Investment Agreement CannaPacific Pty Limited Aleafia Health Inc. Dennis Partners Pty Limited as trustee for Dennis Partners Trust

The Company and the Founder Shareholder have agreed for the Investor to acquire 10% of Shares in the Company from the Founder Shareholder on the terms and conditions of this agreement.

The Investor has agreed to acquire 10% of Shares in the Company from the Founder Shareholder on the terms and conditions of this agreement.

The Investor has otherwise agreed to provide certain knowledge and intellectual property to the Company, and perform certain acts as set out in this agreement to assist the Company establishing operations in Australia.

Interpretation and definitions

Definitions and interpretation

Schedule 1 contains definitions used in this agreement and interpretation rules for this agreement.

Agreement components

This agreement includes any schedule.

Offer to acquire

Offer to acquire

The Investor offers to acquire (and agrees to accept) from the Founder Shareholder the interest in the Acquisition Shares for the Acquisition Price on the terms set out in this agreement.

The Founder Shareholder may accept the Investor’s offer by notice to the Investor (and the Company is authorised to confirm acceptance to the Investor on the Founder Shareholder’s behalf). The Founder Shareholder’s delivery of an executed share transfer to the Investor will in any event be taken as evidence of acceptance.

If the Founder Shareholder accepts the Investor’s offer, on Completion the Founder Shareholder must sell, and the Investor must buy, the Acquisition Shares for the Acquisition Price free and clear of all Encumbrances.

The Founder Shareholder will sell the Acquisition Shares to the Investor together with all rights attached to them as at Completion and title to and risk in the Acquisition Shares will pass to the Investor.

The Investor confirms that the Company has not provided any financial product advice nor made any recommendations nor provided any statement of opinion that has influenced it in making a decision in relation to the acquisition of the Acquisition Shares.

The Investor agrees to be bound by the Constitution and the Shareholders Agreement as an ‘Investor Shareholder’.

Completion

Completion of the sale and purchase of the Acquisition Shares will take place at the registered office of the Company within 5 Business Days after the date of the Founder Shareholder’s acceptance of the Investor’s offer (unless the Investor and the Founder Shareholder agree to another place or time).

At Completion, the Founder Shareholder must give to the Investor a duly executed and completed share transfer of the Acquisition Shares in favour of the Investor.

At Completion the Investor must:

pay (or procure the payment of) the Acquisition Price to the Founder Shareholder without counterclaim or set-off. By accepting the offer, the Founder Shareholder directs the Investor to pay the relevant amount to the Company by bank cheque or electronic funds transfer (and that such payment to the Company will, to the extent of the payment, operate to discharge the Investor’s obligation to pay the purchase price to the Founder Shareholder);

deliver to the Company a duly executed and completed share transfer of the Acquisition Shares from the Founder Shareholder to the Investor; and

deliver to the Company an executed Accession Agreement in accordance with the Shareholders Agreement, duly executed by the Investor.

The Investor must pay any Duty in respect of the purchase of the Acquisition Shares. Otherwise any action to be taken by the Investor or the Founder Shareholder in relation to the sale and purchase must be taken at its own cost and expense, and each party must, at its own expense, do all things and execute all documents necessary to give full effect to the sale and purchase.

register the transfer of Acquisition Shares and updated the Company share register; and

issue new share certificates to the Investor in respect of the Acquisition Shares.

Investor contributions

Provision of Investor expertise and knowledge

The Investor has agreed to provide certain industry knowledge and expertise to the Company to assist the Company establishing operations in Australia. The Investor will work with the Company and make commercially reasonable efforts for the provision of this knowledge and expertise will include:

cannabis cultivation and production experience from ‘seed to sale’ for the medical cannabis industry;

medical research data, and patient experience to assist the Company in the product registration on the Australian Register of Therapeutic Goods (ARTG) provided the Company will provide this same data back to the Investor;

permit the Company to sell and distribute the Investor’s products (including ‘white label’ medicines) to patients in Australia under a co-branded CannaPacific and Aleafia brand (and help facilitate that sale and distribution process) subject to prior written approval of the Investor;

provide the Company with ‘plant starter material’ and germ- plasm of the same type and strain(s) as are used to produce the medicines referred to above as white labelled medicines subject to compliance with applicable import/export laws and regulations governing the Investor and the Company;

provide reasonable advice and assistance to the Company, including in respect of cultivation, GMP (‘Good Manufacturing Practice’) manufacturing and facility design;

provide product data and advice to assist the Company’s doctors to prescribe the most appropriate medical cannabis products to patients; and

permit the Company to make available the ‘Medical Cannabis Portal’ to a group of appropriately licenced prescribers under the guidance of the Medical Director to facilitate the distribution and sale of the Company medicines.

The Investor agrees to work with the Company in good faith (and the Company vice-versa) to make available the knowledge and expertise identified in clause 3.1 within a reasonable timeframe following a request for assistance by the Company (and, in any event, within 6 months of the date of this agreement, subject to compliance with applicable law).

To the extent the knowledge and expertise identified in clause 3.1 includes any Intellectual Property Rights:

nothing in this agreement constitutes a transfer or change of ownership in such Intellectual Property Rights; and

the Investor warrants to the Company that it has valid and enforceable rights to use such Intellectual Property Rights.

Contribution towards Company costs

the first instalment within 2 Business Days of the signing of this agreement; and

the second instalment within 6 months of the date of this agreement,

Company rights of action for Investor failure

Warranties

Representations and Warranties

The Company and the Founder Shareholder each represent and warrant to the Investor that each of the Warranties is true and accurate as at the date of this agreement (subject to disclosures included in the Disclosure Materials).

Warranties separate

Each of the Warranties is separate and independent and, except as expressly provided to the contrary in this agreement, is not limited by reference to any other Warranty.

No other warranties

Each party agrees and acknowledges that it has not relied on any representation or warranty (whether express or implied, written or oral) that is not expressly set out in this agreement.

Investor warranties

The Investor warrants, represents and acknowledges to the Company that it:

is not a competitor to the Company in Australia;

has not made and is not at the date of this agreement considering making an investment (whether by way of equity, loan funds, non-cash contribution or otherwise) in an entity that is a competitor to the Company in Australia;

has full power, authority and capacity to execute, deliver and satisfy its obligations under this agreement, the Shareholder’s Agreement and the constitution of the Company, and such actions will not cause the Investor to be in breach or violation of any contractual, legal or regulatory duty or obligation;

has undertaken its own investigation and assessment of the Company;

has verified to its own satisfaction the accuracy, reliability and completeness of the information provided to it and where appropriate, taken independent legal, accounting, investment and tax advice, in relation thereto; and

accepts that to the fullest extent permitted by law, the Company is permitted to and does disclaim and exclude all liability for any loss or damage suffered or incurred by the Investor as a result of any information, any errors in or omissions from any of that information and/or any negligence or lack of care or otherwise on the part of the Company or any of its associates, members, officers, employees, agents or representatives.

Confidentiality and announcements

No announcements

Confidentiality

Each party agrees to keep as confidential information the terms of this agreement and the contents of all negotiations leading to its preparation, and will not disclose or discuss any of that information without the prior written approval of the other party, except as provided in clause 5.2(c).

The Investor agrees to keep as confidential information any information, technical data or know-how relating to the activities, business, assets or affairs of the Company or any of its employees, officers, shareholders or affiliates (whether such information is disclosed before or after the date of this agreement) (Company Information), and will not disclose or discuss any of that information without the prior written approval of the Company, except as provided in clause 5.2(c).

A party may only disclose information referred to in clause 5.1, and the Investor may only disclose Company Information:

as specifically contemplated by this agreement;

to the extent required by law; or

to the extent required to instruct the Investor’s professional advisers in relation to the preparation and completion of this agreement.

The Investor agrees to:

use Company Information solely for the purpose of evaluating a potential investment in the Company;

maintain the Company Information in strict confidence; and

immediately notify the Company in writing in the event of any unauthorised use or disclosure of Company Information that comes to the attention of the Investor.

Notices

Form of notice

A notice must be in writing and in the English language or capable of being reproduced in that language.

A notice may be given on behalf of a person by a solicitor, director or company secretary of the person.

Means of giving notices

delivering it in writing to the street address of the addressee;

sending it by prepaid ordinary post (airmail if outside Australia) to the street address of the addressee; or

sending it by email to the email address of the addressee.

Specified address for service

Until a party gives notice of a change, the street address and email for that party is the address specified on page 1 of this agreement.

If the street address or email for a party changes the party must give notice of the change to each other party.

Time notices are given

if delivered in writing to the street address of the addressee, at the time of delivery;

if it is sent by post to the street address of the addressee, on the third (seventh if outside Australia) day after posting;

if sent by email to the email address of the addressee, at the time of receipt of the email by the addressee’s email server (even if categorised by the addressee’s server as spam), unless the party sending the notice receives an automated response that delivery of the email has failed, in which case the notice will not be regarded as given, served, received and as having come to the attention of the addressee.

Miscellaneous

Approvals and consent

Except when the contrary is stated in this agreement, a party may give or withhold an approval or consent to be given under this agreement in that party’s absolute discretion and subject to those conditions determined by the party.

Assignment

None of the rights or obligations under this agreement may be assigned or transferred without the written consent of all the parties.

Entire agreement

This agreement, together with the constitution of the Company and the Shareholders’ Agreement, contains everything the parties have agreed on in relation to the matters it deals with. No party can rely on an earlier document or anything said or done by another party, or by a director, officer, agent or employee of that party, before this agreement was executed, save as permitted by law.

Execution of separate documents

This agreement is properly executed if each party executes either this document or an identical document.

Further acts

Each party must promptly execute all documents and do all things that another party from time to time reasonably requests to effect, perfect or complete this agreement and all transactions incidental to it.

Governing law and jurisdiction

This agreement is governed by and must be construed in accordance with the laws of New South Wales, Australia. Each party irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of that place and all courts which have jurisdiction to hear appeals from those courts.

Legal costs

The parties must each pay their own legal and other expenses relating directly or indirectly to the negotiation, preparation and execution of this agreement and all documents incidental to it.

Variation

This agreement may only be varied by the written agreement of the parties.

No Partnership

The parties do not intend to create, and this agreement does not constitute, a partnership, agency, trust or other arrangement.

Definitions

Term

Meaning

Accession Agreement

has the meaning given in the Shareholders Agreement as at the date of this agreement.

Acquisition Price

$100 (being $1 per Acquisition Share).

Acquisition Shares

100 Shares in the Company.

Business Day

a day on which banks are open for business in Sydney excluding a Saturday, Sunday or public holiday in that city.

Completion

the transfer of Acquisition Shares to the Investor from the Founder Shareholder.

Completion Date

the date defined in clause 2.2 of this agreement.

Constitution

the constitution of the Company.

Corporations Act

the Corporations ▇▇▇ ▇▇▇▇ (Cth).

Disclosure Materials

1

the Due Diligence Requisition List dated November 2, 2019 [sic] completed by the Company and all documents and information contained in the online ‘Drop Box’ room made available to the Investor thereunder;

2

an email from                        to                          at 8.29pm (Sydney time) on 10 December 2018 responding to questions submitted on behalf of the Investror; and

3

the information set out in this agreement (including the schedules).

Term

Meaning

Related Body Corporate

has the meaning given in section 9 of the Corporations Act.

Share

an ordinary share in the Company.

Shareholders

has the meaning given in the Shareholders Agreement.

Shareholders Agreement

the CannaPacific Shareholders Agreement dated November 2018.

Subsidiary

has the meaning given under the Corporations Act.

Tax

any tax, levy, charge, impost, fee, deduction, goods and services tax, social security contribution, compulsory loan or withholding, that is assessed, levied, imposed or collected by any Government Agency and includes any interest, fine, penalty, charge, fee or any other amount imposed on, or in respect of any of the above but excludes Duty.

Tax Law

any law relating to either Tax or Duty as the context requires.

Warranties

means each of the representations and warranties set out in Schedule 2.

Interpretation

Interpretation

a reference to this agreement or another instrument includes any variation or replacement of any of them;

a reference to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them;

the singular includes the plural and vice versa;

an obligation or liability assumed by, or a right conferred on, two or more parties binds or benefits each of them severally only (and not jointly);

the word ‘person’ includes a firm, a body corporate, a partnership, a trust, an unincorporated association, a joint venture, an authority or a Government Agency;

a reference to a person includes a reference to the person’s executors, administrators and that person's successors, substitutes (including persons taking by novation) and assigns;

if a period of time is specified and dates from a given day or the day of an act or event, it is to be calculated exclusive of that day;

a reference to a day is to be interpreted as the period of time commencing at midnight and ending 24 hours later;

if an act prescribed under this agreement to be done by a party on or by a given day is done after 5.00pm on that day, it is taken to be done on the next day;

if an event must occur on a stipulated day which is not a Business Day then the stipulated day will be taken to be the next Business Day;

a reference to time is a reference to Sydney time;

a reference to any thing (including any amount) is a reference to the whole and each part of it and a reference to a group of persons is a reference to any one or more of them;

a reference to a part, clause, party, attachment, exhibit or schedule is a reference to a part and clause of, and a party, attachment, exhibit and schedule to, this agreement and a reference to this agreement includes any attachment, exhibit and schedule;

a document in the ‘agreed form’ means a document in the form approved by the parties to this agreement and initialled by a representative of each of them for the purposes of identification;

a reference to $ is to Australian currency unless denominated otherwise;

any term that is capitalised and not defined in this agreement but defined in a Tax Law has the same meaning as in the relevant Tax Law; and

any provision of this agreement which requires a party to use ’reasonable endeavours’, ’all reasonable endeavours’ or ’best endeavours’, or to take all steps reasonable necessary to procure that something is performed or occurs, does not impose any obligation to commence any legal action or proceedings against a person or incur any material expense, except where that provision expressly states otherwise.

Inclusive expressions

Business Day

Shares

The Company is not obliged to issue or allot any Shares or other securities and has not granted any person the right to call for the issue or allotment of any Shares or other securities.

The Investor will acquire at Completion:

the full legal and beneficial ownership of the Acquisition Shares free and clear of all Encumbrances;

the Acquisition Shares free of competing rights, other than under the Shareholders’ Agreement and the Constitution; and

fully paid Shares that have no money owing in respect of them.

On Completion, there will be no Shares in the Company or other securities (including options, warrants, convertible securities or other rights to acquire securities) of the Company on issue apart from the Shares set out in the table in Schedule 3.

Immediately after Completion, the issued capital of the Company will be as set out in Schedule 3.

The Company does not legally or beneficially hold or own shares or other securities in another company or entity.

Authority of Company

The Company is a corporation duly incorporated and validly existing under the laws of its jurisdiction of incorporation or creation.

The Company and the directors of the Company have taken all necessary action to authorise the signing, delivery and performance of this agreement and the documents required under this agreement in accordance with their respective terms.

The Company has power to enter into this agreement and perform its obligations under it and can do so without the consent of any other person.

The Company’s obligations under this agreement are valid and binding and enforceable against it in accordance with their terms.

The Company has the power and capacity to own its assets and to carry on its business as it is now being conducted.

The authorization, execution and delivery of this Agreement by the Company and the Founder Shareholder, the completion of the transactions contemplated by this Agreement and the performance of the Company’s and the Founder Shareholder’s obligations under the Agreement in accordance with the terms hereof will not:

violate, conflict with or result in a violation or breach of any provision of, or require any consent, approval or notice under, or constitute a default or result in a right of termination or acceleration under any of the terms, conditions or provisions of the Company’s constating documents, the Shareholders Agreement, or any permit or material contract to which the Company is a party to or any of its assets is bound;

result in a violation or breach of or constitute a default under any provisions of any laws applicable to the Company or any of its assets;

cause the suspension or revocation of any permit currently in effect held by the Company;

give rise to any rights of first refusal or trigger any change in control provisions under any note, bond, mortgage, indenture, contract, license, franchise or permit to which the Company is a party; or

result in the imposition of any liens upon the assets of the Company or any of its subsidiaries;

Accuracy of information

accurate in all material respects; and

complete and not misleading whether by omission, failure to particularise or otherwise.

Intellectual Property Rights

Litigation

The Company is not engaged in any litigation, arbitration or alternative dispute resolution proceedings and to the knowledge of the Company no such claims are pending or threatened.

To the best of the Company’s knowledge, neither the Company nor its directors or officers are the subject of any investigation, inquiry or enforcement proceedings or process by any Government Agency.

Compliance with Laws and industry codes

Tax

All Taxes which the Company is liable to pay or is required to withhold from any payment made to another person, which are due and payable on or before the Completion Date, have been paid to the appropriate authorities by the due date for payment.

There is not a current, pending or threatened Tax audit or investigation and there are no liens for unpaid taxes upon any of the assets of the Company.

There are no disputes between the Company and a Government Agency about Tax.

The Company has duly and timely filed all tax returns required to be filed by it prior to the date hereof and all such tax returns are complete and correct in all material respects.