Dividend Reinvestment Component by delivering to the Plan Agent
a duly completed Enrollment Form, participation in the manner elected by the Participant continues automatically with respect to
all Shares registered in the name of the Participant or held under the Plan by the Plan Agent for the Participant's account until
the Plan or the Participant's participation therein is terminated or until the Participant changes its election.

 

    	- 5 -

    	 

    

 

Eligible Shareholders who participate in
the Plan indirectly through a Depository or otherwise through their broker, investment dealer, financial institution or other nominee
should consult such nominee to confirm the nominee's policies concerning continued participation following initial enrollment.

 

See "Termination of Participation"
and "Change of Election" below.

 

Enrollment Deadlines

 

In order for a particular Dividend payable
on Shares held by an Eligible Shareholder to be reinvested on the Dividend payment date, the Plan Agent must receive (i) a duly
completed Enrollment Form that covers such Shares not later than 5:00 p.m. (Toronto time) on the third (3rd) business
day preceding the record date for the Dividend, or (ii) in the case of Shares enrolled indirectly through a Depository, appropriate
instructions from such Depository regarding the extent of its participation (on behalf of Eligible Shareholders) not later than
such time as may be agreed from time to time between such Depository and the Plan Agent in accordance with custom and practice
relating to the such Depository's depository system. Such Depository must in turn receive appropriate instructions from the nominee
holders that are Depository Participants not later than such deadline as may be established by such Depository from time to time.
Enrollment Forms or Depository instructions, as applicable, received by the Plan Agent after the stipulated deadline will not be
effective in respect of the corresponding Dividend unless otherwise determined by Pembina and the Plan Agent in their sole discretion.

 

Broker Requirements

 

A Depository Participant or other broker,
investment dealer, financial institution or other nominee may require certain information or documentation from an Eligible Shareholder
before it will act upon enrollment instructions relating to the Plan. Eligible Shareholders who wish to participate in the Plan
should contact the broker, investment dealer, financial institution or other nominee who holds their Shares to provide instructions
regarding their decision to enroll in and their election as between the Dividend Reinvestment Component and the Premium DividendTM
Component, to confirm any information or documentation required to give effect to their instructions, to confirm the nominee's
policies concerning continued participation following initial enrollment, and to inquire about any applicable deadlines that the
nominee may impose or be subject to under the policies of that nominee or the Depository's depository system.

 

Administration

 

Computershare Trust Company of Canada has
been appointed to act as Plan Agent for and on behalf of Participants. If Computershare Trust Company of Canada ceases to act as
Plan Agent for any reason, another qualified party will be designated by Pembina to act as Plan Agent and Participants will be
notified of the change.

 

All funds credited to the Plan Agent under
the Plan on account of the reinvestment of Dividends will be applied to the purchase of new Shares directly from Pembina on behalf
of Participants. In no event will interest be paid to Participants on any funds held for reinvestment under the Plan.

 

In carrying out its obligations under the
Plan on behalf of Participants, the Plan Agent shall only be required to act in accordance with the instructions duly received
within the appropriate time periods.

 

Proration in Certain Events

 

Pembina reserves the right to determine,
promptly following each Dividend record date and where practicable in the context of the administration of the Plan, the amount
of new equity, if any, to be made available under the Plan on the Dividend payment date to which such record date relates. No assurances
can be made that new Shares will be made available under the Plan on a regular basis, or at all.

 

    	- 6 -

    	 

    

 

If, in respect of any Dividend payment
date, fulfilling the elections of all Participants under the Plan would result in the issuance of more than the maximum amount
of new equity determined by Pembina to be available under the Plan, then, where practicable, elections for the purchase of new
Shares on that Dividend payment date will be accepted (i) first, from Participants electing to reinvest Dividends under the Dividend
Reinvestment Component, and (ii) second, to the extent that new equity remains available under the Plan, from Participants electing
to receive the Premium DividendTM under the Premium DividendTM Component. If Pembina is not able to accept all elections
for a particular component of the Plan, then purchases of new Shares under that component on the applicable Dividend payment date
will, where practicable, be prorated among all Participants in that component according to the number of Shares enrolled therein.

 

If trading of Shares on the TSX, or the
trading thereof by the Plan Broker, is for any reason prohibited for an entire day, or if the Premium DividendTM Component
is terminated or suspended for any reason, in any such case during a Pricing Period, then purchases of new Shares under that component
on the applicable Dividend payment date will, where practicable in the context of the administration of the Plan, be prorated among
all Participants in that component according to the number of Shares enrolled therein.

 

If on any Dividend payment date Pembina
determines not to issue any equity through the Plan, or the availability of new Shares is prorated in accordance with the terms
of the Plan, or for any other reason a Dividend cannot be reinvested under the Plan, in whole or in part, then Participants will
be entitled to receive from Pembina the full cash amount of the regular Dividend for each Share in respect of which the Dividend
is payable but cannot be reinvested under the Plan in accordance with the applicable election.

 

Price of New Shares

 

The subscription price of new Shares purchased
on a Dividend payment date under both the Dividend Reinvestment Component and the Premium DividendTM Component will be 95%
of the Average Market Price for that Dividend payment date.

 

Subject to the policies of a particular
broker, investment dealer, financial institution or other nominee through which a beneficial Shareholder holds their Shares, full
reinvestment is possible as fractions of Shares may be credited to Participants' accounts maintained under the Plan.

 

Costs

 

No commissions, service charges or similar
fees are payable by Participants to Pembina, the Plan Agent or the Plan Broker in connection with the purchase of new Shares from
treasury under either the Dividend Reinvestment Component or the Premium DividendTM Component. All administrative costs of
the Plan, including the fees and expenses of the Plan Agent, will be paid by Pembina.

 

However, Eligible Shareholders whose Shares
are not registered in their own name but wish to participate in the Plan should consult the broker, investment dealer, financial
institution or other nominee who holds their Shares to confirm whether the nominee charges any fees to enroll or participate in
the Plan on their behalf.

 

    	- 7 -

    	 

    

 

Reports to Participants

 

The Plan Agent will maintain an account
for each Participant with respect to purchases of Shares made under the Plan for that Participant's account and will issue an unaudited
statement regarding purchases made under the Dividend Reinvestment Component on a monthly basis. These statements are a Participant's
continuing record of purchases of Shares made for its account under the Plan and should be retained for income tax purposes. No
statements will be provided to Participants in respect of purchases made under the Premium DividendTM Component.

 

Eligible Shareholders who participate in
the Plan indirectly through their broker, investment dealer, financial institution or other nominee should consult such nominee
to confirm what statements or reports, if any, will be provided by the nominee, whether for tax reporting purposes or otherwise.

 

Whether or not it receives detailed statements
or reports concerning transactions made on its behalf under the Plan, each Shareholder is responsible for calculating and monitoring
its own adjusted cost base in Shares for Canadian and/or U.S. federal income tax purposes, as certain averaging and other rules
may apply and such calculations may depend on the cost of other Shares held by the Shareholder and other factors.

 

Registration of Shares

 

Shares purchased under the Dividend Reinvestment
Component and held under the Plan by the Plan Agent for the account of Participants other than a Depository will be registered
in the name of the Plan Agent or its nominee or in accounts designated by it for the account of such Participants. A Direct Registration
Advice ("DRS Advice") evidencing book-entry registered ownership of such Shares, or a certificate for such Shares,
will only be issued to the Participant if the Plan or the Participant's participation therein is terminated or if the Participant
withdraws Shares from its account.

 

A Participant may, without terminating
participation in the Plan, withdraw from its account under the Plan, and have a DRS Advice or Share certificate issued and registered
in the Participant's name for, any number of whole Shares held for its account under the Plan by delivering to the Plan Agent a
duly completed withdrawal portion of the voucher located on the reverse of the statement of account issued by the Plan Agent. A
withdrawal request form may also be obtained from the Plan Agent at the address below. Alternatively, Participants may follow the
instructions at the Plan Agent's self-service web portal at www.investorcentre.com. The withdrawal of Shares and issuance of a
DRS Advice or Share certificate will be completed within the Plan Agent's ordinary service standards. Any remaining Shares (including
any residual fraction of a Share) will continue to be held by the Plan Agent for the Participant's account under the Plan.

 

Shares held under the Plan by the Plan
Agent for the account of a Participant may not be sold, pledged or otherwise disposed of by the Participant while so held.

 

For Eligible Shareholders enrolled in the
Dividend Reinvestment Component indirectly through a Depository, any new Shares issued under the Dividend Reinvestment Component
will not be held under the Plan but instead credited through such Depository's depository system to the accounts of appropriate
Depository Participants on behalf of such Eligible Shareholders.

 

Termination of Participation

 

An Eligible Shareholder who is enrolled
in the Plan directly as a Participant and wishes to terminate their participation in the Plan may do so voluntarily by delivering
to the Plan Agent a duly completed termination portion of the voucher located on the reverse of the statement of account issued
by the Plan Agent. A termination request form may also be obtained from the Plan Agent at the address below. Alternatively, Participants
may follow the instructions at the Plan Agent's self-service web portal at www.investorcentre.com. In addition, participation will
be terminated automatically following receipt by the Plan Agent of written notice of an individual Participant's death.

 

    	- 8 -

    	 

    

 

If a duly completed termination request
(or notice of an individual Participant's death) is not received by the Plan Agent before 5:00 p.m. (Toronto time) on the third
(3rd) Business Day preceding a Dividend record date, then the Participant's account will not be closed, and participation in the
Plan by such Participant will not be terminated, until after the Dividend payment date to which that record date relates.

 

An Eligible Shareholder who is enrolled
in the Plan indirectly through a Depository or otherwise through its broker, investment dealer, financial institution or other
nominee and wishes to terminate its participation in the Plan must contact the nominee who holds its Shares and provide appropriate
instructions to do so. The nominee should be consulted to confirm what information or documentation may be required to give effect
to the termination instructions, and to inquire about any applicable deadlines that the nominee may impose or be subject to under
the policies of that nominee or such Depository's depository system.

 

In the event of termination of participation,
a Participant (other than a Depository) or a deceased Participant's estate or legal representative, as applicable, will be issued
a DRS Advice for the number of whole Shares held under the Plan by the Plan Agent in the Participant's account and payment for
the value of any residual fraction of a Share so held based on the closing price of the Shares on the TSX (in respect of Participants
resident in Canada or any jurisdiction other than the United States) or the NYSE (in respect of Participants resident in the United
States) on the trading day prior to the date of termination. Upon termination of participation in the Plan, a Participant will
receive payment for fractional entitlements to Shares, if any, in Canadian currency (for all Participants other than those resident
in the United States) or United States currency (for all Participants resident in the United States).

 

Change of Election

 

An Eligible Shareholder who is enrolled
in the Plan directly as a Participant and wishes to change its election as between the Dividend Reinvestment Component and the
Premium DividendTM Component may do so by delivering to the Plan Agent a new, duly completed Enrollment Form reflecting the
new election. Alternatively, a Participant may follow the instructions at the Plan Agent's self-service web portal at www.investorcentre.com.

 

If a new Enrollment Form is not received
by the Plan Agent before 5:00 p.m. (Toronto time) on the third (3rd) Business Day preceding a Dividend record date, then the previous
election will apply to the Dividend to which that record date relates and the new election will only become effective for purposes
of subsequent Dividends.

 

An Eligible Shareholder who is enrolled
in the Plan indirectly through a Depository or otherwise through its broker, investment dealer, financial institution or other
nominee and wishes to change its election as between the Dividend Reinvestment Component and the Premium DividendTM Component
must contact such nominee who holds its Shares and provide appropriate instructions to do so. The nominee should be consulted to
confirm what information or documentation may be required to give effect to the change of election instructions, and to inquire
about any applicable deadlines that the nominee may impose or be subject to under the policies of that nominee or the applicable
Depository's depository system.

 

Subdivisions

 

If Shares are distributed pursuant to a
subdivision of Shares, the additional Shares received by the Plan Agent in respect of Shares held under the Plan by the Plan Agent
for the account of Participants will be credited proportionately to the accounts of such Participants.

 

    	- 9 -

    	 

    

 

Shareholder Voting

 

Whole Shares held under the Plan by the
Plan Agent for a Participant's account on the record date for a vote of Shareholders will be voted in accordance with the instructions
of the Participant given on a form to be furnished to the Participant for this purpose. Shares for which instructions are not received
will not be voted. No voting rights will attach to any fraction of a Share held for a Participant's account under the Plan.

 

Deemed Representations, Directions and Authorizations

 

Dividend Reinvestment Component

 

By enrolling in the Dividend Reinvestment
Component, whether directly as a Participant or indirectly through a Depository or otherwise through a broker, investment dealer,
financial institution or other nominee, a Shareholder shall be deemed to have: (i) represented and warranted to Pembina and the
Plan Agent that it is an Eligible Shareholder with respect to participation in the Dividend Reinvestment Component; (ii) appointed
the Plan Agent to receive from Pembina, and directed Pembina to credit the Plan Agent with, all Dividends (less any applicable
withholding taxes) payable in respect of all Shares registered in the name of the Shareholder or held under the Plan for its account
or, in the case of a Shareholder enrolled indirectly through a Depository or otherwise through a broker, investment dealer, financial
institution or other nominee, that are enrolled (through a Depository or otherwise) on its behalf in the Dividend Reinvestment
Component; and (iii) authorized and directed the Plan Agent to reinvest such Dividends (less any applicable withholding taxes)
in new Shares, all in accordance with the provisions of the Dividend Reinvestment Component as set forth herein (which provisions
include, without limitation, the purchase of new Shares at a 5% discount to the Average Market Price and the holding of such new
Shares under the Plan or the crediting of such new Shares through a Depository) and otherwise upon and subject to the terms and
conditions described herein.

 

Premium DividendTM Component

 

By enrolling in the Premium DividendTM
Component, whether directly as a Participant or indirectly through CDS or otherwise through a broker, investment dealer, financial
institution or other nominee, a Shareholder shall be deemed to have: (i) represented and warranted to Pembina, the Plan Agent and
the Plan Broker that it is an Eligible Shareholder with respect to participation in the Premium DividendTM Component; (ii)
appointed the Plan Agent to receive from Pembina, and directed Pembina to credit the Plan Agent with, all Dividends (less any applicable
withholding taxes) payable in respect of all Shares registered in the name of the Shareholder or held under the Plan for its account
or, in the case of a Shareholder enrolled indirectly through CDS or otherwise through a broker, investment dealer, financial institution
or other nominee, that are enrolled (through CDS or otherwise) on its behalf in the Premium DividendTM Component; and (iii)
authorized and directed the Plan Agent to reinvest such Dividends (less any applicable withholding taxes) in new Shares, all in
accordance with the provisions of the Premium DividendTM Component as set forth herein (which provisions include, without
limitation, the purchase of new Shares at the 5% discount to the Average Market Price, the pre-sale of Shares through the Plan
Broker and the delivery of new Shares to the Plan Broker in exchange for payment of the Premium DividendTM) and otherwise
upon and subject to the terms and conditions described herein.

 

Responsibilities of Pembina and the Plan Agent

 

None of Pembina, the Plan Agent or the
Plan Broker will be liable to any Shareholder, a Depository, any Depository Participant or any other nominee acting on behalf of
a Shareholder in respect of the Plan for any act or for any omission to act in connection with the operation of the Plan including,
without limitation, any claims or liability with respect to or arising out of:

 

    	- 10 -

    	 

    

 

		(a)	any failure by a Depository, a Depository Participant or any other nominee to enroll or not enroll
in the Plan any Shareholder (or, as applicable, any Shares held on the Shareholder's behalf) in accordance with the Shareholder's
instructions or to not otherwise act upon a Shareholder's instructions;

 

		(b)	the continued enrollment in the Plan of any Shareholder (or, as applicable, any Shares held on
the Shareholder's behalf) until receipt of all necessary documentation as provided herein required to terminate participation in
the Plan;

 

		(c)	the prices and times at which Shares are purchased under the Plan for the account of, or on behalf
of, any Shareholder;

 

		(d)	any decision by Pembina to issue or not issue new equity through the Plan on any given Dividend
payment date, or the amount of equity issued (if any);

 

		(e)	any decision to amend or terminate the Plan in accordance with the terms hereof;

 

		(f)	any default by the Plan Broker in delivering the Premium DividendTM to the Plan Agent on any
Dividend payment date;

 

		(g)	a prorating, for any reason, of the amount of equity available under the Plan in the circumstances
described herein or otherwise;

 

		(h)	any determination made by Pembina or the Plan Agent regarding a Shareholder's eligibility to participate
in the Plan or any component thereof, including the cancellation of a Shareholder's participation for failure to satisfy eligibility
requirements; or

 

		(h)	any income or withholding taxes or other liabilities payable by a Shareholder in connection with
their participation in the Plan.

 

None of Pembina, the Plan Agent or the
Plan Broker can assure a Participant (or any beneficial owner of Shares for which a Participant may be acting) a profit or protect
a Participant (or any such beneficial owner, as applicable) against loss on Shares purchased under the Plan.

 

The Plan Agent retains the right not to
act and shall not be liable for refusing to act if, due to a lack of information or for any other reason whatsoever, the Plan Agent,
in its sole judgment, determines that such act might cause it to be in non-compliance with any applicable anti-money laundering
or anti-terrorist law, regulation or policy or any other law, regulation or policy to which the Plan Agent is now or hereafter
becomes subject.

 

Canadian Federal Income Tax Considerations

 

The following is a summary of the principal
Canadian federal income tax considerations generally applicable to Eligible Shareholders who participate in the Plan. This summary
is of a general nature only, is not exhaustive of all possible tax considerations and is not intended to be legal or tax advice
to any particular Eligible Shareholder.

 

This summary is provided by and on behalf
of Pembina and not the Plan Agent or the Plan Broker. Eligible Shareholders are urged to consult their own tax advisors as to their
particular circumstances and tax position.

 

    	- 11 -

    	 

    

 

This summary is based on the provisions
of the Income Tax Act (Canada) (the "Tax Act") and the regulations thereunder (the "Regulations"),
all specific proposals to amend the Tax Act and the Regulations publicly announced by or on behalf of the Minister of Finance (Canada),
and the administrative and assessing practices of the Canada Revenue Agency (the "CRA"), all as of April
4, 2013. This summary does not otherwise take into account or anticipate any changes in law or the administrative or assessing
practices of the CRA, nor does it take into account any provincial or territorial laws of Canada or the tax laws of any other country,
including, without limitation, any changes which may occur after April 4, 2013.

 

This summary assumes that all Shares held
by an Eligible Shareholder who participates in the Plan (a "Participating Shareholder"), including Shares
purchased pursuant to the Dividend Reinvestment Component or Premium DividendTM Component, are held by the Participating Shareholder
as capital property for the purposes of the Tax Act. The Shares will generally constitute capital property to a Participating Shareholder
provided that the Participating Shareholder does not hold or use such Shares in the course of carrying on a business in which the
Participating Shareholder buys or sells securities, and the Participating Shareholder did not acquire such Shares in one or more
transactions considered to be an adventure or concern in the nature of trade.

 

This summary is not applicable to: (i)
a Participating Shareholder that is a "financial institution" (as defined in the Tax Act) for the purposes of the "mark-to-market"
rules; (ii) a Participating Shareholder an interest in which would be a "tax shelter investment" (as defined in the Tax
Act); (iii) a Participating Shareholder that is a "specified financial institution" or a "restricted financial institution"
(each as defined in the Tax Act); (iv) a Participating Shareholder that has made a "functional currency" election under
the Tax Act to determine its Canadian tax results in a currency other than Canadian currency; or (v) a Participating Shareholder
that has entered or will enter into a "derivative forward agreement" as that term is defined in proposed amendments contained
in a Notice of Ways and Means Motion that accompanied the federal budget tabled by the Minister of Finance (Canada) on March 21,
2013 with respect to the Shares.

 

Canadian Participants

 

This portion of the summary is applicable
to Participating Shareholders who, at all relevant times and for the purposes of the Tax Act, are or are deemed to be residents
of Canada (each, a "Canadian Participant"). Certain Canadian Participants who might not otherwise be considered
to hold their Shares as capital property may, in certain circumstances, be entitled to have their Shares and any other "Canadian
security" (as defined in the Tax Act), treated as capital property by making the irrevocable election permitted by subsection
39(4) of the Tax Act. A Canadian Participant contemplating making such an election should first consult its own tax advisors.

 

Dividends

 

A Canadian Participant's reinvestment of
Dividends pursuant to the Dividend Reinvestment Component or Premium DividendTM Component, in such number of newly-issued
Shares as is equal to the aggregate amount of the Dividend payable on each Dividend payment date divided by 95% of the corresponding
Average Market Price, should not result in the Canadian Participant realizing a taxable benefit under the Tax Act.

 

    	- 12 -

    	 

    

 

The reinvestment of Dividends, or the receipt
of Premium DividendsTM, under the terms of the Plan does not, however, relieve a Canadian Participant from any liability for
income taxes that may otherwise be payable on such Dividends. In this regard, a Canadian Participant who participates in the Dividend
Reinvestment Component or Premium DividendTM Component will be treated, for tax purposes, as having received, on each Dividend
payment date, a taxable dividend equal to the amount of the Dividend payable on such date, which Dividend will be subject to the
same tax treatment accorded to taxable dividends received by the Canadian Participant from a taxable Canadian corporation. For
example, if the Canadian Participant is an individual, Dividends will be subject to the gross-up and dividend tax credit rules
contained in the Tax Act and, if appropriate designations are made at or prior to the time a Dividend is paid to qualify the Dividend
as an "eligible dividend", then the fact that the Dividend is reinvested pursuant to the Plan will not affect the status
of any Dividend as an eligible dividend for purposes of the enhanced gross-up and dividend tax credit available to individuals.
If the Canadian Participant is a corporation, then Dividends received by the Canadian Participant are generally deductible in computing
the Canadian Participant's taxable income and, if the Canadian Participant is a "private corporation" or "subject
corporation" (both defined in the Tax Act), then a refundable tax of 331⁄3% under Part IV of the Tax Act will generally
apply to the Dividend to the extent the Dividend is deductible in computing the Canadian Participant's taxable income.

 

Dispositions

 

A Canadian Participant will generally realize
a capital gain (or loss) on the sale of any Shares, whether sold pursuant to the Premium DividendTM Component or otherwise
outside the Plan (other than a sale to Pembina that is not a sale in the open market in the manner in which Shares would normally
be purchased by any member of the public in the open market), equal to the amount by which the proceeds of disposition is greater
(or less) than the Canadian Participant's adjusted cost base of such Shares and any reasonable costs incurred by the Canadian Participant
in connection with the sale.

 

For the purposes of determining the amount
of any capital gain (or loss) which may result from the disposition of Shares, the adjusted cost base of the Shares owned by a
Canadian Participant at a particular time will be the average cost of all Shares owned by the Canadian Participant at that time,
whether purchased through the Dividend Reinvestment Component or the Premium DividendTM Component or otherwise purchased outside
the Plan. Generally, a Canadian Participant's cost of a Share purchased pursuant to the Dividend Reinvestment Component or Premium
DividendTM Component will be equal to 95% of the Average Market Price of the Share for that Dividend payment date.

 

Generally, one-half of any capital gain
realized by a Canadian Participant on a disposition of Shares purchased pursuant to the Dividend Reinvestment Component or Premium
DividendTM Component must be included in the Canadian Participant's income for the year as a taxable capital gain. Subject
to certain specific rules in the Tax Act, one-half of any capital loss realized by a Canadian Participant on a disposition of Shares
in a taxation year will be an allowable capital loss which must be deducted from any taxable capital gains realized by the Canadian
Participant in the year of disposition. Allowable capital losses for a taxation year in excess of taxable capital gains for that
year generally may be carried back and deducted in any of the three preceding taxation years or carried forward and deducted in
any subsequent taxation year against net taxable capital gains realized in such years to the extent and under the circumstances
prescribed by the Tax Act.

 

A Canadian Participant that is throughout
the relevant taxation year a "Canadian controlled private corporation" (as defined in the Tax Act) may be liable to pay
an additional refundable tax of 6 2/3% on its "aggregate investment income" (as defined in the Tax Act) for the year,
which will include an amount in respect of taxable capital gains. If the Canadian Participant is a corporation, the amount of any
capital loss arising from a disposition or deemed disposition of such Shares may be reduced by the amount of dividends received
or deemed to have been received by it on such shares to the extent and under circumstances prescribed by the Tax Act. Similar rules
may apply where a corporation is a member of a partnership or a beneficiary of a trust that owns Shares. Canadian Participants
to whom these rules may be relevant should consult their own tax advisors.

 

    	- 13 -

    	 

    

 

When a Canadian Participant's participation
in the Plan is terminated by the Canadian Participant or Pembina or when the Plan is terminated by Pembina, the Canadian Participant
will receive a cash payment for the value of any residual fraction of a Share based on the closing price of the Shares on the TSX
on the trading day prior to the date of termination. A deemed dividend may arise if the cash payment for a fractional Share exceeds
the paid-up capital in respect of such fractional Share and a capital gain (or loss) may also be realized in certain circumstances.
A deemed dividend is treated in the manner described above in respect of Dividends.

 

Capital gains realized by an individual
(including certain trusts) may give rise to alternative minimum tax under the Tax Act.

 

Where a Canadian Participant has not
made the irrevocable election permitted under subsection 39(4) of the Tax Act to treat their Shares and any other "Canadian
security" (as defined in the Tax Act) as capital property, the CRA may take the position that any Shares purchased and sold
by the Canadian Participant pursuant to the Premium DividendTM Component are not capital property to the Canadian Participant,
such that the tax consequences of the Canadian Participant's sale of Shares pursuant to the Premium DividendTM Component may
differ from the consequences described above.

 

Non-Resident Participants

 

This portion of the summary is applicable
to Participating Shareholders who, at all relevant times and for the purposes of the Tax Act, are not and are not deemed to be
residents of Canada and do not use or hold, and are not deemed to use or hold, the Shares in the course of, or in connection with,
a business carried on in Canada (each, a "Non-Resident Participant"). Special rules, which are not discussed
in this summary, may apply to a Non-Resident Participant that is an issuer carrying on business in Canada or elsewhere. Such Non-Resident
Participants should consult their own tax advisors.

 

Dividends

 

Any Dividends paid or credited in respect
of a Non-Resident Participant's Shares will be subject to a non-resident withholding tax for Canadian income tax purposes. Under
the Tax Act, the rate of non-resident withholding tax on dividends is 25%. However, this rate may be subject to reduction under
the provisions of any income tax treaty between Canada and the country in which the Non-Resident Participant is resident. For example,
under the provisions of the Canada – United States Income Tax Convention, 1980 (the "Treaty"),
where a Non-Resident Participant is a resident of the United States, is fully entitled to the benefits of the Treaty, is the beneficial
owner of such Dividends, and does not maintain a "permanent establishment" or "fixed base" (each within the
meaning of the Treaty) in Canada to which the Non-Resident Participant's Shares are attributable, the rate of Canadian withholding
tax will generally be reduced to 15% of the Dividend.

 

Any Dividends reinvested pursuant to the
Dividend Reinvestment Component will first be reduced by an amount equal to the Non-Resident Participant's Canadian withholding
tax obligation prior to reinvestment.

 

Dispositions

 

A Non-Resident Participant will not be
subject to Canadian income tax under the Tax Act on any capital gains realized on the disposition of any Shares unless such Shares
constitute "taxable Canadian property" (as defined by the Tax Act) to the Non-Resident Participant. Provided the Shares
are listed on a "designated stock exchange" (as defined in the Tax Act and which currently includes the TSX and the NYSE)
at the time of disposition, Shares will not be taxable Canadian property to the Non-Resident Participant unless: (i) at any time
during the 60-month period immediately preceding the disposition, the Non-Resident Participant and/or persons with whom the Non-Resident
Participant did not deal at arm's length, held 25% or more of the issued shares of any class of Pembina's capital stock; and (ii)
more than 50% of the fair market value of the Shares was derived directly or indirectly from one or any combination of real or
immovable property situated in Canada, "Canadian resource properties" as defined in the Tax Act, "timber resource
properties" as defined in the Tax Act and options in respect of, interests in or civil law rights in such properties.

 

    	- 14 -

    	 

    

 

Notwithstanding the foregoing, Shares may
be deemed to be taxable Canadian property in certain circumstances specified in the Tax Act. Where Shares represent taxable Canadian
property to a Non-Resident Participant, any capital gains realized on the sale or deemed disposition of the Shares will be subject
to taxation in Canada, except as otherwise provided in any tax treaty between Canada and the country in which the Non-Resident
Participant is resident.

 

U.S. Federal Income Tax Considerations

 

The following is a general description
of the material United States federal income tax consequences which may be applicable to a United States person (as defined below)
who holds Shares and participates in the Dividend Reinvestment Component of the Plan (referred to as a "U.S. Participant").
This summary applies only to U.S. Participants that hold Shares, including Shares acquired under the Plan, as capital assets and
that have the U.S. dollar as their functional currency.

 

This summary is for general information
purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations
that may apply to a U.S. Participant arising from and relating to the participation in the Plan. In addition, this summary does
not take into account the individual facts and circumstances of any particular U.S. Participant that may affect the U.S. federal
income tax consequences to such U.S. Participant, including without limitation specific tax consequences to a U.S. Participant
under an applicable tax treaty. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S.
federal income tax advice with respect to any U.S. Participant. This summary does not address the U.S. federal alternative minimum,
U.S. federal estate and gift, U.S. state and local, and foreign tax consequences to U.S. Participants of participation in the Plan.
In addition, except as specifically set forth below, this summary does not discuss applicable tax reporting requirements. This
summary assumes that Pembina is not, and will not become, a passive foreign investment company, as described below. Each prospective
U.S. Participant should consult its own tax advisor regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal
estate and gift, U.S. state and local, and foreign tax consequences relating to the participation in the Plan.

 

No legal opinion from U.S. legal counsel
or ruling from the Internal Revenue Service (the "IRS") has been requested, or will be obtained, regarding the
U.S. federal income tax consequences of the acquisition, ownership, and disposition of Shares. This summary is not binding on the
IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, the positions taken in this summary.
In addition, because the authorities on which this summary is based are subject to various interpretations, the IRS and the U.S.
courts could disagree with one or more of the conclusions described in this summary.

 

NOTICE PURSUANT TO U.S. TREASURY DEPARTMENT
CIRCULAR 230: NOTHING CONTAINED IN THIS SUMMARY CONCERNING ANY U.S. FEDERAL TAX ISSUE IS INTENDED OR WRITTEN TO BE USED, AND IT
CANNOT BE USED, BY A PARTICIPANT, FOR THE PURPOSE OF AVOIDING U.S. FEDERAL TAX PENALTIES UNDER THE CODE (AS DEFINED BELOW). THIS
SUMMARY WAS WRITTEN IN CONNECTION WITH THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED BY THIS DOCUMENT. EACH
PARTICIPANT SHOULD SEEK U.S. FEDERAL TAX ADVICE, BASED ON SUCH PARTICIPANT’S PARTICULAR CIRCUMSTANCES, FROM AN INDEPENDENT
TAX ADVISOR.

 

    	- 15 -

    	 

    

 

For purposes of this description, a "United
States person" means any one of the following:

 

		·	an individual who is a citizen or resident of the United States;

 

		·	a corporation (including any entity treated as a corporation for U.S. federal income tax purposes)
organized in or under the laws of the United States or of any political subdivision of the United States;

 

		·	an estate that is subject to United States federal income taxation without regard to the source
of its income; or

 

		·	a trust, if a United States court has primary supervision over its administration and one or more
United States persons have the authority to control all substantial decisions of the trust, or the trust has made a valid election
to be treated as a United States person.

 

Authorities

 

This summary is based on the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury Regulations (whether final, temporary, or proposed), published
rulings of the IRS, published administrative positions of the IRS, the Convention Between Canada and the United States of America
with Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended (the "Canada-U.S. Tax Convention"),
and U.S. court decisions that are applicable and, in each case, as in effect and available, as of the date of this document. Any
of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change
could be applied on a retroactive or prospective basis which could affect the U.S. federal income tax considerations described
in this summary. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation.

 

U.S. Participants Subject to Special
U.S. Federal Income Tax Rules Not Addressed

 

This summary does not address the U.S.
federal income tax considerations applicable to U.S. Participants that are subject to special provisions under the Code, including,
but not limited to, the following U.S. Participants that: (a) are tax-exempt organizations, qualified retirement plans, individual
retirement accounts, or other tax-deferred accounts; (b) are financial institutions, underwriters, insurance companies, real estate
investment trusts, or regulated investment companies; (c) are broker-dealers, dealers, or traders in securities or currencies that
elect to apply a mark-to-market accounting method; (d) have a “functional currency” other than the U.S. dollar; (e)
own Shares as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involving
more than one position; (f) acquired Shares in connection with the exercise of employee stock options or otherwise as compensation
for services; (g) hold Shares other than as a capital asset within the meaning of Section 1221 of the Code (generally, property
held for investment purposes); or (h) own or have owned (directly, indirectly, or by attribution) 10% or more of the total combined
voting power of the outstanding shares of the Company. This summary also does not address the U.S. federal income tax considerations
applicable to U.S. Participants who are: (a) U.S. expatriates or former long-term residents of the U.S.; (b) persons that have
been, are, or will be a resident or deemed to be a resident in Canada for purposes of the Income Tax Act (Canada) (the "Tax
Act"); (c) persons that use or hold, will use or hold, or that are or will be deemed to use or hold Shares in connection
with carrying on a business in Canada; (d) persons whose Shares constitute "taxable Canadian property" under the Tax
Act; or (e) persons that have a permanent establishment in Canada for the purposes of the Canada-U.S. Tax Convention. U.S. Participants
that are subject to special provisions under the Code, including, but not limited to, U.S. Participants described immediately above,
should consult their own tax advisor regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift,
U.S. state and local, and foreign tax consequences relating to the participation in the Plan.

 

    	- 16 -

    	 

    

 

If an entity or arrangement that is classified
as a partnership (or other "pass-through" entity) for U.S. federal income tax purposes holds Shares, the U.S. federal
income tax consequences to such entity and the partners (or other owners) of such entity generally will depend on the activities
of the entity and the status of such partners (or owners). This summary does not address the tax consequences to any such owner.
Partners (or other owners) of entities or arrangements that are classified as partnerships or as "pass-through" entities
for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences arising
from and relating to the participation in the Plan.

 

Amount Capable of Inclusion in Income

 

For U.S. federal income tax purposes, a
U.S. Participant who is a participant in the Plan will be treated as receiving a distribution equal to the sum of (i) the fair
market value as of the distribution payment date of the Shares acquired pursuant to the Plan, and (ii) any Canadian taxes which
are withheld with respect to the distribution. The amount treated as a distribution will be includible in the U.S. Participant’s
income as a taxable dividend to the extent of Pembina’s current and accumulated earnings and profits, as determined for U.S.
federal income tax purposes. Any portion of the distribution in excess of Pembina’s earnings and profits will first be treated
as a tax-free return of capital to the extent of the U.S. Participant’s tax basis in its Shares and will be applied against
and reduce that basis on a dollar-for-dollar basis (thereby increasing the amount of gain and decreasing the amount of loss recognized
on a subsequent disposition of the Shares). To the extent that the distribution exceeds the U.S. Participant’s tax basis,
the excess will constitute gain from a sale or exchange of the Shares. Dividends received on the Shares by corporate U.S. shareholders
generally will not be eligible for the "dividends received deduction". Subject to applicable limitations, dividends paid
by Pembina to non-corporate U.S. Participants, including individuals, generally would be eligible for the preferential tax rates
applicable to long-term capital gains for dividends, provided certain holding period and other conditions are satisfied, including
that Pembina not be classified as a PFIC (as defined below) in the tax year of distribution or in the preceding tax year. The dividend
rules are complex, and each U.S. Participant should consult its own tax advisor regarding the application of such rules.

 

A U.S. Participant will not realize any
additional taxable income upon the receipt of certificates for whole Shares that were credited to the U.S. Participant’s
account either upon the U.S. Participant’s request for certificates for certain of those Shares or upon withdrawal from or
termination of the Plan although a U.S. Participant could recognize income upon the receipt of cash in lieu of a fractional Share.

 

Foreign Currency Gains

 

Taxable distributions with respect to the
Shares that are paid in Canadian dollars will be included in the gross income of a U.S. Participant as translated into U.S. dollars
calculated by reference to the exchange rate in effect on the day the dividend payment date regardless of whether the Canadian
dollars are converted into U.S. dollars at that time. A U.S. Participant who receives a payment in Canadian dollars and converts
Canadian dollars into U.S. dollars at a conversion rate other than the rate in effect on the day of the dividend payment date may
have a foreign currency exchange gain or loss that would be treated as United States source ordinary income or loss. U.S. Participants
are urged to consult their own tax advisors concerning the U.S. federal income tax consequences of acquiring, holding and disposing
of Canadian dollars.

 

    	- 17 -

    	 

    

 

In the case of a cash basis U.S. Participant
who receives Canadian dollars, or another foreign currency, in connection with a sale, exchange or other disposition of Shares,
the amount realized will be based on the U.S. dollar value of the foreign currency received with respect to the Shares as determined
on the settlement date of the sale or exchange. An accrual basis U.S. Participant may elect the same treatment required of cash
basis taxpayers with respect to a sale or exchange of Shares, provided that the election is applied consistently from year to year.
This election may not be changed without the consent of the IRS. If an accrual basis U.S. Participant does not elect to be treated
as a cash basis taxpayer, that U.S. Participant may have a foreign currency gain or loss for U.S. federal income tax purposes equal
to the difference between the U.S. dollar value of the currency received on the date of the sale or exchange of the Shares and
the date of payment. This currency gain or loss would be treated as ordinary income or loss and would be in addition to the gain
or loss, if any, recognized by that U.S. Participant on the sale, exchange or other disposition of the Shares.

 

Basis and Holding Period

 

The tax basis of Shares received by a U.S.
Participant pursuant to the Plan will equal the fair market value as of the dividend payment date of those Shares, and the holding
period for those Shares will begin on the day after the dividend payment date.

 

Sale, Exchange or Other Disposition
of the Shares

 

Upon a sale, exchange or other disposition
of the Shares acquired under the Plan, a U.S. Participant will recognize a capital gain or loss for U.S. federal income tax purposes
in an amount equal to the difference between the amount realized (which shall include the amount of taxes withheld therefrom, if
any) and its adjusted tax basis in such Shares. Any such gain or loss generally will be long-term capital gain or loss if the U.S.
Participant’s holding period in the Shares exceeds one year. Non-corporate U.S. Participants (including individuals) generally
will be subject to U.S. federal income tax on long-term capital gain at preferential rates. The deductibility of capital losses
is subject to significant limitations.

 

Additional Tax on Passive Income

 

Certain individuals, estates and trusts
whose income exceeds certain thresholds will be required to pay a 3.8% Medicare surtax on "net investment income" including,
among other things, dividends and net gain from disposition of property (other than property held in certain trades or businesses).
U.S. Participants should consult their own tax advisors regarding the effect, if any, of this tax on their participation in the
Plan and the ownership and disposition of Shares.

 

Passive Foreign Investment Company Considerations

 

Special, generally unfavorable, rules apply
to the ownership and disposition of the stock of a passive foreign investment company ("PFIC"). In the absence
of any qualified electing fund ("QEF") or mark-to-market election, if Pembina were to be treated as a PFIC for
any year during which a U.S. Participant held Shares, the U.S. Participant would be taxed under generally unfavorable rules that
apply if a U.S. Participant recognizes a gain on the sale or other disposition of PFIC stock or receives certain distributions
with respect to PFIC stock. Among the consequences would be a loss of favorable capital gains rates and the imposition of an interest
charge. Pembina believes that it was not a PFIC during its prior taxable year and, based on its current operations and financial
expectations, Pembina expects it will not become a PFIC during its current taxable year ending December 31, 2013. However, PFIC
classification is fundamentally factual in nature, generally cannot be determined until the close of the tax year in question,
and is determined annually. Additionally, the analysis depends, in part, on the application of complex U.S. federal income tax
rules, which are subject to differing interpretations. Consequently, there can be no assurance that Pembina has never been and
will not become a PFIC for any tax year during which U.S. Participants hold Shares. U.S. Participants should consult their own
tax advisors regarding the possible classification of Pembina as a PFIC and the consequences if that classification were to occur,
and the availability of the QEF election or mark-to-market election.

 

    	- 18 -

    	 

    

 

Foreign Tax Credits

 

Regardless of whether the distribution
to a U.S. Participant under the Plan is subject to tax under the PFIC rules or as described in "Amount Capable of Inclusion
in Income" above, any tax withheld by Canadian taxing authorities with respect to a distribution under the Plan may, subject
to a number of complex limitations, be claimed as a foreign tax credit against a U.S. Participant’s U.S. federal income tax
liability or may be claimed as a deduction for U.S. federal income tax purposes. The limitation on foreign taxes eligible for credit
is calculated separately with respect to specific classes of income. For this purpose, dividends that are distributed with respect
to Shares will generally be foreign source income for purposes of computing the foreign tax credit allowable to a U.S. Participant.
Gains recognized on the sale of Shares by a U.S. Participant should be treated as U.S. source for this purpose, except as otherwise
provided in an applicable income tax treaty, and if an election is properly made under the Code. Because of the complexity of those
limitations, each U.S. Participant should consult its own tax advisor with respect to the amount of foreign taxes that may be claimed
as a credit.

 

U.S. Information Reporting and Backup
Withholding

 

Under U.S. federal income tax law and Treasury
Regulations, certain categories of U.S. Participants must file information returns with respect to their investment in, or involvement
in, a foreign corporation. For example, U.S. return disclosure obligations (and related penalties) are imposed on individuals who
are U.S. Participants that hold certain specified foreign financial assets. The definition of specified foreign financial assets
includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained
by a financial institution, any stock or security issued by a non-United States person, any financial instrument or contract held
for investment that has an issuer or counterparty other than a United States person and any interest in a foreign entity. U.S.
Participants may be subject to these reporting requirements unless their Shares are held in an account at a U.S. financial institution.
Penalties for failure to file certain of these information returns are substantial. U.S. Participants should consult with their
own tax advisors regarding the requirements of filing information returns, including the requirement to file an IRS Form 8938.

 

Payments made within the U.S. or by a U.S.
payor or U.S. middleman, of dividends on, and proceeds arising from the sale or other taxable disposition of, Shares will generally
be subject to information reporting and backup withholding tax, at the rate of 28%, if a U.S. Participant (a) fails to furnish
such U.S. Participant’s correct U.S. taxpayer identification number (generally on Form W-9), (b) furnishes an incorrect U.S.
taxpayer identification number, (c) is notified by the IRS that such U.S. Participant has previously failed to properly report
items subject to backup withholding tax, or (d) fails to certify, under penalty of perjury, that such U.S. Participant has furnished
its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Participant that it is subject to backup
withholding tax. However, certain exempt persons generally are excluded from these information reporting and backup withholding
rules. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Participant’s
U.S. federal income tax liability, if any, or will be refunded, if such U.S. Participant furnishes required information to the
IRS in a timely manner.

 

The discussion of reporting requirements
set forth above is not intended to constitute a complete description of all reporting requirements that may apply to a U.S. Participant.
A failure to satisfy certain reporting requirements may result in an extension of the time period during which the IRS can assess
a tax, and under certain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting
requirement. Each U.S. Participant should consult its own tax advisor regarding the information reporting and backup withholding
rules.

 

    	- 19 -

    	 

    

 

Amendment or Termination of the Plan

 

Pembina reserves the right to amend or
terminate the Plan at any time, provided that no such action shall have retroactive effect prejudicial to Participants. Pembina
will publicly announce any material amendments to or termination of the Plan. Generally, no notice will be given to Participants
regarding any amendments to the Plan intended to cure, correct or rectify any ambiguities, defective or inconsistent provisions,
errors, mistakes or omissions. Amendments to the Plan will be subject to the prior approval of the TSX and any other applicable
stock exchange on which the Shares are listed.

 

In the event of termination of the Plan,
Participants will be issued a DRS Advice for the number of whole Shares held under the Plan by the Plan Agent in the Participant's
account and payment for the value of any remaining fraction of a Share so held based on the closing price of the Shares on the
TSX (in respect of Participants resident in Canada or any jurisdiction other than the United States) or the NYSE (in respect of
Participants resident in the United States) on the trading day prior to the date of termination. Upon termination, a Participant
will receive payment for fractional entitlements to Shares, if any, in Canadian currency (for all Participants other than those
resident in the United States) or United States currency (for all Participants resident in the United States).

 

Withholding Taxes

 

The Plan is subject to any withholding
obligations that Pembina may have with respect to taxes or other charges under applicable laws, and any amounts to be reinvested
hereunder shall be net of any amounts required to be withheld.

 

Interpretation

 

Any issues of interpretation arising in
connection with the Plan or its application shall be conclusively determined by Pembina.

 

Governing Law

 

The Plan shall be governed by, and administered
and construed in accordance with, the laws of the Province of Alberta and the federal laws of Canada applicable therein.

 

Notices and Inquiries

 

Any notices, documents (including a DRS
Advice or a Share certificate) or payments required under the Plan to be given or delivered to Participants by Pembina or the Plan
Agent shall be validly given or delivered if mailed to Participants at their respective addresses as recorded in the register of
Shareholders maintained by or on behalf of Pembina or, in the case of a Depository, if given in accordance with custom and practice
relating to the such Depository’s depository system.

 

Inquiries to the Plan Agent may be directed
to:

 

Computershare Trust Company of
Canada

100 University Avenue, 9th Floor,
North Tower

Toronto, Ontario M5J 2Y1

 

Attention:  Dividend
Reinvestment Department

Toll-Free Tel:    1-800-564-6253

 

    	- 20 -

    	 

    

 

Inquiries to Pembina may be directed to:

 

Pembina Pipeline Corporation

3800, 525 - 8th Avenue S.W.

Calgary, Alberta T2P 1G1

 

	Attention:	Investor Relations
	Tel:	(403) 231-3156
	Toll-Free:	1-855-880-7404
	Fax:	(403) 691-7356
	E-mail:	investor-relations@pembina.com

 

Effective Date

 

The effective date of the Plan is October
1, 2010, as amended on April 4, 2013.

 

    	- 21 -tckm_ex101.htm

EXHIBIT 10.1

SHARE EXCHANGE AGREEMENT

 

THIS AGREEMENT is made effective as of the 2nd day of April, 2013.

 

AMONG:

 

VICTORY ELECTRONIC CIGARETTES, INC., a company incorporated under the laws of the State of Nevada and having an address at 1880 Airport Drive, Ball Ground, Georgia 30107

 

(the “Target”)

 

AND:

 

THE SHAREHOLDERS OF THE TARGET, as listed on Schedule A attached hereto

 

(the “Shareholders”)

 

AND:

 

TECKMINE INDUSTRIES, INC., a company incorporated under the laws of the State of Nevada and having an address at 17622 La Entrada Drive, Yorba Linda, California 92886

 

(the “Purchaser”)

 

WHEREAS:

 

A. The Shareholders are the registered and/or beneficial owners of all of the issued and outstanding common shares in the capital of the Target;

 

B. The Purchaser has made an offer to issue a total of 32,500,000 common shares in the capital of the Purchaser to the Shareholders as consideration for the acquisition by the Purchaser of all of the issued and outstanding common shares in the capital of the Target; and

 

C. Upon the terms and subject to the conditions set forth in this Agreement, the Shareholders have agreed to sell to the Purchaser and the Purchaser has agreed to purchase from the Shareholders all of the Shareholders’ legal and beneficial interest in the common shares in the capital of the Target such that, at Closing (as defined herein), the Target will become a wholly-owned subsidiary of the Purchaser.

 

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties covenant and agree as follows:

 

  

1

  

 

ARTICLE 1

INTERPRETATION

 

1.1 Definitions

 

In this Agreement the following words and phrases will have the following meanings:

 

	
(a)  

	
“Accounting Date” has the meaning set forth in Section 1.1(iii);

 

	
(b)  

	
“Affiliate” with respect to any specified Person at any time, means each Person directly or indirectly through one or more intermediaries controlling, controlled by or under direct or indirect common control with such specified Person at such time;

 

	
(c)  

	
“Agreement” means this Share Exchange Agreement, and all of the schedules and other documents attached hereto, as it may from time to time be supplemented or amended;

 

	
(d)  

	
“Applicable Law” means, with respect to any Person, any domestic (whether federal, state, territorial, provincial, municipal or local) or foreign statute, law, ordinance, rule, administrative interpretation, regulation, Order, writ, injunction, directive, judgment, decree or other requirement, all as in effect as of the Closing, of any Governmental Body applicable to such Person or any of its Affiliates or any of their respective properties, assets, officers, directors, employees, consultants or agents (in connection with such officer’s, director’s, employee’s, consultant’s or agent’s activities on behalf of such Person or any of its Affiliates);

 

	
(e)  

	
“Applicable Securities Laws” means all applicable securities laws in all jurisdictions relevant to the issuance of securities of the Purchaser pursuant to the terms of this Agreement;

 

	
(f)  

	
“Associate” means with respect to any Person: (i) any other Person of which such Person is an officer, director or partner or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of equity securities issued by such other Person, (ii) any trust or other estate in which such Person has a ten percent (10%) or more beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity, and (iii) any relative or spouse of such Person, or any relative of such spouse who has the same home as such Person or who is a director or officer of such Person or any Affiliate thereof;

 

	
(g)  

	
“Bridge Loan” means the bridge loan of up to $500,000 advanced or to be advanced by the Purchaser to the Target in accordance with the terms of the Commitment Letter and all documents contemplated therein including the General Security Agreement, the Pledge and Assignment of Securities, the Debentures and all such supporting certificates and other documents reasonably required by the Purchaser;

 

	
(h)  

	
“Business” means the business as heretofore or currently conducted by the Target;

 

	
(i)  

	
“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in Nevada, USA are authorized or required by law to close;

 

	
(j)  

	
“Certificate” has the meaning set forth in Section 2.5;

 

	
(k)  

	
“Closing” means the closing of the Transaction pursuant to the terms of this Agreement on the Closing Date;

 

  

2

  

 

	
(l)  

	
“Closing Date” means the day following the satisfaction or waiver all conditions precedent set forth in this Agreement, which shall not be later than April 15, 2013 or such other date as the Shareholders, the Target and the Purchaser may agree in writing;

 

	
(m)  

	
“Commitment Letter” means the Commitment Letter dated January 31, 2013 between the Purchaser and the Target that discussed the terms and conditions of the Bridge Loan;

 

	
(n)  

	
“Consideration Shares” means, collectively, the 32,500,000 fully paid and non-assessable Purchaser Shares to be issued to the Shareholders on the Closing Date;

 

	
(o)  

	
“Contracts” means all contracts, agreements, options, leases, licences, sales and purchase orders, commitments and other instruments of any kind, whether written or oral, to which the Target is a party on the Closing Date;

 

	
(p)  

	
“Copyrights” has the meaning set forth in Section 3.23(a)(iii);

 

	
(q)  

	
“Damages” means all demands, claims, actions, causes of action, assessments, losses, damages, costs, expenses, liabilities, judgments, awards, fines, sanctions, penalties, charges and amounts paid in settlement (net of insurance proceeds actually received), including: (i) interest on cash disbursements in respect of any of the foregoing and (ii) reasonable costs, fees and expenses of attorneys, accountants and other agents of, or other Persons retained by, such Person;

 

	
(r)  

	
“Debentures” mean the debenture or debentures in the principal amount of up to an aggregate of $500,000 issued by the Target in favour of the Purchaser issued in connection with the Bridge Loan;

 

	
(s)  

	
“Disclosure Statement” means the Disclosure Statement of the Target to be signed and dated by the Target and delivered by the Target to the Purchaser as of the date of this Agreement;

 

	
(t)  

	
“Employee” has the meaning set forth in Section 3.15(a)(ii);

 

	
(u)  

	
“Employee Agreement” has the meaning set forth in Section 3.15(a)(iii);

 

	
(v)  

	
“Employee Plan” has the meaning set forth in Section 3.15(a)(i);

 

	
(w)  

	
“Encumbrances” means any lien, claim, charge, pledge, hypothecation, security interest, mortgage, title retention agreement, option or encumbrance of any nature or kind whatsoever, other than: (i) statutory liens for Taxes not yet due and payable; and (ii) such imperfections of title, easements and encumbrances, if any, that will not result in a Material Adverse Effect;

 

	
(x)  

	
“Exchange Act” means the United States Securities Exchange Act of 1934, as amended;

 

	
(y)  

	
“FINRA” means the Financial Industry Regulatory Authority;

 

  

3

  

 

	
(z)  

	
“GAAP” means United States generally accepted accounting principles, applied on a consistent basis with prior periods;

 

	
(aa)  

	
“General Security Agreement” means the General Security Agreement dated for reference January 31, 2013 entered into by the Target granting to the Purchaser a first security interest in all presently owned and after acquired personal property and a floating charge over all of the Target’s other property, assets and undertaking;

 

	
(bb)  

	
“Governmental Body” means any:

 

	
(i)  

	
nation, state, county, city, town, village, district, or other jurisdiction of any nature,

 

	
(ii)  

	
federal, state, provincial, local, municipal, foreign, or other government,

 

	
(iii)  

	
governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal),

 

	
(iv)  

	
multi-national organization or body, or

 

	
(v)  

	
body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature;

 

	
(cc)  

	
“Intellectual Property Assets” has the meaning set forth in Section 3.23(a);

 

	
(dd)  

	
“Key Shareholder” means Marc Hardgrove;

 

	
(ee)  

	
“Legal Requirement” means any federal, state, provincial, local, municipal, foreign, international, multinational, or other administrative order, constitution, law, ordinance, principle of common law, regulation, statute or treaty;

 

	
(ff)  

	
“Liabilities” means, with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, determined, determinable or otherwise and whether or not the same is required to be accrued on the financial statements of such Person;

 

	
(gg)  

	
“Lien” means, with respect to any asset, any mortgage, assignment, trust or deemed trust (whether contractual, statutory or otherwise arising), title defect or objection, lien, pledge, charge, security interest, hypothecation, restriction, Encumbrance or charge of any kind in respect of such asset;

 

	
(hh)  

	
“Loan Fee” means the loan fee of up to $200,000 payable by the Target to the Purchaser in accordance with the terms and conditions of the Commitment Letter as liquated damages upon the occurrence of certain events;

 

	
(ii)  

	
“Losses” means any and all demands, claims, actions or causes of action, assessments, losses, damages, liabilities, costs and expenses, including, without limitation, interest, penalties, fines and reasonable attorneys, accountants and other professional fees and expenses, but excluding any indirect, consequential or punitive damages suffered by the Purchaser, the Target, or the Shareholders, including damages for lost profits or lost business opportunities;

 

  

4

  

 

	
(jj)  

	
“Marks” has the meaning set forth in Section 3.23(a)(i);

 

	
(kk)  

	
“Material Contracts” means those subsisting commitments, contracts, instruments, leases and other agreements, oral or written, entered into by the Target, by which the Target is bound or to which it or its respective assets are subject which have total payment obligations on the part of the Target which exceed $5,000 or are for a term of or in excess of one (1) year;

 

	
(ll)  

	
“Material Adverse Effect”, when used in connection with an entity, means any change, event, violation, inaccuracy, circumstance or effect that is materially adverse to the business, assets (including intangible assets), Liabilities, capitalization, ownership, financial condition or results of operations of such entity and any Affiliates, taken as a whole, other than any change, event, circumstance or effect to the extent resulting from: (i) the announcement of the execution of this Agreement and the transactions contemplated hereby, (ii) changes in legal or regulatory conditions generally affecting the Business, except that any change, effect, event or occurrence described in this subsection (ii) will be considered in determining whether there has been, or will be, a Material Adverse Effect if the same disproportionately affects the Target or the Business, (iii) changes or effects that generally affect the Business, (iv) changes in general economic conditions or (E) changes in GAAP;

 

	
(mm)  

	
“Material Interest” has the meaning set forth in Section 1.1(ddd);

 

	
(nn)  

	
“Order” means any award, decision, injunction, judgment, order, ruling, subpoena or verdict entered, issued, made or rendered by any court, administrative agency or other Governmental Body or authority or by any arbitrator;

 

	
(oo)  

	
“Organizational Documents” means:

 

	
(i)  

	
the articles or certificate of incorporation and the bylaws of a corporation,

 

	
(ii)  

	
any charter or similar document adopted or filed in connection with the creation, formation, or organization of a Person, and

 

	
(iii)  

	
any amendment to any of the foregoing;

 

	
(pp)  

	
“Patents” has the meaning set forth in Section 3.23(a)(ii);

 

	
(qq)  

	
“Permitted Liens” means: (i) Liens for Taxes or governmental assessments, charges or claims the payment of which is not yet due, or for Taxes the validity of which is being contested in good faith by appropriate proceedings; (ii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other similar Persons and other Liens imposed by Applicable Laws incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith; (iii) Liens relating to deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security or to secure the performance of leases, trade contracts or other similar agreements; (iv) Liens and Encumbrances specifically identified in the balance sheet included in the Target Financial Statements; (v) Liens securing executory obligations under any lease that constitutes an “operating lease” under GAAP; and (vi) other Liens set forth in the Disclosure Statement, provided, however, that, with respect to each of clauses (i) through (v), to the extent that any such Encumbrance or Lien arose prior to the date of the balance sheet included in the Target Financial Statements and relates to, or secures the payment of, a Liability that is required to be accrued under GAAP, such Encumbrance or Lien shall not be a Permitted Lien unless adequate accruals for such Liability have been established therefor on such balance sheet in conformity with GAAP;

 

  

5

  

 

	
(rr)  

	
“Person” includes an individual, corporation, body corporate, partnership, joint venture, association, trust or unincorporated organization or any trustee, executor, administrator or other legal representative thereof;

 

	
(ss)  

	
“Pledge and Assignment of Securities” means the Pledge and Assignment of Securities made by each Shareholder in favour of the Purchaser dated for reference January 31, 2013 and issued in connection with the Bridge Loan;

 

	
(tt)  

	
“Premises” means those premises that have been occupied or used, or are occupied or used, by the Target in connection with the Business;

 

	
(uu)  

	
“Proceeding” means any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body or arbitrator;

 

	
(vv)  

	
“Purchaser Accounting Date” has the meaning set forth in Section 5.13;

 

	
(ww)  

	
“Purchaser Disclosure Statement” has the meaning set forth in Article 5;

 

	
(xx)  

	
“Purchaser Note Financing” means the up to $500,000 secured convertible note financing in which the principal amount of each note plus applicable interest thereon may be convertible into Purchaser Shares at the election of the holder of the notes;

 

	
(yy)  

	
“Purchaser Private Placement” means the private placement of Purchaser Shares at a price to be determined by the Purchaser for gross proceeds of at least $2,000,000.

 

	
(zz)  

	
“Purchaser SEC Documents” has the meaning set forth in Section 5.12;

 

	
(aaa)  

	
“Purchaser Shares” means the common shares in the capital of the Purchaser;

 

	
(bbb)  

	
“Purchaser’s Solicitors” means the law firm of Clark Wilson LLP;

 

	
(ccc)  

	
“Regulation S” means Regulation S promulgated under the Securities Act;

 

	
(ddd)  

	
“Related Party” means, with respect to a particular individual:

 

	
(i)  

	
each other member of such individual’s Family,

 

	
(ii)  

	
any Person that is directly or indirectly controlled by such individual or one or more members of such individual’s Family,

 

	
(iii)  

	
any Person in which such individual or members of such individual’s Family hold (individually or in the aggregate) a Material Interest, or

 

	
(iv)  

	
any Person with respect to which such individual or one or more members of such individual’s Family serves as a director, officer, partner, executor or trustee (or in a similar capacity), and

 

  

6

  

 

with respect to a specified Person other than an individual:

 

	
(v)  

	
any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with such specified Person,

 

	
(vi)  

	
any Person that holds a Material Interest in such specified Person,

 

	
(vii)  

	
each Person that serves as a director, officer, partner, executor or trustee of such specified Person (or in a similar capacity),

 

	
(viii)  

	
any Person in which such specified Person holds a Material Interest,

 

	
(ix)  

	
any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity), and

 

	
(x)  

	
any Related Person of any individual described in clause (vi) or (vii).

 

For purposes of this definition: (A) the “Family” of an individual includes: (i) the individual; (ii) the individual’s spouse; (iii) any other natural person who is related to the individual or the individual’s spouse within the second degree; and (iv) any other natural person who resides with such individual, and (B) “Material Interest” means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of voting securities or other voting interests representing at least twenty percent (20%) of the outstanding voting power of a Person or equity securities or other equity interests representing at least twenty percent (20%) of the outstanding equity securities or equity interests in a Person;

 

	
(eee)  

	
“SEC” means the United States Securities and Exchange Commission;

 

	
(fff)  

	
“Securities Act” means the United States Securities Act of 1933, as amended;

 

	
(ggg)  

	
“Shares” means the fully paid and non-assessable common shares in the capital of the Target owned by the Shareholders as set out in Schedule A, being all of the issued and outstanding common shares in the capital of the Target;

 

	
(hhh)  

	
“Stock Option Plan” means the Stock Option Plan to be adopted by the Purchaser on or prior to the Closing Date authorizing the issuance of up to 10,000,000 Purchaser Shares thereunder which may qualify as “Incentive Stock Options” pursuant to Section 422 of the Internal Revenue Code;

 

	
(iii)  

	
“Target Financial Statements” means audited financial statements for the Target for the fiscal years ended December 31, 2012 (the “Accounting Date”) and December 31, 2011, and the comparative fiscal years, together with related statements of income, cash flows, and changes in shareholders’ equity for the fiscal years then ended, all prepared in accordance with GAAP and audited by an independent auditor registered with the Public Company Accounting Oversight Board in the United States;

 

  

7

  

 

	
(jjj)  

	
“Tax” means any tax (including any income tax, capital gains tax, value-added tax, sales tax, property tax, gift tax or estate tax), levy, assessment, tariff, duty (including any customs duty), deficiency or other fee, and any related charge or amount (including any fine, penalty, interest or addition to tax), imposed, assessed or collected by or under the authority of any Governmental Body or payable pursuant to any tax-sharing agreement or any other contract relating to the sharing or payment of any such tax, levy, assessment, tariff, duty, deficiency or fee;

 

	
(kkk)  

	
“Tax Return” means any return (including any information return), report, statement, schedule, notice, form or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax;

 

	
(lll)  

	
“Trade Secrets” has the meaning set forth in Section 3.23(a)(iv);

 

	
(mmm)  

	
“Transaction” means the acquisition by the Purchaser of all of the Shares from the Shareholders in exchange for the issuance of the Consideration Shares to the Shareholders;

 

	
(nnn)  

	
“Transaction Documents” has the meaning set forth in Section 3.4;

 

	
(ooo)  

	
“U.S. Person” has the meaning ascribed thereto in Regulation S; and

 

	
(ppp)  

	
“Woods” means Nathan Woods, the President, Secretary, Treasurer and a director of the Purchaser.

 

1.2 Schedules

 

The following are the schedules to this Agreement:

 

	Schedule A	—	List of Shareholders
	 	 	 
	Schedule B	—	Certificate of U.S. Shareholder

 

1.3 Interpretation

 

For the purposes of this Agreement, except as otherwise expressly provided herein:

 

	
(a)  

	
all references in this Agreement to a designated Article, Section, subsection, paragraph or other subdivision, or to a Schedule, is to the designated Article, section, subsection, paragraph or other subdivision of, or Schedule to, this Agreement unless otherwise specifically stated;

 

	
(b)  

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

 

	
(c)  

	
the singular of any term includes the plural and vice versa and the use of any term is equally applicable to any gender and where applicable to a body corporate;

 

	
(d)  

	
the word “or” is not exclusive and the word “including” is not limiting (whether or not non-limiting language such as “without limitation” or “but not limited to” or other words of similar import are used with reference thereto);

 

	
(e)  

	
all accounting terms not otherwise defined in this Agreement have the meanings assigned to them in accordance with GAAP, applied on a consistent basis with prior periods;

 

	
(f)  

	
except as otherwise provided, any reference to a statute includes and is a reference to such statute and to the regulations made pursuant thereto with all amendments made thereto and in force from time to time, and to any statute or regulations that may be passed which have the effect of supplementing or superseding such statute or such regulations;

 

  

8

  

 

	
(g)  

	
where the phrase “to the best of the knowledge of” or phrases of similar import are used in this Agreement, it will be a requirement that the Person in respect of whom the phrase is used will have made such due enquiries as are reasonably necessary to enable such Person to make the statement or disclosure;

 

	
(h)  

	
the headings to the Articles and sections of this Agreement are inserted for convenience of reference only and do not form a part of this Agreement and are not intended to interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof;

 

	
(i)  

	
any reference to a corporate entity includes and is also a reference to any corporate entity that is a successor to such entity;

 

	
(j)  

	
the parties acknowledge that this Agreement is the product of arm’s length negotiation between the parties, each having obtained its own independent legal advice, and that this Agreement will be construed neither strictly for nor strictly against any party irrespective of which party was responsible for drafting this Agreement;

 

	
(k)  

	
the representations, warranties, covenants and agreements contained in this Agreement will not merge at the Closing and will continue in full force and effect from and after the Closing Date for the applicable period set out in this Agreement; and

 

	
(l)  

	
unless otherwise specifically noted, all references to currency in this Agreement and in the Target Financial Statements are or will be to United States Dollars ($). If it is necessary to convert money from another currency to United States Dollars, such money will be converted using the exchange rates in effect at the date of payment.

 

ARTICLE 2

PURCHASE AND SALE

 

2.1 Purchase and Sale of Shares

 

Subject to the terms and conditions of this Agreement, the Purchaser irrevocably agrees to purchase the Shares from the Shareholders and the Shareholders irrevocably agree to sell, assign and transfer the Shares to the Purchaser, free and clear of all Encumbrances, on the terms and conditions herein set forth, in consideration for the issuance by the Purchaser of the Consideration Shares to the Shareholders, such that, at Closing, the Target will become a wholly-owned subsidiary of the Purchaser.

 

2.2 Consideration

 

As consideration for the Shares to be acquired by the Purchaser pursuant to the terms of this Agreement, the Purchaser shall allot and issue the Consideration Shares to the Shareholders in the amount set out opposite each Shareholder’s name in Schedule A, as fully paid and non-assessable Purchaser Shares.

 

2.3 Fractional Securities

 

Notwithstanding any other provision of this Agreement, no fractional Consideration Shares will be issued in the Transaction. In lieu of any such fractional securities, any Shareholder entitled to receive a fractional amount of Consideration Shares will be entitled to have such fraction rounded down to the nearest whole number of applicable Consideration Shares and will receive from the Purchaser a certificate representing same.

 

  

9

  

 

2.4 Restricted Securities

 

The Shareholders acknowledge that the Consideration Shares issued pursuant to the terms and conditions set forth in this Agreement will have such hold periods as are required under Applicable Securities Laws, and, as a result, may not be sold, transferred or otherwise disposed of, except pursuant to an effective registration statement or prospectus, or pursuant to an exemption from, or in a transaction not subject to, the registration or prospectus requirements of Applicable Securities Laws and in each case only in accordance with all Applicable Securities Laws.

 

2.5 Exemptions

 

The Shareholders acknowledge that the Purchaser has advised each Shareholder that it is issuing the Consideration Shares to such Shareholder under exemptions from the prospectus and registration requirements of Applicable Securities Laws and, as a consequence, certain protections, rights and remedies provided by Applicable Securities Laws, including statutory rights of rescission or damages, will not be available to such Shareholder. To evidence each Shareholder’s eligibility for such exemptions, each Shareholder agrees to deliver a fully completed and executed Certificate of U.S. Shareholder in the form attached hereto as Schedule B (the “Certificate”) to the Purchaser, and agrees that the representations and warranties set out in the Certificate as executed by such Shareholder will be true and complete on the Closing Date.

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE TARGET AND KEY SHAREHOLDER

 

As of the Closing Date, and except as set forth in the Target Financial Statements or the Disclosure Statement, or as otherwise provided for in any certificate or other instrument delivered pursuant to this Agreement, the Target and the Key Shareholder make the following representations to the Purchaser and acknowledge and agree that the Purchaser is relying upon such representations and warranties, each of which is qualified in its entirety by the matters described in the Disclosure Statement, in connection with the execution, delivery and performance of this Agreement:

 

3.1 Organization and Good Standing

 

The Target is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, with full corporate power, authority and capacity to conduct its business as presently conducted, to own or use the properties and assets that it purport to own or use, and to perform all of its obligations under any applicable contracts. The Target is duly qualified to do business as a corporation and is in good standing under the laws of each state or other jurisdiction in which the failure to be so registered would be likely to result in a Material Adverse Effect on the Target.

 

3.2 Capitalization

 

The entire authorized and issued capital stock and other equity securities of the Target are as set out in the Disclosure Statement. All of the issued and outstanding Shares and other securities of the Target are owned of record and beneficially by the Shareholders, free and clear of all Encumbrances. All of the outstanding equity securities of the Target have been duly authorized and validly issued and are fully paid and non-assessable. None of the outstanding equity securities or other securities of the Target, if any, were issued in violation of any Applicable Securities Laws or any other Legal Requirement. The Target does not own, or have any contract to acquire, any equity securities or other securities of any Person or any direct or indirect equity or ownership interest in any other business. There are no agreements purporting to restrict the transfer of any of the issued and outstanding Shares, no voting agreements, shareholders’ agreements, voting trusts, or other arrangements restricting or affecting the voting of any of the Shares to which the Target is a party or of which the Target or the Key Shareholder are aware.

 

  

10

  

 

3.3 Absence of Rights to Acquire Securities

 

Other than as set out in this Agreement, no Person has any agreement, right or option, present or future, contingent, absolute or capable of becoming an agreement, right or option or which with the passage of time or the occurrence of any event could become an agreement, right or option:

 

	
(a)  

	
to require the Target to issue any further or other shares in its capital or any other security convertible or exchangeable into shares in its capital or to convert or exchange any securities into or for shares in the capital of the Target;

 

	
(b)  

	
for the issue or allotment of any unissued shares in the capital of the Target;

 

	
(c)  

	
to require the Target to purchase, redeem or otherwise acquire any of the issued and outstanding shares in the capital of the Target; or

 

	
(d)  

	
to acquire the Shares or any of them.

 

3.4 Authority

 

The Target has all requisite power and authority to execute and deliver this Agreement and any other documents contemplated by this Agreement (collectively, the “Transaction Documents”) to be signed by the Target and to perform its respective obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of each of the Transaction Documents by the Target and the consummation of the transactions contemplated hereby have been duly authorized by the board of directors of the Target. No other corporate or shareholder proceedings on the part of the Target is necessary to authorize such documents or to consummate the transactions contemplated hereby. This Agreement has been, and the other Transaction Documents when executed and delivered by the Target as contemplated by this Agreement will be, duly executed and delivered by the Target and this Agreement is, and the other Transaction Documents when executed and delivered by the Target as contemplated hereby will be, valid and binding obligations of the Target, enforceable in accordance with their respective terms except:

 

	
(a)  

	
as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally;

 

	
(b)  

	
as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and

 

	
(c)  

	
as limited by public policy.

 

3.5 No Conflict

 

Except as set out in the Disclosure Statement, neither the execution and delivery of this Agreement nor the consummation or performance of any of the transactions contemplated herein will, directly or indirectly (with or without notice or lapse of time or both):

 

	
(a)  

	
contravene, conflict with, or result in a violation of any provision of the Organizational Documents of the Target, or any resolution adopted by the board of directors of the Target or the Shareholders;

 

	
(b)  

	
contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the transactions contemplated herein or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which the Target, or any of its respective assets, may be subject;

 

  

11

  

 

	
(c)  

	
contravene, conflict with, or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any governmental authorization that is held by the Target or that otherwise relates to the Business of, or any of the assets owned or used by, the Target;

 

	
(d)  

	
cause the Purchaser or the Target to become subject to, or to become liable for the payment of, any Tax;

 

	
(e)  

	
cause any of the assets owned by the Target to be reassessed or revalued by any taxing authority or other Governmental Body;

 

	
(f)  

	
contravene, conflict with, or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Material Contract;

 

	
(g)  

	
result in the imposition or creation of any Encumbrance upon or with respect to any of the assets owned or used by the Target; or

 

	
(h)  

	
require the Target to obtain any consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the transactions contemplated herein.

 

3.6 Financial Statements

 

	
(a)  

	
The Target Financial Statements:

 

	
(i)  

	
are in accordance with the books and records of the Target;

 

	
(ii)  

	
present fairly the financial condition of the Target as of the respective dates indicated and the results of operations for such periods; and

 

	
(iii)  

	
have been prepared in accordance with GAAP and reflect the consistent application of GAAP throughout the periods involved.

 

	
(b)  

	
All material financial transactions of the Target have been accurately recorded in the books and records of the Target and such books and records fairly present the financial position and the affairs of the Target.

 

	
(c)  

	
Other than the Bridge Loan and the costs and expenses incurred in connection with the negotiation and consummation of the transactions contemplated herein, the Target has no material Liabilities or obligations, net of cash, either direct or indirect, matured or unmatured, absolute, contingent or otherwise, that exceed $5,000, which:

 

	
(i)  

	
are not set forth in the Target Financial Statements or have not heretofore been paid or discharged;

 

	
(ii)  

	
did not arise in the regular and ordinary course of business under any agreement, contract, commitment, lease or plan specifically disclosed in writing to the Purchaser; or

 

	
(iii)  

	
have not been incurred in amounts and pursuant to practices consistent with past business practice, in or as a result of the regular and ordinary course of its business since the Accounting Date.

 

  

12

  

 

	
(d)  

	
Except to the extent reflected or reserved against in the Target Financial Statements or incurred subsequent to the Accounting Date in the ordinary and usual course of the business of the Target, the Target does not have any outstanding indebtedness or any Liabilities or obligations (whether accrued, absolute, contingent or otherwise), and any Liabilities or obligations incurred in the ordinary and usual course of business since the Accounting Date have not had a Material Adverse Effect on the Target.

 

	
(e)  

	
Since the Accounting Date, there have not been:

 

	
(i)  

	
any changes in the condition or operations of the business, assets or financial affairs of the Target which have caused, individually or in the aggregate, a Material Adverse Effect on the Target; or

 

	
(ii)  

	
any damage, destruction or loss, labour trouble or other event, development or condition, of any character (whether or not covered by insurance) which is not generally known or which has not been disclosed to the Purchaser, which has or may cause a Material Adverse Effect on the Target.

 

	
(f)  

	
Since the Accounting Date, and other than as contemplated by this Agreement, the Bridge Loan and the documents delivered thereunder or the Loan Fee, the Target has not:

 

	
(i)  

	
transferred, assigned, sold or otherwise disposed of any of the assets shown or reflected in the Target Financial Statements or cancelled any debts or claims except in each case in the ordinary and usual course of business;

 

	
(ii)  

	
incurred or assumed any obligation or liability (fixed or contingent), except unsecured current obligations and Liabilities incurred in the ordinary and usual course of business;

 

	
(iii)  

	
issued or sold any shares in its capital or any warrants, bonds, debentures or other corporate securities or issued, granted or delivered any right, option or other commitment for the issue of any such or other securities;

 

	
(iv)  

	
discharged or satisfied any Encumbrances, or paid any obligation or liability (fixed or contingent), other than current Liabilities or the current portion of long term liabilities disclosed in the Target Financial Statements or current Liabilities incurred since the date thereof in the ordinary and usual course of business;

 

	
(v)  

	
declared, made, or committed itself to make any payment of any dividend or other distribution in respect of any of its shares, nor has it purchased, redeemed, subdivided, consolidated, or reclassified any of its shares;

 

	
(vi)  

	
made any gift of money or of any assets to any Person;

 

	
(vii)  

	
purchased or sold any assets except in the ordinary and usual course of business;

 

	
(viii)  

	
amended or changed or taken any action to amend or change its Organizational Documents;

 

	
(ix)  

	
made payments of any kind to or on behalf of either a Shareholder or any Related Parties of a Shareholder, nor under any management agreement save and except business related expenses and salaries in the ordinary and usual course of business and at the regular rates payable to them;

 

  

13

  

 

	
(x)  

	
created, incurred, assumed or guaranteed any indebtedness for money borrowed, or mortgaged, pledged or subjected any of the material assets or properties of the Target to any mortgage, lien, pledge, security interest, conditional sales contract or other encumbrance of any nature whatsoever;

 

	
(xi)  

	
made or suffered any amendment or termination of any Material Contract, or cancelled, modified or waived any substantial debts or claims held by it or waived any rights of substantial value, other than in the ordinary course of business;

 

	
(xii)  

	
suffered any damage, destruction or loss, whether or not covered by insurance, that has had or may be reasonably expected to have a Material Adverse Effect on the Target;

 

	
(xiii)  

	
other than in the ordinary course of business, increased the salaries or other compensation of, or made any advance (excluding advances for ordinary and necessary business expenses) or loan to, any of its employees or directors or made any increase in, or any addition to, other benefits to which any of its employees or directors may be entitled;

 

	
(xiv)  

	
adopted, or increased the payments to or benefits under, any profit sharing, bonus, deferred compensation, savings, insurance, pension, retirement, or other employee benefit plan for or with any employees of the Target; or

 

	
(xv)  

	
authorized or agreed or otherwise have become committed to do any of the foregoing.

 

	
(g)  

	
The Target has no guarantees, indemnities or contingent or indirect obligations with respect to the Liabilities or obligations of any other Person including any obligation to service the debt of or otherwise acquire an obligation of another Person or to supply funds to, or otherwise maintain any working capital or other balance sheet condition of any other Person.

 

	
(h)  

	
The Target is not a party to, bound by or subject to any indenture, mortgage, lease, agreement, license, permit, authorization, certification, instrument, statute, regulation, order, judgment, decree or law that would be violated or breached by, or under which default would occur or which could be terminated, cancelled or accelerated, in whole or in part, as a result of the execution and delivery of this Agreement or the consummation of any of the transactions provided for in this Agreement.

 

3.7 Subsidiaries

 

The Target has no wholly-owned or majority owned subsidiaries or material interest in any other Person.

 

3.8 Books and Records

 

The books of account, minute books, stock record books, and other records of the Target are complete and correct and have been maintained in accordance with sound business practices, including the maintenance of an adequate system of internal controls. The minute books of the Target contain accurate and complete records of all meetings held, and corporate action taken by, the respective shareholders, board of directors, and committees of the board of directors of the Target, and no meeting of any such shareholders, board of directors, or committee has been held for which minutes have not been prepared and are not contained in such minute books. At the Closing, all of those books and records will be in the possession of the Target.

 

  

14

  

 

3.9 Title to Personal Property and Encumbrances

 

The Target possesses, and has good and marketable title to all personal property necessary for the continued operation of the Business as presently conducted and as represented to the Purchaser, including all assets reflected in the Target Financial Statements or acquired since the Accounting Date. All such property is in reasonably good operating condition (normal wear and tear excepted), and is reasonably fit for the purposes for which such property is presently used. All material equipment, furniture, fixtures and other tangible personal property and assets owned or leased by the Target is owned by the Target free and clear of all Encumbrances, except as disclosed in the Disclosure Statement.

 

3.10 Title to Real Property and Encumbrances

 

The Target possesses, and has good and marketable title to all real property and leaseholds or other such interests necessary for the continued operation of the Business as presently conducted and as represented to the Purchaser, including all assets reflected in the Target Financial Statements or acquired since the Accounting Date. All such property is in reasonably good operating condition (normal wear and tear excepted), and is reasonably fit for the purposes for which such property is presently used. All material real property and leaseholds are owned or leased by the Target free and clear of all Encumbrances, except as disclosed in the Disclosure Statement. The Target has delivered or made available, or will make available on request, to the Purchaser copies of the deeds and other instruments (as recorded) by which the Target acquired such real property and interests, and copies of all title insurance policies, opinions, abstracts and surveys in the possession of the Target and relating to such property or interests.

 

3.11 Accounts Receivable

 

All accounts receivable of the Target that are reflected on the balance sheet included in the Target Financial Statements or on the accounting records of the Target as of the Closing Date (collectively, the “Accounts Receivable”) have been recorded by the Target in accordance with its usual accounting practices consistent with prior periods and represent or will represent valid obligations arising from sales actually made or services actually performed in the ordinary course of business. To the best knowledge of the Target and the Key Shareholder, the Accounts Receivable are or will be as of the Closing Date current and collectible net of the respective reserves shown on the balance sheet included in the Target Financial Statements or on the accounting records of the Target. The reserve taken for doubtful or bad debtor accounts is adequate based on the past experience of the Target and is consistent with the accounting procedures used in previous fiscal periods. There is nothing which would indicate that such reserves are not adequate or that a higher reserve should be taken. There is no contest, claim, or right of set-off, other than returns in the ordinary course of business, under any contract with any obligor of an Account Receivable relating to the amount or validity of such Account Receivable. The Disclosure Statement contains a complete and accurate list of all Accounts Receivable as of the date of the Financial Statements, which list sets forth the aging of such Accounts Receivable.

 

3.12 Material Contracts

 

The Target has made available all the present outstanding Material Contracts entered into by the Target in the course of carrying on the Business. Except as listed in the Disclosure Statement, the Target is not party to or bound by any other Material Contract, whether oral or written, and the contracts and agreements are all valid and subsisting, in full force and effect and unamended, no material default or violation exists in respect thereof on the part of the Target or, to the best of the knowledge of the Target, on the part of any of the other parties thereto. The Target is not aware of any intention on the part of any of the other parties thereto to terminate or materially alter any such contracts or agreements or any event that with notice or the lapse of time, or both, will create a material breach or violation thereof or default under any such contracts or agreements. To the best knowledge of the Target, the continuation, validity, and effectiveness of each Material Contract will in no way be affected by the consummation of the transactions contemplated by this Agreement. There exists no actual or threatened termination, cancellation, or limitation of, or any amendment, modification, or change to any Material Contract.

 

  

15

  

 

3.13 Tax Matters

 

	
(a)  

	
The Target has filed or caused to be filed all Tax Returns that are or were required to be filed by or with respect to it, either separately or as a member of a group of corporations, pursuant to all applicable statutes and other Legal Requirements. The Target has made available to the Purchaser copies of all such Tax Returns filed by the Target. Except as described in the Disclosure Statement, the Target has not given or been requested to give waivers or extensions (or is or would be subject to a waiver or extension given by any other Person) of any statute of limitations relating to the payment by the Target or for which the Target may be liable.

 

	
(b)  

	
All Taxes that the Target is or was required to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Body or other Person.

 

	
(c)  

	
All Tax Returns filed by (or that include on a consolidated basis) the Target are true, correct, and complete. There is no tax sharing agreement that will require any payment by the Target after the date of this Agreement.

 

	
(d)  

	
The Target has paid all Taxes that have become or are due with respect to any period ended on or prior to the date hereof and has established an adequate reserve therefore in the Target Financial Statements for those Taxes not yet due and payable, except for: (i) any Taxes the non-payment of which will not have a Material Adverse Effect on the Target, and (ii) such Taxes, if any, as are listed in the Disclosure Statement and are being contested in good faith and as to which adequate reserves (determined in accordance with GAAP) have been provided in the Target Financial Statements.

 

	
(e)  

	
The Target is not presently under, nor has it received notice of, any contemplated investigation or audit by any regulatory or government agency or body or any foreign or state taxing authority concerning any fiscal year or period ended prior to the date hereof.

 

	
(f)  

	
The Target Financial Statements contain full provision for all Taxes including any deferred Taxes that may be assessed to the Target.

 

3.14 No Agents

 

The Target warrants to the Purchaser that no broker, agent or other intermediary has been engaged by the Target in connection with the transactions contemplated hereby and, consequently, no commission is payable or due to a third party from the Target.

 

3.15 Employee Benefit Plans and Compensation; Employment Matters.

 

	
(a)  

	
For purposes of this Section 3.15, the following terms will have the meanings set forth below:

 

	
(i)  

	
“Employee Plan” refers to any plan, program, policy, practice, contract, agreement or other arrangement providing for bonuses, severance, termination pay, performance awards, stock or stock-related awards, fringe benefits or other employee benefits of any kind, whether formal or informal, funded or unfunded and whether or not legally binding, and pursuant to which the Target has or may have any material liability contingent or otherwise;

 

  

16

  

 

	
(ii)  

	
“Employee” means any current, former, or retired employee, officer, or director of the Target; and

 

	
(iii)  

	
“Employee Agreement” refers to each employment, severance, consulting or similar agreement or contract between the Target and any Employee.

 

	
(b)  

	
The Target has made available to Purchaser:

 

	
(i)  

	
correct and complete copies of all documents embodying each Employee Plan and each Employee Agreement including all amendments thereto and copies of all forms of agreement and enrollment used in connection therewith;

 

	
(ii)  

	
the most recent annual actuarial valuations, if any, prepared for each Employee Plan;

 

	
(iii)  

	
if the Employee Plan is funded, the most recent annual and periodic accounting of the Employee Plan assets; and

 

	
(iv)  

	
all communications material to any Employee or Employees relating to the Employee Plan and any proposed Employee Plan, in each case, relating to any amendments, terminations, establishments, increases or decreases in benefits, acceleration of payments or vesting schedules or other events which would result in any material liability to the Target.

 

	
(c)  

	
The Target has performed, in all material respects, all obligations required to be performed by it under, is not in default or violation of, and has no knowledge of any default or violation by another party to any Employee Plan, and all Employee Plans have been established and maintained in all material respects in accordance with their respective terms and in substantial compliance with all Applicable Laws. There are no actions, suits or claims pending, or, to the knowledge of the Target, threatened or anticipated (other than routine claims for benefits), against any Employee Plan or against the assets of any Employee Plan. The Employee Plans can be amended, terminated or otherwise discontinued after the Closing in accordance with their terms, without liability to the Target, the Purchaser or any Affiliate thereof (other than ordinary administration expenses typically incurred in a termination event). There are no audits, inquiries or proceedings pending or, to the knowledge of the Key Shareholder and Target threatened, by any Governmental Body.

 

	
(d)  

	
The execution of this Agreement and the consummation of the transactions contemplated hereby will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under an Employee Plan, Employee Agreement, trust or loan that will or may result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any Employee.

 

	
(e)  

	
The Target:

 

	
(i)  

	
is in compliance in all material respects with all Applicable Laws respecting employment, employment practices, terms and conditions of employment and wages and hours, in each case, with respect to Employees;

 

	
(ii)  

	
has withheld all amounts required by law or by agreement to be withheld from the wages, salaries and other payments to Employees;

 

  

17

  

 

	
(iii)  

	
is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing;

 

	
(iv)  

	
is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other benefits for Employees (other than routine payments to be made in the normal course of business and consistent with past practice);

 

	
(v)  

	
has provided the Employees with all wages, benefits, stock options, bonuses, incentives and all other compensation that became due and payable through the date of the Agreement; and

 

	
(vi)  

	
represents that in the last three (3) years, no citation has been issued by any federal, state or provincial occupational safety and health board or agency against them and no notice of contest, claim, complaint, charge, investigation or other administrative enforcement proceeding involving them has been filed or is pending or, to their knowledge, threatened, against them under any federal, state or provincial occupational safety and health board or any other Applicable Law relating to occupational safety and health.

 

	
(f)  

	
No work stoppage, labour strike or other “concerted action” involving Employees against the Target is pending or, to the knowledge of the Target, threatened. The Target is not involved in nor, to the knowledge of the Target, threatened with, any labour dispute, grievance, or litigation relating to labour, safety or discrimination matters involving any Employee, including, without limitation, charges of unfair labour practices or discrimination complaints, which, if adversely determined, would, individually or in the aggregate, result in a Material Adverse Effect on the Target. The Target is not presently, nor has been in the past, a party to, or bound by, any collective bargaining agreement or union contract with respect to any Employees and no collective bargaining agreement is being negotiated. There are no activities or proceedings of a labour union to organize any of the Employees.

 

	
(g)  

	
Except as described in the Disclosure Statement and except for claims by Employees under any applicable workers’ compensation or similar legislation which, if adversely determined, would not, either individually or in the aggregate, have a Material Adverse Effect on the Target, there are no complaints, claims or charges pending or outstanding or, to the best of the knowledge of the Target, anticipated, nor are there any orders, decisions, directions or convictions currently registered or outstanding by any tribunal or agency against or in respect of the Target under or in respect of any employment legislation. The Disclosure Statement lists all Employees in respect of whom of the Target has been advised by any workers compensation or similar authority that such Employees are in receipt of benefits under workers’ compensation or similar legislation. There are no appeals pending before any workers compensation or similar authority involving the Target and all levies, assessments and penalties made against the Target pursuant to workers’ compensation or similar legislation have been paid. The Target is not aware of any audit currently being performed by any workers compensation or similar authority, and all payments required to be made in respect of termination or severance pay under any employment standards or similar legislation in respect of former employees or employees listed on the Disclosure Statement have been made.

 

  

18

  

 

3.16 Consents

 

Except as set forth in the Disclosure Statement, no authorization, approval, order, license, permit or consent of any Governmental Body, regulatory body, agency, other authority or any Person, including any governmental department, commission, bureau, board or administrative agency or court, and no registration, declaration or filing by the Target with any such Governmental Body, regulatory body or agency or court is required in order for the Target to:

 

	
(a)  

	
consummate the transactions contemplated by this Agreement;

 

	
(b)  

	
execute and deliver all of the documents and instruments to be delivered by the Shareholders under this Agreement;

 

	
(c)  

	
duly perform and observe the terms and provisions of this Agreement; or

 

	
(d)  

	
render this Agreement legal, valid, binding and enforceable.

 

3.17 Compliance with Legal Requirements

 

Except as set forth in the Disclosure Statement:

 

	
(a)  

	
the Target is, and at all times has been, in full compliance with all of the terms and requirements of each governmental authorization required for the operation of the Business;

 

	
(b)  

	
no event has occurred or circumstance exists that may (with or without notice or lapse of time) constitute or result directly or indirectly in a violation of or a failure to comply with any term or requirement of any governmental authorization required for the operation of the Business or may result directly or indirectly in the revocation, withdrawal, suspension, cancellation, or termination of, or any modification to, any governmental authorization required for the operation of the Business;

 

	
(c)  

	
the Target has not received, except as set forth in the Disclosure Statement, any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding any actual, alleged, possible, or potential violation of or failure to comply with any term or requirement of any governmental authorization, or any actual, proposed, possible, or potential revocation, withdrawal, suspension, cancellation, termination of, or modification to any governmental authorization; and

 

	
(d)  

	
all applications required to have been filed for the renewal of the governmental authorizations required for the operation of the Business have been duly filed on a timely basis with the appropriate Governmental Bodies, and all other filings required to have been made with respect to such governmental authorizations have been duly made on a timely basis with the appropriate Governmental Bodies.

 

3.18 Legal Proceedings

 

	
(a)  

	
Other than as set forth in the Disclosure Statement, there is no pending Proceeding:

 

	
(i)  

	
that has been commenced by or against the Target or that otherwise relates to or may affect the Business, or any of the assets owned or used by, the Target; or

 

	
(ii)  

	
that challenges, or that may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the transactions contemplated herein.

 

  

19

  

 

	
(b)  

	
To the knowledge of the Target and Key Shareholder, no Proceeding has been threatened, and no event has occurred or circumstance exists that may give rise to or serve as a basis for the commencement of any such Proceeding.

 

	
(c)  

	
Except as set forth in the Disclosure Statement:

 

	
(i)  

	
there is no Order to which either of the Target, the Business, or any of the assets owned or used by either of them, is subject; and

 

	
(ii)  

	
no officer, director, agent, or employee of the Target is subject to any Order that prohibits such officer, director, agent, or employee from engaging in or continuing any conduct, activity, or practice relating to the Business.

 

3.19 Insurance

 

	
(a)  

	
Except as set forth in the Disclosure Statement, all insurance policies to which the Target is a party or that provides coverage to the Target, or to any director or officer of the Target:

 

	
(i)  

	
are valid, outstanding, and enforceable;

 

	
(ii)  

	
are issued by an insurer that is financially sound and reputable;

 

	
(iii)  

	
taken together, provide adequate insurance coverage for the assets and the operations of the Target for all risks normally insured against by a Person carrying on the same business as the Target;

 

	
(iv)  

	
are sufficient for compliance with all Legal Requirements and contracts to which the Target is a party or by which is bound;

 

	
(v)  

	
will continue in full force and effect following the consummation of the transactions contemplated herein; and

 

	
(vi)  

	
do not provide for any retrospective premium adjustment or other experienced-based liability on the part of the Target.

 

	
(b)  

	
The Target has not received: (i) any refusal of coverage or any notice that a defense will be afforded with reservation of rights, or (ii) any notice of cancellation or any other indication that any insurance policy is no longer in full force or effect or will not be renewed or that the issuer of any policy is not willing or able to perform its obligations thereunder.

 

	
(c)  

	
The Target has paid all premiums due, and has otherwise performed all of its respective obligations, under each policy to which the Target is a party or that provides coverage to the Target or any director thereof.

 

	
(d)  

	
The Target has given prompt notice to its insurers of all claims or possible claims that may be insured by any of its respective policies.

 

3.20 Indebtedness to Target

 

Except for: (a) the payment of salaries and reimbursement for out-of-pocket expenses in the ordinary and usual course, or (b) amounts disclosed in the Disclosure Statement or the Target Financial Statements, the Target is not indebted to the Shareholders, any Related Party of the Shareholders or any directors, officers or employees of the Target, on any account whatsoever.

 

  

20

  

 

3.21 Certain Payments

 

Since the Accounting Date, neither the Target nor any director, officer, agent, or employee of the Target, nor any other Person associated with or acting for or on behalf of the Target, has directly or indirectly:

 

	
(a)  

	
made any contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other payment to any Person, private or public, regardless of form, whether in money, property, or services:

 

	
(i)  

	
to obtain favorable treatment in securing business,

 

	
(ii)  

	
to pay for favorable treatment for business secured,

 

	
(iii)  

	
to obtain special concessions or for special concessions already obtained, for or in respect of the Target or any Related Party of the Target, or

 

	
(iv)  

	
in violation of any Legal Requirement; or

 

	
(b)  

	
established or maintained any fund or asset that has not been recorded in the books and records of the Target.

 

3.22 Undisclosed Information

 

	
(a)  

	
The Target does not have any specific information relating to the Target which is not generally known or which has not been disclosed to the Purchaser and which could reasonably be expected to have a Material Adverse Effect on the Target.

 

	
(b)  

	
No representation or warranty of the Target in this Agreement and no statement in the Disclosure Statement omits to state a material fact necessary to make the statements herein or therein, in light of the circumstances in which they were made, not misleading.

 

3.23 Intellectual Property

 

	
(a)  

	
The Target owns or holds an interest in all intellectual property assets necessary for the operation of the Business as it is currently conducted (collectively, the “Intellectual Property Assets”), including:

 

	
(i)  

	
all functional business names, trading names, registered and unregistered trademarks, service marks, and applications (collectively, the “Marks”);

 

	
(ii)  

	
all patents, patent applications, and inventions, methods, processes and discoveries that may be patentable (collectively, the “Patents”);

 

	
(iii)  

	
all copyrights in both published works and unpublished works (collectively, the “Copyrights”); and

 

	
(iv)  

	
all know-how, trade secrets, confidential information, customer lists, software, technical information, data, process technology, plans, drawings, and blue prints owned, used, or licensed by the Target as licensee or licensor (collectively, the “Trade Secrets”).

 

  

21

  

 

	
(b)  

	
The Target has not transferred, assigned or encumbered the Intellectual Property Assets or its interests therein in any way.

 

	
(c)  

	
The conduct of the Business does not infringe the intellectual property or contractual rights or obligations of any Person and is in accordance with any and all agreements pursuant to which the Target has the right to use or license any third-party intellectual property. No Person has instituted or threatened any proceeding or action against the Target alleging any infringement by the Target of the intellectual property of such Person.

 

	
(d)  

	
There are no third parties challenging, infringing or otherwise violating the Target’s rights in the Intellectual Property Assets.

 

	
(e)  

	
The Target has used the Intellectual Property Assets in such a manner as to preserve their rights therein, including the use of proper notices indicating ownership of the Intellectual Property Assets to the extent necessary for the protection of all rights therein and the prevention of any disclosure to the public of any confidential information related to the Intellectual Property Assets.

 

	
(f)  

	
Each Employee has entered into a valid and subsisting employment contract that obliges the Employee to maintain the confidential information related to the Intellectual Property Assets during and following employment and to assign all right, title and interest in the Intellectual Property Assets to the Target and to waive any and all moral rights that such Employees may have therein.

 

3.24 Other Representations

 

All statements contained in any certificate or other instrument delivered by or on behalf of the Target pursuant hereto or in connection with the transactions contemplated by this Agreement will be deemed to be representations and warranties of the Target hereunder.

 

3.25 Survival

 

The representations and warranties of the Target and Key Shareholder hereunder will survive the Closing for a period of 2 years from the Closing Date.

 

3.26 Reliance

 

The Target acknowledges and agrees that the Purchaser has entered into this Agreement relying on the warranties and representations and other terms and conditions contained in this Agreement, notwithstanding any independent searches or investigations that have been or may be undertaken by or on behalf of the Purchaser, and that no information which is now known or should be known or which may hereafter become known by the Purchaser or its officers, directors or professional advisers, on the Closing Date, will limit or extinguish the right to indemnification hereunder.

 

ARTICLE 4

REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS OF SHAREHOLDERS

 

4.1 As of the date hereof and as at the Closing Date, each of the Shareholders, as applicable, acknowledges, represents and warrants to the Purchaser, and acknowledges that the Purchaser is relying upon such acknowledgements, representations and warranties in connection with the execution, delivery and performance of this Agreement, notwithstanding any investigation made by or on behalf of the Purchaser, as follows:

 

  

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(a)  

	
Each Shareholder is the registered and beneficial owner of the number of Shares listed next to his, her or its name in Schedule A to this Agreement free and clear of all Encumbrances, and each Shareholder has no interest, legal or beneficial, direct or indirect, in any other shares of, or the assets or business of, the Target; and

 

	
(b)  

	
Each Shareholder has the power and capacity and good and sufficient right and authority to enter into this Agreement on the terms and conditions herein set forth and to transfer the beneficial title and ownership of its respective Shares to the Purchaser.

 

4.2 Except as provided for in this Agreement, each Shareholder is agreeing to waive all rights held by such Shareholder under prior agreements, including shareholder agreements, pertaining to the Shares held by such Shareholder and the Shareholder will remise, release and forever discharge the Purchaser and its respective directors, officers, employees, successors, solicitors, agents and assigns from any and all obligations to the Shareholder under any such prior agreements.

 

4.3 The representations and warranties of the Shareholders hereunder will survive the Closing and the issuance of the Consideration Shares and, notwithstanding the Closing and the issuance of the Consideration Shares or the waiver of any condition by the Purchaser, the representations, warranties, covenants and agreements of the Target will (except where otherwise specifically provided in this Agreement) survive the Closing and will continue in full force and effect indefinitely.

 

4.4 The Shareholders acknowledge and agree that the Purchaser has entered into this Agreement relying on the warranties and representations and other terms and conditions contained in this Agreement, notwithstanding any independent searches or investigations that have been or may be undertaken by or on behalf of the Purchaser, and that no information which is now known or should be known or which may hereafter become known by the Purchaser or its officers, directors or professional advisers, on the Closing Date, will limit or extinguish the right to indemnification hereunder.

 

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

 

As of the Closing Date and except as set forth in the disclosure statement signed and dated by the Purchaser and delivered by the Purchaser to the Target on the date of this Agreement (the “Purchaser Disclosure Statement”) or as otherwise provided for in any certificate or other instrument delivered pursuant to this Agreement, the Purchaser makes the following representations to the Target and the Purchaser acknowledges that the Target is relying upon such representations and warranties, each of which is qualified in its entirety by the matters described in the Purchaser Disclosure Statement, in connection with the execution, delivery and performance of this Agreement, as follows:

 

5.1 Organization and Good Standing

 

The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, with full corporate power, authority and capacity to conduct its business as presently conducted, to own or use the properties and assets that it purports to own or use, and to perform all its obligations under any applicable contracts. The Purchaser is duly qualified to do business as a corporation and is in good standing under the laws of each state or other jurisdiction in which the failure to be so registered would be likely to result in a Material Adverse Effect on the Purchaser.

 

5.2 Capitalization

 

The entire authorized capital stock of the Purchaser consists of 100,000,000 Purchaser Shares with a par value of $0.001 per share of which 19,506,304 Purchaser Shares are currently issued and outstanding. On Closing, and: (a) excluding the Consideration Shares; (b) including the Purchaser Shares to be issued in the Purchaser Private Placement; and (c) assuming there are no conversions under the Purchaser Note Financing, there will be less than 20,000,000 Purchaser Shares issued and outstanding. All of the outstanding equity securities of the Purchaser have been duly authorized and validly issued and are fully paid and non-assessable. None of the outstanding equity securities or other securities of the Purchaser, if any, were issued in violation of any Applicable Securities Laws or any other Legal Requirement. The Purchaser does not own, or have any contract to acquire, any equity securities or other securities of any Person or any direct or indirect equity or ownership interest in any other business. There are no agreements purporting to restrict the transfer of any of the issued and outstanding Purchaser Shares, no voting agreements, shareholders’ agreements, voting trusts, or other arrangements restricting or affecting the voting of any of the Purchaser Shares to which the Purchaser is a party or of which the Purchaser is aware.

 

  

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5.3 Absence of Rights to Acquire Securities

 

Except as set out in this Agreement and the Purchaser Disclosure Statement, there are no outstanding options, warrants, subscriptions, conversion rights, or other rights, agreements, board of director’s resolutions, shareholders’ resolutions or commitments obligating the Purchaser to issue any additional Purchaser Shares, or any other securities convertible into, exchangeable for, or evidencing the right to subscribe for or acquire from the Purchaser any Purchaser Shares.

 

5.4 Authority

 

The Purchaser has all requisite corporate power and authority to execute and deliver the Transaction Documents to be signed by the Purchaser and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of each of the Transaction Documents by the Purchaser and the consummation of the transactions contemplated hereby have been duly authorized by the board of directors of the Purchaser. No other corporate or shareholder proceedings on the part of the Purchaser are necessary to authorize such documents or to consummate the transactions contemplated hereby. This Agreement has been, and the other Transaction Documents when executed and delivered by the Purchaser as contemplated by this Agreement will be, duly executed and delivered by the Purchaser and this Agreement is, and the other Transaction Documents when executed and delivered by the Purchaser as contemplated hereby will be, valid and binding obligations of the Purchaser enforceable in accordance with their respective terms except:

 

	
(a)  

	
as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally;

 

	
(b)  

	
as limited by laws relating to the availability of specific performance, injunctive relief of other equitable remedies; and

 

	
(c)  

	
as limited by public policy.

 

5.5 Validity of Consideration Shares Issuable upon the Transaction

 

The Consideration Shares to be issued to the Shareholders at Closing will, upon issuance, have been duly and validly authorized and, the Consideration Shares when so issued in accordance with the terms of this Agreement, will be duly and validly issued, fully paid and non-assessable.

 

5.6 Non-Contravention

 

Neither the execution, delivery and performance of this Agreement, nor the consummation of the transactions contemplated herein, will:

 

	
(a)  

	
conflict with, result in a violation of, cause a default under (with or without notice, lapse of time or both) or give rise to a right of termination, amendment, cancellation or acceleration of any obligation contained in or the loss of any material benefit under, or result in the creation of any Lien, security interest, charge or Encumbrance upon any of the material properties or assets of the Purchaser under any term, condition or provision of any loan or credit agreement, note, debenture, bond, mortgage, indenture, lease or other agreement, instrument, permit, license, judgment, Order, decree, statute, law, ordinance, rule or regulation applicable to the Purchaser or its material property or assets;

 

  

24

  

 

	
(b)  

	
violate any provision of the Organizational Documents of the Purchaser or any Applicable Laws; or

 

	
(c)  

	
violate any Order, writ, injunction, decree, statute, rule, or regulation of any court or Governmental Body applicable to the Purchaser or any of its material property or assets.

 

5.7 Subsidiaries

 

The Purchaser has no wholly-owned or majority owned subsidiaries or material interest in any other Person.

 

5.8 Books and Records

 

The books of account, minute books, stock record books, and other records of the Purchaser are complete and correct and have been maintained in accordance with sound business practices, including the maintenance of an adequate system of internal controls. The minute books of the Purchaser contain accurate and complete records of all meetings held, and corporate action taken by, the respective shareholders, board of directors, and committees of the board of directors of the Purchaser, and no meeting of any such shareholders, board of directors, or committee has been held for which minutes have not been prepared and are not contained in such minute books. At the Closing, all of those books and records will be in the possession of the Purchaser.

 

5.9 Actions and Proceedings

 

Except as disclosed in the Purchaser SEC Documents, to the best knowledge of the Purchaser, there is no basis for and there is no claim, charge, arbitration, grievance, action, suit, judgment, demand, investigation or Proceeding by or before any court, arbiter, administrative agency or other Governmental Body now outstanding or pending or, to the best knowledge of the Purchaser, threatened against or affecting the Purchaser which involves any of the business, property or assets of the Purchaser that, if adversely resolved or determined, would have a Material Adverse Effect on the Purchaser. There is no reasonable basis for any claim or action that, based upon the likelihood of its being asserted and its success if asserted, would have a Material Adverse Effect on the Purchaser.

 

5.10 Compliance

 

	
(a)  

	
To the best knowledge of the Purchaser, the Purchaser is in compliance with, is not in default or violation in any material respect under, and has not been charged with or received any notice at any time of any material violation of any Applicable Laws related to the business or operations of the Purchaser.

 

	
(b)  

	
To the best knowledge of the Purchaser, the Purchaser is not subject to any judgment, Order or decree entered in any lawsuit or Proceeding applicable to its business and operations that would have a Material Adverse Effect on the Purchaser.

 

	
(c)  

	
The Purchaser has duly filed all reports and returns required to be filed by it with Governmental Bodies and has obtained all governmental permits and other governmental consents, except as may be required after the execution of this Agreement. All of such permits and consents are in full force and effect, and no Proceedings for the suspension or cancellation of any of them, and no investigation relating to any of them, is pending or to the best knowledge of the Purchaser, threatened, and none of them will be affected in a material adverse manner by the consummation of the Transaction.

 

  

25

  

 

5.11 Filings, Consents and Approvals

 

No filing or registration with, no notice to and no permit, authorization, consent, or approval of any public or Governmental Body or any other Person is necessary for the consummation by the Purchaser of the transactions contemplated herein or to continue to conduct its business after the Closing Date in a manner which is consistent with that in which it is presently conducted.

 

5.12 SEC Filings

 

The Purchaser has furnished or made available to the Shareholders a true and complete copy of each report, schedule and registration statement filed by the Purchaser with the SEC (collectively, and as such documents have since the time of their filing been amended, the “Purchaser SEC Documents”). As of their respective dates, the Purchaser SEC Documents complied in all material respects with the requirements of the Securities Act, and the rules and regulations of the SEC thereunder applicable to such Purchaser SEC Documents. The Purchaser SEC Documents constitute all of the documents and reports that the Purchaser was required to file with the SEC and the rules and regulations promulgated thereunder by the SEC. The SEC has not initiated any inquiry, investigation or Proceeding in respect of the Purchaser and the Purchaser is not aware of any event and does not have any information which would result in the SEC initiating an inquiry, investigation or Proceeding or otherwise affect the registration of the Purchaser Shares.

 

5.13 Financial Representations

 

Included with the Purchaser SEC Documents are true, correct, and complete copies of audited consolidated balance sheets for the Purchaser dated as of December 31, 2012 and 2011 (the “Purchaser Accounting Date”), together with related statements of income, cash flows, and changes in shareholders’ equity for the fiscal years then ended (collectively, the “Purchaser Financial Statements”). The Purchaser Financial Statements:

 

	
(a)  

	
are in accordance with the books and records of the Purchaser;

 

	
(b)  

	
present fairly the financial condition of the Purchaser as of the respective dates indicated and the results of operations for such periods; and

 

	
(c)  

	
have been prepared in accordance with GAAP.

 

The Purchaser has not received any advice or notification from its independent certified public accountants that the Purchaser has used any improper accounting practice that would have the effect of not reflecting or incorrectly reflecting in the Purchaser Financial Statements or the books and records of the Purchaser, any properties, assets, Liabilities, revenues, or expenses. The books, records and accounts of the Purchaser accurately and fairly reflect, in reasonable detail, the assets and Liabilities of the Purchaser. The Purchaser has not engaged in any transaction, maintained any bank account, or used any funds of the Purchaser, except for transactions, bank accounts and funds which have been and are reflected in the normally maintained books and records of the Purchaser.

 

5.14 Absence of Undisclosed Liabilities

 

The Purchaser has no material Liabilities or obligations either direct or indirect, matured or unmatured, absolute, contingent or otherwise, other than: (a) as set out in the Purchaser Financial Statements; (b) payments contemplated by this Agreement to be made by the Purchaser at Closing, (c) reasonable accounting and legal fees of the Purchaser incurred in connection with the Transaction; and (d) amounts owed with respect to the Purchaser Note Financing.

 

  

26

  

 

5.15 Tax Matters

 

	
(a)  

	
As of the date hereof:

 

	
(i)  

	
the Purchaser has timely filed all tax returns in connection with any Taxes which are required to be filed on or prior to the date hereof, taking into account any extensions of the filing deadlines which have been validly granted to it, and

 

	
(ii)  

	
all such returns are true and correct in all material respects.

 

	
(b)  

	
The Purchaser has paid all Taxes that have become or are due with respect to any period ended on or prior to the date hereof and has established an adequate reserve therefore on its balance sheets for those Taxes not yet due and payable, except for any Taxes the non-payment of which will not have a Material Adverse Effect on the Purchaser.

 

	
(c)  

	
The Purchaser is not presently under and has not received notice of, any contemplated investigation or audit by any regulatory or government agency or body or any foreign or state taxing authority concerning any fiscal year or period ended prior to the date hereof.

 

	
(d)  

	
All Taxes required to be withheld on or prior to the date hereof from employees for income Taxes, social security Taxes, unemployment Taxes and other similar withholding Taxes have been properly withheld and, if required on or prior to the date hereof, have been deposited with the appropriate Governmental Body.

 

	
(e)  

	
To the best knowledge of the Purchaser, the Purchaser Financial Statements contain full provision for all Taxes including any deferred Taxes that may be assessed to the Purchaser for the accounting period ended on the Purchaser Accounting Date or for any prior period in respect of any transaction, event or omission occurring, or any profit earned, on or prior to the Purchaser Accounting Date or for which the Purchaser is accountable up to such date and all contingent Liabilities for Taxes have been provided for or disclosed in the Purchaser Financial Statements.

 

5.16 Absence of Changes

 

Since the Purchaser Accounting Date, except as disclosed in the Purchaser Disclosure Statement or the Purchaser SEC Documents and except as contemplated in this Agreement, the Purchaser has not:

 

	
(a)  

	
incurred any Liabilities, other than Liabilities incurred in the ordinary course of business consistent with past practice, or discharged or satisfied any Lien or Encumbrance, or paid any Liabilities, other than in the ordinary course of business consistent with past practice, or failed to pay or discharge when due any Liabilities of which the failure to pay or discharge has caused or will cause any Material Adverse Effect to it or any of its assets or properties;

 

	
(b)  

	
sold, encumbered, assigned or transferred any material fixed assets or properties;

 

	
(c)  

	
created, incurred, assumed or guaranteed any indebtedness for money borrowed, or mortgaged, pledged or subjected any of the material assets or properties of the Purchaser to any mortgage, Lien, pledge, security interest, conditional sales contract or other Encumbrance of any nature whatsoever;

 

  

27

  

 

	
(d)  

	
made or suffered any amendment or termination of any material agreement, contract, commitment, lease or plan to which it is a party or by which it is bound, or cancelled, modified or waived any substantial debts or claims held by it or waived any rights of substantial value, other than in the ordinary course of business;

 

	
(e)  

	
declared, set aside or paid any dividend or made or agreed to make any other distribution or payment in respect of the Purchaser Shares or redeemed, purchased or otherwise acquired or agreed to redeem, purchase or acquire any of the Purchaser Shares;

 

	
(f)  

	
suffered any damage, destruction or loss, whether or not covered by insurance, that has had a Material Adverse Effect on its business, operations, assets, properties or prospects;

 

	
(g)  

	
suffered any material adverse change in its business, operations, assets, properties, prospects or condition (financial or otherwise);

 

	
(h)  

	
received notice or had knowledge of any actual or threatened labour trouble, termination, resignation, strike or other occurrence, event or condition of any similar character which has had or might have a Material Adverse Effect on its business, operations, assets, properties or prospects;

 

	
(i)  

	
made commitments or agreements for capital expenditures or capital additions or betterments exceeding in the aggregate $5,000;

 

	
(j)  

	
other than in the ordinary course of business, increased the salaries or other compensation of, or made any advance (excluding advances for ordinary and necessary business expenses) or loan to, any of its employees or directors or made any increase in, or any addition to, other benefits to which any of its employees or directors may be entitled;

 

	
(k)  

	
entered into any transaction other than in the ordinary course of business consistent with past practice; or

 

	
(l)  

	
agreed, whether in writing or orally, to do any of the foregoing.

 

5.17 Absence of Certain Changes or Events

 

Since the Purchaser Accounting Date, except as and to the extent disclosed in the Purchaser SEC Documents, there has not been:

 

	
(a)  

	
a Material Adverse Effect with respect to the Purchaser; or

 

	
(b)  

	
any material change by the Purchaser in its accounting methods, principles or practices.

 

5.18 Personal Property

 

There are no material equipment, furniture, fixtures or other tangible personal property and assets owned or leased by the Purchaser, except as disclosed in the Purchaser SEC Documents. The Purchaser possesses, and has good and marketable title to all property necessary for the continued operation of the business of the Purchaser as presently conducted and as represented to the Shareholders. All such property is used in the business of the Purchaser. All such property is in reasonably good operating condition (normal wear and tear excepted), and is reasonably fit for the purposes for which such property is presently used. All material equipment, furniture, fixtures and other tangible personal property and assets owned or leased by the Purchaser are owned by the Purchaser free and clear of all Liens, security interests, charges, Encumbrances and other adverse claims, except as previously disclosed to the Shareholders or as disclosed in the Purchaser SEC Documents.

 

  

28

  

 

5.19 Employees and Consultants

 

To the best knowledge of the Purchaser, no employee of the Purchaser is in violation of any term of any employment contract, non-disclosure agreement, non-competition agreement or any other contract or agreement relating to the relationship of such employee with the Purchaser or any other nature of the business conducted or to be conducted by the Purchaser.

 

5.20 Real Property

 

The Purchaser does not own any real property. Each of the leases, subleases, claims or other real property interests (collectively, the “Purchaser Leases”) to which the Purchaser is a party or is bound, as disclosed in writing to the Shareholders or as disclosed in the Purchaser SEC Documents, is legal, valid, binding, enforceable and in full force and effect in all material respects. All rental and other payments required to be paid by the Purchaser pursuant to any such Purchaser Leases have been duly paid and no event has occurred which, upon the passing of time, the giving of notice, or both, would constitute a breach or default by any party under any of the Purchaser Leases. The Purchaser Leases will continue to be legal, valid, binding, enforceable and in full force and effect on identical terms following the Closing Date. The Purchaser has not assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in the Purchaser Leases or the leasehold property pursuant thereto.

 

5.21 Material Contracts and Transactions

 

Other than as expressly contemplated by this Agreement, there are no material contracts, agreements, licenses, permits, arrangements, commitments, instruments or understandings, whether written or oral, express or implied, contingent, fixed or otherwise, to which the Purchaser is a party (the “Purchaser Contracts”), except as previously disclosed to the Shareholders or as disclosed in the Purchaser SEC Documents. The Purchaser has made available to the Shareholders each Purchaser Contract. Each Purchaser Contract is in full force and effect, and there exists no material breach or violation of or default by the Purchaser under any Purchaser Contract, or any event that with notice or the lapse of time, or both, will create a material breach or violation thereof or default under any Purchaser Contract by the Purchaser. To the best knowledge of the Purchaser, the continuation, validity and effectiveness of each Purchaser Contract will in no way be affected by the consummation of the Transaction. There exists no actual or threatened termination, cancellation or limitation of, or any amendment, modification or change to, any Purchaser Contract.

 

5.22 Certain Transactions

 

Except as previously disclosed to the Shareholders or as disclosed in the Purchaser SEC Documents, the Purchaser is not a guarantor or indemnitor of any indebtedness of any Person.

 

5.23 Listing and Maintenance Requirements

 

The Purchaser is currently quoted on the OTC Bulletin Board and has not, in the 12 months preceding the date hereof, received any notice from the OTC Bulletin Board or FINRA to the effect that the Purchaser’s quotation, listing or maintenance on the OTC Bulletin Board is or may be terminated or suspended. No securities commission or other regulatory authority has issued any order preventing or suspending the trading of the Purchaser Shares or prohibiting the issuance of the Consideration Shares to be delivered hereunder, and, to the Purchaser’s knowledge, no Proceedings for such purpose are pending or threatened.

 

5.24 No SEC or FINRA Inquiries

 

Neither the Purchaser nor any of its past or present officers or directors is the subject of any formal or informal inquiry or investigation by the SEC or FINRA. The Purchaser currently does not have any outstanding comment letters or other correspondences from the SEC or FINRA. The Purchaser does not reasonably know of any event or have any information which would result in the SEC or FINRA initiating an inquiry, investigation or Proceeding or otherwise affect the Purchaser.

 

  

29

  

 

5.25 No Agents

 

The Purchaser warrants to the Shareholders that no broker, agent or other intermediary has been engaged by the Purchaser in connection with the transactions contemplated hereby, and consequently, no commission is payable or due to a third party from the Purchaser.

 

5.26 Undisclosed Information

 

	
(a)  

	
The Purchaser does not have any specific information relating to the Purchaser which is not generally known or which has not been disclosed to the Shareholders and which could reasonably be expected to have a Material Adverse Effect on the Purchaser.

 

	
(b)  

	
To the Purchaser’s knowledge, no representation or warranty of the Purchaser in this Agreement and no statement in the Purchaser Disclosure Statement omits to state a material fact necessary to make the statements herein or therein, in light of the circumstances in which they were made, not misleading.

 

5.27 Other Representations

 

All statements contained in any certificate or other instrument delivered by or on behalf of the Purchaser pursuant hereto or in connection with the transactions contemplated by this Agreement will be deemed to be representations and warranties by the Purchaser hereunder.

 

5.28 Survival

 

The representations and warranties of the Purchaser hereunder will survive for a period of 2 years from the Closing Date.

 

5.29 Reliance

 

The Purchaser acknowledges and agrees that the Target and the Shareholders have entered into this Agreement relying on the warranties and representations and other terms and conditions contained in this Agreement, notwithstanding any independent searches or investigations that have been or may be undertaken by or on behalf of the Target or the Shareholders, and that no information which is now known or should be known or which may hereafter become known by the Target or the Shareholders or their respective professional advisers, on the Closing Date, will limit or extinguish the right to indemnification hereunder.

 

ARTICLE 6

CLOSING

 

6.1 Closing Date and Location

 

The transactions contemplated by this Agreement will be completed at 10:00 a.m. (Pacific time) on the Closing Date, at the offices of the Purchaser’s Solicitors, or at such other location and time as is mutually agreed to by the Purchaser and the Shareholders. Notwithstanding the location of the Closing, each party agrees that the Closing may be completed by the exchange of undertakings between the respective legal counsel for the Purchaser and the Shareholders, provided such undertakings are satisfactory to each party’s respective legal counsel.

 

  

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6.2 Target and Shareholders Closing Documents

 

On the Closing Date, the Target and the Shareholders will deliver, or cause to be delivered, to the Purchaser the documents set forth in Section 7.1 and such other documents as the Purchaser may reasonably require to perfect the transactions contemplated hereby.

 

6.3 Purchaser Closing Documents

 

On the Closing Date, the Purchaser will deliver, or cause to be delivered, to the Target the documents set forth in Section 8.1 and such other documents as the Target may reasonably require to effect the transactions contemplated hereby.

 

ARTICLE 7

PURCHASER’S CONDITIONS PRECEDENT

 

7.1 Purchaser’s Conditions

 

The obligation of the Purchaser to complete the transactions contemplated by this Agreement will be subject to the satisfaction of, or compliance with, at or before the Closing Date, of the conditions precedent set forth below. The Closing of the Transaction will be deemed to mean a waiver of all conditions to Closing. These conditions precedent are for the benefit of the Purchaser and may be waived by the Purchaser in its discretion:

 

	
(a)  

	
the representations and warranties of the Target, Key Shareholder and each of the Shareholders set forth in this Agreement will be true, correct and complete in all material respects as of the Closing Date and with the same effect as if made at and as of the Closing Date;

 

	
(b)  

	
the Target and the Shareholders will have performed and complied with all of their respective material obligations, covenants and agreements required hereunder;

 

	
(c)  

	
this Agreement, the Transaction Documents and all other documents necessary or reasonably required to consummate the transactions contemplated hereby, all in form and substance reasonably satisfactory to the Purchaser, will have been executed and delivered to the Purchaser;

 

	
(d)  

	
the Purchaser will be reasonably satisfied that its due diligence, analysis and other customary examinations that it has performed regarding the financial position of and the business of the Target are consistent, in all material respects, with the representations and warranties of the Target and the Shareholders set forth in this Agreement;

 

	
(e)  

	
no injunction or restraining order of any court or administrative tribunal of competent jurisdiction will be in effect prohibiting the transactions contemplated by this Agreement and no action or Proceeding will have been instituted or be pending before any court or administrative tribunal to restrain or prohibit the transactions contemplated by this Agreement;

 

	
(f)  

	
no claim will have been asserted or made that any Person (other than the Purchaser or the Shareholders) is the holder or the beneficial owner of, or has the right to acquire or to obtain beneficial ownership of, any of the Shares, or any other voting, equity, or ownership interest in, the Target, or (other than the Shareholders) is entitled to all or any portion of the Consideration Shares;

 

	
(g)  

	
no Material Adverse Effect will have occurred with respect to the Business or the Shares;

 

  

31

  

 

	
(h)  

	
all consents, renunciations, authorizations or approvals of third parties, which, in the Purchaser’s reasonable opinion must be obtained prior to the Closing in order to give effect to the purchase of the Shares and the other transactions contemplated herein, must be obtained to the Purchaser’s satisfaction or in accordance with the relevant agreements, covenants or applicable law;

 

	
(i)  

	
on the Closing Date, the Target’s total Liabilities shall not exceed $100,000 excluding the Bridge Loan, any credit facility against inventory or receivables of the Target, any related party loans and any deferred compensation; and

 

	
(j)  

	
the Purchaser will have received from the Target, the following closing documentation:

 

	
(i)  

	
a certified copy of resolutions of the directors of the Target approving the entry into and the Closing of this Agreement, authorizing the transfer of the Shares to the Purchaser, the registration of the Shares in the name of the Purchaser, the issue of one or more share certificates representing the Shares registered in the name of the Purchaser and all other matters contemplated by this Agreement;

 

	
(ii)  

	
a certificate executed by an officer of the Target certifying that the representations and warranties of the Target set forth in this Agreement are true and correct in all material respects as at the Closing Date;

 

	
(iii)  

	
a copy of the Target Financial Statements from the Target and the Purchaser and its accountants will be reasonably satisfied with their review of the Target Financial Statements;

 

	
(iv)  

	
from each Shareholder, a duly executed Certificate;

 

	
(v)  

	
from each applicable Shareholder, duly executed stock option agreements in the amounts set out in Schedule A;

 

	
(vi)  

	
duly executed consents to act from Marc Hardgove as Chief Creative Innovation Officer of the Purchaser, Brent Willis as Chief Executive Officer, President, Secretary and Treasurer of the Purchaser and Marc Hardgrove, Brent Willis and James P. Geiskopf as directors of the Purchaser;

 

	
(vii)  

	
a certified copy of the central securities register of the Target evidencing the Purchaser as the sole registered owner of the Shares;

 

	
(viii)  

	
a legal opinion issued by legal counsel for the Target opining on certain corporate matters with respect to the Target in the form required by the Purchaser and the Purchaser’s Solicitors, acting reasonably;

 

	
(ix)  

	
all such instruments of transfer, duly executed, which in the opinion of the Purchaser acting reasonably are necessary to effect and evidence the transfer of the Shares to the Purchaser free and clear of all Encumbrances; and

 

	
(x)  

	
the corporate minute books and all other books and records of the Target.

 

7.2 Waiver/Survival

 

The conditions set forth in this Article 7 are for the exclusive benefit of the Purchaser and may be waived by the Purchaser in writing in whole or in part on or before the Closing Date. Notwithstanding any such waiver, the completion of the transactions contemplated by this Agreement will not prejudice or affect in any way the rights of the Purchaser in respect of the warranties and representations of the Target, Key Shareholder and the Shareholders in this Agreement, and the representations and warranties of the Target, Key Shareholder and the Shareholders in this Agreement will survive the Closing and issuance of the Consideration Shares for the applicable period set out in Sections 3.25 and 4.3, as applicable.

 

  

32

  

 

7.3 Covenant of the Target and the Shareholders

 

The Target and the Shareholders covenant to deliver all of the closing documentation set out in Section 7.1.

 

ARTICLE 8

TARGET’S CONDITIONS PRECEDENT

 

8.1 Target’s Conditions

 

The obligation of the Target and the Shareholders to complete the transactions contemplated by this Agreement will be subject to the satisfaction of, or compliance with, at or before the Closing Date, of the conditions precedent set forth below. The Closing of the Transaction will be deemed to mean a waiver of all conditions to Closing. These conditions precedent are for the benefit of the Target and may be waived by the Target in its discretion:

 

	
(a)  

	
the representations and warranties of the Purchaser set forth in this Agreement will be true, correct and complete in all respects as of the Closing Date and with the same effect as if made at and as of Closing;

 

	
(b)  

	
the Purchaser will have performed and complied with all of the obligations, covenants and agreements to be performed and complied with by it hereunder;

 

	
(c)  

	
this Agreement, the Transaction Documents and all other documents necessary or reasonably required to consummate the transactions contemplated hereby, all in form and substance satisfactory to the Target will have been executed and delivered to the Target;

 

	
(d)  

	
the Target and its accountants will be reasonably satisfied with their review of the Purchaser Financial Statements;

 

	
(e)  

	
no injunction or restraining order of any court or administrative tribunal of competent jurisdiction will be in effect prohibiting the transactions contemplated by this Agreement and no action or proceeding will have been instituted or be pending before any court or administrative tribunal to restrain or prohibit the transactions contemplated by this Agreement;

 

	
(f)  

	
no Material Adverse Effect will have occurred with respect to the business of the Purchaser;

 

	
(g)  

	
all consents, renunciations, authorizations or approvals of third parties, which, in the Target’s reasonable opinion are necessary to give effect to the transactions contemplated herein, must be obtained to the Target’s satisfaction or in accordance with the relevant agreements, covenants or applicable law;

 

	
(h)  

	
the Purchaser will have closed the Purchaser Private Placement for net proceeds of at least $2,000,000, the proceeds of which will result in at least $2,000,000 being available to the Target for working capital purposes (assuming neither the Bridge Loan nor the notes issued pursuant to the Purchaser Note Financing are repaid from the proceeds of the Purchaser Private Placement);

 

  

33

  

 

	
(i)  

	
the Purchaser shall have no more than 20,000,000 Shares outstanding as of the Closing Date (including any Shares to be issued in connection with the Purchaser Private Placement but excluding the issuance of the Consideration Shares, any securities issued in connection with the Purchaser Note Financing and securities convertible or exercisable thereunder);

 

	
(j)  

	
the Target will have received from the Purchaser, the following closing documentation:

 

	
(i)  

	
a certified copy of resolutions of the directors of the Purchaser approving the entry into and Closing of this Agreement, authorizing the issuance of the Consideration Shares, approval of the Stock Option Plan and the stock option agreements contemplated hereunder, the appointment of nominee directors and executive officers as directed by the Target, the issuance of securities and the closing of the Purchaser Private Placement, the approval of the Transaction Documents and all other matters contemplated by this Agreement;

 

	
(ii)  

	
a certificate executed by an officer of the Purchaser certifying that the representations and warranties of the Purchaser set forth in this Agreement are true and correct in all material respects as at the Closing Date;

 

	
(iii)  

	
from the Purchaser, duly executed stock option agreements in the amounts set out in Schedule A;

 

	
(iv)  

	
duly executed consulting agreements between the Purchaser and each of Marc Hardgrove as Chief Creative Innovation Officer and Brent Willis as Chief Executive Officer, President, Secretary and Treasurer of the Purchaser;

 

	
(v)  

	
share certificates in the name of the Shareholders evidencing ownership of the Consideration Shares; and

 

	
(vi)  

	
a legal opinion issued by legal counsel for the Purchaser opining on certain corporate matters with respect to the Purchaser in the form required by the Target and the Target’s legal counsel, acting reasonably.

 

8.2 Waiver/Survival

 

The conditions set forth in this Article 8 are for the exclusive benefit of the Target and the Shareholders and may be waived by the Target and the Shareholders in writing in whole or in part on or before the Closing Date. Notwithstanding any such waiver, completion of the transactions contemplated by this Agreement by the Target and the Shareholders will not prejudice or affect in any way the rights of the Target and the Shareholders in respect of the warranties and representations of the Purchaser set forth in this Agreement, and the representations and warranties of the Purchaser in this Agreement will survive the Closing and issuance of the Consideration Shares for the applicable period set out in Section 5.28.

 

8.3 Covenant of the Purchaser

 

The Purchaser covenants to deliver all of the closing documentation set out in Section 8.1.

 

  

34

  

 

ARTICLE 9

CONDUCT OF BUSINESS PRIOR TO CLOSING

 

9.1 Conduct

 

Except as otherwise contemplated or permitted by this Agreement, the Bridge Financing, or as set forth in the Disclosure Statement, during the period from the date of this Agreement to the Closing Date, the Target will do the following:

 

	
(a)  

	
conduct the Business in the ordinary and usual course and in a continuous fashion and will not, without the prior written consent of the Purchaser:

 

	
(i)  

	
enter into any transaction which would constitute a breach of the Target’s, Key Shareholder’s or Shareholders’ representations, warranties or agreements contained herein,

 

	
(ii)  

	
increase the salaries or other compensation of, or make any advance (excluding advances for ordinary and necessary business expenses) or loan to, any of its Employees, officers or directors or make any increase in, or any addition to, other benefits to which any of its Employees, officers or directors may be entitled,

 

	
(iii)  

	
create, incur, assume or guarantee any indebtedness for money borrowed, or mortgaged or pledged by the Target or a third party, and will not subject any of the material assets or properties of the Target to any mortgage, lien, pledge, security interest, conditional sales contract or other Encumbrance related to any such indebtedness for money borrowed,

 

	
(iv)  

	
declare, set aside or pay any dividend or make or agree to make any other distribution or payment in respect of the Target’s capital shares or redeem, repurchase or otherwise acquire or agree to redeem, purchase or acquire any of the Target’s capital shares or equity securities, or

 

	
(v)  

	
pay any amount (other than salaries in the ordinary course of business) to any Related Party of the Target or the Shareholders;

 

	
(b)  

	
comply with all laws affecting the operation of the Business and pay all required Taxes;

 

	
(c)  

	
not take any action or omit to take any action which would, or would reasonably be expected to, result in a breach of or render untrue any representation, warranty, covenant or other obligation of the Target or the Shareholders contained herein;

 

	
(d)  

	
use commercially reasonable efforts to preserve intact the Business and the assets, operations and affairs of the Target and carry on the Business and the affairs of the Target substantially as currently conducted, and use commercially reasonable efforts to promote and preserve for the Purchaser the goodwill of suppliers, customers and others having business relations with the Target;

 

	
(e)  

	
take all necessary actions, steps and proceedings that are necessary to approve or authorize, or to validly and effectively undertake, the execution and delivery of this Agreement and the completion of the transactions contemplated by this Agreement;

 

	
(f)  

	
otherwise respond reasonably promptly to reasonable requests from the Purchaser for information concerning the status of the Business, operations, and finances of the Target; and

 

	
(g)  

	
comply with the provisions of Article 10 of this Agreement.

 

  

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ARTICLE 10

ADDITIONAL COVENANTS OF THE PARTIES

 

10.1 Board of Directors of the Purchaser

 

On or prior to the Closing Date, the current directors of the Purchaser will adopt resolutions appointing two (2) nominees of the Target and one (1) nominee of the Purchaser to the board of directors of the Purchaser and accepting the resignation of Woods from the board of directors of the Purchaser, which appointments and resignation will be effective on the later of the Closing Date or ten days after the filing of a Schedule 14f-1 in connection with the Transaction.

 

10.2 Officers of the Purchaser

 

On or prior to the Closing Date, the board of directors of the Purchaser will adopt resolutions appointing nominees of the Target as officers of the Purchaser and will accept the resignation of Woods as officer of the Purchaser, which appointments and resignation will be effective on Closing.

 

10.3 Target Financial Statements

 

The Target has, or will prior to the Closing Date have, delivered the Target Financial Statements to the Purchaser.

 

10.4 Stock Option Plan

 

At or prior to Closing, the Purchaser will adopt the Stock Option Plan and the Purchaser and each of the Shareholders identified in Schedule A will enter into a stock option agreement for the number of stock options set out in Schedule A to grant such number of stock options provided each grant is exempted from Applicable Securities Laws.

 

10.5 Notification of Financial Liabilities

 

The Shareholders and the Target will immediately notify the Purchaser in accordance with Section 14.4 hereof, if the Target receives any advice or notification from its independent certified public accountants that the Target has used any improper accounting practice that would have the effect of not reflecting or incorrectly reflecting in the books, records, and accounts of the Target, any properties, assets, Liabilities, revenues, or expenses.

 

10.6 Consents

 

The parties covenant and agree that they will use commercially reasonable efforts to obtain the consents, renunciations and approvals of third parties which are necessary to the completion of the transactions contemplated by this Agreement, provided that such consents, renunciations or approvals may be validly given by such third parties in accordance with relevant agreements, covenants or applicable law.

 

10.7 Exclusivity

 

Until such time, if any, as this Agreement is terminated pursuant to Article 12, the Shareholders and the Target (through their advisors, directors, bankers, employees, shareholders, agents or otherwise) will not, directly or indirectly:

 

	
(a)  

	
solicit, initiate, encourage, facilitate or discuss any proposition, offer, inquiry, submission or proposal from any other Person concerning the purchase of whatever part of the issued and outstanding Shares, other securities, significant elements of assets of the Target or any merger, reorganization, arrangement, capitalization or any other form of business merger implicating, directly or indirectly, the Target or the Business (a “Proposed Transaction”); or

 

  

36

  

 

	
(b)  

	
enter into any agreement, discussions or negotiations with any Person, company or other entity with respect to a Proposed Transaction.

 

The Target and the Shareholders will inform the Purchaser of all propositions, offers, bids or information requests that they might receive regarding a Proposed Transaction and must provide the Purchaser with all relevant information in their possession.

 

10.8 Loan Fee

 

Nothing in this Agreement shall alter or effect the obligation of the Target to pay the Loan Fee in accordance with the terms and conditions of the Commitment Letter which, for greater certainty, remains in full force and effect.

 

10.9 Access for Investigation

 

	
(a)  

	
Between the date of this Agreement and the Closing Date, the Target will:

 

	
(i)  

	
afford the Purchaser, the Purchaser’s Solicitors and the Purchaser’s representatives, advisors, prospective lenders and their representatives (collectively, the “Purchaser’s Advisors”) full and free access to the Target’s personnel, properties, contracts, books and records, and other documents and data, in each case during normal business hours, upon a reasonable number of occasions, upon reasonable notice and in a manner calculated to minimize disruption of the Business;

 

	
(ii)  

	
furnish the Purchaser and the Purchaser’s Advisors with copies of all such contracts, books and records, and other existing documents and data, as the Purchaser may reasonably request; and

 

	
(iii)  

	
furnish the Purchaser and the Purchaser’s Advisors with such additional financial, operating, and other data and information, as the Purchaser may reasonably request.

 

	
(b)  

	
Between the date of this Agreement and the Closing Date, the Purchaser will:

 

	
(i)  

	
afford the Target and the Shareholders and their respective representatives, legal and advisors and prospective lenders and their representatives (collectively, the “Shareholders’ Advisors”) full and free access to the Purchaser’s personnel, properties, contracts, books and records, and other documents and data, in each case during normal business hours, upon a reasonable number of occasions, upon reasonable notice and in a manner calculated to minimize disruption of the Purchaser’s business;

 

	
(ii)  

	
furnish the Shareholders and the Shareholders’ Advisors with copies of all such contracts, books and records, and other existing documents and data, as the Shareholders may reasonably request; and

 

	
(iii)  

	
furnish the Shareholders and the Shareholders’ Advisors with such additional financial, operating, and other data and information, as the Shareholder may reasonably request.

 

  

37

  

 

10.10 Required Approvals

 

	
(a)  

	
As promptly as practicable after the date of this Agreement, the Target will make all filings required by Legal Requirements to be made by it in order to consummate the transactions contemplated herein. Between the date of this Agreement and the Closing Date, the Target and the Shareholders will cooperate with the Purchaser with respect to all filings that the Purchaser elects to make or is required by Legal Requirements to make in connection with the transactions contemplated herein.

 

	
(b)  

	
As promptly as practicable after the date of this Agreement, the Purchaser will make all filings required by Legal Requirements to be made by it in order to consummate the transactions contemplated herein. The Purchaser will: (i) provide the Shareholders with copies of all correspondence with Governmental Bodies relating to such Legal Requirements, (ii) allow the Target and Shareholders to participate on all discussions or meetings (whether in person or via phone or other technology) with Governmental Bodies relating to such Legal Requirements, and (iii) provide the Target and the Shareholders with reasonable notice of each of the foregoing, and a reasonable opportunity to participate in the process where appropriate.

 

10.11 Notification

 

Between the date of this Agreement and the Closing Date, each of the parties hereto will promptly notify the other parties hereto in writing if any such party becomes aware of any fact or condition that causes or constitutes a breach of any of the representations and warranties set forth herein, as of the date of this Agreement, or if such party becomes aware of the occurrence after the date of this Agreement of any fact or condition that would (except as expressly contemplated by this Agreement) cause or constitute a breach of any such representation or warranty had such representation or warranty been made as of the time of occurrence or discovery of such fact or condition. Should any such fact or condition require any change in the Disclosure Statement if the Disclosure Statement were dated the date of the occurrence or discovery of any such fact or condition, the Target and the Shareholders will promptly deliver to the Purchaser a supplement to the Disclosure Statement specifying such change. During the same period, each party hereto will promptly notify the other parties hereto of the occurrence of any breach of any covenant set forth herein or of the occurrence of any event that may make the satisfaction of the conditions set forth herein impossible or unlikely.

 

10.12 Best Efforts

 

Between the date of this Agreement and the Closing Date, the parties will use their best efforts to cause the conditions contained in this Agreement to be satisfied.

 

10.13 Disclosure of Confidential Information

 

	
(a)  

	
Until the Closing Date and, if this Agreement is terminated without consummation of the transactions contemplated herein, then after such termination, the Purchaser, the Target and each of the Shareholders will maintain in confidence, will cause their respective directors, officers, employees, agents, and advisors to maintain in confidence, and will not use to the detriment of another party or divulge to any third parties, other than their respective legal and financial advisors, auditors, representatives and any other Governmental Bodies having jurisdiction, any confidential written, oral, or other information obtained during the course of the investigations in connection with this Agreement or the transactions contemplated herein, unless:

 

  

38

  

 

	
(i)  

	
such information is already known to such party or to others not bound by a duty of confidentiality or such information becomes publicly available through no fault of such party;

 

	
(ii)  

	
the use of such information is necessary or appropriate pursuant to the rules of any stock exchange or in making any filing or obtaining any consent or approval required for the consummation of the transactions contemplated herein; or

 

	
(iii)  

	
the furnishing or use of such information is required by or necessary or appropriate in connection with legal proceedings.

 

10.14 Public Notices

 

The parties agree that they will not release or issue any reports or statements or make any public announcements relating to this Agreement or the transactions contemplated herein without the prior written consent of the other party, except as may be required upon written advice of counsel to comply with applicable laws or regulatory requirements after consulting with the other party hereto and seeking their reasonable consent to such announcement.

 

ARTICLE 11

POST-CLOSING COVENANTS

 

11.1 Purchaser Name Change

 

Immediately following the Closing Date, the Purchaser shall effect a name change with the Secretary of State of the State of Nevada to change its name from “Teckmine Industries, Inc.” to a name as determined by the Target in accordance with applicable corporate and securities laws.

 

ARTICLE 12

TERMINATION

 

12.1 Termination

 

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

 

	
(a)  

	
mutual agreement of the Purchaser and the Target;

 

	
(a)  

	
the Purchaser, if there has been a material breach by the Target, the Key Shareholder or a Shareholder of any material representation, warranty, covenant or agreement set forth in this Agreement on the part of the Target or a Shareholder that is not cured, to the reasonable satisfaction of the Purchaser, within ten (10) business days after notice of such breach is given by the Purchaser (except that no cure period will be provided for a breach by the Target, the Key Shareholder or a Shareholder that, by its nature, cannot be cured);

 

	
(b)  

	
the Target, if there has been a material breach by the Purchaser of any material representation, warranty, covenant or agreement set forth in this Agreement on the part of the Purchaser that is not cured, to the reasonable satisfaction of the Target and the Shareholders within ten (10) business days after notice of such breach is given by the Target or the Shareholders (except that no cure period will be provided for a breach by the Purchaser that by its nature cannot be cured);

 

  

39

  

 

	
(c)  

	
the Purchaser or the Target if any permanent injunction or other order of a Governmental Body of competent authority preventing the consummation of the transaction contemplated by this Agreement has become final and non-appealable; or

 

	
(d)  

	
if the transactions contemplated herein have not been consummated prior to the Closing Date, unless otherwise extended by the written agreement of the parties hereto.

 

12.2 Effect of Termination

 

In the event of the termination of this Agreement as provided in Section 12.1, this Agreement will be of no further force or effect, provided, however, that no termination of this Agreement will relieve any party of liability for any breaches of this Agreement that are based on a wrongful refusal or failure to perform any obligations under this Agreement.

 

ARTICLE 13

INDEMNITIES

 

13.1 Agreement of the Purchaser to Indemnify

 

The Purchaser will indemnify, defend, and hold harmless, to the full extent of the law, the Target, the Key Shareholder and the Shareholders from, against, and in respect of any and all Losses asserted against, relating to, imposed upon, or incurred by the Target, the Key Shareholder or the Shareholders by reason of, resulting from, based upon or arising out of:

 

	
(a)  

	
the material breach by the Purchaser of any representation or warranty of the Purchaser contained in or made pursuant to this Agreement or any certificate or other instrument delivered pursuant to this Agreement; or

 

	
(b)  

	
the material breach or partial breach by the Purchaser of any covenant or agreement of the Purchaser made in or pursuant to this Agreement or any certificate or other instrument delivered pursuant to this Agreement.

 

13.2 Agreement of the Target and the Shareholders to Indemnify

 

The Target, the Key Shareholder and the Shareholders will indemnify, defend, and hold harmless, to the full extent of the law, the Purchaser from, against, and in respect of any and all Losses asserted against, relating to, imposed upon, or incurred by the Purchaser by reason of, resulting from, based upon or arising out of:

 

	
(a)  

	
the material breach by the Target, the Key Shareholder or a Shareholder of any representation or warranty of the Target, the Key Shareholder or a Shareholder contained in or made pursuant to this Agreement or any certificate or other instrument delivered pursuant to this Agreement; or

 

	
(b)  

	
the material breach or partial breach by the Target, the Key Shareholder or a Shareholder of any covenant or agreement of the Target or a Shareholder made in or pursuant to this Agreement or any certificate or other instrument delivered pursuant to this Agreement.

 

13.3 Third Party Claims

 

	
(a)  

	
If any third party notifies a party entitled to indemnification under Section 13.1 or 13.2 (each an “Indemnified Party”) with respect to any matter (a “Third-Party Claim”) which may give rise to an indemnity claim against a party required to indemnify such Indemnified Party under Section 13.1 or 13.2 (each an “Indemnifying Party”), then the Indemnified Party will promptly give written notice to Indemnifying Party; provided, however, that no delay on the part of the Indemnified Party in notifying the Indemnifying Party will relieve the Indemnifying Party from any obligation under this Article 13, except to the extent such delay actually and materially prejudices the Indemnifying Party.

 

  

40

  

 

	
(b)  

	
The Indemnifying Party will be entitled to participate in the defense of any Third-Party Claim that is the subject of a notice given by the Indemnified Party pursuant to Section 13.3(a). In addition, the Indemnifying Party will have the right to defend the Indemnified Party against the Third-Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so long as: (i) the Indemnifying Party gives written notice to the Indemnified Party within fifteen days after the Indemnified Party has given notice of the Third-Party Claim that the Indemnifying Party elects to assume the defense of such Third-Party Claim, (ii) the Indemnifying Party provides the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party will have adequate financial resources to defend against the Third-Party Claim and fulfill its indemnification obligations hereunder, (iii) if the Indemnifying Party is a party to the Third-Party Claim or, in the reasonable opinion of the indemnified Party some other actual or potential conflict of interest exists between the Indemnifying Party and the Indemnified Party, the Indemnified Party determines in good faith that joint representation would not be inappropriate, (iv) the Third-Party Claim does not relate to or otherwise arise in connection with Taxes or any criminal or regulatory enforcement action, (v) settlement of, an adverse judgment with respect to or the Indemnifying Party’s conduct of the defense of the Third-Party Claim is not, in the good faith judgment of the Indemnified Party, likely to be materially adverse to the Indemnified Party’s reputation or continuing business interests (including its relationships with current or potential customers, suppliers or other parties material to the conduct of its business) and (vi) the Indemnifying Party conducts the defense of the Third-Party Claim actively and diligently. The Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third-Party Claim; provided, however, that the Indemnifying Party will pay the reasonable fees and expenses of separate co-counsel retained by the Indemnified Party that are incurred prior to Indemnifying Party’s assumption of control of the defense of the Third-Party Claim.

 

	
(c)  

	
The Indemnifying Party will not consent to the entry of any judgment or enter into any compromise or settlement with respect to the Third-Party Claim without the prior written consent of the Indemnified Party unless such judgment, compromise or settlement: (i) provides for the payment by the Indemnifying Party of money as sole relief for the claimant, (ii) results in the full and general release of the Indemnified Party from all liabilities arising or relating to, or in connection with, the Third-Party Claim and (iii) involves no finding or admission of any violation of Legal Requirements or the rights of any Person and has no effect on any other claims that may be made against the Indemnified Party.

 

	
(d)  

	
If the Indemnifying Party does not deliver the notice contemplated by Section 13.3(b)(i), or the evidence contemplated by Section 13.3(b)(ii), within fifteen days after the Indemnified Party has given notice of the Third-Party Claim, or otherwise at any time fails to conduct the defense of the Third-Party Claim actively and diligently, the Indemnified Party may defend, and may consent to the entry of any judgment or enter into any compromise or settlement with respect to, the Third-Party Claim in any manner it may deem appropriate; provided, however, that the Indemnifying Party will not be bound by the entry of any such judgment consented to, or any such compromise or settlement effected, without its prior written consent (which consent will not be unreasonably withheld or delayed). In the event that the Indemnified Party conducts the defense of the Third-Party Claim pursuant to this Section 13.3(d), the Indemnifying Party will (i) advance the Indemnified Party promptly and periodically for the costs of defending against the Third-Party Claim (including reasonable attorneys’ fees and expenses) and (ii) remain responsible for any and all other Losses that the Indemnified Party may incur or suffer resulting from, arising out of, relating to, in the nature of or caused by the Third-Party Claim to the fullest extent provided in this Article 13.

 

  

41

  

 

13.4 Exclusive Remedy

 

After the Closing, this Article 13 shall be the sole and exclusive remedy for any inaccuracy of any representation and warranty, or breach of any covenant obligation, made in connection with this Agreement.

 

ARTICLE 14

GENERAL

 

14.1 Expenses

 

All costs and expenses incurred in connection with the preparation of this Agreement and the transactions contemplated by this Agreement will be paid by the party incurring such expenses.

 

14.2 Indemnifications Not Affected by Investigation

 

The right to indemnification, payment of damages or other remedy based on the representations, warranties, covenants, and obligations contained herein will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant or obligation. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, will not affect the right to indemnification, payment of damages, or other remedy based on such representations, warranties, covenants, and obligations.

 

14.3 Assignment

 

No parties to this Agreement may assign any of their respective rights under this Agreement without the prior consent of each of the other parties. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of each of the parties, as applicable. Nothing expressed or referred to in this Agreement will be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns, as applicable.

 

14.4 Notices

 

Any notice required or permitted to be given under this Agreement will be in writing and may be given by delivering, sending by electronic facsimile transmission or other means of electronic communication capable of producing a printed copy, or sending by prepaid registered mail, the notice to the following address or number:

 

  

42

  

 

	 	If to the Purchaser:
	 	 
	 	 	Teckmine Industries, Inc.
	 	 	c/o 900 – 885 West Georgia
	 	 	Vancouver, British Columbia
	 	 	Canada
	 	 	V6C 3H1
	 	 	 
	 	 	Attention:	Nathan Woods
	 	 	Telephone:	(949) 280-5710
	 	 	Facsimile: 	(604) 687-6314 Attn: Cam McTavish c/o Nathan Woods

 

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

	 	 	 
	 	 	
Clark Wilson LLP

	 	 	
Barristers & Solicitors

	 	 	
Suite 900 – 885 West Georgia Street

	 	 	
Vancouver, British Columbia, Canada V6C 3H1

	 	 	 
	 	 	Attention:	Cam McTavish
	 	 	Telephone:	(604) 891-7731
	 	 	Facsimile: 	(604) 687-6314

 

	 	
If to the Shareholders or to the Target:

	 	 	 
	 	 	
Victory Electronic Cigarettes, Inc.

	 	 	
1880 Airport Drive

	 	 	
Ball Ground, Georgia

	 	 	
30107

	 	 	 
	 	 	Attention:	Brent Willis
	 	 	Telephone:	(813) 468-8048
	 	 	Facsimile: 	(813) 387-3050 Attn: Jaime R. Quezon c/o Brent Willis

 

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

	 	 	 
	 	 	
Wardell & Quezon, P.A.

	 	 	
805 W. Azeele Street

	 	 	
Tampa, FL 33606

	 	 	 
	 	 	Attention:	Jaime R. Quezon
	 	 	Telephone:	(813) 387-3333
	 	 	Facsimile: 	(813) 387-3050

 

(or to such other address or number as any party may specify by notice in writing to another party).

 

Any notice delivered or sent by electronic facsimile transmission or other means of electronic communication capable of producing a printed copy on a business day will be deemed conclusively to have been effectively given on the day the notice was delivered, or the transmission was sent successfully to the number set out above, as the case may be.

 

Any notice sent by prepaid registered mail will be deemed conclusively to have been effectively given on the third business day after posting; but if at the time of posting or between the time of posting and the third business day thereafter there is a strike, lockout, or other labour disturbance affecting postal service, then the notice will not be effectively given until actually delivered.

 

  

43

  

 

14.5 Governing Law; Venue

 

This Agreement, the legal relations between the parties and the adjudication and the enforcement thereof, shall be governed by and interpreted and construed in accordance with the substantive laws of the State of Nevada without regard to applicable choice of law provisions thereof. The parties hereto agree that any action, suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby will be brought in a suitable court located in the State of Nevada and each party hereto irrevocably submits to the exclusive jurisdiction of those courts.

 

14.6 Severability

 

If any covenant or other provision of this Agreement is invalid, illegal, or incapable of being enforced by reason of any rule of law or public policy, then such covenant or other provision will be severed from and will not affect any other covenant or other provision of this Agreement, and this Agreement will be construed as if such invalid, illegal, or unenforceable covenant or provision had never been contained in this Agreement. All other covenants and provisions of this Agreement will, nevertheless, remain in full force and effect and no covenant or provision will be deemed dependent upon any other covenant or provision unless so expressed herein.

 

14.7 Entire Agreement

 

This Agreement, the schedules attached hereto and the other documents in connection with this transaction contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior arrangements and understandings, both written and oral, expressed or implied, with respect thereto. Any preceding correspondence or offers are expressly superseded and terminated by this Agreement.

 

14.8 Further Assurances

 

The parties will execute and deliver all such further documents, do or cause to be done all such further acts and things, and give all such further assurances as may be necessary to give full effect to the provisions and intent of this Agreement.

 

14.9 Enurement

 

This Agreement and each of the terms and provisions hereof will enure to the benefit of and be binding upon the parties and their respective heirs, executors, administrators, personal representatives, successors and permitted assigns, as applicable.

 

14.10 Amendment

 

This Agreement may not be amended except by an instrument in writing signed by each of the parties.

 

14.11 Schedules and Disclosure Statements

 

The schedules attached, the Disclosure Statement and the Purchaser Disclosure Statement provided pursuant to this Agreement are incorporated herein.

 

  

44

  

 

14.12 Counterparts

 

This Agreement may be executed in several counterparts, each of which will be deemed to be an original and all of which will together constitute one and the same instrument and delivery of an executed copy of this Agreement by electronic facsimile transmission or other means of electronic communication capable of producing a printed copy will be deemed to be execution and delivery of this Agreement as of the date set forth on page one of this Agreement.

 

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

	WITNESSED BY:	 	)	 	 
	 	 	)	VICTORY ELECTRONIC CIGARETTES, INC.
	/s/ Signed 	 	
)

	 	 
	Name	 	
)

	 	 
	 	 	
)

	 	 
	Address	 	
)

	Per: 	/s/ Marc Hardgrove	 
	 	 	
)

	 	Authorized Signatory	 
	 	 	
)

	 	 
	Occupation	 	
)

	 	 

 

	WITNESSED BY:	 	)	 	 
	 	 	)	
TECKMINE INDUSTRIES, INC.

	/s/ Signed 	 	
)

	 	 
	Name	 	
)

	 	 
	 	 	
)

	 	 
	Address	 	
)

	Per: 	/s/ Nathan Woods	 
	 	 	
)

	 	Authorized Signatory	 
	 	 	
)

	 	 
	Occupation	 	
)

	 	 

 

	WITNESSED BY:	 	)	 	 
	 	 	)	
MARC HARDGROVE

	/s/ Signed 	 	
)

	 	 
	Name	 	
)

	 	 
	 	 	
)

	 	 
	Address	 	
)

	 	/s/ Marc Hardgrove	 
	 	 	
)

	 	 	 
	 	 	
)

	 	 
	Occupation	 	
)

	 	 

 

  

45

  

 

	WITNESSED BY:	 	)	 	 
	 	 	)	
DAVID MARTIN

	/s/ Signed 	 	
)

	 	 
	Name	 	
)

	 	 
	 	 	
)

	 	 
	Address	 	
)

	 	
/s/ David Martin

	 
	 	 	
)

	 	 	 
	 	 	
)

	 	 
	Occupation	 	
)

	 	 

 

	WITNESSED BY:	 	)	 	 
	 	 	)	
BRENT WILLIS

	/s/ Signed 	 	
)

	 	 
	Name	 	
)

	 	 
	 	 	
)

	 	 
	Address	 	
)

	 	/s/ Brent Willis	 
	 	 	
)

	 	 	 
	 	 	
)

	 	 
	Occupation	 	
)

	 	 

 

	WITNESSED BY:	 	)	 	 
	 	 	)	
PAUL SIMON

	/s/ Signed 	 	
)

	 	 
	Name	 	
)

	 	 
	 	 	
)

	 	 
	Address	 	
)

	 	/s/ Paul Simon	 
	 	 	
)

	 	 	 
	 	 	
)

	 	 
	Occupation	 	
)

	 	 

 

  

46

  

 

	WITNESSED BY:	 	)	 	 
	 	 	)	
PAUL DILLMAM

	/s/ Signed 	 	
)

	 	 
	Name	 	
)

	 	 
	 	 	
)

	 	 
	Address	 	
)

	 	/s/ Paul Dillman	 
	 	 	
)

	 	 	 
	 	 	
)

	 	 
	Occupation	 	
)

	 	 

 

	WITNESSED BY:	 	)	 	 
	 	 	)	
JOHN PERNER

	/s/ Signed 	 	
)

	 	 
	Name	 	
)

	 	 
	 	 	
)

	 	 
	Address	 	
)

	 	/s/ John Perner	 
	 	 	
)

	 	 	 
	 	 	
)

	 	 
	Occupation	 	
)

	 	 

 

	WITNESSED BY:	 	)	 	 
	 	 	)	
STEVE RIFFLE

	/s/ Signed 	 	
)

	 	 
	Name	 	
)

	 	 
	 	 	
)

	 	 
	Address	 	
)

	 	/s/ Steve Riffle	 
	 	 	
)

	 	 	 
	 	 	
)

	 	 
	Occupation	 	
)

	 	 

  

47

  

 

SCHEDULE A

 

LIST OF VICTORY ELECTRONIC CIGARETTES, INC.

 SHAREHOLDERS

 

	
Name of Shareholder

	
Number of Shares held

	
Number of Purchaser Shares to be issued to Shareholder

	
Number of Options to be issued to Shareholder

	
Marc Hardgrove

	
270,000

	
17,550,000

	
Nil

	
David Martin

	
40,000

	
2,600,000

	
Nil

	
Brent Willis

	
75,000

	
4,875,000

	
3,000,000

	
Paul Simon

	
60,000

	
3,900,000

	
Nil

	
Paul Dillman

	
25,000

	
1,625,000

	
1,000,000

	
John Perner

	
15,000

	
975,000

	
1,000,000

	
Steve Riffle

	
15,000

	
975,000

	
1,000,000

	  	  	  	  
	
Total:

	
500,000

	
32,500,000

	
6,000,000

 

  

48

  

 

SCHEDULE B

 

CERTIFICATE OF U.S. SHAREHOLDER

 

Capitalized terms used but not otherwise defined in this Certificate shall have the meanings given to such terms in that certain Share Exchange Agreement dated April ____, 2013 among the Purchaser, the Target and the Shareholders of the Target, including the undersigned (the “Agreement”). In connection with the issuance of the Consideration Shares to the undersigned, the undersigned hereby agrees, acknowledges, represents and warrants, as an integral part of the Agreement, that:

 

1.           the undersigned satisfies one or more of the categories of “Accredited Investor”, as defined by Regulation D promulgated under the Securities Act, as indicated below: (Please initial in the space provide those categories, if any, of an “Accredited Investor” which the undersigned satisfies.)

 

	
_______

	
 Category 1

	
An organization described in Section 501(c)(3) of the United States Internal Revenue Code, a corporation, a Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the Shares, with total assets in excess of US $5,000,000.

 

	

_______

	
 Category 2

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

 

	

_______

	
 Category 3

	
A natural person who had an individual income in excess of US $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of US $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.

 

	

_______

	
 Category 4

	
A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940 (United States).

 

	

_______

	
 Category 5

	
A director or executive officer of the Target who will continue to be a director or executive officer of the Purchaser after the Closing.

 

	

_______

	
 Category 6

	
A trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Shares, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the Securities Act.

 

	

_______

	
 Category 7

	
An entity in which all of the equity owners satisfy the requirements of one or more of the foregoing categories.

 

  

49

  

 

Note that if the undersigned is claiming to satisfy one of the above categories of Accredited Investor, the undersigned may be required to supply the Purchaser with a balance sheet, prior years’ federal income tax returns or other appropriate documentation to verify and substantiate the undersigned’s status as an Accredited Investor.

 

If the undersigned is an entity which initialled Category 7 in reliance upon the Accredited Investor categories above, state the name, address, total personal income from all sources for the previous calendar year, and the net worth (exclusive of home, home furnishings and personal automobiles) for each equity owner of the said entity:

 

______________________________________________________________________________

 

2.           none of the Consideration Shares have been or will be registered under the Securities Act, or under any state securities or “blue sky” laws of any state of the United States, and may not be offered or sold in the United States or, directly or indirectly, to U.S. Persons, as that term is defined in Regulation S, except in accordance with the provisions of Regulation S or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable state and foreign securities laws;

 

3.           the undersigned understands and agrees that offers and sales of any of the Consideration Shares shall be made only in compliance with the registration provisions of the Securities Act or an exemption therefrom and in each case only in accordance with applicable state and foreign securities laws;

 

4.           the undersigned understands and agrees not to engage in any hedging transactions involving any of the Consideration Shares unless such transactions are in compliance with the provisions of the Securities Act and in each case only in accordance with applicable state and provincial securities laws;

 

5.           the undersigned is acquiring the Consideration Shares for investment only and not with a view to resale or distribution and, in particular, it has no intention to distribute either directly or indirectly any of the Consideration Shares in the United States or to U.S. Persons;

 

6.           except as set out in the Agreement, the Purchaser has not undertaken, and will have no obligation, to register any of the Consideration Shares under the Securities Act;

 

7.           the Purchaser is entitled to rely on the acknowledgements, agreements, representations and warranties and the statements and answers of the undersigned contained in the Agreement and this Certificate, and the undersigned will hold harmless the Purchaser from any loss or damage either one may suffer as a result of any such acknowledgements, agreements, representations and/or warranties made by the undersigned not being true and correct;

 

8.           the undersigned has been advised to consult their own respective legal, tax and other advisors with respect to the merits and risks of an investment in the Consideration Shares and, with respect to applicable resale restrictions, is solely responsible (and the Purchaser is not in any way responsible) for compliance with applicable resale restrictions;

 

9.           the undersigned and the undersigned’s advisor(s) have had a reasonable opportunity to ask questions of and receive answers from the Purchaser in connection with the acquisition of the Consideration Shares under the Agreement, and to obtain additional information, to the extent possessed or obtainable by the Purchaser without unreasonable effort or expense;

 

10.         the books and records of the Purchaser were available upon reasonable notice for inspection, subject to certain confidentiality restrictions, by the undersigned during reasonable business hours at its principal place of business and that all documents, records and books in connection with the acquisition of the Consideration Shares under the Agreement have been made available for inspection by the undersigned, the undersigned’s attorney and/or advisor(s);

 

  

50

  

 

11.         the undersigned (i) is able to fend for itself in connection with the acquisition of the Consideration Shares; (ii) has such knowledge and experience in business matters as to be capable of evaluating the merits and risks of its prospective investment in the Consideration Shares; and (iii) has the ability to bear the economic risks of its prospective investment and can afford the complete loss of such investment;

 

12.         the undersigned is not aware of any advertisement of any of the Consideration Shares and is not acquiring the Consideration Shares as a result of any form of general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising;

 

13.         except as set out in the Agreement, no person has made to the undersigned any written or oral representations:

 

	
  

	
(a)

	
that any person will resell or repurchase any of the Consideration Shares;

 

	
  

	
(b)

	
that any person will refund the purchase price of any of the Consideration Shares;

 

	
  

	
(c)

	
as to the future price or value of any of the Consideration Shares; or

 

	
  

	
(d)

	
that any of the Consideration Shares will be listed and posted for trading on any stock exchange or automated dealer quotation system or that application has been made to list and post any of the Consideration Shares on any stock exchange or automated dealer quotation system, except that currently certain market makers make market in the common shares of the Purchaser on the OTC Bulletin Board;

 

14.         none of the Consideration Shares are listed on any stock exchange or automated dealer quotation system and, except as set out in the Agreement, no representation has been made to the undersigned that any of the Consideration Shares will become listed on any stock exchange or automated dealer quotation system, except that currently certain market makers make market in the common shares of the Purchaser on the OTC Bulletin Board;

 

15.         the undersigned is acquiring the Consideration Shares as principal for their own account, for investment purposes only, and not with a view to, or for, resale, distribution or fractionalization thereof, in whole or in part, and no other person has a direct or indirect beneficial interest in the Consideration Shares;

 

16.         neither the SEC nor any other securities commission or similar regulatory authority has reviewed or passed on the merits of the Consideration Shares;

 

17.         the Purchaser shall refuse to register any transfer of Consideration Shares not made in accordance with the provisions of Regulation S, pursuant to registration under the Securities Act, or pursuant to an available exemption from registration under the Securities Act;

 

18.         the Consideration Shares issued to the undersigned will bear the following legend:

 

“NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.”;

 

  

51

  

 

19.         the address of the undersigned included herein is the sole address of the undersigned as of the date of this certificate;

 

20.         the undersigned is the beneficial owner of the Consideration Shares free and clear of all liens, charges and encumbrances of any kind whatsoever;

 

21.         there are no written instruments, buy-sell agreements, registration rights or agreements, voting agreements or other agreements by and between or among the undersigned and any other Person, imposing any restrictions upon the transfer, prohibiting the transfer of or otherwise pertaining to the Consideration Shares or the ownership thereof;

 

22.         no Person has or will have any agreement or option or any right capable at any time of becoming an agreement to purchase or otherwise acquire the Consideration Shares or require the undersigned to sell, transfer, assign, pledge, charge, mortgage or in any other way dispose of or encumber any of the Consideration Shares other than under the Agreement; and

 

23.         the undersigned waives all claims and actions connected with the issuance of or rights attached to the Consideration Shares, including without limitation, the benefit of any representations, warranties and covenants in favour of the undersigned contained in any share purchase or subscription agreement(s) for such Consideration Shares; and any registration, liquidation, or any other rights by and between or among the undersigned and any other Person, which may be triggered as a result of the consummation of the Transaction.

 

 

IN WITNESS WHEREOF, I have executed this Certificate of U.S. Shareholder.

 

	__________________________________	 	Date: _________________________, 2013
	Signature	 	 
	 	 	 
	___________________________	 	 
	Print Name	 	 
	 	 	 
	___________________________	 	 
	Title (if applicable)	 	 
	 	 	 
	___________________________	 	 
	Address	 	 
	___________________________	 	 

 

  

52

  

 

 

	 	 	 
	 	Register the Securities as set forth below:	 
	 	 	 
	 	 	 
	 	(Name to Appear on Certificate)	 
	 	 	 
	 	 	 
	 	
(Account Reference, if applicable)

	 
	 	 	 
	 	 	 
	 	(Address, including Postal Code)	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 

 

	 	 	 
	 	
Deliver the Securities as set forth below:

	 
	 	 	 
	 	 	 
	 	(Attention - Name)	 
	 	 	 
	 	 	 
	 	
(Account Reference, if applicable)

	 
	 	 	 
	 	 	 
	 	(Street Address, including Postal Code) (No PO Box)	 
	 	 	 
	 	 	 
	 	(Telephone Number)	 

 

 

 

53

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