UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 20-F

 

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the fiscal year ended December 31, 2017

  

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the transition period from ___________ to ___________ __________

  

OR

 

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  Date of event requiring this shell company report

  

Commission file number: 333-207107

 

EHAVE, INC

(Exact name of Registrant as specified in its charter

and translation of Registrant’s name into English)

 

Canada

(Jurisdiction of incorporation or organization)

 

203-277 Lakeshore Road East

Oakville, Ontario, Canada L6J 6J3

(Address of principal executive offices)

 

Prateek Dwivedi, Chief Executive Officer

203-277 Lakeshore Road East

Oakville, Ontario, Canada L6J 6J3

+1(905) 362-1499

info@ehave.com

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Securities registered pursuant to Section 12(g) of the Act: Common Shares, no par value

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:  None

 

Indicate the number of outstanding shares of each of the Registrant’s classes of capital or common stock as of the close of the period covered by the annual report: 71,304,035 common shares as at December 31, 2017

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

 

If this report is an annual or transition report, indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨ No x

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No ¨

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or an emerging growth company.  See definition of “accelerated filer and large accelerated filer,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.  (Check one)

 

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x Emerging growth company x

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ¨

 

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

US GAAP International Financial Reporting Standards as issued  by the International Accounting Standards Board Other  
x ¨ ¨

 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

 

Item 17 ¨                       Item 18   ¨

 

If this is an annual report, indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ¨ No x

 

 

 

 

 

 

EHAVE INC.

 

FORM 20-F

 

TABLE OF CONTENTS

 

Item 1. Identity of Directors, Senior Management and Advisers 4
Item 2. Offer Statistics and Expected Timetable 4
Item 3. Key Information 4
Item 4. Information on the Company 13
Item 4A. Unresolved Staff Comments 25
Item 5. Operating and Financial Review and Prospects 25
Item 6. Directors, Senior Management and Employees 30
Item 7. Major Shareholders and Related Party Transactions 36
Item 8. Financial Information 38
Item 9. The Offer and Listing 38
Item 10. Additional Information 39
Item 11. Quantitative and Qualitative Disclosures About Market Risk 49
Item 12. Description of Securities Other Than Equity Securities 49
Item 13. Defaults, Dividend Arrearages and Delinquencies 50
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds 50
Item 15. Controls and Procedures 50
Item 16. [Reserved] 51
Item 16A. Audit Committee Financial Expert 51
Item 16B. Code of Ethics 51
Item 16C. Principal Accountant Fees and Services 51
Item 16D. Exemptions from the Listing Standards for Audit Committees 51
Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchases 51
Item 16F. Change in Registrant’s Certifying Accountants 51
Item 16G. Corporate Governance 51
Item 16H. Mine Safety Disclosure 51
Item 17. Financial Statements 52
Item 18 Financial Statements 52
Item 19. Exhibits 52
Signatures 54
Financial Statements F2 - F14

 

  1  

 

 

Currency and Exchange Rates

 

All references in this annual report on Form 20-F to the terms “we”, “our”, “us”, “the Company” and “Ehave” refer to Ehave, Inc

 

Unless otherwise indicated, all references to “dollars” or the use of the symbol “$” are to U.S. dollars, and all references to “CDN$” are to Canadian dollars. See “Exchange Rate Data” under Item 1 for relevant information about the rates of exchange between Canadian dollars and U.S. dollars. Our presentation currency is the U.S. dollar.

 

The following table sets forth, for the periods indicated, information concerning exchange rates between the CDN$ and the U.S. dollar based on the exchange rates set forth in the H.10 statistical release of the Federal Reserve Board.

 

    Noon Buying Rate  
    Period End     Average (1)     Low     High  
Year:                                
2013     1.0637       1.03468       0.9839       1.0697  
2014     1.1601       1.1083       1.0612       1.1644  
2015     1.3839       1.2906       1.1725       1.3989  
2016     1.3426       1.3229       1.2544       1.4592  
2017     1.2517       1.2963       1.2131       1.3745  
                                 
Month:                                
December 2017     1.2517       1.2769       1.2517       1.2900  
January 2018     1.2293       1.2429       1.2293       1.2534  
February 2018     1.2806       1.2588       1.2280       1.2806  
March 2018     1.2891       1.2933       1.2822       1.3096  
April 2018     1.2818       1.2732       1.2548       1.2918  
May 2018     1.2970       1.2866       1.2761       1.3027  
June 2018 (through June 8, 2018)    

1.2956

     

1.2955

     

1.2948

     

1.3008

 

 

(1) Averages for a period other than one month are calculated by using the average of the noon buying rate on the last day of each month during the period. Monthly averages are calculated by using the average of the daily noon buying rates during the relevant month.

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This annual report contains “forward-looking statements”. Forward-looking statements reflect the current view about future events. When used in this annual report, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions, as they relate to us or our management, identify forward-looking statements. Such statements, include, but are not limited to, statements contained in this annual report relating to our business strategy, our future operating results and liquidity and capital resources outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward–looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees of assurance of future performance. We caution you therefore against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, our ability to develop and commercialize new and improved products and services; our ability to raise capital to fund continuing operations; a continued decline in general economic conditions nationally and internationally; decreased demand for our products and services; market acceptance of our products and services; our ability to protect our intellectual property rights; the impact of any infringement actions or other litigation brought against us; competition from other providers and products; changes in government regulation; our ability to complete customer transactions and capital raising transactions; and other factors (including the risks contained in the section of this annual report entitled “Risk Factors”) relating to our industry, our operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.

 

  2  

 

 

Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

The forward-looking statements in this annual report are subject to various risks and uncertainties, most of which are difficult to predict and generally beyond our control, including without limitation:

 

  · Our limited operating history makes evaluating our business and future prospects difficult, and may increase the risk of your investment.
  · We have a history of operating losses and expect to continue incurring losses for the foreseeable future.
  · If we are unable to obtain additional funding, our business operations will be harmed.
  · Our independent auditors have expressed their concern as to our ability to continue as a going concern.
  · Our products may not be successful in gaining market acceptance, which would negatively impact our revenues.
  · If we are unable to keep up with rapid technological changes in our field, we will be unable to operate profitably.
  · Many of our potential competitors are better established and have significantly greater resources which may make it difficult for us to compete in the markets in which we intend to sell our products.
  · If we lose any of our key management personnel or consultants, we may not be able to successfully manage our business or achieve our objectives.
  · Developments or assertions by us or against us relating to intellectual property rights could materially impact our business.
  · Our products could infringe on the intellectual property rights of others which may result in costly litigation and, if we do not prevail, could also cause us to pay substantial damages and prohibit us from selling or licensing our products.
  · We have identified material weaknesses in our internal control over financial reporting, and if we are unable to achieve and maintain effective internal control over financial reporting or effective disclosure controls, we may be at risk to accurately report financial results or detect fraud, which could have a material adverse effect on our business.
  · The market for our products is immature and volatile and if it does not develop, or if it develops more slowly than we expect, the growth of our business will be harmed.
  · If our security measures are breached and unauthorized access to a customer’s data are obtained, our products may be perceived as insecure, we may incur significant liabilities, our reputation may be harmed and we could lose sales and customers.
  · If we fail to comply with applicable health information privacy and security laws and other state and federal privacy and security laws, we may be subject to significant liabilities, reputational harm and other negative consequences, including decreasing the willingness of current and potential customers to work with us.
  · Our proprietary software may not operate properly, which could damage our reputation, give rise to claims against us or divert application of our resources from other purposes, any of which could harm our business and operating results.
  · We depend on data centers operated by third parties for our products, and any disruption in the operation of these facilities could adversely affect our business.
  · If currency exchange rates fluctuate substantially in the future, the results of our operations, which are reported in U.S. dollars, could be adversely affected.
  · We may not be in compliance with rules and regulations of the U.S. Food and Drug Administration (the “FDA”) should they become applicable to any products we develop in the future.
  · The results of any future clinical trials that we may need to perform in the future may not support our medical device candidate requirements or intended use claims or may result in the discovery of unanticipated inconsistent data.
  · A security breach or disruption or failure in a computer or communications systems could adversely affect us.

 

  3  

 

 

PART I

 

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

 

Not applicable

 

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

 

Not applicable

 

ITEM 3. KEY INFORMATION

 

A. Selected Financial Data

 

The selected financial data presented below for the four years ended December 31, 2017, is presented in U.S. dollars and is derived from our financial statements prepared in accordance with Generally Accepted Accounting Principles in the United States (“U.S. GAAP”). We have derived the selected financial data as of December 31, 2017, 2016 and 2015 and for the years ended December 31, 2017, 2016 and 2015 from our audited financial statements included elsewhere in this Annual Report on Form 20-F. We have derived the selected financial data as of December 31, 2014, and for the year ended December 31, 2014, from our audited financial statements not included in this annual report. The information set forth below should be read in conjunction with our financial statements (including notes thereto) included under Item 18 and “Operating and Financial Review and Prospects” included under Item 5 and other information provided elsewhere in this annual report on Form 20-F and our financial statements and related notes. The selected financial data in this section is not intended to replace the financial statements and is qualified in its entirety thereby.

 

    2017     2016     2015     2014  
    $     $     $     $  
Revenues     78,260                    
Net loss     (4,141,613 )     (1,502,204 )     (600,835 )     (380,088 )
Net comprehensive loss     (4,208,936 )     (1,466,776 )     (573,461 )     (302,296 )
Basic and diluted loss per share (1)     (0.06 )     (0.05 )     (0.03 )     (0.03 )
Total assets (1)     59,275       48,380       138,995       211,830  
Shareholders’ deficit (1)     (2,009,266 )     (1,191,960 )     (446,680 )     (626,401 )
Cash dividends declared per share (2)                        
Weighted average number of common shares outstanding     69,030,618       32,144,065       22,433,195       13,538,785  

 

 

Notes:

 

  1)

We issued 26,914,315 common shares in 2017. We issued 16,286,796 common shares for net cash proceeds of $366,455 in 2016.  We did not issue any common shares in 2014 or 2015.

 

  2) We have not declared or paid any dividends since incorporation.

 

Exchange Rate Data

 

The following table sets forth the exchange rates for Canadian dollars expressed in U.S. dollars that have been used in the audited financial statements included elsewhere in this Annual Report on Form 20-F.

 

$1 Canadian dollar equivalent in U.S. dollars      
At December 31, 2016     0.7449  
At December 31, 2017     0.7955  
Average for the year ended December 31, 2017     0.7711  

 

  B. Capitalization and Indebtedness

 

Not applicable

 

  C. Reasons for the Offer and Use of Proceeds

 

Not applicable

 

  D. Risk Factors

 

Investment in our common shares involves a high degree of risk. You should carefully consider, among other matters, the following risk factors in addition to the other information in this Annual Report on Form 20-F when evaluating our business because these risk factors may have a significant impact on our business, financial condition, operating results or cash flow. If any of the material risks described below or in subsequent reports we file with the Securities and Exchange Commission (“SEC”) actually occur, they may materially harm our business, financial condition, operating results or cash flow. Additional risks and uncertainties that we have not yet identified or that we presently consider to be immaterial may also materially harm our business, financial condition, operating results or cash flow.

 

  4  

 

 

RISKS RELATED TO OUR BUSINESS AND INDUSTRY

 

Our limited operating history makes evaluating our business and future prospects difficult, and may increase the risk of your investment.

 

We have a very limited operating history on which investors can base an evaluation of our business, operating results and prospects. We have no operating history with respect to commercializing our software applications and products. Consequently, it is difficult to predict our future revenues, if any, and appropriately budget for our expenses, and we have limited insight into trends that may emerge and affect our business.

 

We began processes to develop relationships with potential customers and distribution partners in November 2016. Completion of our cognitive assessment and remediation tools and the further development and commercialization of our products is dependent upon the availability of sufficient funds. This limits our ability to accurately forecast the cost of the development of our products. If the markets and applications of our products do not develop as we expect or develop more slowly than we expect, our business, prospects, financial condition and operating results will be harmed.

 

We have a history of operating losses and expect to continue incurring losses for the foreseeable future.

 

We were incorporated in 2011. We reported a net loss of $4,141,613 for the fiscal year ended December 31, 2017 and had a net loss of approximately $1,502,204 during the fiscal year ended December 31, 2016. As of December 31, 2017, we had an accumulated deficit of $6,989,124. We cannot anticipate when, if ever, our operations will become profitable. We expect to incur significant net losses as we develop and commercialize our products and pursue our business strategy. We intend to invest significantly in our business before we expect cash flow from operations to be adequate to cover our operating expenses. If we are unable to execute our business strategy and grow our business, for any reason, our business, prospects, financial condition and results of operations will be adversely affected.

 

As reflected in the financial statements for the years ended December 31, 2017, and December 31, 2016, included elsewhere in this Annual Report on Form 20-F, we had limited revenues in 2017 and had no revenues in 2016 and needs additional cash resources to maintain its operations. These factors raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise additional capital. We cannot predict when, if ever, we will be successful in raising additional capital and, accordingly, we may be required to cease operations at any time, if we do not have sufficient working capital to pay our operating costs.

 

If we are unable to obtain additional funding, our business operations will be harmed.

 

We raised an aggregate of $1,927,899 through public offerings of convertible debentures and warrants closed in 2018 to date. We raised an aggregate of $330,750 through a public offering of common shares and warrants closed in June 2016. The note and warrant purchase agreement dated November 14, 2016, entered in the private placement provided for additional proceeds of $869,183. We anticipate that we will continue to incur losses and negative cash flows from operations, and that such losses will increase over the next several years due to development costs associated with our MegaTeam, Ninja Reflex and Ehave Connect products, until our products reach commercial profitability. As a result of these expected losses and negative cash flows from operations, along with our current cash position, we only have sufficient resources to fund operations through September 1, 2018. To the extent that we are required to raise additional funds to conduct research and acquire facilities, and to cover costs of operations, we intend to do so through additional public or private offerings of debt or equity securities. There are no assurances that we will be successful in obtaining the level of financing needed for our operations, and we may be unable to secure such funding when needed in adequate amounts or on acceptable terms, if at all. Any additional equity financing may involve substantial dilution to our then existing shareholders. The inability to raise the additional capital will restrict our ability to develop and conduct business operations. If we cannot raise additional capital, we will need to reduce our cash burn to last 12 months by focusing our efforts on existing products only, leveraging research funding to conduct additional clinical studies on efficacy and postponing the development of the Ehave Connect platform and integration and development of new techniques for assessment and rehabilitation.

 

Our independent auditors have expressed their concern as to our ability to continue as a going concern.

 

We reported an accumulated deficit of $6,989,124 and had a stockholders’ deficit of $2,009,266 at December 31, 2017. As a result of our financial condition, we have received a report from our independent registered public accounting firm for our financial statements for the years ended December 31, 2017 and 2016 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern without the infusion of significant additional capital. There can be no assurance that management will be successful in implementing its plans. If we are unable to raise additional financings we may cease operations.

 

Our products may not be successful in gaining market acceptance, which would negatively impact our revenues.

 

Currently, our business strategy is to develop and market Ehave Connect in an effective and timely manner and gain access to additional technologies at a time and in a manner that we believe is best for our development. We deployed our Ehave Connect platform in 2017 in Canada and plan to launch Ehave Connect in the United States in 2018. We may have difficulties in reaching market acceptance, which could negatively impact our revenues, for a number of reasons including:

 

· the failure of our Ehave Connect system to meet the users’ and clinicians’ expectations;
· any delays in securing partnerships and strategic alliances;

 

  5  

 

 

· any technical delays and malfunctions;
· the availability of alternative platforms, software programs or devices that may be, or may be perceived as, more effective, faster, easier to use or less costly than our Ehave Connect platform;
· failure to receive regulatory approval on a timely basis or at all; and
· failure to receive a sufficient level of reimbursement from government, insurers or other third-party payors.

 

If we are unable to keep up with rapid technological changes in our field, we will be unable to operate profitably.

 

Our industry is characterized by extensive research efforts and rapid technological progress. If we fail to anticipate or respond adequately to technological developments, our ability to operate profitably could suffer. We cannot assure you that research and discoveries by other companies will not render our software or potential products uneconomical or result in products superior to those we develop or that any products or services we develop will be preferred to any existing or newly-developed products.

 

Many of our potential competitors are better established and have significantly greater resources which may make it difficult for us to compete in the markets in which we intend to sell our products.

 

The market for the products we develop is highly competitive. Many of our potential competitors are well established with larger and better resources, longer relationships with customers and suppliers, greater name recognition and greater financial, technical and marketing resources than we have. Increased competition may result in price reductions, reduced gross margins, loss of market share and loss of licensees, any of which could materially and adversely affect our business, operating results and financial condition. We cannot ensure that prospective competitors will not adopt technologies or business plans similar to ours, or develop products which may be superior to ours or which may prove to be more popular. It is possible that new competitors will emerge and rapidly acquire market share. We cannot ensure that we will be able to compete successfully against future competitors or that the competitive pressures will not materially and adversely affect our business, operating results and financial condition.

 

If we lose any of our key management personnel or consultants, we may not be able to successfully manage our business or achieve our objectives.

 

Our future success depends in large part upon the leadership and performance of our management and consultants. The Company's operations and business strategy are dependent upon the knowledge and business contacts of our executive officers and our consultants. We have employment agreements with each of Prateek Dwivedi or David Goyette to serve as our chief executive officer and our chief technology officer, respectively. Although, we hope to retain the services of our officers and consultants, if any of our officer or consultants should choose to leave us for any reason before we have hired additional personnel, our operations may suffer. If we should lose their services before we are able to engage and retain qualified employees and consultants to execute our business plan, we may not be able to continue to develop our business as quickly or efficiently.

 

In addition, we must be able to attract, train, motivate and retain highly skilled and experienced technical employees in order to successfully develop our business. Qualified technical employees often are in great demand and may be unavailable in the time frame required to satisfy our business requirements. We may not be able to attract and retain sufficient numbers of highly skilled technical employees in the future. The loss of technical personnel or our inability to hire or retain sufficient technical personnel at competitive rates of compensation could impair our ability to successfully grow our business. If we lose the services of any of our personnel, we may not be able to replace them with similarly qualified personnel, which could harm our business.

 

Developments or assertions by us or against us relating to intellectual property rights could materially impact our business.

 

Pursuant to an amendment to the collaboration agreement, effective January 1, 2014, with Toronto’s Hospital for Sick Children (the “Hospital”), all intellectual property rights to the cognitive assessment and rehabilitation software jointly developed with the Hospital belong to the Hospital. Our agreement with Multi-Health Systems Inc. (“MHS”), as amended, provides that all right, title and interest in and to certain tests and other materials published by MHS relating to the tests are and will remain solely and exclusively vested in MHS.

 

We will attempt to protect proprietary and intellectual property rights to our products through licensing and distribution arrangements although we currently do not have any patents or applications for our products.

 

Litigation may also be necessary in the future to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others or to defend against claims of invalidity. Such litigation could result in substantial costs and the diversion of resources.

 

As we create or adopt new software, we will also face an inherent risk of exposure to the claims of others that we have allegedly violated their intellectual property rights.

 

Our products could infringe on the intellectual property rights of others which may result in costly litigation and, if we do not prevail, could also cause us to pay substantial damages and prohibit us from selling or licensing our products.

 

Third parties may assert infringement or other intellectual property claims against us. We may have to pay substantial damages, including damages for past infringement if it is ultimately determined that our products or technology infringe a third party’s proprietary rights. Further, we may be prohibited from selling or providing products before we obtain additional licenses, which, if available at all, may require us to pay substantial royalties or licensing fees. Even if claims are determined to be without merit, defending a lawsuit takes significant time, may be expensive and may divert management’s attention from our other business concerns. Any public announcements related to litigation or interference proceedings initiated or threatened against us could cause our business to be harmed and our stock price to decline.

 

  6  

 

 

We have identified material weaknesses in our internal control over financial reporting, and if we are unable to achieve and maintain effective internal control over financial reporting or effective disclosure controls, we may be at risk to accurately report financial results or detect fraud, which could have a material adverse effect on our business.

 

As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring an annual assessment by management of the effectiveness of a public company’s internal controls over financial reporting and an attestation report by the company’s independent auditors addressing this assessment, if applicable. As discussed in Item 15 “Controls and Procedures” based on a review of our internal controls over financial reporting, management concluded that our internal controls over financial reporting was not effective due to the existence of a material weakness relating to the lack of segregation of duties as of December 31, 2017. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls. Management has since addressed this weakness and has implemented the necessary changes to have effective controls over financial reporting. For additional information, see Item 15 “Controls and Procedures.”

 

We cannot assure you that we will be able to remediate our existing material weaknesses in a timely manner, if at all, or that in the future additional material weaknesses will not exist, reoccur or otherwise be discovered, a risk that is significantly increased in light of the complexity of our business. If our efforts to remediate these material weaknesses, as described in Item 15 “Controls and Procedures”, are not successful or if other deficiencies occur, our ability to accurately and timely report our financial position, results of operations, cash flows or key operating metrics could be impaired, which could result in late filings of our annual or interim reports under the Exchange Act, restatements of our consolidated financial statements or other corrective disclosures. Our failure to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 on an ongoing, timely basis could result in the loss of investor confidence in the reliability of its financial statements, which in turn could harm our business and negatively impact the trading price of the common shares. In addition, future changes in our accounting, financial reporting, and regulatory environment may create new areas of risk exposure. Failure to modify our existing control environment accordingly may impair our controls over financial reporting and cause our investors to lose confidence in the reliability of our financial reporting, which may adversely affect our share price, suspension of trading or delisting of our common shares by OTCQB, or other material adverse effects on our business, reputation, results of operations, financial condition or liquidity. Furthermore, if we continue to have these existing material weaknesses, other material weaknesses or significant deficiencies in the future, it could create a perception that our financial results do not fairly state our financial condition or results of operations. Any of the foregoing could have an adverse effect on the value of our shares.

 

The market for our products is immature and volatile and if it does not develop, or if it develops more slowly than we expect, the growth of our business will be harmed.

 

The market for software-based systems for mental health or treatments using medical cannabis is a new and unproven market, and it is uncertain whether it will achieve and sustain demand and market adoption. Our success will depend to a substantial extent on the willingness of customers and healthcare professionals to use our systems, as well as on our ability to demonstrate the value of our software and products to customers and to develop new applications that provide value to customers and users. If customers and users do not perceive the benefits of our products, then our market may not develop at all, or it may develop more slowly than we expect, either of which could significantly adversely affect our operating results. In addition, we have limited insight into trends that might develop and affect our business. We might make errors in predicting and reacting to relevant business, legal and regulatory trends, which could harm our business. If any of these events occur, it could materially adversely affect our business, financial condition or results of operations.

 

If our security measures are breached and unauthorized access to a customer’s data are obtained, our products may be perceived as insecure, we may incur significant liabilities, our reputation may be harmed and we could lose sales and customers.

 

Our products involve the storage and transmission of customers’ proprietary information, as well as protected health information, or PHI, which, in the United States, is regulated under the Health Insurance Portability and Accountability Act of 1996 and its implementing regulations, collectively “HIPAA,” and other state and federal privacy and security laws. Because of the extreme sensitivity of this information, the security features of our product are very important. If our security measures, some of which will be managed by third parties, are breached or fail, unauthorized persons may be able to obtain access to sensitive data, including HIPAA-regulated protected health information. A security breach or failure could result from a variety of circumstances and events, including but not limited to third-party action, employee negligence or error, malfeasance, computer viruses, attacks by computer hackers, failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, telecommunication failures, user errors, and catastrophic events.

 

If our security measures were to be breached or fail, our reputation could be severely damaged, adversely affecting customer or investor confidence, customers may curtail their use of or stop using our products and our business may suffer. In addition, we could face litigation, damages for contract breach, penalties and regulatory actions for violations of HIPAA and other state and federal privacy and security regulations, significant costs for investigation, remediation and disclosure and for measures to prevent future occurrences. In addition, any potential security breach could result in increased costs associated with liability for stolen assets or information, repairing system damage that may have been caused by such breaches, incentives offered to customers or other business partners in an effort to maintain the business relationships after a breach and implementing measures to prevent future occurrences, including organizational changes, deploying additional personnel and protection technologies, training employees and engaging third-party experts and consultants. While we maintain insurance covering certain security and privacy damages and claim expenses we may not carry insurance or maintain coverage sufficient to compensate for all liability and in any event, insurance coverage would not address the reputational damage that could result from a security incident.

 

We plan to outsource important aspects of the storage and transmission of customer information, and thus rely on third parties to manage functions that have material cyber-security risks. These outsourced functions include services such as software design and product development, software engineering, database consulting, data-center security, IT, network security, data storage and Web application firewall services. We cannot assure you that any measures that are taken will adequately protect us from the risks associated with the storage and transmission of customers’ proprietary information and protected health information.

 

We may experience cyber-security and other breach incidents that may remain undetected for an extended period. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against us, we may be unable to anticipate these techniques or to implement adequate preventive measures. In addition, in the event that our customers authorize or enable third parties to access their data or the data of their employees on our systems, we cannot ensure the complete integrity or security of such data in our systems as we would not control access. If an actual or perceived breach of our security occurs, or if we are unable to effectively resolve such breaches in a timely manner, the market perception of the effectiveness of our security measures could be harmed, we could be subject to regulatory action or other damages and we could lose sales and customers.

 

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If we fail to comply with applicable health information privacy and security laws and other state and federal privacy and security laws, we may be subject to significant liabilities, reputational harm and other negative consequences, including decreasing the willingness of current and potential customers to work with us.

 

Once our products are deployed in the United States, we will be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA established uniform federal standards for certain “covered entities,” which include health care providers, health plans, and health care clearing houses, governing the conduct of specified electronic health care transactions and protecting the security and privacy of protected health information, or PHI. The Health Information Technology for Economic and Clinical Health Act, or HITECH, which was signed into law on February 17, 2009, makes certain of HIPAA’s privacy and security standards directly applicable to “business associates,” which are individuals or entities that create, receive, maintain, or transmit PHI in connection with providing a service for or on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA’s requirements and seek attorney’s fees and costs associated with pursuing federal civil actions.

 

In addition, states have enacted privacy and security laws and regulations that regulate the use and disclosure of certain data, with some state laws covering medical and healthcare information. These laws vary by state and could impose additional requirements and penalties on us. For example, some states impose restrictions on the use and disclosure of health information pertaining to mental health or substance abuse. Further, state laws and regulations may require us to notify affected individuals in the event of a data breach involving individually identifiable information, which may be broader than the type of information covered by HIPAA. In addition, the Federal Trade Commission may use its consumer protection authority to initiate enforcement actions in data privacy and security matters.

 

If we are unable to protect the privacy and security of our customers’ data, we could be found to have breached our contracts with our customers, we could face civil and criminal penalties under federal and state laws, we could be subject to litigation and we could suffer reputational harm or other damages. We may not be able to adequately address the business, technical and operational risks created by HIPAA and other privacy and security regulations. Furthermore, we are unable to predict what changes to HIPAA or other laws or regulations might be made in the future or how those changes could affect our business or the costs of compliance.

 

Our proprietary software may not operate properly, which could damage our reputation, give rise to claims against us or divert application of our resources from other purposes, any of which could harm our business and operating results.

 

Proprietary software development is time-consuming, expensive and complex, and may involve unforeseen difficulties. We may encounter technical obstacles, and it is possible that we discover additional problems that prevent our proprietary applications from operating properly. We are currently implementing software with respect to a number of new applications and services. If our software does not function reliably or fails to achieve client expectations in terms of performance, clients could assert liability claims against us or attempt to cancel their contracts with us. This could damage our reputation and impair our ability to attract or maintain clients.

 

Moreover, data services are complex as those we offer have in the past contained, and may in the future develop or contain, undetected defects or errors. Material performance problems, defects or errors in our existing or new software and applications and services may arise in the future and may result from interface of our offering with systems and data that we did not develop and the function of which is outside of our control or undetected in our testing. These defects and errors and any failure by us to identify and address them could result in loss of revenue or market share, diversion of development resources, injury to our reputation and increased service and maintenance costs. The costs incurred in correcting any defects or errors may be substantial and could adversely affect our operating results.

 

We depend on data centers operated by third parties for our products, and any disruption in the operation of these facilities could adversely affect our business.

 

We provide our products through a third-party data center. While we control and have access to our servers and all of the components of our network that are located in our external data centers, we do not control the operation of these facilities. The owners of our data centers have no obligation to renew agreements with us on commercially reasonable terms, or at all. If we are unable to renew any such agreements we may enter into on commercially reasonable terms, or if our data center operator is acquired, we may be required to transfer our servers and other infrastructure to new data center facilities, and we may incur significant costs and possible service interruption in connection with doing so.

 

Problems faced by our third-party data center locations could adversely affect the experience of our customers. The operators of the data centers could decide to close their facilities without adequate notice. In addition, any financial difficulties, such as bankruptcy, faced by the operators of the data centers or any of the service providers with whom we or they contract may have negative effects on our business, the nature and extent of which are difficult to predict. Additionally, if our data centers are unable to keep up with our growing needs for capacity, this could have an adverse effect on our business. For example, a rapid expansion of our business could affect the service levels at our data centers or cause such data centers and systems to fail. Any changes in third-party service levels at our data centers or any disruptions or other performance problems with our products could adversely affect our reputation or result in lengthy interruptions in our services. Interruptions in our services might reduce our revenue, cause us to issue refunds to customers for prepaid and unused subscriptions, subject us to potential liability or adversely affect our renewal rates.

 

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If currency exchange rates fluctuate substantially in the future, the results of our operations, which are reported in U.S. dollars, could be adversely affected.

 

As our head office and operations are primarily based in Canada, we become more exposed to the effects of fluctuations in currency exchange rates. We incur expenses for employee compensation and other operating expenses in Canadian dollars. Fluctuations in the exchange rates between the U.S. dollar and the Canadian dollar could result in the dollar equivalent of such expenses being higher. This could have a negative impact on our reported results of operations. Although we may in the future decide to undertake foreign exchange hedging transactions to cover a portion of our foreign currency exchange exposure, we currently do not hedge our exposure to foreign currency exchange risks.

 

Our future U.S. operations and relationships with healthcare providers, investors, consultants, third-party payors, patients, and other customers may be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which in the event of a violation could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

 

Our future U.S. operations and arrangements with healthcare providers, physicians and third-party payors may expose us to broadly applicable fraud and abuse and other federal and state healthcare laws and regulations. These laws may constrain the business and/or financial arrangements and relationships through which we market, sell and distribute our products. Potentially applicable U.S. laws include:

 

· the federal Anti-Kickback Statute, which prohibits the offer, payment, solicitation or receipt of any form of remuneration in return for referring, ordering, leasing, purchasing or arranging for, or recommending the ordering, purchasing or leasing of, items or services payable by Medicare, Medicaid or any other federal healthcare program;

 

· federal false claims laws and civil monetary penalty laws, including the False Claims Act, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other government healthcare programs that are false or fraudulent, or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;

 

· HIPAA, which imposes federal criminal and civil liability for executing, or attempting to execute, a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters;

 

· HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and its implementing regulations, also imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information; and

 

· analogous state laws and regulations, such as state anti-kickback and false claims laws, which may be broader in scope and apply to referrals and items or services reimbursed by any third-party payers, including commercial insurers, many of which differ from each other in significant ways and often are not preempted by federal law, thus complicating compliance efforts.

 

Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available under such laws, it is possible that some of our business activities could be subject to challenge under one or more of such laws. The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform. Our risk of being found in violation of these laws is increased by the fact that some of these laws are open to a variety of interpretations. If our past or present operations, practices, or activities are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, exclusion from participation in government healthcare programs, such as Medicare and Medicaid, imprisonment, damages, fines, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. Further, defending against any such actions can be costly, time-consuming and may require significant resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our customers may be unwilling to use our products and our business may be impaired.

 

We may not be in compliance with rules and regulations of the U.S. Food and Drug Administration (the “FDA”) should they become applicable to any products we develop in the future.

 

While our Ehave Connect product that we intend to sell in the United States is not currently regulated by the FDA, the FDA may decide to regulate our Ehave Connect product in the future. Should the FDA decide to regulate our Ehave Connect product as a medical device, we may not be able to obtain marketing clearance or approval for our Ehave Connect product in a timely manner or at all which may have an adverse effect on our business, financial condition and results of operations.

 

In the event that the FDA decides to regulate our Ehave Connect product as a medical device and we are able to obtain FDA clearance or approval to sell, market or advertise our Ehave Connect product, there is no guarantee that our methods and procedures will continue to satisfy regulatory requirements, should such regulatory requirements exist in the future. Any future regulation could subject us to potential liability if we were deemed to be non-compliant with such rules and regulations. If we are not able to comply with the regulatory requirements, should there be such regulatory requirements in the future, we may be restricted from continuing to sell, market or advertise our Ehave Connect product in the United States which may have an adverse effect on our business, financial condition and results of operations.

 

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We have no current plans to market, advertise or sell computerized cognitive assessment aids in the United States. Types of computerized cognitive assessment aids for the measurement and assessment of behavioral and cognitive abilities such as brain games are games purporting to increase intelligence or cognitive function are currently regulated by the FDA as Class II medical devices. Such brain games may be subject to clinical processes to determine their accuracy or validity. Terminology such as “neuroplasticity”, “attention” and “working memory” have become ubiquitous as the “brain game” market has grown. Current clinical practice refers to the use of cognitive software for the measurement of deficits as an “assessment”, and the use of software tools as rehabilitation methods as “remediation”. Should we decide in the future to market, advertise, or sell products that may be considered by the FDA as computerized cognitive assessment aids, we may be required to undergo costly and time consuming clinical trials to prove the accuracy and validity of our computerized cognitive assessment aids, should we have any such products to market, sell or advertise in the future.

 

The results of any future clinical trials that we may need to perform in the future may not support our medical device candidate requirements or intended use claims or may result in the discovery of unanticipated inconsistent data .

 

We have no current plans to market, advertise or sell computerized cognitive assessment aids in the United States and we do not anticipate that the FDA will require us to perform clinical trials on our Ehave Connect platform. Should we be required by the FDA to perform clinical trials on our Ehave Connect platform, we cannot be certain that results from such clinical trials will support our Ehave Connect requirements or intended use claims, which could inhibit our marketing strategies, or that the FDA or foreign authorities will agree with our conclusions regarding them. Success in our internal development studies of our Ehave Connect does not ensure that formal clinical trials will be successful, and we cannot be sure that clinical trials will replicate the results of our Ehave Connect internal development studies. The clinical trial process may fail to demonstrate that our Ehave Connect, or any computerized cognitive assessment aids that we may develop in the future, are safe, effective, and consistent for the desired or proposed indicated uses, which could cause us to abandon a product and may delay development of others. Any requirement to perform unanticipated clinical trials or delay or termination of any such unanticipated future clinical trials may delay or inhibit our ability to commercialize our Ehave Connect platform, or any computerized cognitive assessment aids that we may develop in the future; and affect our ability to generate revenues.

 

A security breach or disruption or failure in a computer or communications systems could adversely affect us.

 

Our operations depend on the continued and secure functioning of our computer and communications systems and the protection of electronic information (including sensitive personal information as well as proprietary or confidential information) stored in computer databases maintained by us or by third parties. Such systems and databases are subject to breach, damage, disruption or failure from, among other things, cyber-attacks and other unauthorized intrusions, power losses, telecommunications failures, fires and other natural disasters, armed conflicts or terrorist attacks. We may be subject to threats to our computer and communications systems and databases of unauthorized access, computer hackers, computer viruses, malicious code, cyber-crime, cyber-attacks and other security problems and system disruptions. Unauthorized persons may attempt to hack into our systems to obtain personal data relating to clinical trial participants or employees or our confidential or proprietary information or of third parties or information relating to our business and financial data.  If, despite our efforts to secure our systems and databases, events of this nature occur, we could expose clinical trial participants or employees to financial or medical identity theft, lose clinical trial participants or employees or have difficulty attracting new clinical trial participants or employees, be exposed to the loss or misuse of confidential information or business and financial data, have disputes with clinical trial participants or employees, suffer regulatory sanctions or penalties under applicable laws, incur expenses as a result of a data privacy breach, or suffer other adverse consequences including legal action and damage to our reputation.

 

RISKS ASSOCIATED WITH OUR COMMON SHARES AND COMPANY

 

We expect that our stock price will fluctuate significantly.

 

The trading price of our common shares may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this report, these factors include:

 

announcement of new products by our competitors;

 

  release of new products by our competitors;

 

  adverse regulatory decisions;

 

  developments in our industry or target markets; and

 

  general market conditions including factors unrelated to our operating performance.

 

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Recently, the stock market in general has experienced extreme price and volume fluctuations. Continued market fluctuations could result in extreme market volatility in the price of our common shares which could cause a decline in the value of our shares.

 

Market prices for securities of software development companies generally are volatile and the share price for our common shares has been historically volatile. This increases the risk of securities litigation. Factors such as announcements of technological innovations, new commercial products, patents, the development of proprietary rights, results of clinical trials, regulatory actions, publications, financial results, our financial position, future sales of shares by us or our current shareholders and other factors could have a significant effect on the market price and volatility of the common shares.

 

If our business is unsuccessful, our shareholders may lose their entire investment.

 

Although shareholders will not be bound by or be personally liable for our expenses, liabilities or obligations beyond their total original capital contributions, should we suffer a deficiency in funds with which to meet our obligations, the shareholders as a whole may lose their entire investment in our Company.

 

Trading of our common shares on the OTCQB Venture Market is limited and sporadic, making it difficult for our shareholders to sell their shares or liquidate their investments.

 

Prior to the listing of our common shares for trading on the OTCQB Venture Market in November 2016, there was no public market for our common shares. Although our common shares are traded on the OTCQB Venture Market, the market for our common shares has demonstrated varying levels of trading activity. Furthermore, an active trading market may not be sustained in the future. The lack of an active market may impair your ability to sell your common shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair value of your common shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.

 

Our common shares are subject to the “penny stock” rules of the SEC and we have no established market for our securities, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.

 

The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person’s account for transactions in penny stocks; and (ii) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (i) obtain financial information and investment experience objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form: (i) sets forth the basis on which the broker or dealer made the suitability determination; and (ii) that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

 

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common shares and cause a decline in the market value of our stock.

 

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

 

We are a “foreign private issuer”, and you may not have access to the information you could obtain about us if we were not a “foreign private issuer”.

 

We are considered a “foreign private issuer” under the Securities Act of 1933, as amended. As a foreign private issuer we will not have to file quarterly reports with the SEC nor will our directors, officers and 10% stockholders be subject to Section 16(b) of the Exchange Act. Such exemption may result in shareholders having less data and there being fewer restrictions on insiders’ activities in our securities. As a foreign private issuer we will not be subject to the proxy rules of Section 14 of the Exchange Act. Furthermore, Regulation FD does not apply to non-U.S. companies and will not apply to us. Accordingly, you may not be able to obtain information about us as you could obtain if we were not a “foreign private issuer”.

 

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Because the majority of our assets and of our officers and directors are located outside the United States, it may be difficult for an investor to enforce within the United States any judgments obtained against us or any of our officers and directors.

 

All of our assets are presently located outside of the United States and we do not currently maintain a permanent place of business within the United States. In addition, some of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons’ assets are located outside the United States. As a result, it may be difficult for an investor to effect service of process or enforce within the United States any judgments obtained against us or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. In addition, there is uncertainty as to whether the courts of Canada would recognize or enforce judgments of United States courts obtained against us or our directors and officers predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. There is even uncertainty as to whether the Canadian courts would have jurisdiction to hear original actions brought in Canada against us or our directors and officers predicated upon the securities laws of the United States or any state thereof.

 

Because we do not intend to pay any cash dividends on our common shares, our shareholders will not be able to receive a return on their shares unless they sell them.

 

We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common shares in the foreseeable future. Unless we pay dividends, our shareholders will not be able to receive a return on their shares unless they sell them at a price higher than that which they initially paid for such shares.

 

Because we are not subject to compliance with rules requiring the adoption of certain corporate governance measures, our shareholders have limited protections against interested director transactions, conflicts of interest and similar matters.

 

The Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the SEC, the New York Stock Exchange, the NYSE MKT and NASDAQ, as a result of Sarbanes-Oxley Act of 2002, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities which are listed on those exchanges. Because we will not be seeking to be listed on any of the exchanges, we will not be presently required to comply with many of the corporate governance provisions.

 

Our officer and directors own a substantial amount of our common shares and, therefore, exercise significant control over our corporate governance and affairs which may result in their taking actions with which other shareholders do not agree.

 

Our executive officer and directors and their affiliates control approximately 31.54% of our outstanding common shares. These shareholders, if they act together, may be able to exercise substantial influence over the outcome of all corporate actions requiring approval of our shareholders, including the election of directors and approval of significant corporate transactions, which may result in corporate action with which other shareholders do not agree. This concentration of ownership may also have the effect of delaying or preventing a change in control which might be in other shareholders’ best interest but which might negatively affect the market price of our common shares.

 

Our authorized capital consists of an unlimited number of shares of one class designated as common shares. We may, in the future, issue additional common shares, which would reduce investors’ percent of ownership and may dilute our share value.

 

Our Articles of Incorporation authorizes the issuance of an unlimited number of our common shares, no par value, of which 71,304,035 shares are currently issued and outstanding. The future issuance of common shares may result in substantial dilution in the percentage of our common shares held by our then existing shareholders. We may value any common shares issued in the future on an arbitrary basis. The issuance of common shares for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and may have an adverse effect on any trading market of our common shares.

 

Offers or availability for sale of a substantial number of our common shares may cause the price of our common shares to decline.

 

If our shareholders sell substantial amounts of our common shares in the public market, including shares issued in the public offering and shares issued upon conversion of outstanding convertible notes or exercise of outstanding warrants, or upon the expiration of any statutory holding period, under Rule 144, or upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common shares could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

 

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act, or JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.

 

For so long as we are an emerging growth company, we will not be required to:

 

●          have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002;

 

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●          comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

 

●          submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and

 

●          disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation.

 

We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1.07 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

 

Until such time, however, we cannot predict if investors will find our common shares less attractive because we may rely on these exemptions. If some investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and our share price may be more volatile.

 

In addition, when these exemptions cease to apply, we expect to incur additional expenses and devote increased management effort toward ensuring compliance with them. We cannot predict or estimate the amount of additional costs we may incur as a result of us ceasing to be an emerging growth company or the timing of such costs. In addition, once we no longer qualify as an emerging growth company under the JOBS Act and lose the ability to rely on the exemptions related thereto, depending on our status as per Rule 12b-2 of the Securities Exchange Act of 1934, as amended, our independent registered public accounting firm may also need to attest to the effectiveness of our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002. We will be performing the system and process evaluation and testing (and any necessary remediation) required to comply with the management certification and eventual auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 when we are no longer an emerging growth company. This process will require the investment of substantial time and resources, including by our senior management. As a result, this process may divert internal resources and take a significant amount of time and effort to complete.

 

Since we have elected under Section 107 of the JOBS Act to use the extended transition period with respect to complying with new or revised accounting standards, our financial statements may not be comparable to companies that comply with public company effective dates making it more difficult for an investor to compare our results with other public companies.

 

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 102(b)(2)(B) of the Act for complying with new or revised accounting standards. In other words, as an emerging growth company we can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

 

We may be classified as a Passive Foreign Investment Company, or PFIC, for U.S. federal income tax purposes in 2018 and may continue to be, or become, a PFIC in future years, which may have negative tax consequences for U.S. investors.

 

We will be treated as a PFIC for U.S. federal income tax purposes in any taxable year in which either (i) at least 75% of our gross income is “passive income” or (ii) on average at least 50% of our assets by value produce passive income or are held for the production of passive income. Based on our estimated gross income, the average value of our gross assets, and the nature of our business, we may be classified as a PFIC in the current taxable year and may be treated, or may become, a PFIC in future years. If we are treated as a PFIC for any taxable year during which a U.S. investor held our common shares, certain adverse U.S. federal income tax consequences could apply to the U.S. investor. See “Item 10. Additional Information – E. Taxation– Passive Foreign Investment Company Rules.”

 

ITEM 4.  INFORMATION ON THE COMPANY

 

A. History and Development of the Company

 

We were incorporated under the laws of the Province of Ontario (specifically under the Business Corporations Act (Ontario)) on October 31, 2011, in the Province of Ontario, Canada, and did business as Behavioural Neurological Applications and Solutions. Effective November 4, 2015, we changed our name to Ehave, Inc.

 

From inception and prior to our public offering closed in June 2016, we had been funded by a combination of investment capital and grant financing totaling approximately $1,100,000, comprised of approximately $630,000 of grant financing and $470,000 of equity financing.

 

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On May 14, 2015, we effectuated a 100,000:1 forward stock split of our common shares.

 

On July 7, 2015, we closed a private placement of convertible notes with a principal value of $325,000 and commenced the legal and financial processes of becoming an SEC registrant and commencing a public offering.

 

On September 24, 2015, we filed our registration statement on Form F-1, which was declared effective on April 4, 2016, for a public offering of up to 11,002,445 common shares and warrants to purchase 11,002,445 common shares. The registration statement also included a prospectus for resale of up to 11,393,642 common shares issuable upon the conversion of certain convertible notes and 11,393,642 common shares issuable upon the exercise of certain warrants offered by the selling shareholders named in the prospectus.

 

On June 14, 2016, we had a closing of the offering of an aggregate of 6,503,667 common shares and warrants to purchase an aggregate of 6,503,667 common shares, for gross proceeds of $266,000. Subsequent to the initial closing, on June 24, 2016, we had a second closing of the offering of an aggregate of 1,589,242 common shares and warrants to purchase 1,589,242 common shares, for gross proceeds of $65,000. We received total gross proceeds of $331,000 from the offering.

 

On November 14, 2016, we received notice from the Financial Industry Regulatory Authority (“FINRA”) that pursuant to FINRA Rule 6432 and Rule 15c2-11 that our company may initiate a priced quotation on the OTC Bulletin Board under the trading symbol EHVVF. On November 21, 2016, our common shares were listed for trading on the OTCQB Venture Market.

 

On November 21, 2016, we appointed Prateek (Teek) Dwivedi as our Chief Executive Officer and director.

 

On November 14, 2016, we entered into a definitive securities purchase agreement to sell up to $1,500,026 of convertible promissory notes and warrants in multiple closings in a private placement. We have used and intend to use the net proceeds from the private placement to further the development of Ehave Connect, for MegaTeam clinical trials, for general marketing and investor relations’ purposes, and for working capital. As of December 31, 2016, we received $259,357 of $309,357 of the firmly committed amount and waived $50,000 of the firmly committed amount for future reassignment as permitted under the agreement. Certain lenders have notified us that it will not elect to fund an aggregate of $683,130 of additional loans and have permitted its reassignment, of which $489,368 has been reassigned. In the year ended December 31, 2017, we issued additional convertible promissory notes in an aggregate principal amount of $609,826 pursuant to the note and warrant purchase agreement. As of December 31, 2017, we had received total proceeds of $869,183 pursuant to the note and warrant purchase agreement.

 

On December 13, 2016, we entered into an agreement with Multi-Health Systems (“MHS”), an international healthcare technology developer of scientifically validated assessments, granting us access to MHS’s extensive library of mental health assessments. Under the partnership, we agreed to integrate MHS’s psychological assessment tests into our Ehave Connect mental health digital informatics platform. Initially, we focused on MHS’s tests related to behavior assessment and ADHD, including the Conners® suite of ADHD assessments. On May 4, 2017, we amended our agreement with MHS to include the Davidson Trauma Scale and Startle Physiological Anger Numbness to assess Post Traumatic Stress Disorder (“PTSD”). This is a continuation of adding products from MHS’s catalog as a result of completion of the integration of the Conners suite of products. We expect to incrementally add additional products from MHS’s catalog of mental health assessments and services to Ehave Connect.

 

On February 3, 2017, we entered into a Strategic Relationship Agreement (the “MedReleaf Agreement”) with MedReleaf Corp. (“MedReleaf”), pursuant to which we and MedReleaf agreed to develop a branded MedReleaf app utilizing our Ehave Connect platform to advance the study and therapeutic use of medical cannabis. In connection with the MedReleaf Agreement, MedReleaf made an investment of $100,000 into the Company in the form of a convertible note, and was granted an option to invest $200,000 into our TSX-V common stock public offering.

 

On June 30, 2017, we entered into a non-binding Letter of Intent with Companion Healthcare Technologies Corporation (“CHT”), a company engaged in healthcare technologies to improve the quality of care for pets. Under the terms that were contemplated, CHT would have exclusive rights to our Ehave Connect platform for use in companion animals. Initially a demonstration platform will be built to show the capabilities of the Ehave informatics platform. A deposit for the exclusive license fee and demonstration platform was provided by CHT, which will be applied against fees contemplated in a definitive agreement. We performed the services required to create a demonstration platform and delivered it to CHT.

 

On July 27, 2017, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $134,575 (CDN$169,000) to certain lenders.

 

On October 11, 2017, we entered into Investor Letters, pursuant to which certain persons agreed to purchase securities of the Company on similar terms as certain offerings of the Company that are consummated prior to December 31, 2017, or, if such an offering is not consummated, the purchase amount will be converted into a secured promissory note that matures on January 31, 2018 (which, at the investor’s option, may be converted into common shares of the Company). We received aggregate proceeds of $100,000. No such offerings were consummated prior to December 31, 2017, and such notes were converted into unsecured promissory notes on January 31, 2018.

 

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On November 15, 2017, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $196,237. Lenders of the promissory notes were issued 2,133,333 common share warrants at an exercise price of $0.075 per share with an expiry date of November 16, 2022. On January 31, 2018 $148,745 of the promissory notes were repaid and $47,932 of the promissory notes were exchanged for unsecured convertible debentures.

 

On March 1, 2018, we entered in an agreement with Revive Therapeutics Ltd. (“Revive”) for the use of the Ehave Connect platform in Revive’s research initiatives involving medical cannabis for the treatment of liver disease. Under this agreement, Revive will use Ehave Connect for both clinical trials and facilitating patient management.

 

On March 5, 2018, we entered an agreement with Aequus Pharmaceuticals Inc. (“Aequus”), for the use of Ehave Connect to enhance and streamline data management processes for Aequus-sponsored clinical trials studying cannabinoid formulations for treating various neurological conditions.

 

On January 31, 2018, the Company entered into a secured convertible debenture agreement (the “Secured Debentures”) for total proceeds of $1,218,620 (CDN$1,500,000), issued in two installments. The Secured Debentures are secured against certain of our assets. Under the terms of the Secured Debentures, the principal amount and accrued interest is convertible into common shares of the Company at a conversion price equal to 75% the issue price of common shares under a qualified offering. The conversion of the Secured Debentures is at the option of the holder. At the time of conversion, the holder will also receive an equal amount of common share purchase warrants with an exercise price equal to the issue price. The Secured Debentures are due on July 31, 2018 and bear interest at 10% per annum. The initial installment of the Secured Debentures was issued on January 31, 2018 for proceeds of $609,310 (CDN$750,000). On March 19, 2018, the final instalment of $573,307 (CDN$750,000) was received. The Secured Debentures are secured against the general assets and intellectual property of the Company.

 

On January 31, 2018, promissory notes with an aggregate principal amount of $311,967 (CDN$384,000) outstanding at December 31, 2017 were exchanged for unsecured convertible debentures (the “Unsecured Debentures”). From January 1, 2018 to January 31, 2018, the Company issued an additional $20,098 (CDN$25,000) Unsecured Debentures for total proceeds of $332,065 (CDN$409,000). On March 19, 2018, an installment of the Unsecured Debentures in the amount of $382,263 (CDN$500,000) was received. Under the terms of the Unsecured Debentures, the principal amount and accrued interest is convertible into common shares of the Company at a conversion price equal to 75% the issue price of common shares under a qualified offering. The conversion of the Unsecured Debentures is at the option of the holder. At the time of conversion, the holder will also receive 120% of the amount of the common shares issued of common share purchase warrants with an exercise price equal to the issue price. The Unsecured Debentures are due on July 31, 2018 and bear interest at 10% per annum.

 

On February 1, 2018, the Company repaid CDN$60,000 of promissory notes outstanding at December 31, 2017. The balance of the promissory notes due to Scott Woodrow, a Director of the Company, was exchanged for an unsecured convertible debenture in the amount of CDN$59,000.

 

The proceeds from these private placements were used for general working capital purposes, particularly the development and marketing of our platform, Ehave Connect.  

 

Our principal office is located at 203-277 Lakeshore Road East, Oakville, Ontario, Canada L6J 6J3 and our telephone number is (905) 362-1499.

 

We are not aware of any indication of any public takeover offers by third parties in respect of our common shares during our last and current financial years.

 

B. Business Overview

 

We are creating a mental health data platform that integrates with our proprietary and third-party assessment and therapeutic digital applications. Our product focus is based on three tiers of activities: (1) MegaTeam and Ninja Reflex, our clinically validated digital assessment and rehabilitation software that is engaging for the patient, (2) adaptation of third-party clinically validated digital assessment and rehabilitation software for enhanced patient engagement and data modeling, and (3) Ehave Connect, our advanced mental health informatics and digital application delivery platform. We intend to provide technology solutions to clinicians, patients, researchers, pharmaceutical companies and payors.

 

Currently our products are being deployed in Canada.

 

MegaTeam and Ninja Reflex Digital Assessment and Rehabilitation Applications

 

Our MegaTeam and Ninja Reflex assessment and rehabilitation products are built on established methodologies for the measurement of cognitive abilities in populations with attention deficit and hyperactivity disorder, or ADHD. Methodologies commonly used today involve repetitive performance of tasks using digital interface. These tasks are repeatedly administered to the patient in order to obtain accurate measures. Many of the assessments used today had been developed using programming methodologies whereby the task is simply exhibited on screen and the patient is instructed to respond to stimuli. Our research has found that patients, in particular those with symptoms of ADHD, have difficulty completing the necessary regiment of tasks due to lack of engagement. Additionally, these tasks are often administered in a clinical setting, often resulting in the patient and their accompanying parent or guardian staying in clinical settings for an extended time. Our products have been developed to address these primary concerns as well as to enable a breadth of cognitive tasks to be assessed and an individualized cognitive rehabilitation program to be administered remotely.

 

The MegaTeam and NinjaReflex applications involve the imbedding of cognitive assessment and rehabilitation tasks within an engaging video game environment. MegaTeam and NinjaReflex were designed and programmed with the intention of providing comparable engagement to video game play. In the design, narrative and programming of our MegaTeam and NinjaReflex games, we utilize experts in children’s digital content and programming. Our tools have been developed on Unity, a common game development platform that can be used on most fixed and mobile devices, enabling the expansion of narrative and the adaptation of new character and game environments to maintain long-term engagement of product differentiation. The underlying cognitive tools and data remain unchanged as the “skin” is adapted for future versions and client profiles. A significant part of the MegaTeam and NinjaReflex development involved assessing user engagement and consultation on characters, narrative and graphic design.

 

MegaTeam and NinjaReflex applications have been designed for deployment on multiple digital interfaces including PC, Mac, Android and iOS systems. Our applications may be used in a clinic or a patient’s home or remotely, provided there is an adequate data connection.

 

Based on feedback from users and clinical psychologists regarding strong user engagement of our MegaTeam and NinjaReflex products, we believe that our products have a strong capacity for training compliance.

 

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Developed MegaTeam and NinjaReflex products include: (1) Stop Signal Reaction Time Assessment (2) N Back Assessment (3) Inhibitory Control Rehabilitation (4) and Working Memory Rehabilitation. We are planning the development of a broader suite of cognitive tasks and rehabilitation mechanisms in order to increase the addressable mental health indications.

 

Ehave Connect Software Platform

 

Ehave Connect is a cloud-based platform that allows for the input, tracking and extraction of clinical data. Based on the clinical data collected, Ehave Connect provides patient management and digital assessment tools to healthcare providers and physicians so that they are better equip to provide diagnosis and treatment to patients in their care. We expect Ehave Connect to enable a community of third-party solutions providers to connect with end-users of the data. Such solutions include assessments, diagnostics, therapeutics, devices, brain research, clinical research, and such end users include patients, clinicians, regulators, payors, researchers, medical cannabis licensed producers and pharmaceutical companies.

 

Ehave Connect is intended to be integrated into the clinician’s workflow to capture, record and deliver objective patient data, with the ultimate goal of helping the clinician improve patient care. We believe that Ehave Connect can fill the information gap in mental healthcare and medical cannabis due to the inefficiency from relying largely on pen-and-paper assessments and difficulty of tracking patient compliance and outcomes at a large scale. Ehave Connect can also create value for medical cannabis and mental health researchers and insurance payors, by giving access to objective outcomes data to support and validate their efforts.

 

Because of Ehave Connect’s comprehensive data capabilities, we believe that Ehave Connect is ideally suited for major mental health conditions, including illnesses and diseases treated by medical cannabis, which assessment, treatment and outcomes are inherently subjective, variable, or difficult to track with conventional tools. The mental health conditions that we believe our platform is suited for and can be readily used include PTSD, ADHD, anxiety, autism, depression, obsessive compulsive disorder (“OCD”), and concussion. We believe our platform is suited for the following major illnesses that are subject to medical cannabis treatments: pain, arthritis, nausea/cancer treatments, seizures, migraines, MS, psychological conditions, spinal cord injury/diseases and auto-immune diseases.

 

Right Data

 

Our goal is rooted not in “big data”, but in “right data” by providing all of the clinical data in an organized and complete form. While healthcare datasets may quickly become large and complex, we believe that there is a tendency to try to collect anything and everything, and hope that the analytics will derive conclusions. We believe that multiple data sets may provide inconsistencies in the type and quality of data being collected, effectively rendering the combined data incompatible and unusable.

 

Our immediate strategy in the United States is to sell our Ehave Connect alone as a patient management application. However, our long-term strategy is to couple our Ehave Connect cloud-based platform with computerized cognitive assessment aid products into a medical device that is prescriptive on the data being collected and focused on collecting specific data elements that are critical on a per disease/condition basis. We believe that defining a patient-centered ontology for leading behavioral science diseases and conditions that is based on a minimum critical clinical data set would be more effective for clinicians to determine both diagnosis and treatment plans and more useful to researchers who are looking for consistent data across patients. The data categories can be broadly defined as: demographics, clinical tests, diagnosis, treatment, clinician reported outcomes and patient reported outcomes. We work with clinicians and researchers in each of our target diseases/conditions to define the specific data elements in each of these categories. With the definition of the data sets as the basis, we have created a platform that integrates our own, as well as third party, digital applications for clinicians, patients and researchers. We believe that each of these applications is carefully selected to deliver high impact experiences, and when integrated to our platform, are mapped to our data sets.

 

Quality Data

 

While we believe that collecting right data gives the platform focus and ensures that it does not become unwieldy, the quality of the data is imperative. As is the case in other complex data environments, the integrity of healthcare data output depends on the quality of the input data. Our applications are specifically curated so that they minimize entry of invalid data and allow clinicians, patients and researchers to interact with high quality data that are reliable.

 

Outcome Data

 

We have learned from other healthcare institutions that outcome data based on high quality clinical, diagnosis and treatment data can be relied upon to inform clinicians when making treatment decisions. We believe that outcome data in healthcare, and in particular behavioral sciences, has been missing, unstructured or incomplete. The lack of reliable outcome data limits the value of large data sets. We believe that our platform solves this problem by providing the platform and applications that allow for consistent outcome capture by clinicians.

 

Our applications capture outcomes from a patient’s perspective: outcomes can be automatically captured by sensors or manually by inserting input into the applications and become part of the data set.

 

With increased use, we expect the size of our data set to grow, and we hope that our platform will be the source of high quality clinical and outcome data for behavioral sciences for use by clinicians, researchers, healthcare systems and industry partners to improve outcomes. We hope to accomplish this by the creation and integration of carefully chosen applications.

 

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Data Insights and Machine Learning

 

We have built machine learning algorithms that connect outcome data to diagnosis and treatment plans to build data insights that may provide useful guidance on the appropriate treatment plans. This is particularly powerful for both mental healthcare and treatments using medical cannabis. Because, to the best of our knowledge, current regulatory environment in Canada and the United States does not require licensed producers of medical cannabis to conduct clinical trials, clinicians are often missing comprehensive information on how to prescribe medical cannabis in terms of strain, route (smoke/vape, eat, oil, gel cap), dose (quantity) and frequency; such information are typically available to them for traditional pharmaceuticals but are not available for medical cannabis. We believe our solution will provide clinicians the knowledge they need to confidently prescribe cannabis to their patients. With respect to mental healthcare, we believe that the data insights Ehave Connect can provide on the psychological assessment scores, new digital assessments, and outcome data on traditional pharmaceuticals along with digital remediation may heighten the level of rigor in mental healthcare to the level similar to that of other diseases or medical conditions, such as cancer.

 

Patient Privacy and Consent: Use of Blockchain

 

We believe that privacy and security of patient data must be one of the cornerstones of the Ehave Connect platform architecture, especially considering the sensitivity of mental healthcare patients and medical cannabis users tend to have toward keeping their patient data private. We plan to use the Blockchain technology, which we believe will allow patients to have greater control over their health record, while providing a decentralized mechanism for trusted stakeholders to contribute and access data for the benefit of the patient. This includes a simple and automated ability to allow patients to control, including giving consent to, specific portions of their health record to be available to certain parties for a set period of time, which we believe would be ideal for clinical trials. We believe that the current manual process for such tasks can be cumbersome and difficult to ensure compliance We have joined the Hyperledger collaborative, whose members include large technology leaders and innovators, with a goal of working together to help establish standards in Blockchain implementations.

 

Applications

 

Our data platform provides the basis for applications that clinicians, researchers and patients use to receive and contribute data. The applications can be as simple as forms that are filled out or surveys that are responded to, or as complex as digital therapeutics, which is the treatment of cognitive impairments using technology. The applications are curated on a per disease/condition basis. For example, the applications used for ADHD for boys aged 7 to 10 will differ than the applications used for OCD for girls aged 16+.

 

The patient management applications built into Ehave Connect allows clinicians to manage patients, view data within the data sets and assign applications to patients or their parents. They assign applications from an App Store concept, where they see the best clinical data, diagnosis, therapeutic and outcome applications available and can choose the one that is most appropriate for their patient. The applications are ranked in terms of value (our rating), rating (from other users) and use, and can have a fee associated with it.

 

Ehave Connect for Medical Cannabis

 

 

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In medical cannabis, our solution can be suitable for patients with a wide variety of illnesses or diseases that are treated by medical cannabis. Ehave Connect can be configured to capture and track the data required to evaluate cannabis therapies, from intake to assessment, treatment planning, delivery and adherence, to tracking of treatment outcomes. Licensed cannabis producers may use this data to validate and market the efficacy and safety of their products.

 

by providing a suite of patient management and assessment tools that are designed to:

 

  · enable more accurate and efficient study of medical cannabis;
  · establish objective treatment guidelines that physicians can rely upon when prescribing cannabis therapies;
  · provide researchers, regulators and payors/insurers with digital access to objective patient outcomes data; and
  · support development and use of medical cannabis for the full breadth of indications where such therapies are applied.

 

 

 

We believe that Ehave Connect’s benefits for the medical cannabis community is centered around a recognized need for evidence-based approach to formulation, titration, adherence, regulatory compliance and patient outcomes to reach full potential of medical cannabis as a validated clinical therapeutic. Ehave Connect provides patients and caregivers a digital portal available on desktop, tablet, mobile devices that enables self-monitoring and adherence to treatment. Clinicians are provided with reliable, data-driven guidelines for proper dosing and formulation, condition-specific strains and personalized treatment plans. Licensed producers are given access to information on validation of dose, strain, adherence and patient outcomes, and potential supporting information for regulatory approval and reimbursement. Ehave Connect provides developers and pharmaceutical companies clinical evidence to support novel formulations or delivery, and proprietary technologies correlated with patient outcomes. Regulators and payors may be able to make optimal decisions based on real patient outcomes and comprehensive data for dose, strain, potency and formulation.

 

We believe that Ehave Connect can enable prescribers of medical marijuana to design and monitor treatment plans, track patient compliance, and verify treatment outcomes in a reliable and objective manner. Similar to other areas of mental health, Ehave Connect captures clinical data digitally from “gold standard” assessments and surveys from third parties, as well as from novel treatment tools and devices, creating a data-rich network of patient information that has the potential to validate and legitimize this burgeoning healthcare segment.

 

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On March 1, 2018, we entered in an agreement with Revive Therapeutics Ltd. (Revive) for the use of the Ehave Connect platform in Revive’s research initiatives involving medical cannabis for the treatment of liver disease. Under this agreement, Revive will use Ehave Connect for both clinical trials and facilitating patient management.

 

On March 5, 2018, we entered an agreement with Aequus Pharmaceuticals Inc. (“Aequus”), for the use of Ehave Connect to enhance and streamline data management processes for Aequus-sponsored clinical trials studying cannabinoid formulations for treating various neurological conditions.

 

Third Party Content on Ehave Connect

 

We believe that it is critical to partner across the mental healthcare community, and we have secured partnerships with industry leaders.

 

Partnership with MedReleaf

 

On February 3, 2017, we entered into the MedReleaf Agreement with MedReleaf, pursuant to which we and MedReleaf agreed to develop a branded MedReleaf App utilizing our Ehave Connect platform to advance the study and therapeutic use of medical cannabis. MedReleaf is Canada’s premium licensed producer and distributor of medical cannabis. The objective of the partnership with MedReleaf is to validate and optimize the use of MedReleaf’s medical cannabis products as therapeutic treatments for various health conditions. We and MedReleaf monitor every step of the medical cannabis treatment life cycle, collect diagnosis data and intake assessments, run validated psychological assessments to monitor treatment response, manage patient treatment plans, and objectively analyze patient outcomes. On November 1, 2017 we announced the launch of a digital patient intake portal with MedReleaf that was built on our Ehave Connect platform. Our technology is used to establish baseline patient assessments and track patient-reported symptoms by incorporated a panel of clinically-validated assessments into a single portal.

 

Partnership with MHS

 

In December 2016, we signed an agreement with MHS, a leading provider of psychological assessment tools. We have integrated MHS’s gold standard Connors® suite of ADHD assessments, as well as the Davidson Trauma Scale and SPAN assessments for PTSD into Ehave Connect. We expect to offer MHS’s entire catalogue of tests in time, and in so doing we believe that we can enhance the evaluation of any mental health indication. We plan to move into areas such as anxiety, depression, OCD, autism, and more. We believe that the expansion of the implementation of MHS’ catalogue will establish ourselves as a recognized player in this field and provides an opportunity to showcase the value that Ehave Connect adds for patients, clinicians and other leading publishers of mental health assessments, which we anticipate will attract additional partners.

 

The Hospital for Sick Children

 

In December 2011, we entered into a collaboration with Toronto’s Hospital for Sick Children to identify the clinical needs, design and processes required to create clinical grade toolsets. In addition to specific tools, we have developed a content delivery and patient data platform, known as Resource Knowledge Information Access that enables content to be deployed, monitored, analyzed and accessed remotely by clinicians and patients. These tools were used during randomized control studies of the MegaTeam game, and will be used in future trials with the Hospital for Sick Children.

 

Third-party Contract Services

 

We believe that we have the expertise of understanding the complexities of mental health assessments and rehabilitation methodologies, along with game design and programming. Researchers and developers of digital applications for mental health may recognize the advantage of engaged users, but lack the expertise in game based translation. We intend to market our company to researchers and developers with fee-based services to enhance their digital applications. We are working closely with mental health research networks to avail our existing MegaTeam and NinjaReflex tools as well as our programming expertise to enhance and commercialize new products and services.

 

We believe that Ehave Connect is uniquely suited to enhance the development and commercialization of various therapies for mental health conditions, through collaboration with pharmaceutical companies, facilitating the capture and management of clinical data for regulatory trials or post-market validation. Our platform enables the capture of trial data directly from patients and clinicians, and lowers the need of clinical trial coordinators, data clerks and other staff that make clinical trials expensive. In this capacity, we may act as a contract research organization (CRO) for pharmaceutical, biotechnology and medical device industries, as well as research institutions, universities and government organizations, to help in development, commercialization, clinical research and clinical trials management. In March 2018, we entered in an agreement with Revive and Aequus for the use of the Ehave Connect platform in each of Revive’s and Aequus’s clinical studies.

 

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Business Strategy

 

Our business strategy is to develop and market Ehave Connect in an effective and timely manner and gain access to additional technologies at a time and in a manner that we believe is best for our development.  We intend to achieve our business strategy by focusing on these key areas:

 

  developing Ehave Connect to expand its capabilities in delivery of proprietary and third party content;

 

  expanding MegaTeam and Ninja Reflex with additional game titles, and participate in further clinical studies with Hospital for Sick Children on the CHILD-BRIGHT network, which is a Canadian research network that aims to improve the lives of children with brain-based development disabilities we are a partner to and provider of in-kind services and support);

 

  forming strategic alliances with selected licensed producers of medical cannabis and publishers of psychological assessments, at a time and in a manner where such alliances may complement and expand our research and development efforts on the product and provide sales and marketing capabilities;

 

  developing relationships with pharmaceutical and insurance companies that could be instrumental in deploying our technology to drug development and treatment monitoring; and

 

  developing relationships with companies that could be instrumental in assisting us to access other innovative therapeutics.

 

Our business strategy is based on attaining a number of commercial objectives, which, in turn, are supported by a number of product development goals.  Our product development presently being conducted is primarily of a research and development nature.

 

Market

 

We anticipate that the principal markets in which our products will compete will initially include North America. Thereafter, we hope to expand our markets to Europe and Asia. Currently our products are being deployed in Canada. We plan to launch Ehave Connect in the United States in 2018.

 

Mental healthcare, including its assessment and treatment, is a significant market. Forty-four million adults in the United States are estimated to experience mental illness per year, which is 20% of the population. The size of the U.S. mental health treatment market is $113 billion, and the size of private insurance spending on mental health is $32 billion. The size of the cognitive assessment market world-wide is over $2.4 billion. (Source: Mental Health America - State of Mental Health Report, 2016; SAMSHA Spending Estimates Project, 2010; MarketsandMarkets, 2015).

 

ADHD is a common affliction with worldwide prevalence estimated at approximately 7% ( Source: “Prevalence of Attention-Deficit/Hyperactivity Disorder: A Systematic Review and Meta-analysis”, Rae Thomas, Sharon Sanders, Jenny Doust, Elaine Beller, Paul Glasziou, Pediatrics Feb 2015, peds.2014-3482; DOI: 10.1542/peds.2014-3482 ). ADHD symptoms typically start or are first noticed in preschool age children (“Prevalence of Attention-Deficit/Hyperactivity Disorder: A Systematic Review and Meta-analysis”, Rae Thomas, Sharon Sanders, Jenny Doust, Elaine Beller, Paul Glasziou, Pediatrics Feb 2015, peds.2014-3482; DOI: 10.1542/peds.2014-3482 ). While symptoms may decline with age, ADHD symptoms and impairments can persist into adolescence and adulthood (Source: “A lifetime of attention-deficit/hyperactivity disorder: diagnostic challenges, treatment and neurobiological mechanism”, Julia Geissler and Klaus-Peter Lesch, Expert Review Of Neurotherapeutics Vol. 11 , Iss. 10,2011 ).

 

In Deloitte’s Life Sciences Outlook Report in 2016, it recognized a 12-fold increase in companion diagnostics, or technology that provides information that is essential to the safe and effective use of a corresponding drug. Ehave Connect’s comprehensive clinical data model allows for powerful companion applications to be built that aid in diagnosis, treatment and patient outcome optimization.

 

For medical cannabis, the demand is strong and growing, with a projected market of CDN$3 billion by 2024 (Source: Health Canada, 2016) . Between 4,000 and 5,000 new patients are added per month, with a projection of 450,000 licensed users by 2019. At this time, only 5% of physicians in Canada prescribe medical cannabis. This is corroborated with by Grand View Research, which in 2017 published that the global medical marijuana cannabis market will be $55.8 billion by 2025. The increase in interest amongst academic researchers and healthcare providers is amongst the significant factors driving growth. Validating therapeutic dosing and administration of cannabis-based therapies, while paramount to developing new products and promoting clinical acceptance, remains a challenge, particularly in mental health indications where patient outcomes are difficult to track. Currently, the medical marijuana industry lacks comprehensive clinical data for prescribers to draw from when advising patients on treatment plans, as well as systems to track patient adherence and outcomes. Further, the large variety of medical marijuana strains and delivery modalities has not been rigorously assessed or optimized.

 

The National Academy of Sciences report on The Health Effects of Cannabis and Cannabinoids in 2017 states that there is inadequate information to assess their effects, and made key recommendations around research that points to the need for evidence and surveillance, as follows:

 

  1. Address Research Gaps: Develop national cannabis research agenda that addresses key gaps in the evidence base on the short- and long-term health effects of cannabis use (both beneficial and harmful effects)
  2. Improve Research Quality: Develop research standards and benchmarks to guide and ensure the production of high-quality cannabis research

 

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  3. Improve Surveillance Capacity: Support improvements to federal and state-based public health surveillance systems to ensure sufficient data are available to inform research on the short- and long-term health effects of cannabis use
  4. Address Research Barriers: Fully characterize the impacts of regulatory barriers to cannabis research and propose strategies for supporting development of the resources and infrastructure necessary to conduct a comprehensive cannabis research agenda

 

We believe that Ehave Connect’s evidence-based approach to treatment using medical cannabis is aligned with recommendations made in the report.

 

Competition

 

We are not aware of direct competition to Ehave’s mental health informatics platform, Ehave Connect, in the market. We note that electronic health record software vendors, such as Cerner, Epic and Athena Health have broad clinical data solutions as a part of their solution, but are focused on acute care centers, rather than community care where the majority of mental health is practiced. There are many small electronic medical record software vendors that are focused on mental health for community-based clinicians that have small installation base, but, to the best of our knowledge, software from such vendors typically only have a portion of the data that Ehave Connect tracks.

 

In the medical cannabis market, there are licensed producers and third-party software providers who have released patient tracking software applications. While these applications track consumption and how patients are feeling while taking specific strains, to the best of our knowledge, they typically do not have the clinical data to map to the consumption and the outcome.

 

For our MegaTeam and Ninja Reflex game applications, we are aware of a few competitors, including Akili Ineractive, Attentiv, Myndlift and C8Sciences. Many of these companies are currently conducting clinical trials. Our strategy for game development starts from using known proven clinical measures rather than creating new measures, and we believe that the advantage of this methodology is that broad normative data does not need to be established and the barrier to clinical adoption may be lower with known measures that clinicians are already comfortable with.

 

Product Differentiation

 

We strive to provide the best tools and resources for today’s populations suffering from mental illness. Many of the incumbent products have been developed and validated in their academic forms, which, we believe, lack appeal for today’s clients and practitioners. We believe there is a demand for real time, data-rich digital tools that enable individual treatment and ongoing monitoring, while a significant portion of the existing market for cognitive assessment and therapy relies upon paper-based tools and checklists that have little or no connected monitoring capacity or real-time progress reporting. As such, we seek to develop products with the following key features: (1) user engagement, (2) data richness, (3) clinically validated, and (4) multi-screen and mobile deployment.

 

Our assessment products are derived from designs and methods clinically studied. Our plans include the study of our derived products and cognitive rehabilitation software through clinical studies led by hospitals. These studies include multiple phases from pilot studies through affected population studies and allow the measurement, using various criteria and techniques, of the effect of our cognitive rehabilitation program on target populations.

 

Marketing

 

Our marketing channels consist of direct sales and leveraging partners for market outreach. Our current strategy is for direct sales to publishing partners, medical device partners, pharmaceutical companies and medical cannabis licensed producers. These partnerships strengthen the content that is on the Ehave Connect platform that helps to ensure the capture high quality clinical data that we depend on. Through these partnerships, we gain access to clinicians and the patients they serve.

 

We also engage a public relations firm to help reach media outlets.

 

Regulatory Requirements

 

Our future business operations and activities in the U.S. may be directly or indirectly subject to subject to certain federal and state laws relating to the privacy and security of health information, and state and federal laws designed to guard against healthcare fraud and abuse, including, but not limited to, those described below.

 

· HIPAA, as amended by HITECH, established comprehensive requirements related to the privacy, security, and transmission of individually identifiable health information. It governs patient privacy practices of healthcare providers, health plans, and healthcare clearinghouses (or “covered entities”), as well as their respective business associates to the extent that they perform services for or on behalf of the covered entities that involve the use or disclosure of protected health information. HIPAA also mandates notification in the event of a breach and regulates standardization of data content, codes and formats used in healthcare transactions. Covered entities and business associates may be subject to significant civil and criminal penalties, as well as enforcement by state attorneys general, for violations of HIPAA or its implementing regulations.

 

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· HIPAA also imposes federal criminal and civil liability for knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters.

 

· The federal Anti-Kickback Statute which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order, or recommendation of, an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs.

 

· The federal Civil False Claims Act imposes liability on any person or entity, which, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal healthcare program. The “qui tam” or “whistleblower” provisions of the False Claims Act allow a private individual to bring actions on behalf of the federal government, alleging that the defendant has submitted a false claim to the federal government, and to share in any monetary recovery.

 

· The federal Civil Monetary Penalties Law prohibits, among other things, the offering or transfer of remuneration to a Medicare or state health care program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state health care program, unless an exception applies.

 

· Analogous state fraud and abuse laws and regulations, such as state anti-kickback and false claims laws, may apply to items or services reimbursed under Medicaid, other state programs, or, in some states, private third-party payors. In addition, many U.S. states have enacted patient confidentiality laws that protect against the disclosure of confidential medical information, and many states have adopted or are considering adopting further legislation in this area, including privacy safeguards, security standards, and data security breach notification requirements. These state laws, which may be even more stringent than the HIPAA requirements, many of which differ from each other in significant ways and are often not preempted by the federal requirements.

 

FDA's Medical Device Regulation

 

The FDA has broad authority over the regulation of medical devices marketed for sale in the United States. The FDA regulates the research, clinical testing, manufacturing, safety, labeling, storage, recordkeeping, premarket clearance or approval, promotion, distribution and production of medical devices. The FDA also regulates the export of medical devices manufactured in the United States to international markets.

 

Under the Food, Drug, and Cosmetic Act, or FDCA, the FDA classifies medical devices into one of three classes: Class 1, Class 2 or Class 3. Medical devices deemed to pose lower risk are placed into either Class 1 or Class 2.

 

Class 1 medical devices are deemed to pose the lowest risk to the patient. Accordingly, Class 1 medical devices are subject to the lowest degree of regulatory scrutiny and need only comply with the FDA's General Controls. The General Controls include compliance with the registration, listing, adverse event reporting requirements, and applicable portions of the Quality Systems Regulation, or QSR, as well as the general misbranding and adulteration prohibitions. Unless specifically exempted in the regulations, general controls require a company that intends to market a Class 1 medical device, like us, to gain clearance for marketing through the 510(k) process. Many Class 1 medical devices, however, are exempt from 510(k) clearance because the level of risk is low.

 

Class 2 medical devices are considered higher risk devices than Class I medical devices. Class 2 medical devices are subject to General Controls as well as additional Special Controls. Special Controls may include labeling requirements, mandatory performance standards, and post market surveillance. Generally companies that intend to market Class 2 medical devices, like us, must comply with applicable regulations and submit a 510(k) premarket submission for review to receive clearance to list and market their medical devices. The 510(k) must establish substantial equivalence to a predicate medical device. Some Class 2 medical devices are exempt from filing a 510(k) but in some instances, Class II medical devices may be required to file a Premarket Approval, or PMA, application.

 

Medical devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a previously cleared medical device, are classified as Class 3 medical devices and require a PMA before commercialization.

All medical device manufacturers must register their establishments with the FDA; such registrations require the payment of user fees. In addition, both 510(k) premarket submissions and PMA applications are subject to the payment of user fees, paid at the time of submission for FDA review.

 

The use of forms and tools for the measurement and assessment of behavioral and cognitive abilities are considered computerized cognitive assessment aids by the FDA. The FDA currently classifies such products as Class II medical devices. Currently we are engaging in clinical trials of Ehave MegaTeam games outside of the United States. Such clinical trials are being performed to prove efficacy and may have supporting evidence in the event that we filed an marketing application in the United States and the FDA requires this data before we are able to market, advertise or sell our Ehave MegaTeam games in the United States.

 

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510(k) Clearance Pathway

 

If required to obtain 510(k) clearance for our Ehave MegaTeam games or any other computerized cognitive assessment aid products in the future, such products may be classified as medical devices and we would may be required to submit a premarket notification demonstrating that the proposed medical device is substantially equivalent to a previously cleared 510(k) device. FDA's 510(k) clearance pathway usually takes from three to twelve months. On average the review time is approximately six months, but it can take significantly longer than twelve months in some instances, as the FDA may require additional information, including clinical data, to make a determination regarding substantial equivalence.

 

After a medical device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a new or major change in its intended use, will require a new 510(k) clearance or, depending on the modification, require a PMA. The FDA requires each manufacturer to determine whether the proposed change requires submission of a new 510(k) notice, or a premarket approval, but the FDA can review any such decision and can disagree with a manufacturer's determination. If the FDA disagrees with a manufacturer's determination, the FDA can require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or premarket approval is obtained. If the FDA requires us to seek 510(k) clearance or premarket approval for any modifications to a previously cleared product, we may be required to cease marketing or recall the modified device until we obtain this clearance or approval. Also, in these circumstances, we may be subject to significant regulatory fines or penalties. We have made and plan to continue to make additional product enhancements to products that we believe do not require new 510(k) clearances, but we cannot guarantee that the future enhancements, should they occur, will be exempt from new 510(k) clearances.

 

De Novo Reclassification

 

If we decide to market, advertise or sell our Ehave MegaTeam games or any other any other computerized cognitive assessment aid products in the future, such products may not have a suitable predicate medical device to be cleared as a 510(k) medical device. If the FDA finds that there is no suitable predicate medical device, it will automatically be considered our Ehave MegaTeam games or any other computerized cognitive assessment aid products that we apply for clearance to market, advertise or sell in the future a Class III medical device. However, in instances where a medical device is novel and there is no suitable predicate device, but that medical device is deemed to be of low to moderate risk, the FDA may reclassify the device to Class I or Class II via de novo reclassification petition pathway. This process involves the submission of a de novo reclassification petition, and the FDA's acceptance that “special controls” are adequate to ensure the product’s performance and safety.

 

The FDA now allows de novo reclassification petitions, a mechanism by which a sponsor can directly submit a detailed de novo reclassification petition as the device’s initial submission without having to first receive a not substantially equivalent, or NSE, decision on a 510(k) submission. Historically, the de novo reclassification pathway typically would take at least 9 to 12 months from filing to clearance. Since the enactment of the 21 st Century Cures Act, de novo classification petitions may be submitted to the FDA at any time and does not require a FDA finding of not substantially equivalent to a 510(k) application before the petition is made. FDA must respond to any de novo classification requests within 120 days of a completed petition.

 

In the future, we may decide to submit a de novo reclassification petition for our Ehave MegaTeam games or any other computerized cognitive assessment aid products that we may develop. To support a de novo reclassification petition, our objective would be to demonstrate that the proposed medical device poses a low to moderate risk to patients. If the FDA determines that such a product is not a candidate for de novo reclassification, it will require approval of the device for market through the PMA application process.

 

Alternatively, if we seek 510(k) clearance and our medical device is found not substantially equivalent, or NSE, the FDA will consider a de novo petition if our proposed medical device has been determined to be NSE due to: (1) the lack of an identifiable predicate medical device, (2) a new intended use, or (3) different technological characteristics to a predicate device that raise different questions of safety and effectiveness. The de novo classification request should include a description of the medical device, labeling for the device, reasons for the recommended classification and information to support the recommendation. Should the FDA believe our proposed medical device’s general controls or general and special controls provides reasonable assurance of safety and effectiveness, the FDA may classify our medical device as a Class II medical device. If the FDA classifies the device into Class II, we will then receive an approval order to market the device. This device type can then be used as a predicate device for future 510(k) submissions. However, if the FDA subsequently determines that the device will remain in the Class III category, then we may not be marketed until we have obtained a PMA.

 

Premarket Approval Pathway

 

A PMA application must be submitted if a medical device cannot be cleared through the 510(k) process or by de novo reclassification petition. The PMA application process is generally more costly and time consuming than the 510(k) process. A PMA application must be supported by extensive data including, but not limited to, analytical, preclinical, clinical trials, manufacturing, statutory preapproval inspections, and labeling to demonstrate to the FDA's satisfaction the safety and effectiveness of the medical device for its intended use.

 

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After a PMA application is sufficiently complete, the FDA will accept the application and begin an in-depth review of the submitted information. By statute, the FDA has 180 days to review the "accepted application," although, generally, review of the application can take between one and three years, but it may take significantly longer. During this review period, the FDA may request additional information or clarification of information already provided. Also during the review period, an advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the medical device. The preapproval inspections conducted by the FDA include an evaluation of the manufacturing facility to ensure compliance with the QSR, as well as inspections of the clinical trial sites by the Bioresearch Monitoring group to evaluate compliance with good clinical practice and human subject protections. New premarket approval applications or premarket approval application supplements are required for modifications that affect the safety or effectiveness of the medical device, including, for example, certain types of modifications to the medical device's indication for use, manufacturing process, labeling and design. Significant changes to an approved PMA require a 180-day supplement, whereas less substantive changes may utilize a 30-day notice, or the 135-day supplement. PMA supplements often require submission of the same type of information as a PMA application, except that the supplement is limited to information needed to support any changes from the medical device covered by the original PMA application, and may not require as extensive clinical data or the convening of an advisory panel. None of our products are currently approved under a premarket approval and we do not believe that we will ever have a product that requires a PMA.

 

Clinical Trials

 

Clinical trials are almost always required to support a PMA application or de novo reclassification petition and are sometimes required for a 510(k) premarket notification. If we decide to market, advertise or sell our Ehave MegaTeam and NinjaReflex games or any other any other computerized cognitive assessment aid products that we may develop in the future, and if the FDA believes that such product presents a potential “significant risk” to health, safety, or the welfare of a human subject, the FDA may require us to collect safety and effectiveness data on human subjects regardless of our device’s classification. If we are required to collect data on human subjects, the FDA will require us to file an application for an Investigational Device Exemption, or IDE with the FDA and obtain IDE approval prior to commencing the human clinical trials. The IDE application must be supported by appropriate pre-clinical data, such as animal and laboratory testing results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound. The IDE application must be approved in advance by the FDA for a specified number of patients, unless the product is deemed a “non-significant risk” device and eligible for more abbreviated investigational device exemption requirements. Clinical trials for a significant risk device may begin once the IDE application is approved by the FDA and the appropriate institutional review boards at the clinical trial sites. Future clinical trials of our motion preservation designs will require that we obtain an IDE from the FDA prior to commencing clinical trials and that the trial be conducted under the oversight of an institutional review board at the clinical trial site. Our clinical trials must be conducted in accordance with FDA regulations and other federal and state regulations concerning human subject protection, including informed consent and healthcare privacy. A clinical trial may be suspended by the FDA or the IRB at any time for various reasons, including a belief that the risks to the study participants outweigh the benefits of participation in the study. Even if a study is completed, the results of our clinical trials may not demonstrate the safety and efficacy of the medical device, or may be equivocal or otherwise not be sufficient to obtain approval of our Ehave MegaTeam and NinjaReflex game or any other computerized cognitive assessment aid products that we may develop in the future. At this time, we do not plan on marketing, advertising or selling our Ehave MegaTeam and NinjaReflex games or any other computerized cognitive assessment aid products in the United States and therefore, do not anticipate performing clinical trials in the United States.

 

Patents and Trade Secrets

 

The patent positions and proprietary rights of pharmaceutical and biotechnology firms, including us, are generally uncertain and involve complex legal and factual questions. We believe there will continue to be significant litigation in the industry regarding patent and other intellectual property rights.

 

We have not registered any patents in respect of Ehave Connect, Megateam and NinjaReflex ; however we maintain our proprietary server architecture and mobile applications as trade secrets. We have registered the trade name “Ehave, Inc.” and owns the domain “ehave.com.”

 

We rely on unpatented trade secrets and improvements, unpatented know-how and continuing technological innovation to develop and maintain our competitive position. No assurance can be given that others will not independently develop substantially equivalent proprietary information and techniques, or otherwise gain access to our trade secrets or disclose such technology, or that we can meaningfully protect our rights to our unpatented trade secrets.

 

We require our employees and consultants to execute confidentiality agreements upon the commencement of employment and consulting relationships with us. These agreements provide that all confidential information developed by or made known to an individual during the course of the employment or consulting relationship generally must be kept confidential. In the case of employees, the agreements provide that all inventions conceived by the individual, while employed by us, relating to our business are our exclusive property. While we have implemented reasonable business measurements to protect confidential information, these agreements may not provide meaningful protection for our trade secrets in the event of unauthorized use or disclosure of such information.

 

Seasonality of Business

 

Our results of operations have not been materially impacted by seasonality.

 

C. Organizational Structure

 

Not applicable.

 

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D. Property, Plants and Equipment

 

We currently lease approximately 1,636 square feet of office space located at 277 Lakeshore Road East, Suite 203, Oakville, Ontario, Canada. The term under our lease agreement, as amended on April 6, 2018, will expire on May 1, 2020. We do not own or lease any other office space, manufacturing facilities or equipment and do not have any current plans to construct or acquire any facilities.

 

ITEM 4A.  UNRESOLVED STAFF COMMENTS

 

Not applicable.

 

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this Annual Report on Form 20-F. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs, including our belief as to the potential of MegaTeam applications as an effective remediation tool for ADHD and our expectations as to the success of our research and development and Ehave Connect platform and related content distribution in 2018 and beyond, future financial position, business strategy and plans for future operations, and statements that are not historical facts, involve known and unknown risks and uncertainties]. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 20-F, particularly those in “Item 3. Key Information – D. Risk Factors.” See also “Special Note Regarding Forward-Looking Statements.”

 

With respect to the forward-looking statements made within this Item 5, we have made numerous assumptions regarding among other things: our ability to obtain financing to fund our continuing development programs, the results of our clinical trials, our ability to obtain commercial sales and on the distribution of proprietary and partnered content on Ehave Connect, and future expense levels being within our current expectations.  Investors are cautioned against placing undue reliance on forward-looking statements.  We do not undertake to update these forward-looking statements except as required by applicable law.

 

Overview

 

We are creating a medical cannabis and mental health data platform that integrates with our proprietary and third-party assessment and therapeutic digital applications. Our product focus is based on three tiers of activities: (1) MegaTeam and Ninja Reflex, our clinically validated digital assessment and rehabilitation software that is engaging for the patient, (2) adaptation of custom and third-party clinically validated digital assessment and rehabilitation software for enhanced patient engagement and data modeling, and (3) Ehave Connect, our advanced mental health and medical cannabis informatics and digital application delivery platform. We intend to provide technology solutions to clinicians, patients, researchers, pharmaceutical companies and payors.

 

We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

 

- have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
- comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
- submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and
- disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation.

 

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

 

We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1.07 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

 

Critical Accounting Policies and Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires companies to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and judgments are subject to an inherent degree of uncertainty, and actual results may differ. Our significant accounting policies are more fully described in Note 1 to our financial statements included elsewhere in this Annual Report. Critical accounting estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances, and are particularly important to the portrayal of our financial position and results of operations. Our estimates are primarily guided by observing the following critical accounting policies:

 

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Financial Overview

 

Our operations have been funded, to date, primarily through the sale of our common shares in a public offering and series of private placements of convertible notes and warrants. From our inception through December 31, 2017, we have raised an aggregate of approximately $2,292,516 to fund our operations, of which approximately $366,455 was from our public offering in June 2016, and approximately $1,961,764 was from the issuance of convertible notes and warrants. In addition, we received additional aggregate investments of $1,924,582 from private placements of convertible notes and warrants that closed in each of January and March of 2018.

 

Operating Losses

 

Since our inception, we have incurred significant operating losses. Our net losses were $4,141,613 and $1,502,204 for the year ended December 31, 2017 and 2016, respectively. As of December 31, 2017, we had an accumulated deficit of $6,989,124. We expect to continue to incur significant expenses and operating losses over the next several years. Our net losses may fluctuate significantly from quarter to quarter and from year to year. We anticipate that our expenses will increase significantly as we plan to continue development and commercialization of Ehave Connect and MegaTeam and NinjaReflex products as well as to engage in continuing research and development related to products and services.

 

A. Operating Results

 

Years Ended December 31, 2017, and December 31, 2016

 

Revenues

 

We earned total revenue of $78,260 during the year ended December 31, 2017, compared to no revenue during the year ended December 31, 2016. This increase was primarily due to proceeds for professional services pursuant to contracts we entered into with MedReleaf for customizations for its digital intake portal and CHT for its demonstration platform.

 

Operating Expenses

 

Our total operating expenses for the year ended December 31, 2017 was $1,260,574 compared to $1,110,847 in 2016, an increase of $149,727. The increase in operating expenses is primarily due to an increase in overall operating activity due to available funding. Major areas of increased activity include additions to the team. The operating expenses for the year ended December 31, 2017, consisted of salaries of $560,440, rent of $26,235, professional fees of $223,928, insurance expenses of $10,277, travel expenses of $12,112, software development of $189,976, communications of $231,662 and general and administrative expenses of $5,944.The operating expenses for the year ended December 31, 2016, consisted of salaries of $292,389, rent of $35,328, professional fees of $378,156, insurance expenses of $5,110, travel expenses of $30,608, software development of $221,688, communications of $108,175 and general and administrative expenses of $39,393. We believe that the upward trend in operating expenses will continue as we further develop our products for distribution and advance our capital markets objectives. 

 

    For the years ended
December 31,
 
    2017     2016  
    $     $  
Operating Expenses                
Salaries     560,440       292,389  
Rent     26,235       35,328  
Professional fees     223,928       378,156  
Insurance     10,277       5,110  
Travel     12,112       30,608  
Communications     231,662       108,175  
Software development     189,976       221,688  
General and administrative     5,944       39,393  
Total operating expenses     1,260,574       1,110,8 47  
Other expenses                
Warrant expense     2,745,731       301,606  

 

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Salaries

 

    For the years ended December 31,              
    2017     2016     Increase     %  
    $     $     (decrease)     Change  
                         
      560,440       292,389       268,051       92  

 

The increase in salaries is primarily attributable to an increase in the number of employees and full year salaries. During the year ended December 31, 2017, we had stock options expense of $139,758 related to stock option grants to our CEO and CTO that is not included in salaries.

 

Professional Fees

 

    For the years ended December 31,              
    2017     2016     Increase     %  
    $     $     (decrease)     Change  
                         
      223,928       378,156       (154,228 )     41  

 

The decrease in professional fees is primarily attributable to the hiring of full time employees.

 

Communications

 

    For the years ended December 31,              
    2017     2016     Increase     %  
    $     $     (decrease)     Change  
                                 
      231,663       108,175       123,487       114  

 

We continued to incur communications expenses due to the listing of our common shares on the OTCQB Venture Market in 2017. In connection with our SEC filings, we engaged communications consultants to assist in the preparation, assembly and dissemination of relevant information.

 

Software Development

 

    For the years ended December 31,              
    2017     2015     Increase     %  
    $     $     (decrease)     Change  
                                 
      189,976       221,688       (31,712 )     14  

 

The decrease in software development expenses is due to the addition of 3 full-time equivalent personnel during the year ended in December 31, 2017

 

Warrant Expense

 

    For the years ended December 31,              
    2017     2016     Increase     %  
    $     $     (decrease)     Change  
                                 
    2,745,731       301,666       2,444,125       810  

  

The increase in warrant expense is due to the issuance of warrants to purchase 5,433,230 common shares, as compared to the issuance of warrants to purchase 12,645,476 common shares in 2016, associated with our fundraising.

 

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Net Loss

 

Net loss for the year ended December 31, 2017, was $4,141,613 as compared to a net loss of $1,502,204 in 2016.

 

B. Liquidity and Capital Resources

 

Through December 31, 2017, we have incurred an accumulated deficit of $6,989,124, primarily as a result of expenses incurred through a combination of development and commercialization activities related to our products and general and administrative expenses supporting those activities, as well as a net loss of $4,141,613 and negative operating cash flows. Our total cash and cash equivalents balance as of December 31, 2017 was $3,671. At December 31, 2017, we had working capital deficit of $1,830,282, of which $1,092,047 relates to convertible notes convertible into common shares subsequent to the year ended December 31, 2017. We anticipate that we will continue to incur losses and negative cash flows from operations, and that such losses will increase over the next several years due to development costs associated with our MegaTeam, Ninja Reflex and Ehave Connect products, until our products reach commercial profitability. As a result of these expected losses and negative cash flows from operations, along with our current cash position, we only have sufficient resources to fund operations through September 1, 2018. Therefore, there is substantial doubt about our ability to continue as a going concern.

 

Our plans include the continued commercialization of our products and raising capital through a combination of equity offerings, debt financings, other third-party funding and other collaborations and strategic partnerships. There are no assurances, however, that we will be successful in obtaining the level of financing needed for our operations. We are exploring various financing options including equity funding and strategic collaboration. However, there are no assurances that we will be successful in obtaining the level of financing needed for our operations or that any such financing would be on terms favorable to us. Any future financing may involve substantial dilution to existing investors. If we are unsuccessful in commercializing our products and raising capital, we may need to reduce activities, curtail or cease operations.

 

In 2013 and 2014 we entered into convertible loan agreements with investors, including our President and Chief Executive Officer, and affiliates of his, and a former director, pursuant to which such investors loaned us an aggregate of CDN$490,000. All of the loans were converted into an aggregate of 13,176,094 common shares on December 15, 2014.

 

We received approximately CDN$491,204 in grants in connection with our collaboration with the Hospital and CDN$225,000 from Canada-Israel Research and Development Foundation. In addition, we received aggregate gross proceeds of CDN$490,000 pursuant to our convertible loan and an aggregate of CDN$75,000 from the sale of equity securities in December 2014 and March 2015.

 

On July 7, 2015, we closed a private placement offering with seven investors for the sale of $325,000 principal amount of convertible notes and warrants to purchase common shares. Between January 20, 2016 and February 17, 2016, we sold an additional $141,000 principal amount of convertible notes and warrants in private placement offerings to three initial investors.

 

On June 14, 2016, we had a closing of the offering of an aggregate of 6,503,667 common shares and warrants to purchase an aggregate of 6,503,667 common shares, for gross proceeds of $266,000. Subsequent to the initial closing, on June 24, 2016, we had a second closing of the offering of an aggregate of 1,589,242 common shares and warrants to purchase 1,589,242 common shares, for gross proceeds of $65,000. We received total gross proceeds of $331,000 from the offering.

 

On November 14, 2016, we entered into a definitive securities purchase agreement to sell up to $1,500,026 of convertible promissory notes and warrants in multiple closings in a private placement. We used the net proceeds from the private placement to further the development of Ehave Connect, for MegaTeam clinical trials, for general marketing and investor relations’ purposes, and for working capital. As of December 31, 2016, we received $259,357 of $309,357 of the firmly committed amount and waived $50,000 of the firmly committed amount for future reassignment as permitted under the agreement. Certain lenders have notified us that it will not elect to fund an aggregate of $683,130 of additional loans and have permitted its reassignment, of which $489,368 has been reassigned. In the year ended December 31, 2017, we issued additional convertible promissory notes in an aggregate principal amount of $609,826 pursuant to the note and warrant purchase agreement. As of December 31, 2017, we had received total proceeds of $869,183 pursuant to the note and warrant purchase agreement. Although there are remaining commitments under the note and warrant purchase agreement, we have not received funds thereunder since May 2017.

 

On July 27, 2017, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $134,575 (CDN$169,000).

 

On October 11, 2017, we entered into Investor Letters, pursuant to which certain persons agreed to purchase our securities on similar terms as certain of our offerings that are consummated prior to December 31, 2017, or, if such an offering is not consummated, the purchase amount will be converted into a secured promissory note that matures on January 31, 2018 (which, at the investor’s option, may be converted into our common shares). We received aggregate proceeds of $100,000. No such offerings consummated prior to December 31, 2017, and such notes were converted into unsecured promissory notes on January 31, 2018.

 

On November 15, 2017, we issued demand non-interest bearing senior secured promissory notes in the aggregate principal amount of $196,237. Lenders of the promissory notes were issued 2,133,333 common share warrants at an exercise price of $0.075 per share with an expiry date of November 16, 2022. On January 31, 2018 $148,745 of the promissory notes were repaid and $47,932 of the promissory notes were exchanged for unsecured convertible debentures.

 

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We earned total revenue of $78,260 during the year ended December 31, 2017, for providing services pursuant to contracts we entered into with MedReleaf for customizations for its digital intake portal and CHT for its demonstration platform.

 

On January 31, 2018, the Company entered into a secured convertible debenture agreement (the “Secured Debentures”) for total proceeds of $1,218,620 (CDN$1,500,000), issued in two installments. The Secured Debentures are secured against certain of our assets. Under the terms of the Secured Debentures, the principal amount and accrued interest is convertible into common shares of the Company at a conversion price equal to 75% the issue price of common shares under a qualified offering. The conversion of the Secured Debentures is at the option of the holder. At the time of conversion, the holder will also receive an equal amount of common share purchase warrants with an exercise price equal to the issue price. The Secured Debentures are due on July 31, 2018 and bear interest at 10% per annum. The initial installment of the Secured Debentures was issued on January 31, 2018 for proceeds of $609,310 (CDN$750,000). On March 19, 2018, the final instalment of $573,307 (CDN$750,000) was received. The Secured Debentures are secured against the general assets and intellectual property of the Company.

 

On January 31, 2018, promissory notes with an aggregate principal amount of $311,967 (CDN$384,000) outstanding at December 31, 2017 were exchanged for unsecured convertible debentures (the “Unsecured Debentures”). From January 1, 2018 to January 31, 2018, the Company issued an additional $20,098 (CDN$25,000) Unsecured Debentures for total proceeds of $332,065 (CDN$409,000). On March 19, 2018, an installment of the Unsecured Debentures in the amount of $382,263 (CDN$500,000) was received. Under the terms of the Unsecured Debentures, the principal amount and accrued interest is convertible into common shares of the Company at a conversion price equal to 75% the issue price of common shares under a qualified offering. The conversion of the Unsecured Debentures is at the option of the holder. At the time of conversion, the holder will also receive 120% of the amount of the common shares issued of common share purchase warrants with an exercise price equal to the issue price. The Unsecured Debentures are due on July 31, 2018 and bear interest at 10% per annum.

 

On February 1, 2018, the Company repaid CDN$60,000 of promissory notes outstanding at December 31, 2017. The balance of the promissory notes due to Scott Woodrow, a Director of the Company, was exchanged for an unsecured convertible debenture in the amount of CDN$59,000.

 

The proceeds from these private placements were used for general working capital purposes, particularly the development and marketing of our platform, Ehave Connect.

 

Operating Activities

 

Net cash used in operating activities increased to $977,372 for the year ended December 31, 2017, from $760,495 for the year ended December 31, 2016. The increase in net cash used in the year ended December 31, 2017 of $216,877 was primarily due to increased operating expenses as described above under “–A. Operating Results—Operating Expenses.”

 

Investing Activities

 

Net cash provided by investing activities increased to $450,229 for the year ended December 31, 2017, from ($14,667) for the year ended December 31, 2016. The increase in net cash provided in the year ended December 31, 2017, was primarily due to the effect of foreign exchange fluctuations on the holding of cash in Canadian dollar accounts

 

Financing Activities

 

Net cash provided by financing activities decreased to $524,033 for the year ended December 31, 2017, from $766,812 for the year ended December 31, 2016. The decrease in net cash provided by financing activities in the year ended December 31, 2017 was primarily due to the decreased amount raised from the private placement of convertible notes and promissory notes raised in the year ended December 31, 2017, compared to the year ended December 31, 2016.

 

C. Research and Development, Patents, and Licenses, etc.

 

Ongoing research and development is critical to our success. We seek to engage with reputable research and clinical institutions to access and assist tools and methods developed. We hope to finance our research and development with government and research grants and internal funds. Our research and development is comprised primarily of software development expenditures. We intend to continue to research and develop new technologies and products for the mental health market. There can be no assurance that we can achieve any or all of our research and development goals.

 

We spent $189,976 and $221,688 on software development in 2017 and 2016, respectively. These amounts were spent on the development or improvement of our technologies and products, including salary paid to our employees engaged in research and development activities. During the twelve months ended December 31, 2017, we had 5 employees engaged in our research and development activities, compared to 4 employees engaged in research and development activities during the twelve months ended December 31, 2016. See the disclosure in “Item 4. Information on the Company B. Business Overview” for further information on the Company’s research and development policies.

 

  D. Trend Information

 

It is important to note that historical patterns of expenditures cannot be taken as an indication of future expenditures.  The amount and timing of expenditures and availability of capital resources vary substantially from period to period, depending on the level of development activity being undertaken at any one time and the availability of funding from investors and prospective strategic partners. See discussion in Parts A and B of Item 5:“Operating and Financial Review and Prospects” for a description of the trend information relevant to us. Except as disclosed elsewhere in our annual report, we know of no trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our liquidity or capital resources or that would cause reported financial information not necessarily to be indicative of future operating results or financial conditions.

 

  E. Off-Balance Sheet Arrangements

 

We are not party to any transactions, agreements or other contractual arrangements with unconsolidated entities whereby we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.

 

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  F. Tabular Disclosure of Contractual Obligations

 

We have the following contractual obligations as of December 31, 2017:

 

Contractual Obligations   Payments Due by Period  
    Total
$
    Less than 1 year
$
    2-3 years
$
    4-5 years
$
    After 5 years
$
 
Capital lease obligations     -       -       -       -       -  
Operating lease (1)     109,679       45,893       63,786       -       -  
Purchase obligations     -       -       -       -       -  
Other long term obligations     -       -       -       -       -  
Total contractual obligations     109,679       45,893       63,786       -       -  

 

Note:

 

  (1) Our operating leases are comprised of our office leases and exclude our portion of operating costs.

 

We expect to fund our capital expenditure requirements and commitments with existing working capital.

 

G. Safe Harbor

 

We seek safe harbor for our forward-looking statements contained in Items 5.E and F.  See “ Cautionary Note Regarding Forward-Looking Statements”.

 

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

 

A. Directors and Senior Management

 

The following table sets forth the names, ages and positions of our current board members and executive officers:

 

Name    Age   Position with the Company   Director of the
Company Since
Scott Woodrow   46   Founder, Director   October 31, 2011
Prateek Dwivedi   46   President, Chief Executive Officer, Director   November 18, 2016
Dr. Ted Witek   60   Chairman of the Board, Director   November 18, 2016
Steve Stefano   63   Director   November 18, 2016
Dr. Harry Levy   74   Director   November 18, 2016
Dianne Parsons   54   Acting Chief Financial Officer and Controller   Not applicable
David Goyette   57   Chief Technology Officer   Not applicable

 

The business address of our officers and directors is c/o Ehave, Inc., 277 Lakeshore Road East, Suite 203, Oakville, Ontario, Canada L6J 6J3.

 

Our directors are elected for a term of one year and serve until such director’s successor is duly elected and qualified. Our executive officer serves at the pleasure of the Board of Directors. None of our directors have any family relationships with any of our other directors or executive officer.

 

Certain of our directors are associated with other companies, which may give rise to conflicts of interest.  In accordance with the Business Corporations Act (Ontario), directors who have a material interest in any person who is a party to a material contract or a proposed material contract with us are required, subject to certain exceptions, to disclose that interest and abstain from voting on any resolution to approve that contract.  In addition, the directors are required to act honestly and in good faith with a view to the best interests of Ehave Inc.

 

We are not aware of any arrangement or understanding with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a director or officer.

 

Biographies

 

Ted Witek, Chairman of the Board, Director

 

Dr. Ted Witek is a healthcare executive and scholar based in Toronto and Lisbon. He currently serves as the Chief Scientific Officer of Innoviva (Nasdaq: INVA). He is also appointed a Senior Fellow at the Institute of Health Policy, Management, and Evaluation of The University of Toronto and Professor at the Dalla Lana School of Public Health and Faculty of Pharmacy.

 

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Prior to joining Innoviva, Dr. Witek served as President and Chief Executive Officer of Boehringer Ingelheim in Canada and in Portugal. Joining Boehringer in 1992, Dr. Witek held a number of positions of increasing responsibility, including leading the global clinical development and launch of several respiratory products, most notably Spiriva®. Dr. Witek led the Respiratory and Immunology clinical research groups in the U.S. and served as the Boehringer Co-chair of the Joint Operating Committee with Pfizer in their global alliance. During his tenure in Canada, Dr. Witek served on the Board of Directors at Rx&D, Canada’s National Association for Research-Based Pharmaceutical Companies, chairing its Heath Technology Assessment and Public Affairs Committees. He also served more than 10 years on the Drug/Device Discovery and Development Committee of the American Thoracic Society, serving as Chairman from 2010 to 2012. He currently serves on the Ontario Heath Innovation Council. Dr. Witek holds a doctorate of public health from Columbia University, an M.P.H. from Yale University, and an MBA from Henley Management College.

 

Steve Stefano, Director

 

Steve Stefano is a seasoned pharmaceutical executive and entrepreneur with more than 30 years of relevant industry experience. Mr. Stefano currently serves as Managing Director of Ashfield Market Access, a subsidiary of United Drug Group, a multi-national corporation based in Dublin, Ireland, that provides outsourced commercial and medical solutions to biopharmaceutical companies. Ashfield Market Access is a consulting organization that specializes in market research, market strategies, and account management for payer reimbursement and retail distribution in the U.S. commercial market. Prior to joining the Ashfield Market Access, Mr. Stefano founded and served as Managing Partner of SynopiaRx, a consulting firm specializing in U.S. payer reimbursement and retail distribution. SynopiaRx was acquired by United Drug Group in 2012.

 

From 1986 to 2009, Mr. Stefano held various roles of increased responsibility at Glaxo, GlaxoWellcome, and GlaxoSmithKline (GSK), within its commercial organizations. From 1986 to 2009, Mr. Stefano led GSK’s U.S. Payer Markets Divisions. From 2001 to 2008, he led GSK’s Neurohealth Division, and organically grew the division’s sales from $300 million to $2.6 billion in seven years. Mr. Stefano also spearheaded the acquisition of several critical and strategic in-licensed medicines for GSK, including Horizant®, Dynastat®, and Potiga®, as well as the acquisition of Reliant Pharmaceuticals.

 

Mr. Stefano served on the Board of Directors for Valeant Pharmaceuticals (2008-2010), Teamm Pharmaceuticals (2001-2004), and The Jimmy V Celebrity Golf Classic (2002-2009). He has been a frequent guest lecturer at the Duke Fuqua School of Business and at the University of Pennsylvania Wharton School of Business. He is a graduate of Saint Joseph’s University.

 

Harry Levy, Director

 

Dr. Harry Levy, who is the Founder and CEO of interMDnet Corporation, which for the past 20 years in partnership with the Albert Einstein College of Medicine in New York and academic professors from 15 other U.S. medical schools, has pioneered the design and distribution of e-learning for physicians, allied medical professionals, and health consumers. Among its many clinical offerings across various digital platforms, interMDnet created innovative “medutainment,” real-time, competitive educational games which motivate physicians to adopt new clinical guidelines and protocols.

 

Prior to founding interMDnet, Dr. Levy was the research director of Health Opinion Research, Inc., where he led the development of “video interactive patients,” a research tool designed to prospectively assess actual physician-patient practice behavior. Dr. Levy received his A.B. degree from Columbia University, his M.D. from New York University, post-doctoral training in community and preventive medicine at the Mount Sinai School of Medicine in New York, where he was later a fellow and junior faculty member, and his M.P.H. from Yale.

 

Prateek Dwivedi, President, Chief Executive Officer, Director

 

Prateek (Teek) Dwivedi is the chief executive officer of Ehave, bringing 20 years of technology and healthcare leadership experience. Prior to joining Ehave in 2015, Teek led Cancer Informatics at Princess Margaret Hospital at the University Health Network in Toronto, Canada. In this position, Teek was responsible for building a next generation health and research informatics platform designed to capture and analyze cancer patient data. From 2008 to 2011, Teek was the Vice President and Chief Information Officer at Mount Sinai Hospital in Toronto, where he led a 170+ person team responsible for technology infrastructure. At Mount Sinai, Teek was instrumental in implementing a personalized medicine informatics platform strategy.

 

Before his tenure at Mount Sinai, Teek was the Vice President of Operations at AudienceView Ticketing, where he managed a team of 47 engineers. Teek has held key strategy and product development positions at Cascada Mobile (exit via acquisition), Casero (exit via acquisition) and Solect Technology group (exit via acquisition). Teek received his undergraduate and graduate degrees in Systems Design Engineering from the University of Waterloo.

 

Scott Woodrow, Founder, Director

 

Scott Woodrow is a Founder and Director of Ehave, Inc. From October 2011 through April 2018, Scott served as the Company’s Chief Financial Officer, and from July 31, 2018 through April 2018, Scott served as the Company’s VP Corporate and Business Development. Scott formed the company through his understanding and experience with the significant gaps that exist between the treatment of mental health and other healthcare needs. Scott has been involved in healthcare technologies for over 20 years, starting in an advisory capacity and growing through active investment and finally in the establishment of Ehave, Inc. Scott is passionate about improving the human condition and believes strongly that the unlimited capacity of the human mind is our greatest gift. Scott is involved with many healthcare industry and research institutions in assisting the advancement of technologies and bringing solutions from the bench to the clinic. Scott is an active volunteer in the community and is a Board member of the Zareinu Education Centre – a school for children with mild and severe physical and mental disabilities.

 

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Scott was Managing Partner of Lions Peak International Innovation Fund, LP, a Canadian investment fund investing in Israeli high tech companies, from 2007 to 2013. He has also provided consulting services to healthcare research facilities and companies since 2013. From 2007 through 2013, Scott was a director of PCure Ltd., a medical device company developing patient positioning and planning systems for radiation therapy for cancer. From 1998-2005, Scott was at Ernst & Young, LLP with a primary client base of venture capital firms and their venture backed portfolio companies. Scott served clients primarily in Canada and in Israel and was a designated individual for clients originating in Israel. After leaving Ernst & Young, LLP in 2005, Mr. Woodrow continued advisory services to venture firms and venture backed companies.

 

Dianne Parsons , Acting Chief Financial Officer and Controller

 

Dianne Parsons was appointed as the acting chief financial officer in April 2018. Prior to joining Ehave, Dianne has held senior financial officer positions focused on strategic planning, operations and financial management in technology-based businesses, turnaround management situations, and manufacturing. In addition to her role at Ehave, Ms. Parsons provides consulting services to Alpha Cancer Technologies Inc. since May 2016 and has held a part time CFO position with Alpha Cancer Technologies Inc. since January 2017. Ms. Parsons holds a Master of Accounting degree from the University of Waterloo and is a Chartered Professional Accountant and Chartered Accountant.

 

David Goyette, Chief Technology Officer

 

David Goyette is the chief technology officer of Ehave, Inc. Dave joined Ehave in December 2016 and brings over 30 years of technology, software architecture, and innovation experience in healthcare, imaging solutions, embedded systems, distributed systems, and gaming. Dave’s most recent experience includes the position of software architect for the Cancer Informatics program at Princess Margaret Hospital at University Health Network in Toronto. Dave was also recently a software architect at Symcor, responsible for architecting and designing a next generation platform to be used by new initiatives. Prior to these positions, Dave designed and implemented the next generation console and analytic tools for Novadaq’s SPY fluorescent imaging platform (Dave co-authored several patents for this product). Before Novadaq, Dave proposed a concept for a new MMOG game to the Montecito Picture Company, and partnered with them on developing the concept and building a prototype in cooperation with a team of artists and game developers from Seneca at York.

 

Dave is experienced in building applications for the Android ecosystem, and in building cross platform applications for Android and IOS. Dave’s other healthcare experience includes the architecture and design for both the Philip and Hitachi Medical System MRI devices. Dave has been a trainer for Sun Microsystems, and has successfully led technical teams on a score of other projects throughout his career. Dave received his undergraduate degree in B.Math (double honours in Computer Science and C&O) from the University of Waterloo, and successfully completed 7 of the 9 courses required for an M.Eng degree from the University of Toronto.

 

B. Compensation

 

Directors

 

In the year ended December 31, 2017, each director who is not a salaried employee of the Company earned a fee of $33,000, which will be paid in 2018.

 

Directors, annually, may elect to take up to 100% of their respective annual retainer in either options or restricted share awards.

 

Officers

 

Summary Compensation Table

 

The following table sets forth information concerning the total compensation paid to our officers in 2017. Our officers are paid fees in Canadian dollars. These amounts are presented in U.S. dollars and have been converted at the rate of exchange as of December 29, 2017, the last business day prior to December 31, 2017 ($1.00 = CDN$1.2571).

 

Name and principal
position
  Year     Salary
$
    Share-
based
awards
(1)
    Option-
based
awards
(1)
    Bonus
$
    All other
compensation
$
    Total
compensation
$
 
Prateek Dwivedi     2017       304,572       N/A       2,672       N/A       N/A       423,098  
Chief Executive Officer     2016       25,853        N/A       73,435        N/A        N/A       106,935  
(2)     2015        N/A        N/A        N/A        N/A        N/A       N/A  
                                                         
Scott Woodrow     2017       0       N/A       N/A       N/A       116,238 (3)     116,238  
Former Chief Executive Officer, Former Chief Financial Officer and VP of Corporate and Business Development     2016       236,525       N/A       N/A        N/A       N/A       236,525  
(1)(2)     2015       192,783       N/A       N/A        N/A       N/A       192,783  
                                                         
David Goyette     2017       154,214       N/A       137,086       N/A       N/A       398,893  
Chief Technology Officer     2016       13,315        N/A        N/A        N/A        N/A       16,667  
      2015        N/A        N/A        N/A        N/A        N/A       N/A  

 

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Notes:

 

(1) The value of share and option based awards are based on the grant date assumptions as disclosed in Note 7 ” Stock Based Compensation” in our 2017 audited financial statements.
(2) On December 1, 2016, Mr. Woodrow resigned as President and Chief Executive Officer and Mr. Dwivedi was appointed President and Chief Executive Officer. As of April 23, 2018, Mr. Woodrow ceased to serve as our chief financial officer.
(3) Consulting fees paid to NView Management Inc. pursuant to the Services Agreement with the Company, dated January 15, 2017. Scott Woodrow is the president of the NView Management Inc., and provided services as Vice President Corporate and Business Development.

 

Narrative Discussion

 

We have entered into employment agreements with each of the following Executive Officers (each an “Employment Agreement”).  Pursuant to the terms of the Employment Agreements, the salary for the year 2018 are:

 

Name and principal position   Year     Salary
$(1)
 
Mr. Prateek Dwivedi     2018       304,572  
Chief Executive Officer                
Mr. David Goyette     2018       154,214  
Chief Technology Officer                

 

  (1) Our officers are paid fees in Canadian dollars. These amounts are presented in U.S. dollars and have been converted at the rate of exchange ($1.00 = Cdn$1.2969).

 

Further, each executive officer is entitled to additional benefits and performance-based bonuses. Such benefits relate to supplemental health care plans and travel allowances. Performance based bonuses are based on the achievement of our plans and objectives and may be up to 100% of the base salary in which a proportion may be paid in the form of additional stock options.  Each of the foregoing officers’ Employment Agreements provides that such officer is subject to certain confidentiality and non-competition restrictions during and following the course of his employment with the Company.

 

Pursuant to the Employment Agreement with Prateek Dwivedi, dated July 25, 2016, we appointed Mr. Dwivedi as our chief executive officer, his employment to begin upon our achievement of the closure of a financing round in $500,000. Mr. Dwivedi’s annual base salary is set at $304,572 (CDN$395,000 converted at the rate of exchange of $1.00 = Cdn$1.2969), and he is eligible to receive a performance-based bonus from time to time, up to 100% of his annual base salary, subject to the approval and reasonable discretion of the board of directors as may be delegated to our Compensation Committee from time to time, in a combination of cash payments and the granting of option awards, again subject to the reasonable discretion of the board of directors. Notwithstanding the foregoing, Mr. Dwivedi shall be paid his discretionary bonus in the form of cash payments alone until he has received the equivalent of 50% of his annual base salary, after which time any additional discretionary bonus payments may be made as a combination of cash payments or option awards, subject to the reasonable discretion of the board of directors. On the date of Mr. Dwivedi’s hire, Mr. Dwivedi is entitled to receive an initial equity award of in the form of participation in our incentive stock option plan, of 5% of our total outstanding common shares, subject to regulatory approval (the “Initial Equity Award”). The Initial Equity Award will commence vesting immediately, with a vesting period of six (6) months. Conditional upon completion of the next financing round of $10 million, we will grant to Mr. Dwivedi a single one-time adjustment equity award in an amount sufficient to maintain his 5% share of our total outstanding common shares, subject to regulatory approval (the “Adjustment Equity Award”). The Adjustment Equity Award will commence vesting immediately, with a vesting period of twelve (12) months. In the event that Mr. Dwivedi’s employment with the Company is terminated without cause, vesting of the Initial Equity Award and the Adjustment Equity Award will occur in the normal course, as if Mr. Dwivedi’s employment had not terminated. If we terminate Mr. Dwivedi’s Employment Agreement for “cause” (as set forth in his Employment Agreement), Mr. Dwivedi shall receive payment of any salary and vacation pay earned to the date of termination, and any stock options will vest and be exercisable in accordance with the express terms of our stock option plan, as may be amended from time to time. We may terminate Mr. Dwivedi’s Employment Agreement without “cause,” by providing 6 to 24 months’ pay, depending on the duration of his service to the Company, in lieu of notice of termination, and Mr. Dwivedi will be entitled to a discretionary bonus for the period of pay in lieu of notice calculated as the average of the discretionary bonus received by him over the previous 3 years, or part thereof if his employment is terminated earlier than his 3rd anniversary date. Mr. Dwivedi may terminate his Employment Agreement for any reason at any time with 3 months’ written notice to the Company. Mr. Dwivedi may resign for “good reason” (as set forth in his Employment Agreement) within 60 days of him learning of the facts that are the basis for the resignation for good reason. Upon Mr. Dwivedi’s written notice tendering of his resignation for good reason, it shall be deemed that Mr. Dwivedi’s employment by the Company is terminated without cause. At the time of Mr. Dwivedi’s appointment, Mr. Dwivedi was also appointed to the board of directors.

 

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On December 1, 2016, we entered into the Employment Agreement with David Goyette as our chief technology officer, his employment to begin upon our achievement of the closure of a financing round in CDN$500,000. Mr. Goyette’s annual base salary is set at $159,096 (CDN$200,000 converted at the rate of exchange as of December 29, 2017, the last business day prior to December 31, 2017, $1.00 = CDN$1.2571), and he is eligible to receive a performance-based bonus from time to time, up to 25% of his annual base salary, in cash, subject to the approval and sole discretion of the board of directors. On the date of Mr. Goyette’s hire, Mr. Goyette is entitled to receive an initial equity award of 365 common shares, subject to regulatory approval. Such award will commence vesting immediately, with a vesting period of 2 years. In the event that Mr. Goyette’s employment is terminated for any reason, vesting will cease immediately on the date of termination, and any unvested options will be forfeited. If we terminate Mr. Goyette’s Employment Agreement for “cause” (as set forth in his Employment Agreement), Mr. Goyette shall receive payment of any salary and vacation pay earned to the date of termination. We may terminate Mr. Goyette’s Employment Agreement without “cause,” by providing Mr. Goyette with the minimum notice (or pay in lieu of such notice) and severance pay (if any) to which he is entitled under the Employment Standards Act, 2000 or any amended or replacement legislation, plus any other minimum rights, benefits and entitlements to which he is entitled under the Employment Standards Act, 2000 at such time. Mr. Goyette may terminate his Employment Agreement for any reason at any time with 2 months’ written notice to the Company.

 

On April 28, 2018, we entered into a Services Agreement with Dianne Parsons, C.P.A., pursuant to which, as a contractor, she will provide services as controller and chief financial officer of the Company. The term of her engagement will continue until June 30, 2018, unless terminated by either the Company or Dianne upon one month prior notice. In addition, the Company may immediately terminate the Services Agreement, with no other obligations, upon default by Dianne in the performance of any of her obligations under the Services Agreement. For the term of the Services Agreement, the Company agreed to pay Dianne CDN$60 per hour for controller activities and CDN$105 per hour for chief financial officer activities.

 

We do not provide pension, retirement or similar benefits to its directors and executive officers. No funds were set aside or accrued by the Company during the fiscal year ended December 31, 2017, to provide pension, retirement or similar benefits to our directors or officers pursuant to any existing plan provided or contributed to by us or our subsidiaries. We do not currently have a stock appreciation rights plan.

 

C. Board Practices

 

Our directors are elected by the shareholders at each Annual General Meeting (or Annual Special Meeting) and typically hold office until the next meeting, at which time they may be re-elected or replaced.  Casual vacancies on the board are filled by the remaining directors and the persons filling those vacancies hold office until the next Annual General Meeting (or Annual Special Meeting), at which time they may be re-elected or replaced.  Our officers are appointed by the Board of Directors and hold office indefinitely at the pleasure of the Board of Directors.

 

Directors’ Contracts

 

We receive a director’s consent from each of the independent directors upon their acceptance of their director’s position. 

 

We do not have any contracts with any of its directors which provide for benefits upon the termination of employment.

 

Compensation Committee

 

Our compensation committee consists of three outside, independent directors under Canadian law: Mr. Witek, Mr. Stefano and Mr. Levy. Mr. Witek serves as chairman of the compensation committee. The members of the compensation committee have not been officers of the company. Our compensation committee is responsible for making recommendations to the board of directors regarding compensation terms for our officers and directors and for determining salaries and incentive compensation for our executive officers and incentive compensation for our other employees and consultants.

 

Audit Committee

 

Our audit committee consists of Mr. Woodrow, Mr. Stefano and Mr. Levy. Mr. Woodrow serves as chairman of the audit committee. The audit committee ensures that the Company’s management has designed and implemented an effective system of internal financial controls, assesses the integrity of the financial statements and related financial disclosure of the Company, and reviews the Company’s compliance with regulatory and statutory requirements as they relate to financial statements, taxation matters and disclosure of financial information. The audit committee also reports to the board of directors with respect to such matters and recommends the selection of independent auditors. Additionally, the committee monitors and reports on the independence and performance of the Company’s independent auditors.

 

  D. Employees

 

The following table sets out the number of our employees at the end of each of the last three fiscal years by activity. All employees are located in Canada.

 

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Activity   2017     2016     2015  
Research and development     5       4       2  
Operating     2       2       1  
Total     7       6       3  

 

  E. Share Ownership

 

The following table sets forth certain information as of May 14, 2018, regarding the beneficial ownership of our common shares by each of our directors and all of our executive officers and directors as a group.

 

    Number of common shares
beneficially owned  (1)
    % of  
Outstanding common
shares  (2)
 
Directors and Executive Officers                
Scott Woodrow     19,777,338 (3)     27.73 %
Prateek Dwivedi     3,393,296 (4)     4.76 %
David Goyette     605,261 (5)     0.86 %
Dr. Ted Witek     -       -  
Steve Stefano     -       -  
Dr. Harry Levy     -       -  
All officers and directors as a group (6 persons):     23,775,895       33.35 %

   

Notes:

 

  (1) Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Ordinary shares relating to options currently exercisable or exercisable within 60 days of the date of this table are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them.

 

  (2) Based on 71,304,035 common shares issued and outstanding on May 14, 2018.

 

  (3) Includes 13,973,623 common shares beneficially owned by 2110345 Ontario Inc. and NView Management Inc. over which Mr. Woodrow has sole voting and dispositive power.

 

  (4) Includes options to purchase 3,271,047 common shares that are currently exercisable or exercisable within 60 days of May 14, 2018.

 

  (5) Includes options to purchase 580,811 common shares that are currently exercisable or exercisable within 60 days of May 14, 2018.

 

The following table sets forth the amount and terms of options to acquire common shares of our Company we have granted to our directors, senior management and key employees:

 

Name and office
held
  Number of
Options
    Date of
Grant
  Exercise
Price
    Expiry Date
                     
Prateek Dwivedi
Chief Executive Officer, President
    2,808,359      November 28, 2016     0.12     November 28, 2021
David Goyette
Chief Technology Officer
    433,000      January 12, 2017     0.50     January 12, 2022
Prateek Dwivedi
Chief Executive Officer, President
    1,404,118     October 20, 2017     0.08     October 20, 2022
David Goyette
Chief Technology Officer
    274,415     October 20, 2017     0.08     October 20, 2022
 Total:     4,919,892                  

 

  35  

 

 

Option Plan

 

Our Stock Option Plan (“SOP”) sets the maximum number of common shares which may be issued under options granted pursuant to the SOP which shall be 15% of the number of issued and outstanding common shares of the Company.

 

The SOP authorizes the board of directors of the Company or a committee of the board of directors to issue options to directors, officers, employees and consultants of the Company.

 

The purpose of the SOP is to provide consultants, officers, directors and employees with a proprietary interest in the Company in order to: (i) increase the interest in the Company’s welfare of those individuals who share primary responsibility for the management, growth and protection of the business of the Company; (ii) furnish an incentive to such individuals to continue providing their services to the Company and its subsidiaries; and (iii) provide a means through which the Company and its subsidiaries may attract qualified persons to engage as consultants, officers, directors and employees.

 

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

 

  A. Major Shareholders

 

The following table lists the beneficial ownership of our securities as of May 14, 2018, by each person known by us to be the beneficial owner of 5% or more of the outstanding shares of any class of our securities. As of May 14, 2018, 71,304,035 of our ordinary shares were outstanding. As at May 14, 2018, with the exception of Shareholders disclosed in “Item 6.E Share Ownership”, we are not aware of any shareholder who beneficially owns, directly or indirectly, or exercises control or direction over, our common shares, of more than 5% of the outstanding common shares.

 

Name of Beneficial Owner   Number of
Shares
Beneficially
Owned
    Percentage of Shares
Outstanding
 
Rocfrim, Inc. (2)(3)(4)     7,840,882       10.84 %
                 
Plazacorp Investments Limited(5)(6)     8,601,992       11.90 %
                 
David Stefansky (1)     8,801,176       12.17 %
                 
Eisenberg Family Foundation(7)     9,088,710       12.57 %

 

 

 
(1)

Includes (i) 690,399 shares issuable upon the conversion of notes and (ii) 3,108,381 shares issuable upon the exercise of warrants that are currently convertible or exercisable within 60 days of May 14, 2018. Includes 5,590,791 common shares and shares issuable upon exercise of warrants beneficially owned by Bezalel Partners, LLC over which Mr. Stefansky has sole voting and dispositive power. Includes 988,206 shares issuable upon the exercise of warrants that are currently exercisable within 60 days of May 14, 2018 and 988,206 shares issuable upon the conversion of the convertible note outstanding as of May 14, 2018.

(2)

Includes 872,870 shares issuable upon the exercise of warrants that are currently exercisable within 60 days of May 14, 2018 and 872,870 shares issuable upon the conversion of the convertible note outstanding as of May 14, 2018.

(3) Includes (i) 697,248 shares held by Rocpart Inc. ("Rocpart") over which Mr. Kaplan, as President of Rocpart has sole voting and dispositive power and (ii) 5,476,772 shares held by Rocfrim over which Mr. Kaplan has sole voting and dispositive power.
(4) Jesse Kaplan, President of Rocfrim has sole voting and dispositive power over shares held by Rocfrim.
(5) Sruli Weinrib, Vice President of Plazacorp has sole voting and dispositive power over shares held by Plazacorp.
(6)

Includes 888,615 shares issuable upon the exercise of warrants that are currently exercisable within 60 days of May 14, 2018 and 888,615 shares issuable upon the conversion of the convertible note outstanding as of May 14, 2018.

(8)

Solomon Eisenberg has sole voting and dispositive power over shares held by Eisenberg Family Foundation. Includes 4,544,355 shares issuable upon the conversion of the convertible note outstanding as of May 14, 2018.

 

The voting rights of our major shareholders do not differ from the voting rights of holders of our shares who are not major shareholders. Each of the above listed securities entitles the holder to one vote at our company’s shareholder meetings.

 

Changes in Percentage Ownership by Major Shareholders

 

As of May 14, 2018, Mr. Woodrow, a founder of the Company, beneficially owned 19,777,338 common shares, or 27.73%, of our then outstanding common shares.

 

As of May 15, 2017, Mr. Woodrow beneficially owned 19,777,338 common shares, or 27.73%, of our then outstanding common shares.

 

As of March 10, 2016, Mr. Woodrow beneficially owned 19,777,241 common shares, or 63.24%, of our then outstanding common shares.

  

  36  

 

 

As of March 10, 2016, Romena Holdings Inc. beneficially owned 5,000,000 common shares, or 17.81%, of our then outstanding common shares.

 

As of May 14, 2018, Rocfrim Inc. beneficially owned 7,840,882 common shares, or 10.84%, of our then outstanding common shares.

 

As of May 15, 2017, Rocfrim Inc. beneficially owned 7,449,646 common shares, or 9.6%, of our then outstanding common shares.

 

As of March 10, 2016, Rocfrim Inc. beneficially owned 5,476,772 common shares, or 16.32% of our then outstanding common shares.

 

As of May 14, 2018, Plazacorp Investments Limited beneficially owned 8,601,992 common shares, or 11.9%, of our then outstanding common shares.

 

As of May 15, 2017, Plazacorp Investments Limited beneficially owned 7,567,951 common shares, or 9.84%, of our then outstanding common shares.

 

As of March 10, 2016, Plazacorp Investments Limited beneficially owned 5,476,772 common shares, or 16.32% of our then outstanding common shares.

 

As of May 14, 2018, David Stefansky beneficially owned 8,801,176 common shares, or 12.17%, of our then outstanding common shares.

 

As of May 15, 2017, David Stefansky beneficially owned 7,567,951 common shares, or 9.84%, of our then outstanding common shares. Includes 5,590,791 common shares and shares issuable upon exercise of warrants beneficially owned by Bezalel Partners, LLC over which Mr. Stefansky has sole voting and dispositive power.

 

As of March 10, 2016, David Stefansky beneficially owned 7,546,781 common shares, or 9.81% of our then outstanding common shares.

 

As of May 14, 2018, Eisenberg Family Foundation beneficially owned 9,088,710 common shares, or 12.57%, of our then outstanding common shares. Solomon Eisenberg has sole voting and dispositive power over shares held by Eisenberg Family Foundation.

 

Shares Held in the United States

 

The following table indicates, as of May 14, 2018, the total number of common shares issued and outstanding, the approximate total number of holders of record of common shares, the number of holders of record of common shares with U.S. addresses, the portion of the outstanding common shares held by U.S. holders of record, and the percentage of common shares held by U.S. holders of record. This table does not indicate beneficial ownership of common shares.

 

Total Number of Holders of Record     Total Number of
Common Shares
Issued and
Outstanding
    Number of
US Holders of
Record
    Number of
Common Shares
Held by
US Holders of
Record
    Percentage of
Common Shares Held
by US Holders of
Record
 
48       71,304,035       11       34,027,278      

47.72

%

 

Change of Control

 

As of May 14, 2018, there were no arrangements known to the Company which may, at a subsequent date, result in a change of control of the Company.

 

Control by Others

 

To the best of the Company’s knowledge, the Company is not directly or indirectly owned or controlled by another corporation, any foreign government, or any other natural or legal person, severally or jointly.

 

B. Related Party Transactions

 

Other than the transactions described below, since January 1, 2017, we entered into related party transactions as follows:

 

  · We have entered into employment contracts with each of our officers (see Item 6).
  ·

We entered into an Investor Letter, dated October 11, 2017, with each of Scott Woodrow, Jesse Kaplan, PlazaCorp Investments Limited, Rocfrim Inc., Bezalel Partners LLC, and David Stefansky, pursuant to which such persons agreed to purchase securities of the Company on similar terms as certain offerings of the Company that are consummated prior to December 31, 2017, or, if such an offering is not consummated, the purchase amount will be converted into a secured promissory note that matures on January 31, 2018 (which, at the investor’s option, may be converted into common shares of the Company). Such investors are also entitled to additional warrant coverage in the event that we do not close such an offering prior to December 31, 2017. No such offering consummated prior to December 31, 2017, and such notes were converted into unsecured convertible debentures notes on January 31, 2018.

  ·

On July 27, 2017, the Company entered into a demand non-interest bearing secured promissory note with Scott Woodrow, a director of the Company, in the principal amount of $47,778 (CDN$60,000). In November 2017, the note was converted into a note with 626,513 attached warrants. Subsequently, the note has been repaid.

  ·

On July 27, 2017, the Company entered into a demand non-interest bearing secured promissory note with NView Management in the principal amount of $86,797 (CDN$109,000). Scott Woodrow, a director of the Company, is the controlling shareholder, director and President of NView Management, Currently, $45,490 (CDN$59,000) is outstanding on this note.

· On October 11, 2017, the Company entered into a demand non-interest bearing unsecured promissory note with Scott Woodrow, a director of the Company, in the principal amount of $80,276 (CDN$100,000). On January 18, 2018 the note was exchanged for an unsecured convertible debenture.

 

  37  

 

 

  ·

We entered into a term sheet with Companion Healthcare Corporation (“CHC”), dated June 30, 2017, whereby CHC will acquire the exclusive rights to the Company’s informatics platform for use in companion animals, and we received a deposit of $135,232 for the Company’s fieldwork. License fees are to be established by a third party evaluator. Scott Woodrow, a director of the Company, is the President and a minority shareholder of CHC.

  · On November 14, 2016, we entered into a definitive securities purchase agreement to sell up to $1,500,026 of convertible promissory notes and warrants in multiple closings in a private placement. Each of Bezalel Partners, LLC (an entity over which Mr. Stefansky holds sole control), Rocfrim, Inc. and Plazacorp Investments Limited participated in the private placement committed to fund a total of $185,718 per such investor. As of May 14, 2018, Bazalel Partners, LLC has purchased convertible promissory notes in an aggregate principal amount of $55,358, Rocfrim, Inc. has purchased convertible promissory notes in an aggregate principal amount of $48,897 and Plazacorp Investments Limited has purchased convertible promissory notes in an aggregate principal amount of $49,779.

 

  C. Interests of Experts and Council

 

Not applicable

 

ITEM 8. FINANCIAL INFORMATION

 

  A. Statements and Other Financial Statements

 

Financial Statements

 

The financial statements filed as part of this annual report are filed under Item 18.

 

Legal Proceedings

 

The directors and the management of the Company do not know of any material, active or pending, legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation.

 

The directors and the management of the Company know of no active or pending proceedings against anyone that might materially adversely affect an interest of the Company.

 

Dividend Policy

 

We have not paid any dividends on our common shares.  We anticipate that, for the foreseeable future, we will retain any future earnings to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends for at least the next several years. We may pay dividends on our common shares in the future if we generate profits and in accordance with the Business Corporations Act (Ontario).  Any decision to pay dividends on common shares in the future will be made by the board of directors on the basis of the earnings, financial requirements and other conditions existing at such time.

 

  B. Significant Changes

 

Except as otherwise disclosed in this Annual Report on Form 20-F, no significant change has occurred since December 31, 2017.

 

ITEM 9. THE OFFER AND LISTING

 

  A. Offering and Listing Details

 

Our common shares have commented trading on the OTCQB Venture Market under the symbol EHVVF on November 21, 2016. Prior to that, there was no established market for our common shares. The last reported sales price of our common shares on June 12, 2018 on the OTCQB Venture Market was $0.044.  The following table sets forth the high and low per share sales prices for our common shares on the OTCQB Venture Market, for the periods indicated.

 

Annual Stock Information

 

OTCQB
    High     Low  
2016     0.50       0.01  
2017     0.50       0.04  

 

  38  

 

 

Quarterly Stock Information

 

    High     Low  
2016                
Fourth Quarter   $ 0.50     $ 0.01  
2017                
First Quarter   $ 0.50     $ 0.2544  
Second Quarter   $ 0.48     $ 0.2544  
Third Quarter   $ 0.2544     $ 0.04  
Fourth Quarter   $ 0.15     $ 0.06  
2018                
First Quarter   $ 0.085     $ 0.05359  

 

Monthly Stock Information

 

Month   High     Low  
December 2017   $ 0.09535     $ 0.06  
January 2018   $ 0.085     $ 0.057  
February 2018   $ 0.0749     $ 0.05359  
March 2018   $ 0.07     $ 0.055  
April 2018   $ 0.07     $ 0.05  
May 2018   $ 0.067     $ 0.037  
Through June 12, 2018   $ 0.05     $ 0.043  

 

  B. Plan of Distribution

 

Not applicable

 

  C. Markets

 

Our common shares are traded/quoted on the OTCQB Venture Market under the symbol “EHVVF”.

 

  D. Selling Shareholders

 

Not applicable

 

  E. Dilution

 

Not applicable

 

  F. Expenses of the Issue

 

Not applicable

 

ITEM 10.  ADDITIONAL INFORMATION

 

  A. Share Capital

 

Not applicable

 

  B. Memorandum and Articles of Association

 

Articles of Continuance

 

We are governed by our amended articles of incorporation (the “Articles”) under the Business Corporations Act of Ontario (the “Act”) and by our by-laws (the “By-laws”). Our Articles provide that there are no restrictions on the business we may carry on or on the powers we may exercise. Companies incorporated under the Act are not required to include specific objects or purposes in their articles or by-laws.

 

Directors

 

Subject to certain exceptions, including in respect of voting on any resolution to approve a contract that relates primarily to the director’s remuneration, directors may not vote on resolutions to approve a material contract or material transaction if the director is a party to such contract or transaction. The directors are entitled to remuneration as shall from time to time be determined by the Board of Directors with no requirement for a quorum of independent directors. The directors have the ability under the Act to exercise our borrowing power, without authorization of the shareholders. The Act permits shareholders to restrict this authority through a company’s articles or by-laws (or through a unanimous shareholder agreement), but no such restrictions are in place for us. Our Articles and By-laws do not require directors to hold shares for qualification.

 

  39  

 

 

Rights, Preferences and Dividends Attaching to Shares

 

The holders of common shares have the right to receive dividends if and when declared. Each holder of common shares, as of the record date prior to a meeting, is entitled to attend and to cast one vote for each common share held as of such record date at such annual and/or special meeting, including with respect to the election or re-election of directors. Subject to the provisions of our By-laws, all directors may, if still qualified to serve as directors, stand for re-election. The numbers of our Board of Directors are not replaced at staggered intervals but are elected annually.

 

On a distribution of assets on a winding-up, dissolution or other return of capital (subject to certain exceptions) the holders of common shares shall have a right to receive their pro rata share of such distribution. There are no sinking fund or redemption provisions in respect of the common shares. Our shareholders have no liability to further capital calls as all shares issued and outstanding are fully paid and non-assessable.

 

No other classes of shares are currently permitted to be issued.

 

Action Necessary to Change the Rights of Shareholders

 

The rights attaching to the different classes of shares may be varied by special resolution passed at a meeting of that class’s shareholders.

 

Annual and Special Meetings of Shareholders

 

Under the Act and our By-laws, we are required to mail a Notice of Meeting and Management Information Circular to registered shareholders not less than 21 days and not more than 50 days prior to the date of the meeting. Such materials must be filed concurrently with the applicable securities regulatory authorities in Canada and the US.  Subject to certain provisions of the By-laws, a quorum of two or more shareholders in person or represented by proxy holding or representing by proxy not less than five (5%) percent of the total number of issued and outstanding shares enjoying voting rights at such meeting is required to properly constitute a meeting of shareholders.  Shareholders and their duly appointed proxies and corporate representatives are entitled to be admitted to our annual and/or special meetings.

 

Limitations on the Rights to Own Shares

 

The Articles do not contain any limitations on the rights to own shares. Except as described below, there are currently no limitations imposed by Canadian federal or provincial laws on the rights of non-resident or foreign owners of Canadian securities to hold or vote the securities held. There are also no such limitations imposed by the Articles and By-laws with respect to our common shares.

 

Disclosure of Share Ownership

 

In general, under applicable securities regulation in Canada, a person or company who beneficially owns, directly or indirectly, voting securities of an issuer or who exercises control or direction over voting securities of an issuer or a combination of both, carrying more than 10% of the voting rights attached to all the issuer’s outstanding voting securities is an insider and must, within 10 days of becoming an insider, file a report in the required form effective the date on which the person became an insider. The report must disclose any direct or indirect beneficial ownership of, or control or direction over, securities of the reporting issuer. Additionally, securities regulation in Canada provides for the filing of a report by an insider of a reporting issuer whose holdings change, which report must be filed within 10 days from the day on which the change takes place.

 

The rules in the US governing the ownership threshold above which shareholder ownership must be disclosed are more stringent than those discussed above. Section 13 of the Exchange Act imposes reporting requirements on persons who acquire beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange Act) of more than 5% of a class of an equity security registered under Section 12 of the Exchange Act.  In general, such persons must file, within 10 days after such acquisition, a report of beneficial ownership with the SEC containing the information prescribed by the regulations under Section 13 of the Exchange Act. This information is also required to be sent to the issuer of the securities and to each exchange where the securities are traded.

 

Other Provisions of Articles and By-laws

 

There are no provisions in the Articles or By-laws:

 

  delaying or prohibiting a change in control of our company that operate only with respect to a merger, acquisition or corporate restructuring;

 

  discriminating against any existing or prospective holder of shares as a result of such shareholder owning a substantial number of shares;

 

  requiring disclosure of share ownership; or

 

  governing changes in capital, where such provisions are more stringent than those required by law.

 

  40  

 

 

  C. Material Contracts

 

We have employment contracts with our chief executive officer and our chief technology officer as summarized in Item 6B. 

 

On March 5, 2018, we entered a definitive agreement with Aequus, following a Letter of Interest signed in August 2017. Under this agreement, Aequus will use Ehave Connect to enhance and streamling data management processes for Aequus-sponsored clinical trials studing Cannabinoid formulations for treating various neurological conditions.

 

On March 1, 2018, we entered in an agreement with Revive for the use of the Ehave Connect platform in Revive’s research initiatives involving medical cannabis for the treatment of liver disease. Under this agreement, Revive will use Ehave Connect for both clinical trials and facilitating patient management. In the initial project, Revive will pay us based on the number of patient records it hosts on Ehave Connect, and subsequent projects will be negotiated by the parties. The agreement will renew for one year terms unless notice of termination is rendered one month prior to such termination dates.

 

On April 6, 2018, we signed an amendment to the lease of our office space in Oakville, Ontario, for a period of two years, commencing on May 1, 2018 and expiring on May 1, 2020. The total monthly payment under the sublease is $1,607, plus any applicable fees and taxes.

 

On September 12, 2017, we entered into a consulting agreement with Bull Media Consulting LLC, for a period of 3 months, commencing September 15, 2017 for financial advisory, strategic business panning, and investor relations services. The total monthly cost is $10,000 per month.

 

On March 22, 2017, we entered into a consulting agreement with Nison Consulting, LLC, for a period of 6 months, commencing on March 27, 2017 for public relations and media relations services. The total monthly cost is $5,000 per month. The term of the agreement will automatically renew for additional six-month terms unless either party notifies its intention not to renew with 30 days notice. Ehave had given notice on the fourth month, with total obligations agreed to be 5 months.

 

On December 13, 2016, we entered into an agreement with MHS, pursuant to which MHS granted us the non-exclusive license to use certain test materials published by MHS for inclusion and integration into our mental health informatics platform and distribution in North America and to create output reports for the completed tests. We are to pay MHS 70% of net sales of all copies of the test published by us. The initial term of the agreement is three years. The agreement may be terminated by either party upon delivery of written notice of termination to the other party, in the event that the other party fails to comply with any term or condition of the agreement and such non-compliance is not cured within the 60 day period following written notice thereof given by the non-defaulting party to the defaulting party. On May 4, 2017, we amended our agreement with MHS to include the Davidson Trauma Scale (DTS) and Startle Physiological Anger Numbness (SPAN) to assess Post Traumatic Stress Disorder (PTSD).

 

On November 1, 2016, we entered into an agreement with Tiberend Strategic Advisors for exclusive public relations services. The term of the agreement is 12 months, which will automatically renew for additional one-year terms unless either party notifies its intention not to renew with 60 days’ notice. The total monthly cost is $9,350 per month prior to the listing of our securities on the NASDAQ Stock Market or $12,100 per month following the listing of our securities on the NASDAQ Stock Market.

 

  D. Exchange Controls

 

Canada has no system of exchange controls. There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company to non-resident investors. There are no laws in Canada or exchange restrictions affecting the remittance of dividends, profits, interest, royalties and other payments to non-resident holders of our securities, except as discussed below in Section E,  Taxation .

 

Restrictions on Share Ownership by Non-Canadians

 

There are no limitations under the laws of Canada or in our organizational documents on the right of foreigners to hold or vote securities of our company, except that the Investment Canada Act (the “Investment Canada Act”) may require review and approval by the Minister of Industry (Canada) of certain acquisitions of “control” of our Company by a “non-Canadian.”

 

Investment Canada Act

 

Under the Investment Canada Act, transactions exceeding certain financial thresholds, and which involve the acquisition of control of a Canadian business by a non-Canadian, are subject to review and cannot be implemented unless the Minister of Industry and/or, in the case of a Canadian business engaged in cultural activities, the Minister of Canadian Heritage, are satisfied that the transaction is likely to be of “net benefit to Canada”. If a transaction is subject to review (a “Reviewable Transaction”), an application for review must be filed with the Investment Review Division of Industry Canada and/or the Department of Canadian Heritage prior to the implementation of the Reviewable Transaction. The responsible Minister is then required to determine whether the Reviewable Transaction is likely to be of net benefit to Canada taking into account, among other things, certain factors specified in the Investment Canada Act and any written undertakings that may have been given by the applicant. The Investment Canada Act contemplates an initial review period of up to 45 days after filing; however, if the responsible Minister has not completed the review by that date, the Minister may unilaterally extend the review period by up to 30 days (or such longer period as may be agreed to by the applicant and the Minister) to permit completion of the review. Direct acquisitions of control of most Canadian businesses by or from World Trade Organization (“WTO”) investors are reviewable under the Investment Canada Act only if, in the case of an acquisition of voting securities, the value of the worldwide assets of the Canadian business or, in the case of an acquisition of substantially all the assets of a Canadian business, the value of those assets exceed C$295 million for the year 2008 (this figure is adjusted annually to reflect inflation). Indirect acquisitions (e.g., an acquisition of a US corporation with a Canadian subsidiary) of control of such businesses by or from WTO investors are not subject to review, regardless of the value of the Canadian businesses’ assets. Significantly lower review thresholds apply where neither the investor nor the Canadian business is WTO investor controlled or where the Canadian business is engaged in uranium mining, certain cultural businesses, financial services or transportation services.

 

  41  

 

 

Even if the transaction is not reviewable because it does not meet or exceed the applicable financial threshold, the non-Canadian investor must still give notice to Industry Canada and, in the case of a Canadian business engaged in cultural activities, Canadian Heritage, of its acquisition of control of a Canadian business within 30 days of its implementation.

 

Competition Act

 

The Competition Act (Canada) (the “Competition Act”) requires that a pre-merger notification filing be submitted to the Commissioner of Competition (the “Commissioner”) in respect of proposed transactions that exceed certain financial and other thresholds. If a proposed transaction is subject to pre-merger notification, a pre-merger notification filing must be submitted to the Commissioner and a waiting period must expire or be waived by the Commissioner before the transaction may be completed. The parties to a proposed transaction may choose to submit either a short-form filing (in respect of which there is a 14-day statutory waiting period) or a long-form filing (in respect of which there is a 42-day statutory waiting period). However, where the parties choose to submit a short-form filing, the Commissioner may, within 14 days, require that the parties submit a long-form filing, in which case the proposed transaction generally may not be completed until 42 days after the long-form filing is submitted by the parties.

 

The Commissioner may, upon request, issue an advance ruling certificate (“ARC”) in respect of a proposed transaction where she is satisfied that she would not have sufficient grounds on which to apply to the Competition Tribunal for an order under the merger provisions of the Competition Act. If the Commissioner issues an ARC in respect of a proposed transaction, the transaction is exempt from the pre-merger notification provisions. In addition, if the transaction to which the ARC relates is substantially completed within one year after the ARC is issued, the Commissioner cannot seek an order of the Competition Tribunal under the merger provisions of the Competition Act in respect of the transaction solely on the basis of information that is the same or substantially the same as the information on the basis of which the ARC was issued.

 

If the Commissioner is unwilling to issue an ARC, she may nevertheless issue a “no action” letter waiving notification and confirming that she is of the view that grounds do not then exist to initiate proceedings before the Competition Tribunal under the merger provisions of the Competition Act with respect to the proposed transaction, while preserving, during the three years following completion of the proposed transaction, her authority to initiate proceedings should circumstances change.

 

Regardless of whether pre-merger notification is required, the Commissioner may apply to the Competition Tribunal (a special purpose tribunal) for an order under the merger provisions of the Competition Act. If the Competition Tribunal finds that the transaction is or is likely to prevent or lessen competition substantially, it may order that the parties not proceed with the transaction or part of it or, in the event that the transaction has already been completed, order its dissolution or the disposition of some of the assets or shares involved. In addition, the Competition Tribunal may, with the consent of the person against whom the order is directed and the Commissioner, order that person to take any other action as is deemed necessary to remedy any substantial lessening or prevention of competition that the Competition Tribunal determines would or would likely result from the transaction.

 

  E. Taxation

 

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

 

The following is a general summary of certain material U.S. federal income tax considerations applicable to a U.S. Holder (as defined below) arising from and relating to the acquisition, ownership and disposition of common shares.

 

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. Holder arising from and relating to the acquisition, ownership, and disposition of common shares. In addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences to such U.S. Holder, including, without limitation, specific tax consequences to a U.S. Holder under an applicable income 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. Holder. This summary does not address the U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences to U.S. Holders of the acquisition, ownership, and disposition of common shares. In addition, except as specifically set forth below, this summary does not discuss applicable tax reporting requirements. Each prospective U.S. Holder should consult its own tax advisors regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences relating to the acquisition, ownership and disposition of common shares.

 

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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 common 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.

 

Scope of this Summary

 

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 retroactively. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation.

 

U.S. Holders

 

For purposes of this summary, the term “U.S. Holder” means a beneficial owner of common shares that is for U.S. federal income tax purposes:

 

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

 

  a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) organized under the laws of the United States, any state thereof or the District of Columbia;

 

  an estate whose income is subject to U.S. federal income taxation regardless of its source; or

 

  a trust that (1) is subject to the primary supervision of a court within the U.S. and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.

 

U.S. Holders 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. Holders that are subject to special provisions under the Code, including, but not limited to, U.S. Holders 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 common shares as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than one position; (f) acquire common shares in connection with the exercise of employee stock options or otherwise as compensation for services; (g) hold common 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, have owned or will own (directly, indirectly, or by attribution) 10% or more of the total combined voting power or value of the outstanding shares of the Company. This summary also does not address the U.S. federal income tax considerations applicable to U.S. Holders 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 common shares in connection with carrying on a business in Canada; (d) persons whose common 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. Holders that are subject to special provisions under the Code, including, but not limited to, U.S. Holders described immediately above, should consult their own tax advisors regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences relating to the acquisition, ownership and disposition of common shares.

 

If an entity or arrangement that is classified as a partnership (or other “pass-through” entity) for U.S. federal income tax purposes holds common shares, the U.S. federal income tax consequences to such entity or arrangement and the partners (or other owners or participants) of such entity or arrangement generally will depend on the activities of the entity or arrangement and the status of such partners (or owners or participants). This summary does not address the tax consequences to any such partner (or owner or participants). Partners (or other owners or participants) 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 acquisition, ownership and disposition of common shares.

 

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Passive Foreign Investment Company Rules

 

PFIC Status of the Company

 

If the Company were to constitute a “passive foreign investment company” under the meaning of Section 1297 of the Code (a “PFIC”, as defined below) for any year during a U.S. Holder’s holding period, then certain potentially adverse rules may affect the U.S. federal income tax consequences to a U.S. Holder as a result of the acquisition, ownership and disposition of common shares. The Company may be a PFIC for its current tax year and subsequent tax years. The determination of whether any corporation was, or will be, a PFIC for a tax year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations. In addition, whether any corporation will be a PFIC for any tax year depends on the assets and income of such corporation over the course of each such tax year and, as a result, cannot be predicted with certainty as of the date of this document. Accordingly, there can be no assurance that the IRS will not challenge any determination made by the Company (or any subsidiary of the Company) concerning its PFIC status. Each U.S. Holder should consult its own tax advisors regarding the PFIC status of the Company and each subsidiary of the Company.

 

In any year in which the Company is classified as a PFIC, a U.S. Holder will be required to file an annual report with the IRS containing such information as Treasury Regulations and/or other IRS guidance may require. In addition to penalties, a failure to satisfy such reporting requirements may result in an extension of the time period during which the IRS can assess a tax. U.S. Holders should consult their own tax advisors regarding the requirements of filing such information returns under these rules, including the requirement to file an IRS Form 8621.

 

The Company generally will be a PFIC if, for a tax year, (a) 75% or more of the gross income of the Company is passive income (the “PFIC income test”) or (b) 50% or more of the value of the Company’s assets either produce passive income or are held for the production of passive income, based on the quarterly average of the fair market value of such assets (the “PFIC asset test”). “Gross income” generally includes all sales revenues less the cost of goods sold, plus income from investments and from incidental or outside operations or sources, and “passive income” generally includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions.

 

For purposes of the PFIC income test and PFIC asset test described above, if the Company owns, directly or indirectly, 25% or more of the total value of the outstanding shares of another corporation, the Company will be treated as if it (a) held a proportionate share of the assets of such other corporation and (b) received directly a proportionate share of the income of such other corporation. In addition, for purposes of the PFIC income test and PFIC asset test described above, and assuming certain other requirements are met, “passive income” does not include certain interest, dividends, rents, or royalties that are received or accrued by the Company from certain “related persons” (as defined in Section 954(d)(3) of the Code) also organized in Canada, to the extent such items are properly allocable to the income of such related person that is not passive income.

 

Under certain attribution rules, if the Company is a PFIC, U.S. Holders will generally be deemed to own their proportionate share of the Company’s direct or indirect equity interest in any company that is also a PFIC (a ’’Subsidiary PFIC’’), and will generally be subject to U.S. federal income tax on their proportionate share of (a) any “excess distributions,” as described below, on the stock of a Subsidiary PFIC and (b) a disposition or deemed disposition of the stock of a Subsidiary PFIC by the Company or another Subsidiary PFIC, both as if such U.S. Holders directly held the shares of such Subsidiary PFIC. In addition, U.S. Holders may be subject to U.S. federal income tax on any indirect gain realized on the stock of a Subsidiary PFIC on the sale or disposition of common shares. Accordingly, U.S. Holders should be aware that they could be subject to tax under the PFIC rules even if no distributions are received and no redemptions or other dispositions of common shares are made.

 

Default PFIC Rules Under Section 1291 of the Code

 

If the Company is a PFIC for any tax year during which a U.S. Holder owns common shares, the U.S. federal income tax consequences to such U.S. Holder of the acquisition, ownership, and disposition of common shares will depend on whether and when such U.S. Holder makes an election to treat the Company and each Subsidiary PFIC, if any, as a “qualified electing fund” or “QEF” under Section 1295 of the Code (a “QEF Election”) or makes a mark-to-market election under Section 1296 of the Code (a “Mark-to-Market Election”). A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election will be referred to in this summary as a “Non-Electing U.S. Holder.”

 

A Non-Electing U.S. Holder will be subject to the rules of Section 1291 of the Code (described below) with respect to (a) any gain recognized on the sale or other taxable disposition of common shares and (b) any “excess distribution” received on the common shares. A distribution generally will be an “excess distribution” to the extent that such distribution (together with all other distributions received in the current tax year) exceeds 125% of the average distributions received during the three preceding tax years (or during a U.S. Holder’s holding period for the common shares, if shorter).

 

Under Section 1291 of the Code, any gain recognized on the sale or other taxable disposition of common shares (including an indirect disposition of the stock of any Subsidiary PFIC), and any “excess distribution” received on common shares or with respect to the stock of a Subsidiary PFIC, must be ratably allocated to each day in a Non-Electing U.S. Holder’s holding period for the respective common shares. The amount of any such gain or excess distribution allocated to the tax year of disposition or distribution of the excess distribution and to years before the entity became a PFIC, if any, would be taxed as ordinary income (and not eligible for certain preferred rates). The amounts allocated to any other tax year would be subject to U.S. federal income tax at the highest tax rate applicable to ordinary income in each such year, and an interest charge would be imposed on the tax liability for each such year, calculated as if such tax liability had been due in each such year. A Non-Electing U.S. Holder that is not a corporation must treat any such interest paid as “personal interest,” which is not deductible.

 

If the Company is a PFIC for any tax year during which a Non-Electing U.S. Holder holds common shares, the Company will continue to be treated as a PFIC with respect to such Non-Electing U.S. Holder, regardless of whether the Company ceases to be a PFIC in one or more subsequent tax years. A Non-Electing U.S. Holder may terminate this deemed PFIC status by electing to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed above), but not loss, as if such common shares were sold on the last day of the last tax year for which the Company was a PFIC.

 

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QEF Election

 

A U.S. Holder that makes a timely and effective QEF Election for the first tax year in which the holding period of its common shares begins generally will not be subject to the rules of Section 1291 of the Code discussed above with respect to its common shares. A U.S. Holder that makes a timely and effective QEF Election will be subject to U.S. federal income tax on such U.S. Holder’s pro rata share of (a) the net capital gain of the Company, which will be taxed as long-term capital gain to such U.S. Holder, and (b) the ordinary earnings of the Company, which will be taxed as ordinary income to such U.S. Holder. Generally, “net capital gain” is the excess of (a) net long-term capital gain over (b) net short-term capital loss, and “ordinary earnings” are the excess of (a) “earnings and profits” over (b) net capital gain. A U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such amounts for each tax year in which the Company is a PFIC, regardless of whether such amounts are actually distributed to such U.S. Holder by the Company. However, for any tax year in which the Company is a PFIC and has no net income or gain, U.S. Holders that have made a QEF Election would not have any income inclusions as a result of the QEF Election. If a U.S. Holder that made a QEF Election has an income inclusion, such a U.S. Holder may, subject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. If such U.S. Holder is not a corporation, any such interest paid will be treated as “personal interest,” which is not deductible.

 

A U.S. Holder that makes a timely and effective QEF Election with respect to the Company generally (a) may receive a tax-free distribution from the Company to the extent that such distribution represents “earnings and profits” of the Company that were previously included in income by the U.S. Holder because of such QEF Election and (b) will adjust such U.S. Holder’s tax basis in the common shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election. In addition, a U.S. Holder that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of common shares. The procedure for making a QEF Election, and the U.S. federal income tax consequences of making a QEF Election, will depend on whether such QEF Election is timely. A QEF Election will be treated as “timely” if such QEF Election is made for the first year in the U.S. Holder’s holding period for the common shares in which the Company was a PFIC. A U.S. Holder may make a timely QEF Election by filing the appropriate QEF Election documents at the time such U.S. Holder files a U.S. federal income tax return for such year. If a U.S. Holder does not make a timely and effective QEF Election for the first year in the U.S. Holder’s holding period for the common shares, the U.S. Holder may still be able to make a timely and effective QEF Election in a subsequent year if such U.S. Holder meets certain requirements and makes a “purging” election to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed above) as if such common shares were sold for their fair market value on the day the QEF Election is effective. If a U.S. Holder makes a QEF Election but does not make a “purging” election to recognize gain as discussed in the preceding sentence, then such U.S. Holder shall be subject to the QEF Election rules and shall continue to be subject to tax under the rules of Section 1291 discussed above with respect to its common shares. If a U.S. Holder owns PFIC stock indirectly through another PFIC, separate QEF Elections must be made for the PFIC in which the U.S. Holder is a direct shareholder and the Subsidiary PFIC for the QEF rules to apply to both PFICs.

 

A QEF Election will apply to the tax year for which such QEF Election is timely made and to all subsequent tax years, unless such QEF Election is invalidated or terminated or the IRS consents to revocation of such QEF Election. If a U.S. Holder makes a QEF Election and, in a subsequent tax year, the Company ceases to be a PFIC, the QEF Election will remain in effect (although it will not be applicable) during those tax years in which the Company is not a PFIC. Accordingly, if the Company becomes a PFIC in another subsequent tax year, the QEF Election will be effective and the U.S. Holder will be subject to the QEF rules described above during any subsequent tax year in which the Company qualifies as a PFIC.

 

U.S. Holders should be aware that there can be no assurances that the Company will satisfy the record keeping requirements that apply to a QEF, or that the Company will supply U.S. Holders with information that such U.S. Holders are required to report under the QEF rules, in the event that the Company is a PFIC. Thus, U.S. Holders may not be able to make a QEF Election with respect to their common shares. Each U.S. Holder should consult its own tax advisors regarding the availability of, and procedure for making, a QEF Election.

 

A U.S. Holder makes a QEF Election by attaching a completed IRS Form 8621, including a PFIC Annual Information Statement, to a timely filed United States federal income tax return. However, if the Company does not provide the required information with regard to the Company or any of its Subsidiary PFICs, U.S. Holders will not be able to make a QEF Election for such entity and will continue to be subject to the rules of Section 1291 of the Code discussed above that apply to Non-Electing U.S. Holders with respect to the taxation of gains and excess distributions.

 

Mark-to-Market Election

 

A U.S. Holder may make a Mark-to-Market Election only if the common shares are marketable stock. The common shares generally will be “marketable stock” if the common shares are regularly traded on (a) a national securities exchange that is registered with the Securities and Exchange Commission, (b) the national market system established pursuant to section 11A of the Securities and Exchange Act of 1934, or (c) a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located, provided that (i) such foreign exchange has trading volume, listing, financial disclosure, and surveillance requirements, and meets other requirements and the laws of the country in which such foreign exchange is located, together with the rules of such foreign exchange, ensure that such requirements are actually enforced and (ii) the rules of such foreign exchange effectively promote active trading of listed stocks. If such stock is traded on such a qualified exchange or other market, such stock generally will be “regularly traded” for any calendar year during which such stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. Provided that the common shares are “regularly traded” as described in the preceding sentence, the common shares are expected to be marketable stock. However, each U.S. Holder should consult its own tax advisor in this regard.

 

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A U.S. Holder that makes a Mark-to-Market Election with respect to its common shares generally will not be subject to the rules of Section 1291 of the Code discussed above with respect to such common shares. However, if a U.S. Holder does not make a Mark-to-Market Election beginning in the first tax year of such U.S. Holder’s holding period for the common shares for which the Company is a PFIC and such U.S. Holder has not made a timely QEF Election, the rules of Section 1291 of the Code discussed above will apply to certain dispositions of, and distributions on, the common shares.

 

A U.S. Holder that makes a Mark-to-Market Election will include in ordinary income, for each tax year in which the Company is a PFIC, an amount equal to the excess, if any, of (a) the fair market value of the common shares, as of the close of such tax year over (b) such U.S. Holder’s adjusted tax basis in such common shares. A U.S. Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal to the excess, if any, of (a) such U.S. Holder’s adjusted tax basis in the common shares, over (b) the fair market value of such common shares (but only to the extent of the net amount of previously included income as a result of the Mark-to-Market Election for prior tax years).

 

A U.S. Holder that makes a Mark-to-Market Election generally also will adjust such U.S. Holder’s tax basis in the common shares to reflect the amount included in gross income or allowed as a deduction because of such Mark-to-Market Election. In addition, upon a sale or other taxable disposition of common shares, a U.S. Holder that makes a Mark-to-Market Election will recognize ordinary income or ordinary loss (not to exceed the excess, if any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior tax years over (b) the amount allowed as a deduction because of such Mark-to-Market Election for prior tax years). Losses that exceed this limitation are subject to the rules generally applicable to losses provided in the Code and Treasury Regulations.

 

A U.S. Holder makes a Mark-to-Market Election by attaching a completed IRS Form 8621 to a timely filed United States federal income tax return. A Mark-to-Market Election applies to the tax year in which such Mark-to-Market Election is made and to each subsequent tax year, unless the common shares cease to be “marketable stock” or the IRS consents to revocation of such election. Each U.S. Holder should consult its own tax advisors regarding the availability of, and procedure for making, a Mark-to-Market Election.

 

Although a U.S. Holder may be eligible to make a Mark-to-Market Election with respect to the common shares, no such election may be made with respect to the stock of any Subsidiary PFIC that a U.S. Holder is treated as owning, because such stock is not marketable. Hence, the Mark-to-Market Election will not be effective to avoid the application of the default rules of Section 1291 of the Code described above with respect to deemed dispositions of Subsidiary PFIC stock or excess distributions from a Subsidiary PFIC to its shareholder.

 

Other PFIC Rules

 

Under Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S. Holder that had not made a timely QEF Election to recognize gain (but not loss) upon certain transfers of common shares that would otherwise be tax-deferred (e.g., gifts and exchanges pursuant to corporate reorganizations). However, the specific U.S. federal income tax consequences to a U.S. Holder may vary based on the manner in which common shares are transferred.

 

Certain additional adverse rules may apply with respect to a U.S. Holder if the Company is a PFIC, regardless of whether such U.S. Holder makes a QEF Election. For example, under Section 1298(b)(6) of the Code, a U.S. Holder that uses common shares as security for a loan will, except as may be provided in Treasury Regulations, be treated as having made a taxable disposition of such common shares.

 

Special rules also apply to the amount of foreign tax credit that a U.S. Holder may claim on a distribution from a PFIC. Subject to such special rules, foreign taxes paid with respect to any distribution in respect of stock in a PFIC are generally eligible for the foreign tax credit. The rules relating to distributions by a PFIC and their eligibility for the foreign tax credit are complicated, and a U.S. Holder should consult with its own tax advisors regarding the availability of the foreign tax credit with respect to distributions by a PFIC.

 

The PFIC rules are complex, and each U.S. Holder should consult its own tax advisors regarding the PFIC rules and how the PFIC rules may affect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of common shares.

 

General Rules Applicable to the Ownership and Disposition of Common Shares

 

The following discussion describes the general rules applicable to the ownership and disposition of the common shares but is subject in its entirety to the special rules described above under the heading “Passive Foreign Investment Company Rules.”

 

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Distributions on Common Shares

 

A U.S. Holder that receives a distribution, including a constructive distribution, with respect to a Common Share will be required to include the amount of such distribution in gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent of the current and accumulated “earnings and profits” of the Company, as computed for U.S. federal income tax purposes. A dividend generally will be taxed to a U.S. Holder at ordinary income tax rates if the Company is a PFIC for the tax year of such distribution or the preceding tax year. To the extent that a distribution exceeds the current and accumulated “earnings and profits” of the Company, such distribution will be treated first as a tax-free return of capital to the extent of a U.S. Holder’s tax basis in the common shares and thereafter as gain from the sale or exchange of such common shares. (See “Sale or Other Taxable Disposition of Common Shares” below). However, the Company may not maintain the calculations of its earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder may have to assume that any distribution by the Company with respect to the common shares will constitute ordinary dividend income. Dividends received on common shares by corporate U.S. Holders generally will not be eligible for the “dividends received deduction.” Subject to applicable limitations and provided the Company is eligible for the benefits of the Canada-U.S. Tax Convention, dividends paid by the Company to non-corporate U.S. Holders, including individuals, generally will 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 the Company not be classified as a PFIC in the tax year of distribution or in the preceding tax year. The dividend rules are complex, and each U.S. Holder should consult its own tax advisors regarding the application of such rules.

 

Sale or Other Taxable Disposition of Common Shares

 

Upon the sale or other taxable disposition of common shares, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the U.S. dollar value of cash received plus the fair market value of any property received and such U.S. Holder’s tax basis in such common shares sold or otherwise disposed of. A U.S. Holder’s tax basis in common shares generally will be such holder’s U.S. dollar cost for such common shares. Gain or loss recognized on such sale or other disposition generally will be long-term capital gain or loss if, at the time of the sale or other disposition, the common shares have been held for more than one year.

 

Preferential tax rates currently apply to long-term capital gain of a U.S. Holder that is an individual, estate, or trust. There are currently no preferential tax rates for long-term capital gain of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations under the Code.

 

Additional Considerations

 

Additional Tax on Passive Income

 

Certain U.S. Holders that are individuals, estates or trusts (other than trusts that are exempt from tax) will be subject to a 3.8% tax on all or a portion of their “net investment income,” which includes dividends on the common shares and net gains from the disposition of the common shares. Further, excess distributions treated as dividends, gains treated as excess distributions under the PFIC rules discussed above, and mark-to-market inclusions and deductions are all included in the calculation of net investment income.

 

Treasury Regulations provide, subject to the election described in the following paragraph, that solely for purposes of this additional tax, that distributions of previously taxed income will be treated as dividends and included in net investment income subject to the additional 3.8% tax. Additionally, to determine the amount of any capital gain from the sale or other taxable disposition of common shares that will be subject to the additional tax on net investment income, a U.S. Holder who has made a QEF Election will be required to recalculate its basis in the common shares excluding QEF basis adjustments.

 

Alternatively, a U.S. Holder may make an election which will be effective with respect to all interests in controlled foreign corporations and QEFs held in that year or acquired in future years. Under this election, a U.S. Holder pays the additional 3.8% tax on QEF income inclusions and on gains calculated after giving effect to related tax basis adjustments. U.S. Holders that are individuals, estates or trusts should consult their own tax advisors regarding the applicability of this tax to any of their income or gains in respect of the common shares.

 

Receipt of Foreign Currency

 

The amount of any distribution paid to a U.S. Holder in foreign currency, or on the sale, exchange or other taxable disposition of common shares, generally will be equal to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of receipt (regardless of whether such foreign currency is converted into U.S. dollars at that time). A U.S. Holder will have a basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Any U.S. Holder who converts or otherwise disposes of the foreign currency after the date of receipt may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss, and generally will be U.S. source income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method. Each U.S. Holder should consult its own U.S. tax advisors regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.

 

Foreign Tax Credit

 

Subject to the PFIC rules discussed above, a U.S. Holder that pays (whether directly or through withholding) Canadian income tax with respect to dividends paid on the common shares generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such Canadian income tax. Generally, a credit will reduce a U.S. Holder’s U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holder’s income that is subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year.

 

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Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holder’s U.S. federal income tax liability that such U.S. Holder’s “foreign source” taxable income bears to such U.S. Holder’s worldwide taxable income. In applying this limitation, a U.S. Holder’s various items of income and deduction must be classified, under complex rules, as either “foreign source” or “U.S. source.” Generally, dividends paid by a foreign corporation should be treated as foreign source for this purpose, and gains recognized on the sale of stock of a foreign corporation by a U.S. Holder 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. However, the amount of a distribution with respect to the common shares that is treated as a “dividend” may be lower for U.S. federal income tax purposes than it is for Canadian federal income tax purposes, resulting in a reduced foreign tax credit allowance to a U.S. Holder. In addition, this limitation is calculated separately with respect to specific categories of income. The foreign tax credit rules are complex, and each U.S. Holder should consult its own U.S. tax advisors regarding the foreign tax credit rules.

 

Backup Withholding and Information Reporting

 

Under U.S. federal income tax law, certain categories of U.S. Holders 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. Holders that hold certain specified foreign financial assets in excess of certain thresholds. 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-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person and any interest in a foreign entity. U.S. Holders may be subject to these reporting requirements unless their common shares are held in an account at certain financial institutions. Penalties for failure to file certain of these information returns are substantial. U.S. Holders 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, common shares will generally be subject to information reporting and backup withholding tax, at the rate of 24%, if a U.S. Holder (a) fails to furnish such U.S. Holder’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. Holder 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. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding tax. However, certain exempt persons generally are excluded from these information reporting and backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Holder’s U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder 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. Holder. 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. Holder should consult its own tax advisors regarding the information reporting and backup withholding rules.

 

THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH RESPECT TO THE ACQUISITION, OWNERSHIP, AND DISPOSITION OF COMMON SHARES. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR OWN PARTICULAR CIRCUMSTANCES.

 

F. Dividends and Paying Agents

 

Not applicable

 

  G. Statements by Experts

 

Not applicable

 

  H. Documents on Display

 

We are subject to the informational requirements of the Exchange Act and file reports and other information with the SEC. You may read and copy any of our reports and other information at, and obtain copies upon payment of prescribed fees from, the Public Reference Room maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. In addition, the SEC maintains a Website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC at http://www.sec.gov. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

  

  48  

 

 

We “incorporate by reference” information that we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this Form 20-F and more recent information automatically updates and supersedes more dated information contained or incorporated by reference in this Form 20-F.

 

As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements to shareholders.

 

We will provide without charge to each person, including any beneficial owner, to whom a copy of this annual report has been delivered, on the written or oral request of such person, a copy of any or all documents referred to above which have been or may be incorporated by reference in this annual report (not including exhibits to such incorporated information that are not specifically incorporated by reference into such information). Requests for such copies should be directed to us at the following address Prateek Dwivedi, Chief Executive Officer, 277 Lakeshore Road East, Suite 203, Oakville, Ontario, Canada L6J 6J3, +1(905)362-1499, info@ehave.com

 

  I. Subsidiary Information

 

Not applicable.

 

ITEM 11.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Foreign Currency Risk

 

We operate primarily in Canada and the United States.  Therefore, we are exposed to foreign currency risk associated with our expenses outside of Canada.  We do not use financial derivative instruments to manage this market risk.

 

Interest Rate Risk

 

None of the Company’s long-term debt contain interest rate provisions that may be subject to fluctuations in market interest rates. As such, the Company does not have significant interest rate risk or has entered into any financial instruments to mitigate such risk.

 

We do not use financial instruments for trading purposes and are not parties to any leverage derivatives.  We do not currently engage in hedging transactions.  See “Currency and Exchange Rates” and Item 4 – “Information on the Company”.

 

ITEM 12.   DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

 

Not applicable.

 

  49  

 

 

PART II

 

ITEM 13.   DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.

 

None

 

ITEM 14.   MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.

 

  A. Modification of Instruments Defining Rights of Security Holders

 

None

 

  B. Modification or Issuance of Other Class of Securities

 

None

 

  C. Withdrawal or Substitution of Security

 

None

 

 

  D. Change of Trustee or Paying Agent

 

 

None

 

  E. Use of Proceeds

 

None.

 

ITEM 15.  CONTROLS AND PROCEDURES

 

  A. Evaluation of Disclosures and Procedures

 

During the review by our Chief Executive Officer and Chief Financial Officer of our Company’s disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)), and based on the evaluation of these controls and procedures as of the end of the period covered by this annual report, a material weakness has been identified in our controls for ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. New policies and procedures have been established and are being implemented to eliminate the identified weakness.

 

  B. Management’s Annual Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. As required by Rule 13a-15(c) of the Exchange Act, our management conducted an evaluation of our company's internal control over financial reporting as of December 31, 2017, based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal controls over financial reporting was not effective due to the existence of a material weakness as it relates to the segregation of duties as of December 31, 2017. Management has since addressed this weakness and has implemented the necessary changes to have effective controls.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness of our internal control over financial reporting to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

  C. Attestation Report of the Registered Public Accounting Firms

 

Not applicable.

 

  D. Changes in Internal Controls over Financial Reporting

 

There were no changes in our internal controls over financial reporting that occurred during the period that is covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

  50  

 

 

ITEM 16.  [RESERVED]

 

ITEM 16A.  AUDIT COMMITTEE FINANCIAL EXPERT

 

Our Audit Committee is comprised of Mr. Woodrow, Mr. Stefano and Mr. Levy. Our Board has determined that Mr. Woodrow is an audit committee financial expert. Mr. Woodrow is not independent either under the Rule 5605(d)(2) of the NASDAQ Capital Market or Rule 10A-3 of the Exchange Act.

 

ITEM 16B.  CODE OF ETHICS

 

Our board of directors has adopted a Code of Conduct for all Company personnel, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.  A copy of this Code of Conduct may be found on our website at http://www.ehve.com.

 

There were no amendments to our Code of Conduct during the fiscal year ended December 31, 2017. We did not grant any waivers to the provisions of our Code of Conduct during the fiscal year ended December 31, 2017.

 

ITEM 16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Audit Fees and Services

 

During the financial years ended December 31, 2017, and 2016, Turner Stone and Company, L.L.P. received the following fees:

 

    2017     2016  
Item   $     $  
Audit fees     19,500       28,150  
Audit-related fees            
Tax fees            
All other fees            
Total    

19,500

      28,150  

 

Audit Fees

 

Audit fees were for professional services rendered by Turner Stone and Company for the audit of our annual financial statements and services provided in connection with statutory and regulatory filings or engagements, accounting consultations and subscription to on-line accounting services.

 

Audit-related Fees

 

Audit-related fees are the aggregate fees billed for assurance and related services by Turner Stone and Company that are reasonably related to the performance of the audit or review of our financial statements and are not reported under Audit Fees.

 

Tax Fees

 

Tax fees are the aggregate fees billed for professional services rendered for tax compliance, tax advice, and tax planning.

 

All Other Fees

 

Other fees are for products and services other than those described under the headings Audit Fees, Audit-Related Fees and Tax Fees above.

 

The Audit Committee pre-approves all audit services to be provided to us by our independent auditors. The Audit Committee’s policy regarding the pre-approval of non-audit services to be provided to us by our independent auditors is that all such services shall be pre-approved by the Audit Committee or by the Chair of the Audit Committee, who must report all such pre-approvals to the Audit Committee at their next meeting following the granting thereof. Non-audit services that are prohibited to be provided to us by our independent auditors may not be pre-approved. In addition, prior to the granting of any pre-approval, the Audit Committee or the Chair, as the case may be, must be satisfied that the performance of the services in question will not compromise the independence of the independent auditors.

 

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

 

Not applicable.

 

ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASES

 

None.

 

ITEM 16F.  CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTS

 

None.

 

ITEM 16G. CORPORATE GOVERNANCE

 

Not applicable.

 

ITEM 16H.  MINE SAFETY DISCLOSURE

 

Not applicable.

 

  51  

 

  

PART III

 

ITEM 17. FINANCIAL STATEMENTS.

 

Not applicable.

 

ITEM 18 FINANCIAL STATEMENTS

 

The financial statements appear on pages F-1 through F-13.

 

ITEM 19. EXHIBITS.

 

The following exhibits are filed as part of this annual report:

 

Exhibit
Number
  Description
     
1.1   Articles of Incorporation (1)
1.2   Articles of Amendment to the Articles of Incorporation dated November 30, 2011 (2)
1.3   Articles of Amendment to the Articles of Incorporation dated May 13, 2015 (3)
1.4   Articles of Amendment to the Articles of Incorporation dated June 26, 2015 (4)
1.5   Articles of Amendment to the Articles of Incorporation dated November 4, 2015 (5)
1.6   Bylaws No. 2 (6)
4.1   Form of Convertible Loan Agreement (7)
4.2   Securities Purchase Agreement, dated July 7, 2015, between the Company and the purchasers identified therein (8)
4.3   Form of Secured Convertible Note, dated July 7, 2015 (9)
4.4   Form of Common Stock Purchase Warrant, dated July 7, 2015 (10)
4.5   Form of Lock Up Agreement (11)
4.6   License Agreement, dated April 24, 2015, between the Company and The Governing Counsel of the University of Toronto (12)
4.7   Form of Subscription Agreement (13)
4.8   Office Suite License and Services Agreement, effective November 1, 2015, between iQ Univeristy LP and the Company (14)
4.9   Form of Warrant sold in the registered public offering (15)
4.10   Services Agreement, dated February 1, 2016 with Artimetrix Software Inc. (16)
4.11   Consulting Agreement, dated August 3, 2015 with 8121346 Canada Inc. (17)
4.12   Amendment to Consulting Agreement, dated February 1, 2016 with 8121346 Canada Inc. (18)
4.13   Master Services Agreement, dated December 8, 2015 with Blog Inc LLC (dba Cress & Company) (19)
4.14   Executive Employment Agreement, dated July 25, 2016, between the Company and its President and CEO, Prateek Dwivedi (20)
4.15   Executive Employment Agreement, dated December 1, 2016, between the Company and its Chief Technology Officer, David Goyette (21)
4.16   Offer to Sublease, dated January 30, 2017, between the Company and Home Trust Company (22)
4.17   API Integration & Distribution Agreement dated December 13, 201,6 between the Company and MHS (23)
4.18   Letter of Agreement, dated November 1, 2017, between the Company and Tiberend Strategic Advisors, Inc. (24)
4.19   Stock Option Plan, approved on January 12, 2017, at the Annual and Special Meeting of Shareholders (25)
4.20   Note and Warrant Purchase Agreement, dated as of November 14, 2016 (26)
4.21   Form of Convertible Promissory Note (27)
4.22*   Strategic Relationship Agreement, dated as of February 3, 2017, between the Company and MedReleaf Corp.
4.23*   Amendment to API Integration & Distribution Agreement, dated as of May 4, 2017, between the Company and MHS
4.24*   Form of Promissory Note
4.25*   Form of Investor Letter
4.26*   Form of Promissory Note with Warrants
4.27*   Form of Secured Subscription Agreement for Units
4.28*   Form of Compensation Option to Purchase Common Shares
4.29*   Form of Senior Secured Convertible Debenture
4.30*   Form of Warrant to Purchase Common Shares
4.31*   Form of Unsecured Subscription Agreement for Units (Premium)
4.32*   Form of Unsecured Subscription Agreement for Units (Regular)
4.33*   Form of Unsecured Convertible Debenture
4.34*   Agreement, dated March 1, 2018, between the Company and Revive Therapeutics Ltd.
4.35*   Agreement, dated March 5, 2018, between the Company and Aequus Pharmaceuticals Inc.
4.36*   Services Agreement, dated January 15, 2017, between the Company and NView Management Inc.
4.37*   Services Agreement, dated April 23, 2018, between the Company and Dianne Parsons, C.P.A.

 

  52  

 

 

4.38*   Lease, dated April 6, 2018, between the Company and Lisgar Development Limited
12.1*   Certificate of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2*   Certificate of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1*   Certificate of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2*   Certificate of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*   XBRL Instance Document
101.SCH*   XBRL Taxonomy Extension Schema Document
101.CAL*   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*   XBRL Taxonomy Extension Label Linkbase Document
101.PRE*   XBRL Taxonomy Extension Presentation Linkbase Document

 

*Filed herewith

‡ To be filed by amendment.

  

 

(1) Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form F-1/A filed with the SEC on November 16, 2015. 
(2) Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form F-1/A filed with the SEC on November 16, 2015.
(3) Incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form F-1/A filed with the SEC on November 16, 2015.
(4) Incorporated by reference to Exhibit 3.4 to the Company’s Registration Statement on Form F-1/A filed with the SEC on November 16, 2015.
(5) Incorporated by reference to Exhibit 3.6 to the Company’s Registration Statement on Form F-1/A filed with the SEC on November 16, 2015.
(6) Incorporated by reference to Exhibit 3.5 to the Form 6-K filed with the SEC on January 12, 2017.
(7) Incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form F-1 filed with the SEC on September 24, 2015.
(8) Incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form F-1 filed with the SEC on September 24, 2015.
(9) Incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form F-1 filed with the SEC on September 24, 2015.
(10) Incorporated by reference to Exhibit 10.4 to the Company’s Registration Statement on Form F-1 filed with the SEC on September 24, 2015.
(11) Incorporated by reference to Exhibit 10.8 to the Company’s Registration Statement on Form F-1 filed with the SEC on September 24, 2015.
(12) Incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement on Form F-1/A filed with the SEC on November 16, 2015.
(13) Incorporated by reference to Exhibit 10.19 to the Company’s Registration Statement on Form F-1/A filed with the SEC on December 18, 2015.
(14) Incorporated by reference to Exhibit 10.21 to the Company’s Registration Statement on Form F-1/A filed with the SEC on November 16, 2015.
(15) Incorporated by reference to Exhibit 10.23 to the Company’s Registration Statement on Form F-1/A filed with the SEC on December 18, 2015.
(16) Incorporated by reference to Exhibit 10.24 to the Company’s Registration Statement on Form F-1/A filed with the SEC on March 11, 2016.
(17) Incorporated by reference to Exhibit 10.25 to the Company’s Registration Statement on Form F-1/A filed with the SEC on March 11, 2016.
(18) Incorporated by reference to Exhibit 10.26 to the Company’s Registration Statement on Form F-1/A filed with the SEC on March 11, 2016.
(19) Incorporated by reference to Exhibit 10.27 to the Company’s Registration Statement on Form F-1/A filed with the SEC on March 11, 2016.
(20) Incorporated by reference to Exhibit 4.14 to the Company’s Annual Report on Form 20-F filed with the SEC on May 16, 2017.
(21) Incorporated by reference to Exhibit 4.15 to the Company’s Annual Report on Form 20-F filed with the SEC on May 16, 2017.
(22) Incorporated by reference to Exhibit 4.16 to the Company’s Annual Report on Form 20-F filed with the SEC on May 16, 2017.
(23) Incorporated by reference to Exhibit 4.17 to the Company’s Annual Report on Form 20-F filed with the SEC on May 16, 2017.
(24) Incorporated by reference to Exhibit 4.18 to the Company’s Annual Report on Form 20-F filed with the SEC on May 16, 2017.
(25) Incorporated by reference to Exhibit 4.19 to the Company’s Annual Report on Form 20-F filed with the SEC on May 16, 2017.
(26) Incorporated by reference to Exhibit 99.1 to the Form 6-K filed with the SEC on November 23, 2016.
(27) Incorporated by reference to Exhibit 99.2 to the Form 6-K filed with the SEC on November 23, 2016.
  53  

 

  

SIGNATURE

 

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

 

Date: June 13, 2018

 

EHAVE, INC.

 

/s/ Prateek Dwivedi   /s/ Dianne Parsons
Prateek Dwivedi   Dianne Parsons
Chief Executive Officer   Chief Financial Officer

 

  54  

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of EHAVE, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of EHAVE, Inc. (the “Company”) as of December 31, 2017 and 2016 and the related statements of operations and other comprehensive income (loss), changes in stockholders’ deficit and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Explanatory Paragraph – Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has had insufficient operating revenues and cash flows both of which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ Turner, Stone & Company, L.L.P.  
   
Dallas, Texas  
June 13, 2018  

 

We have served as the Company’s auditor since 2015.

 

  F- 1  

 

 

EHAVE, INC.

BALANCE SHEETS

December 31, 2017 and December 31, 2016

  

    2017     2016  
    $     $  
ASSETS                
Current Assets                
Cash     3,671       6,781  
Other receivables     10,706       28,444  
Prepaid expenses     14,051       13,155  
Refundable taxes     30,847       -  
Total current assets     59,275       48,380  
TOTAL ASSETS     59,275       48,380  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
Current Liabilities                
Accounts payable     509,758       357,593  
Promissory Notes (Note 6)     196,237       -  
Current portion of Convertible notes (Note  5)     1,018,885       325,000  
Accrued interest on convertible notes     73,162       24,085  
Unearned Revenue     91,515       -  
Total current liabilities     1,889,557       706,678  
Long term liabilities            
Development grant     178,984       167,573  
Convertible notes (Note 5)     -       366,089  
Total long term liabilities     178,984       533,662  
Total Liabilities     2,068,541       1,240,340  
Commitments and Contingencies (Note 10)                
                 
Stockholders’ Deficit                
                 
Common stock, no par value, unlimited authorized,  71,304,035 issued and outstanding (2016 – 44,359,162 issued and outstanding)     1,419,544       913,403  
Additional paid in capital (Note 7)     3,468,314       582,825  
Accumulated deficit     (6,989,124 )     (2,847,511 )
Accumulated other comprehensive income     92,000       159,323  
Total stockholders' deficit     (2,009,266 )     (1,191,960 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT     59,275       48,380  

 

The accompanying notes are an integral part of these financial statements.

 

F- 2  

 

 

EHAVE, INC.

STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

  

    For the years ended December 31,  
    2017     2016  
    $     $  
Revenue     78,260       -  
                 
Operating Expenses                
Salaries     560,440       292,389  
Rent     26,235       35,328  
Professional fees     223,928       378,156  
Insurance     10,277       5,110  
Travel     12,112       30,608  
Communications     231,662       108,175  
Software development     189,976       221,688  
General and administrative     5,944       39,393  
Total operating expenses     1,260,574       1,110,847  
Operating Loss     (1,182,314 )     (1,110,847 )
                 
Other expenses                
Warrant expense     2,745,731       301,606  
Stock options expense     139,758       73,435  
Interest and bank charges     1,208       1,175  
Interest on convertible notes     72,602       19,186  
Total other expenses     2,959,299       395,402  
Loss before taxes     (4,141,613 )     (1,506,249 )
Less: Refundable taxes     -       4,045  
Net loss     (4,141,613 )     (1,502,204 )
Other Comprehensive income (loss)                
Foreign exchange translation adjustment     (67,323 )     35,428  
Total other comprehensive income (loss)     (67,323 )     35,428  
Comprehensive loss     (4,208,936 )     (1,466,776 )
                 
Weighted average shares used to compute net loss per share     69,030,618       32,144,065  
Net loss per share   $ (0.06 )   $ (0.05 )

 

The accompanying notes are an integral part of these financial statements.

 

F- 3  

 

 

EHAVE, INC.

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED

DECEMBER 31, 2017 AND 2016

 

    2017     2016  
    $     $  
CASH FLOWS FROM OPERATING ACTIVITIES                
Net loss     (4,141,613 )     (1,502,204 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Warrant expense     2,745,731       301,606  
Stock options expense     139,758       73,435  
                 
Changes in operating assets and liabilities:                
Other receivables     17,738       (15,070 )
Prepaid expenses     (896 )     (7,155 )
Accounts payable     152,165       261,569  
Accrued interest on convertible notes     49,077       17,854  
Unearned revenue     91,515       -  
Refundable taxes receivable     (30,847 )     109,470  
Net cash used in operating activities     (977,372 )     (760,495 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from convertible notes     327,796       400,357  
Proceeds from promissory notes     196,237       -  
Proceeds from sale of common shares     -       366,455  
Net cash provided by financing activities     524,033       766,812  
                 
CASH FLOWS FROM INVESTING ACTIVITIES     -       -  
                 
Effect of exchange rate on cash     450,229       (14,667 )
                 
Net increase (decrease) in cash     (3,110 )     (8,350 )
Cash, beginning of year     6,781       15,131  
Cash, end of year     3,671       6,781  
                 
Interest and taxes paid     -       -  
Supplemental cash flow data                
Non-cash financing activity                
Conversion of convertible notes     506,141       -  

 

The accompanying notes are an integral part of these financial statements.

 

F- 4  

 

 

EHAVE, INC.

STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

 

                      Accumulated        
          Additional           Other     Total  
    Common stock     Paid in     Accumulated     Comprehensive     Stockholders’  
    Shares     Amount    

Capital

   

Deficit

   

Income

    deficit  
          $     $     $     $     $  
                                     
Balance December 31, 2015     28,072,366       546,948       207,784       (1,345,307 )     123,895       (466,680 )
                                                 
Issuance of shares for cash     16,286,796       366,455                               366,455  
Warrants issued (Note 7)                     375,041                       375,041  
Net loss                             (1,502,204 )             (1,502,204 )
Foreign exchange translation                                     35,428       35,428  
Balance December 31, 2016     44,359,162       913,403       582,825       (2,847,511 )     159,323       (1,191,960 )
Prior Year Adjustment     30,558                                          
Issuance of shares, primarily on conversion of debt     26,914,315       506,141                               506,141  
Warrants and stock options issued (Note 7)                     2,885,489                       2,885,489  
Net loss                             (4,141,613 )             (4,141,613 )
Foreign exchange translation                                     (67,323 )     (67,323 )
Balance December 31, 2017     71,304,035     $ 1,419,544     $ 3,468,314     $ (6,989,124 )   $ 92,000     $ (2,009,266 )

 

The accompanying notes are an integral part of these financial statements.

 

F- 5  

 

  

EHAVE, INC.

NOTES TO FINANCIAL STATEMENTS

 

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

A. Organization and General Description of Business

 

EHAVE, Inc. (formerly known as “Behavioural Neurological Applications and Solutions or 2304101 Ontario Inc.”) (“We” or “the Company”), was incorporated under the laws of the Province of Ontario, Canada on October 31, 2011.  The Company is a publicly listed company whose shares are traded on the OTCQB under the symbol EHVVF.

 

The Company is a healthcare company developing a health data platform that integrates with proprietary and third-party assessment and therapeutic digital applications. Our product focus is based on three tiers of activities: (1) MegaTeam and Ninja Reflex, our clinically validated digital assessment and rehabilitation software that is engaging for the patient, (2) adaptation of third-party clinically validated digital assessment and rehabilitation software for enhanced patient engagement and data modeling, and (3) Ehave Connect, our advanced health informatics and digital application delivery platform. We intend to provide technology solutions to clinicians, patients, researchers, pharmaceutical companies and payors.

 

B.  Basis of Presentation

 

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars.  The Company’s functional currency is Canadian dollars. The Company’s fiscal year end is December 31.

 

The Company qualifies as an “emerging growth company” as defined in Section 101 of the Jumpstart our Business Startups Act (“JOBS Act”) as the Company does not have more than $1,000,000,000 in annual gross revenue and did not have such amount as of December 31, 2017, its last fiscal year. The Company has elected to take advantage of the extended transition period provided in Section 102(b)(1) of the JOBS Act for complying with new or revised accounting standards.

 

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.

 

Revenue Recognition

 

The following criteria must be met in determining whether revenue may be recorded: (1) persuasive evidence of a contract exists; (2) software has been delivered and/or services have been provided; (3) the price is fixed or determinable; and (4) collection is reasonably assured.

 

Revenue is recorded as the software is delivered and/or services are provided based on the relative fair value of each element. Unbilled receivables are created when services are performed or software is delivered and revenue is recognized in advance of billings. Deferred revenue is created when billing occurs in advance of performing services or when all revenue recognition criteria have not been met.

 

The Company generates revenue from the following sources: (1) Software revenue, (2) Software as a Service [“SaaS”], and (3) Services revenue.

 

Software Revenue : The Company’s software revenue is comprised of traditional software license fees, maintenance and support fees, and fees from the resale of third-party software licenses. These software license fees include term licenses, perpetual licenses and rental fees. Maintenance and support are generally offered under annual or multi-year terms and are billed either monthly or annually in advance. The Company’s maintenance and support provides customers with periodic technology updates and interactive support related to our software. Maintenance and support revenue is recognized ratably over the stated term.

 

F- 6  

 

 

Services Revenue : The Company’s services offerings help customers to install, optimize and integrate the Company’s software into their computing environment. For fixed-fee professional services contracts, revenue is recorded based upon proportional performance, measured by the actual number of hours incurred divided by the total estimated number of hours for the project. Changes in the estimated costs or hours to complete the contract, and losses, if any, are reflected in the period during which the change or loss becomes known. The Company also provides professional services on a time and materials basis, recognized monthly based upon hours incurred to date. In all cases, contract milestones, project risk profile and refund provisions are taken into consideration.

 

Foreign Currency Translation

 

The functional currency of the Company’s foreign operations is generally the local currency of the country in which the operation is located. All assets and liabilities are translated into U.S. dollars using exchange rates in effect at the balance sheet date. Revenue and expenses are translated using average exchange rates during the period. The result from currency translation is reflected in stockholders’ deficit as a component of accumulated other comprehensive income.

 

Software Products and Research and Development

 

Software development costs are expensed as incurred and consist primarily of design and development costs of new products, and significant enhancements to existing products incurred before the establishment of technological feasibility. Costs incurred subsequent to technological feasibility of new and enhanced products, costs incurred to purchase or to create and implement internal-use software, and software obtained through business acquisitions are capitalized. Such costs are amortized over the estimated useful lives of the related products, using the straight-line method.

 

Income Taxes

 

Income tax expense is based on income before income taxes, and is accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded when it is more likely than not that a deferred tax asset will not be realized. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Considerable judgment is required in assessing and estimating these amounts and the difference between the actual outcome of these future tax consequences and the estimates made could have a material impact on the operating results. To the extent that new information becomes available which causes the Company to change its judgment regarding the adequacy of existing tax liabilities, such changes to tax liabilities will impact income tax expense in the period in which such determination is made. The Company records interest and penalties related to unrecognized tax benefits in income tax expense.

 

The Company makes claims for Scientific Research and Experimental Development (“SRED”) expenditures which are included in refundable taxes receivable. Judgment is required in the determination of qualifying expenses. The final determination of qualifying expenses is not known until acceptance by tax authorities. The Company's SRED credits are recorded in the financial statements after review of the relevant accounting pronouncements and once the determination of the expected SRED credits are reasonably assured. The claim for the current and prior year is in progress.

 

F- 7  

 

 

Net Loss per Common Share, basic

 

The Company has adopted Accounting Standards Codification (“ASC”) subtopic 260-10, Earnings Per Share (“ASC 260-10”) specifying the computation, presentation and disclosure requirements of earnings per share (EPS) information. Basic earnings (loss) per share includes no dilution and is computed by dividing net income or loss by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution of securities that could share in the earnings or losses of the entity. The Company had options to purchase 4,919,892 (2016- 2,217,958) common shares outstanding for the year December 31, 2017. Additionally, warrants to purchase 11,220.545 (2016- 12,064,140) common shares of the Company have been issued. Since these options and warrants would be anti-dilutive, no fully diluted loss per share is presented.

 

Recent Pronouncements

 

During the years ended December 31, 2017 and 2016 and through June 13, 2018 there were several new accounting pronouncements issued by the Financial Accounting Standards Board (FASB). Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s financial statements.

 

New standards and interpretations

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, as a new Topic, ASC 606. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The effective date for ASC 606 is annual reporting periods beginning after December 15, 2017. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Companies may apply the new guidance using either the full retrospective transition method, which requires restating each prior period presented, or the modified retrospective transition method, under which the new guidance is applied to the current period presented in the financial statements and a cumulative-effect adjustment is recorded as of the date of adoption. The Company is evaluating the potential impact this guidance will have on our financial statements, if any.

 

In March 2016, the FASB issued ASU 2016-02, Leases, which supersedes ASC Topic 840, Leases, and sets forth the principles for the recognition, measurement, presentation, and disclosure of leases for both lessees and lessors. ASU 2016- 02 requires lessees to classify leases as either finance or operating leases and to record on the balance sheet a right-of-use asset and a lease liability, equal to the present value of the remaining lease payments, for all leases with a term greater than 12 months regardless of the lease classification. The lease classification will determine whether the lease expense is recognized based on an effective interest rate method or a straight-line basis over the term of the lease. ASU 2016-02 will be effective for use beginning January 1, 2019, with early adoption permitted. Entities are required to use a modified retrospective transition method for existing leases. The Company is currently evaluating the potential impact this guidance will have on our financial statements, if any.

 

C. Risks and Uncertainties

 

Foreign Currency Risk

 

The Company is exposed to fluctuations in the exchange rate between the United States dollar and the Canadian dollar. The Company’s continued financing activities are primarily in United States dollars while the Company’s expenditures are primarily in Canadian dollars. Should the exchange rate between the Canadian dollar and the United States dollar fluctuate, the Company may be exposed to resource constraints.

 

2.  GOING CONCERN

 

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States, which contemplate the continuation of the Company as a going concern. The Company reported an accumulated deficit of $6,989,124 at December 31, 2017, and had a comprehensive loss of $4,208,936 for the year ended December 31, 2017.

 

In view of the matters described, there is substantial doubt as to the Company's ability to continue as a going concern without a significant infusion of capital. At December 31, 2017, the Company had insufficient operating revenues and cash flows to meet its financial obligations. There can be no assurance that management will be successful in implementing its plans. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

F- 8  

 

 

The Company raised $917,138   through private placements of convertible notes during the year ended December 31, 2017. The translation effect on this amount is $49,500. The subscription agreements dated January 31, 2018 and March 19, 2018 in the private placement provides for additional proceeds of $1,620,587   . If we receive the potential additional proceeds of up to $591,000 combined with the Company's anticipated operating cash flows, the Company is expected to have sufficient cash flows to operate for at least the next 12 months.   See Note 11.

 

Notwithstanding the foregoing, the Company anticipates that it will have to raise additional capital to fund research and development and operations over the next 12 months. To the extent that the Company is required to raise additional funds to cover costs of operations, the Company intends to do so through additional public or private offerings of debt or equity securities. There are no commitments or arrangements for other offerings in place, other than those described in Note 11, no guaranties that any other such financings would be forthcoming, or as to the terms of any such financings. Any future financing may involve substantial dilution to existing investors.

 

3.  FAIR VALUE MEASUREMENT

 

ASC Topic 820,  Fair Value Measurement , establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Refundable taxes, accounts payable, development grant and convertible notes are all stated at book value due to the term and nature of such items.

 

4.  RELATED PARTY TRANSACTIONS

 

The Company paid a salary to Prateek Dwivedi, the current Chief Executive Officer and a Director of the Company of $304,572 (CDN$395,000) (2016 - $23,568 (CDN$32,500) and consulting fees to a company in which he is the beneficial owner of $117,839 (CDN$162,350)). During 2017 the Company paid consulting fees of $116,238 (CDN$150,750) to Scott Woodrow. The Company paid a salary to Scott Woodrow, the former Chief Executive Officer and Director of the Company, of $171,519 (CDN$236,525) for the year ended December 31, 2016.

 

On July 27, 2017, the Company entered into a demand non-interest bearing secured promissory note with Scott Woodrow, a director of the Company, in the principal amount of $47,778 (CDN$60,000). In November 2017, the note was converted into a note with 800,000 attached warrants.

 

On July 27, 2017, the Company entered into a demand non-interest bearing secured promissory note with NView Management in the principal amount of $86,797 (CDN$109,000). Scott Woodrow, a director of the Company, is the controlling shareholder, director and President of NView Management , As at December 31, 2017 $45,490 (CDN$59,000) was outstanding on this note.

 

On October 11, 2017, the Company entered into a demand non-interest bearing unsecured promissory note with Scott Woodrow, a director of the Company, in the principal amount of $80,276 (CDN$100,000). On January 18, 2018 the note was exchanged for an unsecured convertible debenture. (see note 11)

 

At December 31, 2016, Convertible Notes to related parties were as follows:

 

Related Party   Position   Amount  
Jesse Kaplan   Director   $ 142,358  
David Stefansky   Director     142,358  
        $ 284,896  

 

On January 12, 2017, Jesse Kaplan and David Stefansky resigned as Directors of the Company.

 

F- 9  

 

 

5.  CONVERTIBLE NOTES

 

During the year ended December 31, 2017, the Company issued $609,826 [2016 – 400,357] of convertible promissory notes under the convertible promissory note agreement with existing shareholders entered into on November 14, 2016.  The convertible promissory note agreement with existing shareholders of the Company, allows for proceeds up to $1,500,000.  The convertible promissory notes are convertible into the number of securities sold in the qualified offering equal to the aggregate amount of the principal and accrued and unpaid interest then outstanding under such note divided by the lower of (i) 80% of the price per equity security sold to investors in the qualified offering, and (ii) the quotient of $5,500,000 and the number of common shares outstanding immediately prior to the closing of a qualified offering.  Holders of the convertible promissory note shall receive warrant to purchase the number of common shares of the Company equal to the aggregate consideration funded by each lender prior to the qualified offering divided by the conversion price. Common Stock Purchase Warrants shall have a strike price of 120% of the conversion price.

 

During the year ended December 31, 2016, the Company received proceeds on convertible notes of $466,000. The convertible notes bear interest at a rate of 4% per annum and have maturity dates from July 7, 2017 to November 16, 2018. Interest is to be accrued January 1 and July 1 commencing January 1, 2016. The holders, at their option, may elect to receive interest in cash, common shares or a combination thereof. The notes are convertible into common shares of the Company at the option of the holder at a conversion price of $0.0409 per share being equal to 11,947,403 common shares. Under the terms of the convertible note, the Company was required to have a “Go Public Event”. Under the provisions of the convertible note, the Go Public Event required the Company’s common shares to be listed for trading or quoted on a Trading Market. This event took place on February 7, 2017 when the shares of the Company began trading on the OTCQB.

 

In connection with the purchase of convertible notes, holders of the convertible note were issued 9,529,643 Common Stock Purchase Warrants.

 

The convertible notes are secured by a general security agreement on the Company’s assets. On February 2, 2017, the notes were converted and the warrants were exercised under the cashless exercise provision resulting in the issuance of 26,914,315 common shares effective as of that date.

 

6. PROMISSORY NOTES

 

During the year ended December 31, 2017, the Company received proceeds on promissory notes of $196,237.  The promissory notes are non-interest bearing and due on demand.  Lenders of the promissory notes were issued 2,133,333   common stock purchase warrants at an exercise price of $0.075   per share with an expiry date of November 16, 2022.  On January 31, 2018, $148,745   of the promissory notes were repaid and $47,932 of the promissory notes were exchanged for unsecured convertible debentures. 

 

7. STOCK BASED COMPENSATION

 

Under the terms of the Company’s employment agreement with the Chief Executive Officer, Prateek Dwivedi, and the Chief Technology Officer, Dave Goyette, Mr. Dwivedi and Mr. Goyette received during the year a grant of stock options to purchase up to 1,404,118 and 707,415, respectively (2016 - 2,808,359 & nil ) shares of the Company’s common stock at a price of $0.50 and $0.08 per share. The Option Shares vested rateably over 12 months and 24 months respectively at the date of issuance.

 

F- 10  

 

 

Summary Stock Compensation Table

 

The following table sets forth the Company’s paid or accrued stock compensation expense to its officers, directors, employees and contractors.

 

    Stock
Awards
    Stock
Options
Awards
    Non-Vested
Stock
Awards
    Securities
Underlying
Non-Vested
Stock
    Total  
Year ended December 31, 2016   $ -     $ -     $ -       2,808,359     $ -  
Year ended December 31, 2017   $ -     $ -     $ -       2,111,533     $ -  

 

A Summary of the status of the Company’s option grants as of December 31, 2017 and 2016 and the changes during the periods then ended is presented below:

 

    Shares     Weighted-
Average
Exercise
Price
    Weighted
Average
Remaining
Contractual
Term
(in Years)
    Aggregate
Intrinsic
Value
 
Outstanding December 31, 2015     8,200,000     $ 0       6.0       -  
Granted     2,808,359       -       5.0       -  
Exercised     (8,200,000 )     -       4.0       -  
Forfeited     -       -       -       -  
Outstanding December 31, 2016     2,808,359     $ -       5.0     $ -  
Granted     2,111,533     $ 0.17       5.0       -  
Exercised           $ -       -       -  
Forfeited     -       -       -       -  
Outstanding December 31, 2017     4,919,892     $ -       5.0     $ -  

 

The weighted average fair value at the grant date for options during the years ended December 31, 2017 and 2016 was estimated using the Black-Scholes option valuation model with the following inputs:

 

    2017     2016  
Average expected life in years     5       5  
Average risk-free interest rate     2.20 %     5.00 %
Average volatility     253 %     100 %
Dividend yield     0 %     0 %

 

Risk-free interest rates for the options were taken from the 5 year federal treasury rate at December 31, 2017. The expected volatility was based on historical data and other relevant factors such as capital structure and the nature of the Company as a development stage company.

 

F- 11  

 

 

In calculating the expected life of stock options, the Company determines the amount of time from grant date to expected contractual term date for vested options. In developing the expected life assumption, all amounts of time are weighted by the number of underlying options.

 

A summary of the status of the Company’s vested and non-vested option grants at December 31, 2017 and December 31, 2016 and the weighted average grant date fair value is presented below:

 

 

2017

  Shares     Weighted Average
Grant Date
Fair Value per
Share
    Weighted
Average Grant
Date
Fair Value
 
Vested     3,410,191     $ 0.14     $ 476,080  
Non-vested     1,509,701     $ 0.14     $ 211,706  
Total     4,919,892     $ 0.14     $ 687,786  

 

2016   Shares     Weighted Average
Grant Date
Fair Value per
Share
    Weighted
Average Grant
Date
Fair Value
 
Vested     2,808,359     $ 0.12     $ 73,435  
Non-vested     -       0.00     $ 0  
Total     2,808,359     $ 0.12     $ 73,435  

 

Warrants Issued

 

The following table reflects a summary of Common Stock warrants outstanding and warrant activity during 2017 and 2016:

 

    Number of
warrants
    Weighted
Average Exercise
Price
    Weighted Average
Term
(Years)
 
Warrants outstanding at December 31, 2015     7,946,210       -       -  
Granted during the year     12,645,476     $ 0.0818       4.55  
Exercised during the year     -       -       -  
Forfeited during the year     -       -       -  
Warrants outstanding at December 31, 2016     20,591,686       -       -  
Granted during the year     5,433,230     $ 0.0818       4.50  
Exercised during the year     13,330,539       -       -  
Forfeited during the year     -       -       -  
Warrants outstanding at December 31, 2017     12,694,377     $ 0.0818       4.50  

 

F- 12  

 

 

The Common stock warrants expire in the years ended December 31 as follows:

 

Year   Amount  
       
2018     -  
2019     -  
2020     7,946,210  
2021     4,748,167  
2022     -  
      12,694,377  

 

In the Company’s registered public offering in June 2016, purchasers of 8,086,796 common shares were issued warrants to purchase 8,086,796 common shares. The warrants entitle the holder to purchase the Company’s common shares at a purchase price of $0.0818 per share for up to a period of five years from the date of issuance. After six months from the date of issuance, the holders of the warrants, at their option, may exercise their warrants using a cashless exercise. An aggregate of warrants to purchase 11,393,643 common shares were issued in the registered public offering. The value of Warrant expense recognized during the year ended December 31, 2017, was $2,745,730. (2016 - $ 301,606).

 

The Company estimates the fair value of warrants using the Black-Scholes pricing model with the following inputs:

 

    2017     2016  
             
Average expected life in years     4.5       5.0  
Average risk-free interest rate     2.20 %     5.0 %
Average volatility     253 %     100 %
Dividend yield     0 %     0 %

 

8.  DEVELOPMENT GRANT

 

On June 7, 2012, the Company entered into a project funding agreement with the Canada-Israel Research and Development Foundation (“CIIRDF”). The purpose of the grant was to fund the Company’s activities related to the development of a cognitive assessment and treatment platform for childhood attention deficit disorder and attention hyperactivity disorder (the “Development”). Under the terms of the grant, CIIRDF would fund up to CDN$300,000 of development activities related to the Development. The grant is repayable to CIIRDF based on 2.5% of annual gross sales related to products developed from the Development. The Company received CDN$225,000 from CIIRDF to fund the Development. The amount presented in these financial statements is reflected in United States dollars.

 

9. INCOME TAXES

 

The Company computes income taxes using the asset and liability approach. The Company currently has no issue that creates timing differences that would mandate a deferred tax expense. Due to the uncertainty as to the utilization of net operating loss carryforwards, a valuation allowance has been made to the extent of any tax benefit that net operating losses may generate. No provision for income tax has been recorded for the years ended December 31, 2017 and December 31, 2016 due to the Company’s net operating loss carryforward from prior years.

 

The Company is entitled to refundable SRED tax credits for qualifying research and development activities performed in Canada. The Company recognizes the benefit of its SRED tax credits when there is reasonable assurance that they will be realized.

 

The Company has a net operating loss for tax purposes of CDN$1,629,068 (2016 – CDN$1,130,809) that can be carried forward over 20 years.

 

F- 13  

 

 

Deferred Income Taxes

 

Deferred income taxes primarily represent the net effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. The components of the Company’s deferred taxes are as follows:

 

    2017     2016  
Deferred tax assets (liabilities):                
Net operating loss carryforward   $      340,489     $ 175,275  
Total deferred tax assets     340,489       175,275  
Valuation Allowance     (340,489 )     (175,275 )
Net Deferred tax assets   $ -     $ -  

 

10.  COMMITMENTS AND CONTINGENCIES

 

On December 8, 2011 the Company entered into a Collaboration Agreement between The Hospital for Sick Children (“SickKids”) and the Ontario Brain Institute (“OBI”). Under the terms of the Collaboration Agreement, the OBI agreed to fund SickKids activities related to the development of a software based treatment program for Attention Deficit and Hyperactivity Disorder in children (the “Project”). Funding of SickKids by the OBI was based on a Project budget of CDN$491,204 in which the Company was to contribute at least the same financial commitments for its own activities under the Project. During the Project period from December 8, 2011 to March 31, 2014, the Company contributed approximately CDN$540,000 consisting of CDN$437,400 of salaries and consulting fees, CDN$50,000 of software development and CDN$53,000 of equipment, supplies and overhead. Under the terms of the Collaboration Agreement, Project activities were to be substantially completed by March 31, 2014. Under the terms of the Collaboration Agreement, the Company is obligated to pay SickKids a minimum royalty on Project intellectual property of the amount of the Development Grant CDN$491,204. Under the terms of the royalty agreement between the Company and SickKids, such payments are to be made based on 5% of net revenue for the first CDN$15,000,000 of related Project product and 2.5% of net revenue thereafter. As of December 31, 2017, no amounts have been paid under the terms of the royalty agreement.

 

11  SUBSEQUENT EVENTS  

 

On January 31, 2018, the Company entered into a secured convertible debenture agreement for total proceeds of $1,218,620 (CDN$1,500,000) issued in two instalments. Under the terms of the secured convertible debenture, the principal amount and accrued interest is convertible into shares of the Company at a conversion price equal to 75% the issue price of common shares under a qualified offering. The conversion of the secured convertible debenture is at the option of the holder. At the time of conversion, the holder will also receive an equal amount of common share purchase warrants with an exercise price equal to the issue price. The secured convertible debenture is due on July 31, 2018 and bears interest at 10% per annum. The initial instalment of the secured convertible note was issued on January 31, 2018 for proceeds of $609,310 (CDN$750,000). On March 19, 2018, the final instalment of $573,307 (CDN$750,000) was received. The secured convertible note is secured against the general assets and intellectual property of the Company.

 

On January 31, 2018, promissory notes of $311,967 (CDN$384,000) outstanding at December 31, 2017 were exchanged for unsecured convertible debentures. From Jan 1, 2018 to January 31, 2018, the Company issued an additional $20,098 (CDN$25,000) unsecured convertible debentures for total proceeds of $332,065 (CDN$409,000). Under the terms of the unsecured convertible debenture, the principal amount and accrued interest is convertible into shares of the Company at a conversion price equal to 75% the issue price of common shares under a qualified offering. The conversion of the unsecured convertible debenture is at the option of the holder. At the time of conversion, the holder will also receive 120% of the amount of the common shares issued of common share purchase warrants with an exercise price equal to the issue price. The unsecured convertible debenture is due on July 31, 2018 and bears interest at 10% per annum.

 

On February 1, 2018, the Company repaid CDN$60,000 of the promissory notes outstanding at December 31, 2017. The balance of the promissory notes due to Scott Woodrow, a Director of the Company, was exchanged for an unsecured convertible debenture in the amount of CDN$59,000.

 

F- 14  

 

Exhibit 4.22

 

Strategic Relationship Agreement

 

THIS STRATEGIC RELATIONSHIP AGREEMENT (“ Agreement ”), made the 3 day of February, 2017 (“ Effective Date ”) between MedReleaf Corp., a corporation existing under the laws of Ontario, and having a registered address at P.O. Box 3040, Markham Industrial Park, Markham Ontario Canada L3R 6G4 (“ MedReleaf ”) and Ehave Inc. a corporation existing under the laws of Ontario, and having a place of business at 250 University Avenue, Suite 200. Toronto, ON M5H 3E5 (“ Ehave ”). MedReleaf and Ehave may be individually referred to as a “ Party ” or jointly as the “ Parties ”.

 

WHEREAS the Parties entered into a term sheet dated December 30, 2016 (“ Term Sheet ”) to contemplate a strategic relationship between the Parties where MedReleaf is to license to Ehave and codevelop with Ehave assessment, diagnostic and therapeutic content for distribution on Ehave's mental health informatics platform (“ Platform ”); and

 

WHEREAS MedReleaf was to provide consulting services to assist Ehave in the development of a standalone mobile application for doctors and caregivers and patients with respect to medical cannabis; and

 

WHEREAS the Parties intend that this Agreement is to give effect to the rights and obligations contained in the Term Sheet.

 

NOW THEREFORE for good and valuable consideration the Parties hereby agree as follows:

 

1. Definitions

 

(1) “ Acceptance ” means successful completion of the Project as set forth in Section 5.

 

(2) “ App(s) ” means the standalone mobile application that connects with the Platform as more particularly described in the Specification and any corrections, updates, revisions or enhancements thereto, which App(s) shall include a proprietary self-reporting patient dashboard and supporting dashboards for doctors,caregivers and patients developed exclusively for MedReleaf pursuant to Schedule B hereof and any future or derivative Apps based on the Project Documentation.

 

(3) “ Background Intellectual Property ” means Intellectual Property provided by either Party that was: (i) developed prior to the Effective Date; or (ii) developed other than in performance of the Agreement, as is partially described in Schedule A;

 

(4) “ Collaboration Content ” means Content, made or conceived by a Party pursuant to or as a result of the performance of this Agreement, or otherwise in the course of the Parties’ work together hereunder within the Field of Use.

 

(5) “ Collaboration Intellectual Property ” means Intellectual Property, including Inventions, Collaboration Content, made or conceived by a Party pursuant to or as a result of the performance of this Agreement, or otherwise in the course of the Parties’ work together, or by a receiving Party based on the disclosing Party’s Confidential Information within the Field of Use.

 

(6) “ Content ” means all content including text, information, data, software, executable code, images, audio, or video material in any medium or form.

 

(7) “ Delivery Date ” means the date upon which the Service is provided to an End User.

 

(8) “ Derivative Work ” means an enhancement or modification to Background Intellectual Property that one Party generates or develops to its own Background Intellectual Property outside of the scope of this Agreement or without input of the other Party.

 

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(9) “ End User ” means any person, firm or corporation which acquires the Services.

 

(10) “Field of Use” means all mental health conditions and pain indications. All other indications to be mutually agreed upon.

 

(11) “ Force Majeure Event ” means a fire, flood, earthquake, severe weather, act of God, any change of law, trade sanction, embargo, act of war or terrorism, strike, condition caused by national emergency or any other act or cause beyond the reasonable control and without the fault of either Party;

 

(12) “ Inventions ” means any discoveries, improvements or ideas (whether or not patentable or copyrightable), developed or discovered in connection with the Project by the Parties together, but excluding Derivative Work.

 

(13) " Intellectual Property " includes any idea, improvement, Content, Inventions or discovery, whether or not patented or patentable, any know-how or trade secret, any design or any work subject to copyright, whether or not such design or copyright is registered or registrable, which is recognised or protected as intellectual property.

 

(14) “ Intellectual Property Rights ” means rights in Intellectual Property in patents, copyrights, designs and design patents, trademarks (including service marks) trade secrets, mask work rights, moral rights, or forms of protection of a similar nature having equivalent or similar effect to any of the foregoing, which may subsist anywhere in the world.

 

(15) “ Licence Period ” means the subscription term for an End User for the licensing of the Service beginning from the Delivery Date.

 

(16) “ Milestone ” means any of the events shown on Schedule “C”.

 

(17) “ Net Sales Revenues ” means the gross amount of revenues from End Users during a License Period actually recognized in accordance with GAAP from the licensing of the Services less all value-added, sales, use and similar taxes and also less all return credits, discounts and commissions granted or paid in the ordinary course of business.

 

(18) “ Project ” means the work, services, research and development undertaken since the Effective Date or to be undertaken by the Parties to design, test and produce the Collaboration Intellectual Property, the App, and Project Documentation and offer the Services.

 

(19) “ Project Documentation ” means the software programs comprising the Software, including all Software Source Code, the App design documentation, design specifications and descriptions, project control documents, calculation formulae and details of all algorithms and all other software, documentation, blue prints and parts lists reasonably required to produce the App as may be shared between the Parties from time to time.

 

(20) “ Project Schedule ” means the schedule of Milestones and dates attached hereto as Schedule “C”.

 

(21) “ Prototype ” means the version of the App developed and produced for purposes of Acceptance testing in accordance with Section 5.

 

(22) “ Services ” means the licensing of the Collaboration Intellectual Property, including the App, and access and use of the Platform to End Users.

 

(23) “ Services Intellectual Property ” means the Background Intellectual Property or Collaboration Intellectual Property that is used to create the App.

 

(24) “ Software ” means the software program portion of the App, complying with the applicable portions of the Specification, and any corrections, updates, revisions or enhancements thereto, regardless of the physical medium in or on which such Software may be embodied.

 

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(25) “ Software Source Code ” means program listings of the Software in human-readable form.

 

(26) “ Specification ” means the features, functionality, and performance, technical and other requirements for the App set forth in Schedule “B”, as amended from time to time.

 

(27) “ Support Services ” means upgrades, warranty, maintenance, training, technical and marketing services described in Schedule “F”.

 

(28) “ Test Criteria ” means the testing methods and related standards set forth in Schedule “D” for determining whether the App complies with the Specification.

 

2. Development Project

 

(1) Ehave and MedReleaf shall each carry out its respective obligations in connection with the Project and deliver and create the Collaboration Intellectual Property, Apps, and Project Documentation in accordance with the Project Schedule and all other provisions of this Agreement.

 

(2) Ehave and MedReleaf shall each use such employees, research and analytical tools, services and facilities as it shall reasonably deem necessary and appropriate to complete its obligations under this Agreement and shall each ensure that such employees are suitably qualified with scientific, technical and engineering expertise necessary to complete its obligations under this Agreement.

 

(3) Ehave shall be responsible for obtaining all regulatory and governmental approvals as may be necessary for the distribution of the Apps.

 

(4) Ehave shall be responsible, with consulting input from MedReleaf, to develop and create the App and integrate the Collaboration Intellectual Property into the Platform.

 

(5) At reasonable intervals during the Project, each Party shall deliver to the other that portion of the Project Documentation for which it is responsible.

 

(6) At intervals no longer than 14 days unless otherwise agreed, the Parties shall review the progress of the Project. Notwithstanding the foregoing, each Party shall closely monitor its activities hereunder; advise the other immediately of any possibility that a Milestone may not be met, and in such event devise remedial action to recover lost time.

 

(7) Ehave or MedReleaf may propose changes to the Specification during the Project. No such changes shall be implemented unless such changes and the resulting impact on cost, schedule and other aspects of this Agreement, are mutually agreed upon in writing.

 

(8) Each Party shall, upon the reasonable request of the other Party, provide technical assistance to the other party during the Project. Notwithstanding such assistance being provided, each Party shall remain solely responsible for the completion of its specific obligations in connection with the Project.

 

(9) Ehave agrees that it shall not, for a period of 1 year after the public launch date of the App, offer the App to other Cannabis industry parties or integrate the App into the Platform for distribution.

 

3. Obligations of the Parties

 

(1) The obligations of Ehave in carrying out the purposes of the Project are:

 

(i) to undertake forthwith the programming of the Software and launch of the App;
(ii) to maintain the Software and Platform in accordance with Schedule F;
(iii) to collaborate to create Collaboration Intellectual Property;

 

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(iii) to integrate Collaboration Intellectual Property into the Platform as required; and
(v) upon Acceptance, to carry out the marketing arrangements described in Schedule F.

 

(2) The obligations of the MedReleaf in carrying out the purposes of the Project are:

 

(i) to assist Ehave in the development of the App by the provision of a sufficient description and technical expertise with respect to content provided to enable Ehave to program the Software and launch the App;
(ii) to assist in determining the scope of the potential market for the Services; to assist in marketing the Services using its field sales teams, online presence and other existing and future channels;
(v) upon Acceptance, carry out any agreed upon marketing arrangements described in Schedule E.
(vi) to collaborate to create Collaboration Intellectual Property.
(vii) to make an investment into Ehave of USD$100,000 in the form of a convertible note with the same terms of the existing note holders. Convertible into common shares at a company valuation of USD$5,500,000 based on outstanding shares at time of conversion, full warrant coverage with 20% premium on strike price. MedReleaf will invest US$200,000 into Ehave's TSX-V common stock public offering (the " Offering "). The Offering shall be at company valuation of US$15,000,000 on a fully diluted basis. The Offering shall include 1/2 warrant for every share of common stock issued.

 

4. Representations and Warranties

 

(1) Ehave hereby represents and warrants as follows:

 

(i) that it has full right, power and authority to enter into and carry out this Agreement and has been and is on the Effective Date duly authorized by all necessary and appropriate corporate or other action to execute this Agreement;
(ii) that it has no prior commitments, arrangements or agreements with any other person which might interfere with, or preclude the carrying out of its obligations under this Agreement, and
(iii) that it has no knowledge or information indicating that its’ Background Intellectual Property in any way infringes upon patents, trade marks or trade secrets owned by any other persons.
(iv) that is has no less than USD $300,000 of new capital available for the purpose of fulfilling its obligations hereunder.

 

(2) MedReleaf hereby represents and warrants as follows:

 

(i) that it has full right, power and authority to enter into and carry out this Agreement and has been and is on the Effective Date duly authorized by all necessary and appropriate corporate or other action of execute this Agreement.
(2) that it has no prior commitments, arrangements or agreements with any other person which might interfere with, or preclude the carrying out of its obligations under this Agreement, and
(3) that it has no knowledge or information indicating that its’ Background Intellectual Property in any way infringes upon patents, trade marks or trade secrets owned by any other persons

 

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5. Testing and Acceptance of App

 

(1) When Ehave has produced the Prototypes and the then existing Project Documentation, the Parties shall conduct the applicable acceptance tests in accordance with Schedule “D” using the Test Criteria.

 

(2) Upon completion of such acceptance testing, Ehave shal correct any deficiencies in the portion of the Prototypes and related Project Documentation. Upon completion of such development, the Parties shall then employ the Test Criteria until Acceptance has been achieved. The App shall be deemed to have achieved Acceptance upon the earliest of Ehave’s receipt of MedReleaf’s notice of Acceptance, correction of all defective portions of the App in accordance with the Test Criteria or 5 days after MedReleaf’s receipt of Ehaves notice to MedReleaf advising that Acceptance has been achieved and MedReleaf not identifying any defects in the App in writing within such 5 day period.

 

6, Rights and Licenses in Intellectual Property

 

(1) Ownership of any Intellectual Property, including Inventions, owned or controlled by a Party prior to the Effective Date or that are or have been otherwise made, conceived or acquired by a Party outside of the scope of the Agreement shall not be affected by this Agreement.

 

(2) Subject to the terms of this Agreement, each Party hereby grants to the other Party, a revocable, nonexclusive license to use, modify, copy, and store (electronically or otherwise) such Party’s Background Intellectual Property for the purpose of the Project and solely to provide the Services. Ehave is hereby authorized to grant sublicenses to any End Users of MedReleaf’s Background Intellectual Property as it is incorporated into the Service on terms that prohibit those End Users from granting any further sub-licence.

 

(3) Any Derivative Work to a Party’s Background Intellectual Property that it creates outside of the scope of the Field of Use or this Agreement shall be owned by that Party.

 

(4) Collaboration Intellectual Property shall be jointly owned by Ehave and MedReleaf and the Parties do hereby sell and assign to each other an undivided half-interest in all Collaboration Intellectual Property. The Parties further agree to execute any documents or take any action that may be reasonably required to register the Parties as joint owners of Collaboration Intellectual Property. Each Party warrants that any and all Intellectual Property created by its personnel under this Agreement is and shall be, as between that Party and such personnel, owned by the Party, and that each Party shall have full rights in such Intellectual Property and an ability to assign the undivided half-interest to the other Party as promised herein. Each Party shall sign all papers, perform all acts, or otherwise assist the other party, at its own expense, to perfect and ensure the Intellectual Property ownership provisions of this Section.

 

(5) Collaboration Intellectual Property is hereby deemed to contain Ehave and MedReleaf Confidential Information, shall be marked as containing Ehave and MedReleaf Confidential Information, and shall not be disclosed to any third party nor used for any purpose other than in furtherance of the mutual purposes of this Agreement without prior written consent of the other Party.

 

(6) Unless otherwise agreed, Collaboration Intellectual Property may only be used in furtherance of this Agreement. In the event that either Party wishes to use Collaboration Intellectual Property, and/or the other Party’s Background Intellectual Property for any purpose not expressly permitted by this Agreement, the express prior written consent of the other Party is required, and the Parties agree to negotiate in good faith appropriate compensation on a case–by-case basis and address the approach to registrations and maintenance of any Intellectual Property registrations.

 

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(7) Each Party represents and warrants to the other that the Intellectual Property contributed, disclosed, shared or otherwise used by such Party under this Agreement is owned or controlled by such Party with the power to disclose, sublicense or transfer, as applicable, and such Party's actions hereunder with respect to such Intellectual Property does not violate any intellectual property rights belonging to a third party.

 

(8) (i) In the event a Party seeks to enforce Collaboration Intellectual Property rights against any third party, the Party seeking enforcement (the “Initiating Party”) shall provide written notice to the other Party (the “Notified Party”). The Initiating Party and the Notified Party shall confer promptly regarding the enforcement identified in the notice. The Notified Party shall inform the Initiating Party, in writing, within 30 days of receipt of the written notice, whether or not it will agree to participate in the enforcement effort.
(ii) If the Notified Party agrees to participate in the enforcement effort, unless the Parties agree otherwise, the following shall apply:

 

(A) The Initiating Party shall act as lead party in the enforcement effort, and shall be entitled to immediately take control of the enforcement effort, including any suits or actions in support thereof, and to employ and engage attorneys reasonably acceptable to both Parties to handle and prosecute the same. The Notified Party shall cooperate with the Initiating Party at its own costs; and
(B) The costs of the enforcement effort (including, but not limited to, attorneys’ fees and fees for experts) shall be shared equally by the Parties; and
(C) Any monetary recovery achieved by the enforcement effort shall be shared equally by each of the Parties participating in and paying their share of the costs of the enforcement effort (after deducting all costs arising from the enforcement effort and reimbursing each of the Parties for the payments they have made).

 

(iii) If a Notified Party declines or fails to participate in, or fails to pay its share of the costs of an enforcement effort the Initiating Party shall have the right to proceed with the enforcement effort, and it alone shall share any monetary recovery achieved by the enforcement effort.
(iv) If a Notified Party declines or fails to participate in, or fails to pay its share of the costs of an enforcement effort, such Notified Party shall execute any documentation that is reasonably necessary to enable the Initiating Party to proceed with the enforcement effort. A Notified Party declining or failing to participate, or failing to pay its share of the enforcement effort agrees to be joined as a real-party-in-interest in any suit or action related to the enforcement effort, at the sole cost of the Initiating Party, if reasonably necessary to enable them to proceed with the enforcement effort. Joinder as a real-party-in-interest of a Notified Party who has declined or failed to participate, or failed to pay its share of the enforcement effort, shall not entitle such Notified Party joined as a real-party-in-interest to any share of the recovery of the enforcement effort, nor shall it require such Notified Party to be responsible for any share of the costs of the enforcement effort.

 

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(v) Notwithstanding anything in this Agreement to the contrary, except as expressly provided in the immediately preceding paragraph, no Party shall frustrate, impair, or hinder an enforcement effort concerning Collaboration Intellectual Property, including, but not limited to, by licensing to or otherwise authorizing a third party that is the target of an enforcement effort to make, use, sell or otherwise exploit the subject matter of the applicable Joint Intellectual Property rights.

 

(9 ) Ehave shall ensure the Services contain adequate terms and conditions to ensure that End Users: (i) comply with all applicable laws in using the Collaboration Intellectual Property; (ii) state that the Collaboration Intellectual Property being supplied is only for the End User's personal use; (iii) prohibit reproduction or distribution of Collaboration Intellectual Property that violates applicable law; and (iv) contain a reservation in favor of the Parties that all Intellectual Property Rights and other rights in the Collaboration Intellectual Property.

 

(10) Ehave shall have responsibility for integrating the Collaboration Intellectual Property into the Platform to be accessed exclusively through the App in accordance with Section 2(9) hereof, however, MedReleaf shall be permitted to update or revise its Background Intellectual Property (including availability or pricing) or suggest changes to the Collaboration Intellectual Property. Ehave shall effect such changes to MedReleaf Background Intellectual Property in a timely manner.

 

7. Pricing and Licensing of the Services and Revenue Share

 

(1) It is understood that the App shall be offered to MedReleaf patients at no cost. Following the end of the exclusivity period, unless otherwise determined by the Parties, pricing of the Services for the App as offered to other Cannabis industry parties will be jointly set and each Party is to receive 50% of the Net Sales Revenue.

 

(2) Ehave to provide detailed reporting on sales activity to facilitate MedReleaf sales and marketing operations and confirm revenue share by providing MedReleaf access to its online reporting software.

 

8. Term and Termination Termination

 

(1) The term of this Agreement shall commence on the Effective Date and shall be for an initial period of five (5) years, and thereafter shall continue for automatic and successive renewal terms of twelve months unless (i) thirty days’ written notice of termination is given by either Party before the commencement of any such renewal period, or (ii) this Agreement is otherwise terminated in accordance with its terms.

 

(2) This Agreement and the relationship created under this Agreement may be terminated by either Party upon the happening of any of the following events:

 

(i) if the other Party is in breach or default in any material respect of any material provision of this Agreement upon notice in writing of a material breach or default of any of the material provisions of this Agreement which breach or default remains uncured for a period of thirty days after the giving of such notice
(ii) if the other Party is the subject of any bankruptcy or insolvency proceedings, whether voluntary or involuntary, and such proceedings remain outstanding for a period greater than fourteen days; or
(iii) if either Party gives not less than thirty days’ notice in writing prior to the effective date of expiration of the initial term or of any renewal term thereof;

 

(3) Upon termination of this Agreement,

 

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(i) both Parties shall return or destroy all documents and sales materials relating to the other Party’s products or services that remain in its possession,
(ii) the Parties agree to maintain and respect all confidentiality provisions between them and neither party shall take any actions or make any communications that will adversely affect the reputation or goodwill of the other Party, and
(iii) In the event of termination by MedReleaf, all revenue share obligations end.

 

9. Patient Data, Research Data and Pilot

 

(1) Ehave shall be permitted to aggregate and anonymize patient data specific to clinical context and patient outcomes from the use of Services, as allowed by consent and standard research ethics approvals and shall provide a copy of this aggregated data exclusively to MedReleaf. For patients’ of MedReleaf where full consent has been obtained, all patient data will be provided to MedReleaf.

 

(2) Ehave to work with MedReleaf and customers to create detailed research projects as allowed by consent and standard research ethics approvals, with initial focus on a research study in the Field of Use for post-traumatic stress disorder.

 

(3) Ehave and MedReleaf will work collaboratively on identification and execution of pilot customers to use the Services, with focus on assessment content for post-traumatic stress disorder in the Field of Use.

 

10 Limitation of Liability

 

EXCEPT FOR WILFULL MISCONDUCT, FRAUD, BREACH OF CONFIDENTIALITY OR MISAPPROPRIATION OF INTELLECTUAL PROPERTY, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOSS OF BUSINESS OR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES (EVEN IF SUCH DAMAGES ARE FORESEEABLE OR THAT PARTY HAS BEEN ADVISED OR HAS CONSTRUCTIVE KNOWLEDGE OF THE POSSIBILITY OF SUCH DAMAGES) ARISING FROM SUCH PARTY’S PERFORMANCE OR NON-PERFORMANCE PURSUANT TO ANY PROVISION OF THIS AGREEMENT. EXCEPT FOR WILFULL MISCONDUCT, FRAUD, BREACH OF CONFIDENTIALITY OR MISAPPROPRIATION OF INTELLECTUAL PROPERTY, EACH PARTIES LIABILITY SHALL BE LIMITED TO THE REVENUE SHARE PAID OR PAYABLE BY EHAVE TO MEDRELEAF AS A RESULT OF END USERS USE OF THE SERVICES IN THE 12 MONTH PERIOD PRIOR TO A CLAIM ARISING.

 

11. Confidentiality

 

(1) During the Term of this Agreement and for a period of five years thereafter, both Parties shall treat all information that they may have acquired in relation to each other and the Project as strictly confidential. Each Party shall use the same degree of care to avoid the disclosure of confidential data and information of the other Party as it uses to protect its own confidential data and information. The obligations undertaken by the Parties hereto pursuant to this Section shall not apply to any data or information which are or become in the public domain, other than in consequence of the willful or negligent act or omission of either of the Parties hereto or its employees, or which are developed independently from this agreement, or which are rightly obtained from third parties.

 

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12. Schedules

 

The following schedules shall constitute an integral part of this agreement:

Schedule “A”, Background Content and Background Intellectual Property

Schedule “B”, App Specification

Schedule “C”, Project Schedule

Schedule “D”, Test Criteria

Schedule “E”, Marketing Arrangements

Schedule “F”, Support Services

 

13. Severability

 

In the event of an enforceable decision or directive declaring invalid an essential part of this agreement, without which this agreement would not have been entered into, this agreement may, at the option of either party, be terminated upon the giving of written notice to the other party. Except as aforesaid, if any term, clause, provision or condition of this agreement is similarly adjudged invalid for any reason whatsoever, such invalidity shall not affect the validity or operation of any other term, clause, provision or condition and such invalid term, clause, provision or condition shall be deemed to have been deleted from this agreement.

 

14. Survival

 

Notwithstanding any termination or expiry of this agreement, the provisions of sections 1, 6, 9, 10 and 11 and all consequent rights, obligations and liabilities shall survive the termination or expiry of this agreement.

 

15. Assignment

 

(1) This Agreement shall be binding upon and enure to the benefit of Ehave and MedReleaf and their respective heirs, executors, legal personal representatives, successors and permitted assigns.

 

16. Waiver

 

The failure of either party to enforce at any time or for any period of time any of the provisions of this agreement shall not constitute a waiver of such provisions or the right of either party to enforce each and every provision.

 

17. Governing Law

 

The rights and obligations arising under the agreement shall be governed by and construed in accordance with the laws applicable in the Province of Ontario other than those dealing with conflicts of law, and the parties shall attorn to the jurisdiction of the Ontario courts.

 

18. Notices

 

(1) Any and all notices or other information required to be given by one of the party to the other shall be deemed sufficiently given when forwarded by prepaid registered mail, or by cable, telegram, facsimile or hand-delivery to the other party at the following address:

 

If to MedReleaf:

 

Attention: Neil Closner

 

If to Ehave:

 

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Attention: Prateek Dwivedi

 

and such notices shall be deemed to have been received five business days after mailing if forwarded by mail, and the following business day if forwarded by cable, telegram, facsimile or hand-delivery.

 

(2) The aforementioned address of either party may be changed at any time by giving fifteen business days’ prior notice to the other party in accordance with the foregoing.

 

(3) In the event of a generally prevailing labour dispute or other situation which will delay or impede the giving of notice by any such means, the notice shall be given by such specified mode as will be most reliable and expeditious and least affected by such dispute or situation.

 

19. Currency

 

All revenue share amounts are in Canadian dollars.

 

20. Miscellaneous

 

This Agreement and Schedules set forth the entire agreement and understanding between the Parties and supersede and cancel all previous negotiations, agreements, commitments and writings in respect of the subject-matter hereof (including the Term Sheet) and there are no understandings, representations, conditions, warranties, express or implied, statutory or otherwise made or assumed by the Parties, other than those expressly contained in this Agreement. Clause, schedule and paragraph headings shall not affect the interpretation of this agreement. A person includes a natural person, corporate or unincorporated body (whether or not having separate legal personality) and that person's legal and personal representatives, successors and permitted assigns. Words in the singular shall include the plural and vice versa. A reference to one gender shall include a reference to the other gender. This Agreement may be signed in counterparts.

 

IN WITNESS WHEREOF, the parties have signed this agreement on the day, month and year first above mentioned.

 

MEDRELEAF EHAVE INC.
   
Per: /s/ Neil Closner                  Per: /s/ Prateek Dwivedi                
Neil Closner, CEO Prateek Dwivedi, CEO

 

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Schedule A - Background Intellectual Property

 

Description of background intellectual property provided by either party (include trademarks if desired)

 

By Ehave:

 

· Mental Health Informatics Platform that provides the following features:

 

o Flexible and secure data platform

 

o Desktop and mobile clinician portal

 

§ Add/modify/delete patient data

 

§ Access to marketplace to assign demographic, intake, assessment, diagnostic, treatment plan, treatment, adherence and outcomes content/applications to patients

 

§ Review results/output of content/applications

 

§ Receive insights based on results in textual and graphical format

 

§ Send/receive messages from patient and/or their family

 

o Desktop and mobile patient portal

 

§ Receive request to use content/applications from clinician

 

§ Inform clinician of intake, assessment, diagnostic, treatment, adherence and outcome content/application

 

§ Integrated to medical devices such as biofeedback sensors

 

o Clinical trial management

 

§ Mask patients as subjects

 

o Clinical grade executive function assessments in the form of video games

 

o Clinical grade executive function remediation in the form of video games

 

o Partnership content for psychological assessments

 

BY MEDRELEAF:

 

o Making App available to MedReleaf Patients

 

o MedReleaf Marks.

 

o MedReleath assessment, diagnostic, therapeutic and other related content

 

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Schedule “B”, MedReleaf App Specification

 

Scope of the first project is a mobile application for patients to report their outcomes, including strains they are using, the format they are consuming, and how they are feeling. The measurements are designed to be scientifically valid to ensure they can be used for clinical and research conclusions.

 

The first phase of development activity to create a detailed specification, the result of which will be updated in this schedule.

 

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Schedule “C”, Project Schedule

 

Day 0 = Effective Date

 

Day 1 to Day 15 – Application Specification – Update Schedules B and F

 

Remainder of schedule to be updated based on specification and sizing estimates

 

Day 15 to Day 30 – Research Trial Specification

 

Day 15 to Day 45 – Development of first version of clinician and patient applications

 

Day 45 to Day 50 – Validate features with research team

 

Day 50 to Day 70 – Development of second version of clinician and patient applications

 

Day 70 to Day 90 – Execute acceptance test and updated iterations based on feedback

 

Day 90+ - Execute trial

 

Day 90+ - Plan for next versions of application

 

  13  

 

 

Schedule “D”, Test Criteria

 

The first phase of development activity to create a detailed specification, the result of which will be updated in this schedule

 

  14  

 

 

Schedule “E”, Marketing Arrangements

 

The Parties agree within 45 days following Effective Date to engage in the following activities:

 

PR Ehave and MedReleaf to discuss establishing a plan for joint PR activities.
   
Co-Branding Ehave and MedReleaf to discuss the potential of co-branding of Collaboration Content and either Parties Background Content under each other's brands outside of the scope of this Agreement.
   
Co-Marketing Ehave and MedReleaf to discuss jointly investing in co-marketing funds to help with market education and raise awareness of the Background Content and Collaboration Content. Initial focus will be on leveraging MedReleaf s existing market.
   
Other producers MedReleaf to make reasonable efforts to facilitate introductions to other producers to help establish a comprehensive marketplace following the completion of the exclusivity period pursuant to Section 2(9). MedReleaf to receive compensation in form of revenue share and/or equity for signed partnerships that result from their facilitation on a basis to be determined by the Parties.

 

  15  

 

 

Schedule “F”, Support Services

 

1. Definitions .

 

a. “Customer” means MedReleaf

 

b. “Designated Support Contact” means any Customer employee appointed by Customer who has been trained and certified by Ehave to be a primary Customer contact with Ehave for support services.

 

c. “Incident” means when the App(s) do not seem to materially perform in accordance with the specifications specified in the relevant App Specification.

 

d. “Response” means when Ehave support personnel have (i) triaged the Incident, (ii) contacted Customer, and (iii) begun initial troubleshooting on the Incident.

 

2.   Support Services .

 

a. Support and Trouble Tickets . During the term of this Agreement, Ehave shall use commercially reasonable efforts to provide support services to Customer, as described below. The Designated Support Contact may report Incidents to Ehave through Ehave’s Support Portal (available at https://help.Ehave.com ) or support telephone helpline, and thereafter, the parties may cooperate to address the Incidents via email, telephone or the Support Portal. Ehave shall provide Customer with a trouble ticket number that Customer can use to track the status of Incidents. Ehave may close the trouble ticket without further responsibility if Customer fails to respond to a request for additional information or to confirm that the trouble ticket is resolved within ten (10) days of Ehave’s request or receipt of a patch or workaround (as applicable). Support services for the App(s) are available for twenty-four hours per day and seven days per week, unless the Customer has purchased a Direct Support Case Pack, in which case support services are available during business hours, which are 6 am-6 pm pacific, Monday through Friday (excluding holidays). 

 

b. Initial Response Times for Technical Support Issues.  Ehave shall provide Responses for Incidents that have been properly reported through the Support Portal in accordance with the table below. The Response times set forth below shall not apply to the Direct Support Case Pack:

 

  16  

 

 

Severity
Level
Description Initial
Response Time
1 A severity one (1) issue is a catastrophic production problem which may severely impact Customer's production systems or that causes Customer's production systems to go down or not function. There may be a loss of production data and no procedural work around exists. 1 hour
2 A severity two (2) issue is an issue where Customer's production systems are functioning but does so in a severely reduced capacity. The situation causes significant impact to portions of Customer's business operations and productivity. The systems are exposed to potential loss or interruption of service, including disruption of Customer’s High Availability Configuration. 4 hours
3 A severity three (3) issue is a medium-to-low impact problem which involves partial non-critical functionality loss. This issue impairs some operations but allows Customer to continue to function. This may be a minor issue with limited/no loss of functionality or impact to Customer’s operation and there is an easy circumvention or avoidance by the end user. This includes errors in App Specification. 1 business day
4 A severity four (4) issue is for a general usage question or recommendation for a future product enhancement or modification. There is no impact on the quality, performance or functionality of the product. 5 business days

 

c. Limitations . Ehave shall have no obligations under this Section 2: (i) if the Incident cannot be reproduced by Ehave, (ii) if the App(s) has been modified or repaired, except by or at the direction of Ehave, (iii) if the App(s) has not been installed, used or maintained in accordance with the App Specification, (iv) the App(s) is used on hardware, software or other equipment that deviates from Ehave’s recommendations made in the then current App Specification, (v) Customer does not permit Ehave timely access to the logs or to perform remote troubleshooting sessions on the affected server or component, as reasonably requested by Ehave, and/or (vi) for information or data contained in, stored on or integrated, with any App(s).   Ehave’s obligations to provide maintenance for software shall apply only to the current shipping release of the Software and any prior release for one (1) year after such prior release has been superseded by a subsequent shipping release.

 

3. Maintenance Services .  During the term of this Agreement, Ehave shall make available to Customer all updates to the extent generally released to other Ehave customers that purchased the same maintenance services. Such maintenance services shall apply only to the current shipping release of the App(s) and, for security fixes only, the immediately prior release.

 

4. General .  Ehave may revise the terms of the Support Services, provided that: (a) such revision is made to its standard Support Services terms made generally available to other customers, (b) Ehave provides written/email notice of such revision at least sixty (60) days prior to the expiration of the then-current Agreement, (c) such revisions only apply to renewal terms, and (d) renewal is subject to mutual agreement. Any delay or failure in the performance by Ehave (including in App(s) availability) shall be excused if and to the extent caused by a cause or event that is not reasonably foreseeable or otherwise caused by or under the control of Ehave, including but not limited to acts of God (including but not limited to fire, flood, earthquake, storm, hurricane or other natural disaster), war, hostilities (whether war be declared or not), invasion, act of foreign enemies, mobilization, requisition or embargo, rebellion, revolution, insurrection, military or usurped power, civil war, acts or threats of terrorism, riots, strikes or labor disputes (excluding by Ehave employees) (“Force Majeure”).

 

  17  

 

Exhibit 4.23

 

FIRST AMENDMENT AGREEMENT

 

RE: API INTEGRATION & DISTRIBUTION AGREEMENT

 

Multi-Health Systems Inc. and Ehave, Inc. entered into an API Integration & Distribution Agreement (Contract No. MHS-AIDA-EHA-20160922) executed on December 13, 2016 (the "Agreement").

 

This is a First Amendment to the Agreement (the "First Amendment Agreement") and is effective from the date of full execution (the "Amendment Effective Date"). This First Amendment Agreement is by and between

 

MULTI-HEALTH SYSTEMS INC. ("MHS"),

an Ontario corporation addressed at 3770 Victoria Park Avenue, Toronto, Ontario, M2H 3M6, Canada.

 

and

 

EHAVE, INC. ("Licensee"),

an Ontario corporation addressed at 250 University Avenue, Suite 200,

Toronto, Ontario, M5H 3E5, Canada.

 

For good and valuable consideration and pursuant to S. 10.12 of the Agreement, MHS and the Licensee have agreed to amend the Agreement as set out below:

 

1. Schedule III, Scope of Services, is hereby deleted and replaced with the following:

 

SCHEDULE III

 

Scope of Services

 

Purpose

 

The License is granted for the sole purposes of inclusion and integration of the Tests via an MHS Application Programming Interface, within the Licensee's mental health informatics platform (the "Licensee Platform").

 

MHS Tests

 

Application Programming Interface ("API") for select MHS Tests related to ADHD, Trauma, and Behavior.

 

  - 1 -  

 

 

Delivery of Services

 

Conners 3rd Edition™ (Conners 3 ® ) API

 

Within thirty (30) days of execution of the Agreement or such later date as is mutually agreed upon by the parties in writing, MHS will provide the Licensee with all relevant documentation associated with the API delivery option for the Conners 3 ® as well as the necessary components in order to implement this option accordingly.

 

The Conners 3 ® API and relevant documentation were delivered by MHS to Licensee in December, 2016.

 

Conners Comprehensive Behavior Rating Scales™ (Conners CBRS ® ) API

 

On or before February 28th, 2017 or such later date as is mutually agreed upon by the parties in writing, MHS will provide the Licensee with all relevant documentation associated with the API delivery option for the Conners CBRS ® as well as the necessary components in order to implement this option accordingly.

 

The Conners CBRS ® API and relevant documentation were delivered by MHS to Licensee in December, 2016.

 

Davidson Trauma Scale™ (DTS™) API

 

On or before May 15, 2017, or such later date as is mutually agreed upon by the parties in writing, MHS will provide the Licensee with all relevant documentation associated with the API delivery option for the DTS™ as well as the necessary components in order to implement this option accordingly.

 

Startle Physiological Anger Numbness™ (SPAN™) API

 

On or before May 15, 2017, or such later date as is mutually agreed upon by the parties in writing, MHS will provide the Licensee with all relevant documentation associated with the API delivery option for the DTS™ as well as the necessary components in order to implement this option accordingly.

 

For any additional Tests, MHS and Licensee will enter into mutual discussions for the scheduling and delivery of each potential Test API of which will be added to the Agreement via a written Amendment duly signed by both parties.

 

=================================================================================================END

 

  - 2 -  

 

 

2. Schedule IV, Consent Form, is hereby amended to delete subsection Copyright, Logos, and Trademarks and replace it with the following:

 

COPYRIGHT, LOGOS, AND TRADEMARKS

 

MHS is the copyright holder of the Conners 3 ® , Conners CBRS ® , DTS™, and SPAN™. These rights are protected by Canadian intellectual property right laws, international treaty provisions, and other applicable national laws. No portion of this assessment, including the information, text, images, audio, or video, may be copied, modified, or used in any manner without prior written permission. Any name, logo, trademark, or service mark contained and accessed by this website is owned or licensed by MHS or Ehave, as the case may, be and may not be used in any manner without prior written permission. Unauthorized use of all or part of this assessment is strictly prohibited and may result in the violation of trademark, privacy, copyright, and publicity rights.

 

3. Except as specifically deleted, amended or modified by this First Amendment Agreement on the Amendment Effective Date, all of the terms and provisions of the Agreement shall remain unchanged, continuous, and in full force and effect between MHS and the Licensee. To the extent of any conflict between the terms of this First Amendment Agreement and the Agreement, this First Amendment Agreement shall govern.

 

4. This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, personal representatives, successors and assigns, as the case may be.

 

5. Faxed and photostatic copies of this Agreement shall be considered valid legal documents.

 

IN WITNESS WHEREOF this First Amendment Agreement has been executed and dated by the parties hereto.

 

MULTI-HEALTH SYSTEMS INC.   EHAVE, INC.
     
/s/ Hazel Wheldon   /s/ Prateek Dwivedi
Hazel Wheldon, MA   Prateek Dwivedi
President & C.O.O.   C.E.O.
     
Date: May 4, 2017   Date: May 4, 2017

 

  - 3 -  

 

Exhibit 4.24

 

PROMISSORY NOTE

 

Borrower: Ehave, Inc. of 2020 Winston Park Drive, Suite 201, Oakville, ON L6H 6X7 (the “Borrower”)

 

Lender: ________ of ________________________ (the “Lender”)

 

Principal Amount: $______ CAD

 

1. FOR VALUE RECEIVED, The Borrower promises to pay the Lender at such address as may be provided in writing to the Borrower, the principal sum of $_______ CAD, without interest payable on the unpaid principal on demand.
     
2. Any any time while not in default under this Note, the Borrower may repay the outstanding balance then owing under this Note to the Lender without further bonus or penalty.
     
3. This Note will be construed in accordance with and governed by the laws of the Province of Ontario.
     
4. This Note will enure to the benefit of and be binding upon the representative heirs, executors, administrators, successors and assigns of the Borrower and the Lender.

 

IN WITNESS WHEREOF the parties have duly affixed their signatures under seal on this 27 day of July, 2017.

 

SIGNED, SEALED AND DELIVERED Ehave, Inc.
   
July 27, 2017  
  Per ________________________________________
   
SIGNED, SEALED AND DELIVERED ___________________________________________
   
July 27, 2017  
  Per _ _______________________________________

 

 

 

Exhibit 4.25

 

EHAVE, INC.

2020 Winston Park Drive, Suite 201

Oakville, Ontario, Canada L6H 6X7

 

October 11, 2017

 

[name]

[address]

[address]

 

Re: Ehave, Inc. private placement

 

Gentlemen:

 

This letter evidences the receipt by Ehave, Inc. (the “Company”) of $______ from the undersigned investor. It is your intention, as evidenced by our communications and memorialized in this letter, that said amount shall automatically convert into the appropriate amount of securities in the Offering (defined below) upon the receipt of fully executed documents (the “Transaction Documents”), including without limitation, a completed accredited investor questionnaire and customary investor representations in compliance with a private offering to be made pursuant to certain exemptions from registration under the Securities Act of 1933, as amended.

 

The terms and conditions of your investment shall be set forth in the Transaction Documents and shall be substantially similar to the terms and conditions of the securities sold by the Company in an upcoming proposed offering in which Andrew Garrett, Inc. will serve as placement agent (the “Offering”), which currently contemplated terms are described in the Term Sheet with Andrew Garrett Inc. attached hereto, except that you will be entitled to 120% warrant coverage and shall not be entitled to appoint a member(s) to the Company’s board of directors. If the Offering is not consummated for any reason by December 31, 2017, the Company agrees to memorialize the amount you paid as a secured promissory note (the “Note”) that matures on January 31, 2018. In addition, following provisions will apply: (a) you will be entitled to additional warrant coverage of 10% for each month that the initial closing of the Offering does not close after December 31, 2017; (b) the terms of the warrants will be the same as the to warrants in the Offering; and (c) at the maturity date of the Note, you have the option to convert the principal amount plus interest into common stock of the Company at $0.075 per share.

 

Please indicate your acknowledgment and agreement to the foregoing by signing in the space provided below.

 

ACKNOWLEDGED AND AGREED:

INVESTOR:

 

 

 

  Sincerely,
   
  Ehave, Inc.
   
   
  By: Prateek Dwivedi
       Chief Executive Officer

 

 

Exhibit 4.26

 

PROMISSORY NOTE

 

Borrower: Ehave, Inc. of 277 Lakeshore Road East, Suite 203, Oakville, ON L6J 6J3 (the “Borrower”)
   

Lender:

  (the “Lender”),  

 

Principal Amount: $            USD

 

1. FOR VALUE RECEIVED, The Borrower promises to pay the Lender at such address as may be provided in writing to the Borrower, the principal sum of $ _____ USD, without interest payable on the unpaid principal on demand. The Lender shall receive _________ warrants for purchase of common stock of the Borrower, with an exercise price of $0.075. The note shall rank senior to all other debt of the Company and shall be secured. The warrants shall be exercisable for a period of 5 years and provide for cashless exercise and contain price protection anti-dilution provisions. The warrants shall be issued within 5 business days from the date hereof.

 

2. Any time while not in default under this Note, the Borrower may repay the outstanding balance then owing under this Note to the Lender without further bonus or penalty.

 

3. This Note will be construed in accordance with and governed by the laws of the State of New York.

 

4. This Note will endure to the benefit of and be binding upon the representative heirs, executors, administrators, successors and assigns of the Borrower and the Lender.

 

IN WITNESS WHEREOF the parties have duly affixed their signatures under seal on this 15 day of November, 2017.

 

SIGNED, SEALED AND DELIVERED Ehave, Inc.
     
November 15, 2017 Per

     
     
SIGNED, SEALED AND DELIVERED    
     
November 15, 2017 Per  

 

 

 

Exhibit 4.27

 

 

EHAVE, INC.

 

SUBSCRIPTION AGREEMENT FOR UNITS

 

TO: EHAVE, INC. (THE “CORPORATION”)

 

The undersigned hereby irrevocably subscribes for and agrees to purchase from the Corporation that number of units of the Corporation (the “ Units ”) set out below at a price of $1,000 per Unit (the “ Subscription Price ”). Each Unit consists of one (1) Convertible Debenture (as defined herein) and such number of Warrants (as defined herein) as is equal to $1,000 divided by the Conversion Price (as defined herein). The Subscriber agrees to be bound by the terms and conditions set forth in the attached “Terms and Conditions of Subscription for Units” including without limitation the terms, representations, warranties, covenants, certifications and acknowledgements set forth in the applicable Schedules attached thereto. The Subscriber further agrees, without limitation, that the Corporation may rely upon the Subscriber’s representations, warranties, covenants, certifications and acknowledgments contained in such documents.

 

SUBSCRIPTION AND SUBSCRIBER INFORMATION

 

Please print all information (other than signatures), as applicable, in the space provided below

 

Subscriber Information and Signature    

_______________________________________________________
(Name of Subscriber)

 

 

 

 

Number of  Units:     _____________________________x $1,000
    =
Account Reference (if applicable):  ________________ ___________    
By:  ________________________________________ ____________
        Authorized Signature
 

Aggregate Subscription Price:_____________________________

 (the “ Subscription Amount ”)

     

______________________________________________________

(Official Capacity or Title – if the Subscriber is not an individual)

 

_______________________________________________________ 

(Name of individual whose signature appears above if different than the name of the Subscriber printed above.)

 

 ______________________________________________________ 

(Subscriber’s Residential Address, including Municipality and Province)

 

 ______________________________________________________ 

 

 ______________________________________________________ 

(Subscriber’s Telephone Number)                            (Email Address)

 

 

 

 

 

State whether Subscriber is an Insider* of the Corporation:

Yes  ¨            No  ¨

 

State whether Subscriber is a Registrant*:

Yes  ¨           No  ¨

 

(*see Article I, section 1.1. – Definitions)

 

 

 

 

The Subscriber hereby provides the Corporation the following instructions in connection with the settlement of the Convertible Debentures and Warrants comprising the Units being purchased hereunder and hereby directs the Corporation to issue and register (and deliver any definitive certificates, if applicable) the Convertible Debentures and Warrants comprising the Units as follows.

 

  Account Registration Information :       Delivery Instructions :  
             
  (Name)       (Name)  
             
             
  (Account Reference, if applicable)       (Account Reference, if applicable)  
             
             
             
             
  (Address, including Postal Code)       (Address, including Postal Code)  
             
             
          (Telephone Number)                      (Fax Number)  
             
             
          (Contact Name)  
             

 

  2  

 

 

TERMS AND CONDITIONS OF SUBSCRIPTION FOR UNITS

 

ARTICLE 1 - INTERPRETATION

 

1.1 Definitions

 

Whenever used in this Subscription Agreement, unless there is something in the subject matter or context inconsistent therewith, the following words and phrases shall have the respective meanings ascribed to them as follows:

 

Business Day ” means a day other than a Saturday, Sunday or any other day on which the principal chartered banks located in Toronto, Ontario are not open for business.

 

Closing ” has the meaning ascribed to such term in Section 4.1.

 

Closing Date ” has the meaning ascribed to such term in Section 4.1.

 

Closing Time ” has the meaning ascribed to such term in Section 4.1.

 

Common Shares ” means the shares of common stock in the capital of the Corporation.

 

Conversion Price ” shall mean the Qualified Financing Price multiplied by 0.75.

 

Convertible Debentures ” has the meaning ascribed to such term in the Term Sheet.

 

Corporation ” means Ehave, Inc. and includes any successor corporation to or of the Corporation.

 

Debenture Certificate ” means the certificate to be delivered by the Corporation to the Subscriber evidencing the Debentures.

 

including ” means without limitation.

 

Insider ” means (a) a director or senior officer of the Corporation (or a subsidiary of the Corporation), (b) any Person who beneficially owns, directly or indirectly, voting securities of the Corporation or who exercises control or direction over voting securities of the Corporation or a combination of both carrying more than 10% of the voting rights attached to all voting securities of the Corporation for the time being outstanding, or (c) a director or senior officer of an Insider of the Corporation.

 

knowledge of the Corporation ” (or similar phrases) means, as it pertains to the Corporation, the actual knowledge of the executive officers of the Corporation in office as at the date of this Subscription Agreement, together with the knowledge which they would have had if they had conducted a reasonable inquiry into the relevant subject matter;

 

NI 45-106 ” means National Instrument 45-106 – Prospectus Exemptions of the Canadian Securities Administrators.

 

Offering ” means the offering to the Subscriber of up to 1,500 Units to be issued and sold by the Corporation pursuant to this Subscription Agreement.

 

  3  

 

 

Person ” includes any individual (whether acting as an executor, trustee administrator, legal representative or otherwise), corporation, firm, partnership, sole proprietorship, syndicate, joint venture, trustee, trust, unincorporated organization or association, and pronouns have a similar extended meaning.

 

Qualified Financing ” shall mean the completion of a financing by the Corporation after the date hereof for aggregate gross proceeds of not less than CDN$2,000,000; provided that such financing shall be completed in connection with the proposed listing of the Common Shares on a recognized stock exchange in Canada within two (2) months of the completion of such financing;

 

Qualified Financing Price ” shall mean the price per security issued by the Corporation in the Qualified Financing

 

Registrant ” means a dealer, adviser, investment fund manager, an ultimate designated person or chief compliance officer as those terms are used pursuant to Securities Laws, or a person registered or otherwise required to be registered under the Securities Laws.

 

Securities Laws ” means, as applicable, the securities laws, regulations, rules, rulings and orders in each of the provinces of Canada, the applicable policy statements, notices, blanket rulings, orders and all other regulatory instruments of the securities regulators in each of the provinces of Canada.

 

Subscriber ” means the subscriber for the Units as set out on page 1 of this Subscription Agreement.

 

Subscription Agreement ” means this subscription agreement (including any Schedules hereto) and any instrument amending this Subscription Agreement; “ hereof ”, “ hereto ”, “ hereunder ”, “ herein ” and similar expressions mean and refer to this Subscription Agreement and not to a particular Article or Section; and the expression “ Article ” or “ Section ” followed by a number means and refers to the specified Article or Section of this Subscription Agreement.

 

Subscription Amount ” has the meaning ascribed to such term on page 1 of this Subscription Agreement.

 

Subscription Price ” has the meaning ascribed to such term on page 1 of this Subscription Agreement.

 

Term Sheet ” means the term sheet delivered to potential purchasers of Units, a copy of which is attached hereto as Schedule “A”.

 

Underlying Shares ” means the Common Shares issuable on conversion of the Convertible Debentures, as more particularly set out in the Term Sheet.

 

United States ” means the United States of America, its territories and possessions, any State of the United States and the District of Columbia.

 

Units ” has the meaning ascribed to such term on page 1 of this Subscription Agreement.

 

U.S. Securities Act ” means the United States Securities Act of 1933, as amended.

 

Warrant Certificate ” means the certificate to be delivered by the Corporation to the Subscriber evidencing the Warrants.

 

Warrants ” has the meaning ascribed to such term in the Term Sheet.

 

  4  

 

 

Warrant Shares ” means the Common Shares issuable upon the exercise of the Warrants, as more particularly set out in the Term Sheet.

 

1.2 Gender and Number

 

Words importing the singular number only shall include the plural and vice versa, words importing the masculine gender shall include the feminine gender and words importing persons shall include firms and corporations and vice versa.

 

1.3 Currency

 

Unless otherwise specified, all dollar amounts in this Subscription Agreement and the Schedules, including the symbol “$”, are expressed in Canadian dollars.

 

1.4 Subdivisions and Headings

 

The division of this Subscription Agreement into Articles, Sections, Schedules and other subdivisions and the inclusion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Subscription Agreement. The headings in this Subscription Agreement are not intended to be full or precise descriptions of the text to which they refer. Unless something in the subject matter or context is inconsistent therewith, references herein to an Article, Section, Subsection, paragraph, clause or Schedule are to the applicable article, section, subsection, paragraph, clause or schedule of this Subscription Agreement.

 

ARTICLE 2 - SCHEDULES

 

2.1 Description of Schedules

 

The following are the Schedules attached to and incorporated in this Subscription Agreement by reference and deemed to be a part hereof:

 

Schedule “A” -            Term Sheet
Schedule “B” -            Accredited Investor Certificate
Schedule “C” -            Contact Information for Canadian Securities Commissions

 

ARTICLE 3 - SUBSCRIPTION AND DESCRIPTION OF UNITS

 

3.1 Subscription for the Units

 

The Subscriber hereby confirms its irrevocable subscription for and offer to purchase from the Corporation that number of Units indicated on page 2 of this Subscription Agreement, on and subject to the terms and conditions set out in this Subscription Agreement, for the Subscription Amount which is payable as described in Article 4 hereto.

 

  5  

 

 

3.2 Description of the Units

 

Each Unit consists of one (1) Convertible Debenture and such number of Warrants (as defined herein) as is equal to $1,000 divided by the Conversion Price. A summary of certain terms of the Convertible Debentures and the Warrants are set forth in the Term Sheet; however, reference should be made to the Debenture Certificates and Warrant Certificates for the definitive terms of the Convertible Debentures and the Warrants. In the event of a conflict or inconsistency between the Term Sheet and the Debenture Certificates or Warrant Certificates, the Debenture Certificates and Warrant Certificates shall be paramount and shall govern.

 

3.3 Acceptance and Rejection of Subscription by the Corporation

 

The Subscriber acknowledges and agrees that the Corporation reserves the right, in its absolute discretion, to reject this subscription for Units, in whole or in part, at any time prior to the Closing Time. If this subscription is rejected in whole, any payment delivered by the Subscriber representing the Subscription Amount pursuant to this Agreement, will be promptly returned to the Subscriber without interest or deduction. If this subscription is accepted only in part, a cheque representing any refund of the Subscription Amount for that portion of the subscription for the Units which is not accepted will be promptly returned to the Subscriber without interest or deduction.

 

ARTICLE 4 - CLOSING

 

4.1 Closing

 

Delivery and sale of the Units and payment of the aggregate Subscription Amount will be completed (the “ Closing ”) at the offices of the Corporation’s counsel, Dentons Canada LLP, in Toronto, Ontario at 10:00 a.m. (Toronto time) (the “ Closing Time ”) on or about January 31, 2018, or such other place or date or time as the Corporation may determine (a “ Closing Date ”). Provided that on or prior to the Closing Time, the terms and conditions contained in this Subscription Agreement have been complied with to the satisfaction of the Corporation, or waived by the Corporation, the Subscriber shall deliver a completed Subscription Agreement and payment of the aggregate Subscription Amount for all of the Units sold hereunder to the Corporation, against delivery by the Corporation of the Debenture Certificates and the Warrant Certificates (or such other evidence of issue of the Units as the Subscriber and the Corporation may agree) and such other documentation as may be required pursuant to this Subscription Agreement.

 

If, prior to the Closing Time, the terms and conditions contained in this Subscription Agreement (other than the delivery by the Corporation of the Debenture Certificates and the Warrant Certificates or the delivery by the Corporation of such other evidence of issue of the Convertible Debentures and Warrants comprising the Units as the Subscriber and the Corporation may agree) have not been complied with to the satisfaction of the Corporation, or waived by it, the Corporation and the Subscriber will have no further obligations under this Subscription Agreement.

 

4.2 Conditions of Closing

 

The Subscriber acknowledges and agrees that the Corporation is relying on the truth of the representations and warranties of the Subscriber contained in this Subscription Agreement as of the date of this Subscription Agreement, and as of the Closing Time as if made at and as of the Closing Time, and the fulfillment of the following additional conditions prior to the Closing Time:

 

(a) on or before January 31, 2018, the Subscriber having made payment arrangements for the Subscription Amount in a manner acceptable to the Corporation;

  

  6  

 

 

(b) on or before January 31, 2018, the Subscriber having delivered a properly completed and signed Subscription Agreement to the Corporation;

 

(c) the Subscriber having executed and returned to the Corporation, at the Corporation’s request, all other documents as may be required by the securities laws for delivery by the Corporation on behalf of the Subscriber;

 

(d) the Corporation having obtained all necessary approvals and consents in respect of the Offering;

 

(e) the Corporation having accepted the Subscriber’s subscription, in whole or in part; and

 

(f) the issue and sale of the Convertible Debentures and Warrants comprising the Units being exempt from the requirement to file a prospectus and the requirement to deliver an offering memorandum under applicable securities legislation, or the Corporation having received such orders, consents or approvals as may be required to permit such sale without the requirement to file a prospectus or deliver an offering memorandum.

 

ARTICLE 5 – REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CORPORATION

 

5.1 Representations, Warranties and Covenants of the Corporation

 

The Corporation represents and warrants to the Subscriber and acknowledges that:

 

(a) the Corporation is a corporation duly incorporated duly organized, continued or amalgamated and validly existing under the laws of the jurisdiction in which it was incorporated, organized, continued or amalgamated, as the case may be;

 

(b) the Corporation has all requisite corporate power, authority and capacity to enter into this Subscription Agreement and to perform the transactions contemplated herein and carry on its business and, to the knowledge of the Corporation, no steps or proceedings have been taken by any person, voluntary or otherwise, requiring or authorizing its dissolution or winding-up;

 

(c) the Corporation is not in default of any material requirement of applicable Securities Laws;

 

(d) no order, ruling or determination having the effect of suspending the sale or ceasing the trading in any securities of the Corporation has been issued by any regulatory authority and is continuing in effect and no proceedings for that purpose have been instituted or, to the knowledge of the Corporation, are pending, contemplated or threatened by any regulatory authority;

 

(e) at the Closing Time, the Convertible Debentures and the Warrants will be duly and validly issued and created; and

 

(f) the issuance of the Convertible Debentures and Warrants have been authorized and the Underlying Shares and Warrant Shares have been duly reserved and allotted for issuance.

 

  7  

 

 

ARTICLE 6 - ACKNOWLEDGEMENTS, REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SUBSCRIBER

 

6.1 Acknowledgements, Representations, Warranties and Covenants of the Subscriber

 

The Subscriber hereby acknowledges, represents and warrants to, and covenants with, the Corporation as follows and acknowledges that the Corporation is relying on such acknowledgements, representations, warranties and covenants in connection with the transactions contemplated herein:

 

(a) the Subscriber confirms that it:

 

(i) has such knowledge in financial and business affairs as to be capable of evaluating the merits and risks of its investment in the Units, including the potential loss of its entire investment;

 

(ii) is aware of the characteristics of the Convertible Debentures and Warrants comprising the Units and understands the risks relating to an investment therein; and

 

(iii) is able to bear the economic risk of loss of its investment in the Units;

 

(b) the Subscriber is a resident, or if not an individual, the Subscriber has its head office, in the jurisdiction set out on page 1 of this Subscription Agreement and intends that the securities laws of that jurisdiction govern the Subscriber’s subscription. Such address was not created and is not used solely for the purpose of acquiring the Units;

 

(c) the Subscriber is aware that the Convertible Debentures and Warrants comprising the Units (and the Underlying Shares and Warrant Shares) have not been and will not be registered under the U.S. Securities Act or the securities laws of any state and that the Convertible Debentures and Warrants comprising the Units (and the Underlying Shares and Warrant Shares) may not be offered or sold, directly or indirectly, in the United States without registration under the U.S. Securities Act and applicable state securities laws or compliance with the requirements of an exemption from registration therefrom and it acknowledges that the Corporation has no present intention of filing a registration statement under the U.S. Securities Act or applicable state securities laws in respect of such securities;

 

(d) the Units have not been offered to the Subscriber in the United States, and the individuals making the order to purchase the Units and executing and delivering this Subscription Agreement on behalf of the Subscriber were not in the United States when the order was placed and this Subscription Agreement was executed and delivered;

 

(e) the Subscriber undertakes and agrees that it will not offer or sell any of the Convertible Debentures or Warrants comprising the Units (and the Underlying Shares and Warrant Shares) in the United States unless such securities are registered under the U.S. Securities Act and the securities laws of all applicable states of the United States, or an exemption from such registration requirement is available;

 

  8  

 

  (f) the execution and delivery of this Subscription Agreement, the performance and compliance with the terms hereof, the subscription for the Units (and any subsequent conversion of the Convertible Debentures or exercise of the Warrants) and the completion of the transactions described herein by the Subscriber will not result in any material breach of, or be in conflict with or constitute a material default under, or create a state of facts which, after notice or lapse of time, or both, would constitute a material default under any term or provision of the constating documents, by-laws or resolutions of the Subscriber, if applicable, the Securities Laws or any other laws applicable to the Subscriber, any agreement to which the Subscriber is a party, or any judgment, decree, order, statute, rule or regulation applicable to the Subscriber;

 

(g) the Subscriber is subscribing for the Units as principal for its own account and not for the benefit of any other Person (within the meaning of applicable Securities Laws);

 

(h) the Subscriber is either:

 

(i) relying on the “accredited investor” exemption under NI 45-106, and shall complete, sign and deliver to the Corporation (1) Schedule “B” (the “Accredited Investor Status Certificate”); and (2) Exhibit “I” to Schedule “B” if subscribing under categories (j), (k) or (l) of the Accredited Investor Status Certificate; or

 

(ii) relying on the “minimum amount investment” exemption under NI 45-106, and shall indicate by initialing immediately below that the Subscriber is (1) not an individual; (2) is purchasing the Units as principal; and (3) the Subscription amount is not less than $150,000

 

___________________ (initial if relying on the “minimum amount investment exemption under NI 45-106);

 

(i) if the Subscriber is an “accredited investor” within the meaning of NI 45-106, the Subscriber has properly completed, executed and delivered to the Corporation this Subscription Agreement and Schedule “B” (the Accredited Investor Status Certificate), as applicable and the acknowledgements, representations, warranties, covenants and information contained herein and therein are true and correct as of the date hereof and will be true and correct as of the Closing Time and if less than a complete copy of this Subscription Agreement is delivered to the Corporation, the Corporation and its are entitled to assume that the Subscriber accepts and agrees to all the terms and conditions of the pages not delivered, unaltered;

 

(j) if the Subscriber is not an individual, this Subscription Agreement has been duly authorized, executed and delivered by, and constitutes a legal, valid and binding agreement of the Subscriber and is enforceable in accordance with its terms against the Subscriber;

 

(k) if the Subscriber is a corporation, the Subscriber is duly incorporated and is validly subsisting under the laws of its jurisdiction of incorporation and has all requisite legal and corporate power and authority to execute and deliver this Subscription Agreement, to subscribe for the Units as contemplated herein and to carry out and perform its covenants and obligations under the terms of this Subscription Agreement and has obtained all necessary approvals in respect thereof, and the individual signing this Subscription Agreement has been duly authorized to execute and deliver this Subscription Agreement;

 

  9  

 

 

(l) there is no Person acting or purporting to act in connection with the transactions contemplated herein who is entitled to any brokerage or finder’s fee;

 

(m) if required by applicable Securities Laws, the Subscriber will execute, deliver and file or assist the Corporation in filing such reports, undertakings and other documents with respect to the issue of the Convertible Debentures and Warrants comprising the Units as may be required by any securities commission, stock exchange or other regulatory authority;

 

(n) the Subscriber has been advised to consult its own legal advisors with respect to the execution, delivery and performance by it of this Subscription Agreement and the transactions contemplated herein, including trading in the Convertible Debentures, Warrants, Underlying Shares and Warrant Shares, and with respect to the hold periods imposed by the Securities Laws and acknowledges that no representation has been made by the Corporation respecting the applicable hold periods imposed by the Securities Laws or other resale restrictions applicable to such securities which restrict the ability of the Subscriber (or others for whom it is contracting hereunder) to resell such securities, that the Subscriber (or others for whom it is contracting hereunder) is solely responsible to find out what these restrictions are, that the Subscriber is solely responsible (and the Corporation is in no way responsible) for compliance with applicable resale restrictions and that the Subscriber (or others for whom it is contracting hereunder) is aware that it may not resell such securities except in accordance with limited exemptions under the Securities Laws and other applicable securities laws;

 

(o) the Subscriber has not received or been provided with a prospectus, offering memorandum (within the meaning of the Securities Laws) or any sales or advertising literature in connection with the Offering or any document purporting to describe the business and affairs of the Corporation which has been prepared for review by prospective purchasers to assist in making an investment decision in respect of the Units and the Subscriber’s decision to subscribe for the Units was not based upon, and the Subscriber has not relied upon, any oral or written representations as to facts made by or on behalf of the Corporation, or any employee, agent or affiliate thereof or any other person associated therewith, except as set forth herein. The Subscriber’s decision to subscribe for the Units was based solely upon this Subscription Agreement (including the Term Sheet) and any information about the Corporation which is publicly available (any such information having been obtained by the Subscriber);

 

(p) The Corporation has not, nor have any of its directors, employees, officers, affiliates or agents made any written or oral representations:

 

(i) that any Person will resell or repurchase the Convertible Debentures or Warrants comprising the Units (or the Underlying Shares or Warrant Shares);

 

(ii) that any Person will refund all or any part of the Subscription Amount; or

 

  10  

 

 

(iii) as to the future price or value of the Convertible Debentures or Warrants or the Underlying Shares or Warrant Shares;

 

(q) the subscription for the Units has not been made through or as a result of, and the distribution of the Units is not being accompanied by any advertisement, including without limitation in printed public media, radio, television or telecommunications, including electronic display, or as part of a general solicitation; and

 

(r) The funds representing the Subscription Amount which will be advanced by the Subscriber to the Corporation hereunder will not represent proceeds of crime for the purposes of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) (the “ PCMLTFA ”), the United Kingdom’s Proceeds of Crime Act 2002 (the “ POCA ”) or the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (the “ PATRIOT Act ”), and the Subscriber acknowledges that the Corporation may in the future be required by law to disclose the Subscriber’s name and other information relating to this Subscription Agreement and the Subscriber’s subscription hereunder, on a confidential basis, pursuant to the PCMLTFA, POCA or the PATRIOT Act. To the best of its knowledge (a) none of the subscription funds to be provided by the Subscriber (i) have been or will be derived from or related to any activity that is deemed criminal under the laws of Canada, the United States, or any other jurisdiction, or (ii) are being tendered on behalf of a Person or entity who has not been identified to the Subscriber, and (b) the Subscriber shall promptly notify the Corporation if the Subscriber discovers that any of such representations ceases to be true, and to provide the Corporation with appropriate information in connection therewith.

 

6.2 Acknowledgments and Covenants of the Subscriber

 

The Subscriber acknowledges, covenants and agrees as follows:

 

(a) it (i) has received and reviewed a copy of the Term Sheet setting out the principal terms of the Offering; and (ii) has had the opportunity to ask and have answered any and all questions which the Subscriber wished to have answered with respect to the subscription for the Units made hereunder;

 

(b) the offer of the Units does not constitute a recommendation to purchase the Units or financial product advice and the Subscriber acknowledges that the Corporation has not had regard to the Subscriber’s particular objectives, financial situation or needs;

 

(c) there are risks associated with the purchase of the Units and no securities commission, agency, governmental authority, regulatory body, stock exchange or similar regulatory authority has reviewed or passed on the merits of the Convertible Debentures and Warrants comprising the Units nor have any such agencies or authorities made any recommendations or endorsement with respect to the foregoing;

 

  11  

 

(d) the Corporation is not now a “reporting issuer” under the Securities Laws of any province or territory of Canada, the Corporation and there is no guarantee that it will become a reporting issuer in the future. The Subscriber further acknowledges that as a result of the Corporation not being a reporting issuer the Convertible Debentures and the Warrants (and the Underlying Shares and Warrant Shares) will be subject to an indefinite “restricted period” under applicable Securities Laws of four (4) months and a one (1) day from the later of the applicable Closing Date and the date the Corporation becomes a reporting issuer under the Securities Laws of any province or territory of Canada, unless a prospectus is filed in accordance with applicable Securities Laws qualifying their distribution. The Subscriber further acknowledges that during such indefinite “restricted period”, the Subscriber may not trade the Convertible Debentures or the Warrants (and the Underlying Shares and Warrant Shares) under applicable Securities Laws without filing a prospectus in accordance with such laws or being able to rely on one of the limited exemptions under Canadian Securities Laws;

 

(e) the Convertible Debentures and the Warrants (and the Underlying Shares and Warrant Shares) will be subject to statutory resale restrictions under the Securities Laws of Canada and under other applicable Securities Laws, and the Subscriber covenants that it will not resell the Convertible Debentures, Warrants, Underlying Shares or Warrant Shares except in compliance with such laws and the Subscriber acknowledges that it is solely responsible (and the Corporation is in no way responsible) for such compliance;

 

(f) the Convertible Debentures and the Warrants (and the Underlying Shares and the Warrant Shares) may only be transferred or assigned by the Subscriber in compliance with applicable laws, including applicable Securities Laws;

 

(g) the Debenture Certificates and Warrant Certificates shall have attached to them an ownership statement setting out resale restrictions under applicable Securities Laws substantially in the following form (and with the necessary information inserted):

 

“Unless permitted under securities legislation, the holder of this security must not trade the security before the date which is four months and a day after the later of (i) [applicable Closing Date will be inserted], and (ii) the date the issuer became a reporting issuer in any province or territory.” ;

 

(h) there is no market for the Convertible Debentures and Warrants comprising the Units (and the Underlying Shares and the Warrant Shares) and there is no assurance that a market will ever develop;

 

(i) the Corporation is relying on an exemption from the requirement to provide the Subscriber with a prospectus under the Securities Laws and, as a consequence of acquiring the Convertible Debentures and Warrants comprising the Units pursuant to such exemption:

 

(i) certain protections, rights and remedies provided by the Securities Laws, including statutory rights of rescission, or damages and certain statutory remedies against an issuer, underwriters, auditors, directors and officers that are available to investors who acquire securities offered by a prospectus, will not be available to the Subscriber;

 

(ii) the common law may not provide investors with an adequate remedy in the event that they suffer investment losses in connection with securities acquired in a private placement;

 

  12  

 

 

(iii) the Subscriber may not receive information that would otherwise be required to be given under the Securities Laws; and

 

(iv) the Corporation is relieved from certain obligations that would otherwise apply under the Securities Laws;

 

(j) the offer, issuance, sale and delivery of the Convertible Debentures and Warrants comprising the Units is conditional upon such sale being exempt from the prospectus filing or registration requirements and the requirement to deliver an offering memorandum in connection with the distribution of the Convertible Debentures and Warrants comprising the Units under the Securities Laws of Canada or upon the issuance of such orders, consents or approvals as may be required to permit such sale without the requirement of filing a prospectus;

 

(k) the Corporation may complete additional financings in the future in order to develop the business of the Corporation and fund its ongoing development, and such future financings may have a dilutive effect on current shareholders or securityholders of the Corporation, including the Subscriber. However there is no assurance that any future financings will be available, on reasonable terms or at all, and if not so available, could have a material adverse effect on the Corporation’s business, financial condition, performance or prospects;

 

(l) the Subscriber is responsible for obtaining such legal and tax advice as it considers appropriate in connection with the execution, delivery and performance of this Subscription Agreement and the transactions contemplated under this Subscription Agreement;

 

(m) this offer to subscribe is made for valuable consideration and may not be withdrawn, cancelled, terminated or revoked by the Subscriber without the consent of the Corporation;

 

(n) there is no government or other insurance covering the Convertible Debentures, Warrants, Underlying Shares or Warrant Shares;

 

(o) legal counsel retained by the Corporation is acting as counsel to the Corporation and not as counsel to the Subscriber;

 

(p) the Subscriber acknowledges that this Subscription Agreement requires the Subscriber to provide certain personal information to the Corporation. Such information is being collected by the Corporation for the purposes of completing the transaction contemplated herein, which includes, without limitation, determining the Subscriber’s eligibility to purchase the Units under the Securities Laws and other applicable securities laws. The Subscriber’s personal information may be disclosed by the Corporation to: (i) stock exchanges or securities regulatory authorities; (ii) the Canada Revenue Agency or other taxing authorities; and (iii) employees, advisors, consultants and agents of the Corporation. By executing this Subscription Agreement, the Subscriber is deemed to be consenting to the foregoing collection, use and disclosure of the Subscriber’s personal information. The Subscriber also consents to the filing of copies or originals of any of the Subscriber’s documents described herein as may be required to be filed with any stock exchange or securities regulatory authority in connection with the transactions contemplated hereby;

 

  13  

 

 

(q) the information provided by the Subscriber on pages 1 and 2 of this Subscription Agreement identifying among other things, the name, address, telephone number and email address of the Subscriber, the number of Units being purchased hereunder, the Subscription Amount, the applicable Closing Date and the exemption that the Subscriber is relying on in purchasing the Units will be disclosed to the Canadian securities regulatory authorities, and such information is being indirectly collected by the Canadian securities regulatory authorities under the authority granted to it under Canadian securities legislation. This information is being collected for the purposes of the administration and enforcement of Canadian securities legislation. The Subscriber hereby authorizes the indirect collection of such information by the Canadian securities regulatory authorities. In the event the Subscriber has any questions with respect to the indirect collection of such information, the Subscriber should contact the applicable securities regulatory authority at the contact details provided in Schedule “C”.

 

6.3 Reliance on Representations, Warranties, Covenants and Acknowledgements

 

The Subscriber acknowledges and agrees that the representations, warranties, covenants and acknowledgements made by the Subscriber in this Subscription Agreement are made with the intention that they may be relied upon by the Corporation and its legal counsel in determining the Subscriber’s to purchase the Units. The Subscriber further agrees that by accepting the Units, the Subscriber shall be representing and warranting that such representations, warranties, covenants and acknowledgements are true as at the Closing Time with the same force and effect as if they had been made by the Subscriber at the Closing Time.

 

ARTICLE 7 - SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS

 

7.1 Survival of Representations, Warranties and Covenants of the Corporation

 

The representations, warranties and covenants of the Corporation contained in this Subscription Agreement shall survive the Closing and continue in full force and effect for the benefit of the Subscriber for a period of two years following Closing.

 

7.2 Survival of Representations, Warranties and Covenants of the Subscriber

 

The representations, warranties and covenants of the Subscriber contained in this Subscription Agreement shall survive the Closing and continue in full force and effect for the benefit of the Corporation for a period of two years following the Closing.

 

ARTICLE 9 - MISCELLANEOUS

 

9.1 Further Assurances

 

Each of the parties hereto upon the request of each of the other parties hereto, whether before or after the Closing Time, shall do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all such further acts, deeds, documents, assignments, transfers, conveyances, powers of attorney and assurances as may reasonably be necessary or desirable to complete the transactions contemplated herein.

 

  14  

 

 

9.2 Notices

 

(a) Any notice, direction or other instrument required or permitted to be given to any party hereto shall be in writing and shall be sufficiently given if delivered personally, or transmitted electronically tested prior to transmission to such party, as follows:

 

(i) in the case of the Corporation, to:

 

Ehave, Inc.

203-277 Lakeshore Road East 

Oakville, ON L6J 6J3

 

Attention: Prateek Dwivedi
Email: teek@ehave.com

 

with a copy to:

 

Dentons Canada LLP

77 King Street West, Suite 400
Toronto-Dominion Centre
Toronto, Ontario M5K 0A1

 

Attention: Eric Foster
Email: eric.foster@dentons.com

 

(ii) in the case of the Subscriber, at the address specified on the face page hereof, with a copy to:

 

Garfinkle Biderman LLP

1 Adelaide Street East, Suite 801

Toronto, Ontario M5C 2V9

 

Attention: Shimmy Posen
Email: sposen@garfinkle.com

 

(b) Any such notice, direction or other instrument, if delivered personally, shall be deemed to have been given and received on the day on which it was delivered, provided that if such day is not a Business Day then the notice, direction or other instrument shall be deemed to have been given and received on the first Business Day next following such day and if transmitted electronically, shall be deemed to have been given and received on the day of its transmission, provided that if such day is not a Business Day or if it is transmitted or received after the end of normal business hours then the notice, direction or other instrument shall be deemed to have been given and received on the first Business Day next following the day of such transmission.

 

(c) Any party hereto may change its address for service from time to time by notice given to each of the other parties hereto in accordance with the foregoing provisions.

 

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9.3 Time of the Essence

 

Time shall be of the essence of this Subscription Agreement and every part hereof.

 

9.4 Costs and Expenses

 

All costs and expenses (including, without limitation, the fees and disbursements of legal counsel) incurred in connection with this Subscription Agreement and the transactions herein contemplated shall be paid and borne by the party incurring such costs and expenses.

 

9.5 Applicable Law

 

This Subscription Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the Province of Ontario and the laws of Canada applicable therein. Any and all disputes arising under this Subscription Agreement, whether as to interpretation, performance or otherwise, shall be subject to the non-exclusive jurisdiction of the courts of the Province of Ontario and each of the parties hereto hereby irrevocably attorns to the jurisdiction of the courts of such Province.

 

9.6 Entire Agreement

 

This Subscription Agreement, including the Schedules hereto, constitutes the entire agreement between the parties with respect to the transactions contemplated herein and cancels and supersedes any prior understandings, agreements, negotiations and discussions between the parties. There are no representations, warranties, terms, conditions, undertakings or collateral agreements or understandings, express or implied, between the parties hereto other than those expressly set forth in this Subscription Agreement or in any such agreement, certificate, affidavit, statutory declaration or other document as aforesaid. This Subscription Agreement may not be amended or modified in any respect except by written instrument executed by each of the parties hereto.

 

9.7 Counterparts

 

This Subscription Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same Subscription Agreement. Counterparts may be delivered either in original, PDF or faxed form and the parties adopt any signatures received by PDF or a receiving fax machine as original signatures of the parties. If less than a complete copy of this Subscription Agreement is delivered to the Corporation, the Corporation and its advisors are entitled to assume that the Subscriber accepts and agrees to all the terms and conditions of the pages not delivered, unaltered.

 

9.8 Assignment

 

This Subscription Agreement may not be assigned by either party except with the prior written consent of the other party hereto.

 

9.9 Enurement

 

This Subscription Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, successors (including any successor by reason of the amalgamation or merger of any party), administrators and permitted assigns.

 

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9.10 Language

 

It is the express wish of the Subscriber that the Subscription Agreement and any related documentation be drawn up in English only. Il est de la volonté expresse du souscripteur que la convention de souscription ainsi que tout document connexe soient rédigés en langue anglaise uniquement.

 

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

 

  17  

 

 

The Corporation hereby accepts the subscription for Units as set forth on the face page of this Subscription Agreement on the terms and conditions contained in this Subscription Agreement (including all applicable Schedules) this ____ day of ____________, 2018.

 

    EHAVE, INC.
     
  Per:  
     
    Authorized Signatory

 

 

 

 

SCHEDULE “A”

 

TERM SHEET

 

EHAVE, INC.

 

PRIVATE PLACEMENT OF UNITS

 

Issuer:   Ehave, Inc. (“ Ehave ” or, the “ Company ”).
     
Offered Securities:   Senior secured Convertible debenture units (the “ Units ”).
     
Amount:   Up to a maximum of $1,500,000, to be advanced in tranches, the first tranche is for $750,000 and a second tranche of $750,000 (collectively, the “ Secured Offering ”) to be advanced once a minimum of $500,000 of unsecured debt has been raised (the “ Unsecured Offering ”).
     
Offering Price:   C$1,000 per Unit.
     
Unit:   Each Unit shall consist of one 10.0% senior secured convertible debenture (each a “ Convertible Debenture ”) of the Company and warrants of the Company exercisable to purchase that number of common shares as is equal to C$1,000 divided by the Conversion Price (as defined herein)  (each a “ Warrant ”).
     
Conversion Privilege:   The principal amount of each Convertible Debenture shall be convertible, for no additional consideration, into common shares of the Company (each a “ Common Share ”) at the option of the holders at any time following the completion of a Qualified Financing (as defined herein) and prior to the close of business on the Maturity Date, at a conversion price equal to 0.75 multiplied by the Qualified Financing Price (as defined herein) (the “ Conversion Price) .
     
Maturity Date:   Two years from the date the Units are issued.
     
Interest:   The Convertible Debentures shall bear interest at a rate of 10.0% per annum from the date of issue and shall be payable, at the election of the holder, in (i) cash, (ii) Common Shares at the Conversion Price, or (iii) any combination thereof upon conversion or maturity.
     
Security:   The Convertible Debentures shall be secured, in first position, by the assets of the Company. The Company will provide proof of subordination of existing debt prior to funding.
     
Optional Repayment:   The Company may elect to repay in cash the outstanding principal outstanding on the Convertible Debentures (including accrued and unpaid interest) at any time upon 30 days’ notice.
     
Warrants:   Following the completion of a Qualified Financing, each Warrant entitles the holder to acquire one Common Share for an exercise price equal to the Qualified Financing Price at any time up to 5 years following the Closing Date (subject to adjustment in certain customary events).

 

  A- 1  

 

 

Anti-Dilution Adjustments:   The Conversion Price will be subject to adjustment in certain events including, without limitation, the subdivision or consolidation of the outstanding Common Shares, the issue of Common Shares or securities convertible into Common Shares by way of stock dividend or distribution, the issue of rights, options or warrants to all or substantially all of the holders of Common Shares in certain circumstances, and the distribution to all or substantially all of the holders of Common Shares of any other class of shares, rights, options or warrants, evidences of indebtedness or assets.
     
Events of Default:   The Convertible Debentures shall include customary events of default and shall also provide that it shall be an event of default if the Company (or any successor) has not become a “reporting issuer” in a province or territory of Canada within 6 months from the date on which the Convertible Debentures have been issued. If at any time during the term of the Convertible Debenture the Company issues securities at price deemed lower than the Conversion Price, the maturity date will be accelerated and occur on the 30 th day following such issuance.
     
Qualified Financing:   The Company shall use commercially reasonable efforts to complete a subsequent financing for aggregate gross proceeds to the Company of at least C$2,000,000 (“ Qualified Financing ”) and be approved for trading on a Canadian recognized stock exchange (which, for greater certainty, includes the CSE or TSX Venture Exchange).  The issue price of the securities issued by the Company in the Qualified Financing shall be the “ Qualified Financing Price ”.
     
Finder Fees and Expenses  

The Company may pay finder fees comprised of (i) a cash commission of up to 7.0% of the aggregate gross proceeds arising from the sale of Units, and (ii) compensation options (the “ Compensation Options ”) exercisable at any time up to the Maturity Date to purchase Common Shares in an amount equal to up to 7.0% of the number of Units sold. The Compensation Options shall be exercisable at the Qualified Financing Price and for a period of 24 months.

 

On closing the Company shall pay to KW Capital Partners Limited, or as other directed thereby, a non-refundable arrangement fee of $15,000.

 

The Company shall also pay First Republic Capital Corporation, or as otherwise directed thereby, up to $20,000 for reasonable legal fees and other expenses as agreed upon before they are incurred.

     
Closing Date:   Initial closing on or about January 31, 2018.
     
Use of Proceeds:   The Company covenants and agrees to use the proceeds of the Secured Offering as outlined in the financial model attached hereto as Appendix 1 to Schedule A (the “ Financial Model ”). Any material variance from the Financial Model without prior approval of the KW Capital Partners Limited, shall be deemed a default under the terms of the Convertible Debentures.  For greater certainty, the Company shall have full and absolute discretion with respect to any use of proceeds of the Unsecured Offering and any use of such proceeds in variance from the Financial Model shall not require the consent of KW Capital Partners Limited or be deemed an event of default under the terms of the Convertible Debentures.

 

  A- 2  

 

 

SCHEDULE “B”

 

Accredited Investor Status CERTIFICATE

 

The categories listed herein contain certain specifically defined terms. If you are unsure as to the meanings of those terms, or are unsure as to the applicability of any category below, please contact your broker and/or legal advisor before completing this certificate.

 

TO: EHAVE, INC. (the “ Corporation ”)

 

In connection with the purchase by the undersigned Subscriber of the Units, the Subscriber (the “ Subscriber ”) hereby represents, warrants, covenants and certifies to the Corporation (and acknowledges that the Corporation and its counsel are relying thereon) that:

 

(a) the Subscriber is resident in or otherwise subject to the securities laws of one of the Provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, Nova Scotia, Prince Edward Island or Newfoundland and Labrador;

 

(b) the Subscriber is purchasing the Units as principal for its own account and not for the benefit of any other person or is deemed to be purchasing as principal pursuant to NI 45-106;

 

(c) the Subscriber is an “accredited investor” within the meaning of NI 45-106 on the basis that the Subscriber fits within one of the categories of an “accredited investor” reproduced below beside which the Subscriber has indicated the undersigned belongs to such category;

 

(d) the Subscriber was not created or used solely to purchase or hold securities as an accredited investor as described in paragraph (m) below;

 

(e) if the Subscriber is purchasing under category (j), (k) or (l) below, it has completed and signed Exhibit “I” attached hereto; and

 

(f) upon execution of this Schedule “B” by the Subscriber, this Schedule “B” shall be incorporated into and form a part of the Subscription Agreement to which this Schedule “B” is attached.

 

(PLEASE CHECK THE BOX OF THE APPLICABLE CATEGORY OF ACCREDITED INVESTOR)

 

¨ (a) (i) except in Ontario, a Canadian financial institution, or a Schedule III bank; or
     
    (ii) in Ontario, a financial institution that is (A) a bank listed in Schedule I, II or III of the Bank Act (Canada); (B) an association to which the Cooperative Credit Associations Act (Canada) applies or a central cooperative credit society for which an order has been made under subsection 473(1) of that Act; or (C) a loan corporation, trust company, trust corporation, insurance company, treasury branch, credit union, caisse populaire, financial services cooperative or credit union league or federation that is authorized by a statute of Canada or Ontario to carry on business in Canada or Ontario, as the case may be;
     
¨ (b) the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada);
     
¨ (c) a subsidiary of any person or company referred to in paragraphs (a) or (b), if the person or company owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary;
     
¨ (d) a person or company registered under the securities legislation of a jurisdiction (province or territory) of Canada as an adviser or dealer (or in Ontario, except as otherwise prescribed by the regulations under the Securities Act (Ontario));

 

  B- 1  

 

 

¨ (e) an individual registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (d);
     
¨ (e.1) an individual formerly registered under the securities legislation of a jurisdiction of Canada, other than an individual formerly registered solely as a representative of a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador);
     
¨ (f) the Government of Canada or a jurisdiction (province or territory) of Canada, or any crown corporation, agency or wholly owned entity of the Government of Canada or a jurisdiction of Canada;
     
¨ (g) a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l’île de Montréal or an intermunicipal management board in Québec;
     
¨ (h) any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government;
     
¨ (i) a pension fund that is regulated by either the Office of the Superintendent of Financial Institutions (Canada), a pension commission or similar regulatory authority of a jurisdiction (province or territory) of Canada;
     
¨ (j) an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that, before taxes, but net of any related liabilities, exceeds $1,000,000 (completion of Exhibit “I” is also required) ;
     
¨ (j.1) an individual who beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $5,000,000;
     
¨ (k) an individual whose net income before taxes exceeded $200,000 in each of the two most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the two most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year (completion of Exhibit “I” is also required) ;
     
¨ (l) an individual who, either alone or with a spouse, has net assets of at least $5,000,000 (completion of Exhibit “I” is also required) ;
     
¨ (m) a person, other than an individual or investment fund, that has net assets of at least $5,000,000 as shown on its most recently prepared financial statements;
     
¨ (n) an investment fund that distributes or has distributed its securities only to (i) a person that is or was an accredited investor at the time of the distribution, (ii) a person that acquires or acquired securities in the circumstances referred to in sections 2.10 [ Minimum amount investment ] or 2.19 [ Additional investment in investment funds ] of NI 45-106, or (iii) a person described in sub-paragraph (i) or (ii) that acquires or acquired securities under section 2.18 [ Investment fund reinvestment ] of NI 45-106;
     
¨ (o) an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt;

 

  B- 2  

 

 

¨ (p) a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation, as the case may be;
     
¨ (q) a person acting on behalf of a fully managed account managed by that person, if that person is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction;
     
¨ (r) a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded;
     
¨ (s) an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) to (d) or paragraph (i) in form and function;
     
¨ (t) a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors;
     
¨ (u) an investment fund that is advised by a person registered as an adviser or a person that is exempt from registration as an adviser;
     
¨ (v) a person that is recognized or designated by the securities regulatory authority or, except in Ontario or Québec, the regulator as an accredited investor;
     
¨ (w) a trust established by an accredited investor for the benefit of the accredited investor’s family members of which a majority of the trustees are accredited investors and all of the beneficiaries are the accredited investor’s spouse, a former spouse of the accredited investor or a parent, grandparent, brother, sister, child or grandchild of that accredited investor, of that accredited investor’s spouse or of that accredited investor’s former spouse; or
     
¨ (x) in Ontario, such other persons or companies as may be prescribed by the regulations under the Securities Act (Ontario).
     
    ***If checking this category (x), please provide a description of how this requirement is met.

 

For the purposes hereof, the following definitions are included for convenience:

 

(a) bank ” means a bank named in Schedule I or II of the Bank Act (Canada);

 

(b) Canadian financial institution ” means (i) an association governed by the Cooperative Credit Associations Act (Canada) or a central cooperative credit society for which an order has been made under section 473(1) of that Act, or (ii) a bank, loan corporation, trust company, trust corporation, insurance company, treasury branch, credit union, caisse populaire, financial services cooperative, or league that, in each case, is authorized by an enactment of Canada or a jurisdiction of Canada to carry on business in Canada or a jurisdiction of Canada;

 

(c) company ” means any corporation, incorporated association, incorporated syndicate or other incorporated organization;

 

(d) eligibility adviser ” means:

 

(i) a person that is registered as an investment dealer and authorized to give advice with respect to the type of security being distributed, and

 

(ii) in Saskatchewan or Manitoba, also means a lawyer who is a practicing member in good standing with a law society of a jurisdiction of Canada or a public accountant who is a member in good standing of an institute or association of chartered accountants, certified general accountants or certified management accountants in a jurisdiction of Canada provided that the lawyer or public accountant must not

 

  B- 3  

 

 

(A) have a professional, business or personal relationship with the issuer, or any of its directors, executive officer, founders, or control persons, and

 

(B) have acted for or been retained personally or otherwise as an employee, executive officer, director, associate or partner of a person that has acted for or been retained by the issuer or any of its directors, executive officers, founders or control persons within the previous 12 months;

 

(e) executive officer ” means, for an issuer, an individual who is: (i) a chair, vice-chair or president, (ii) a vice-president in charge of a principal business unit, division or function including sales, finance or production, or (iii) performing a policy-making function in respect of the issuer;

 

(f) financial assets ” means (i) cash, (ii) securities, or (iii) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation;

 

(g) fully managed account ” means an account of a client for which a person makes the investment decisions if that person has full discretion to trade in securities for the account without requiring the client’s express consent to a transaction;

 

(h) investment fund ” has the same meaning as in National Instrument 81-106 Investment Fund Continuous Disclosure ;

 

(i) person ” includes: (i) an individual, (ii) a corporation, (iii) a partnership, trust, fund and an association, syndicate, organization or other organized group of persons whether incorporated or not, and (iv) an individual or other person in that person’s capacity as a trustee, executor, administrator or personal or other legal representative.

 

(j) related liabilities ” means (i) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or (ii) liabilities that are secured by financial assets;

 

(k) Schedule III bank ” means an authorized foreign bank named in Schedule III of the Bank Act (Canada);

 

(l) spouse ” means, an individual who, (i) is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual, (ii) is living with another individual in a marriage-like relationship, including a marriage-like relationship between individuals of the same gender, or (iii) in Alberta, is an individual referred to in paragraph (i) or (ii), or is an adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta); and

 

(m) subsidiary ” means an issuer that is controlled directly or indirectly by another issuer and includes a subsidiary of that subsidiary.

 

In NI 45-106 a person or company is an affiliate of another person or company if one of them is a subsidiary of the other, or if each of them is controlled by the same person.

 

In NI 45-106 and except in Part 2 Division 4 (Employee, Executive Officer, Director and Consultant Exemption) of NI 45-106, a person (first person) is considered to control another person (second person) if (a) the first person, beneficially owns or directly or indirectly exercises control or direction over securities of the second person carrying votes which, if exercised, would entitle the first person to elect a majority of the directors of the second person, unless that first person holds the voting securities only to secure an obligation, (b) the second person is a partnership, other than a limited partnership, and the first person holds more than 50% of the interests of the partnership, or (c) the second person is a limited partnership and the general partner of the limited partnership is the first person.

 

  B- 4  

 

 

The foregoing representations contained in this certificate are true and accurate as of the date of this certificate and will be true and accurate as of the Closing Time (as defined in the Subscription Agreement to which this Schedule “B” is attached) and the Subscriber acknowledges that this Accredited Investor Status Certificate is incorporated into and forms a part of the Subscription Agreement to which it is attached. If any such representations shall not be true and accurate prior to the Closing Time, the undersigned shall give immediate written notice of such fact to the Corporation prior to the Closing Time.

 

Dated:     Signed:    
     
     
Witness (If Subscriber is an Individual)   Print the name of Subscriber
     
     
Print Name of Witness   If Subscriber is a corporation,
    print name and title of Authorized Signing Officer

 

  B- 5  

 

 

EXHIBIT “I” TO SCHEDULE “B”

 

FORM FOR INDIVIDUAL ACCREDITED INVESTORS

 

THIS “EXHIBIT I” TO SCHEDULE “B” IS TO BE COMPLETED BY ACCREDITED INVESTORS WHO ARE INDIVIDUALS SUBSCRIBING UNDER CATEGORIES (J), (K) OR (L) IN SCHEDULE “B” TO WHICH THIS EXHIBIT “I” IS ATTACHED.

 

WARNING!

 

This investment is risky. Don’t invest unless you can afford to lose all the money you pay for
this investment.

 

SECTION 1 TO BE COMPLETED BY THE ISSUER OR SELLING SECURITY HOLDER
1.  About your investment
Type of securities: Units (comprised of one (1) convertible debenture and a variable number of common share purchase warrants) Issuer:  Ehave, Inc.
Purchased from: Issuer
SECTIONS 2 TO 4 TO BE COMPLETED BY THE SUBSCRIBER
2.  Risk acknowledgement
This investment is risky. Initial that you understand that: Your
Initials
Risk of loss - You could lose your entire investment of $ _____________ . [Instruction: Insert the total dollar amount of the investment.]  
Liquidity risk - You may not be able to sell your investment quickly - or at all.  
Lack of information - You may receive little or no information about your investment.  
Lack of advice - You will not receive advice from the salesperson about whether this investment is suitable for you unless the salesperson is registered. The salesperson is the person who meets with, or provides information to, you about making this investment. To check whether the salesperson is registered, go to www.aretheyregistered.ca .  
3.  Accredited investor status
You must meet at least one of the following criteria to be able to make this investment. Initial the statement that applies to you. (You may initial more than one statement.) The person identified in section 6 is responsible for ensuring that you meet the definition of accredited investor. That person, or the salesperson identified in section 5, can help you if you have questions about whether you meet these criteria. Your
initials

· Your net income before taxes was more than $200,000 in each of the 2 most recent calendar years, and you expect it to be more than $200,000 in the current calendar year. (You can find your net income before taxes on your personal income tax return.)  
· Your net income before taxes combined with your spouse’s was more than $300,000 in each of the 2 most recent calendar years, and you expect your combined net income before taxes to be more than $300,000 in the current calendar year.  
· Either alone or with your spouse, you own more than $1 million in cash and securities, after subtracting any debt related to the cash and securities.  
· Either alone or with your spouse, you have net assets worth more than $5 million. (Your net assets are your total assets (including real estate) minus your total debt.)  

 

  B- 6  

 

 

4. Your name and signature
By signing this form, you confirm that you have read this form and you understand the risks of making this investment as identified in this form.
First and last name (please print):
Signature: Date:
SECTION 5 TO BE COMPLETED BY THE SALESPERSON
5. Salesperson information
[Instruction: The salesperson is the person who meets with, or provides information to, the Subscriber with respect to making this investment. That could include a representative of the issuer or selling security holder, a registrant or a person who is exempt from the registration requirement.]
First and last name of salesperson (please print):
Telephone: Email:
Name of firm (if registered):
SECTION 6 TO BE COMPLETED BY THE ISSUER OR SELLING SECURITY HOLDER
6. For more information about this investment

For investment in a non-investment fund

Ehave, Inc.

203-277 Lakeshore Road East

Oakville, ON L6J 6J3

 

Attention:     Prateek Dwivedi
Email:             teek@ehave.com

For more information about prospectus exemptions, contact your local securities regulator. You can find contact information at www.securities-administrators.ca .

 

Form instructions:

 

1. This form does not mandate the use of a specific font size or style but the font must be legible.

 

2. The information in sections 1, 5 and 6 must be completed before the Subscriber completes and signs the form.

 

3. The Subscriber must sign this form. Each of the Subscriber and the issuer or selling security holder must receive a copy of this form signed by the Subscriber. The issuer or selling security holder is required to keep a copy of this form for 8 years after the distribution.

 

  B- 7  

 

 

SCHEDULE “C”

CONTACT INFORMATION FOR CANADIAN SECURITIES COMMISSIONS

 

Alberta Securities Commission

Suite 600, 250 – 5th Street SW

Calgary, Alberta T2P 0R4

Telephone: (403) 297-6454

Toll free in Canada: 1-877-355-0585

Facsimile: (403) 297-2082

Public official contact: FOIP Coordinator

 

British Columbia Securities Commission

P.O. Box 10142, Pacific Centre

701 West Georgia Street

Vancouver, British Columbia V7Y 1L2

Inquiries: (604) 899-6854

Toll free in Canada: 1-800-373-6393

Facsimile: (604) 899-6581

Email: FOI-privacy@bcsc.bc.ca

Public official contact: FOI Inquiries

 

The Manitoba Securities Commission

500 – 400 St. Mary Avenue

Winnipeg, Manitoba R3C 4K5

Telephone: (204) 945-2561

Toll free in Manitoba 1-800-655-5244

Facsimile: (204) 945-0330

Public official contact: Director

 

Financial and Consumer Services Commission (New Brunswick)

85 Charlotte Street, Suite 300

Saint John, New Brunswick E2L 2J2

Telephone: (506) 658-3060

Toll free in Canada: 1-866-933-2222

Facsimile: (506) 658-3059

Email: info@fcnb.ca

Public official contact: Chief Executive Officer and Privacy Officer

 

Government of Newfoundland and Labrador

Financial Services Regulation Division

P.O. Box 8700, Confederation Building

2nd Floor, West Block, Prince Philip Drive

St. John’s, Newfoundland and Labrador A1B 4J6

Attention: Director of Securities

Telephone: (709) 729-4189

Facsimile: (709) 729-6187

Public official contact: Superintendent of Securities

 

Government of the Northwest Territories

Office of the Superintendent of Securities

P.O. Box 1320

Yellowknife, Northwest Territories X1A 2L9

Attention: Deputy Superintendent, Legal & Enforcement

Telephone: (867) 767-9305

Facsimile: (867) 873-0243

Public official contact: Superintendent of Securities

 

Nova Scotia Securities Commission

Suite 400, 5251 Duke Street

Duke Tower

P.O. Box 458

Halifax, Nova Scotia B3J 2P8

Telephone: (902) 424-7768

Facsimile: (902) 424-4625

Public official contact: Executive Director

 

Government of Nunavut

Department of Justice

Legal Registries Division

P.O. Box 1000, Station 570

1st Floor, Brown Building

Iqaluit, Nunavut X0A 0H0

Telephone: (867) 975-6590

Facsimile: (867) 975-6594

Public official contact: Superintendent of Securities

 

Ontario Securities Commission

20 Queen Street West, 22 nd Floor

Toronto, Ontario M5H 3S8

Telephone: (416) 593-8314

Toll free in Canada: 1-877-785-1555

Facsimile: (416) 593-8122

Email: exemptmarketfilings@osc.gov.on.ca

Public official contact: Inquiries Officer

 

Prince Edward Island Securities Office

95 Rochford Street, 4th Floor Shaw Building

P.O. Box 2000

Charlottetown, Prince Edward Island C1A 7N8

Telephone: (902) 368-4569

Facsimile: (902) 368-5283
Public official contact: Superintendent of Securities

 

Autorité des marchés financiers

800, Square Victoria, 22e étage

C.P. 246, Tour de la Bourse

Montréal, Québec H4Z 1G3

Telephone: (514) 395-0337 or 1-877-525-0337

Facsimile: (514) 873-6155 (For filing purposes only)

Facsimile: (514) 864-6381 (For privacy requests only)

Email: financementdessocietes@lautorite.qc.ca (For corporate finance issuers); fonds_dinvestissement@lautorite.qc.ca (For investment fund issuers)
Public official contact: Secrétaire générale

 

Financial and Consumer Affairs Authority of Saskatchewan

Suite 601 - 1919 Saskatchewan Drive

Regina, Saskatchewan S4P 4H2

Telephone: (306) 787-5842

Facsimile: (306) 787-5899
Public official contact: Director

 

Government of Yukon

Department of Community Services

Office of the Superintendent of Securities

307 Black Street

Whitehorse, Yukon Y1A 2N1

Telephone: 867-667-5466

Facsimile: (867) 393-6251

Email: securities@gov.yk.ca

Public official contact: Superintendent of Securities

 

  C- 1  

 

 

Exhibit 4.28

 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY OR ANY SECURITY INTO WHICH THIS SECURITY MAY BE CONVERTED INTO BEFORE THE DATE THAT IS 4 MONTHS AND ONE DAY AFTER THE LATER OF (I) JANUARY 31, 2018, AND (II) THE DATE the ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.

 

EXERCISABLE FOLLOWING THE QUALIFIED FINANCING DATE AND PRIOR TO 4:30 P.M., TORONTO TIME, ON THE EXPIRY DATE (AS DEFINED BELOW) AT WHICH TIME THESE COMPENSATION OPTIONS SHALL EXPIRE AND BE NULL AND VOID

 

COMPENSATION OPTIONS TO PURCHASE COMMON SHARES

 

OF

 

EHAVE, INC.

 

Issue Date: January 31, 2018

 

Compensation Option Certificate No. [        ] Options to Purchase
Common Shares

 

THIS CERTIFIES THAT, for value received, First Republic Capital Corporation, 55 University Avenue, Suite 1003, Toronto, Ontario M5J 2H7 (the “ Holder ”), being the registered holder of the Number of Options (as defined herein), is entitled at any time following the Qualified Financing Date (as defined herein) and prior to 4:30 p.m. (Toronto time) on the Expiry Date (as defined herein) to subscribe for and purchase such number of Common Shares (as defined herein) at the Exercise Price (as defined herein) for each Compensation Option exercised, subject to adjustment as set out herein, by surrendering to the Corporation at its registered and records office at 203-277 Lakeshore Road East, Oakville, ON L6J 6J3, Canada, a completed and executed subscription form, attached hereto as Exhibit “I”, and payment in full for the Common Shares (as defined herein) being purchased, which payment shall be made by certified cheque, bank draft or such other means acceptable to the Corporation in same day freely transferable funds in Toronto, Ontario.

 

The Corporation shall cause a register (the “ Register ”) to be kept and maintained in which shall be entered the names and addresses of all holders of Compensation Options and the number of Compensation Options held by each of them.

 

The Corporation shall treat the Holder as the absolute owner of the Compensation Options contemplated by this certificate representing such Compensation Options (the “ Compensation Option Certificate ”) for all purposes and the Corporation shall not be affected by any notice or knowledge to the contrary. The Holder shall be entitled to the rights evidenced by this Compensation Option Certificate free from all equities and rights of set-off or counterclaim between the Corporation and the original or any intermediate holder and all persons may act accordingly and the receipt by the Holder of the Common Shares issuable upon exercise hereof shall be a good discharge to the Corporation and the Corporation shall not be bound to inquire into the title of any such Holder.

 

 

 

1. Definitions : In this Compensation Option Certificate, unless there is something in the subject matter or context inconsistent therewith, the following expressions shall have the following meanings namely:

 

(a) Adjustment Period ” means the period commencing on the Qualified Financing Date and ending at the Expiry Time;

 

(b) Business Day ” means any day other than a Saturday, Sunday, legal holiday or a day on which banking institutions are closed in Toronto, Ontario;

 

(c) Common Shares ” means the common shares in the capital of the Corporation;

 

(d) Compensation Option ” means an option to purchase a Common Share;

 

(e) Conversion Price ” shall mean the Qualified Financing Price multiplied by 0.75;

 

(f) Corporation ” means Ehave, Inc. a corporation incorporated under the laws of Canada and its successors and assigns;

 

(g) Exercise Price ” shall equal the Qualified Financing Price;

 

(h) Expiry Date ” means January 31, 2020;

 

(i) Expiry Time ” means 4:30 p.m., Toronto, Ontario time, on the Expiry Date;

 

(j) Holder ” means the holder set forth on the first page hereof;

 

(k) Issue Date ” means the issue date set forth on the first page of this Compensation Option Certificate;

 

(l) Number of Options ” means $52,500 divided by the Conversion Price;

 

(m) person ” means an individual, corporation, partnership, unincorporated syndicate, unincorporated organization, trust, trustee, executor, administrator, or other legal representative, or any group or combination thereof or any other entity whatsoever;

 

(n) Qualified Financing ” means a financing (which may be completed in one of more tranches) by the Corporation after the date hereof for aggregate gross proceeds of not less than CDN$2,000,000; provided that such financing shall be completed in connection with the proposed listing of the Common Shares on a recognized stock exchange in Canada (which, for greater certainty, includes the TSX Venture Exchange and Canadian Securities Exchange) within two (2) months of the completion of such financing;

 

(o) Qualified Financing Date ” means the closing date of the Qualified Financing;

 

(p) Qualified Financing Price ” shall mean the price per security issued by the Corporation in the Qualified Financing; and

 

(q) Register ” has the meaning ascribed to such term on the first page hereof.

 

2. Expiry Time : At the Expiry Time, all rights under the Compensation Options evidenced hereby, in respect of which the right of subscription and purchase herein provided for shall not theretofore have been exercised, shall expire and be of no further force and effect.

 

  2  

 

 

3. Exercise Procedure :

 

(a) Following the Qualified Financing Date, the Holder may exercise the right to subscribe and purchase the number of Common Shares herein provided for by delivering to the Corporation prior to the Expiry Time at its office set forth herein the subscription form, attached hereto as Exhibit “I”, duly completed and executed by the Holder or its legal representative or attorney, duly appointed by an instrument in writing in form and manner satisfactory to the Corporation, together with a certified cheque, bank draft or other means acceptable to the Corporation in same day freely transferable funds, payable to or to the order of the Corporation in an amount equal to the aggregate Exercise Price in respect of the Compensation Options so exercised. Any subscription form so surrendered shall be deemed to be surrendered only upon delivery thereof to the Corporation at its office set forth herein (or to such other address as the Corporation may notify the Holder).

 

(b) Upon such delivery as aforesaid, the Corporation shall cause to be issued to the Holder hereof the Common Shares subscribed for not exceeding those which such Holder is entitled to purchase pursuant to this Compensation Option Certificate and the Holder hereof shall become a shareholder of the Corporation in respect of the Common Shares subscribed for with effect from the date of such delivery and shall be entitled to delivery of a certificate or direct registration transaction advice evidencing the Common Shares and the Corporation shall cause such certificate or direct registration transaction advice to be couriered to the Holder hereof at the address or addresses specified in such subscription as soon as practicable, and in any event within five Business Days of such delivery.

 

(c) Where required by applicable securities laws, the certificate representing the Common Shares issued upon exercise of this Compensation Option Certificate shall bear the following legend:

 

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) [INSERT THE ISSUE DATE], AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.”

 

provided that, if at any time, in the opinion of counsel to the Corporation, such legend is no longer necessary or advisable under any such securities laws, or the holder of any such legended certificate, provides the Corporation with evidence satisfactory in form and substance to the Corporation (which may include an opinion of counsel satisfactory to the Corporation) to the effect that such legends are not required, such legended certificate may thereafter be surrendered to the Corporation in exchange for a certificate which does not bear such legend.

 

(d) The Compensation Options contemplated herein may not be exercised in the United States or by or on behalf of a U.S. Person unless an exemption is available from the registration requirements of the United States Securities Act of 1933, as amended (the “ U.S. Securities Act ”), and applicable state securities laws and the Holder has furnished an opinion of counsel of recognized standing in form and substance satisfactory to the Corporation to such effect. THESE COPMENSATION OPTIONS MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR BEHALF OF, OR FOR THE ACCOUNT OR BENEFIT OF A US PERSON UNLESS THE SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LEGISLATION OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. “UNITED STATES” AND “US PERSON’ ARE DEFINED BY REGULATION S UNDER THE U.S. SECURITIES ACT.

 

  3  

 

 

4. Partial Exercise : Following the Qualified Financing Date, the Holder may subscribe for and purchase a number of Common Shares less than the number the Holder is entitled to purchase pursuant to this Compensation Option Certificate. In the event of any such subscription prior to the Expiry Time, the Holder shall in addition be entitled to receive, without charge, a new Compensation Option Certificate in respect of the balance of the Common Shares which the Holder was entitled to subscribe for pursuant to this Compensation Option Certificate and which were then not purchased.

 

5. No Fractional Shares : Notwithstanding any adjustments provided for in Section 11 hereof or otherwise, the Corporation shall not be required upon the exercise of any Compensation Options to issue fractional Common Shares in satisfaction of its obligations hereunder and, in any such case, the number of Common Shares issuable upon the exercise of any Compensation Options shall be rounded down to the nearest whole number without compensation to the Holder therefor.

 

6. Exchange of Compensation Option Certificates : This Compensation Option Certificate may be exchanged for Compensation Option Certificates representing in the aggregate the same number of Compensation Options and entitling the Holder thereof to subscribe for and purchase an equal aggregate number of Common Shares at the same Exercise Price and on the same terms as this Compensation Option Certificate (with or without legends as may be appropriate).

 

7. Transfer of Compensation Options : The Compensation Options are non-transferrable.

 

8. Not a Shareholder : Nothing in this Compensation Option Certificate or in the holding of a Compensation Option evidenced hereby shall be construed as conferring upon the Holder any right or interest whatsoever as a shareholder of the Corporation.

 

9. No Obligation to Purchase : Nothing herein contained or done pursuant hereto shall obligate the Holder to subscribe for or the Corporation to issue any Common Shares except those Common Shares in respect of which the Holder shall have exercised its right to purchase hereunder in the manner provided herein.

 

10. Covenants :

 

The Corporation covenants and agrees that so long as any Compensation Options evidenced hereby remain outstanding:

 

(a) until the Expiry Time, it will reserve and there will remain unissued out of its authorized capital a sufficient number of Common Shares to satisfy the right of purchase herein provided, as such right of purchase may be adjusted as contemplated herein;

 

(b) it will use reasonable efforts: (i) to comply with securities legislation applicable to it in order that the Corporation not be in default of any material requirements of such legislation; (ii) to do or cause to be done all things necessary to preserve and maintain its corporate existence; and (iii) in the event that the Common Shares are listed on a recognized stock exchange in Canada, to maintain the listing of the Common Shares on such exchange until the Expiry Time, provided that this covenant shall not prevent the Corporation from completing any transaction which would result in the Common Shares ceasing to be listed so long as the holders of such shares receive securities of an entity which is listed on a stock exchange in Canada or cash, or the holders of such shares have approved the transaction in accordance with the requirements of applicable corporate and securities laws and the rules and policies of the applicable stock exchange. All Common Shares will be issued upon the exercise of the right to purchase herein provided for, upon payment therefor of the amount at which such Common Shares may at the time be purchased pursuant to the provisions hereof, as fully paid and non-assessable shares; and

 

  4  

 

 

(c) the Corporation will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, all other acts, deeds and assurances in law as may be reasonably required for the better accomplishing and effecting of the intentions and provisions of this Compensation Option Certificate.

 

11. Adjustments :

 

(a) Adjustment : The rights of the Holder, including the number of Common Shares issuable upon the exercise of such Compensation Options represented by this Compensation Option Certificate, will be adjusted from time to time in the events and in the manner provided in, and in accordance with the provisions of, this Section 11.

 

(b) Share Reorganization : If and whenever at any time during the Adjustment Period, the Corporation shall (i) subdivide, redivide or change the outstanding Common Shares into a greater number of Common Shares; (ii) consolidate, combine or reduce the outstanding Common Shares into a lesser number of Common Shares; or (iii) fix a record date for the issue of Common Shares or securities convertible into or exchangeable for Common Shares to all or substantially all of the holders of Common Shares by way of a stock dividend or other distribution, then, in each such event, the Exercise Price shall, on the record date for such event or, if no record date is fixed, the effective date of such event, be adjusted so that it will equal the rate determined by multiplying the Exercise Price in effect immediately prior to such date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such date before giving effect to such event, and of which the denominator shall be the total number of Common Shares outstanding on such date after giving effect to such event. Such adjustment shall be made successively whenever any such event shall occur. Any such issue of Common Shares by way of a stock dividend shall be deemed to have been made on the record date for such stock dividend for the purpose of calculating the number of outstanding Common Shares under this subsection 11(b).

 

(c) Reclassifications : If and whenever at any time during the Adjustment Period, there is (i) any reclassification of or amendment to the outstanding Common Shares, any change of the Common Shares into other shares or any other reorganization of the Corporation (other than as described in subsection 11(b) hereof); (ii) any consolidation, amalgamation, arrangement, merger or other form of business combination of the Corporation with or into any other corporation resulting in any reclassification of the outstanding Common Shares, any change of the Common Shares into other shares or any other reorganization of the Corporation; or (iii) any sale, lease, exchange or transfer of the undertaking or assets of the Corporation as an entirety or substantially as an entirety to another corporation or entity, then, in each such event, the Holder upon the exercise of each Compensation Option shall be entitled to receive, and shall accept, in lieu of the number of Common Shares to which such Holder was theretofore entitled upon such exercise, the kind and number or amount of shares or other securities or property which such Holder would have been entitled to receive as a result of such event if, on the effective date thereof, such Holder had been the registered holder of the number of Common Shares to which such Holder was theretofore entitled upon such exercise. If necessary as a result of any such event, appropriate adjustments will be made in the application of the provisions set forth in this subsection with respect to the rights and interests thereafter of the Holder of this Compensation Option Certificate to the end that the provisions set forth in this subsection will thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares or other securities or property thereafter deliverable upon the exercise of the Compensation Options evidenced by this Compensation Option Certificate. Any such adjustments will be made by and set forth in an instrument supplemental hereto approved by the directors of the Corporation, acting reasonably, and shall for all purposes be conclusively deemed to be an appropriate adjustment.

 

  5  

 

 

(d) If at any time during the Adjustment Period any adjustment or readjustment in the Exercise Price shall occur pursuant to the provisions of subsection 11(b) or  11(c) of this Compensation Option Certificate, then the number of Common Shares purchasable upon the subsequent exercise of the Compensation Options shall be simultaneously adjusted or readjusted, as the case may be, by multiplying the number of Common Shares and Compensation Options purchasable upon the exercise of the Compensation Options immediately prior to such adjustment or readjustment by a fraction which shall be the reciprocal of the fraction used in the adjustment or readjustment of the Exercise Price.

 

12. Rules Regarding Calculation of Adjustment of Exercise Price :

 

(a) The adjustments provided for in Section 11 are cumulative and will, in the case of adjustments to the Exercise Price, be computed to the nearest one-hundredth of one cent and will be made successively whenever an event referred to therein occurs, subject to the following subsections of this Section 12.

 

(b) No adjustment in the Exercise Price is required to be made unless such adjustment would result in a change of at least 1% in the prevailing Exercise Price provided, however, that any adjustments which, except for the provisions of this subsection, would otherwise have been required to be made, will be carried forward and taken into account in any subsequent adjustments.

 

(c) No adjustment in the Exercise Price will be made in respect of any event described in Section 11(c), other than the events referred to in subsection 11(c), if the Holder is entitled to participate in such event on the same terms, mutatis mutandis , as if the Holder had exercised their Compensation Options prior to or on the effective date or record date of such event.

 

(d) If at any time a question or dispute arises with respect to adjustments provided for in Section 11, such question or dispute will be conclusively determined by the auditor of the Corporation or, if they are unable or unwilling to act, by such other firm of independent chartered accountants as may be selected by action of the directors of the Corporation and any such determination, subject to regulatory approval and absent manifest error, will be binding upon the Corporation and the Holder. The Corporation will provide such auditor or chartered accountant with access to all necessary records of the Corporation.

 

(e) In case the Corporation after the date of issuance of the Compensation Options evidenced by this Compensation Option Certificate takes any action affecting the Common Shares, other than action described in Section 11, which in the opinion of the board of directors of the Corporation would materially affect the rights of the Holder, the Exercise Price will be adjusted in such manner, if any, and at such time, by action of the directors of the Corporation in their sole discretion, acting reasonably and in good faith, but subject in all cases to any necessary regulatory approval. Failure of the taking of action by the directors of the Corporation so as to provide for an adjustment on or prior to the effective date of any action by the Corporation affecting the Common Shares will be conclusive evidence that the board of directors of the Corporation has determined that it is equitable to make no adjustment in the circumstances.

 

(f) If the Corporation sets a record date to determine the holders of the Common Shares for the purpose of entitling them to receive any dividend or distribution or sets a record date to take any other action and, thereafter and before the distribution to such shareholders of any such dividend or distribution or the taking of any other action, decides not to implement its plan to pay or deliver such dividend or distribution or take such other action, then no adjustment in the Exercise Price will be required by reason of the setting of such record date.

 

  6  

 

 

(g) In the absence of a resolution of the directors of the Corporation fixing a record date for any event which would require any adjustment to the Compensation Options evidenced by this Compensation Option Certificate, the Corporation will be deemed to have fixed as the record date therefor the date on which the event is effected.

 

(h) As a condition precedent to the taking of any action which would require any adjustment to the Compensation Options evidenced by this Compensation Option Certificate, including the Exercise Price, the Corporation shall take any corporate action which may be necessary in order that the Corporation or any successor to the Corporation or successor to the undertaking or assets of the Corporation have unissued and reserved in its authorized capital and may validly and legally issue as fully paid and non-assessable all the shares or other securities which the Holder is entitled to receive on the full exercise thereof in accordance with the provisions hereof.

 

(i) The Corporation will from time to time, immediately after the occurrence of any event which requires an adjustment or readjustment as provided in Section 11, forthwith give notice to the Holder specifying the event requiring such adjustment or readjustment and the results thereof, including the resulting Exercise Price.

 

(j) The Corporation covenants to and in favour of the Holder that so long as any Compensation Options evidenced by this Compensation Option Certificate remain outstanding, it will give notice to the Holder of the effective date or of its intention to fix a record date for any event referred to in Sections 11 or 12 whether or not such event gives rise to an adjustment in the Exercise Price or the number and type of securities issuable upon the exercise of the Compensation Options and, in each case, such notice shall specify the particulars of such event and the record date and the effective date for such event; provided that the Corporation shall only be required to specify in such notice such particulars of such event as have been fixed and determined on the date on which such notice is given. Such notice shall be given not less than 14 days in each case prior to such applicable record date or effective date, unless giving such notice is not reasonably practicable, in which case the Corporation will give as much notice as is reasonably practicable.

 

(k) In any case in which Section 11 shall require that an adjustment shall become effective immediately after a record date for or an effective date of an event referred to herein, the Corporation may defer, until the occurrence and consummation of such event, issuing to the Holder, if exercised after such record date or effective date and before the occurrence and consummation of such event, the additional Common Shares or other securities or property issuable upon such exercise by reason of the adjustment required by such event, provided, however, that the Corporation will deliver to the Holder an appropriate instrument evidencing the Holder’s right to receive such additional Common Shares or other securities or property upon the occurrence and consummation of such event and the right to receive any dividend or other distribution in respect of such additional Common Shares or other securities or property declared in favour of the holders of record of Common Shares or of such other securities or property on or after the Exercise Date or such later date as the Holder would, but for the provisions of this subsection, have become the holder of record of such additional Common Shares or of such other securities or property.

 

13. Consolidation and Amalgamation :

 

(a) The Corporation shall not enter into any transaction whereby all or substantially all or its undertaking, property and assets would become the property of any other corporation (herein called a “successor corporation”) whether by way of reorganization, reconstruction, consolidation, amalgamation, merger, transfer, sale, disposition or otherwise, unless prior to or contemporaneously with the consummation of such transaction the Corporation and the successor corporation shall have executed such instruments and done such things as the Corporation, acting reasonably, considers necessary or advisable to establish that upon the consummation of such transaction:

 

  7  

 

 

(i) the successor corporation will have assumed all the covenants and obligations of the Corporation under this Compensation Option Certificate, and

 

(ii) the Compensation Options and the terms set forth in this Compensation Option Certificate will be a valid and binding obligation of the successor corporation entitling the Holder, as against the successor corporation, to all the rights of the Holder under this Compensation Option Certificate.

 

(b) Whenever the conditions of subsection 13(a) shall have been duly observed and performed the successor corporation shall possess, and from time to time may exercise, each and every right and power of the Corporation under this Compensation Option Certificate in the name of the Corporation or otherwise and any act or proceeding by any provision hereof required to be done or performed by any director or officer of the Corporation may be done and performed with like force and effect by the like directors or officers of the successor corporation.

 

14. Representation and Warranty : The Corporation hereby represents and warrants with and to the Holder that the Corporation is duly authorized and has the corporate and lawful power and authority to create and issue the Compensation Options evidenced by this Compensation Option Certificate and the Common Shares issuable upon the exercise hereof and perform its obligations hereunder and that this Compensation Option Certificate represents a valid, legal and binding obligation of the Corporation enforceable in accordance with its terms.

 

15. Lost Certificate : If this Compensation Option Certificate becomes stolen, lost, mutilated or destroyed the Corporation may, on such terms as it may in its discretion, acting reasonably, impose, issue and countersign a new Compensation Option Certificate of like denomination, tenor and date as the Compensation Option Certificate so stolen, lost mutilated or destroyed.

 

16. Governing Law : This Compensation Option Certificate shall be governed by, and construed in accordance with, the laws of the Province of Ontario and the federal laws of Canada applicable therein and will be treated in all respects as an Ontario contract. Each of the parties hereto, irrevocably attorns to the exclusive jurisdiction of the courts of the province of Ontario with respect to all matters arising out of this Compensation Option Certificate.

 

17. Severability : If any one or more of the provisions or parts thereof contained in this Compensation Option Certificate should be or become invalid, illegal or unenforceable in any respect in any jurisdiction, the remaining provisions or parts thereof contained herein shall be and shall be conclusively deemed to be, as to such jurisdiction, severable therefrom.

 

18. Headings : The headings of the articles, sections, subsections and clauses of this Compensation Option Certificate have been inserted for convenience and reference only and do not define, limit, alter or enlarge the meaning of any provision of this Compensation Option Certificate.

 

19. Numbering of Articles, etc. : Unless otherwise stated, a reference herein to a numbered or lettered article, section, subsection, clause, subclause or schedule refers to the article, section, subsection, clause, subclause or schedule bearing that number or letter in this Compensation Option Certificate.

 

20. Gender : Whenever used in this Compensation Option Certificate, words importing the singular number only shall include the plural, and vice versa, and words importing the masculine gender shall include the feminine gender.

 

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21. Day not a Business Day : In the event that any day on or before which any action is required to be taken hereunder is not a Business Day, then such action shall be required to be taken on or before the requisite time on the next succeeding day that is a Business Day.

 

22. Binding Effect : This Compensation Option Certificate and all of its provisions shall enure to the benefit of the Holder, its successors, assigns and legal personal representatives and shall be binding upon the Corporation and its successors.

 

23. Further Assurances: The Corporation hereby covenants and agrees that it will do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, all and every such other act, deed and assurance as the Holder shall reasonably require for the better accomplishing and effectuating of the intentions and provisions of this Compensation Option Certificate.

 

24. Notice : Unless herein otherwise expressly provided, a notice to be given hereunder will be deemed to be validly given if the notice is sent by courier or registered mail addressed as follows:

 

(a) If to the Holder at the latest address of the Holder as recorded on the Register; and

 

(b) If to the Corporation at:

 

203-277 Lakeshore Road East

Oakville, ON L6J 6J3

 

Any notice given as aforesaid shall conclusively be deemed to have been received by the addressee, if sent by courier, on the next following Business Day and, if sent by mail, on the fifth day following the posting thereof.

 

25. Time of Essence : Time shall be of the essence hereof.

 

[ Signature Page to Follow ]

 

  9  

 

 

IN WITNESS WHEREOF the Corporation has caused this Compensation Option Certificate to be signed by its duly authorized officer as of ______________________________, 2018.

 

 

 

EHAVE, INC.
  Per:  
    Authorized Signatory

 

Signature Page – Ehave, Inc. Compensation Option Certificate  

 

     

 

 

EXHIBIT “I”

 

SUBSCRIPTION FORM

 

TO:         Ehave, Inc.

203-277 Lakeshore Road East

Oakville, ON L6J 6J3

 

The undersigned holder of the within Compensation Option Certificate hereby irrevocably subscribes for ___________ Common Shares of Ehave, Inc. pursuant to the within Compensation Option Certificate and tenders herewith a certified cheque or bank draft for CDN$_________________ in full payment therefor.

 

The undersigned represents, warrants and certifies the undersigned is not a U.S. Person or a person in the United States, and is not acquiring any of the Common Shares issuable upon the exercise of the Compensation Options for the account or benefit of a U.S. Person or a person in the United States, and none of the persons listed above is a U.S. Person or a person in the United States. For purposes hereof “United States” and “U.S. Person” shall have the meanings given to such terms in Regulation S under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”).

 

DATED                                                                                      .    
     
     
    (Name of Subscriber - please print)

 

 

    By:                                                                                      
    (Authorized Signature)
     
      _____________________________________________
    (Official Capacity or Title - please print)
     
      _____________________________________________
    Please print name of individual whose signature appears
    above if different than the name of the Subscriber
printed
    above.

 

Deliver the Common Shares as set forth below:   Register the Common Shares as set forth below:
     
    ¨ Same as Delivery Address (otherwise complete below)
     
     
(Name)   (Name)
     
     
(Account reference, if applicable)   (Account reference, if applicable)
     
     
(Contact Name)   (Contact Name)
     
     
(Address)   (Address)
     
     

 

Exhibit I – Ehave, Inc. Compensation Option Certificate

 

     

 

Exhibit 4.29

 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY OR ANY SECURITIES INTO WHICH THIS SECURITY MAY BE CONVERTED INTO BEFORE THE DATE THAT IS 4 MONTHS AND ONE DAY AFTER THE LATER OF (I) [ l ] , AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.

 

DEBENTURE CERTIFICATE NUMBER: 201801 – D[ l ] [ l ]DEBENTURES

 

EHAVE, INC.

 

SENIOR SECURED CONVERTIBLE DEBENTURE

 

EHAVE, INC. a body corporate incorporated under the laws of [ l ] (the “ Corporation ”), for value received hereby acknowledges itself indebted and promises to pay to [ name and address of debenture holder ] (the “ Holder ”), on [ l ] , 2020 (the “ Maturity Date ”) or on such earlier date as the principal amount of [ Dollar amount written ] ($ [ l ] ) (the “ Principal ”) convertible debentures of the Corporation (the “ Debentures ”) may become payable hereunder, in lawful money of Canada to the Holder and to pay in the same money and at the same place interest on the Principal or on so much thereof as remains from time to time unpaid at the rate of ten percent (10.0%) per annum, payable at the earlier of (i) the Conversion Date (as defined herein), and (ii) the Maturity Date.

 

 

 

 

ARTICLE 1
INTERPRETATION

 

1.1 Definitions

 

In this Debenture, including the recitals and any schedules hereto:

 

(a) Business Day ” means any day other than Saturday, Sunday or a statutory or civic holiday, or any other day on which the banks are open for business in the Province of Ontario;

 

(b) Common Shares ” means common shares in the capital of the Corporation;

 

(c) Conversion Date ” has the meaning ascribed to such term in Section 3.1(a);

 

(d) Conversion Price ” shall mean the Qualified Financing Price multiplied by 0.75;

 

(e) Corporation ” has the meaning ascribed to such term on the first page of this Debenture;

 

(f) Current Market Price ” means the price per share of the Common Shares as determined by the board of directors of the Corporation;

 

(g) Debentures ” has the meaning ascribed to such term on the first page of this Agreement;

 

(h) Event of Default ” has the meaning ascribed to such term in Section 4.1;

 

(i) Holder ” has the meaning ascribed to such term on the first page of this Agreement;

 

(j) Maturity Date ” has the meaning ascribed to such term on the first page of this Agreement, subject to adjustment pursuant to Section 2.9;

 

(k) Offering ” means the offering by the Corporation of units comprised of secured convertible debentures and Common Share purchase warrants for aggregate proceeds of approximately CDN$1,500,000 and which Offering may close in multiple tranches;

 

(l) Principal ” has the meaning ascribed to such term on the first page of this Agreement;

 

(m) Qualified Financing ” shall mean the completion of a financing by the Corporation after the date hereof for aggregate gross proceeds of not less than CDN$2,000,000; provided that such financing shall be completed in connection with the proposed listing of the Common Shares on a recognized stock exchange in Canada (which, for greater certainty, includes the TSX Venture Exchange and Canadian Securities Exchange) within two (2) months of the completion of such financing;

 

(n) Qualified Financing Price ” shall mean the price per security issued by the Corporation in the Qualified Financing; and

 

(o) Taxes ” has the meaning ascribed to such term in Section 2.4.

 

  2  -  

 

 

1.2 Gender and Number

 

Words importing the singular number or masculine gender shall include the plural number or the feminine or neuter genders, and vice versa.

 

1.3 Headings, Etc.

 

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

 

1.4 Day not a Business Day.

 

If any day on or before which any action or notice is required to be taken or given hereunder is not a Business Day, then such action or notice shall be required to be taken or given on or before the requisite time on the next succeeding day that is a Business Day.

 

1.5 Monetary References.

 

Whenever any amounts of money are referred to herein, such amounts shall be deemed to be in lawful money of Canada unless otherwise expressed.

 

ARTICLE 2
REGISTRATION AND TRANSFER OF DEBENTURE

 

2.1 Registration and Transfer of Debentures

 

(a) The Corporation shall, at all times while this Debenture is outstanding, cause to be kept by and at the principal office of the Corporation a register in which shall be entered the name and address of the Holder and particulars of this Debenture. No transfer of this Debenture shall be valid unless made by the Holder or its executors or administrators or other legal representatives or its attorney duly appointed by an instrument in writing in form and execution satisfactory to the Corporation, upon compliance with such reasonable requirements as the Corporation may prescribe, and unless such transfer shall have been duly entered on the register.

 

(b) The register referred to in this Section shall at all reasonable times be open for inspection by the Holder.

 

(c) This Debenture shall not be assigned unless all the obligations due to the assignor are also assigned to the assignee of this Debenture and a notice of such assignment shall be submitted to the Corporation substantially in the form of Schedule “A” attached hereto.

 

(d) The Corporation shall not be required to transfer or exchange this Debenture on any date when interest payment are due as contemplated hereunder or during a period of ten (10) Business Days immediately preceding any such date.

 

2.2 Person Entitled to Payment

 

(a) The Holder shall be deemed and regarded as the owner for all purposes of this Debenture and payment of the Principal and any interest thereon shall be made only to or upon the order in writing of the Holder and such payment shall be a good and sufficient discharge to the Corporation and any paying agent for the amounts so paid.

 

  3  -  

 

 

(b) The Holder shall be entitled to the Principal and interest thereon evidenced by this Debenture, free from all equities or rights of set-off or counterclaim between the Corporation and the original or any intermediate holder thereof and all persons may act accordingly and a transferee of this Debenture shall, after an appropriate form of transfer is lodged with the Corporation be entitled to be entered on any of the appropriate registers as the owner of this Debenture, free from all equities or rights of set-off or counterclaim between the Corporation and such holder’s transferor or any previous holder thereof, except for equities the Corporation is required to take notice of by statute or by order of a court of competent jurisdiction.

 

(c) Delivery to the Corporation by the Holder of the receipt of the Holder for the Principal and interest thereon shall be a good and valid discharge to the Corporation, which shall not be bound to enquire into the title of the Holder, save as ordered by some court of competent jurisdiction or as required by statute. The Corporation shall not be bound to see to the execution of any trust affecting the ownership of this Debenture nor be affected by notice of any equity that may be subsisting in respect thereof.

 

2.3 Mutilation, Loss, Theft or Destruction

 

In case this Debenture shall become mutilated or be lost, stolen or destroyed, the Corporation, in its discretion, may issue and deliver a new Debenture upon surrender and cancellation of the mutilated Debenture, or in the case of a lost, stolen or destroyed Debenture, in lieu of and in substitution for the same. In case of loss, theft or destruction, the applicant for a substituted Debenture shall furnish to the Corporation such evidence of the loss, theft or destruction of this Debenture as shall be satisfactory to the Corporation in its discretion and shall also furnish an indemnity satisfactory to the Corporation. The applicant shall pay all reasonable expenses incidental to the issuance of any substituted Debenture including the cost of such indemnity or indemnity bond.

 

2.4 Payment of Debenture

 

All payments to be made to the Holder by the Corporation under this Debenture shall be made by certified cheque, bank draft or wire transfer in immediately available funds to the Holder’s designated account or at the address of the Holder as set out in Section 5.7, free and clear of and without deduction or withholding for any and all taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto (all such taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “ Taxes ”) imposed by Canada (or any of the provinces and territories thereof), unless such Taxes are required by applicable law to be deducted or withheld. If the Corporation shall be required by applicable law to deduct or withhold any such Taxes from or in respect of any amount payable under this Debenture, (a) the amount payable shall be decreased (and for greater certainty, in the case of interest, the amount of interest shall be decreased) by the amount of such deduction or withholding; (b) the Corporation shall make such deductions or withholdings; and (c) the Corporation shall pay the full amount deducted or withheld forthwith to the relevant governmental entity in accordance with applicable law.

 

  4  -  

 

 

2.5 Holder not a Shareholder

 

Nothing in this Debenture shall, in itself confer or be construed as conferring upon the Holder any right or interest whatsoever as a shareholder of the Corporation, including, without limitation, the right to vote at, to receive notice of, or to attend a meeting of shareholders or any offer of the Corporation, or the right to receive dividends or other distributions.

 

2.6 Debenture Issued as Security

 

This Debenture shall be held by the Holder as continuing security for the obligations which from time to time are due and owing by the Corporation to the Holder and any ultimate unpaid balance or unperformed part thereof.

 

2.7 Concerning Interest

 

(a) Unless otherwise specifically provided herein, interest shall be computed on the basis of a year of 360 days composed of twelve 30-day months. With respect to the Debentures, whenever interest is computed on the basis of a year (the “ deemed year ”) which contains more days than the actual number of days in the calendar year of calculation, such rate of interest shall be expressed as a yearly rate for purposes of the Interest Act (Canada) by multiplying such rate of interest by the actual number of days in the calendar year of calculation and dividing it by the number of days in the deemed year.

 

(b) Subject to any required approval of a recognized stock exchange in connection with a Qualified Financing, all unpaid interest earned and accrued with respect to the Debentures shall be deemed as Principal and shall be treated as same for the purposes of this Debenture (“ Added Principal ”). If in connection with a Qualified Financing, a recognized stock exchange shall not allow for accrued and earned interest to be reclassified as Principal, the provisions of this Section 2.7(b) shall have no force and effect.

 

(c) There shall be no interest earned on Added Principal.

 

2.8 Pre-Payment Right

 

If no Event of Default has occurred, and upon providing not less than thirty (30) days written notice to the Holder, the Corporation shall have the option to pre-pay all or any portion of the Principal outstanding plus any accrued and unpaid interest in cash. Upon receiving the notice referred to in the prior sentence, the Holder shall have ten (10) days to exercise the Holder’s right of conversion pursuant to Section 3.1 (in whole or in part).

 

2.9 Acceleration of Maturity Date

 

If, following the completion of a Qualified Financing, the Corporation issues any Common Shares (“ Discounted Issuance ”) at a price that is lower than the Conversion Price (after taking into account any adjustments in accordance with this Debenture), then the Maturity Date shall be accelerated to the date that is thirty (30) days following the closing of the Discounted Issuance and all outstanding Principal and any accrued and unpaid interest thereon shall become due on such accelerated Maturity Date.

 

  5  -  

 

 

ARTICLE 3
CONVERSION OF DEBENTURE

 

3.1 Conversion Privilege

 

(a) Following the completion of a Qualified Financing and subject to the provisions and conditions of Section 2.8 and this ARTICLE 4, the Holder shall have the right, at the Holder's option, at any time prior to 5:00 p.m. (Toronto time) on the last Business Day immediately preceding the Maturity Date, to convert the whole or any part of the Principal that is divisible by $1,000 into Common Shares at the Conversion Price, in effect as of the date of such conversion (“ Conversion Date ”). To make such election to convert, the Holder shall deliver to the Corporation a conversion notice substantially in the form of Schedule “B” attached hereto.

 

(b) The conversion shall extend only to the maximum number of whole Common Shares into which the aggregate Principal surrendered for conversion at any one time by the Holder may be converted in accordance with the foregoing provisions of this Section. Fractional interests in Common Shares shall be adjusted for in the manner provided in Section 3.3.

 

(c) Upon conversion of this Debenture, any accrued but unpaid interest due to the date of conversion which is not being converted in the manner herein provided shall be payable by the Corporation to the Holder within 30 days of the Conversion Date.

 

(d) Within ten Business Days of the Conversion Date, the Corporation shall issue or cause to be issued and deliver or cause to be delivered to the Holder a certificate or certificates in the name of the Holder for the number of Common Shares deliverable upon the conversion of this Debenture (or specified portion thereof).

 

(e) If the Holder shall convert less than all of the Principal, the Holder shall be entitled to receive a certificate representing any balance of the Principal amount of Debenture not converted and interest accrued thereon.

 

3.2 Adjustment of Conversion Price

 

The Conversion Price shall be subject to adjustment from time to time as follows:

 

(a) if and whenever at any time prior to the Conversion Date the Corporation shall (i) subdivide or re-divide the outstanding Common Shares into a greater number of shares; (ii) reduce, combine or consolidate the outstanding Common Shares into a smaller number of shares; or (iii) issue Common Shares to the holders of all or substantially all of the outstanding Common Shares by way of a stock dividend (other than the issue of Common Shares to holders of Common Shares who have elected to receive dividends in the form of Common Shares in lieu of dividends paid in the ordinary course on the Common Shares), the Conversion Price in effect on the effective date of such subdivision, re-division, reduction, combination or consolidation or on the record date for such issue of Common Shares by way of a stock dividend, as the case may be, shall in the case of any of the events referred to in (i) and (iii) above be decreased in proportion to the number of outstanding Common Shares resulting from such subdivision, redivision or dividend, or shall, in the case of any of the events referred to in (ii) above, be increased in proportion to the number of outstanding Common Shares resulting from such reduction, combination or consolidation. Such adjustment shall be made successively whenever any event referred to in this subsection 3.2(a) shall occur. Any such issue of Common Shares by way of a stock dividend shall be deemed to have been made on the record date for the stock dividend for the purpose of calculating the number of outstanding Common Shares under subsections (b) and (c) of this Section 3.2;

 

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(b) if and whenever at any time prior to the Conversion Date the Corporation shall fix a record date for the issuance of rights or warrants to all or substantially all the holders of its outstanding Common Shares entitling them, for a period expiring not more than 45 days after such record date, to subscribe for or purchase Common Shares (or securities convertible into or exchangeable for Common Shares) at a price per share (or having a conversion or exchange price per share) less than 80% of the Current Market Price of a Common Share on such record date, the Conversion Price shall be adjusted immediately after such record date so that it shall equal the price determined by multiplying the Conversion Price in effect on such record date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such record date plus a number of Common Shares equal to the number arrived at by dividing the aggregate price of the total number of additional Common Shares offered for subscription or purchase (or the aggregate conversion or exchange price of the convertible or exchangeable securities so offered) by such Current Market Price per Common Share, and of which the denominator shall be the total number of Common Shares outstanding on such record date plus the total number of additional Common Shares offered for subscription or purchase (or into which the convertible or exchangeable securities so offered are convertible or exchangeable). Such adjustment shall be made successively whenever such a record date is fixed. To the extent that any such rights or warrants are not so issued or any such rights or warrants are not exercised prior to the expiration thereof, the Conversion Price shall be re-adjusted to the Conversion Price which would then be in effect if such record date had not been fixed or to the Conversion Price which would then be in effect based upon the number of Common Shares (or securities convertible into or exchangeable for Common Shares) actually issued upon the exercise of such rights or warrants, as the case may be;

 

(c) if and whenever at any time prior to the Conversion Date the Corporation shall fix a record date for the making of a distribution to all or substantially all the holders of its outstanding Common Shares of (i) shares of any class other than Common Shares and other than shares distributed to holders of Common Shares who have elected to receive dividends in the form of such shares in lieu of dividends paid in the ordinary course; (ii) rights, options or warrants (excluding rights, options or warrants entitling the holders thereof for a period of not more than 45 days to subscribe for or purchase Common Shares or securities convertible into Common Shares); or (iii) evidences of its indebtedness; or (iv) assets (excluding dividends paid in the ordinary course) then, in each such case, the Conversion Price shall be adjusted immediately after such record date so that it shall equal the price determined by multiplying the Conversion Price in effect on such record date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such record date multiplied by the Current Market Price per Common Share on such record date, less the fair market value (as determined by the board of directors with the approval of the trustee, acting reasonably, which determination shall be conclusive) of such shares or rights, options or warrants or evidences or indebtedness or assets so distributed, and of which the denominator shall be the total number of Common Shares outstanding on such record date multiplied by such Current Market Price per Common Share. Such adjustment shall be made successively whenever such a record date is fixed. To the extent that such distribution is not so made, the Conversion Price shall be re-adjusted to the Conversion Price which would then be in effect if such record date had not been fixed or to the Conversion Price which would then be in effect based upon such shares or rights, options or warrants or evidences of indebtedness or assets actually distributed, as the case may be. In (iv) of this subsection (c) the term “dividends paid in the ordinary course” shall include the value of any securities or other property or assets distributed in lieu of cash dividends paid in the ordinary course at the option of shareholders;

 

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(d) in any case in which this Section 3.2 shall require that an adjustment shall become effective immediately after a record date for an event referred to herein, the Corporation may defer, until the occurrence of such event, issuing to the Holder after such record date and before the occurrence of such event the additional Common Shares issuable upon such conversion by reason of the adjustment required by such event before giving effect to such adjustment; provided, however, that the Corporation shall deliver to the Holder an appropriate instrument evidencing the Holder's right to receive such additional Common Shares upon the occurrence of the event requiring such adjustment and the right to receive any distributions made on such additional Common Shares declared in favour of holders of record of Common Shares on and after the date of conversion or such later date as the Holder would, but for the provisions of this subsection (d) have become the holder of record of such additional Common Shares;

 

(e) the adjustments provided for in this Section 3.2 are cumulative and shall apply to successive subdivisions, re-divisions, reductions, combinations, consolidations, distributions, issues or other events resulting in any adjustment under the provisions of this Section 3.2, provided that, notwithstanding any other provision of this Section, no adjustment of the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Conversion Price then in effect; provided however, that any adjustments which by reason of this subsection (e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment;

 

(f) for the purpose of calculating the number of Common Shares outstanding, Common Shares owned by or for the benefit of the Corporation or its subsidiaries shall not be counted;

 

(g) in the event of any question arising with respect to the adjustments provided in this Section 3.2, such question shall be conclusively determined by a firm of chartered accountants appointed by the Corporation (who may be the auditors of the Corporation); such accountants shall have access to all necessary records of the Corporation any such determination shall be binding upon the Corporation and the Holder;

 

(h) in case the Corporation shall take any action affecting the Common Shares other than action described in this Section 3.2, which in the opinion of the directors of the Corporation would materially affect the rights of the Holder, the Conversion Price shall be adjusted in such manner and at such time, by action of the directors, as the directors in their sole discretion may determine to be equitable in the circumstances. Failure of the directors to make such an adjustment shall be conclusive evidence that the directors have determined that it is equitable to make no adjustment in the circumstances; and

 

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(i) no adjustment in the Conversion Price shall be made in respect of any event described in subsection 3.2(a)(iii), 3.2(b) or 3.2(c) if the Holder is entitled to participate in such event on the same terms mutatis mutandis as if the Holder had converted the Debenture prior to the effective date or record date, as the case may be, of such event.

 

3.3 Fractional Shares

 

The Corporation shall not issue fractional Common Shares upon the conversion of this Debenture and the Holder will receive a cash payment in satisfaction of any fractional Common Shares determined on the basis of the Conversion Price on the Conversion Date.

 

3.4 Corporation to Reserve Shares

 

The Corporation covenants that it will at all times reserve and keep available out of its authorized Common Shares, solely for the purpose of issue upon conversion of this Debenture such number of Common Shares as shall then be issuable upon the conversion of this Debenture. The Corporation covenants that all Common Shares which shall be so issuable shall be duly and validly issued as fully paid and non-assessable.

 

3.5 Taxes on Conversion

 

The Corporation will from time to time promptly pay or make provision for the payment of any and all Taxes which may be imposed by the laws of Canada or any province of Canada (except income tax or security transfer tax, if any) which shall be payable with respect to the issuance or delivery to the Holder, upon the exercise of its right to conversion, of Common Shares of the Corporation pursuant to the terms of this Debenture.

 

3.6 Legended Certificates

 

Notwithstanding anything herein contained, Common Shares issuable upon conversion of this Debenture will only be issued in compliance with the securities laws of any applicable jurisdiction, and the certificates representing the Common Shares issued will bear all applicable legends.

 

3.7 Cancellation of Converted Debenture

 

This Debenture converted in whole or in part under the provisions specified herein shall be forthwith delivered to and cancelled by the Corporation and, subject to the provisions of Section 3.1(d), no Debenture shall be issued in substitution therefor.

 

3.8 Certificate as to Adjustment

 

The Corporation shall from time to time immediately after the occurrence of any event which requires an adjustment or readjustment as provided in Section 3.2, deliver an officer’s certificate to the Holder specifying the nature of the event requiring the same and the amount of the adjustment necessitated thereby and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based, which certificate and the amount of the adjustment specified therein shall be verified by an opinion of a firm of chartered accountants appointed by the Corporation (who may be the auditors of the Corporation) and, shall be conclusive and binding on all parties in interest. The Corporation shall, except in respect of any subdivision, re-division, reduction, combination or consolidation of the Common Shares, forthwith give notice to the Holder in the manner herein provided specifying the event requiring such adjustment or readjustment and the results thereof, including the resulting Conversion Price; provided that, if the Corporation has given notice under Section 3.9 covering all the relevant facts in respect of such event, no such notice need be given under this Section 3.8.

 

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3.9 Notice of Special Matters

 

The Corporation covenants with the holder that so long as this Debenture remains outstanding, it will give notice to the holder in the manner herein provided, of its intention to fix a record date for any event referred to in Sections 3.2(a), 3.2(b), or 3.2(c) (other than the subdivision, re-division, reduction, combination or consolidation of its Common Shares) which may give rise to an adjustment in the Conversion Price, and, in each case, such notice shall specify the particulars of such event and the record date and the effective date for such event; provided that the Corporation shall only be required to specify in such notice such particulars of such event as shall have been fixed and determined on the date on which such notice is given. Such notice shall be given not less than ten (10) days in each case prior to such applicable record date.

 

ARTICLE 4
EVENTS OF DEFAULT

 

4.1 Events of Default

 

The Principal, interest and other monies secured by this Debenture shall become immediately due and payable, whether with or without prior demand therefor, and the security hereby constituted shall become immediately enforceable in each and every of the following events (each of such events being hereinafter called an “ Event of Default ”):

 

(a) if the Corporation makes a default in the payment, in whole or in part, of the Principal or interest thereon or any other monies secured hereby and following notice from the Holder of such failure the default remains unrectified for a period of ten Business Days;

 

(b) if any material representation or warranty contained herein proves to be untrue;

 

(c) if the Corporation makes default in the observance or performance of any other covenant, agreement or condition on the part of the Corporation to be kept, observed or performed, whether herein or in any other agreement or instrument between the Corporation and the Holder and the default remains unrectified for a period of thirty (30) days;

 

(d) if an order is made or an effective resolution is passed for the winding up of the Corporation, or if a petition is filed for the winding up of the Corporation;

 

(e) if the Corporation becomes insolvent, or makes an unauthorized assignment or bulk sale of its assets, or if a petition in bankruptcy is filed or presented against the Corporation;

 

(f) if the Corporation ceases or threatens to cease to carry on its business, or if any proceeding with respect to the Corporation is commenced under the Companies' Creditors Arrangements Act or the Bankruptcy and Insolvency Act or any other proceedings is taken for the winding up, dissolution, or liquidation of the Corporation;

 

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(g) if proceedings are commenced to appoint a receiver/manager, or trustee in respect of the assets of the Corporation by a court or pursuant to any other agreement;

 

(h) if the securities of Corporation are not posted for trading on a recognized Canadian stock exchange (which, for greater certainty, includes the TSX Venture Exchange and Canadian Securities Exchange) within six (6) months from the date hereof;

 

(i) if the proceeds of the Offering are used in material variance of the financial model set out in Schedule “C” attached hereto without the prior written consent of KW Capital Partners Limited. For greater certainty, the Corporation shall have full and absolute discretion with respect to any use of proceeds in respect of any financing (other than the Offering) and any use of such proceeds in variance from the financial model shall not require the consent of KW Capital Partners Limited or be deemed an Event of Default; or

 

(j) the default which is continuing by the Corporation under the terms and conditions of any promissory issued by the Corporation prior to the date hereof.

 

4.2 Breach

 

The Holder may waive any breach by the Corporation of any of the provisions contained in this Debenture or any default by the Corporation in the observance or performance of any covenant, agreement or condition required to be kept, observed or performed by the Corporation under the terms of this Debenture.

 

ARTICLE 5
MISCELLANEOUS

 

5.1 Covenants of the Corporation

 

The Corporation hereby covenants and agrees with the Holder as follows:

 

(a) the Corporation covenants and agrees with the Holder that it shall repay all of the Principal and any interest thereon to the Holder in accordance with the terms hereof; and

 

(b) the Corporation shall give notice in writing forthwith to the Holder of the occurrence of any Event of Default, or other event which with lapse of time and/or giving of notice or otherwise would be an Event of Default, forthwith upon becoming aware thereof and specifying the nature of such default and/or Event of Default and the steps taken to remedy the same.

 

5.2 Failure to Comply

 

If the Corporation should fail to comply with any covenant or agreement contained herein, the Holder may, but shall not be obligated to, do whatever is necessary to rectify such failure, and all sums so expended by the Holder or its agent shall forthwith become due and be payable by the Corporation to the Holder and until paid shall form part of the Principal secured hereby and shall bear interest at the aforesaid rate.

 

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5.3 Amalgamation

 

The Corporation acknowledges and agrees that in the event it amalgamates with any other corporation or corporations it is the intention of the Corporation and the Holder that the term “ Corporation ” when used herein shall apply to each of the amalgamating corporations and to the amalgamated corporation.

 

5.4 Indemnity

 

The Corporation will indemnify the Holder and its successors and assigns against any and all liabilities, actions, claims, judgments, costs, charges and reasonable legal fees that may be made against or incurred by the Holder, by reason of the assertion that the Holder has received funds that may be claimed by third persons, either before or after the payment in full of the Principal, interest and other monies secured hereby; and the Holder shall have the right to defend against any such claims, actions and charges and claim from the Corporation all expenses incurred by the Holder in connection therewith, together with all reasonable legal fees as may be paid by the Holder in connection therewith. It is understood and agreed that the covenants and conditions of this Section 5.4 shall at all times be construed to be a personal covenant in favour of the Holder, and that such covenants and indemnity shall remain in full force and effect notwithstanding the payment of the Principal, interest and all other monies secured by this Debenture.

 

5.5 Assignability

 

The Principal, interest and other monies hereby secured will be paid by the Corporation and shall be assignable by Holder free from any right of set off or counterclaim by the Corporation or any equities between the Corporation and the Holder.

 

5.6 Advances

 

Neither the execution and delivery nor the registration of this Debenture shall for any reason whatsoever obligate or bind the Holder to advance any monies, or having advanced a portion obligate the Holder in any way to advance the balance thereof.

 

5.7 Notices

 

Unless herein otherwise expressly provided, a notice to be given hereunder will be deemed to be validly given if the notice is sent by courier or registered mail addressed as follows:

 

(a) If to the Holder at the latest address of the Holder as recorded on the register referenced in ARTICLE 2 herein; and

 

(b) If to the Corporation at:

 

Ehave, Inc.

203-277 Lakeshore Road East

Oakville, ON L6J 6J3

 

Any notice given as aforesaid shall conclusively be deemed to have been received by the addressee, if sent by courier, on the next following Business Day and, if sent by mail, on the fifth day following the posting thereof.

 

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5.8 Receipt

 

The Corporation hereby acknowledges receipt of a copy of this Debenture, and waives its right to receive a copy of any financing statement, financing change statement or verification statement filed or registered by the Holder.

 

5.9 Enurement

 

This Debenture and all its provisions shall enure to the benefit of the Holder, their successors and assigns and shall be binding upon the Corporation, its successors and assigns.

 

5.10 Plural

 

Wherever the singular or masculine or neuter is used in this Debenture, the same shall be construed as meaning the plural or feminine or body corporate and vice versa, where the context so requires.

 

5.11 Waiver

 

No waiver of any right of the Holder hereof shall be valid unless in writing delivered to the Corporation as herein provided. No amendment hereunder shall be valid or effective for any purpose unless consented to in writing by the Holder.

 

5.12 Severability

 

In the event that any term or provision in this Debenture shall, to any extent, be invalid or unenforceable, the remaining terms and provisions of this Debenture shall not be affected thereby and shall be valid and enforceable to the fullest extent permitted by applicable law.

 

5.13 Governing Law

 

This Debenture shall be governed by and construed in accordance with the laws in force in the Province of Ontario and the federal laws of Canada applicable therein and for the purposes of any legal proceedings in respect of this Debenture, the Corporation irrevocably submits to the jurisdiction of the courts of the Province of Ontario. There shall be no application of any conflict of laws rule which is inconsistent with this section.

 

[ Signature Page to Follow ]

 

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IN WITNESS WHEREOF the Corporation has executed this Debenture by its proper officer duly authorized in that behalf as of the ___ day of ___________________, 2018.

 

  EHAVE, INC.
   
   
  Name:
  Title:

 

Signature Page – Ehave, Inc. – Debenture Certificate

 

 

 

SCHEDULE “A”

 

FORM OF ASSIGNMENT

 

FOR VALUE RECEIVED , the undersigned hereby sells, assigns and transfers unto _______________________________, whose address and social insurance number, if applicable, are set forth below, this Debenture (or $________________ principal amount hereof*) of EHAVE, INC. standing in the name(s) of the undersigned in the register maintained by the Corporation with respect to the Debentures and does hereby irrevocably authorize and direct the Corporation to transfer such Debentures in such register, with full power of substitution in the premises.

 

Dated:
   
Address of Transferee:  
  (Street Address, City, Province and Postal Code)
   
Social Insurance Number of Transferee, if applicable:  
       

 

*If less than the full principal amount of the within Debenture is to be transferred, indicate in the space provided the principal amount (which must be $1,000 or an integral multiple thereof, unless you hold a Debenture in a non-integral multiple of $1,000, in which case such Debenture is transferable only in its entirety) to be transferred.

 

The signature(s) to this assignment must correspond with the name(s) as written upon the face of this Debenture in every particular without alteration or any change whatsoever. The signature(s) must be guaranteed by a member of an acceptable Medallion Guarantee Program. Notarized or witnessed signatures are not acceptable as guaranteed signatures. The Guarantor must affix a stamp bearing the actual words: "SIGNATURE GUARANTEED".

 

The registered holder of this Debenture is responsible for the payment of any documentary, stamp or other transfer taxes that may be payable in respect of the transfer of this Debenture.

 

Signature of Guarantor:    
     
     
Authorized Officer   Signature of transferring registered holder
     
     
Name of Institution    

 

Form of Assignment – Ehave, Inc. – Winter 2018 Debenture Certificate

 

 

 

SCHEDULE “B”

 

CONVERSION NOTICE

TO:

EHAVE, INC.

203-277 Lakeshore Road East

Oakville, ON L6J 6J3

   
Note: All capitalized terms used herein have the meaning ascribed thereto in the certificate (the “ Certificate ”) representing the Debentures to which this conversion notice is attached.

 

The undersigned registered holder of the Debentures irrevocably elects to convert $_________________* of Principal in accordance with the terms of the Certificate and tenders herewith the Certificate and the Debentures contemplated thereunder, and, if applicable, directs that the common shares of Ehave, Inc. (“ Common Shares ”) issuable upon a conversion be issued and delivered to the person indicated below. (If the Common Shares are to be issued in the name of a person other than the Holder, all requisite transfer taxes must be tendered by the undersigned).

 

Dated:      
    (Signature of Registered Holder)

 

* The conversion amount must be $1,000 or integral multiples thereof.

 

NOTE: If Common Shares are to be issued in the name of a person other than the Holder, the signature must be guaranteed by a member of an acceptable Medallion Guarantee Program. The Guarantor must affix a stamp bearing the actual words: “SIGNATURE GUARANTEED”.

 

(Print name in which Common Shares are to be issued, delivered and registered)

 

Name:    
     
     
(Address)  
   
   
(City, Province and Postal Code)  
     
Name of guarantor:    
     
     
Authorized signature:    
       

 

Conversion Notice – Ehave, Inc. – Winter 2018 Debenture Certificate

 

 

 

SCHEDULE “C”

 

FINANCIAL MODEL

 

(see attached)

 

Financial Model – Ehave, Inc. – Winter 2018 Debenture Certificate

 

 

Exhibit 4.30

 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY OR ANY SECURITY INTO WHICH THIS SECURITY MAY BE CONVERTED INTO BEFORE THE DATE THAT IS 4 MONTHS AND ONE DAY AFTER THE LATER OF (I) [ l ] , AND (II) THE DATE the ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.

 

EXERCISABLE FOLLOWING THE QUALIFIED FINANCING DATE AND PRIOR TO 4:30 P.M., TORONTO TIME, ON THE EXPIRY DATE (AS DEFINED BELOW) AT WHICH TIME THESE WARRANTS SHALL EXPIRE AND BE NULL AND VOID

 

WARRANTS TO PURCHASE COMMON SHARES

 

OF

 

EHAVE, INC.

 

Issue Date: [ l ] , 2018

 

Warrant Certificate No.  201801–W [ l ] Warrants to Purchase
Common Shares

 

THIS CERTIFIES THAT, for value received, [name and address of warrantholder ] (the “ Holder ”), being the registered holder of the Number of Warrants (as defined herein), is entitled at any time following the Qualified Financing Date (as defined herein) and prior to 4:30 p.m. (Toronto time) on the Expiry Date (as defined herein) to subscribe for and purchase such number of Common Shares (as defined herein) at the Exercise Price (as defined herein) for each Warrant exercised, subject to adjustment as set out herein, by surrendering to the Corporation at its registered and records office at 203-277 Lakeshore Road East, Oakville, ON L6J 6J3, Canada, a completed and executed subscription form, attached hereto as Exhibit “I”, and payment in full for the Common Shares (as defined herein) being purchased, which payment shall be made by certified cheque, bank draft or such other means acceptable to the Corporation in same day freely transferable funds in Toronto, Ontario.

 

This Warrant certificate (the “ Warrant Certificate ”) is issued pursuant to, and is subject to, the terms of that certain Subscription Agreement dated [ l ], 2018 between the Corporation and the Holder.

 

The Corporation shall cause a register (the “ Register ”) to be kept and maintained in which shall be entered the names and addresses of all holders of Warrants and the number of Warrants held by each of them.

 

The Corporation shall treat the Holder as the absolute owner of this Warrant for all purposes and the Corporation shall not be affected by any notice or knowledge to the contrary. The Holder shall be entitled to the rights evidenced by this Warrant Certificate free from all equities and rights of set-off or counterclaim between the Corporation and the original or any intermediate holder and all persons may act accordingly and the receipt by the Holder of the Common Shares issuable upon exercise hereof shall be a good discharge to the Corporation and the Corporation shall not be bound to inquire into the title of any such Holder.

 

 

 

1. Definitions : In this Warrant Certificate, unless there is something in the subject matter or context inconsistent therewith, the following expressions shall have the following meanings namely:

 

(a) Adjustment Period ” means the period commencing on the Qualified Financing Date and ending at the Expiry Time;

 

(b) Business Day ” means any day other than a Saturday, Sunday, legal holiday or a day on which banking institutions are closed in Toronto, Ontario;

 

(c) Common Shares ” means the common shares in the capital of the Corporation;

 

(d) Conversion Price ” shall mean the Qualified Financing Price multiplied by 0.75;

 

(e) Corporation ” means Ehave, Inc. a corporation incorporated under the laws of Canada and its successors and assigns;

 

(f) Exercise Price ” shall equal the Qualified Financing Price;

 

(g) Expiry Date ” means [ l ] , 2023;

 

(h) Expiry Time ” means 4:30 p.m., Toronto, Ontario time, on the Expiry Date;

 

(i) Holder ” means the holder set forth on the first page hereof;

 

(j) Issue Date ” means the issue date set forth on the first page of this Warrant Certificate;

 

(k) Number of Warrants ” means the [ aggregate subscription price to be added ] divided by the Conversion Price;

 

(l) person ” means an individual, corporation, partnership, unincorporated syndicate, unincorporated organization, trust, trustee, executor, administrator, or other legal representative, or any group or combination thereof or any other entity whatsoever;

 

(m) Qualified Financing ” means a financing (which may be completed in one of more tranches) by the Corporation after the date hereof for aggregate gross proceeds of not less than CDN$2,000,000; provided that such financing shall be completed in connection with the proposed listing of the Common Shares on a recognized stock exchange in Canada (which, for greater certainty, includes the TSX Venture Exchange and Canadian Securities Exchange) within two (2) months of the completion of such financing;

 

(n) Qualified Financing Date ” means the closing date of the Qualified Financing;

 

(o) Qualified Financing Price ” shall mean the price per security issued by the Corporation in the Qualified Financing;

 

(p) Register ” has the meaning ascribed to such term on the first page hereof; and

 

(q) Warrant ” shall mean a common share purchase warrant of the Corporation.

 

2. Expiry Time : At the Expiry Time, all rights under the Warrants evidenced hereby, in respect of which the right of subscription and purchase herein provided for shall not theretofore have been exercised, shall expire and be of no further force and effect.

 

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3. Exercise Procedure :

 

(a) Following the Qualified Financing Date, the Holder may exercise the right to subscribe and purchase the number of Common Shares herein provided for by delivering to the Corporation prior to the Expiry Time at its office set forth herein the subscription form, attached hereto as Exhibit “I”, duly completed and executed by the Holder or its legal representative or attorney, duly appointed by an instrument in writing in form and manner satisfactory to the Corporation, together with a certified cheque, bank draft or other means acceptable to the Corporation in same day freely transferable funds, payable to or to the order of the Corporation in an amount equal to the aggregate Exercise Price in respect of the Warrants so exercised. Any subscription form so surrendered shall be deemed to be surrendered only upon delivery thereof to the Corporation at its office set forth herein (or to such other address as the Corporation may notify the Holder).

 

(b) Upon such delivery as aforesaid, the Corporation shall cause to be issued to the Holder hereof the Common Shares subscribed for not exceeding those which such Holder is entitled to purchase pursuant to this Warrant Certificate and the Holder hereof shall become a shareholder of the Corporation in respect of the Common Shares subscribed for with effect from the date of such delivery and shall be entitled to delivery of a certificate or direct registration transaction advice evidencing the Common Shares and the Corporation shall cause such certificate or direct registration transaction advice to be couriered to the Holder hereof at the address or addresses specified in such subscription as soon as practicable, and in any event within five Business Days of such delivery.

 

(c) Where required by applicable securities laws, the certificate representing the Common Shares issued upon exercise of this Warrant Certificate shall bear the following legend:

 

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) [INSERT THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE ISSUE DATE], AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.”

 

provided that, if at any time, in the opinion of counsel to the Corporation, such legend is no longer necessary or advisable under any such securities laws, or the holder of any such legended certificate, provides the Corporation with evidence satisfactory in form and substance to the Corporation (which may include an opinion of counsel satisfactory to the Corporation) to the effect that such legends are not required, such legended certificate may thereafter be surrendered to the Corporation in exchange for a certificate which does not bear such legend.

 

(d) This Warrant may not be exercised in the United States or by or on behalf of a U.S. Person unless an exemption is available from the registration requirements of the United States Securities Act of 1933, as amended (the “ U.S. Securities Act ”), and applicable state securities laws and the Holder has furnished an opinion of counsel of recognized standing in form and substance satisfactory to the Corporation to such effect. THESE WARRANTS MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR BEHALF OF, OR FOR THE ACCOUNT OR BENEFIT OF A US PERSON UNLESS THE SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LEGISLATION OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. “UNITED STATES” AND “US PERSON’ ARE DEFINED BY REGULATION S UNDER THE U.S. SECURITIES ACT.

 

  3  

 

 

4. Partial Exercise : Following the Qualified Financing Date, the Holder may subscribe for and purchase a number of Common Shares less than the number the Holder is entitled to purchase pursuant to this Warrant Certificate. In the event of any such subscription prior to the Expiry Time, the Holder shall in addition be entitled to receive, without charge, a new Warrant Certificate in respect of the balance of the Common Shares which the Holder was entitled to subscribe for pursuant to this Warrant Certificate and which were then not purchased.

 

5. No Fractional Shares : Notwithstanding any adjustments provided for in Section 11 hereof or otherwise, the Corporation shall not be required upon the exercise of any Warrants to issue fractional Common Shares in satisfaction of its obligations hereunder and, in any such case, the number of Common Shares issuable upon the exercise of any Warrants shall be rounded down to the nearest whole number without compensation to the Holder therefor.

 

6. Exchange of Warrant Certificates : This Warrant Certificate may be exchanged for Warrant Certificates representing in the aggregate the same number of Warrants and entitling the Holder thereof to subscribe for and purchase an equal aggregate number of Common Shares at the same Exercise Price and on the same terms as this Warrant Certificate (with or without legends as may be appropriate).

 

7. Transfer of Warrants : The Warrants may be transferred by the Holder completing and delivering to the Corporation the transfer form attached hereto as Exhibit "II" and upon compliance with all applicable securities laws. The transferee of a Warrant shall, after a transfer form is duly completed and upon compliance with all other reasonable requirements of the Corporation or law, be entitled to have his, her or its name entered on the Register as the owner of such Warrant, free from all equities or rights of set-off or counterclaim between the Issuer and the transferor or any previous holder of such Warrant, save in respect of equities of which the Corporation is required to take notice by statute or by order of a court of competent jurisdiction.

 

8. Not a Shareholder : Nothing in this Warrant Certificate or in the holding of a Warrant evidenced hereby shall be construed as conferring upon the Holder any right or interest whatsoever as a shareholder of the Corporation.

 

9. No Obligation to Purchase : Nothing herein contained or done pursuant hereto shall obligate the Holder to subscribe for or the Corporation to issue any Common Shares except those Common Shares in respect of which the Holder shall have exercised its right to purchase hereunder in the manner provided herein.

 

10. Covenants :

 

The Corporation covenants and agrees that so long as any Warrants evidenced hereby remain outstanding:

 

(a) until the Expiry Time, it will reserve and there will remain unissued out of its authorized capital a sufficient number of Common Shares to satisfy the right of purchase herein provided, as such right of purchase may be adjusted as contemplated herein;

 

(b) it will use reasonable efforts: (i) to comply with securities legislation applicable to it in order that the Corporation not be in default of any material requirements of such legislation; (ii) to do or cause to be done all things necessary to preserve and maintain its corporate existence; and (iii) in the event that the Common Shares are listed on a recognized stock exchange in Canada, to maintain the listing of the Common Shares on such exchange until the Expiry Time, provided that this covenant shall not prevent the Corporation from completing any transaction which would result in the Common Shares ceasing to be listed so long as the holders of such shares receive securities of an entity which is listed on a stock exchange in Canada or cash, or the holders of such shares have approved the transaction in accordance with the requirements of applicable corporate and securities laws and the rules and policies of the applicable stock exchange. All Common Shares will be issued upon the exercise of the right to purchase herein provided for, upon payment therefor of the amount at which such Common Shares may at the time be purchased pursuant to the provisions hereof, as fully paid and non-assessable shares; and

 

  4  

 

 

(c) the Corporation will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, all other acts, deeds and assurances in law as may be reasonably required for the better accomplishing and effecting of the intentions and provisions of this Warrant Certificate.

 

11. Adjustments :

 

(a) Adjustment : The rights of the Holder, including the number of Common Shares issuable upon the exercise of such Warrants represented by this Warrant Certificate, will be adjusted from time to time in the events and in the manner provided in, and in accordance with the provisions of, this Section 11.

 

(b) Share Reorganization : If and whenever at any time during the Adjustment Period, the Corporation shall (i) subdivide, redivide or change the outstanding Common Shares into a greater number of Common Shares; (ii) consolidate, combine or reduce the outstanding Common Shares into a lesser number of Common Shares; or (iii) fix a record date for the issue of Common Shares or securities convertible into or exchangeable for Common Shares to all or substantially all of the holders of Common Shares by way of a stock dividend or other distribution, then, in each such event, the Exercise Price shall, on the record date for such event or, if no record date is fixed, the effective date of such event, be adjusted so that it will equal the rate determined by multiplying the Exercise Price in effect immediately prior to such date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such date before giving effect to such event, and of which the denominator shall be the total number of Common Shares outstanding on such date after giving effect to such event. Such adjustment shall be made successively whenever any such event shall occur. Any such issue of Common Shares by way of a stock dividend shall be deemed to have been made on the record date for such stock dividend for the purpose of calculating the number of outstanding Common Shares under this subsection 11(b).

 

(c) Reclassifications : If and whenever at any time during the Adjustment Period, there is (i) any reclassification of or amendment to the outstanding Common Shares, any change of the Common Shares into other shares or any other reorganization of the Corporation (other than as described in subsection 11(b) hereof); (ii) any consolidation, amalgamation, arrangement, merger or other form of business combination of the Corporation with or into any other corporation resulting in any reclassification of the outstanding Common Shares, any change of the Common Shares into other shares or any other reorganization of the Corporation; or (iii) any sale, lease, exchange or transfer of the undertaking or assets of the Corporation as an entirety or substantially as an entirety to another corporation or entity, then, in each such event, the Holder upon the exercise of each Warrant shall be entitled to receive, and shall accept, in lieu of the number of Common Shares to which such Holder was theretofore entitled upon such exercise, the kind and number or amount of shares or other securities or property which such Holder would have been entitled to receive as a result of such event if, on the effective date thereof, such Holder had been the registered holder of the number of Common Shares to which such Holder was theretofore entitled upon such exercise. If necessary as a result of any such event, appropriate adjustments will be made in the application of the provisions set forth in this subsection with respect to the rights and interests thereafter of the Holder of this Warrant Certificate to the end that the provisions set forth in this subsection will thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares or other securities or property thereafter deliverable upon the exercise of this Warrant. Any such adjustments will be made by and set forth in an instrument supplemental hereto approved by the directors of the Corporation, acting reasonably, and shall for all purposes be conclusively deemed to be an appropriate adjustment.

 

  5  

 

 

(d) If at any time during the Adjustment Period any adjustment or readjustment in the Exercise Price shall occur pursuant to the provisions of subsection 11(b) or  11(c) of this Warrant Certificate, then the number of Common Shares purchasable upon the subsequent exercise of the Warrants shall be simultaneously adjusted or readjusted, as the case may be, by multiplying the number of Common Shares and Warrants purchasable upon the exercise of the Warrants immediately prior to such adjustment or readjustment by a fraction which shall be the reciprocal of the fraction used in the adjustment or readjustment of the Exercise Price.

 

12. Rules Regarding Calculation of Adjustment of Exercise Price :

 

(a) The adjustments provided for in Section 11 are cumulative and will, in the case of adjustments to the Exercise Price, be computed to the nearest one-hundredth of one cent and will be made successively whenever an event referred to therein occurs, subject to the following subsections of this Section 12.

 

(b) No adjustment in the Exercise Price is required to be made unless such adjustment would result in a change of at least 1% in the prevailing Exercise Price provided, however, that any adjustments which, except for the provisions of this subsection, would otherwise have been required to be made, will be carried forward and taken into account in any subsequent adjustments.

 

(c) No adjustment in the Exercise Price will be made in respect of any event described in Section 11(c), other than the events referred to in subsection 11(c), if the Holder is entitled to participate in such event on the same terms, mutatis mutandis , as if the Holder had exercised this Warrant prior to or on the effective date or record date of such event.

 

(d) If at any time a question or dispute arises with respect to adjustments provided for in Section 11, such question or dispute will be conclusively determined by the auditor of the Corporation or, if they are unable or unwilling to act, by such other firm of independent chartered accountants as may be selected by action of the directors of the Corporation and any such determination, subject to regulatory approval and absent manifest error, will be binding upon the Corporation and the Holder. The Corporation will provide such auditor or chartered accountant with access to all necessary records of the Corporation.

 

(e) In case the Corporation after the date of issuance of this Warrant takes any action affecting the Common Shares, other than action described in Section 11, which in the opinion of the board of directors of the Corporation would materially affect the rights of the Holder, the Exercise Price will be adjusted in such manner, if any, and at such time, by action of the directors of the Corporation in their sole discretion, acting reasonably and in good faith, but subject in all cases to any necessary regulatory approval. Failure of the taking of action by the directors of the Corporation so as to provide for an adjustment on or prior to the effective date of any action by the Corporation affecting the Common Shares will be conclusive evidence that the board of directors of the Corporation has determined that it is equitable to make no adjustment in the circumstances.

 

(f) If the Corporation sets a record date to determine the holders of the Common Shares for the purpose of entitling them to receive any dividend or distribution or sets a record date to take any other action and, thereafter and before the distribution to such shareholders of any such dividend or distribution or the taking of any other action, decides not to implement its plan to pay or deliver such dividend or distribution or take such other action, then no adjustment in the Exercise Price will be required by reason of the setting of such record date.

 

  6  

 

 

(g) In the absence of a resolution of the directors of the Corporation fixing a record date for any event which would require any adjustment to this Warrant, the Corporation will be deemed to have fixed as the record date therefor the date on which the event is effected.

 

(h) As a condition precedent to the taking of any action which would require any adjustment to this Warrant, including the Exercise Price, the Corporation shall take any corporate action which may be necessary in order that the Corporation or any successor to the Corporation or successor to the undertaking or assets of the Corporation have unissued and reserved in its authorized capital and may validly and legally issue as fully paid and non-assessable all the shares or other securities which the Holder is entitled to receive on the full exercise thereof in accordance with the provisions hereof.

 

(i) The Corporation will from time to time, immediately after the occurrence of any event which requires an adjustment or readjustment as provided in Section 11, forthwith give notice to the Holder specifying the event requiring such adjustment or readjustment and the results thereof, including the resulting Exercise Price.

 

(j) The Corporation covenants to and in favour of the Holder that so long as this Warrant remains outstanding, it will give notice to the Holder of the effective date or of its intention to fix a record date for any event referred to in Sections 11 or 12 whether or not such event gives rise to an adjustment in the Exercise Price or the number and type of securities issuable upon the exercise of the Warrants and, in each case, such notice shall specify the particulars of such event and the record date and the effective date for such event; provided that the Corporation shall only be required to specify in such notice such particulars of such event as have been fixed and determined on the date on which such notice is given. Such notice shall be given not less than 14 days in each case prior to such applicable record date or effective date, unless giving such notice is not reasonably practicable, in which case the Corporation will give as much notice as is reasonably practicable.

 

(k) In any case in which Section 11 shall require that an adjustment shall become effective immediately after a record date for or an effective date of an event referred to herein, the Corporation may defer, until the occurrence and consummation of such event, issuing to the Holder of this Warrant, if exercised after such record date or effective date and before the occurrence and consummation of such event, the additional Common Shares or other securities or property issuable upon such exercise by reason of the adjustment required by such event, provided, however, that the Corporation will deliver to the Holder an appropriate instrument evidencing the Holder’s right to receive such additional Common Shares or other securities or property upon the occurrence and consummation of such event and the right to receive any dividend or other distribution in respect of such additional Common Shares or other securities or property declared in favour of the holders of record of Common Shares or of such other securities or property on or after the Exercise Date or such later date as the Holder would, but for the provisions of this subsection, have become the holder of record of such additional Common Shares or of such other securities or property.

 

13. Consolidation and Amalgamation :

 

(a) The Corporation shall not enter into any transaction whereby all or substantially all or its undertaking, property and assets would become the property of any other corporation (herein called a “successor corporation”) whether by way of reorganization, reconstruction, consolidation, amalgamation, merger, transfer, sale, disposition or otherwise, unless prior to or contemporaneously with the consummation of such transaction the Corporation and the successor corporation shall have executed such instruments and done such things as the Corporation, acting reasonably, considers necessary or advisable to establish that upon the consummation of such transaction:

 

  7  

 

 

(i) the successor corporation will have assumed all the covenants and obligations of the Corporation under this Warrant Certificate, and

 

(ii) the Warrant and the terms set forth in this Warrant Certificate will be a valid and binding obligation of the successor corporation entitling the Holder, as against the successor corporation, to all the rights of the Holder under this Warrant Certificate.

 

(b) Whenever the conditions of subsection 13(a) shall have been duly observed and performed the successor corporation shall possess, and from time to time may exercise, each and every right and power of the Corporation under this Warrant in the name of the Corporation or otherwise and any act or proceeding by any provision hereof required to be done or performed by any director or officer of the Corporation may be done and performed with like force and effect by the like directors or officers of the successor corporation.

 

14. Representation and Warranty : The Corporation hereby represents and warrants with and to the Holder that the Corporation is duly authorized and has the corporate and lawful power and authority to create and issue this Warrant and the Common Shares issuable upon the exercise hereof and perform its obligations hereunder and that this Warrant represents a valid, legal and binding obligation of the Corporation enforceable in accordance with its terms.

 

15. Lost Certificate : If the Warrant Certificate evidencing the Warrants issued hereby becomes stolen, lost, mutilated or destroyed the Corporation may, on such terms as it may in its discretion, acting reasonably, impose, issue and countersign a new Warrant Certificate of like denomination, tenor and date as the Warrant Certificate so stolen, lost mutilated or destroyed.

 

16. Governing Law : This Warrant shall be governed by, and construed in accordance with, the laws of the Province of Ontario and the federal laws of Canada applicable therein and will be treated in all respects as an Ontario contract. Each of the parties hereto, irrevocably attorns to the exclusive jurisdiction of the courts of the province of Ontario with respect to all matters arising out of this Warrant Certificate.

 

17. Severability : If any one or more of the provisions or parts thereof contained in this Warrant Certificate should be or become invalid, illegal or unenforceable in any respect in any jurisdiction, the remaining provisions or parts thereof contained herein shall be and shall be conclusively deemed to be, as to such jurisdiction, severable therefrom.

 

18. Headings : The headings of the articles, sections, subsections and clauses of this Warrant Certificate have been inserted for convenience and reference only and do not define, limit, alter or enlarge the meaning of any provision of this Warrant Certificate.

 

19. Numbering of Articles, etc. : Unless otherwise stated, a reference herein to a numbered or lettered article, section, subsection, clause, subclause or schedule refers to the article, section, subsection, clause, subclause or schedule bearing that number or letter in this Warrant Certificate.

 

20. Gender : Whenever used in this Warrant Certificate, words importing the singular number only shall include the plural, and vice versa, and words importing the masculine gender shall include the feminine gender.

 

  8  

 

 

21. Day not a Business Day : In the event that any day on or before which any action is required to be taken hereunder is not a Business Day, then such action shall be required to be taken on or before the requisite time on the next succeeding day that is a Business Day.

 

22. Binding Effect : This Warrant Certificate and all of its provisions shall enure to the benefit of the Holder, its successors, assigns and legal personal representatives and shall be binding upon the Corporation and its successors.

 

23. Further Assurances: The Corporation hereby covenants and agrees that it will do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, all and every such other act, deed and assurance as the Holder shall reasonably require for the better accomplishing and effectuating of the intentions and provisions of this Warrant Certificate.

 

24. Notice : Unless herein otherwise expressly provided, a notice to be given hereunder will be deemed to be validly given if the notice is sent by courier or registered mail addressed as follows:

 

(a) If to the Holder at the latest address of the Holder as recorded on the Register; and

 

(b) If to the Corporation at:

 

203-277 Lakeshore Road East

Oakville, ON L6J 6J3

 

Any notice given as aforesaid shall conclusively be deemed to have been received by the addressee, if sent by courier, on the next following Business Day and, if sent by mail, on the fifth day following the posting thereof.

 

25. Time of Essence : Time shall be of the essence hereof.

 

[ Signature Page to Follow ]

 

  9  

 

 

IN WITNESS WHEREOF the Corporation has caused this Warrant Certificate to be signed by its duly authorized officer as of ______________________________, 2018.

 

  EHAVE, INC.
   
  Per:  
    Authorized Signatory

 

Signature Page – Ehave, Inc. Warrant Certificate

 

     

 

 

EXHIBIT “I”

 

SUBSCRIPTION FORM

 

TO:         Ehave, Inc.

203-277 Lakeshore Road East

Oakville, ON L6J 6J3

 

The undersigned holder of the within Warrant certificate hereby irrevocably subscribes for ___________ Common Shares of Ehave, Inc. pursuant to the within Warrant certificate and tenders herewith a certified cheque or bank draft for CDN$_________________ in full payment therefor.

 

The undersigned represents, warrants and certifies the undersigned is not a U.S. Person or a person in the United States, and is not acquiring any of the Common Shares issuable upon the exercise of the Warrants for the account or benefit of a U.S. Person or a person in the United States, and none of the persons listed above is a U.S. Person or a person in the United States. For purposes hereof “United States” and “U.S. Person” shall have the meanings given to such terms in Regulation S under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”).

 

DATED                                                                                       .    
     
    (Name of Subscriber - please print)
     
    By:                                                                                                          
          (Authorized Signature)
     
     
    (Official Capacity or Title - please print)
     
     
    Please print name of individual whose signature appears
    above if different than the name of the Subscriber
printed
    above.

 

Deliver the Common Shares as set forth below:   Register the Common Shares as set forth below:
     
    ¨ Same as Delivery Address (otherwise complete below)
     
     
(Name)   (Name)
     
     
(Account reference, if applicable)   (Account reference, if applicable)
     
     
(Contact Name)   (Contact Name)
     
     
(Address)   (Address)
     
     

 

Exhibit II – Ehave, Inc. Warrant Certificate

 

     

 

 

EXHIBIT “II”

 

TRANSFER FORM

 

To:           Ehave, Inc. (the “ Corporation ”)

203-277 Lakeshore Road East

Oakville, ON L6J 6J3

 

FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers to __________________________________________________________________________________________________________

________________________________________________________________________________________________(print name and address) the Warrants represented by this Warrant certificate and hereby irrevocable constitutes and appoints ____________________ as its attorney with full power of substitution to transfer the said securities on the appropriate register of the Warrant Agent.

 

In the case of a warrant certificate that contains a U.S. restrictive legend, the undersigned hereby represents, warrants and certifies that (one (only) of the following must be checked):

 

¨            (A)           the transfer is being made only to the Corporation;

 

¨            (B)            the transfer is being made outside the United States in accordance with Rule 904 of Regulation S under the U.S. Securities Act, and in compliance with any applicable local securities laws and regulations and the holder has provided herewith the Declaration for Removal of Legend attached as Appendix “A” to this Exhibit “II”; or

 

¨            (C)           the transfer is being made within the United States or to, or for the account or benefit of, U.S. Persons, in accordance with a transaction that does not require registration under the U.S. Securities Act or any applicable state securities laws and the undersigned has furnished to the Corporation and the Warrant Agent an opinion of counsel of recognized standing in form and substance reasonably satisfactory to the Corporation and the Warrant Agent to such effect.

 

In the case of a warrant certificate that does not contain a U.S. restrictive legend, if the proposed transfer is to, or for the account or benefit of a U.S. Person or to a person in the United States, the undersigned hereby represents, warrants and certifies that the transfer of the Warrants is being completed pursuant to an exemption from the registration requirements of the U.S. Securities Act and any applicable state securities laws, in which case the undersigned has furnished to the Corporation and the Warrant Agent an opinion of counsel of recognized standing in form and substance reasonably satisfactory to the Corporation and the Warrant Agent to such effect.

 

¨            If transfer is to a U.S. Person, check this box.

 

DATED this ____ day of_________________, 20____.

 

SPACE FOR GUARANTEES OF )  
SIGNATURES (BELOW) )  
  ) Signature of Transferor
  )  
  )  
Guarantor’s Signature/Stamp ) Name of Transferor

 

Exhibit II – Ehave, Inc. Warrant Certificate

 

     

 

 

APPENDIX “A” TO EXHIBIT “II”

 

FORM OF DECLARATION FOR REMOVAL OF LEGEND

 

TO:          Ehave, Inc. (the “ Corporation ”)

 

The undersigned: (a) acknowledges that the sale of the securities of the Corporation to which this declaration relates is being made in reliance on Rule 904 of Regulation S under the United States Securities Act of 1933, as amended (the “ U.S. Securities Act ”); and (b) certifies that: (1) the undersigned is not an affiliate of the Corporation as that term is defined in the 1933 Act; (2) the offer of such securities was not made to a person in the United States and either: (A) at the time the buy order was originated, the buyer was outside the United States, or the seller and any person acting on its behalf reasonably believed that the buyer was outside the United States; or (B) the transaction was executed in, on or through the facilities of a designated offshore securities market as defined in Regulation S under the U.S. Securities Act and neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States; (3) neither the seller nor any affiliate of the seller nor any person acting on any of their behalf has engaged or will engage in any directed selling efforts in the United States in connection with the offer and sale of such securities; (4) the sale is bona fide and not for the purpose of “washing off” the resale restrictions imposed because the securities are “restricted securities” (as such term is defined in Rule 144(a)(3) under the U.S. Securities Act); (5) the seller does not intend to replace the securities sold in reliance on Rule 904 of the U.S. Securities Act with fungible unrestricted securities; and (6) the contemplated sale is not a transaction, or part of a series of transactions which, although in technical compliance with Regulation S, is part of a plan or scheme to evade the registration provisions of the U.S. Securities Act. Terms used herein have the meanings given to them by Regulation S.

 

DATED this ____day of _____, 20__.

 

   
  (Name of Seller)
  By:  
    Name:
    Title:

 

Appendix “A” to Exhibit II – Ehave, Inc. Warrant Certificate

 

     

 

Exhibit 4.31 

 

EHAVE, INC.

 

SUBSCRIPTION AGREEMENT FOR UNITS

 

TO: EHAVE, INC. (THE “CORPORATION”)

 

The undersigned hereby irrevocably subscribes for and agrees to purchase from the Corporation that number of units of the Corporation (the “ Units ”) set out below at a price of $1,000 per Unit (the “ Subscription Price ”). Each Unit consists of one (1) Convertible Debenture (as defined herein) and such number of Warrants (as defined herein) as is equal to $1,200 divided by the Conversion Price (as defined herein). The Subscriber agrees to be bound by the terms and conditions set forth in the attached “Terms and Conditions of Subscription for Units” including without limitation the terms, representations, warranties, covenants, certifications and acknowledgements set forth in the applicable Schedules attached thereto. The Subscriber further agrees, without limitation, that the Corporation may rely upon the Subscriber’s representations, warranties, covenants, certifications and acknowledgments contained in such documents.

 

SUBSCRIPTION AND SUBSCRIBER INFORMATION

 

Please print all information (other than signatures), as applicable, in the space provided below

 

Subscriber Information and Signature    

_______________________________________________________
(Name of Subscriber)

 

 

 

 

Number of  Units:     _____________________________x $1,000
    =
Account Reference (if applicable):  ________________ ___________    
By:  ________________________________________ ____________
        Authorized Signature
 

Aggregate Subscription Price:_____________________________

 (the “ Subscription Amount ”)

     

______________________________________________________

(Official Capacity or Title – if the Subscriber is not an individual)

 

_______________________________________________________ 

(Name of individual whose signature appears above if different than the name of the Subscriber printed above.)

 

 ______________________________________________________ 

(Subscriber’s Residential Address, including Municipality and Province)

 

 ______________________________________________________ 

 

 ______________________________________________________ 

(Subscriber’s Telephone Number)                            (Email Address)

 

 

 

 

 

State whether Subscriber is an Insider* of the Corporation:

Yes  ¨            No  ¨

 

State whether Subscriber is a Registrant*:

Yes  ¨           No  ¨

 

(*see Article I, section 1.1. – Definitions)

 

   

 

 

The Subscriber hereby provides the Corporation the following instructions in connection with the settlement of the Convertible Debentures and Warrants comprising the Units being purchased hereunder and hereby directs the Corporation to issue and register (and deliver any definitive certificates, if applicable) the Convertible Debentures and Warrants comprising the Units as follows.

 

  Account Registration Information :       Delivery Instructions :  
             
  (Name)       (Name)  
             
             
  (Account Reference, if applicable)       (Account Reference, if applicable)  
             
             
             
             
  (Address, including Postal Code)       (Address, including Postal Code)  
             
             
          (Telephone Number)                      (Fax Number)  
             
             
          (Contact Name)  
             

 

2
 

 

TERMS AND CONDITIONS OF SUBSCRIPTION FOR UNITS

 

ARTICLE 1 - INTERPRETATION

 

1.1 Definitions

 

Whenever used in this Subscription Agreement, unless there is something in the subject matter or context inconsistent therewith, the following words and phrases shall have the respective meanings ascribed to them as follows:

 

Business Day ” means a day other than a Saturday, Sunday or any other day on which the principal chartered banks located in Toronto, Ontario are not open for business.

 

Closing ” has the meaning ascribed to such term in Section 4.1.

 

Closing Date ” has the meaning ascribed to such term in Section 4.1.

 

Closing Time ” has the meaning ascribed to such term in Section 4.1.

 

Common Shares ” means the shares of common stock in the capital of the Corporation.

 

Conversion Price ” shall mean the Qualified Financing Price multiplied by 0.75.

 

Convertible Debentures ” has the meaning ascribed to such term in the Term Sheet.

 

Corporation ” means Ehave, Inc. and includes any successor corporation to or of the Corporation.

 

Debenture Certificate ” means the certificate to be delivered by the Corporation to the Subscriber evidencing the Debentures.

 

including ” means without limitation.

 

Insider ” means (a) a director or senior officer of the Corporation (or a subsidiary of the Corporation), (b) any Person who beneficially owns, directly or indirectly, voting securities of the Corporation or who exercises control or direction over voting securities of the Corporation or a combination of both carrying more than 10% of the voting rights attached to all voting securities of the Corporation for the time being outstanding, or (c) a director or senior officer of an Insider of the Corporation.

 

knowledge of the Corporation ” (or similar phrases) means, as it pertains to the Corporation, the actual knowledge of the executive officers of the Corporation in office as at the date of this Subscription Agreement, together with the knowledge which they would have had if they had conducted a reasonable inquiry into the relevant subject matter;

 

NI 45-106 ” means National Instrument 45-106 – Prospectus Exemptions of the Canadian Securities Administrators.

 

Offering ” means the offering to the Subscriber of approximately 500 Units to be issued and sold by the Corporation pursuant to this Subscription Agreement.

 

3
 

  

Person ” includes any individual (whether acting as an executor, trustee administrator, legal representative or otherwise), corporation, firm, partnership, sole proprietorship, syndicate, joint venture, trustee, trust, unincorporated organization or association, and pronouns have a similar extended meaning.

 

Qualified Financing ” shall mean the completion of a financing by the Corporation after the date hereof for aggregate gross proceeds of not less than CDN$2,000,000; provided that such financing shall be completed in connection with the proposed listing of the Common Shares on a recognized stock exchange in Canada within two (2) months of the completion of such financing;

 

Qualified Financing Price ” shall mean the price per security issued by the Corporation in the Qualified Financing

 

Registrant ” means a dealer, adviser, investment fund manager, an ultimate designated person or chief compliance officer as those terms are used pursuant to Securities Laws, or a person registered or otherwise required to be registered under the Securities Laws.

 

Securities Laws ” means, as applicable, the securities laws, regulations, rules, rulings and orders in each of the provinces of Canada, the applicable policy statements, notices, blanket rulings, orders and all other regulatory instruments of the securities regulators in each of the provinces of Canada.

 

Subscriber ” means the subscriber for the Units as set out on page 1 of this Subscription Agreement.

 

Subscription Agreement ” means this subscription agreement (including any Schedules hereto) and any instrument amending this Subscription Agreement; “ hereof ”, “ hereto ”, “ hereunder ”, “ herein ” and similar expressions mean and refer to this Subscription Agreement and not to a particular Article or Section; and the expression “ Article ” or “ Section ” followed by a number means and refers to the specified Article or Section of this Subscription Agreement.

 

Subscription Amount ” has the meaning ascribed to such term on page 1 of this Subscription Agreement.

 

Subscription Price ” has the meaning ascribed to such term on page 1 of this Subscription Agreement.

 

Term Sheet ” means the term sheet delivered to potential purchasers of Units, a copy of which is attached hereto as Schedule “A”.

 

Underlying Shares ” means the Common Shares issuable on conversion of the Convertible Debentures, as more particularly set out in the Term Sheet.

 

United States ” means the United States of America, its territories and possessions, any State of the United States and the District of Columbia.

 

Units ” has the meaning ascribed to such term on page 1 of this Subscription Agreement.

 

U.S. Securities Act ” means the United States Securities Act of 1933, as amended.

 

Warrant Certificate ” means the certificate to be delivered by the Corporation to the Subscriber evidencing the Warrants.

 

Warrants ” has the meaning ascribed to such term in the Term Sheet.

 

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Warrant Shares ” means the Common Shares issuable upon the exercise of the Warrants, as more particularly set out in the Term Sheet.

 

1.2 Gender and Number

 

Words importing the singular number only shall include the plural and vice versa, words importing the masculine gender shall include the feminine gender and words importing persons shall include firms and corporations and vice versa.

 

1.3 Currency

 

Unless otherwise specified, all dollar amounts in this Subscription Agreement and the Schedules, including the symbol “$”, are expressed in Canadian dollars.

 

1.4 Subdivisions and Headings

 

The division of this Subscription Agreement into Articles, Sections, Schedules and other subdivisions and the inclusion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Subscription Agreement. The headings in this Subscription Agreement are not intended to be full or precise descriptions of the text to which they refer. Unless something in the subject matter or context is inconsistent therewith, references herein to an Article, Section, Subsection, paragraph, clause or Schedule are to the applicable article, section, subsection, paragraph, clause or schedule of this Subscription Agreement.

 

ARTICLE 2 - SCHEDULES

 

2.1 Description of Schedules

 

The following are the Schedules attached to and incorporated in this Subscription Agreement by reference and deemed to be a part hereof:

 

Schedule “A” - Term Sheet

Schedule “B” - Accredited Investor Certificate
Schedule “C” - Contact Information for Canadian Securities Commissions

 

ARTICLE 3 - SUBSCRIPTION AND DESCRIPTION OF UNITS

 

3.1 Subscription for the Units

 

The Subscriber hereby confirms its irrevocable subscription for and offer to purchase from the Corporation that number of Units indicated on page 2 of this Subscription Agreement, on and subject to the terms and conditions set out in this Subscription Agreement, for the Subscription Amount which is payable as described in Article 4 hereto.

 

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3.2 Description of the Units

 

Each Unit consists of one (1) Convertible Debenture and such number of Warrants (as defined herein) as is equal to $1,200 divided by the Conversion Price. A summary of certain terms of the Convertible Debentures and the Warrants are set forth in the Term Sheet; however, reference should be made to the Debenture Certificates and Warrant Certificates for the definitive terms of the Convertible Debentures and the Warrants. In the event of a conflict or inconsistency between the Term Sheet and the Debenture Certificates or Warrant Certificates, the Debenture Certificates and Warrant Certificates shall be paramount and shall govern.

 

3.3 Acceptance and Rejection of Subscription by the Corporation

 

The Subscriber acknowledges and agrees that the Corporation reserves the right, in its absolute discretion, to reject this subscription for Units, in whole or in part, at any time prior to the Closing Time. If this subscription is rejected in whole, any payment delivered by the Subscriber representing the Subscription Amount pursuant to this Agreement, will be promptly returned to the Subscriber without interest or deduction. If this subscription is accepted only in part, a cheque representing any refund of the Subscription Amount for that portion of the subscription for the Units which is not accepted will be promptly returned to the Subscriber without interest or deduction.

 

ARTICLE 4 - CLOSING

 

4.1 Closing

 

Delivery and sale of the Units and payment of the aggregate Subscription Amount will be completed (the “ Closing ”) at the offices of the Corporation’s counsel, Dentons Canada LLP, in Toronto, Ontario at 10:00 a.m. (Toronto time) (the “ Closing Time ”) on or about January 31, 2018, or such other place or date or time as the Corporation may determine (a “ Closing Date ”). Provided that on or prior to the Closing Time, the terms and conditions contained in this Subscription Agreement have been complied with to the satisfaction of the Corporation, or waived by the Corporation, the Subscriber shall deliver a completed Subscription Agreement and payment of the aggregate Subscription Amount for all of the Units sold hereunder to the Corporation, against delivery by the Corporation of the Debenture Certificates and the Warrant Certificates (or such other evidence of issue of the Units as the Subscriber and the Corporation may agree) and such other documentation as may be required pursuant to this Subscription Agreement.

 

If, prior to the Closing Time, the terms and conditions contained in this Subscription Agreement (other than the delivery by the Corporation of the Debenture Certificates and the Warrant Certificates or the delivery by the Corporation of such other evidence of issue of the Convertible Debentures and Warrants comprising the Units as the Subscriber and the Corporation may agree) have not been complied with to the satisfaction of the Corporation, or waived by it, the Corporation and the Subscriber will have no further obligations under this Subscription Agreement.

 

4.2 Conditions of Closing

 

The Subscriber acknowledges and agrees that the Corporation is relying on the truth of the representations and warranties of the Subscriber contained in this Subscription Agreement as of the date of this Subscription Agreement, and as of the Closing Time as if made at and as of the Closing Time, and the fulfillment of the following additional conditions prior to the Closing Time:

 

(a) on or before January 31, 2018, the Subscriber having made payment arrangements for the Subscription Amount in a manner acceptable to the Corporation;

 

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(b) on or before January 31, 2018, the Subscriber having delivered a properly completed and signed Subscription Agreement to the Corporation;

 

(c) the Subscriber having executed and returned to the Corporation, at the Corporation’s request, all other documents as may be required by the securities laws for delivery by the Corporation on behalf of the Subscriber;

 

(d) the Corporation having obtained all necessary approvals and consents in respect of the Offering;

 

(e) the Corporation having accepted the Subscriber’s subscription, in whole or in part; and

 

(f) the issue and sale of the Convertible Debentures and Warrants comprising the Units being exempt from the requirement to file a prospectus and the requirement to deliver an offering memorandum under applicable securities legislation, or the Corporation having received such orders, consents or approvals as may be required to permit such sale without the requirement to file a prospectus or deliver an offering memorandum.

 

ARTICLE 5 – REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CORPORATION

 

5.1 Representations, Warranties and Covenants of the Corporation

 

The Corporation represents and warrants to the Subscriber and acknowledges that:

 

(a) the Corporation is a corporation duly incorporated duly organized, continued or amalgamated and validly existing under the laws of the jurisdiction in which it was incorporated, organized, continued or amalgamated, as the case may be;

 

(b) the Corporation has all requisite corporate power, authority and capacity to enter into this Subscription Agreement and to perform the transactions contemplated herein and carry on its business and, to the knowledge of the Corporation, no steps or proceedings have been taken by any person, voluntary or otherwise, requiring or authorizing its dissolution or winding-up;

 

(c) the Corporation is not in default of any material requirement of applicable Securities Laws;

 

(d) no order, ruling or determination having the effect of suspending the sale or ceasing the trading in any securities of the Corporation has been issued by any regulatory authority and is continuing in effect and no proceedings for that purpose have been instituted or, to the knowledge of the Corporation, are pending, contemplated or threatened by any regulatory authority;

 

(e) at the Closing Time, the Convertible Debentures and the Warrants will be duly and validly issued and created; and

 

(f) the issuance of the Convertible Debentures and Warrants have been authorized and the Underlying Shares and Warrant Shares have been duly reserved and allotted for issuance.

 

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ARTICLE 6 - ACKNOWLEDGEMENTS, REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SUBSCRIBER

 

6.1 Acknowledgements, Representations, Warranties and Covenants of the Subscriber

 

The Subscriber hereby acknowledges, represents and warrants to, and covenants with, the Corporation as follows and acknowledges that the Corporation is relying on such acknowledgements, representations, warranties and covenants in connection with the transactions contemplated herein:

 

(a) the Subscriber confirms that it:

 

(i) has such knowledge in financial and business affairs as to be capable of evaluating the merits and risks of its investment in the Units, including the potential loss of its entire investment;

 

(ii) is aware of the characteristics of the Convertible Debentures and Warrants comprising the Units and understands the risks relating to an investment therein; and

 

(iii) is able to bear the economic risk of loss of its investment in the Units;

 

(b) the Subscriber is a resident, or if not an individual, the Subscriber has its head office, in the jurisdiction set out on page 1 of this Subscription Agreement and intends that the securities laws of that jurisdiction govern the Subscriber’s subscription. Such address was not created and is not used solely for the purpose of acquiring the Units;

 

(c) the Subscriber is aware that the Convertible Debentures and Warrants comprising the Units (and the Underlying Shares and Warrant Shares) have not been and will not be registered under the U.S. Securities Act or the securities laws of any state and that the Convertible Debentures and Warrants comprising the Units (and the Underlying Shares and Warrant Shares) may not be offered or sold, directly or indirectly, in the United States without registration under the U.S. Securities Act and applicable state securities laws or compliance with the requirements of an exemption from registration therefrom and it acknowledges that the Corporation has no present intention of filing a registration statement under the U.S. Securities Act or applicable state securities laws in respect of such securities;

 

(d) the Units have not been offered to the Subscriber in the United States, and the individuals making the order to purchase the Units and executing and delivering this Subscription Agreement on behalf of the Subscriber were not in the United States when the order was placed and this Subscription Agreement was executed and delivered;

 

(e) the Subscriber undertakes and agrees that it will not offer or sell any of the Convertible Debentures or Warrants comprising the Units (and the Underlying Shares and Warrant Shares) in the United States unless such securities are registered under the U.S. Securities Act and the securities laws of all applicable states of the United States, or an exemption from such registration requirement is available;

 

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(f) the execution and delivery of this Subscription Agreement, the performance and compliance with the terms hereof, the subscription for the Units (and any subsequent conversion of the Convertible Debentures or exercise of the Warrants) and the completion of the transactions described herein by the Subscriber will not result in any material breach of, or be in conflict with or constitute a material default under, or create a state of facts which, after notice or lapse of time, or both, would constitute a material default under any term or provision of the constating documents, by-laws or resolutions of the Subscriber, if applicable, the Securities Laws or any other laws applicable to the Subscriber, any agreement to which the Subscriber is a party, or any judgment, decree, order, statute, rule or regulation applicable to the Subscriber;

 

(g) the Subscriber is subscribing for the Units as principal for its own account and not for the benefit of any other Person (within the meaning of applicable Securities Laws);

 

(h) the Subscriber is either:

 

(i) relying on the “accredited investor” exemption under NI 45-106, and shall complete, sign and deliver to the Corporation (1) Schedule “B” (the “Accredited Investor Status Certificate”); and (2) Exhibit “I” to Schedule “B” if subscribing under categories (j), (k) or (l) of the Accredited Investor Status Certificate; or

 

(ii) relying on the “minimum amount investment” exemption under NI 45-106, and shall indicate by initialing immediately below that the Subscriber is (1) not an individual; (2) is purchasing the Units as principal; and (3) the Subscription amount is not less than $150,000

 

___________________ (initial if relying on the “minimum amount investment exemption under NI 45-106);

 

(i) if the Subscriber is an “accredited investor” within the meaning of NI 45-106, the Subscriber has properly completed, executed and delivered to the Corporation this Subscription Agreement and Schedule “B” (the Accredited Investor Status Certificate), as applicable and the acknowledgements, representations, warranties, covenants and information contained herein and therein are true and correct as of the date hereof and will be true and correct as of the Closing Time and if less than a complete copy of this Subscription Agreement is delivered to the Corporation, the Corporation and its are entitled to assume that the Subscriber accepts and agrees to all the terms and conditions of the pages not delivered, unaltered;

 

(j) if the Subscriber is not an individual, this Subscription Agreement has been duly authorized, executed and delivered by, and constitutes a legal, valid and binding agreement of the Subscriber and is enforceable in accordance with its terms against the Subscriber;

 

(k) if the Subscriber is a corporation, the Subscriber is duly incorporated and is validly subsisting under the laws of its jurisdiction of incorporation and has all requisite legal and corporate power and authority to execute and deliver this Subscription Agreement, to subscribe for the Units as contemplated herein and to carry out and perform its covenants and obligations under the terms of this Subscription Agreement and has obtained all necessary approvals in respect thereof, and the individual signing this Subscription Agreement has been duly authorized to execute and deliver this Subscription Agreement;

 

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(l) there is no Person acting or purporting to act in connection with the transactions contemplated herein who is entitled to any brokerage or finder’s fee;

 

(m) if required by applicable Securities Laws, the Subscriber will execute, deliver and file or assist the Corporation in filing such reports, undertakings and other documents with respect to the issue of the Convertible Debentures and Warrants comprising the Units as may be required by any securities commission, stock exchange or other regulatory authority;

 

(n) the Subscriber has been advised to consult its own legal advisors with respect to the execution, delivery and performance by it of this Subscription Agreement and the transactions contemplated herein, including trading in the Convertible Debentures, Warrants, Underlying Shares and Warrant Shares, and with respect to the hold periods imposed by the Securities Laws and acknowledges that no representation has been made by the Corporation respecting the applicable hold periods imposed by the Securities Laws or other resale restrictions applicable to such securities which restrict the ability of the Subscriber (or others for whom it is contracting hereunder) to resell such securities, that the Subscriber (or others for whom it is contracting hereunder) is solely responsible to find out what these restrictions are, that the Subscriber is solely responsible (and the Corporation is in no way responsible) for compliance with applicable resale restrictions and that the Subscriber (or others for whom it is contracting hereunder) is aware that it may not resell such securities except in accordance with limited exemptions under the Securities Laws and other applicable securities laws;

 

(o) the Subscriber has not received or been provided with a prospectus, offering memorandum (within the meaning of the Securities Laws) or any sales or advertising literature in connection with the Offering or any document purporting to describe the business and affairs of the Corporation which has been prepared for review by prospective purchasers to assist in making an investment decision in respect of the Units and the Subscriber’s decision to subscribe for the Units was not based upon, and the Subscriber has not relied upon, any oral or written representations as to facts made by or on behalf of the Corporation, or any employee, agent or affiliate thereof or any other person associated therewith, except as set forth herein. The Subscriber’s decision to subscribe for the Units was based solely upon this Subscription Agreement (including the Term Sheet) and any information about the Corporation which is publicly available (any such information having been obtained by the Subscriber);

 

(p) the Corporation has not, nor have any of its directors, employees, officers, affiliates or agents made any written or oral representations:

 

(i) that any Person will resell or repurchase the Convertible Debentures or Warrants comprising the Units (or the Underlying Shares or Warrant Shares);

 

(ii) that any Person will refund all or any part of the Subscription Amount; or

 

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(iii) as to the future price or value of the Convertible Debentures or Warrants or the Underlying Shares or Warrant Shares;

 

(q) the subscription for the Units has not been made through or as a result of, and the distribution of the Units is not being accompanied by any advertisement, including without limitation in printed public media, radio, television or telecommunications, including electronic display, or as part of a general solicitation; and

 

(r) the funds representing the Subscription Amount which will be advanced by the Subscriber to the Corporation hereunder will not represent proceeds of crime for the purposes of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) (the “ PCMLTFA ”), the United Kingdom’s Proceeds of Crime Act 2002 (the “ POCA ”) or the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (the “ PATRIOT Act ”), and the Subscriber acknowledges that the Corporation may in the future be required by law to disclose the Subscriber’s name and other information relating to this Subscription Agreement and the Subscriber’s subscription hereunder, on a confidential basis, pursuant to the PCMLTFA, POCA or the PATRIOT Act. To the best of its knowledge (a) none of the subscription funds to be provided by the Subscriber (i) have been or will be derived from or related to any activity that is deemed criminal under the laws of Canada, the United States, or any other jurisdiction, or (ii) are being tendered on behalf of a Person or entity who has not been identified to the Subscriber, and (b) the Subscriber shall promptly notify the Corporation if the Subscriber discovers that any of such representations ceases to be true, and to provide the Corporation with appropriate information in connection therewith.

 

6.2 Acknowledgments and Covenants of the Subscriber

 

The Subscriber acknowledges, covenants and agrees as follows:

 

(a) it (i) has received and reviewed a copy of the Term Sheet setting out the principal terms of the Offering; and (ii) has had the opportunity to ask and have answered any and all questions which the Subscriber wished to have answered with respect to the subscription for the Units made hereunder;

 

(b) the offer of the Units does not constitute a recommendation to purchase the Units or financial product advice and the Subscriber acknowledges that the Corporation has not had regard to the Subscriber’s particular objectives, financial situation or needs;

 

(c) there are risks associated with the purchase of the Units and no securities commission, agency, governmental authority, regulatory body, stock exchange or similar regulatory authority has reviewed or passed on the merits of the Convertible Debentures and Warrants comprising the Units nor have any such agencies or authorities made any recommendations or endorsement with respect to the foregoing;

 

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(d) the Corporation is not now a “reporting issuer” under the Securities Laws of any province or territory of Canada, the Corporation and there is no guarantee that it will become a reporting issuer in the future. The Subscriber further acknowledges that as a result of the Corporation not being a reporting issuer the Convertible Debentures and the Warrants (and the Underlying Shares and Warrant Shares) will be subject to an indefinite “restricted period” under applicable Securities Laws of four (4) months and a one (1) day from the later of the applicable Closing Date and the date the Corporation becomes a reporting issuer under the Securities Laws of any province or territory of Canada, unless a prospectus is filed in accordance with applicable Securities Laws qualifying their distribution. The Subscriber further acknowledges that during such indefinite “restricted period”, the Subscriber may not trade the Convertible Debentures or the Warrants (and the Underlying Shares and Warrant Shares) under applicable Securities Laws without filing a prospectus in accordance with such laws or being able to rely on one of the limited exemptions under Canadian Securities Laws;

 

(e) the Convertible Debentures and the Warrants (and the Underlying Shares and Warrant Shares) will be subject to statutory resale restrictions under the Securities Laws of Canada and under other applicable Securities Laws, and the Subscriber covenants that it will not resell the Convertible Debentures, Warrants, Underlying Shares or Warrant Shares except in compliance with such laws and the Subscriber acknowledges that it is solely responsible (and the Corporation is in no way responsible) for such compliance;

 

(f) the Convertible Debentures and the Warrants (and the Underlying Shares and the Warrant Shares) may only be transferred or assigned by the Subscriber in compliance with applicable laws, including applicable Securities Laws;

 

(g) the Debenture Certificates and Warrant Certificates shall have attached to them an ownership statement setting out resale restrictions under applicable Securities Laws substantially in the following form (and with the necessary information inserted):

 

“Unless permitted under securities legislation, the holder of this security must not trade the security before the date which is four months and a day after the later of (i) [applicable Closing Date will be inserted], and (ii) the date the issuer became a reporting issuer in any province or territory.” ;

 

(h) there is no market for the Convertible Debentures and Warrants comprising the Units (and the Underlying Shares and the Warrant Shares) and there is no assurance that a market will ever develop;

 

(i) the Corporation is relying on an exemption from the requirement to provide the Subscriber with a prospectus under the Securities Laws and, as a consequence of acquiring the Convertible Debentures and Warrants comprising the Units pursuant to such exemption:

 

(i) certain protections, rights and remedies provided by the Securities Laws, including statutory rights of rescission, or damages and certain statutory remedies against an issuer, underwriters, auditors, directors and officers that are available to investors who acquire securities offered by a prospectus, will not be available to the Subscriber;

 

(ii) the common law may not provide investors with an adequate remedy in the event that they suffer investment losses in connection with securities acquired in a private placement;

 

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(iii) the Subscriber may not receive information that would otherwise be required to be given under the Securities Laws; and

 

(iv) the Corporation is relieved from certain obligations that would otherwise apply under the Securities Laws;

 

(j) the offer, issuance, sale and delivery of the Convertible Debentures and Warrants comprising the Units is conditional upon such sale being exempt from the prospectus filing or registration requirements and the requirement to deliver an offering memorandum in connection with the distribution of the Convertible Debentures and Warrants comprising the Units under the Securities Laws of Canada or upon the issuance of such orders, consents or approvals as may be required to permit such sale without the requirement of filing a prospectus;

 

(k) the Corporation may complete additional financings in the future in order to develop the business of the Corporation and fund its ongoing development, and such future financings may (i) have a dilutive effect on current shareholders or securityholders of the Corporation, including the Subscriber; or (ii) offer securities senior to the Convertible Debentures. However there is no assurance that any future financings will be available, on reasonable terms or at all, and if not so available, could have a material adverse effect on the Corporation’s business, financial condition, performance or prospects;

 

(l) the Subscriber is responsible for obtaining such legal and tax advice as it considers appropriate in connection with the execution, delivery and performance of this Subscription Agreement and the transactions contemplated under this Subscription Agreement;

 

(m) this offer to subscribe is made for valuable consideration and may not be withdrawn, cancelled, terminated or revoked by the Subscriber without the consent of the Corporation;

 

(n) there is no government or other insurance covering the Convertible Debentures, Warrants, Underlying Shares or Warrant Shares;

 

(o) legal counsel retained by the Corporation is acting as counsel to the Corporation and not as counsel to the Subscriber;

 

(p) the Subscriber acknowledges that this Subscription Agreement requires the Subscriber to provide certain personal information to the Corporation. Such information is being collected by the Corporation for the purposes of completing the transaction contemplated herein, which includes, without limitation, determining the Subscriber’s eligibility to purchase the Units under the Securities Laws and other applicable securities laws. The Subscriber’s personal information may be disclosed by the Corporation to: (i) stock exchanges or securities regulatory authorities; (ii) the Canada Revenue Agency or other taxing authorities; and (iii) employees, advisors, consultants and agents of the Corporation. By executing this Subscription Agreement, the Subscriber is deemed to be consenting to the foregoing collection, use and disclosure of the Subscriber’s personal information. The Subscriber also consents to the filing of copies or originals of any of the Subscriber’s documents described herein as may be required to be filed with any stock exchange or securities regulatory authority in connection with the transactions contemplated hereby;

 

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(q) the information provided by the Subscriber on pages 1 and 2 of this Subscription Agreement identifying among other things, the name, address, telephone number and email address of the Subscriber, the number of Units being purchased hereunder, the Subscription Amount, the applicable Closing Date and the exemption that the Subscriber is relying on in purchasing the Units will be disclosed to the Canadian securities regulatory authorities, and such information is being indirectly collected by the Canadian securities regulatory authorities under the authority granted to it under Canadian securities legislation. This information is being collected for the purposes of the administration and enforcement of Canadian securities legislation. The Subscriber hereby authorizes the indirect collection of such information by the Canadian securities regulatory authorities. In the event the Subscriber has any questions with respect to the indirect collection of such information, the Subscriber should contact the applicable securities regulatory authority at the contact details provided in Schedule “C”.

 

6.3 Reliance on Representations, Warranties, Covenants and Acknowledgements

 

The Subscriber acknowledges and agrees that the representations, warranties, covenants and acknowledgements made by the Subscriber in this Subscription Agreement are made with the intention that they may be relied upon by the Corporation and its legal counsel in determining the Subscriber’s to purchase the Units. The Subscriber further agrees that by accepting the Units, the Subscriber shall be representing and warranting that such representations, warranties, covenants and acknowledgements are true as at the Closing Time with the same force and effect as if they had been made by the Subscriber at the Closing Time.

 

ARTICLE 7 - SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS

 

7.1 Survival of Representations, Warranties and Covenants of the Corporation

 

The representations, warranties and covenants of the Corporation contained in this Subscription Agreement shall survive the Closing and continue in full force and effect for the benefit of the Subscriber for a period of two years following Closing.

 

7.2 Survival of Representations, Warranties and Covenants of the Subscriber

 

The representations, warranties and covenants of the Subscriber contained in this Subscription Agreement shall survive the Closing and continue in full force and effect for the benefit of the Corporation for a period of two years following the Closing.

 

ARTICLE 9 - MISCELLANEOUS

 

9.1 Further Assurances

 

Each of the parties hereto upon the request of each of the other parties hereto, whether before or after the Closing Time, shall do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all such further acts, deeds, documents, assignments, transfers, conveyances, powers of attorney and assurances as may reasonably be necessary or desirable to complete the transactions contemplated herein.

 

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9.2 Notices

 

(a) Any notice, direction or other instrument required or permitted to be given to any party hereto shall be in writing and shall be sufficiently given if delivered personally, or transmitted electronically tested prior to transmission to such party, as follows:

 

(i) in the case of the Corporation, to:

 

Ehave, Inc.  
203-277 Lakeshore Road East  
Oakville, ON L6J 6J3  
   
Attention: Prateek Dwivedi
Email: teek@ehave.com

 

(ii) in the case of the Subscriber, at the address specified on the face page hereof,.

 

(b) Any such notice, direction or other instrument, if delivered personally, shall be deemed to have been given and received on the day on which it was delivered, provided that if such day is not a Business Day then the notice, direction or other instrument shall be deemed to have been given and received on the first Business Day next following such day and if transmitted electronically, shall be deemed to have been given and received on the day of its transmission, provided that if such day is not a Business Day or if it is transmitted or received after the end of normal business hours then the notice, direction or other instrument shall be deemed to have been given and received on the first Business Day next following the day of such transmission.

 

(c) Any party hereto may change its address for service from time to time by notice given to each of the other parties hereto in accordance with the foregoing provisions.

 

9.3 Time of the Essence

 

Time shall be of the essence of this Subscription Agreement and every part hereof.

 

9.4 Costs and Expenses

 

All costs and expenses (including, without limitation, the fees and disbursements of legal counsel) incurred in connection with this Subscription Agreement and the transactions herein contemplated shall be paid and borne by the party incurring such costs and expenses.

 

9.5 Applicable Law

 

This Subscription Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the Province of Ontario and the laws of Canada applicable therein. Any and all disputes arising under this Subscription Agreement, whether as to interpretation, performance or otherwise, shall be subject to the non-exclusive jurisdiction of the courts of the Province of Ontario and each of the parties hereto hereby irrevocably attorns to the jurisdiction of the courts of such Province.

 

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9.6 Entire Agreement

 

This Subscription Agreement, including the Schedules hereto, constitutes the entire agreement between the parties with respect to the transactions contemplated herein and cancels and supersedes any prior understandings, agreements, negotiations and discussions between the parties. There are no representations, warranties, terms, conditions, undertakings or collateral agreements or understandings, express or implied, between the parties hereto other than those expressly set forth in this Subscription Agreement or in any such agreement, certificate, affidavit, statutory declaration or other document as aforesaid. This Subscription Agreement may not be amended or modified in any respect except by written instrument executed by each of the parties hereto.

 

9.7 Counterparts

 

This Subscription Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same Subscription Agreement. Counterparts may be delivered either in original, PDF or faxed form and the parties adopt any signatures received by PDF or a receiving fax machine as original signatures of the parties. If less than a complete copy of this Subscription Agreement is delivered to the Corporation, the Corporation and its advisors are entitled to assume that the Subscriber accepts and agrees to all the terms and conditions of the pages not delivered, unaltered.

 

9.8 Assignment

 

This Subscription Agreement may not be assigned by either party except with the prior written consent of the other party hereto.

 

9.9 Enurement

 

This Subscription Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, successors (including any successor by reason of the amalgamation or merger of any party), administrators and permitted assigns.

 

9.10 Language

 

It is the express wish of the Subscriber that the Subscription Agreement and any related documentation be drawn up in English only. Il est de la volonté expresse du souscripteur que la convention de souscription ainsi que tout document connexe soient rédigés en langue anglaise uniquement.

 

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

 

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The Corporation hereby accepts the subscription for Units as set forth on the face page of this Subscription Agreement on the terms and conditions contained in this Subscription Agreement (including all applicable Schedules) this ____ day of ____________, 2018.

 

    EHAVE, INC.
     
  Per:  
     
    Authorized Signatory

 

 
 

 

SCHEDULE “A”

 

TERM SHEET

 

EHAVE, INC.

 

PRIVATE PLACEMENT OF UNITS

 

Issuer: Ehave, Inc. (“ Ehave ” or, the “ Company ”).
   
Offered Securities: Subordinated unsecured convertible debenture units (the “ Units ”).
   
Amount: Approximately $500,000 of Units (the “ Offering ”).
   
Offering Price: C$1,000 per Unit.
   
Unit: Each Unit shall consist of one 10.0% subordinated unsecured convertible debenture (each a “ Convertible Debenture ”) of the Company and warrants of the Company exercisable to purchase that number of common shares as is equal to C$1,200 divided by the Conversion Price (as defined herein)  (each a “ Warrant ”).
   
Conversion Privilege: The principal amount of each Convertible Debenture shall be convertible, for no additional consideration, into common shares of the Company (each a “ Common Share ”) at the option of the holders at any time following the completion of a Qualified Financing (as defined herein) and prior to the close of business on the Maturity Date, at a conversion price equal to 0.75 multiplied by the Qualified Financing Price (as defined herein) (the “ Conversion Price) .
   
Maturity Date: Two years from the date the Units are issued.
   
Interest: The Convertible Debentures shall bear interest at a rate of 10.0% per annum from the date of issue and shall be payable, at the election of the holder, in (i) cash, (ii) Common Shares at the Conversion Price, or (iii) any combination thereof upon conversion or maturity.
   
Optional Repayment: The Company may elect to repay in cash the outstanding principal outstanding on the Convertible Debentures (including accrued and unpaid interest) at any time upon 30 days’ notice.
   
Warrants: Following the completion of a Qualified Financing, each Warrant entitles the holder to acquire one Common Share for an exercise price equal to the Qualified Financing Price at any time up to 5 years following the Closing Date (subject to adjustment in certain customary events).
   
Anti-Dilution Adjustments: The Conversion Price will be subject to adjustment in certain events including, without limitation, the subdivision or consolidation of the outstanding Common Shares, the issue of Common Shares or securities convertible into Common Shares by way of stock dividend or distribution, the issue of rights, options or warrants to all or substantially all of the holders of Common Shares in certain circumstances, and the distribution to all or substantially all of the holders of Common Shares of any other class of shares, rights, options or warrants, evidences of indebtedness or assets.

 

A- 1
 

 

Events of Default: The Convertible Debentures shall include customary events of default and shall also provide that it shall be an event of default if the Company (or any successor) has not become a “reporting issuer” in a province or territory of Canada within 6 months from the date on which the Convertible Debentures have been issued. If at any time during the term of the Convertible Debenture the Company issues securities at price deemed lower than the Conversion Price, the maturity date will be accelerated and occur on the 30 th day following such issuance.
   
Qualified Financing: The Company shall use commercially reasonable efforts to complete a subsequent financing for aggregate gross proceeds to the Company of at least C$2,000,000 (“ Qualified Financing ”) and be approved for trading on a Canadian recognized stock exchange (which, for greater certainty, includes the CSE or TSX Venture Exchange).  The issue price of the securities issued by the Company in the Qualified Financing shall be the “ Qualified Financing Price ”.
   
Closing Date: January 31, 2018.
   
Use of Proceeds: The Company shall have full and absolute discretion with respect to the use of proceeds.

 

A- 2
 

 

SCHEDULE “B”

 

Accredited Investor Status CERTIFICATE

 

The categories listed herein contain certain specifically defined terms. If you are unsure as to the meanings of those terms, or are unsure as to the applicability of any category below, please contact your broker and/or legal advisor before completing this certificate.

 

TO: EHAVE, INC. (the “ Corporation ”)

 

In connection with the purchase by the undersigned Subscriber of the Units, the Subscriber (the “ Subscriber ”) hereby represents, warrants, covenants and certifies to the Corporation (and acknowledges that the Corporation and its counsel are relying thereon) that:

 

(a) the Subscriber is resident in or otherwise subject to the securities laws of one of the Provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, Nova Scotia, Prince Edward Island or Newfoundland and Labrador;

 

(b) the Subscriber is purchasing the Units as principal for its own account and not for the benefit of any other person or is deemed to be purchasing as principal pursuant to NI 45-106;

 

(c) the Subscriber is an “accredited investor” within the meaning of NI 45-106 on the basis that the Subscriber fits within one of the categories of an “accredited investor” reproduced below beside which the Subscriber has indicated the undersigned belongs to such category;

 

(d) the Subscriber was not created or used solely to purchase or hold securities as an accredited investor as described in paragraph (m) below;

 

(e) if the Subscriber is purchasing under category (j), (k) or (l) below, it has completed and signed Exhibit “I” attached hereto; and

 

(f) upon execution of this Schedule “B” by the Subscriber, this Schedule “B” shall be incorporated into and form a part of the Subscription Agreement to which this Schedule “B” is attached.

 

(PLEASE CHECK THE BOX OF THE APPLICABLE CATEGORY OF ACCREDITED INVESTOR)

 

¨ (a) (i) except in Ontario, a Canadian financial institution, or a Schedule III bank; or
  (ii) in Ontario, a financial institution that is (A) a bank listed in Schedule I, II or III of the Bank Act (Canada); (B) an association to which the Cooperative Credit Associations Act (Canada) applies or a central cooperative credit society for which an order has been made under subsection 473(1) of that Act; or (C) a loan corporation, trust company, trust corporation, insurance company, treasury branch, credit union, caisse populaire, financial services cooperative or credit union league or federation that is authorized by a statute of Canada or Ontario to carry on business in Canada or Ontario, as the case may be;
     
¨ (b) the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada);
     
¨ (c) a subsidiary of any person or company referred to in paragraphs (a) or (b), if the person or company owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary;
     
¨ (d) a person or company registered under the securities legislation of a jurisdiction (province or territory) of Canada as an adviser or dealer (or in Ontario, except as otherwise prescribed by the regulations under the Securities Act (Ontario));

 

B- 1
 

 

¨ (e) an individual registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (d);
     
¨ (e.1) an individual formerly registered under the securities legislation of a jurisdiction of Canada, other than an individual formerly registered solely as a representative of a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador);
     
¨ (f) the Government of Canada or a jurisdiction (province or territory) of Canada, or any crown corporation, agency or wholly owned entity of the Government of Canada or a jurisdiction of Canada;
     
¨ (g) a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l’île de Montréal or an intermunicipal management board in Québec;
     
¨ (h) any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government;
     
¨ (i) a pension fund that is regulated by either the Office of the Superintendent of Financial Institutions (Canada), a pension commission or similar regulatory authority of a jurisdiction (province or territory) of Canada;
     
¨ (j) an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that, before taxes, but net of any related liabilities, exceeds $1,000,000 (completion of Exhibit “I” is also required) ;
     
¨ (j.1) an individual who beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $5,000,000;
     
¨ (k) an individual whose net income before taxes exceeded $200,000 in each of the two most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the two most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year (completion of Exhibit “I” is also required) ;
     
¨ (l) an individual who, either alone or with a spouse, has net assets of at least $5,000,000 (completion of Exhibit “I” is also required) ;
     
¨ (m) a person, other than an individual or investment fund, that has net assets of at least $5,000,000 as shown on its most recently prepared financial statements;
     
¨ (n) an investment fund that distributes or has distributed its securities only to (i) a person that is or was an accredited investor at the time of the distribution, (ii) a person that acquires or acquired securities in the circumstances referred to in sections 2.10 [ Minimum amount investment ] or 2.19 [ Additional investment in investment funds ] of NI 45-106, or (iii) a person described in sub-paragraph (i) or (ii) that acquires or acquired securities under section 2.18 [ Investment fund reinvestment ] of NI 45-106;
     
¨ (o) an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt;

 

B- 2
 

 

¨ (p) a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation, as the case may be;
¨ (q) a person acting on behalf of a fully managed account managed by that person, if that person is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction;
¨ (r) a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded;
¨ (s) an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) to (d) or paragraph (i) in form and function;
¨ (t) a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors;
¨ (u) an investment fund that is advised by a person registered as an adviser or a person that is exempt from registration as an adviser;
¨ (v) a person that is recognized or designated by the securities regulatory authority or, except in Ontario or Québec, the regulator as an accredited investor;
¨ (w) a trust established by an accredited investor for the benefit of the accredited investor’s family members of which a majority of the trustees are accredited investors and all of the beneficiaries are the accredited investor’s spouse, a former spouse of the accredited investor or a parent, grandparent, brother, sister, child or grandchild of that accredited investor, of that accredited investor’s spouse or of that accredited investor’s former spouse; or
¨ (x) in Ontario, such other persons or companies as may be prescribed by the regulations under the Securities Act (Ontario).
    ***If checking this category (x), please provide a description of how this requirement is met.

 

For the purposes hereof, the following definitions are included for convenience:

 

(a) bank ” means a bank named in Schedule I or II of the Bank Act (Canada);

 

(b) Canadian financial institution ” means (i) an association governed by the Cooperative Credit Associations Act (Canada) or a central cooperative credit society for which an order has been made under section 473(1) of that Act, or (ii) a bank, loan corporation, trust company, trust corporation, insurance company, treasury branch, credit union, caisse populaire, financial services cooperative, or league that, in each case, is authorized by an enactment of Canada or a jurisdiction of Canada to carry on business in Canada or a jurisdiction of Canada;

 

(c) company ” means any corporation, incorporated association, incorporated syndicate or other incorporated organization;

 

(d) eligibility adviser ” means:

 

(i) a person that is registered as an investment dealer and authorized to give advice with respect to the type of security being distributed, and

 

(ii) in Saskatchewan or Manitoba, also means a lawyer who is a practicing member in good standing with a law society of a jurisdiction of Canada or a public accountant who is a member in good standing of an institute or association of chartered accountants, certified general accountants or certified management accountants in a jurisdiction of Canada provided that the lawyer or public accountant must not

 

B- 3
 

 

(A) have a professional, business or personal relationship with the issuer, or any of its directors, executive officer, founders, or control persons, and

 

(B) have acted for or been retained personally or otherwise as an employee, executive officer, director, associate or partner of a person that has acted for or been retained by the issuer or any of its directors, executive officers, founders or control persons within the previous 12 months;

 

(e) executive officer means, for an issuer, an individual who is: (i) a chair, vice-chair or president, (ii) a vice-president in charge of a principal business unit, division or function including sales, finance or production, or (iii) performing a policy-making function in respect of the issuer;

 

(f) financial assets ” means (i) cash, (ii) securities, or (iii) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation;

 

(g) fully managed account ” means an account of a client for which a person makes the investment decisions if that person has full discretion to trade in securities for the account without requiring the client’s express consent to a transaction;

 

(h) investment fund ” has the same meaning as in National Instrument 81-106 Investment Fund Continuous Disclosure ;

 

(i) person ” includes: (i) an individual, (ii) a corporation, (iii) a partnership, trust, fund and an association, syndicate, organization or other organized group of persons whether incorporated or not, and (iv) an individual or other person in that person’s capacity as a trustee, executor, administrator or personal or other legal representative.

 

(j) related liabilities ” means (i) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or (ii) liabilities that are secured by financial assets;

 

(k) Schedule III bank ” means an authorized foreign bank named in Schedule III of the Bank Act (Canada);

 

(l) spouse ” means, an individual who, (i) is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual, (ii) is living with another individual in a marriage-like relationship, including a marriage-like relationship between individuals of the same gender, or (iii) in Alberta, is an individual referred to in paragraph (i) or (ii), or is an adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta); and

 

(m) subsidiary ” means an issuer that is controlled directly or indirectly by another issuer and includes a subsidiary of that subsidiary.

 

In NI 45-106 a person or company is an affiliate of another person or company if one of them is a subsidiary of the other, or if each of them is controlled by the same person.

 

In NI 45-106 and except in Part 2 Division 4 (Employee, Executive Officer, Director and Consultant Exemption) of NI 45-106, a person (first person) is considered to control another person (second person) if (a) the first person, beneficially owns or directly or indirectly exercises control or direction over securities of the second person carrying votes which, if exercised, would entitle the first person to elect a majority of the directors of the second person, unless that first person holds the voting securities only to secure an obligation, (b) the second person is a partnership, other than a limited partnership, and the first person holds more than 50% of the interests of the partnership, or (c) the second person is a limited partnership and the general partner of the limited partnership is the first person.

 

B- 4
 

 

The foregoing representations contained in this certificate are true and accurate as of the date of this certificate and will be true and accurate as of the Closing Time (as defined in the Subscription Agreement to which this Schedule “B” is attached) and the Subscriber acknowledges that this Accredited Investor Status Certificate is incorporated into and forms a part of the Subscription Agreement to which it is attached. If any such representations shall not be true and accurate prior to the Closing Time, the undersigned shall give immediate written notice of such fact to the Corporation prior to the Closing Time.

 

Dated: ____________________   Signed: ________________________________
     

_________________________________

Witness (If Subscriber is an Individual)

 

__________________________________________

Print the name of Subscriber

     
     

_________________________________

Print Name of Witness

 

__________________________________________

If Subscriber is a corporation,
print name and title of Authorized Signing Officer

 

B- 5
 

 

EXHIBIT “I” TO SCHEDULE “B”

 

FORM FOR INDIVIDUAL ACCREDITED INVESTORS

 

THIS “EXHIBIT I” TO SCHEDULE “B” IS TO BE COMPLETED BY ACCREDITED INVESTORS WHO ARE INDIVIDUALS SUBSCRIBING UNDER CATEGORIES (J), (K) OR (L) IN SCHEDULE “B” TO WHICH THIS EXHIBIT “I” IS ATTACHED.

 

WARNING!

This investment is risky. Don’t invest unless you can afford to lose all the money you pay for this investment.

 

SECTION 1 TO BE COMPLETED BY THE ISSUER OR SELLING SECURITY HOLDER
1. About your investment
Type of securities: Units (comprised of one (1) convertible debenture and a variable number of common share purchase warrants) Issuer: Ehave, Inc.
Purchased from: Issuer
SECTIONS 2 TO 4 TO BE COMPLETED BY THE SUBSCRIBER
2. Risk acknowledgement
This investment is risky. Initial that you understand that: Your
Initials
Risk of loss - You could lose your entire investment of $ _____________ . [Instruction: Insert the total dollar amount of the investment.]  
Liquidity risk - You may not be able to sell your investment quickly - or at all.  
Lack of information - You may receive little or no information about your investment.  
Lack of advice - You will not receive advice from the salesperson about whether this investment is suitable for you unless the salesperson is registered. The salesperson is the person who meets with, or provides information to, you about making this investment. To check whether the salesperson is registered, go to www.aretheyregistered.ca .  
3. Accredited investor status
You must meet at least one of the following criteria to be able to make this investment. Initial the statement that applies to you. (You may initial more than one statement.) The person identified in section 6 is responsible for ensuring that you meet the definition of accredited investor. That person, or the salesperson identified in section 5, can help you if you have questions about whether you meet these criteria. Your
initials

· Your net income before taxes was more than $200,000 in each of the 2 most recent calendar years, and you expect it to be more than $200,000 in the current calendar year. (You can find your net income before taxes on your personal income tax return.)  
· Your net income before taxes combined with your spouse’s was more than $300,000 in each of the 2 most recent calendar years, and you expect your combined net income before taxes to be more than $300,000 in the current calendar year.  
· Either alone or with your spouse, you own more than $1 million in cash and securities, after subtracting any debt related to the cash and securities.  
· Either alone or with your spouse, you have net assets worth more than $5 million. (Your net assets are your total assets (including real estate) minus your total debt.)  

 

 

B- 6
 

 

4. Your name and signature
By signing this form, you confirm that you have read this form and you understand the risks of making this investment as identified in this form.
First and last name (please print):
Signature: Date:
SECTION 5 TO BE COMPLETED BY THE SALESPERSON
5. Salesperson information
[Instruction: The salesperson is the person who meets with, or provides information to, the Subscriber with respect to making this investment. That could include a representative of the issuer or selling security holder, a registrant or a person who is exempt from the registration requirement.]
First and last name of salesperson (please print):
Telephone: Email:
Name of firm (if registered):
SECTION 6 TO BE COMPLETED BY THE ISSUER OR SELLING SECURITY HOLDER
6. For more information about this investment

For investment in a non-investment fund

Ehave, Inc.

203-277 Lakeshore Road East

Oakville, ON L6J 6J3

 

Attention:     Prateek Dwivedi
Email:             teek@ehave.com

For more information about prospectus exemptions, contact your local securities regulator. You can find contact information at www.securities-administrators.ca

 

Form instructions:

 

1. This form does not mandate the use of a specific font size or style but the font must be legible.

 

2. The information in sections 1, 5 and 6 must be completed before the Subscriber completes and signs the form.

 

3. The Subscriber must sign this form. Each of the Subscriber and the issuer or selling security holder must receive a copy of this form signed by the Subscriber. The issuer or selling security holder is required to keep a copy of this form for 8 years after the distribution.

 

B- 7
 

 

SCHEDULE “C”
CONTACT INFORMATION FOR CANADIAN SECURITIES COMMISSIONS

 

Alberta Securities Commission

Suite 600, 250 – 5th Street SW

Calgary, Alberta T2P 0R4

Telephone: (403) 297-6454

Toll free in Canada: 1-877-355-0585

Facsimile: (403) 297-2082

Public official contact: FOIP Coordinator

 

British Columbia Securities Commission

P.O. Box 10142, Pacific Centre

701 West Georgia Street

Vancouver, British Columbia V7Y 1L2

Inquiries: (604) 899-6854

Toll free in Canada: 1-800-373-6393

Facsimile: (604) 899-6581

Email: FOI-privacy@bcsc.bc.ca

Public official contact: FOI Inquiries

 

The Manitoba Securities Commission

500 – 400 St. Mary Avenue

Winnipeg, Manitoba R3C 4K5

Telephone: (204) 945-2561

Toll free in Manitoba 1-800-655-5244

Facsimile: (204) 945-0330

Public official contact: Director

 

Financial and Consumer Services Commission (New
Brunswick)

85 Charlotte Street, Suite 300

Saint John, New Brunswick E2L 2J2

Telephone: (506) 658-3060

Toll free in Canada: 1-866-933-2222

Facsimile: (506) 658-3059

Email: info@fcnb.ca

Public official contact: Chief Executive Officer and Privacy Officer

 

Government of Newfoundland and Labrador

Financial Services Regulation Division

P.O. Box 8700, Confederation Building

2nd Floor, West Block, Prince Philip Drive

St. John’s, Newfoundland and Labrador A1B 4J6

Attention: Director of Securities

Telephone: (709) 729-4189

Facsimile: (709) 729-6187

Public official contact: Superintendent of Securities

 

Government of the Northwest Territories

Office of the Superintendent of Securities

P.O. Box 1320

Yellowknife, Northwest Territories X1A 2L9

Attention: Deputy Superintendent, Legal & Enforcement

Telephone: (867) 767-9305

Facsimile: (867) 873-0243

Public official contact: Superintendent of Securities

 

Nova Scotia Securities Commission

Suite 400, 5251 Duke Street

Duke Tower

P.O. Box 458

Halifax, Nova Scotia B3J 2P8

Telephone: (902) 424-7768

Facsimile: (902) 424-4625

Public official contact: Executive Director

Government of Nunavut

Department of Justice

Legal Registries Division

P.O. Box 1000, Station 570

1st Floor, Brown Building

Iqaluit, Nunavut X0A 0H0

Telephone: (867) 975-6590

Facsimile: (867) 975-6594

Public official contact: Superintendent of Securities

 

Ontario Securities Commission

20 Queen Street West, 22 nd Floor

Toronto, Ontario M5H 3S8

Telephone: (416) 593-8314

Toll free in Canada: 1-877-785-1555

Facsimile: (416) 593-8122

Email: exemptmarketfilings@osc.gov.on.ca

Public official contact: Inquiries Officer

 

Prince Edward Island Securities Office

95 Rochford Street, 4th Floor Shaw Building

P.O. Box 2000

Charlottetown, Prince Edward Island C1A 7N8

Telephone: (902) 368-4569

Facsimile: (902) 368-5283
Public official contact: Superintendent of Securities

 

Autorité des marchés financiers

800, Square Victoria, 22e étage

C.P. 246, Tour de la Bourse

Montréal, Québec H4Z 1G3

Telephone: (514) 395-0337 or 1-877-525-0337

Facsimile: (514) 873-6155 (For filing purposes only)

Facsimile: (514) 864-6381 (For privacy requests only)

Email: financementdessocietes@lautorite.qc.ca (For corporate finance issuers); fonds_dinvestissement@lautorite.qc.ca (For investment fund issuers)
Public official contact: Secrétaire générale

 

Financial and Consumer Affairs Authority of
Saskatchewan

Suite 601 - 1919 Saskatchewan Drive

Regina, Saskatchewan S4P 4H2

Telephone: (306) 787-5842

Facsimile: (306) 787-5899
Public official contact: Director

 

Government of Yukon

Department of Community Services

Office of the Superintendent of Securities

307 Black Street

Whitehorse, Yukon Y1A 2N1

Telephone: 867-667-5466

Facsimile: (867) 393-6251

Email: securities@gov.yk.ca

Public official contact: Superintendent of Securities

 

  

C- 1

 

Exhibit 4.32

 

EHAVE, INC.

 

SUBSCRIPTION AGREEMENT FOR UNITS

 

TO: EHAVE, INC. (THE “CORPORATION”)

 

The undersigned hereby irrevocably subscribes for and agrees to purchase from the Corporation that number of units of the Corporation (the “ Units ”) set out below at a price of $1,000 per Unit (the “ Subscription Price ”). Each Unit consists of one (1) Convertible Debenture (as defined herein) and such number of Warrants (as defined herein) as is equal to $1,000 divided by the Conversion Price (as defined herein). The Subscriber agrees to be bound by the terms and conditions set forth in the attached “Terms and Conditions of Subscription for Units” including without limitation the terms, representations, warranties, covenants, certifications and acknowledgements set forth in the applicable Schedules attached thereto. The Subscriber further agrees, without limitation, that the Corporation may rely upon the Subscriber’s representations, warranties, covenants, certifications and acknowledgments contained in such documents.

 

SUBSCRIPTION AND SUBSCRIBER INFORMATION

 

Please print all information (other than signatures), as applicable, in the space provided below

 

Subscriber Information and Signature    

_______________________________________________________
(Name of Subscriber)

 

 

 

 

Number of  Units:     _____________________________x $1,000
    =
Account Reference (if applicable):  ________________ ___________    
By:  ________________________________________ ____________
        Authorized Signature
 

Aggregate Subscription Price:_____________________________

 (the “ Subscription Amount ”)

     

______________________________________________________

(Official Capacity or Title – if the Subscriber is not an individual)

 

_______________________________________________________ 

(Name of individual whose signature appears above if different than the name of the Subscriber printed above.)

 

 ______________________________________________________ 

(Subscriber’s Residential Address, including Municipality and Province)

 

 ______________________________________________________ 

 

 ______________________________________________________ 

(Subscriber’s Telephone Number)                            (Email Address)

 

 

 

 

 

State whether Subscriber is an Insider* of the Corporation:

Yes  ¨            No  ¨

 

State whether Subscriber is a Registrant*:

Yes  ¨           No  ¨

 

(*see Article I, section 1.1. – Definitions)

 

 
 

 

The Subscriber hereby provides the Corporation the following instructions in connection with the settlement of the Convertible Debentures and Warrants comprising the Units being purchased hereunder and hereby directs the Corporation to issue and register (and deliver any definitive certificates, if applicable) the Convertible Debentures and Warrants comprising the Units as follows.

 

  Account Registration Information :       Delivery Instructions :  
             
  (Name)       (Name)  
             
             
  (Account Reference, if applicable)       (Account Reference, if applicable)  
             
             
             
             
  (Address, including Postal Code)       (Address, including Postal Code)  
             
             
          (Telephone Number)                      (Fax Number)  
             
             
          (Contact Name)  
             

 

 

2
 

 

TERMS AND CONDITIONS OF SUBSCRIPTION FOR UNITS

 

ARTICLE 1 - INTERPRETATION

 

1.1 Definitions

 

Whenever used in this Subscription Agreement, unless there is something in the subject matter or context inconsistent therewith, the following words and phrases shall have the respective meanings ascribed to them as follows:

 

Business Day ” means a day other than a Saturday, Sunday or any other day on which the principal chartered banks located in Toronto, Ontario are not open for business.

 

Closing ” has the meaning ascribed to such term in Section 4.1.

 

Closing Date ” has the meaning ascribed to such term in Section 4.1.

 

Closing Time ” has the meaning ascribed to such term in Section 4.1.

 

Common Shares ” means the shares of common stock in the capital of the Corporation.

 

Conversion Price ” shall mean the Qualified Financing Price multiplied by 0.75.

 

Convertible Debentures ” has the meaning ascribed to such term in the Term Sheet.

 

Corporation ” means Ehave, Inc. and includes any successor corporation to or of the Corporation.

 

Debenture Certificate ” means the certificate to be delivered by the Corporation to the Subscriber evidencing the Debentures.

 

including ” means without limitation.

 

Insider ” means (a) a director or senior officer of the Corporation (or a subsidiary of the Corporation), (b) any Person who beneficially owns, directly or indirectly, voting securities of the Corporation or who exercises control or direction over voting securities of the Corporation or a combination of both carrying more than 10% of the voting rights attached to all voting securities of the Corporation for the time being outstanding, or (c) a director or senior officer of an Insider of the Corporation.

 

knowledge of the Corporation ” (or similar phrases) means, as it pertains to the Corporation, the actual knowledge of the executive officers of the Corporation in office as at the date of this Subscription Agreement, together with the knowledge which they would have had if they had conducted a reasonable inquiry into the relevant subject matter;

 

NI 45-106 ” means National Instrument 45-106 – Prospectus Exemptions of the Canadian Securities Administrators.

 

Offering ” means the offering to the Subscriber of up to approximately 1,500 Units to be issued and sold by the Corporation pursuant to this Subscription Agreement.

 

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Person ” includes any individual (whether acting as an executor, trustee administrator, legal representative or otherwise), corporation, firm, partnership, sole proprietorship, syndicate, joint venture, trustee, trust, unincorporated organization or association, and pronouns have a similar extended meaning.

 

Qualified Financing ” shall mean the completion of a financing by the Corporation after the date hereof for aggregate gross proceeds of not less than CDN$2,000,000; provided that such financing shall be completed in connection with the proposed listing of the Common Shares on a recognized stock exchange in Canada within two (2) months of the completion of such financing;

 

Qualified Financing Price ” shall mean the price per security issued by the Corporation in the Qualified Financing

 

Registrant ” means a dealer, adviser, investment fund manager, an ultimate designated person or chief compliance officer as those terms are used pursuant to Securities Laws, or a person registered or otherwise required to be registered under the Securities Laws.

 

Securities Laws ” means, as applicable, the securities laws, regulations, rules, rulings and orders in each of the provinces of Canada, the applicable policy statements, notices, blanket rulings, orders and all other regulatory instruments of the securities regulators in each of the provinces of Canada.

 

Subscriber ” means the subscriber for the Units as set out on page 1 of this Subscription Agreement.

 

Subscription Agreement ” means this subscription agreement (including any Schedules hereto) and any instrument amending this Subscription Agreement; “ hereof ”, “ hereto ”, “ hereunder ”, “ herein ” and similar expressions mean and refer to this Subscription Agreement and not to a particular Article or Section; and the expression “ Article ” or “ Section ” followed by a number means and refers to the specified Article or Section of this Subscription Agreement.

 

Subscription Amount ” has the meaning ascribed to such term on page 1 of this Subscription Agreement.

 

Subscription Price ” has the meaning ascribed to such term on page 1 of this Subscription Agreement.

 

Term Sheet ” means the term sheet delivered to potential purchasers of Units, a copy of which is attached hereto as Schedule “A”.

 

Underlying Shares ” means the Common Shares issuable on conversion of the Convertible Debentures, as more particularly set out in the Term Sheet.

 

United States ” means the United States of America, its territories and possessions, any State of the United States and the District of Columbia.

 

Units ” has the meaning ascribed to such term on page 1 of this Subscription Agreement.

 

U.S. Securities Act ” means the United States Securities Act of 1933, as amended.

 

Warrant Certificate ” means the certificate to be delivered by the Corporation to the Subscriber evidencing the Warrants.

 

Warrants ” has the meaning ascribed to such term in the Term Sheet.

 

Warrant Shares ” means the Common Shares issuable upon the exercise of the Warrants, as more particularly set out in the Term Sheet.

 

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1.2 Gender and Number

 

Words importing the singular number only shall include the plural and vice versa, words importing the masculine gender shall include the feminine gender and words importing persons shall include firms and corporations and vice versa.

 

1.3 Currency

 

Unless otherwise specified, all dollar amounts in this Subscription Agreement and the Schedules, including the symbol “$”, are expressed in Canadian dollars.

 

1.4 Subdivisions and Headings

 

The division of this Subscription Agreement into Articles, Sections, Schedules and other subdivisions and the inclusion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Subscription Agreement. The headings in this Subscription Agreement are not intended to be full or precise descriptions of the text to which they refer. Unless something in the subject matter or context is inconsistent therewith, references herein to an Article, Section, Subsection, paragraph, clause or Schedule are to the applicable article, section, subsection, paragraph, clause or schedule of this Subscription Agreement.

 

ARTICLE 2 - SCHEDULES

 

2.1 Description of Schedules

 

The following are the Schedules attached to and incorporated in this Subscription Agreement by reference and deemed to be a part hereof:

 

Schedule “A” - Term Sheet  
Schedule “B” - Accredited Investor Certificate  
Schedule “C” - Contact Information for Canadian Securities Commissions  

 

ARTICLE 3 - SUBSCRIPTION AND DESCRIPTION OF UNITS

 

3.1 Subscription for the Units

 

The Subscriber hereby confirms its irrevocable subscription for and offer to purchase from the Corporation that number of Units indicated on page 2 of this Subscription Agreement, on and subject to the terms and conditions set out in this Subscription Agreement, for the Subscription Amount which is payable as described in Article 4 hereto.

 

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3.2 Description of the Units

 

Each Unit consists of one (1) Convertible Debenture and such number of Warrants (as defined herein) as is equal to $1,000 divided by the Conversion Price. A summary of certain terms of the Convertible Debentures and the Warrants are set forth in the Term Sheet; however, reference should be made to the Debenture Certificates and Warrant Certificates for the definitive terms of the Convertible Debentures and the Warrants. In the event of a conflict or inconsistency between the Term Sheet and the Debenture Certificates or Warrant Certificates, the Debenture Certificates and Warrant Certificates shall be paramount and shall govern.

 

3.3 Acceptance and Rejection of Subscription by the Corporation

 

The Subscriber acknowledges and agrees that the Corporation reserves the right, in its absolute discretion, to reject this subscription for Units, in whole or in part, at any time prior to the Closing Time. If this subscription is rejected in whole, any payment delivered by the Subscriber representing the Subscription Amount pursuant to this Agreement, will be promptly returned to the Subscriber without interest or deduction. If this subscription is accepted only in part, a cheque representing any refund of the Subscription Amount for that portion of the subscription for the Units which is not accepted will be promptly returned to the Subscriber without interest or deduction.

 

ARTICLE 4 - CLOSING

 

4.1 Closing

 

Delivery and sale of the Units and payment of the aggregate Subscription Amount will be completed (the “ Closing ”) at such time (the “ Closing Time ”), date (the “ Closing Date ”) and place as the Corporation may determine. Provided that on or prior to the Closing Time, the terms and conditions contained in this Subscription Agreement have been complied with to the satisfaction of the Corporation, or waived by the Corporation, the Subscriber shall deliver a completed Subscription Agreement and payment of the aggregate Subscription Amount for all of the Units sold hereunder to the Corporation, against delivery by the Corporation of the Debenture Certificates and the Warrant Certificates (or such other evidence of issue of the Units as the Subscriber and the Corporation may agree) and such other documentation as may be required pursuant to this Subscription Agreement.

 

If, prior to the Closing Time, the terms and conditions contained in this Subscription Agreement (other than the delivery by the Corporation of the Debenture Certificates and the Warrant Certificates or the delivery by the Corporation of such other evidence of issue of the Convertible Debentures and Warrants comprising the Units as the Subscriber and the Corporation may agree) have not been complied with to the satisfaction of the Corporation, or waived by it, the Corporation and the Subscriber will have no further obligations under this Subscription Agreement.

 

4.2 Conditions of Closing

 

The Subscriber acknowledges and agrees that the Corporation is relying on the truth of the representations and warranties of the Subscriber contained in this Subscription Agreement as of the date of this Subscription Agreement, and as of the Closing Time as if made at and as of the Closing Time, and the fulfillment of the following additional conditions prior to the Closing Time:

 

(a) on or before the Closing Date the Subscriber having made payment arrangements for the Subscription Amount in a manner acceptable to the Corporation;

 

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(b) on or before the Closing Date, the Subscriber having delivered a properly completed and signed Subscription Agreement to the Corporation;

 

(c) the Subscriber having executed and returned to the Corporation, at the Corporation’s request, all other documents as may be required by the securities laws for delivery by the Corporation on behalf of the Subscriber;

 

(d) the Corporation having obtained all necessary approvals and consents in respect of the Offering;

 

(e) the Corporation having accepted the Subscriber’s subscription, in whole or in part; and

 

(f) the issue and sale of the Convertible Debentures and Warrants comprising the Units being exempt from the requirement to file a prospectus and the requirement to deliver an offering memorandum under applicable securities legislation, or the Corporation having received such orders, consents or approvals as may be required to permit such sale without the requirement to file a prospectus or deliver an offering memorandum.

 

ARTICLE 5 – REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CORPORATION

 

5.1 Representations, Warranties and Covenants of the Corporation

 

The Corporation represents and warrants to the Subscriber and acknowledges that:

 

(a) the Corporation is a corporation duly incorporated duly organized, continued or amalgamated and validly existing under the laws of the jurisdiction in which it was incorporated, organized, continued or amalgamated, as the case may be;

 

(b) the Corporation has all requisite corporate power, authority and capacity to enter into this Subscription Agreement and to perform the transactions contemplated herein and carry on its business and, to the knowledge of the Corporation, no steps or proceedings have been taken by any person, voluntary or otherwise, requiring or authorizing its dissolution or winding-up;

 

(c) the Corporation is not in default of any material requirement of applicable Securities Laws;

 

(d) no order, ruling or determination having the effect of suspending the sale or ceasing the trading in any securities of the Corporation has been issued by any regulatory authority and is continuing in effect and no proceedings for that purpose have been instituted or, to the knowledge of the Corporation, are pending, contemplated or threatened by any regulatory authority;

 

(e) at the Closing Time, the Convertible Debentures and the Warrants will be duly and validly issued and created; and

 

(f) the issuance of the Convertible Debentures and Warrants have been authorized and the Underlying Shares and Warrant Shares have been duly reserved and allotted for issuance.

 

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ARTICLE 6 - ACKNOWLEDGEMENTS, REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SUBSCRIBER

 

6.1 Acknowledgements, Representations, Warranties and Covenants of the Subscriber

 

The Subscriber hereby acknowledges, represents and warrants to, and covenants with, the Corporation as follows and acknowledges that the Corporation is relying on such acknowledgements, representations, warranties and covenants in connection with the transactions contemplated herein:

 

(a) the Subscriber confirms that it:

 

(i) has such knowledge in financial and business affairs as to be capable of evaluating the merits and risks of its investment in the Units, including the potential loss of its entire investment;

 

(ii) is aware of the characteristics of the Convertible Debentures and Warrants comprising the Units and understands the risks relating to an investment therein; and

 

(iii) is able to bear the economic risk of loss of its investment in the Units;

 

(b) the Subscriber is a resident, or if not an individual, the Subscriber has its head office, in the jurisdiction set out on page 1 of this Subscription Agreement and intends that the securities laws of that jurisdiction govern the Subscriber’s subscription. Such address was not created and is not used solely for the purpose of acquiring the Units;

 

(c) the Subscriber is aware that the Convertible Debentures and Warrants comprising the Units (and the Underlying Shares and Warrant Shares) have not been and will not be registered under the U.S. Securities Act or the securities laws of any state and that the Convertible Debentures and Warrants comprising the Units (and the Underlying Shares and Warrant Shares) may not be offered or sold, directly or indirectly, in the United States without registration under the U.S. Securities Act and applicable state securities laws or compliance with the requirements of an exemption from registration therefrom and it acknowledges that the Corporation has no present intention of filing a registration statement under the U.S. Securities Act or applicable state securities laws in respect of such securities;

 

(d) the Units have not been offered to the Subscriber in the United States, and the individuals making the order to purchase the Units and executing and delivering this Subscription Agreement on behalf of the Subscriber were not in the United States when the order was placed and this Subscription Agreement was executed and delivered;

 

(e) the Subscriber undertakes and agrees that it will not offer or sell any of the Convertible Debentures or Warrants comprising the Units (and the Underlying Shares and Warrant Shares) in the United States unless such securities are registered under the U.S. Securities Act and the securities laws of all applicable states of the United States, or an exemption from such registration requirement is available;

 

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(f) the execution and delivery of this Subscription Agreement, the performance and compliance with the terms hereof, the subscription for the Units (and any subsequent conversion of the Convertible Debentures or exercise of the Warrants) and the completion of the transactions described herein by the Subscriber will not result in any material breach of, or be in conflict with or constitute a material default under, or create a state of facts which, after notice or lapse of time, or both, would constitute a material default under any term or provision of the constating documents, by-laws or resolutions of the Subscriber, if applicable, the Securities Laws or any other laws applicable to the Subscriber, any agreement to which the Subscriber is a party, or any judgment, decree, order, statute, rule or regulation applicable to the Subscriber;

 

(g) the Subscriber is subscribing for the Units as principal for its own account and not for the benefit of any other Person (within the meaning of applicable Securities Laws);

 

(h) the Subscriber is either:

 

(i) relying on the “accredited investor” exemption under NI 45-106, and shall complete, sign and deliver to the Corporation (1) Schedule “B” (the “Accredited Investor Status Certificate”); and (2) Exhibit “I” to Schedule “B” if subscribing under categories (j), (k) or (l) of the Accredited Investor Status Certificate; or

 

(ii) relying on the “minimum amount investment” exemption under NI 45-106, and shall indicate by initialing immediately below that the Subscriber is (1) not an individual; (2) is purchasing the Units as principal; and (3) the Subscription amount is not less than $150,000

 

  (initial if relying on the “minimum amount investment
    exemption under NI 45-106);

 

(i) if the Subscriber is an “accredited investor” within the meaning of NI 45-106, the Subscriber has properly completed, executed and delivered to the Corporation this Subscription Agreement and Schedule “B” (the Accredited Investor Status Certificate), as applicable and the acknowledgements, representations, warranties, covenants and information contained herein and therein are true and correct as of the date hereof and will be true and correct as of the Closing Time and if less than a complete copy of this Subscription Agreement is delivered to the Corporation, the Corporation and its are entitled to assume that the Subscriber accepts and agrees to all the terms and conditions of the pages not delivered, unaltered;

 

(j) if the Subscriber is not an individual, this Subscription Agreement has been duly authorized, executed and delivered by, and constitutes a legal, valid and binding agreement of the Subscriber and is enforceable in accordance with its terms against the Subscriber;

 

(k) if the Subscriber is a corporation, the Subscriber is duly incorporated and is validly subsisting under the laws of its jurisdiction of incorporation and has all requisite legal and corporate power and authority to execute and deliver this Subscription Agreement, to subscribe for the Units as contemplated herein and to carry out and perform its covenants and obligations under the terms of this Subscription Agreement and has obtained all necessary approvals in respect thereof, and the individual signing this Subscription Agreement has been duly authorized to execute and deliver this Subscription Agreement;

 

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(l) there is no Person acting or purporting to act in connection with the transactions contemplated herein who is entitled to any brokerage or finder’s fee;

 

(m) if required by applicable Securities Laws, the Subscriber will execute, deliver and file or assist the Corporation in filing such reports, undertakings and other documents with respect to the issue of the Convertible Debentures and Warrants comprising the Units as may be required by any securities commission, stock exchange or other regulatory authority;

 

(n) the Subscriber has been advised to consult its own legal advisors with respect to the execution, delivery and performance by it of this Subscription Agreement and the transactions contemplated herein, including trading in the Convertible Debentures, Warrants, Underlying Shares and Warrant Shares, and with respect to the hold periods imposed by the Securities Laws and acknowledges that no representation has been made by the Corporation respecting the applicable hold periods imposed by the Securities Laws or other resale restrictions applicable to such securities which restrict the ability of the Subscriber (or others for whom it is contracting hereunder) to resell such securities, that the Subscriber (or others for whom it is contracting hereunder) is solely responsible to find out what these restrictions are, that the Subscriber is solely responsible (and the Corporation is in no way responsible) for compliance with applicable resale restrictions and that the Subscriber (or others for whom it is contracting hereunder) is aware that it may not resell such securities except in accordance with limited exemptions under the Securities Laws and other applicable securities laws;

 

(o) the Subscriber has not received or been provided with a prospectus, offering memorandum (within the meaning of the Securities Laws) or any sales or advertising literature in connection with the Offering or any document purporting to describe the business and affairs of the Corporation which has been prepared for review by prospective purchasers to assist in making an investment decision in respect of the Units and the Subscriber’s decision to subscribe for the Units was not based upon, and the Subscriber has not relied upon, any oral or written representations as to facts made by or on behalf of the Corporation, or any employee, agent or affiliate thereof or any other person associated therewith, except as set forth herein. The Subscriber’s decision to subscribe for the Units was based solely upon this Subscription Agreement (including the Term Sheet) and any information about the Corporation which is publicly available (any such information having been obtained by the Subscriber);

 

(p) the Corporation has not, nor have any of its directors, employees, officers, affiliates or agents made any written or oral representations:

 

(i) that any Person will resell or repurchase the Convertible Debentures or Warrants comprising the Units (or the Underlying Shares or Warrant Shares);

 

(ii) that any Person will refund all or any part of the Subscription Amount; or

 

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(iii) as to the future price or value of the Convertible Debentures or Warrants or the Underlying Shares or Warrant Shares;

 

(q) the subscription for the Units has not been made through or as a result of, and the distribution of the Units is not being accompanied by any advertisement, including without limitation in printed public media, radio, television or telecommunications, including electronic display, or as part of a general solicitation; and

 

(r) the funds representing the Subscription Amount which will be advanced by the Subscriber to the Corporation hereunder will not represent proceeds of crime for the purposes of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) (the “ PCMLTFA ”), the United Kingdom’s Proceeds of Crime Act 2002 (the “ POCA ”) or the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (the “ PATRIOT Act ”), and the Subscriber acknowledges that the Corporation may in the future be required by law to disclose the Subscriber’s name and other information relating to this Subscription Agreement and the Subscriber’s subscription hereunder, on a confidential basis, pursuant to the PCMLTFA, POCA or the PATRIOT Act. To the best of its knowledge (a) none of the subscription funds to be provided by the Subscriber (i) have been or will be derived from or related to any activity that is deemed criminal under the laws of Canada, the United States, or any other jurisdiction, or (ii) are being tendered on behalf of a Person or entity who has not been identified to the Subscriber, and (b) the Subscriber shall promptly notify the Corporation if the Subscriber discovers that any of such representations ceases to be true, and to provide the Corporation with appropriate information in connection therewith.

 

6.2 Acknowledgments and Covenants of the Subscriber

 

The Subscriber acknowledges, covenants and agrees as follows:

 

(a) it (i) has received and reviewed a copy of the Term Sheet setting out the principal terms of the Offering; and (ii) has had the opportunity to ask and have answered any and all questions which the Subscriber wished to have answered with respect to the subscription for the Units made hereunder;

 

(b) the offer of the Units does not constitute a recommendation to purchase the Units or financial product advice and the Subscriber acknowledges that the Corporation has not had regard to the Subscriber’s particular objectives, financial situation or needs;

 

(c) there are risks associated with the purchase of the Units and no securities commission, agency, governmental authority, regulatory body, stock exchange or similar regulatory authority has reviewed or passed on the merits of the Convertible Debentures and Warrants comprising the Units nor have any such agencies or authorities made any recommendations or endorsement with respect to the foregoing;

 

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(d) the Corporation is not now a “reporting issuer” under the Securities Laws of any province or territory of Canada, the Corporation and there is no guarantee that it will become a reporting issuer in the future. The Subscriber further acknowledges that as a result of the Corporation not being a reporting issuer the Convertible Debentures and the Warrants (and the Underlying Shares and Warrant Shares) will be subject to an indefinite “restricted period” under applicable Securities Laws of four (4) months and a one (1) day from the later of the applicable Closing Date and the date the Corporation becomes a reporting issuer under the Securities Laws of any province or territory of Canada, unless a prospectus is filed in accordance with applicable Securities Laws qualifying their distribution. The Subscriber further acknowledges that during such indefinite “restricted period”, the Subscriber may not trade the Convertible Debentures or the Warrants (and the Underlying Shares and Warrant Shares) under applicable Securities Laws without filing a prospectus in accordance with such laws or being able to rely on one of the limited exemptions under Canadian Securities Laws;

 

(e) the Convertible Debentures and the Warrants (and the Underlying Shares and Warrant Shares) will be subject to statutory resale restrictions under the Securities Laws of Canada and under other applicable Securities Laws, and the Subscriber covenants that it will not resell the Convertible Debentures, Warrants, Underlying Shares or Warrant Shares except in compliance with such laws and the Subscriber acknowledges that it is solely responsible (and the Corporation is in no way responsible) for such compliance;

 

(f) the Convertible Debentures and the Warrants (and the Underlying Shares and the Warrant Shares) may only be transferred or assigned by the Subscriber in compliance with applicable laws, including applicable Securities Laws;

 

(g) the Debenture Certificates and Warrant Certificates shall have attached to them an ownership statement setting out resale restrictions under applicable Securities Laws substantially in the following form (and with the necessary information inserted):

 

“Unless permitted under securities legislation, the holder of this security must not trade the security before the date which is four months and a day after the later of (i) [applicable Closing Date will be inserted], and (ii) the date the issuer became a reporting issuer in any province or territory.” ;

 

(h) there is no market for the Convertible Debentures and Warrants comprising the Units (and the Underlying Shares and the Warrant Shares) and there is no assurance that a market will ever develop;

 

(i) the Corporation is relying on an exemption from the requirement to provide the Subscriber with a prospectus under the Securities Laws and, as a consequence of acquiring the Convertible Debentures and Warrants comprising the Units pursuant to such exemption:

 

(i) certain protections, rights and remedies provided by the Securities Laws, including statutory rights of rescission, or damages and certain statutory remedies against an issuer, underwriters, auditors, directors and officers that are available to investors who acquire securities offered by a prospectus, will not be available to the Subscriber;

 

(ii) the common law may not provide investors with an adequate remedy in the event that they suffer investment losses in connection with securities acquired in a private placement;

 

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(iii) the Subscriber may not receive information that would otherwise be required to be given under the Securities Laws; and

 

(iv) the Corporation is relieved from certain obligations that would otherwise apply under the Securities Laws;

 

(j) the offer, issuance, sale and delivery of the Convertible Debentures and Warrants comprising the Units is conditional upon such sale being exempt from the prospectus filing or registration requirements and the requirement to deliver an offering memorandum in connection with the distribution of the Convertible Debentures and Warrants comprising the Units under the Securities Laws of Canada or upon the issuance of such orders, consents or approvals as may be required to permit such sale without the requirement of filing a prospectus;

 

(k) the Corporation may complete additional financings in the future in order to develop the business of the Corporation and fund its ongoing development, and such future financings may (i) have a dilutive effect on current shareholders or securityholders of the Corporation, including the Subscriber; or (ii) offer securities senior to the Convertible Debentures . However there is no assurance that any future financings will be available, on reasonable terms or at all, and if not so available, could have a material adverse effect on the Corporation’s business, financial condition, performance or prospects;

 

(l) the Subscriber is responsible for obtaining such legal and tax advice as it considers appropriate in connection with the execution, delivery and performance of this Subscription Agreement and the transactions contemplated under this Subscription Agreement;

 

(m) this offer to subscribe is made for valuable consideration and may not be withdrawn, cancelled, terminated or revoked by the Subscriber without the consent of the Corporation;

 

(n) there is no government or other insurance covering the Convertible Debentures, Warrants, Underlying Shares or Warrant Shares;

 

(o) legal counsel retained by the Corporation is acting as counsel to the Corporation and not as counsel to the Subscriber;

 

(p) the Subscriber acknowledges that this Subscription Agreement requires the Subscriber to provide certain personal information to the Corporation. Such information is being collected by the Corporation for the purposes of completing the transaction contemplated herein, which includes, without limitation, determining the Subscriber’s eligibility to purchase the Units under the Securities Laws and other applicable securities laws. The Subscriber’s personal information may be disclosed by the Corporation to: (i) stock exchanges or securities regulatory authorities; (ii) the Canada Revenue Agency or other taxing authorities; and (iii) employees, advisors, consultants and agents of the Corporation. By executing this Subscription Agreement, the Subscriber is deemed to be consenting to the foregoing collection, use and disclosure of the Subscriber’s personal information. The Subscriber also consents to the filing of copies or originals of any of the Subscriber’s documents described herein as may be required to be filed with any stock exchange or securities regulatory authority in connection with the transactions contemplated hereby;

 

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(q) the information provided by the Subscriber on pages 1 and 2 of this Subscription Agreement identifying among other things, the name, address, telephone number and email address of the Subscriber, the number of Units being purchased hereunder, the Subscription Amount, the applicable Closing Date and the exemption that the Subscriber is relying on in purchasing the Units will be disclosed to the Canadian securities regulatory authorities, and such information is being indirectly collected by the Canadian securities regulatory authorities under the authority granted to it under Canadian securities legislation. This information is being collected for the purposes of the administration and enforcement of Canadian securities legislation. The Subscriber hereby authorizes the indirect collection of such information by the Canadian securities regulatory authorities. In the event the Subscriber has any questions with respect to the indirect collection of such information, the Subscriber should contact the applicable securities regulatory authority at the contact details provided in Schedule “C”.

 

6.3 Reliance on Representations, Warranties, Covenants and Acknowledgements

 

The Subscriber acknowledges and agrees that the representations, warranties, covenants and acknowledgements made by the Subscriber in this Subscription Agreement are made with the intention that they may be relied upon by the Corporation and its legal counsel in determining the Subscriber’s to purchase the Units. The Subscriber further agrees that by accepting the Units, the Subscriber shall be representing and warranting that such representations, warranties, covenants and acknowledgements are true as at the Closing Time with the same force and effect as if they had been made by the Subscriber at the Closing Time.

 

ARTICLE 7 - SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS

 

7.1 Survival of Representations, Warranties and Covenants of the Corporation

 

The representations, warranties and covenants of the Corporation contained in this Subscription Agreement shall survive the Closing and continue in full force and effect for the benefit of the Subscriber for a period of two years following Closing.

 

7.2 Survival of Representations, Warranties and Covenants of the Subscriber

 

The representations, warranties and covenants of the Subscriber contained in this Subscription Agreement shall survive the Closing and continue in full force and effect for the benefit of the Corporation for a period of two years following the Closing.

 

ARTICLE 9 - MISCELLANEOUS

 

9.1 Further Assurances

 

Each of the parties hereto upon the request of each of the other parties hereto, whether before or after the Closing Time, shall do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all such further acts, deeds, documents, assignments, transfers, conveyances, powers of attorney and assurances as may reasonably be necessary or desirable to complete the transactions contemplated herein.

 

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9.2 Notices

 

(a) Any notice, direction or other instrument required or permitted to be given to any party hereto shall be in writing and shall be sufficiently given if delivered personally, or transmitted electronically tested prior to transmission to such party, as follows:

 

(i) in the case of the Corporation, to:

 

Ehave, Inc.

203-277 Lakeshore Road East

Oakville, ON L6J 6J3

 

Attention: Prateek Dwivedi
Email: teek@ehave.com

 

(ii) in the case of the Subscriber, at the address specified on the face page hereof,.

 

(b) Any such notice, direction or other instrument, if delivered personally, shall be deemed to have been given and received on the day on which it was delivered, provided that if such day is not a Business Day then the notice, direction or other instrument shall be deemed to have been given and received on the first Business Day next following such day and if transmitted electronically, shall be deemed to have been given and received on the day of its transmission, provided that if such day is not a Business Day or if it is transmitted or received after the end of normal business hours then the notice, direction or other instrument shall be deemed to have been given and received on the first Business Day next following the day of such transmission.

 

(c) Any party hereto may change its address for service from time to time by notice given to each of the other parties hereto in accordance with the foregoing provisions.

 

9.3 Time of the Essence

 

Time shall be of the essence of this Subscription Agreement and every part hereof.

 

9.4 Costs and Expenses

 

All costs and expenses (including, without limitation, the fees and disbursements of legal counsel) incurred in connection with this Subscription Agreement and the transactions herein contemplated shall be paid and borne by the party incurring such costs and expenses.

 

9.5 Applicable Law

 

This Subscription Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the Province of Ontario and the laws of Canada applicable therein. Any and all disputes arising under this Subscription Agreement, whether as to interpretation, performance or otherwise, shall be subject to the non-exclusive jurisdiction of the courts of the Province of Ontario and each of the parties hereto hereby irrevocably attorns to the jurisdiction of the courts of such Province.

 

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9.6 Entire Agreement

 

This Subscription Agreement, including the Schedules hereto, constitutes the entire agreement between the parties with respect to the transactions contemplated herein and cancels and supersedes any prior understandings, agreements, negotiations and discussions between the parties. There are no representations, warranties, terms, conditions, undertakings or collateral agreements or understandings, express or implied, between the parties hereto other than those expressly set forth in this Subscription Agreement or in any such agreement, certificate, affidavit, statutory declaration or other document as aforesaid. This Subscription Agreement may not be amended or modified in any respect except by written instrument executed by each of the parties hereto.

 

9.7 Counterparts

 

This Subscription Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same Subscription Agreement. Counterparts may be delivered either in original, PDF or faxed form and the parties adopt any signatures received by PDF or a receiving fax machine as original signatures of the parties. If less than a complete copy of this Subscription Agreement is delivered to the Corporation, the Corporation and its advisors are entitled to assume that the Subscriber accepts and agrees to all the terms and conditions of the pages not delivered, unaltered.

 

9.8 Assignment

 

This Subscription Agreement may not be assigned by either party except with the prior written consent of the other party hereto.

 

9.9 Enurement

 

This Subscription Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, successors (including any successor by reason of the amalgamation or merger of any party), administrators and permitted assigns.

 

9.10 Language

 

It is the express wish of the Subscriber that the Subscription Agreement and any related documentation be drawn up in English only. Il est de la volonté expresse du souscripteur que la convention de souscription ainsi que tout document connexe soient rédigés en langue anglaise uniquement.

 

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

 

16
 

 

The Corporation hereby accepts the subscription for Units as set forth on the face page of this Subscription Agreement on the terms and conditions contained in this Subscription Agreement (including all applicable Schedules) this ____ day of ____________, 2018.

 

    EHAVE, INC.
     
  Per:  
    Authorized Signatory

 

 
 

 

SCHEDULE “A”

 

TERM SHEET

 

EHAVE, INC.

 

PRIVATE PLACEMENT OF UNITS

Issuer:

Ehave, Inc. (“ Ehave ” or, the “ Company ”).
   
Offered Securities: Subordinated unsecured convertible debenture units (the “ Units ”).
   
Amount: Approximately $1,500,000 of Units (the “ Offering ”).
   
Offering Price: C$1,000 per Unit.
   
Unit: Each Unit shall consist of one 10.0% subordinated unsecured convertible debenture (each a “ Convertible Debenture ”) of the Company and warrants of the Company exercisable to purchase that number of common shares as is equal to C$1,000 divided by the Conversion Price (as defined herein)  (each a “ Warrant ”).
   
Conversion Privilege: The principal amount of each Convertible Debenture shall be convertible, for no additional consideration, into common shares of the Company (each a “ Common Share ”) at the option of the holders at any time following the completion of a Qualified Financing (as defined herein) and prior to the close of business on the Maturity Date, at a conversion price equal to 0.75 multiplied by the Qualified Financing Price (as defined herein) (the “ Conversion Price) .
   
Maturity Date: Two years from the date the Units are issued.
   
Interest: The Convertible Debentures shall bear interest at a rate of 10.0% per annum from the date of issue and shall be payable, at the election of the holder, in (i) cash, (ii) Common Shares at the Conversion Price, or (iii) any combination thereof upon conversion or maturity.
   
Optional Repayment: The Company may elect to repay in cash the outstanding principal outstanding on the Convertible Debentures (including accrued and unpaid interest) at any time upon 30 days’ notice.
   
Warrants: Following the completion of a Qualified Financing, each Warrant entitles the holder to acquire one Common Share for an exercise price equal to the Qualified Financing Price at any time up to 5 years following the Closing Date (subject to adjustment in certain customary events).
   
Anti-Dilution Adjustments: The Conversion Price will be subject to adjustment in certain events including, without limitation, the subdivision or consolidation of the outstanding Common Shares, the issue of Common Shares or securities convertible into Common Shares by way of stock dividend or distribution, the issue of rights, options or warrants to all or substantially all of the holders of Common Shares in certain circumstances, and the distribution to all or substantially all of the holders of Common Shares of any other class of shares, rights, options or warrants, evidences of indebtedness or assets.

 

A- 1
 

 

Events of Default:

The Convertible Debentures shall include customary events of default and shall also provide that it shall be an event of default if the Company (or any successor) has not become a “reporting issuer” in a province or territory of Canada within 6 months from the date on which the Convertible Debentures have been issued. If at any time during the term of the Convertible Debenture the Company issues securities at price deemed lower than the Conversion Price, the maturity date will be accelerated and occur on the 30 th day following such issuance.
   
Qualified Financing: The Company shall use commercially reasonable efforts to complete a subsequent financing for aggregate gross proceeds to the Company of at least C$2,000,000 (“ Qualified Financing ”) and be approved for trading on a Canadian recognized stock exchange (which, for greater certainty, includes the CSE or TSX Venture Exchange).  The issue price of the securities issued by the Company in the Qualified Financing shall be the “ Qualified Financing Price ”.
   
Closing Date: On such date determined by the Company.
   
Use of Proceeds: The Company shall have full and absolute discretion with respect to the use of proceeds.

 

A- 2
 

 

SCHEDULE “B”

 

Accredited Investor Status CERTIFICATE

 

The categories listed herein contain certain specifically defined terms. If you are unsure as to the meanings of those terms, or are unsure as to the applicability of any category below, please contact your broker and/or legal advisor before completing this certificate.

 

TO: EHAVE, INC. (the “ Corporation ”)

 

In connection with the purchase by the undersigned Subscriber of the Units, the Subscriber (the “ Subscriber ”) hereby represents, warrants, covenants and certifies to the Corporation (and acknowledges that the Corporation and its counsel are relying thereon) that:

 

(a) the Subscriber is resident in or otherwise subject to the securities laws of one of the Provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, Nova Scotia, Prince Edward Island or Newfoundland and Labrador;

 

(b) the Subscriber is purchasing the Units as principal for its own account and not for the benefit of any other person or is deemed to be purchasing as principal pursuant to NI 45-106;

 

(c) the Subscriber is an “accredited investor” within the meaning of NI 45-106 on the basis that the Subscriber fits within one of the categories of an “accredited investor” reproduced below beside which the Subscriber has indicated the undersigned belongs to such category;

 

(d) the Subscriber was not created or used solely to purchase or hold securities as an accredited investor as described in paragraph (m) below;

 

(e) if the Subscriber is purchasing under category (j), (k) or (l) below, it has completed and signed Exhibit “I” attached hereto; and

 

(f) upon execution of this Schedule “B” by the Subscriber, this Schedule “B” shall be incorporated into and form a part of the Subscription Agreement to which this Schedule “B” is attached.

 

(PLEASE CHECK THE BOX OF THE APPLICABLE CATEGORY OF ACCREDITED INVESTOR)

 

¨ (a) (i) except in Ontario, a Canadian financial institution, or a Schedule III bank; or
    (ii) in Ontario, a financial institution that is (A) a bank listed in Schedule I, II or III of the Bank Act (Canada); (B) an association to which the Cooperative Credit Associations Act (Canada) applies or a central cooperative credit society for which an order has been made under subsection 473(1) of that Act; or (C) a loan corporation, trust company, trust corporation, insurance company, treasury branch, credit union, caisse populaire, financial services cooperative or credit union league or federation that is authorized by a statute of Canada or Ontario to carry on business in Canada or Ontario, as the case may be;
     
¨ (b) the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada);
     
¨ (c) a subsidiary of any person or company referred to in paragraphs (a) or (b), if the person or company owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary;
     
¨ (d) a person or company registered under the securities legislation of a jurisdiction (province or territory) of Canada as an adviser or dealer (or in Ontario, except as otherwise prescribed by the regulations under the Securities Act (Ontario));

 

B- 1
 

 

¨ (e) an individual registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (d);
     
¨ (e.1) an individual formerly registered under the securities legislation of a jurisdiction of Canada, other than an individual formerly registered solely as a representative of a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador);
     
¨ (f) the Government of Canada or a jurisdiction (province or territory) of Canada, or any crown corporation, agency or wholly owned entity of the Government of Canada or a jurisdiction of Canada;
     
¨ (g) a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l’île de Montréal or an intermunicipal management board in Québec;
     
¨ (h) any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government;
     
¨ (i) a pension fund that is regulated by either the Office of the Superintendent of Financial Institutions (Canada), a pension commission or similar regulatory authority of a jurisdiction (province or territory) of Canada;
     
¨ (j) an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that, before taxes, but net of any related liabilities, exceeds $1,000,000 (completion of Exhibit “I” is also required) ;
     
¨ (j.1) an individual who beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $5,000,000;
     
¨ (k) an individual whose net income before taxes exceeded $200,000 in each of the two most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the two most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year (completion of Exhibit “I” is also required) ;
     
¨ (l) an individual who, either alone or with a spouse, has net assets of at least $5,000,000 (completion of Exhibit “I” is also required) ;
     
¨ (m) a person, other than an individual or investment fund, that has net assets of at least $5,000,000 as shown on its most recently prepared financial statements;
     
¨ (n) an investment fund that distributes or has distributed its securities only to (i) a person that is or was an accredited investor at the time of the distribution, (ii) a person that acquires or acquired securities in the circumstances referred to in sections 2.10 [ Minimum amount investment ] or 2.19 [ Additional investment in investment funds ] of NI 45-106, or (iii) a person described in sub-paragraph (i) or (ii) that acquires or acquired securities under section 2.18 [ Investment fund reinvestment ] of NI 45-106;
     
¨ (o) an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt;

 

B- 2
 

 

¨ (p) a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation, as the case may be;
     
¨ (q) a person acting on behalf of a fully managed account managed by that person, if that person is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction;
     
¨ (r) a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded;
     
¨ (s) an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) to (d) or paragraph (i) in form and function;
     
¨ (t) a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors;
     
¨ (u) an investment fund that is advised by a person registered as an adviser or a person that is exempt from registration as an adviser;
     
¨ (v) a person that is recognized or designated by the securities regulatory authority or, except in Ontario or Québec, the regulator as an accredited investor;
     
¨ (w) a trust established by an accredited investor for the benefit of the accredited investor’s family members of which a majority of the trustees are accredited investors and all of the beneficiaries are the accredited investor’s spouse, a former spouse of the accredited investor or a parent, grandparent, brother, sister, child or grandchild of that accredited investor, of that accredited investor’s spouse or of that accredited investor’s former spouse; or
     
¨ (x) in Ontario, such other persons or companies as may be prescribed by the regulations under the Securities Act (Ontario).
    ***If checking this category (x), please provide a description of how this requirement is met.

 

For the purposes hereof, the following definitions are included for convenience:

 

(a) bank ” means a bank named in Schedule I or II of the Bank Act (Canada);

 

(b) Canadian financial institution ” means (i) an association governed by the Cooperative Credit Associations Act (Canada) or a central cooperative credit society for which an order has been made under section 473(1) of that Act, or (ii) a bank, loan corporation, trust company, trust corporation, insurance company, treasury branch, credit union, caisse populaire, financial services cooperative, or league that, in each case, is authorized by an enactment of Canada or a jurisdiction of Canada to carry on business in Canada or a jurisdiction of Canada;

 

(c) company ” means any corporation, incorporated association, incorporated syndicate or other incorporated organization;

 

(d) eligibility adviser ” means:

 

(i) a person that is registered as an investment dealer and authorized to give advice with respect to the type of security being distributed, and

 

(ii) in Saskatchewan or Manitoba, also means a lawyer who is a practicing member in good standing with a law society of a jurisdiction of Canada or a public accountant who is a member in good standing of an institute or association of chartered accountants, certified general accountants or certified management accountants in a jurisdiction of Canada provided that the lawyer or public accountant must not

 

B- 3
 

 

(A) have a professional, business or personal relationship with the issuer, or any of its directors, executive officer, founders, or control persons, and

 

(B) have acted for or been retained personally or otherwise as an employee, executive officer, director, associate or partner of a person that has acted for or been retained by the issuer or any of its directors, executive officers, founders or control persons within the previous 12 months;

 

(e) executive officer ” means, for an issuer, an individual who is: (i) a chair, vice-chair or president, (ii) a vice-president in charge of a principal business unit, division or function including sales, finance or production, or (iii) performing a policy-making function in respect of the issuer;

 

(f) financial assets ” means (i) cash, (ii) securities, or (iii) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation;

 

(g) fully managed account ” means an account of a client for which a person makes the investment decisions if that person has full discretion to trade in securities for the account without requiring the client’s express consent to a transaction;

 

(h) investment fund ” has the same meaning as in National Instrument 81-106 Investment Fund Continuous Disclosure ;

 

(i) person ” includes: (i) an individual, (ii) a corporation, (iii) a partnership, trust, fund and an association, syndicate, organization or other organized group of persons whether incorporated or not, and (iv) an individual or other person in that person’s capacity as a trustee, executor, administrator or personal or other legal representative.

 

(j) related liabilities ” means (i) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or (ii) liabilities that are secured by financial assets;

 

(k) Schedule III bank ” means an authorized foreign bank named in Schedule III of the Bank Act (Canada);

 

(l) spouse ” means, an individual who, (i) is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual, (ii) is living with another individual in a marriage-like relationship, including a marriage-like relationship between individuals of the same gender, or (iii) in Alberta, is an individual referred to in paragraph (i) or (ii), or is an adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta); and

 

(m) subsidiary ” means an issuer that is controlled directly or indirectly by another issuer and includes a subsidiary of that subsidiary.

 

In NI 45-106 a person or company is an affiliate of another person or company if one of them is a subsidiary of the other, or if each of them is controlled by the same person.

 

In NI 45-106 and except in Part 2 Division 4 (Employee, Executive Officer, Director and Consultant Exemption) of NI 45-106, a person (first person) is considered to control another person (second person) if (a) the first person, beneficially owns or directly or indirectly exercises control or direction over securities of the second person carrying votes which, if exercised, would entitle the first person to elect a majority of the directors of the second person, unless that first person holds the voting securities only to secure an obligation, (b) the second person is a partnership, other than a limited partnership, and the first person holds more than 50% of the interests of the partnership, or (c) the second person is a limited partnership and the general partner of the limited partnership is the first person.

 

B- 4
 

 

The foregoing representations contained in this certificate are true and accurate as of the date of this certificate and will be true and accurate as of the Closing Time (as defined in the Subscription Agreement to which this Schedule “B” is attached) and the Subscriber acknowledges that this Accredited Investor Status Certificate is incorporated into and forms a part of the Subscription Agreement to which it is attached. If any such representations shall not be true and accurate prior to the Closing Time, the undersigned shall give immediate written notice of such fact to the Corporation prior to the Closing Time.

 

Dated:

____________________   Signed:   ________________________________
         
     

_________________________________

Witness (If Subscriber is an Individual)

 

__________________________________________

Print the name of Subscriber

     
     

_________________________________

Print Name of Witness

 

__________________________________________

If Subscriber is a corporation,
print name and title of Authorized Signing Officer

 

B- 5
 

 

EXHIBIT “I” TO SCHEDULE “B”

 

FORM FOR INDIVIDUAL ACCREDITED INVESTORS

 

THIS “EXHIBIT I” TO SCHEDULE “B” IS TO BE COMPLETED BY ACCREDITED INVESTORS WHO ARE INDIVIDUALS SUBSCRIBING UNDER CATEGORIES (J), (K) OR (L) IN SCHEDULE “B” TO WHICH THIS EXHIBIT “I” IS ATTACHED.

 

WARNING!

This investment is risky. Don’t invest unless you can afford to lose all the money you pay for this investment.

 

SECTION 1 TO BE COMPLETED BY THE ISSUER OR SELLING SECURITY HOLDER
1.  About your investment
Type of securities: Units (comprised of one (1) convertible debenture and a variable number of common share purchase warrants) Issuer:  Ehave, Inc.
Purchased from: Issuer
SECTIONS 2 TO 4 TO BE COMPLETED BY THE SUBSCRIBER
2.  Risk acknowledgement
This investment is risky. Initial that you understand that: Your
Initials
Risk of loss - You could lose your entire investment of $ _____________ . [Instruction: Insert the total dollar amount of the investment.]  
Liquidity risk - You may not be able to sell your investment quickly - or at all.  
Lack of information - You may receive little or no information about your investment.  
Lack of advice - You will not receive advice from the salesperson about whether this investment is suitable for you unless the salesperson is registered. The salesperson is the person who meets with, or provides information to, you about making this investment. To check whether the salesperson is registered, go to www.aretheyregistered.ca .  
3.  Accredited investor status
You must meet at least one of the following criteria to be able to make this investment. Initial the statement that applies to you. (You may initial more than one statement.) The person identified in section 6 is responsible for ensuring that you meet the definition of accredited investor. That person, or the salesperson identified in section 5, can help you if you have questions about whether you meet these criteria. Your
initials

· Your net income before taxes was more than $200,000 in each of the 2 most recent calendar years, and you expect it to be more than $200,000 in the current calendar year. (You can find your net income before taxes on your personal income tax return.)  
· Your net income before taxes combined with your spouse’s was more than $300,000 in each of the 2 most recent calendar years, and you expect your combined net income before taxes to be more than $300,000 in the current calendar year.  
· Either alone or with your spouse, you own more than $1 million in cash and securities, after subtracting any debt related to the cash and securities.  
· Either alone or with your spouse, you have net assets worth more than $5 million. (Your net assets are your total assets (including real estate) minus your total debt.)  

 

B- 6
 

 

4.  Your name and signature
By signing this form, you confirm that you have read this form and you understand the risks of making this investment as identified in this form.
First and last name (please print):
Signature: Date:
SECTION 5 TO BE COMPLETED BY THE SALESPERSON
5.  Salesperson information
[Instruction: The salesperson is the person who meets with, or provides information to, the Subscriber with respect to making this investment. That could include a representative of the issuer or selling security holder, a registrant or a person who is exempt from the registration requirement.]
First and last name of salesperson (please print):
Telephone: Email:
Name of firm (if registered):
SECTION 6 TO BE COMPLETED BY THE ISSUER OR SELLING SECURITY HOLDER
6.  For more information about this investment
For investment in a non-investment fund
Ehave, Inc.
203-277 Lakeshore Road East
Oakville, ON L6J 6J3
 
Attention:     Prateek Dwivedi  
Email:             teek@ehave.com  
   
For more information about prospectus exemptions, contact your local securities regulator. You can find contact information at www.securities-administrators.ca .
 
     

Form instructions:

 

1. This form does not mandate the use of a specific font size or style but the font must be legible.

 

2. The information in sections 1, 5 and 6 must be completed before the Subscriber completes and signs the form.

 

3. The Subscriber must sign this form. Each of the Subscriber and the issuer or selling security holder must receive a copy of this form signed by the Subscriber. The issuer or selling security holder is required to keep a copy of this form for 8 years after the distribution.

 

B- 7
 

 

SCHEDULE “C”
CONTACT INFORMATION FOR CANADIAN SECURITIES COMMISSIONS

 

Alberta Securities Commission Government of Nunavut
Suite 600, 250 – 5th Street SW Department of Justice
Calgary, Alberta T2P 0R4 Legal Registries Division
Telephone: (403) 297-6454 P.O. Box 1000, Station 570
Toll free in Canada: 1-877-355-0585 1st Floor, Brown Building
Facsimile: (403) 297-2082 Iqaluit, Nunavut X0A 0H0
Public official contact: FOIP Coordinator Telephone: (867) 975-6590
  Facsimile: (867) 975-6594
British Columbia Securities Commission Public official contact: Superintendent of Securities
P.O. Box 10142, Pacific Centre  
701 West Georgia Street Ontario Securities Commission
Vancouver, British Columbia V7Y 1L2 20 Queen Street West, 22 nd Floor
Inquiries: (604) 899-6854 Toronto, Ontario M5H 3S8
Toll free in Canada: 1-800-373-6393 Telephone: (416) 593-8314
Facsimile: (604) 899-6581 Toll free in Canada: 1-877-785-1555
Email: FOI-privacy@bcsc.bc.ca Facsimile: (416) 593-8122
Public official contact: FOI Inquiries Email: exemptmarketfilings@osc.gov.on.ca
  Public official contact: Inquiries Officer
The Manitoba Securities Commission  
500 – 400 St. Mary Avenue Prince Edward Island Securities Office
Winnipeg, Manitoba R3C 4K5 95 Rochford Street, 4th Floor Shaw Building
Telephone: (204) 945-2561 P.O. Box 2000
Toll free in Manitoba 1-800-655-5244 Charlottetown, Prince Edward Island C1A 7N8
Facsimile: (204) 945-0330 Telephone: (902) 368-4569
Public official contact: Director Facsimile: (902) 368-5283
  Public official contact: Superintendent of Securities
Financial and Consumer Services Commission (New Brunswick)  
85 Charlotte Street, Suite 300 Autorité des marchés financiers
Saint John, New Brunswick E2L 2J2 800, Square Victoria, 22e étage
Telephone: (506) 658-3060 C.P. 246, Tour de la Bourse
Toll free in Canada: 1-866-933-2222 Montréal, Québec H4Z 1G3
Facsimile: (506) 658-3059 Telephone: (514) 395-0337 or 1-877-525-0337
Email: info@fcnb.ca Facsimile: (514) 873-6155 (For filing purposes only)
Public official contact: Chief Executive Officer and Privacy Officer Facsimile: (514) 864-6381 (For privacy requests only)
  Email: financementdessocietes@lautorite.qc.ca (For
Government of Newfoundland and Labrador corporate finance issuers);
Financial Services Regulation Division fonds_dinvestissement@lautorite.qc.ca (For investment
P.O. Box 8700, Confederation Building fund issuers)
2nd Floor, West Block, Prince Philip Drive Public official contact: Secrétaire générale
St. John’s, Newfoundland and Labrador A1B 4J6  
Attention: Director of Securities Financial and Consumer Affairs Authority of Saskatchewan
Telephone: (709) 729-4189 Suite 601 - 1919 Saskatchewan Drive
Facsimile: (709) 729-6187 Regina, Saskatchewan S4P 4H2
Public official contact: Superintendent of Securities Telephone: (306) 787-5842
  Facsimile: (306) 787-5899
Government of the Northwest Territories Public official contact: Director
Office of the Superintendent of Securities  
P.O. Box 1320 Government of Yukon
Yellowknife, Northwest Territories X1A 2L9 Department of Community Services
Attention: Deputy Superintendent, Legal & Enforcement Office of the Superintendent of Securities
Telephone: (867) 767-9305 307 Black Street
Facsimile: (867) 873-0243 Whitehorse, Yukon Y1A 2N1
Public official contact: Superintendent of Securities Telephone: 867-667-5466
  Facsimile: (867) 393-6251
Nova Scotia Securities Commission Email: securities@gov.yk.ca
Suite 400, 5251 Duke Street Public official contact: Superintendent of Securities
Duke Tower  
P.O. Box 458  
Halifax, Nova Scotia B3J 2P8  
Telephone: (902) 424-7768  
Facsimile: (902) 424-4625  
Public official contact: Executive Director  

 

C- 1

 

Exhibit 4.33

 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY OR ANY SECURITIES INTO WHICH THIS SECURITY MAY BE CONVERTED INTO BEFORE THE DATE THAT IS 4 MONTHS AND ONE DAY AFTER THE LATER OF (I) [ l ] , AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.

 

DEBENTURE CERTIFICATE NUMBER: 201801 – D[ l ] [ l ]DEBENTURES

 

EHAVE, INC.

 

CONVERTIBLE DEBENTURE

 

EHAVE, INC. a body corporate incorporated under the laws of [ l ] (the “ Corporation ”), for value received hereby acknowledges itself indebted and promises to pay to [ name and address of debenture holder ] (the “ Holder ”), on [ l ] , 2020 (the “ Maturity Date ”) or on such earlier date as the principal amount of [ Dollar amount written ] ($ [ l ] ) (the “ Principal ”) convertible debentures of the Corporation (the “ Debentures ”) may become payable hereunder, in lawful money of Canada to the Holder and to pay in the same money and at the same place interest on the Principal or on so much thereof as remains from time to time unpaid at the rate of ten percent (10.0%) per annum, payable at the earlier of (i) the Conversion Date (as defined herein), and (ii) the Maturity Date.

 

 

 

 

ARTICLE 1
INTERPRETATION

 

1.1 Definitions

 

In this Debenture, including the recitals and any schedules hereto:

 

(a) Business Day ” means any day other than Saturday, Sunday or a statutory or civic holiday, or any other day on which the banks are open for business in the Province of Ontario;

 

(b) Common Shares ” means common shares in the capital of the Corporation;

 

(c) Conversion Date ” has the meaning ascribed to such term in Section 3.1(a);

 

(d) Conversion Price ” shall mean the Qualified Financing Price multiplied by 0.75;

 

(e) Corporation ” has the meaning ascribed to such term on the first page of this Debenture;

 

(f) Current Market Price ” means the price per share of the Common Shares as determined by the board of directors of the Corporation;

 

(g) Debentures ” has the meaning ascribed to such term on the first page of this Agreement;

 

(h) Event of Default ” has the meaning ascribed to such term in Section 4.1;

 

(i) Holder ” has the meaning ascribed to such term on the first page of this Agreement;

 

(j) Maturity Date ” has the meaning ascribed to such term on the first page of this Agreement, subject to adjustment pursuant to Section 2.9;

 

(k) Offering ” means the offering by the Corporation of units comprised of convertible debentures and Common Share purchase warrants for aggregate proceeds of approximately CDN$500,000 and which Offering may close in multiple tranches;

 

(l) Principal ” has the meaning ascribed to such term on the first page of this Agreement;

 

(m) Qualified Financing ” shall mean the completion of a financing by the Corporation after the date hereof for aggregate gross proceeds of not less than CDN$2,000,000; provided that such financing shall be completed in connection with the proposed listing of the Common Shares on a recognized stock exchange in Canada (which, for greater certainty, includes the TSX Venture Exchange and Canadian Securities Exchange) within two (2) months of the completion of such financing;

 

(n) Qualified Financing Price ” shall mean the price per security issued by the Corporation in the Qualified Financing; and

 

(o) Taxes ” has the meaning ascribed to such term in Section 2.4.

 

  - 2 -  

 

 

1.2 Gender and Number

 

Words importing the singular number or masculine gender shall include the plural number or the feminine or neuter genders, and vice versa.

 

1.3 Headings, Etc.

 

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

 

1.4 Day not a Business Day.

 

If any day on or before which any action or notice is required to be taken or given hereunder is not a Business Day, then such action or notice shall be required to be taken or given on or before the requisite time on the next succeeding day that is a Business Day.

 

1.5 Monetary References.

 

Whenever any amounts of money are referred to herein, such amounts shall be deemed to be in lawful money of Canada unless otherwise expressed.

 

ARTICLE 2
REGISTRATION AND TRANSFER OF DEBENTURE

 

2.1 Registration and Transfer of Debentures

 

(a) The Corporation shall, at all times while this Debenture is outstanding, cause to be kept by and at the principal office of the Corporation a register in which shall be entered the name and address of the Holder and particulars of this Debenture. No transfer of this Debenture shall be valid unless made by the Holder or its executors or administrators or other legal representatives or its attorney duly appointed by an instrument in writing in form and execution satisfactory to the Corporation, upon compliance with such reasonable requirements as the Corporation may prescribe, and unless such transfer shall have been duly entered on the register.

 

(b) The register referred to in this Section shall at all reasonable times be open for inspection by the Holder.

 

(c) This Debenture shall not be assigned unless all the obligations due to the assignor are also assigned to the assignee of this Debenture and a notice of such assignment shall be submitted to the Corporation substantially in the form of Schedule “A” attached hereto.

 

(d) The Corporation shall not be required to transfer or exchange this Debenture on any date when interest payment are due as contemplated hereunder or during a period of ten (10) Business Days immediately preceding any such date.

 

2.2 Person Entitled to Payment

 

(a) The Holder shall be deemed and regarded as the owner for all purposes of this Debenture and payment of the Principal and any interest thereon shall be made only to or upon the order in writing of the Holder and such payment shall be a good and sufficient discharge to the Corporation and any paying agent for the amounts so paid.

 

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(b) The Holder shall be entitled to the Principal and interest thereon evidenced by this Debenture, free from all equities or rights of set-off or counterclaim between the Corporation and the original or any intermediate holder thereof and all persons may act accordingly and a transferee of this Debenture shall, after an appropriate form of transfer is lodged with the Corporation be entitled to be entered on any of the appropriate registers as the owner of this Debenture, free from all equities or rights of set-off or counterclaim between the Corporation and such holder’s transferor or any previous holder thereof, except for equities the Corporation is required to take notice of by statute or by order of a court of competent jurisdiction.

 

(c) Delivery to the Corporation by the Holder of the receipt of the Holder for the Principal and interest thereon shall be a good and valid discharge to the Corporation, which shall not be bound to enquire into the title of the Holder, save as ordered by some court of competent jurisdiction or as required by statute. The Corporation shall not be bound to see to the execution of any trust affecting the ownership of this Debenture nor be affected by notice of any equity that may be subsisting in respect thereof.

 

2.3 Mutilation, Loss, Theft or Destruction

 

In case this Debenture shall become mutilated or be lost, stolen or destroyed, the Corporation, in its discretion, may issue and deliver a new Debenture upon surrender and cancellation of the mutilated Debenture, or in the case of a lost, stolen or destroyed Debenture, in lieu of and in substitution for the same. In case of loss, theft or destruction, the applicant for a substituted Debenture shall furnish to the Corporation such evidence of the loss, theft or destruction of this Debenture as shall be satisfactory to the Corporation in its discretion and shall also furnish an indemnity satisfactory to the Corporation. The applicant shall pay all reasonable expenses incidental to the issuance of any substituted Debenture including the cost of such indemnity or indemnity bond.

 

2.4 Payment of Debenture

 

All payments to be made to the Holder by the Corporation under this Debenture shall be made by certified cheque, bank draft or wire transfer in immediately available funds to the Holder’s designated account or at the address of the Holder as set out in Section 5.7, free and clear of and without deduction or withholding for any and all taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto (all such taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “ Taxes ”) imposed by Canada (or any of the provinces and territories thereof), unless such Taxes are required by applicable law to be deducted or withheld. If the Corporation shall be required by applicable law to deduct or withhold any such Taxes from or in respect of any amount payable under this Debenture, (a) the amount payable shall be decreased (and for greater certainty, in the case of interest, the amount of interest shall be decreased) by the amount of such deduction or withholding; (b) the Corporation shall make such deductions or withholdings; and (c) the Corporation shall pay the full amount deducted or withheld forthwith to the relevant governmental entity in accordance with applicable law.

 

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2.5 Holder not a Shareholder

 

Nothing in this Debenture shall, in itself confer or be construed as conferring upon the Holder any right or interest whatsoever as a shareholder of the Corporation, including, without limitation, the right to vote at, to receive notice of, or to attend a meeting of shareholders or any offer of the Corporation, or the right to receive dividends or other distributions.

 

2.6 Debenture Issued as Security

 

This Debenture shall be held by the Holder as continuing security for the obligations which from time to time are due and owing by the Corporation to the Holder and any ultimate unpaid balance or unperformed part thereof.

 

2.7 Concerning Interest

 

(a) Unless otherwise specifically provided herein, interest shall be computed on the basis of a year of 360 days composed of twelve 30-day months. With respect to the Debentures, whenever interest is computed on the basis of a year (the “ deemed year ”) which contains more days than the actual number of days in the calendar year of calculation, such rate of interest shall be expressed as a yearly rate for purposes of the Interest Act (Canada) by multiplying such rate of interest by the actual number of days in the calendar year of calculation and dividing it by the number of days in the deemed year.

 

(b) Subject to any required approval of a recognized stock exchange in connection with a Qualified Financing, all unpaid interest earned and accrued with respect to the Debentures shall be deemed as Principal and shall be treated as same for the purposes of this Debenture (“ Added Principal ”). If in connection with a Qualified Financing, a recognized stock exchange shall not allow for accrued and earned interest to be reclassified as Principal, the provisions of this Section 2.7(b) shall have no force and effect.

 

(c) There shall be no interest earned on Added Principal.

 

2.8 Pre-Payment Right

 

If no Event of Default has occurred, and upon providing not less than thirty (30) days written notice to the Holder, the Corporation shall have the option to pre-pay all or any portion of the Principal outstanding plus any accrued and unpaid interest in cash. Upon receiving the notice referred to in the prior sentence, the Holder shall have ten (10) days to exercise the Holder’s right of conversion pursuant to Section 3.1 (in whole or in part).

 

2.9 Acceleration of Maturity Date

 

If, following the completion of a Qualified Financing, the Corporation issues any Common Shares (“ Discounted Issuance ”) at a price that is lower than the Conversion Price (after taking into account any adjustments in accordance with this Debenture), then the Maturity Date shall be accelerated to the date that is thirty (30) days following the closing of the Discounted Issuance and all outstanding Principal and any accrued and unpaid interest thereon shall become due on such accelerated Maturity Date.

 

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ARTICLE 3
CONVERSION OF DEBENTURE

 

3.1 Conversion Privilege

 

(a) Following the completion of a Qualified Financing and subject to the provisions and conditions of Section 2.8 and this ARTICLE 4, the Holder shall have the right, at the Holder's option, at any time prior to 5:00 p.m. (Toronto time) on the last Business Day immediately preceding the Maturity Date, to convert the whole or any part of the Principal that is divisible by $1,000 into Common Shares at the Conversion Price, in effect as of the date of such conversion (“ Conversion Date ”). To make such election to convert, the Holder shall deliver to the Corporation a conversion notice substantially in the form of Schedule “B” attached hereto.

 

(b) The conversion shall extend only to the maximum number of whole Common Shares into which the aggregate Principal surrendered for conversion at any one time by the Holder may be converted in accordance with the foregoing provisions of this Section. Fractional interests in Common Shares shall be adjusted for in the manner provided in Section 3.3.

 

(c) Upon conversion of this Debenture, any accrued but unpaid interest due to the date of conversion which is not being converted in the manner herein provided shall be payable by the Corporation to the Holder within 30 days of the Conversion Date.

 

(d) Within ten Business Days of the Conversion Date, the Corporation shall issue or cause to be issued and deliver or cause to be delivered to the Holder a certificate or certificates in the name of the Holder for the number of Common Shares deliverable upon the conversion of this Debenture (or specified portion thereof).

 

(e) If the Holder shall convert less than all of the Principal, the Holder shall be entitled to receive a certificate representing any balance of the Principal amount of Debenture not converted and interest accrued thereon.

 

3.2 Adjustment of Conversion Price

 

The Conversion Price shall be subject to adjustment from time to time as follows:

 

(a) if and whenever at any time prior to the Conversion Date the Corporation shall (i) subdivide or re-divide the outstanding Common Shares into a greater number of shares; (ii) reduce, combine or consolidate the outstanding Common Shares into a smaller number of shares; or (iii) issue Common Shares to the holders of all or substantially all of the outstanding Common Shares by way of a stock dividend (other than the issue of Common Shares to holders of Common Shares who have elected to receive dividends in the form of Common Shares in lieu of dividends paid in the ordinary course on the Common Shares), the Conversion Price in effect on the effective date of such subdivision, re-division, reduction, combination or consolidation or on the record date for such issue of Common Shares by way of a stock dividend, as the case may be, shall in the case of any of the events referred to in (i) and (iii) above be decreased in proportion to the number of outstanding Common Shares resulting from such subdivision, redivision or dividend, or shall, in the case of any of the events referred to in (ii) above, be increased in proportion to the number of outstanding Common Shares resulting from such reduction, combination or consolidation. Such adjustment shall be made successively whenever any event referred to in this subsection 3.2(a) shall occur. Any such issue of Common Shares by way of a stock dividend shall be deemed to have been made on the record date for the stock dividend for the purpose of calculating the number of outstanding Common Shares under subsections (b) and (c) of this Section 3.2;

 

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(b) if and whenever at any time prior to the Conversion Date the Corporation shall fix a record date for the issuance of rights or warrants to all or substantially all the holders of its outstanding Common Shares entitling them, for a period expiring not more than 45 days after such record date, to subscribe for or purchase Common Shares (or securities convertible into or exchangeable for Common Shares) at a price per share (or having a conversion or exchange price per share) less than 80% of the Current Market Price of a Common Share on such record date, the Conversion Price shall be adjusted immediately after such record date so that it shall equal the price determined by multiplying the Conversion Price in effect on such record date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such record date plus a number of Common Shares equal to the number arrived at by dividing the aggregate price of the total number of additional Common Shares offered for subscription or purchase (or the aggregate conversion or exchange price of the convertible or exchangeable securities so offered) by such Current Market Price per Common Share, and of which the denominator shall be the total number of Common Shares outstanding on such record date plus the total number of additional Common Shares offered for subscription or purchase (or into which the convertible or exchangeable securities so offered are convertible or exchangeable). Such adjustment shall be made successively whenever such a record date is fixed. To the extent that any such rights or warrants are not so issued or any such rights or warrants are not exercised prior to the expiration thereof, the Conversion Price shall be re-adjusted to the Conversion Price which would then be in effect if such record date had not been fixed or to the Conversion Price which would then be in effect based upon the number of Common Shares (or securities convertible into or exchangeable for Common Shares) actually issued upon the exercise of such rights or warrants, as the case may be;

 

(c) if and whenever at any time prior to the Conversion Date the Corporation shall fix a record date for the making of a distribution to all or substantially all the holders of its outstanding Common Shares of (i) shares of any class other than Common Shares and other than shares distributed to holders of Common Shares who have elected to receive dividends in the form of such shares in lieu of dividends paid in the ordinary course; (ii) rights, options or warrants (excluding rights, options or warrants entitling the holders thereof for a period of not more than 45 days to subscribe for or purchase Common Shares or securities convertible into Common Shares); or (iii) evidences of its indebtedness; or (iv) assets (excluding dividends paid in the ordinary course) then, in each such case, the Conversion Price shall be adjusted immediately after such record date so that it shall equal the price determined by multiplying the Conversion Price in effect on such record date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such record date multiplied by the Current Market Price per Common Share on such record date, less the fair market value (as determined by the board of directors with the approval of the trustee, acting reasonably, which determination shall be conclusive) of such shares or rights, options or warrants or evidences or indebtedness or assets so distributed, and of which the denominator shall be the total number of Common Shares outstanding on such record date multiplied by such Current Market Price per Common Share. Such adjustment shall be made successively whenever such a record date is fixed. To the extent that such distribution is not so made, the Conversion Price shall be re-adjusted to the Conversion Price which would then be in effect if such record date had not been fixed or to the Conversion Price which would then be in effect based upon such shares or rights, options or warrants or evidences of indebtedness or assets actually distributed, as the case may be. In (iv) of this subsection (c) the term “dividends paid in the ordinary course” shall include the value of any securities or other property or assets distributed in lieu of cash dividends paid in the ordinary course at the option of shareholders;

 

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(d) in any case in which this Section 3.2 shall require that an adjustment shall become effective immediately after a record date for an event referred to herein, the Corporation may defer, until the occurrence of such event, issuing to the Holder after such record date and before the occurrence of such event the additional Common Shares issuable upon such conversion by reason of the adjustment required by such event before giving effect to such adjustment; provided, however, that the Corporation shall deliver to the Holder an appropriate instrument evidencing the Holder's right to receive such additional Common Shares upon the occurrence of the event requiring such adjustment and the right to receive any distributions made on such additional Common Shares declared in favour of holders of record of Common Shares on and after the date of conversion or such later date as the Holder would, but for the provisions of this subsection (d) have become the holder of record of such additional Common Shares;

 

(e) the adjustments provided for in this Section 3.2 are cumulative and shall apply to successive subdivisions, re-divisions, reductions, combinations, consolidations, distributions, issues or other events resulting in any adjustment under the provisions of this Section 3.2, provided that, notwithstanding any other provision of this Section, no adjustment of the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Conversion Price then in effect; provided however, that any adjustments which by reason of this subsection (e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment;

 

(f) for the purpose of calculating the number of Common Shares outstanding, Common Shares owned by or for the benefit of the Corporation or its subsidiaries shall not be counted;

 

(g) in the event of any question arising with respect to the adjustments provided in this Section 3.2, such question shall be conclusively determined by a firm of chartered accountants appointed by the Corporation (who may be the auditors of the Corporation); such accountants shall have access to all necessary records of the Corporation any such determination shall be binding upon the Corporation and the Holder;

 

(h) in case the Corporation shall take any action affecting the Common Shares other than action described in this Section 3.2, which in the opinion of the directors of the Corporation would materially affect the rights of the Holder, the Conversion Price shall be adjusted in such manner and at such time, by action of the directors, as the directors in their sole discretion may determine to be equitable in the circumstances. Failure of the directors to make such an adjustment shall be conclusive evidence that the directors have determined that it is equitable to make no adjustment in the circumstances; and

 

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(i) no adjustment in the Conversion Price shall be made in respect of any event described in subsection 3.2(a)(iii), 3.2(b) or 3.2(c) if the Holder is entitled to participate in such event on the same terms mutatis mutandis as if the Holder had converted the Debenture prior to the effective date or record date, as the case may be, of such event.

 

3.3 Fractional Shares

 

The Corporation shall not issue fractional Common Shares upon the conversion of this Debenture and the Holder will receive a cash payment in satisfaction of any fractional Common Shares determined on the basis of the Conversion Price on the Conversion Date.

 

3.4 Corporation to Reserve Shares

 

The Corporation covenants that it will at all times reserve and keep available out of its authorized Common Shares, solely for the purpose of issue upon conversion of this Debenture such number of Common Shares as shall then be issuable upon the conversion of this Debenture. The Corporation covenants that all Common Shares which shall be so issuable shall be duly and validly issued as fully paid and non-assessable.

 

3.5 Taxes on Conversion

 

The Corporation will from time to time promptly pay or make provision for the payment of any and all Taxes which may be imposed by the laws of Canada or any province of Canada (except income tax or security transfer tax, if any) which shall be payable with respect to the issuance or delivery to the Holder, upon the exercise of its right to conversion, of Common Shares of the Corporation pursuant to the terms of this Debenture.

 

3.6 Legended Certificates

 

Notwithstanding anything herein contained, Common Shares issuable upon conversion of this Debenture will only be issued in compliance with the securities laws of any applicable jurisdiction, and the certificates representing the Common Shares issued will bear all applicable legends.

 

3.7 Cancellation of Converted Debenture

 

This Debenture converted in whole or in part under the provisions specified herein shall be forthwith delivered to and cancelled by the Corporation and, subject to the provisions of Section 3.1(d), no Debenture shall be issued in substitution therefor.

 

3.8 Certificate as to Adjustment

 

The Corporation shall from time to time immediately after the occurrence of any event which requires an adjustment or readjustment as provided in Section 3.2, deliver an officer’s certificate to the Holder specifying the nature of the event requiring the same and the amount of the adjustment necessitated thereby and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based, which certificate and the amount of the adjustment specified therein shall be verified by an opinion of a firm of chartered accountants appointed by the Corporation (who may be the auditors of the Corporation) and, shall be conclusive and binding on all parties in interest. The Corporation shall, except in respect of any subdivision, re-division, reduction, combination or consolidation of the Common Shares, forthwith give notice to the Holder in the manner herein provided specifying the event requiring such adjustment or readjustment and the results thereof, including the resulting Conversion Price; provided that, if the Corporation has given notice under Section 3.9 covering all the relevant facts in respect of such event, no such notice need be given under this Section 3.8.

 

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3.9 Notice of Special Matters

 

The Corporation covenants with the holder that so long as this Debenture remains outstanding, it will give notice to the holder in the manner herein provided, of its intention to fix a record date for any event referred to in Sections 3.2(a), 3.2(b), or 3.2(c) (other than the subdivision, re-division, reduction, combination or consolidation of its Common Shares) which may give rise to an adjustment in the Conversion Price, and, in each case, such notice shall specify the particulars of such event and the record date and the effective date for such event; provided that the Corporation shall only be required to specify in such notice such particulars of such event as shall have been fixed and determined on the date on which such notice is given. Such notice shall be given not less than ten (10) days in each case prior to such applicable record date.

 

ARTICLE 4
EVENTS OF DEFAULT

 

4.1 Events of Default

 

The Principal, interest and other monies secured by this Debenture shall become immediately due and payable, whether with or without prior demand therefor, and the security hereby constituted shall become immediately enforceable in each and every of the following events (each of such events being hereinafter called an “ Event of Default ”):

 

(a) if the Corporation makes a default in the payment, in whole or in part, of the Principal or interest thereon or any other monies secured hereby and following notice from the Holder of such failure the default remains unrectified for a period of ten Business Days;

 

(b) if any material representation or warranty contained herein proves to be untrue;

 

(c) if the Corporation makes default in the observance or performance of any other covenant, agreement or condition on the part of the Corporation to be kept, observed or performed, whether herein or in any other agreement or instrument between the Corporation and the Holder and the default remains unrectified for a period of thirty (30) days;

 

(d) if an order is made or an effective resolution is passed for the winding up of the Corporation, or if a petition is filed for the winding up of the Corporation;

 

(e) if the Corporation becomes insolvent, or makes an unauthorized assignment or bulk sale of its assets, or if a petition in bankruptcy is filed or presented against the Corporation;

 

(f) if the Corporation ceases or threatens to cease to carry on its business, or if any proceeding with respect to the Corporation is commenced under the Companies' Creditors Arrangements Act or the Bankruptcy and Insolvency Act or any other proceedings is taken for the winding up, dissolution, or liquidation of the Corporation;

 

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(g) if proceedings are commenced to appoint a receiver/manager, or trustee in respect of the assets of the Corporation by a court or pursuant to any other agreement; and

 

(h) if the securities of Corporation are not posted for trading on a recognized Canadian stock exchange (which, for greater certainty, includes the TSX Venture Exchange and Canadian Securities Exchange) within six (6) months from the date hereof.

 

4.2 Breach

 

The Holder may waive any breach by the Corporation of any of the provisions contained in this Debenture or any default by the Corporation in the observance or performance of any covenant, agreement or condition required to be kept, observed or performed by the Corporation under the terms of this Debenture.

 

ARTICLE 5
MISCELLANEOUS

 

5.1 Covenants of the Corporation

 

The Corporation hereby covenants and agrees with the Holder as follows:

 

(a) the Corporation covenants and agrees with the Holder that it shall repay all of the Principal and any interest thereon to the Holder in accordance with the terms hereof; and

 

(b) the Corporation shall give notice in writing forthwith to the Holder of the occurrence of any Event of Default, or other event which with lapse of time and/or giving of notice or otherwise would be an Event of Default, forthwith upon becoming aware thereof and specifying the nature of such default and/or Event of Default and the steps taken to remedy the same.

 

5.2 Failure to Comply

 

If the Corporation should fail to comply with any covenant or agreement contained herein, the Holder may, but shall not be obligated to, do whatever is necessary to rectify such failure, and all sums so expended by the Holder or its agent shall forthwith become due and be payable by the Corporation to the Holder and until paid shall form part of the Principal secured hereby and shall bear interest at the aforesaid rate.

 

5.3 Amalgamation

 

The Corporation acknowledges and agrees that in the event it amalgamates with any other corporation or corporations it is the intention of the Corporation and the Holder that the term “ Corporation ” when used herein shall apply to each of the amalgamating corporations and to the amalgamated corporation.

 

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5.4 Indemnity

 

The Corporation will indemnify the Holder and its successors and assigns against any and all liabilities, actions, claims, judgments, costs, charges and reasonable legal fees that may be made against or incurred by the Holder, by reason of the assertion that the Holder has received funds that may be claimed by third persons, either before or after the payment in full of the Principal, interest and other monies secured hereby; and the Holder shall have the right to defend against any such claims, actions and charges and claim from the Corporation all expenses incurred by the Holder in connection therewith, together with all reasonable legal fees as may be paid by the Holder in connection therewith. It is understood and agreed that the covenants and conditions of this Section 5.4 shall at all times be construed to be a personal covenant in favour of the Holder, and that such covenants and indemnity shall remain in full force and effect notwithstanding the payment of the Principal, interest and all other monies secured by this Debenture.

 

5.5 Assignability

 

The Principal, interest and other monies hereby secured will be paid by the Corporation and shall be assignable by Holder free from any right of set off or counterclaim by the Corporation or any equities between the Corporation and the Holder.

 

5.6 Advances

 

Neither the execution and delivery nor the registration of this Debenture shall for any reason whatsoever obligate or bind the Holder to advance any monies, or having advanced a portion obligate the Holder in any way to advance the balance thereof.

 

5.7 Notices

 

Unless herein otherwise expressly provided, a notice to be given hereunder will be deemed to be validly given if the notice is sent by courier or registered mail addressed as follows:

 

(a) If to the Holder at the latest address of the Holder as recorded on the register referenced in ARTICLE 2 herein; and

 

(b) If to the Corporation at:

 

Ehave, Inc.

203-277 Lakeshore Road East

Oakville, ON L6J 6J3

 

Any notice given as aforesaid shall conclusively be deemed to have been received by the addressee, if sent by courier, on the next following Business Day and, if sent by mail, on the fifth day following the posting thereof.

 

5.8 Receipt

 

The Corporation hereby acknowledges receipt of a copy of this Debenture, and waives its right to receive a copy of any financing statement, financing change statement or verification statement filed or registered by the Holder.

 

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5.9 Enurement

 

This Debenture and all its provisions shall enure to the benefit of the Holder, their successors and assigns and shall be binding upon the Corporation, its successors and assigns.

 

5.10 Plural

 

Wherever the singular or masculine or neuter is used in this Debenture, the same shall be construed as meaning the plural or feminine or body corporate and vice versa, where the context so requires.

 

5.11 Waiver

 

No waiver of any right of the Holder hereof shall be valid unless in writing delivered to the Corporation as herein provided. No amendment hereunder shall be valid or effective for any purpose unless consented to in writing by the Holder.

 

5.12 Severability

 

In the event that any term or provision in this Debenture shall, to any extent, be invalid or unenforceable, the remaining terms and provisions of this Debenture shall not be affected thereby and shall be valid and enforceable to the fullest extent permitted by applicable law.

 

5.13 Governing Law

 

This Debenture shall be governed by and construed in accordance with the laws in force in the Province of Ontario and the federal laws of Canada applicable therein and for the purposes of any legal proceedings in respect of this Debenture, the Corporation irrevocably submits to the jurisdiction of the courts of the Province of Ontario. There shall be no application of any conflict of laws rule which is inconsistent with this section.

 

[ Signature Page to Follow ]

 

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IN WITNESS WHEREOF the Corporation has executed this Debenture by its proper officer duly authorized in that behalf as of the ___ day of ___________________, 2018.

 

  EHAVE, INC.
   
   
  Name:
  Title:

 

Signature Page- Ehave, Inc. -Winter 2018 Debenture Certificate

 

 

 

 

SCHEDULE “A”

 

FORM OF ASSIGNMENT

 

FOR VALUE RECEIVED , the undersigned hereby sells, assigns and transfers unto _______________________________, whose address and social insurance number, if applicable, are set forth below, this Debenture (or $________________ principal amount hereof*) of EHAVE, INC. standing in the name(s) of the undersigned in the register maintained by the Corporation with respect to the Debentures and does hereby irrevocably authorize and direct the Corporation to transfer such Debentures in such register, with full power of substitution in the premises.

 

Dated:  

 

Address of Transferee:  
  (Street Address, City, Province and Postal Code)

 

Social Insurance Number of Transferee, if applicable:  

 

*If less than the full principal amount of the within Debenture is to be transferred, indicate in the space provided the principal amount (which must be $1,000 or an integral multiple thereof, unless you hold a Debenture in a non-integral multiple of $1,000, in which case such Debenture is transferable only in its entirety) to be transferred.

 

The signature(s) to this assignment must correspond with the name(s) as written upon the face of this Debenture in every particular without alteration or any change whatsoever. The signature(s) must be guaranteed by a member of an acceptable Medallion Guarantee Program. Notarized or witnessed signatures are not acceptable as guaranteed signatures. The Guarantor must affix a stamp bearing the actual words: "SIGNATURE GUARANTEED".

 

The registered holder of this Debenture is responsible for the payment of any documentary, stamp or other transfer taxes that may be payable in respect of the transfer of this Debenture.

 

Signature of Guarantor:    
     
     
Authorized Officer   Signature of transferring registered holder
     
     
Name of Institution    

 

Form of Assignment - Ehave, Inc. Winter 2018 Debenture Certificate

 

 

 

 

SCHEDULE “B”

 

CONVERSION NOTICE

TO: EHAVE, INC.
  203-277 Lakeshore Road East
  Oakville, ON L6J 6J3
   
Note: All capitalized terms used herein have the meaning ascribed thereto in the certificate (the “ Certificate ”) representing the Debentures to which this conversion notice is attached.

 

The undersigned registered holder of the Debentures irrevocably elects to convert $_________________* of Principal in accordance with the terms of the Certificate and tenders herewith the Certificate and the Debentures contemplated thereunder, and, if applicable, directs that the common shares of Ehave, Inc. (“ Common Shares ”) issuable upon a conversion be issued and delivered to the person indicated below. (If the Common Shares are to be issued in the name of a person other than the Holder, all requisite transfer taxes must be tendered by the undersigned).

 

Dated:      
      (Signature of Registered Holder)

 

* The conversion amount must be $1,000 or integral multiples thereof.
 
NOTE: If Common Shares are to be issued in the name of a person other than the Holder, the signature must be guaranteed by a member of an acceptable Medallion Guarantee Program. The Guarantor must affix a stamp bearing the actual words: “SIGNATURE GUARANTEED”.
   
(Print name in which Common Shares are to be issued, delivered and registered)

 

Name:    

 

     
(Address)  
   
   
(City, Province and Postal Code)  
   
   
Name of guarantor:    
     
Authorized signature:    

 

Conversion Notice - Ehave, Inc. - Winter 2018 Debenture Certificate

 

 

 

Exhibit 4.34

 

THIS COLLABORATION AND SERVICES AGREEMENT dated as of the February 28, 2018 is made

 

BETWEEN:

 

EHAVE, INC. , a company incorporated under the laws of the Province of Ontario, Canada (“ Ehave ”);

 

- and -

 

REVIVE THERAPEUTICS LTD. , a company incorporated under the laws of Province of Ontario, Canada (“ Collaborator ”)

 

RECITALS:

 

A. Ehave has developed a software platform that provides an end-to-end patient management solution to healthcare professionals and provides that platform to users as a service.

 

B. Collaborator is in the business of developing speciality pharmaceuticals.

 

C. Collaborator desires to use Ehave’s platform to accelerate its research and development of speciality pharmaceuticals by utilizing the patient management and data analytics capability of Ehave’s solution.

 

NOW THEREFORE , in consideration of the premises and the mutual agreements hereinafter set out and of other consideration (the receipt and sufficiency of which are acknowledged by each Party), the Parties covenant and agree as follows:

 

1. INTERPRETATION

 

(a) Definitions

 

In this Agreement and the schedules annexed hereto, the following terms shall have the respective meanings indicated below:

 

Acceptance Criteria ” has the meaning ascribed to it in Section 3(e).

 

Acceptance Period ” has the meaning ascribed to it in Section 3(e).

 

Acceptance Procedures ” has the meaning ascribed to it in Section 3(e).

 

Agreement ” means this service agreement and all Exhibits attached hereto.

 

Applicable Laws ” means any and all (i) laws, statutes, rules, regulations, by laws, codes, treaties, constitutions and ordinances, including Privacy Legislation (“ Laws ”), (ii) order, directive, judgment, decree, award or writ of any court (including a court of equity), arbitrator or arbitration panel, or any Governmental Authority or other body exercising adjudicative, regulatory, judicial or quasi-judicial powers, including any stock exchange (“ Orders ”), and (iii) policies, guidelines, standards, requirements, notices and protocols of any Governmental Authority (“ Policies ”); which are applicable to or govern Collaborator, Ehave or the transactions contemplated by this Agreement.

 

Authentication ID ” means a security mechanism by which an Authorized User identifies herself or himself to the Ehave Platform and gains access thereto, which security mechanism may include user identification, passwords, digital certificates or any other similar process mechanism for authentication and recognition as determined by Ehave from time to time.

 

 
 

 

Authorized User ” means an individual who Collaborator has authorized to access and use the Services.

 

Business Day ” means any calendar day except for Saturday or Sunday or any statutory holiday observed in the Province of Ontario.

 

Business Hour ” means the hours between 9:00 a.m. and 5:00 p.m. on Business Days.

 

Claim ” has the meaning ascribed to it in Section 15(a).

 

Collaboration Activities ” means those activities set out in Section 2 and in Schedule “2” attached hereto.

 

Collaborator Data ” means collectively any data, files, documentation or other information that Collaborator or any of its Authorized Users may: (i) upload to the Ehave Platform when using the Services; and (ii) processed through the use of the Services.

 

Confidential Information ” means this Agreement, the Software, Collaborator Data and all ideas, designs, business models, databases, drawings, documents, diagrams, formulas, test data, marketing, financial or personnel data, sales information, customer or supplier information, including information provided by such customers or suppliers, or any other information already furnished and to be furnished or made available by one Party to the other, whether in oral, written, graphic or electronic form including any such information exchanged during informational sessions designated as confidential, including, without limitation, information concerning a Party's actual and potential customers and other Intellectual Property Rights of such Party, provided, however, that Confidential Information shall not include any data or information:

 

(i) that, at the time of disclosure, is in or, after disclosure, becomes part of the public domain, through no act or failure on the part of the receiving Party, whether through breach of this Agreement or otherwise;

 

(ii) that, prior to disclosure by the disclosing Party, was already in the possession of the receiving Party, as evidenced by written records kept by the receiving Party in the ordinary course of its business, or as evidenced by proof of actual prior use by the receiving Party;

 

(iii) independently developed by the receiving Party, by Persons having no direct or indirect access to the disclosing Party’s Confidential Information provided that the receiving Party provides clear and convincing evidence of such independent development;

 

(iv) which, subsequent to disclosure, is obtained from a third Person: (A) who is lawfully in possession of the such information; (B) who is not in violation of any contractual, legal, or fiduciary obligation to either Party, as applicable, with respect to such information; and (C) who does not prohibit either Party from disclosing such information to others; or

 

(v) is further disclosed with the prior written consent of the disclosing Party, but only to the extent of such consent.

 

Customization ” means any change to the Software requested by Collaborator, which requires modification to the Software’s Source Code.

 

Effective Date ” means the date first written above.

 

2 .
 

 

Ehave Platform ” means the Software, Ehave Server and such devices and peripherals physically located with the Ehave Server, including all computer hardware, software, network elements, and electrical and telecommunications infrastructure located behind the Point of Access.

 

Ehave Server ” means that computer server located at Ehave’s premises, or a third party provider of hosting and/or network services, that houses the Software.

 

Fees ” means the charges, as set out in Exhibit “B” attached hereto, to be paid by Collaborator to Ehave for the performance of the Services.

 

Governmental Authority ” means any domestic, foreign or supranational government, whether federal, provincial, state, territorial or municipal; and any governmental agency, ministry, department, tribunal, commission, bureau, board or other instrumentality, including international institutions, exercising or purporting to exercise legislative, judicial, regulatory or administrative functions of, or pertaining to, government.

 

Implementation Plan ” has the meaning ascribed to it in Section 3(a).

 

Intellectual Property ” means any property, tangible or intangible, that may be subject to Intellectual Property Rights, including without limitation, ideas, formulae, algorithms, concepts, techniques, processes, procedures, approaches, methodologies, plans, systems, research, information, documentation, data, data compilations, specifications, requirements, designs, diagrams, programs, inventions, technologies, software (including its source code), tools, products knowledge, know-how, including without limitation, trade secrets, and other materials or things.

 

Intellectual Property Rights ” means (a) any and all proprietary rights anywhere in the world provided under (i) patent law; (ii) copyright law, including moral rights; (iii) trademark law; (iv) design patent or industrial design law; (v) semiconductor chip or mask work law; (vi) trade secret law; (vii) privacy law; or (viii) any other statutory provision or common law principle applicable to this Agreement which may provide a right in either (A) Intellectual Property; or (B) the expression or use of Intellectual Property; and (b) any and all applications, registrations, licenses, sub-licenses, franchises, agreements or any other evidence of a right in any of the foregoing.

 

Licensed Materials ” means collectively the Ehave Platform and the User Documentation.

 

Objectionable Content ” means content that infringes any Applicable Laws, regulations or third party rights, and content which is obscene, indecent, pornographic, seditious, offensive, defamatory, threatening, liable to incite racial hatred, menacing, blasphemous, misleading, deceptive or in breach of any person’s Intellectual Property Rights.

 

Party ” means either Ehave or Collaborator; and “ Parties ” means both of them.

 

Person ” means any individual, estate, sole proprietorship, firm, partnership, unincorporated association, unincorporated syndicate, unincorporated organization, limited liability company, corporation, body corporate, trustee, trust, Governmental Authority or other entity or organization and includes any successor to any of the foregoing.

 

Point of Access ” means Ehave’s, or its subcontractor’s, border router, which is used to establish connectivity from the Ehave Platform to Ehave’s, or its subcontractor’s, Internet provider, or the public Internet.

 

Personal Information ” means any information, including any information identifiable to an individual that is protected under applicable Privacy Legislation.

 

3 .
 

 

Privacy Legislation ” means the Personal Information and Protection of Electronic Documents Act (Canada), the Personal Health Information Protection Act , 2004 (Ontario) and any other Canadian, federal or provincial, or other Governmental Authority personal information protection legislation, as from time to time enacted or amended.

 

Security Requirements ” means those safeguards and controls set out in Exhibit “D”.

 

Services ” means collectively the services to be provided by Ehave to Collaborator as described and set out in this Agreement and the Exhibits referenced herein.

 

Software ” means Ehave’s proprietary patient and data management software.

 

Solution ” means the Licensed Materials configured for Collaborator in accordance with the specifications set out in Schedule “1”.

 

Source Code ” means the human-readable form of a computer instruction, including, but not limited to, related system documentation, all comments and any procedural code.

 

Specifications ” means, with respect to the Software, the functional specifications for the performance, operation and use of the Software, as set out in the User Documentation.

 

Term ” has the meaning ascribed to it in Section 9.

 

Term Sheet ” has the meaning ascribed to it in Recital D above.

 

Transition out Period ” has the meaning ascribed to it in Section 10(f).

 

Transition-out Services ” has the meaning ascribed to it in Section 10(f).

 

User Documentation ” means the documents, user manuals and guides with respect to the operation, use and functions of the Software, which may be amended or updated by Ehave from time to time.

 

Virus ” means a piece of code usually (but not necessarily) disguised as something else that causes some unexpected and, for the victim, usually undesirable, event and which is designed so that it may automatically spread to other computer users; the term ‘Virus’ will also be deemed to include worms, cancelbots, trojan horses, harmful contaminants (whether self-replicating or not) and nuisance causing or otherwise harmful applets.

 

(b) Headings

 

The division of this Agreement into articles, sections, schedules and other subdivisions, and the inclusion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. The headings in the Agreement are not intended to be full or precise descriptions of the text to which they refer. Unless something in the subject matter or context is inconsistent therewith, references herein to Articles and Sections are to Articles and Sections of this Agreement.

 

(c) Currency

 

Unless otherwise specified, all references to monetary amounts, including the symbol “$”, are in respect of Canadian currency.

 

(d) Exhibits and Schedules

 

The following Exhibits and Schedules are a part of and are integral to this Agreement:

 

  Exhibit “A” - Authorized Users, Term, Fees, Payment Terms and Invoicing
  Exhibit “B” - Help Desk Services
  Exhibit “C” - Service Level Objectives
  Exhibit “D” - Security Requirements
       
  Schedule “1” - Development and Implementation Plan
  Schedule “2” - Collaboration Activities

 

4 .
 

 

(e) Entire Agreement

 

This Agreement, together with any other documents to be delivered pursuant hereto, constitutes the entire agreement between the Parties pertaining to the subject matter hereof and supersedes all prior agreements, negotiations, discussions and understandings, written or oral, between the Parties, including the Term Sheet. Except as expressly provided in this Agreement, there are no representations, warranties, conditions other agreements or acknowledgements, whether direct or collateral, express or implied, that form part of or affect this Agreement. The execution of this Agreement has not been induced by, nor do either of the Parties rely upon or regard as material, any representations, warranties, conditions, other agreements or acknowledgements not expressly made in this Agreement or in the other documents to be delivered pursuant hereto.

 

(f) Governing Law:

 

This Agreement shall be governed by, and construed and enforced in accordance with, the laws in force in the Province of Ontario (excluding any conflict of laws rule or principle which might refer such construction to the laws of another jurisdiction). The Parties hereto agree to submit to the exclusive jurisdiction of the courts of the Province of Ontario and waive any objection relating to improper venue or forum non conveniens to the conduct of any proceeding in any such court.

 

(g) Severability:

 

In the event that any provision (or any portion of a provision) of this Agreement shall for any reason be held by a court of competent jurisdiction to be invalid, illegal, or unenforceable for any reason, such invalidity, illegality or unenforceability shall not affect any other provision hereof and this Agreement shall be construed as if such invalid, illegal or unenforceable provision (or portion of a provision) had never been contained herein in regards to that particular jurisdiction.

 

2. COLLABORATION ACTIVITIES

 

The Parties acknowledge that one of the purposes of entering into this Agreement is to enhance the each of the Parties service offerings top their respective customers. In that regard, the Parties agree to perform the Collaboration Activities set out in Schedule “2” attached hereto for the duration of the Term of this Agreement.

 

3. EHAVE SERVICES GENERALLY

 

Subject to the terms and conditions contained in this Agreement and payment of the Fees by Collaborator to Ehave, Ehave shall perform the Services as set out herein to Collaborator in accordance with the terms hereof and the policies and procedures in relation to the Service, which are established by Ehave from time to time. In the event of a conflict between the preceding documents, the following shall be the order of precedence: (i) this Agreement; and (ii) the policies and procedures set out by Ehave from time to time, which may be posted on the Ehave Platform.

 

5 .
 

 

4. IMPLEMENTATION

 

(a) Implementation

 

Attached hereto as Schedule “1” is the development and implementation plan (the “ Implementation Plan ”), which sets out the procedures and obligations of each of the Parties in relation to the implementation of the Solution. The Parties acknowledge that at the time of execution of this Agreement that the Implementation Plan may not have been fully developed, but that the development of the detailed Implementation Plan will be the first step in respect of the development and implementation of the Solution, in which case, once approved by the Parties, the Implementation Plan so developed will be attached hereto and shall replace Schedule “1”. Once finalized the Implementation Plan may not be changed or modified by either Party, except in accordance with the procedures set out in Section 3(d).

 

(b) Customizations:

 

Collaborator acknowledges that implementation of the Solution involves configuration of the Licensed Materials, but does not include the development and deployment of any Customizations. If the Implementation Plan requires any Customizations and Ehave agrees to make such Customizations, Collaborator acknowledges and agrees that Ehave shall be the sole and exclusive owner of such Customizations and its Specifications, including all Intellectual Property Rights therein. Any such Customizations developed by Ehave shall form part of and shall be deemed Software for the purposes of this Agreement.

 

(c) Obligations

 

Each of Ehave and Collaborator shall perform their respective obligations and responsibilities set out in the Implementation Plan as necessary to accomplish the configuration and implementation of the Solution. Collaborator acknowledges that the implementation of the Solution requires decisions and input from Collaborator and for Collaborator to perform its obligations thereunder in a timely manner. In the event that Collaborator delays in providing such decisions, input or performance of its obligations, implementation of the Solution shall be correspondingly delayed. Once the implementation of the Solution is completed, Ehave shall notify Collaborator of such completion and that the Solution is ready for testing in accordance with Section 3(e).

 

(d) Change Control Process

 

Either Party may request additions, deletions or amendments in respect of the implementation of the Solution (“ Change ”). Changes shall be requested in writing signed by an authorized representative of the Party requesting the Change (“ Change Request ”). Ehave shall have no obligation to perform, and Collaborator shall have no obligation to pay for, services related to any proposed modification or change unless both Parties have agreed to the modifications or changes in writing in accordance with the procedures set forth herein. The Change Request shall include a reasonably detailed description of the scope and nature of the requested Change. If Collaborator desires a Change, Ehave shall evaluate such change as it relates to the scope of providing the Services and implementing the Solution. As soon as reasonably possible after receipt of Collaborator’ request, Ehave agrees to provide Collaborator with a written estimate of the cost, if any, of the requested Changes. The costs, if any, associated with the development of such estimate shall be borne by Collaborator. Upon Collaborator’ approval of the cost estimate and any additional terms and conditions related to such Changes, including delivery dates and payment terms provided by Ehave, the Parties shall revise the Implementation Plan and it shall replace the Implementation Plan attached hereto as Schedule “1”.

 

6 .
 

 

(e) Acceptance

 

The criteria (“ Acceptance Criteria ”) which the Solution is to meet and the procedures by which such criteria are to be tested (“ Acceptance Procedures ”) shall be set out in the Implementation Plan and shall follow the requirements set out in this Section 3(e). Once notified by Ehave that the Solution is ready for acceptance testing, Collaborator shall perform the tests as set out in the Acceptance Procedures. Unless otherwise set out in the Acceptance Procedures, Collaborator shall have ten (10) Business Days to perform the acceptance tests as set out in the Acceptance Procedures and to provide Ehave written notice of acceptance or non-acceptance of the Solution (the “ Acceptance Period ”). Collaborator shall not refuse to accept the Solution unless all or portions of the Solution fail to substantially perform, in any material respect, in accordance with the Acceptance Criteria. Any notice of non-acceptance shall describe the material failure of the Solution in reasonable detail and Collaborator shall provide Ehave with reasonably detailed documentation and explanations, together with underlying data, to substantiate the failure and to reasonably assist Ehave in its efforts to diagnose and correct the failure. If Collaborator gives notice to Ehave of non-acceptance of the Solution then Ehave shall investigate the reported failure in good faith and correct same. If Ehave does not correct the failure within fifteen (15) Business Days after receipt of Collaborator’ notice of non-acceptance, then Collaborator shall at its sole discretion, promptly return to Ehave all copies of the Licensed Materials under the applicable Statement of Work and any other items delivered to Collaborator by Ehave thereunder. If, within such fifteen (15) Business day period, Ehave does correct the failure, then Ehave shall give written notice to Collaborator certifying that the failure has been corrected, and another Acceptance Period of the same duration as the initial Acceptance Period shall begin and shall be governed by the provisions of this Section 3(e) upon delivery of the corrected Solution to Collaborator. If the Acceptance Procedures were conducted three (3) times and the Solution failed to pass the Acceptance Criteria on the third (3rd) try, then, at the discretion of either Party, Ehave may continue to fix the problem or terminate this Agreement in which case, Collaborator shall promptly return to Ehave all copies of the Licensed Materials and any other items delivered to Collaborator by Ehave thereunder.

 

(f) Deployment

 

Once Collaborator provides Ehave written notice of acceptance, Ehave will deploy the Solution by promoting the Solution into production in accordance with, and within the timelines set out, in the Implementation Plan.

 

5. EHAVE SYSTEM

 

(a) Provision and Access to Ehave Platform

 

The Service will require access and use of the Ehave Platform. Ehave shall operate and maintain the Ehave Platform in accordance with the terms of this Agreement, including the Service Level Objectives set out in Exhibit “C” and the Security Requirements set out in Exhibit “D”. Access to the Ehave Platform may be through a secure connection with the public Internet. Collaborator acknowledges and agrees that Ehave is not responsible or liable for any communication over the public Internet.

 

(b) Security Requirements

 

Ehave shall implement and maintain those safeguards and controls set out in Exhibit “D” to deter and for the detection, prevention and correction of any unauthorized intrusion, access or use of the Ehave Platform and Collaborator Data. Collaborator acknowledges and agrees that notwithstanding the Security Requirements, such methods and procedures may not prevent unauthorized electronic intruders to access the Ehave Platform through the Internet or through other form of electronic communication. If such unauthorized electronic intruders are able to bypass Ehave’s security protocols, firewall and safeguards, such unauthorized electronic intruder may change, delete or otherwise corrupt the contents and data contained in the Ehave Server, including the Collaborator Data. Except for the maintenance of appropriate firewall and safeguards in compliance with the Security Requirements, which are designed to frustrate access from unauthorized electronic intruders, Ehave shall not be liable to Collaborator, and hereby disclaims responsibility, with respect to any action, destructive or otherwise, by any unauthorized electronic intruder.

 

7 .
 

 

(c) Maintenance

 

From time to time, it will be necessary for Ehave to perform maintenance on the Ehave Platform. Such maintenance includes routine maintenance to ensure the continued provision of the Services through the continued operation of the Ehave Platform or upgrading, updating or enhancing the Ehave Platform. Ehave shall use its commercially reasonable efforts to perform such maintenance at such times to minimize the impact of any downtime of the Ehave Platform to Collaborator. To the extent Ehave is able; Ehave shall notify Collaborator in advance of any scheduled maintenance by posting a message on the Website or by sending an email to the designated Collaborator Service Manager of the scheduled maintenance time and the anticipated duration of such maintenance.

 

(d) Changes to Service

 

Ehave may, at any time, with or without notice to Collaborator (i) make changes that are necessary to comply with applicable safety, security or other statutory requirements or orders from applicable Governmental Authorities; (ii) supplement or make changes to its user documentation and to its rules of operations, access procedures, security and privacy procedures and policies; and (iii) change the components, type and location of the Ehave Platform.

 

(e) Authentication IDs

 

Ehave will provide Collaborator with that number of Authentication IDs as set out in Exhibit “A” to be distributed by Collaborator to its Authorized Users. Collaborator shall control and maintain the security of all Authentication IDs. Collaborator shall be solely responsible for all instructions, commitments and other actions or communications taken under any of Its Authentication IDs. Collaborator shall promptly report to Ehave any errors or irregularities in the Service or the Ehave Platform or any unauthorized use of any part thereof and inform Ehave immediately if any Authentication ID becomes known to any third person who is not authorized to possess such password. Collaborator hereby indemnifies and holds harmless Ehave from any actions, claims, suits, proceeding or damages made against Ehave from a third person as a result of any use of Collaborator's Authentication IDs, whether or not such use is authorized by Collaborator.

 

(f) Collaborator Data

 

Collaborator acknowledges and agrees that Ehave: (i) will not be responsible for the accuracy, completeness or adequacy of any Collaborator Data or the results generated from any Collaborator Data uploaded to the Ehave Platform and processed by the Software; (ii) has no control over any Collaborator Data or the results therefrom; (iii) does not purport to monitor Collaborator Data; and (iv) shall not be responsible to back up or maintain any back up of the Collaborator Data or portion thereof.

 

6. USE OF SERVICES

 

(a) Grant by Ehave

 

Subject to the terms and conditions of this Agreement commencing as of the Effective Date and for the duration of the Term, Ehave hereby grants to Collaborator a non-exclusive, non-transferable, revocable right, for Collaborator' internal business purposes and for that number of permitted Authorized Users as set out in Exhibit “A”, to access the Ehave Platform in accordance with the security protocols as set out herein for the purpose of:

 

8 .
 

 

(i) using the Software;

 

(ii) viewing and displaying the User Documentation; and

 

(iii) uploading, processing, viewing, displaying, using and downloading Collaborator Data to and from the Ehave Platform.

 

(b) Restrictions on Use

 

Any rights not granted herein are strictly reserved by Ehave. Collaborator shall not (i) permit, any third Person to use the Licensed Materials, (ii) re-license or sublicense, lease, loan or otherwise distribute the Licensed Materials to any third Person; (iii) process or permit to be processed the data of any other Person, or (iv) use the Licensed Materials or the Service in the operation of a service bureau. Collaborator shall not, and shall not permit others to, reverse engineer, decompile, disassemble or translate any software used by Ehave to deliver the Services, including the Software, or otherwise attempt to view, display or print such software, including the Software's, Source Code.

 

(c) Permitted and Authorized Users

 

Collaborator shall ensure that all Authorized Users are aware of the provisions of this Agreement, including their obligation to comply with the provisions contained herein as it relates to their use of the Services and the Software. Collaborator shall be responsible and liable for the actions and omissions of each Authorized User and their compliance of the provisions herein.

 

(d) Help Desk

 

Ehave shall make available its help desk to support Collaborator and its Authorized Users use of the Services during Business Hours on Business Days in accordance with the provisions set out in Exhibit “B”.

 

7. CUSTOMER'S OBLIGATIONS

 

(a) Grant by Collaborator

 

Collaborator hereby grants to Ehave:

 

(i) a royalty-free, non-exclusive, non-transferable right and licence to use, copy, store and display the Collaborator Data solely for the purpose of enabling Ehave to perform the Services under this Agreement; and

 

(ii) a royalty-free, non-exclusive, perpetual right and license to use, copy, store and display Collaborator Data on an aggregated and anonymous basis for the purposes of improving or developing enhancements to the Licensed Materials or improving or enhancing the provision of Services from Ehave.

 

(b) Collaborator Responsibilities

 

In addition to its other obligations contained in this Agreement, Collaborator shall:

 

(i) be responsible for procuring, installing, operating, supporting and maintaining Collaborator' systems, including computer hardware and software, including browsers, necessary for Collaborator to access the Services (the minimum requirements of which are as stipulated on Exhibit “A”);

 

9 .
 

 

(ii) be responsible for procuring and maintaining communication services, including high speed Internet connections between Collaborator' systems and the Ehave Platform;

 

(iii) assign, record and control the issuance and use of all Authentication IDs;

 

(iv) be responsible for the accuracy, completeness and adequacy of all Collaborator Data; for the management, manipulation and processing of Collaborator Data; and the back up and maintenance of all Collaborator Data;

 

(v) use of the Services, Ehave Platform and Software, by itself and Authorized Users in accordance with Applicable Laws, the terms of this Agreement and the User Documentation; and

 

(vi) comply, at all times, with all applicable legal and regulatory requirements and with Ehave's conduct and security policies in respect of the use of the Services and the Software.

 

(c) Prohibited Activities

 

Collaborator shall not:

 

(i) use the Services for improper or unlawful purposes;

 

(ii) include, or knowingly allow others to include, any Objectionable Content or introduce Viruses to the Ehave Platform and shall institute such security procedures and safeguards as Collaborator deems necessary to prevent the posting, uploading or inclusion of any Objectionable Content or Viruses to the Ehave Platform;

 

(iii) intercept or attempt to intercept any messages transmitted to and from the Ehave Platform that are not intended for Collaborator or any of its Authorized Users;

 

(iv) take any action that imposes an unreasonable or disproportionately large load on the Ehave Platform;

 

(v) use the Services or the Software to develop any derivative works or any functionally compatible or competitive software;

 

(vi) copy or download the Software or any other software used by Ehave to provide the Services and which is contained within the Ehave Platform; or

 

(vii) remove any copyright or other proprietary rights notice on the Software or the User Documentation or any copies thereof.

 

(d) Viruses

 

If Ehave, in its absolute discretion, forms the view that any Collaborator Data or any other information or files uploaded by Collaborator or any of its Authorized Users contains or includes a Virus or is considered Objectionable Content, Ehave may remove such Collaborator Data, information or file from the Ehave Platform and take such other action as Ehave deems necessary to protect the integrity and operation of the Services, Ehave Platform and the Software. Any costs associated with such removal may be charged by Ehave to Collaborator. Ehave shall notify Collaborator of its actions under this Section 6(d) as soon as reasonably possible.

 

8. AUDIT RIGHTS

 

(a) Ehave’s Audit Right

 

(i) Ehave reserves the right to monitor and audit Collaborator’s and its Authorized Users’ usage of the Services for the purpose of (among others) ensuring compliance with the terms of this Agreement, including without limitation Section 6(c). Any such audit may be carried out by Ehave or a third party authorised by Ehave, at Ehave’s expense.

 

10 .
 

 

(ii) If Ehave’s monitoring activities or its audit pursuant to Section 7(a)(i) reveals that Collaborator’s or any Authorized User’s use of the Services is in contravention of this Agreement, including any Applicable Laws, then Ehave may immediately suspend and discontinue the Services to Collaborator or to that specific End User, at Ehave’s sole discretion and without notice to Collaborator. Ehave shall notify Collaborator of such suspension as soon as reasonably possible, which notice shall set out the circumstances of the suspension. If Collaborator rectifies the situation to Ehave’s satisfaction, then Ehave will reinstate the Services. If Collaborator does not rectify the situation within a reasonable period of time, then it shall be deemed a material breach of this Agreement and Ehave shall be free to terminate this Agreement under Section 10(c) and pursue any remedies available to it.

 

(iii) If the audit pursuant to Section 7(a)(i) reveals the use of the Services by Collaborator is in excess of the permitted level set out in Exhibit “A”; or (ii) any Authentication ID has been provided to a person who is not an Authorized User, or access to the Ehave Platform was otherwise granted to a person who is not an Authorized User, or the number of Authentication IDs granted by Collaborator exceeds the number of Authorized Users set out in Exhibit “A”; Collaborator shall, without delay, pay Ehave the amount of Fees required for such level of use or number of Authorized Users based on Ehave’s then current list price for the Services. In case of unauthorized use of the Services and Software, whether by Collaborator, an Authorized User or another person, Ehave reserves the right to deny access to the Services, the Ehave Platform and/or the Software to Collaborator or such Authorized User or other person, by blocking without prior notification the IP address(es) used to access the Ehave Platform and/or Software by such Authorized User or other person.

 

(b) Collaborator’ Regulatory Audits

 

(i) Ehave shall provide to such auditors (including external auditors and Collaborator’s internal audit staff or agents) as Collaborator may designate in writing, access to the facility at which the Services are being performed, to systems and assets used by Ehave to provide the Services, to all appropriate Ehave personnel and subcontractors, and to the data, records and supporting documentation maintained by Ehave with respect to the Services for the purpose of performing audits and inspections of Ehave to enable Collaborator to satisfy applicable statutory and regulatory requirements or to certify compliance with Applicable Laws, and solely to the extent required to satisfy such requirements. The scope of such audits shall be limited solely to that which is necessary to enable Collaborator to satisfy its statutory or regulatory compliance obligations and may include, without limitation, and when applicable, (i) Ehave’s practices and procedures; (ii) controls as set out and which forms part of the Security Requirements; and (iii) disaster recovery and back-up procedures.

 

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(ii) Collaborator and its auditors shall use commercially reasonable efforts to conduct such audits in a manner that will result in a minimum of inconvenience and disruption to Ehave’s business operations. Audits may be conducted only during normal business hours. Collaborator will provide Ehave with reasonable prior written notice of each audit, but with at least thirty (30) calendar days. Collaborator and its auditors will not be entitled to audit (i) data or information of other customers or clients of Ehave; or (ii) any Confidential Information of Ehave that is not necessary for purposes of the audit. Ehave will use commercially reasonable efforts to cooperate in the audit, will provide facilities to conduct the audit, will, to the extent applicable and reasonably practicable, convert any technical records maintained in an electronic format into a readily understandable format, or a format that can be readily understood without need for special equipment or specialized knowledge, will make available on a timely basis the information reasonably required to conduct the audit and will assist the designated employees and agents of Collaborator or its auditors as reasonably necessary. To the maximum extent possible, audits shall be designed and conducted (in such manner and with such frequency) so as not to interfere with the provision of the Services. All information learned or exchanged in connection with the conduct of an audit, as well as the result of any audit, constitutes Ehave Confidential Information. Each Party shall maintain during the Term and thereafter as required by Applicable Law, a complete and accurate set of files, records and books and accounts of their transactions hereunder.

 

(iii) In addition to the audit referred to in Section 7(b)(i), Ehave acknowledges that Collaborator may be subject to statutory audits and other requests for information from taxation and other Governmental Authorities. Collaborator shall notify Ehave in a timely manner after being contacted by such Governmental Authority regarding such an audit. Ehave shall respond reasonably to any requests from such Governmental Authority regarding Collaborator according to Collaborator’ direction, subject to Ehave’s obligations under Applicable Law. Except as otherwise required by Applicable Law, if Collaborator is contacted by a Governmental Authority regarding such an audit, Ehave may provide information to such Governmental Authority only under the direction of Collaborator. Ehave shall provide such information in a timely manner either to Collaborator or, at Collaborator’ request, directly to the applicable Governmental Authority. As part of this audit process, Ehave may be required to answer questions from Governmental Authorities with respect to its processing of certain transactions for Collaborator. Collaborator shall send a representative to be present at all such discussions with such Governmental Authorities if and to the extent not prohibited by Applicable Law.

 

(iv) Any audits or provision of information under this Section 6(b) will be conducted at Collaborator’ expense.

 

(c) Coordination of Regulatory Audits

 

Collaborator acknowledges that the audits set out in Section 7(b) are disruptive to the provision of the Services. In order to satisfy all audit requests from Collaborator and to Ehave’s other customers; Collaborator hereby agrees that Ehave may hire an independent third party auditor to conduct an audit in satisfaction of Section 7(b)(i) and to provide the results of such audit to Collaborator in lieu of Collaborator conducting its own audit pursuant to Section 7(b)(i). Alternatively and if consented to by Ehave, Collaborator shall coordinate with Ehave regarding the timing, scope and processes regarding of any audit conducted by Collaborator under Section 7(b)(i) to minimize any disruption to the Services and duplication of effort with any other similar audit.

 

(d) Security Audit

 

On an annual basis, Ehave shall conduct and provide Collaborator the results of an audit conducted in accordance with the Statement on Standards for Attestation Engagements (SSAE) No. 16, Service Organization Control (SOC) 2 Report type audit or similar audits in respect of its operations. Ehave shall also provide Collaborator written notice and detail of any deficiencies that Ehave’s auditors (whether internal or external) found through the conduct of such audits and the remediation efforts that Ehave shall undergo to rectify such deficiencies.

 

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9. FEES AND PAYMENT

 

(a) Fees

 

Fees, payment terms and invoicing are as set out in Exhibit “A”. The Fees do not include applicable taxes. Ehave shall invoice the Fees and applicable taxes in accordance with the provisions set out in Exhibit “A”. Collaborator agrees to pay the Fees and applicable taxes in accordance with the payment terms as set out in Exhibit “A”.

 

(b) Taxes:

 

Collaborator shall pay any and all taxes, however designated or incurred, which are paid or payable as a result of or otherwise in connection with the transactions contemplated in this Agreement including, without limitation, federal, provincial and local, excise, sales, use, goods and services, harmonized, value added and any taxes or other amounts in lieu thereof, except for any taxes based on Ehave’s net income.

 

(c) Interest on Late Payments:

 

Where Collaborator fails to pay any amount in accordance with the payment terms set out in Exhibit “A”, Ehave shall have the right, in addition to any other rights or remedies available to it, to charge, and Collaborator shall pay, interest on such overdue amounts at the rate of 1% per month calculated daily, compounded monthly (12.68% per annum) both before and after any court judgement in respect of the same from the date such payment was due.

 

10. TERM

 

This term of this Agreement and the rights and obligations of the Parties hereto shall commence as of the Effective Date and shall continue for such period set out in Exhibit “A” attached hereto (the “ Initial Term ”), unless terminated earlier in accordance with the provisions contained herein. Unless either Party notifies the other at least one (1) month prior to the expiration of the Initial Term or the then Renewal Term, this Agreement and the rights and obligations of the Parties hereto shall renew for an additional period of one (1) year (each a “ Renewal Term ”; the Initial Term and any Renewal Terms collectively referred to as the “ Term ”).

 

11. SUSPENSION AND TERMINATION

 

(a) Suspension of Services:

 

In the event that Collaborator does not pay the Fees or any portion thereof, when due, Ehave may immediately suspend Collaborator’s and each of its Authorized Users’ right to receive the Services and access and use of the Software.

 

(b) Collaborator’ Right to Terminate:

 

Subject to Sections 10(e) and 10(g), Collaborator may terminate this Agreement and the rights granted hereunder without prejudice to enforcement of any other legal right or remedy, immediately upon giving written notice of such termination if Ehave:

 

(i) breaches any material provision of this Agreement and such breach continues for a period of twenty (20) Business Days after delivery of a written notice by Collaborator requiring Ehave to correct such failure;

 

(ii) commits a Service Level Termination Event; or

 

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(iii) becomes or is adjudicated insolvent or bankrupt, admits in writing its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; or Ehave applies for or consents to the appointment of any receiver, trustee or similar officer for it or for all or any substantial part of its property; or such receiver, trustee or similar officer is appointed without the consent of Ehave; or Ehave institutes any bankruptcy, insolvency, reorganization, moratorium, arrangement, readjustment or debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, or any such proceeding is instituted against Ehave and is not dismissed within sixty (60) Business Days; or any judgment, writ, warrant or attachment or execution of similar process is issued or levied against a substantial part of Ehave’s property and remains unsatisfied for sixty (60) Business Days.

 

(c) Ehave’s Right to Terminate:

 

Subject to Sections 10(e) and 10(g), Ehave may terminate this Agreement and the rights granted hereunder without prejudice to enforcement of any other legal right or remedy, immediately upon giving written notice of such termination if Collaborator:

 

(i) fails to pay in full any sum owing by it under this Agreement by the due date thereof and such failure continues for a period of five (5) Business Days after delivery of a written notice by Ehave requiring Collaborator to correct such failure;

 

(ii) infringes the Intellectual Property Rights of Ehave;

 

(iii) breaches any other material provision of this Agreement and such breach continues for a period of twenty (20) Business Days after delivery of a written notice by Ehave requiring Collaborator to correct such failure; or

 

(iv) becomes or is adjudicated insolvent or bankrupt, admits in writing its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; or Collaborator applies for or consents to the appointment of any receiver, trustee or similar officer for it or for all or any substantial part of its property; or such receiver, trustee or similar officer is appointed without the consent of Collaborator; or Collaborator institutes any bankruptcy, insolvency, reorganization, moratorium, arrangement, readjustment or debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, or any such proceeding is instituted against Collaborator and is not dismissed within sixty (60) Business Days; or any judgment, writ, warrant or attachment or execution of similar process is issued or levied against a substantial part of Collaborator’ property and remains unsatisfied for sixty (60) Business Days.

 

(d) Waiver:

 

The waiver by either Party of a breach or default of any provision of this Agreement by the other Party shall not be effective unless in writing and shall not be construed as a waiver of any succeeding breach of the same or of any other provision. Nor shall any delay or omission on the part of either Party to exercise or avail itself of any right, power or privilege by such Party shall constitute a waiver.

 

(e) Effect of Termination:

 

Upon the termination of this Agreement for any reason:

 

(i) the Parties shall implement the Transition-Out Services pursuant to Section 10(f);

 

(ii) Ehave shall terminate and invalidate any Authentication IDs associated with Collaborator and any of its Authorized Users;

 

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(iii) Ehave shall, but not earlier than ten (10) Business Days after the termination or expiration of this Agreement, destroy any copies of the Collaborator Data contained in the Ehave Platform;

 

(iv) Collaborator shall pay to Ehave the full amount of all Fees payable hereunder as of the date of termination, if any, whether already invoiced or not (including any amounts due as late payment charges), and any other monies owing to Ehave hereunder; and

 

(v) each Party will return to the other Party all Confidential Information of the other Party which is then in its possession or control.

 

Collaborator acknowledges and agrees if Collaborator fails to download the Collaborator Data from the Ehave Platform in a timely manner, it may not have access to such information or such information may be destroyed by Ehave in accordance with the terms of this Section 10(e). Subject to Section 10(f), it is Collaborator' responsibility to download and obtain all Collaborator Data prior to the expiration or termination of this Agreement. Ehave shall have no responsibility, or any liability to Collaborator, for maintaining or providing to Collaborator the Collaborator Data or any portion thereof from and after the twentieth (20 th ) Business Day after the termination or expiration of this Agreement.

 

(f) Transition Assistance:

 

Commencing at the earlier of (i) one (1) month prior to the scheduled expiration date of this Agreement; or (ii) the delivery of any notice of termination or non-renewal of this Agreement, and continuing through the effective date of expiration or termination and for a period of twenty (20 Business Days thereafter (the “ Transition-out Period ”), Ehave will, to the extent requested by Collaborator, provide to Collaborator (or at Collaborator's request to Collaborator's designee) such reasonable cooperation, assistance and services to facilitate the orderly wind down, transition and migration of the Services and transfer of the Collaborator Data from Ehave to Collaborator or Collaborator's designee (the “ Transition-out Services ”). Collaborator will continue to pay for Services properly rendered during the Transition-out Period, in each case until they are wound down or discontinued. For additional services and resources required to provide Transition-out Services, the applicable rate card then in effect under this Agreement will apply. As part of the Transition-out Services, Collaborator shall download any and all Collaborator Data contained on the Ehave Platform and store such Collaborator Data on Collaborator's systems.

 

(g) Survival of Covenants:

 

Notwithstanding the termination or expiration of this Agreement for any reason, the covenants set out in this Section 10(g) and in Sections 8(c), 10(e), 10(f), 11, 12, 15, 16, 18, 19(a) and those provisions set out in Section 1 as necessary to interpret the foregoing provisions, of this Agreement shall survive any such termination or expiration.

 

12. OWNERSHIP

 

(a) Ehave’s Ownership

 

Collaborator acknowledges and agrees that, as between Collaborator and Ehave, Ehave owns all worldwide right, title and interest, including all Intellectual Property Rights, in and to: (i) the Ehave Platform; (ii) Software: (iii) User Documentation; and (iv) any modifications, enhancements, upgrades, updates or Customization to the Software or User Documentation. Collaborator does not acquire any rights, title or ownership interests of any kind whatsoever, express or implied, in any of the foregoing other than the licenses granted herein.

 

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(b) Collaborator’ Ownership

 

Ehave acknowledges and agrees that all worldwide right, title and interest including, all Intellectual Property Rights in and to the Collaborator Data shall be the exclusive property of Collaborator. Ehave does not acquire any rights, title or ownership interest of any kind whatsoever, express or implied, in any of the Collaborator Data, other than the license granted herein.

 

13. CONFIDENTIALITY

 

(a) Obligation:

 

Each Party acknowledges that all Confidential Information consists of confidential and proprietary information of the disclosing Party. Each Party shall, and shall cause its employees, agents and contractors to hold Confidential Information of the other Party in confidence, and shall use the same degree of care by instruction, agreement or otherwise, to maintain the confidentiality of the other Party’s Confidential Information that it uses to maintain the confidentiality of its own Confidential Information, but with at least a reasonable degree of care commensurate with the nature and importance of such Confidential Information. Each Party agrees not to make use of Confidential Information other than for the exercise of rights or the performance of obligations under this Agreement, and not to release, disclose, communicate it or make it available to any third person other than employees, agents and contractors of the Party who reasonably need to know it in connection with the exercise of rights or the performance of obligations under this Agreement.

 

(b) Subpoena:

 

In the event that any Party receives a request to disclose all or any part of the Confidential Information under the terms of a valid and effective subpoena or order issued by a court of competent jurisdiction or by a Governmental Authority, such Party agrees to (i) immediately notify the other Party of the existence, terms and circumstances surrounding such a request; (ii) consult with the other Party on the advisability of taking legally available steps to resist or narrow such request; and (iii) if disclosure of such Confidential Information is required, exercise its best [commercially reasonable] efforts to obtain an order or other reliable assurance that confidential treatment will be accorded to such portion of the disclosed Confidential Information which the other Party so designates.

 

(c) Injunctive Relief:

 

Each Party acknowledges and agrees that any unauthorized use or disclosure by it of any of the other Party's Confidential Information, in whole or part, will cause irreparable damage to the disclosing Party, that monetary damages would be an inadequate remedy and that the amount of such damages would be extremely difficult to measure. The receiving Party agrees that the disclosing Party shall be entitled to seek temporary and permanent injunctive relief to restrain the receiving Party from any unauthorized disclosure or use. Nothing in this Agreement shall be construed as preventing the disclosing Party from pursuing any and all remedies available to it for a breach or threatened breach of a covenant made in this Section 12, including the recovery of monetary damages from the receiving Party.

 

14. REPRESENTATIONS, WARRANTIES AND DISCLAIMERS

 

(a) Mutual Representations of the Parties:

 

Each Party represents to the other that:

 

(i) it is a company duly organized, validly existing and in good standing under the laws of its incorporation and it has full power and authority to enter into this Agreement and to perform each and every covenant and agreement herein contained;

 

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(ii) this Agreement has been duly authorized, executed and delivered by it and constitutes a valid, binding and legally enforceable agreement of it;

 

(iii) the execution and delivery of this Agreement, and the performance of the covenants and agreements herein contained, are not, in any manner or to any extent, limited or restricted by, and are not in conflict with, any commercial arrangements, obligations, contract, agreement or instrument to which it is either bound or subject; and

 

(iv) the execution and delivery of this Agreement and the performance of its covenants and agreements herein contained shall comply in all respects with all laws and regulations to which it or its business is subject.

 

(b) Additional representations of Ehave:

 

Ehave represents to Collaborator that Ehave possesses the knowledge, skill and experience necessary for the provision and completion of the Services in accordance with the terms of this Agreement.

 

(c) Warranties

 

Ehave warrants that:

 

(i) it shall perform the Services in a professional and timely manner in accordance with the standards of its industry; and

 

(ii) for the duration of the Term, the Software will substantially operate in accordance with, and have the functions set out in, the Specifications.

 

(d) Exclusion of Other Warranties:

 

Except as otherwise expressly stated in this Agreement, there are no express or implied warranties or conditions in relation to the Service, the Ehave Platform, Software or User Documentation that are the subject matter of this Agreement, including implied warranties or conditions of merchantable quality, fitness for a particular purpose, or non-infringement, or that the services, Ehave Platform, Software or User Documentation will meet Collaborator’ needs or will be available for use at any particular time or will be error free. Under no circumstances will Ehave be liable for the results of Collaborator use or misuse of the Services, including any use contrary to Applicable Law.

 

15. INSURANCE

 

(a) Required Insurance: Ehave shall, at all times during the currency of this Agreement and for a period of one (1) year after the termination or expiration of this Agreement, maintain the following policies of insurance in effect:

 

(i) a comprehensive general liability insurance policy, with minimum coverage of five hundred thousand dollars ($500,000) per occurrence and in the annual aggregate for product liability and completed operations, covering bodily and personal injury, including death, and property damage, including loss of use; and

 

(ii) an information and network technology blended liability insurance policy with an insured limit of at least five hundred thousand dollars ($500,000) in the aggregate.

 

(b) Evidence of Insurance: Upon the execution of this Agreement or at any time at Collaborator' request during the term of this Agreement, Ehave shall provide Collaborator with evidence of the aforementioned insurance coverage in the form of a certificate of insurance acceptable to Collaborator. Ehave will not permit any such insurance policy to lapse. In the event of any material change or cancellation of the required insurance policies, Ehave will provide thirty (30) calendar days' prior written notice to Collaborator and will promptly replace such insurance policy in accordance with this Section 12, without lapse in coverage.

 

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16. INDEMNITIES

 

(a) Intellectual Property Indemnity

 

Ehave shall defend at its own expense any claim, proceeding or suit (a “ Claim ”) brought against Collaborator or any of its Authorized Users to the extent such Claim alleges that any of the Service, Software or User Documentation furnished hereunder infringes any Canadian copyright, patent or registered trademark of a third person, and will indemnify and pay all damages which by final judgment or settlement may be assessed against Collaborator on account of such infringement, provided that:

 

(i) Ehave is given prompt written notice of the Claim or of any allegations or circumstances known to Collaborator which could result in a Claim;

 

(ii) Ehave is given all reasonable information and assistance from Collaborator, at Ehave’s expense, which Ehave may require to defend the Claim;

 

(iii) Ehave is given sole control of the defence of the Claim, and all negotiations for the settlement or compromise thereof; and

 

(iv) the alleged infringement does not result from any non-permitted uses, alterations, modifications or enhancements carried out by Collaborator or on its behalf by a third person.

 

If such Claim has occurred, or in Ehave’s opinion is likely to occur, Ehave may, at its option and expense, either procure for Collaborator the right to continue using the Service, Software or User Documentation or modify the same so that it becomes non-infringing without loss of functionality, or if none of the foregoing alternatives is reasonably available and at Ehave’s discretion, discontinue the Service and use of the Software and refund to Collaborator any pre-paid and unused portion of the Fees paid by Collaborator in respect of use of the Services. The foregoing states the entire obligations of Ehave with respect to any infringement of Intellectual Property Rights of any third Person.

 

(b) Collaborator' Indemnity

 

Collaborator shall defend at its own expense any Claim brought against Ehave, its affiliates, directors, officers, employees and agents, to the extent such Claim: (i) alleges, directly or indirectly, that any Collaborator Data infringes any Canadian copyright, patent or registered trademark of a third person; alleges, directly or indirectly, that the Collaborator Data contains any Objectionable Content; or (iii) is in relation to Collaborator's use of the Service, including contrary to Applicable Law, except however to the extent as Ehave has indemnified Collaborator pursuant to Section 15(a); provided that Collaborator is given:

 

(i) prompt written notice of the Claim or of any allegations or circumstances known to Ehave which could result in a Claim;

 

(ii) all reasonable information and assistance from Ehave, at Collaborator's expense, which Collaborator may require to defend the Claim; and

 

(iii) sole control of the defence of the Claim, and all negotiations for its settlement or compromise thereof.

 

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17. LIMITATION OF LIABILITY

 

(a) Consequential Damages

 

Subject to Section 16(c), in no event shall either Party be liable to the other for any consequential, incidental, exemplary or punitive damages even if advised in advance of the possibility of such damages. Further Ehave shall not be liable to Collaborator for any lost revenue, lost profit or lost savings.

 

(b) Limitation of Direct Damages

 

Subject to Section 16(c), in respect of any claim, demand or action by Collaborator against Ehave or any of its employees, directors, officers, or agents whether based in contract, tort (including negligence), or otherwise, including a breach by Ehave of any of its obligations under this Agreement (whether or not a fundamental breach), the Collaborator’ sole and exclusive remedy shall be to receive from Ehave payment for actual and direct damages to a maximum aggregate amount equal to the amount paid by Collaborator to Ehave in the three (3) months preceding the date of the event.

 

(c) Exceptions to Limitations

 

Notwithstanding Sections 16(a) and 16(b), neither Party excludes or limits any liability for:

 

(i) personal injury or death to the extent that such injury or death results from the negligence or wilful misconduct of a Party or its employees;

 

(ii) fraud, fraudulent misrepresentation or fraudulent concealment;

 

(iii) the Party’s obligations set out in Sections 5(a), 5(b), 5(c), 6(c), 12 or 15; or

 

(iv) Collaborator’ payment obligations contained herein.

 

18. FORCE MAJEURE

 

Except for any obligation to make payments, any delay or failure of either Party to perform its obligations under this Agreement or under any Exhibit attached hereto shall be excused if, and to the extent, that the delay or failure is caused by an event or occurrence beyond the reasonable control of the Party and without its fault or negligence, such as, by way of example and not by way of limitation, acts of God, action by any Governmental Authority (whether valid or invalid), fires, flood, wind storms, explosions, riots, natural disasters, wars, terrorist acts, sabotage, labour problems (including lock-outs, strikes and slow downs, except for any labour problems of the Party claiming a force majeure event), or court order or injunction; provided that written notice of delay (including anticipated duration of the delay) shall be given by the affected Party to the other Party within two (2) Business Days of the affected Party first becoming aware of such event. If requested by the unaffected Party, the affected Party shall, within two (2) Business Days of the request, provide adequate assurances that the delay shall not exceed ten (10) Business Days. In the event that the force majeure event lasts for fifteen (15) Business Days or longer, either Party shall have the option to terminate this Agreement upon written notice to the other without liability.

 

19. DISPUTE RESOLUTION

 

(a) Discussions:

 

Each Party agrees to utilize all reasonable efforts to resolve any dispute, whether arising during the term of this Agreement or at any time after the expiration of termination of this Agreement, which touches upon the validity, construction, meaning, performance or affect this Agreement or the rights and liabilities of the Parties or any matter arising out of or connected with this Agreement, promptly and in an amicable and good faith manner by negotiations between the Parties.

 

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(b) Mediation:

 

Either Party may submit a dispute to mediation by providing written notice to the other Party. In the mediation process, the Parties will try to resolve their differences voluntarily with the aid of a single, impartial mediator, who shall attempt to facilitate negotiations. The mediator shall be selected by agreement of the Parties. If the Parties cannot otherwise agree on a mediator within five (5) Business Days, a single mediator shall be designated by the ADR Institute of Canada, Inc. or any successor organization (“ ADR ”) at the request of a Party. Any mediator so designated must not have a conflict of interest with respect to any Party. The mediation shall be conducted as specified by the mediator and agreed upon by the Parties. The Parties agree to discuss their differences in good faith and to attempt, with the assistance of the mediator, to reach an amicable resolution of the dispute. The mediation shall be treated as a settlement discussion and therefore shall be confidential. The mediator may not testify for either Party in any later proceeding relating to the dispute. No recording or transcript shall be made of the mediation proceedings. Each Party shall bear its own costs and legal fees in the mediation. The Parties shall share the fees and expenses of the mediator equally.

 

(c) Arbitration:

 

Subject to Section 18(d), any dispute that has proceeded through mediation established in Section 18(b) without resolution may be submitted to arbitration. Any arbitration conducted pursuant to this Agreement shall take place in the City of Toronto, Ontario. The costs of the arbitration shall be borne equally by the Parties or as may be specified in the arbitrator's decision. The provisions of the Arbitration Act of Ontario, as amended, except as otherwise provided in this Agreement shall govern the arbitration process. The Parties agree to exclude the appeal provisions of the Arbitration Act, as may be amended from time to time, and in particular, section 45 thereof. The determination arising out of the arbitration process shall be final and binding upon the Parties to the arbitration.

 

(d) Exceptions to Arbitration:

 

The following matters shall be excluded from arbitration under this Agreement:

 

(i) any disputes involving third Persons;

 

(ii) breach of confidentiality by either Party; and

 

(iii) intellectual property claims, whether initiated by third Persons or by one of the Parties to this Agreement.

 

20. MISCELLANEOUS

 

(a) Notice:

 

Every notice or other communication hereunder shall be deemed to have been duly given and made if in writing and if served by personal delivery upon the Party for whom it is intended, if delivered by registered or certified mail, return receipt requested, or by a national courier service, or if sent by fax (receipt of which is confirmed) to the Person at the address set forth below, or such other address as may be designated in writing hereafter, in the same manner, by such Person:

 

To: Ehave To: Collaborator
   
277 Lakeshore Road East 5 Director Court
Suite 203 Suite 105
Oakville, Ontario Vaughan, Ontario
Canada Canada
L6J 6J3 L4L 4S5

 

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Attention: Prateek Dwivedi, President & CEO Attention: Craig Leon, CEO

 

Any such notification shall be deemed delivered (a) upon receipt, if delivered personally, (b) on the next Business Day, if sent by national courier service for next Business Day delivery or if sent by fax. Any correctly addressed notice or last known address of the other Party that is relied on herein that is refused, unclaimed, or undeliverable because of an act or omission of the Party to be notified as provided herein shall be deemed effective as of the first date that said notice was refused, unclaimed, or deemed undeliverable by the postal authorities by mail, through messenger or commercial express delivery services.

 

(b) Modifications:

 

The Parties may modify this Agreement only upon written agreement.

 

(c) Further Assurances:

 

Each Party shall take such action (including, but not limited to, the execution, acknowledgement and delivery of documents) as may reasonably be requested by the other Party for the implementation or continuing performance of this Agreement.

 

(d) Relationship:

 

The Parties are independent contractors and no other relationship is intended. Nothing herein shall be deemed to constitute either Party as an agent, representative or employee of the other Party, or both Parties as joint venturers or partners for any purpose. Neither Party shall act in a manner that expresses or implies a relationship other than that of independent contractor. Each Party shall act solely as an independent contractor and shall not be responsible for the acts or omissions of the other Party. Neither Party will have the authority or right to represent nor obligate the other Party in any way except as expressly authorized by this Agreement.

 

(e) Enurement:

 

This Agreement shall enure to the benefit of and be binding upon each of the Parties hereto and their permitted successor and assigns.

 

(f) No Assignment:

 

Neither this Agreement nor any rights or obligations hereunder shall be assignable by a Party without the prior written consent of the other Party.

 

(g) Counterparts and Facsimile Execution and Delivery:

 

This Agreement may be executed in counterparts, each of which shall be deemed to be an original and both of which together shall constitute one and the same instrument. To evidence its execution of an original counterpart of this Agreement, a Party may send a copy of its original signature on the execution page hereof to the other Party by facsimile transmission or email and such transmission shall constitute delivery of an executed copy of this Agreement to the receiving Party as of the date of receipt thereof by the receiving Party or such other date as may be specified by the sending Party as part of such transmission.

 

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(h) Language:

 

It is the Parties desire and agreement that this Agreement and all Exhibits and associated documentation be drafted in English. Les Parties conviennent que la présente convention et tous les documents s’y rattachant, soient rédigés en anglais.

 

IN WITNESS WHEREOF, each Party hereto has caused this Agreement to be duly executed as of the date first written above by an officer authorized in that behalf.

 

EHAVE, INC.   REVIVE THERAPEUTICS LTD.
         
per: /s/ Prateek Dwivedi   per: /s/ Craig Leon
Name: Prateek Dwivedi   Name: Craig Leon
Title: CEO   Title: Chairman & CEO

 

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EXHIBIT “A”
AUTHORIZED USERS, TERM, FEES, PAYMENT TERMS AND INVOICING

 

This Exhibit “A” is attached to and forms a part of the Services Agreement dated February 28, 2018 and made between Ehave, Inc. (“ Ehave ”) and Revive Therapeutics Ltd. (“ Collaborator ”) (the “ Agreement ”).

 

1. USE METRICS

 

Fees will be based on the number of patient records that Collaborator in blocks of 100. Once Collaborator has exceeded the number of patient records for a block, then Collaborator must pay the applicable fee for the next block of patients. Once Collaborator has moved to the next block, it cannot return to a lower level of blocks.

 

2. Expiry Date

 

The Initial Term of this Agreement shall commence on the Effective Date and shall continue for one year.

 

3. Fees

 

The first project will be the importation of data of the Collaborator preclinical study for liver (AIH) into the Ehave Platform. A Statement of Work for Professional Services Fees for the work to import the data will be agreed upon, and no further platform fees will be charged for this preclinical study. The study has the following characteristics:

 

· Duration: 112 days
· # of mice: 40
· Examinations (i.e. body weights): once weekly
· Clinical pathology: 1 occasion (on Day 56)
· Necropsy: 50% of mice are sacrificed on Day 56 and remaining are sacrificed on Day 112 (bone marrow smears and in situ photos of liver)
· Serum collection: 1 occasion at termination
· Histopathology: all mice, tissue, blocks and unstained slides

 

For subsequent project(s), such as patient records, a Statement of Work will be agreed upon. Collaborator and Ehave to agree on list pricing based on scale, scope and duration of trials based on published trial protocols.

 

Professional Services Fees for consultation and integration deemed out of scope are billed at $150/hour. Prior to performing Professional Services that are deemed out of scope, Ehave and Collaborator shall agree in advance and in writing, the estimated cost and completion date of such further work and execute a Statement of Work.

 

For clarity, no Fees are to be invoiced to Collaborator upon execution of this Agreement.

 

4. INVOICING AND PAYMENT TERMS

 

(a) Invoicing:

 

Ehave shall invoice Collaborator monthly in arrears.

 

Invoices shall be submitted electronically to the following address:

 

Angela Fuda – angela@revivethera.com

 

(b) Payment Terms:

 

All invoices are payable by Collaborator upon receipt, however, interest on late payments will accrue only from the date that is 10 calendar days from the date of the invoice.

 

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EXHIBIT “B”
HELP DESK SERVICES

 

This Exhibit “B” is attached to and forms a part of the Software as a Service Agreement dated February 28, 2018 and made between Ehave, Inc. (“ Ehave ”) and Revive Therapeutics Ltd. (“ Collaborator ”) (the “ Agreement ”).

 

1. DEFINITIONS

 

Any capitalized terms not defined in this Exhibit “B” shall have the meaning ascribed to them in the Agreement. In addition to the definitions contained in the main part of the Agreement, the following terms shall have the following meanings for the purposes of this Exhibit “B”:

 

Collaborator Support Person ” shall have the meaning ascribed to it in Section 3 of this Exhibit “B”.

 

Defect ” means any material deviation in the functioning of the Software from, or any failure of the Service or the Ehave Platform to work in accordance with, the specifications as set out in the User Documentation.

 

Problem Notification Time ” means the date and time that Collaborator notifies Ehave of a Defect, as recorded by Ehave.

 

2. SCOPE

 

(a) Inclusion:

 

Support services consist of technical assistance as described in Section 4 of this Exhibit “B”

 

(b) Excluded:

 

Support services do not include:

 

(i) development or any Customizations;

 

(ii) consultation on Collaborator internal operations;

 

(iii) training;

 

(iv) on-site support; and

 

(v) any services not explicitly stated in this Exhibit “B”.

 

Any request for assistance that is not within the scope of the support services shall be subject to a charge per contact.

 

3. CUSTOMER POINT OF CONTACT

 

Collaborator must designate a single staff member who shall be responsible for all day-to-day communications with Ehave for support services. Collaborator will provide the contact name, telephone number and external e-mail address to Ehave, as well as ensure any alternate vacation or illness back up contact information is provided (the “ Collaborator Support Person ”). All calls for support must be directed to the Collaborator Support Person. The Collaborator Support Person shall diagnose the incident and if the Collaborator Support Person determines that the incident is a Defect, then the Collaborator Support Person shall contact Ehave.

 

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4. SERVICE DESK

 

(a) Availability:

 

Ehave’s service desk will be available to respond to queries from Collaborator during Business Hours on Business Days.

 

(b) Classification:

 

When making an initial request for assistance, the Collaborator Support Person shall provide Ehave with an assessment of the severity of the Defect in accordance with the Severity Categories set out below and sufficient amount of information to permit Ehave to replicate the Defect.

 

(c) Response:

 

After Ehave responds to the Collaborator Support Person based on his/her assessment of the Severity Category, Ehave will either confirm or assign a different Severity Category in accordance with the classifications contained in this Section 4(c). Notwithstanding any other provision of this Exhibit “B”, Ehave has final authority in determining the Severity Category of all problems and in determining the priority of repair of Severity Category 1 through Severity Category 2 Defects. After determining the severity of the Defect, Ehave shall commence resolution procedures. Ehave shall respond to a Defect within the time stipulated based on the severity of the Defect. Ehave shall use commercially reasonable efforts to resolve the Defect within the target resolution times based on the severity of the Defect. Target resolution times commence once Ehave has confirmed or determined the Severity Category and communicated it to Collaborator. Section 5 of this Exhibit “B” sets out the descriptions of the Severity Categories, response times and target resolution times and support procedures.

 

5. SEVERITY CATEGORIES

 

(a) Classifications:

 

Defects will be classified using the following definitions:

 

Category   Classification   Definition
1   Critical   Collaborator is unable to access the Services
2   High   Collaborator is significantly inhibited from working with the Software
3   Medium   Collaborator’s use of the Software is impaired, but Collaborator is not unable to process a transaction and a workaround is possible
4   Low   Collaborator is able to process a transaction

 

25 .
 

 

(b) Support Procedures:

 

After assigning a Severity Category to a Defect, in accordance with Section 5(a) of this Exhibit “B”, Ehave will determine the escalation procedure to be followed, in accordance with the following:

 

(i) Level 0:

 

A technical support specialist works to analyze and verify the problem reported in a Collaborator support query. A service number, bug number or feature request number may be associated with each query. The problem may be broken up into component issues. For Severity Category 1 and 2 problems, if the problem is not resolved at this within 4 Business Hours of Ehave’s response to Collaborator, it will be escalated to Level 1. For severity Category 3 problems, if the problem is not resolved at this Level within 24 Business Hours of Ehave’s response to Collaborator, it will be escalated to Level 1. Severity Category 4 will be resolved at this level only.

 

(ii) Level 1:

 

If initial efforts fail to resolve a problem, the situation is re-evaluated by Ehave in conference with available members of the technical support group. For Severity Category 1 problems, if the problem is not resolved at this Level within 8 Business Hours of escalation to this level, it will be escalated to Level 2. For Severity Category 2 problems, if the problem is not resolved at this Level within 16 Business Hours of escalation to this level, it will be escalated to Level 2. Severity Category 3 will be resolved at this level only.

 

(iii) Level 2:

 

If re-evaluation under Level 1 fails to provide a resolution, the Collaborator will be notified, and the product developer(s) for the Software will be consulted. For Severity Category 1 problems, if the problem is not resolved at this Level within 16 Business Hours of escalation to this level, it will be escalated to Level 3. Severity Category 2 will be resolved at this level only.

 

(iv) Level 3:

 

If the product developer(s) are unable to rectify the problem, the product manager is apprised of the situation and will determine the final course of action.

 

The escalation procedures and Severity Categories set out in this Exhibit “B” are subject to change by Ehave without providing prior notice to the Collaborator. However, at Collaborator' request, Ehave will provide Collaborator with information relating to Ehave’s then current Severity Categories and escalation procedures.

 

26 .
 

 

EXHIBIT “C”
SERVICE LEVEL OBJECTIVES

 

This Exhibit “C” is attached to and forms a part of the Software as a Service Agreement dated February 28, 2018 and made between Ehave, Inc. (“ Ehave ”) and Revive Therapeutics Ltd. (“ Collaborator ”) (the “ Agreement ”).

 

1. SERVICE LEVEL OBJECTIVE

 

(a) Objective:

 

Ehave’s objective is to have Service Availability (as defined below) of the Ehave Platform equal to or greater than ninety-nine point nine percent (99.9%).

 

(b) Definition:

 

Any capitalized terms not defined in this Exhibit “C” shall have the meaning ascribed to them in the Agreement. In addition to the definitions contained in the main part of the Agreement, the following terms shall have the following meanings for the purposes of this Exhibit “C”:

 

Service Availability ” is defined as, in any calendar month:

 

Service Minutes – unplanned outages during Service Minutes

Service Minutes

 

where:

 

Service Minutes ” is defined as Minutes of Availability less Scheduled Outage less Other Permitted Outages.

 

Minutes of Availability ” means: (A) the total number of minutes in the applicable calendar month; less (B) that number of minutes in the applicable calendar month for any routine maintenance as set out in in Section 4(c) of the main part of the Agreement.

 

Scheduled Outage ” means, that number of minutes in the applicable calendar month for required repairs, preventative maintenance, system upgrades or other similar activities, which cannot be performed during scheduled routine maintenance windows and which Ehave provided Collaborator reasonable advance notice thereof.

 

Other Permitted Outages ” means any outages caused by: (i) the actions, inactions or omissions of Collaborator, its Authorized Users /or any third person that is not a contractor to Ehave; (ii) circumstances that constitute an event of force majeure under the Agreement; or (iii) unauthorized use or misuse by Collaborator of the Services or breach by the Collaborator of the terms of the Agreement.

 

2. REPORTING AND ESCALATION

 

(a) Reporting:

 

Ehave will provide Collaborator a monthly report describing the System Availability percentage for the Service either: (i) by email following a request from Collaborator for such report; or (ii) through the Service.

 

(b) Escalation:

 

In the event that Ehave fails to meet the Service Availability objective set out in Section 1 of this Exhibit “C” in a particular month, then within ten (10) Business Days from receipt by Ehave from Collaborator of a query regarding such failure, Ehave will submit to Collaborator a written explanation of the failure and a rectification plan to prevent or minimize the likelihood of a recurrence.

 

27 .
 

 

EXHIBIT “D”
SECURITY REQUIREMENTS

 

To be agreed upon and updated during first trial.

 

 
 

 

SCHEDULE “1”
IMPLEMENTATION PLAN

 

This Schedule “1” is attached to and forms a part of the Software as a Service Agreement dated February 28, 2018 and made between Ehave, Inc. (“ Ehave ”) and Revive Therapeutics Ltd. (“ Collaborator ”) (the “ Agreement ”).

 

To be agreed upon and updated during first trial.

 

 
 

 

SCHEDULE “2”
COLLABORATION ACTIVITIES

 

This Schedule “2” is attached to and forms a part of the Software as a Service Agreement dated February 28, 2018and made between Ehave, Inc. (“ Ehave ”) and Revive Therapeutics Ltd. (“ Collaborator ” or “ Revive ”) (the “ Agreement ”).

 

1. Purpose of Collaboration:

 

Revive and Ehave plan to collaborate on conducting trials both in the traditional pharmaceutical drug regulatory regime and in the medical and recreational cannabis regulatory regime.

 

The initial pharmaceutical drug for such collaboration is to be agreed upon before first trial.

 

2. Ehave Responsibilities

 

(a) Ehave shall provide the following reports to facilitate Revive sales and marketing operations:

 

To be agreed upon before first trial.

 

(b) For the duration of the Term of the Agreement, Ehave will provide aggregate patient data specific to clinical context and patient outcomes for Revive content, as allowed by consent and standard research ethics approvals. For patients of Revive where full consent has been obtained, all patient data will be provided to Revive. Revive shall own all clinical results and data generated from trials conducted within the partnership, subject to the licenses set out in the Agreement.

 

3. Joint Marketing Activities

 

As soon as possible after the execution of the Agreement, Ehave and Revive will develop a plan for joint public relation and marketing activities to be performed by each of Ehave and Revive. Such plan may include:

 

· co-branding content under the each other's brands;

 

· commitment to jointly invest in co-marketing funds to help with market education and to raise awareness of the licensed and co-developed content.

 

 

 

Exhibit 4.35

 

THIS COLLABORATION AND SERVICES AGREEMENT dated as of the March 2, 2018 is made

 

BETWEEN:

 

  EHAVE, INC. , a company incorporated under the laws of the Province of Ontario, Canada (“ Ehave ”);
   
  - and -
   
  AEQUUS PHARMACEUTICALS INC. , a company incorporated under the laws of the Province of British Columbia(“ Collaborator ”)

 

RECITALS:

 

A. Ehave has developed a software platform that provides an end-to-end patient management solution to healthcare professionals and provides that platform to users as a service.

 

B. Collaborator is in the business of developing speciality pharmaceuticals.

 

C. Collaborator desires to use Ehave’s platform to accelerate its research and development of speciality pharmaceuticals by utilizing the patient management and data analytics capability of Ehave’s solution.

 

D. Ehave and Collaborator entered into a Term Sheet dated July 12, 2017 (the “ Term Sheet ”) for the purpose of conducting a pilot of the Services and to establish a framework by which the Parties can collaborate for the mutual benefit of the Parties and now desire to formalize their arrangement by entering into this Agreement.

 

NOW THEREFORE , in consideration of the premises and the mutual agreements hereinafter set out and of other consideration (the receipt and sufficiency of which are acknowledged by each Party), the Parties covenant and agree as follows:

 

1. INTERPRETATION

 

(a) Definitions

 

In this Agreement and the schedules annexed hereto, the following terms shall have the respective meanings indicated below:

 

Acceptance Criteria ” has the meaning ascribed to it in Section 4(e).

 

Acceptance Period ” has the meaning ascribed to it in Section 4(e).

 

Acceptance Procedures ” has the meaning ascribed to it in Section 4(e).

 

Agreement ” means this service agreement and all Exhibits attached hereto.

 

Applicable Laws ” means any and all (i) laws, statutes, rules, regulations, by laws, codes, treaties, constitutions and ordinances, including Privacy Legislation (“ Laws ”), (ii) order, directive, judgment, decree, award or writ of any court (including a court of equity), arbitrator or arbitration panel, or any Governmental Authority or other body exercising adjudicative, regulatory, judicial or quasi-judicial powers, including any stock exchange (“ Orders ”), and (iii) policies, guidelines, standards, requirements, notices and protocols of any Governmental Authority (“ Policies ”); which are applicable to or govern Collaborator, Ehave or the transactions contemplated by this Agreement.

 

     

 

 

Authentication ID ” means a security mechanism by which an Authorized User identifies herself or himself to the Ehave Platform and gains access thereto, which security mechanism may include user identification, passwords, digital certificates or any other similar process mechanism for authentication and recognition as determined by Ehave from time to time.

 

Authorized User ” means an individual who Collaborator has authorized to access and use the Services.

 

Business Day ” means any calendar day except for Saturday or Sunday or any statutory holiday observed in the Province of Ontario.

 

Business Hour ” means the hours between 9:00 a.m. and 5:00 p.m. EST on Business Days.

 

Claim ” has the meaning ascribed to it in Section 16(a).

 

Collaboration Activities ” means those activities set out in Section 2 and in Schedule “2” attached hereto.

 

Collaborator Data ” means collectively any data, files, documentation or other information that Collaborator or any of its Authorized Users may: (i) upload to the Ehave Platform when using the Services; and (ii) processed through the use of the Services.

 

Confidential Information ” means this Agreement, the Software, Collaborator Data and all ideas, designs, business models, databases, drawings, documents, diagrams, formulas, test data, marketing, financial or personnel data, sales information, customer or supplier information, including information provided by such customers or suppliers, or any other information already furnished and to be furnished or made available by one Party to the other, whether in oral, written, graphic or electronic form including any such information exchanged during informational sessions designated as confidential, including, without limitation, information concerning a Party's actual and potential customers and other Intellectual Property Rights of such Party, provided, however, that Confidential Information shall not include any data or information:

 

(i) that, at the time of disclosure, is in or, after disclosure, becomes part of the public domain, through no act or failure on the part of the receiving Party, whether through breach of this Agreement or otherwise;

 

(ii) that, prior to disclosure by the disclosing Party, was already in the possession of the receiving Party, as evidenced by written records kept by the receiving Party in the ordinary course of its business, or as evidenced by proof of actual prior use by the receiving Party;

 

(iii) independently developed by the receiving Party, by Persons having no direct or indirect access to the disclosing Party’s Confidential Information provided that the receiving Party provides clear and convincing evidence of such independent development;

 

(iv) which, subsequent to disclosure, is obtained from a third Person: (A) who is lawfully in possession of the such information; (B) who is not in violation of any contractual, legal, or fiduciary obligation to either Party, as applicable, with respect to such information; and (C) who does not prohibit either Party from disclosing such information to others; or

 

(v) is further disclosed with the prior written consent of the disclosing Party, but only to the extent of such consent.

 

Customization ” means any change to the Software requested by Collaborator, which requires modification to the Software’s Source Code.

 

  2 .  

 

 

Effective Date ” means the date first written above.

 

Ehave Platform ” means the Software, Ehave Server and such devices and peripherals physically located with the Ehave Server, including all computer hardware, software, network elements, and electrical and telecommunications infrastructure located behind the Point of Access.

 

Ehave Server ” means that computer server located at Ehave’s premises, or a third party provider of hosting and/or network services, that houses the Software.

 

Fees ” means the charges, as set out in Exhibit “B” attached hereto, to be paid by Collaborator to Ehave for the performance of the Services.

 

Governmental Authority ” means any domestic, foreign or supranational government, whether federal, provincial, state, territorial or municipal; and any governmental agency, ministry, department, tribunal, commission, bureau, board or other instrumentality, including international institutions, exercising or purporting to exercise legislative, judicial, regulatory or administrative functions of, or pertaining to, government.

 

Implementation Plan ” has the meaning ascribed to it in Section 4(a).

 

Intellectual Property ” means any property, tangible or intangible, that may be subject to Intellectual Property Rights, including without limitation, ideas, formulae, algorithms, concepts, techniques, processes, procedures, approaches, methodologies, plans, systems, research, information, documentation, data, data compilations, specifications, requirements, designs, diagrams, programs, inventions, technologies, software (including its source code), tools, products knowledge, know-how, including without limitation, trade secrets, and other materials or things.

 

Intellectual Property Rights ” means (a) any and all proprietary rights anywhere in the world provided under (i) patent law; (ii) copyright law, including moral rights; (iii) trademark law; (iv) design patent or industrial design law; (v) semiconductor chip or mask work law; (vi) trade secret law; (vii) privacy law; or (viii) any other statutory provision or common law principle applicable to this Agreement which may provide a right in either (A) Intellectual Property; or (B) the expression or use of Intellectual Property; and (b) any and all applications, registrations, licenses, sub-licenses, franchises, agreements or any other evidence of a right in any of the foregoing.

 

Licensed Materials ” means collectively the Ehave Platform and the User Documentation.

 

Objectionable Content ” means content that infringes any Applicable Laws, regulations or third party rights, and content which is obscene, indecent, pornographic, seditious, offensive, defamatory, threatening, liable to incite racial hatred, menacing, blasphemous, misleading, deceptive or in breach of any person’s Intellectual Property Rights.

 

Party ” means either Ehave or Collaborator; and “ Parties ” means both of them.

 

Person ” means any individual, estate, sole proprietorship, firm, partnership, unincorporated association, unincorporated syndicate, unincorporated organization, limited liability company, corporation, body corporate, trustee, trust, Governmental Authority or other entity or organization and includes any successor to any of the foregoing.

 

Point of Access ” means Ehave’s, or its subcontractor’s, border router, which is used to establish connectivity from the Ehave Platform to Ehave’s, or its subcontractor’s, Internet provider, or the public Internet.

 

Personal Information ” means any information, including any information identifiable to an individual that is protected under applicable Privacy Legislation.

 

  3 .  

 

 

Privacy Legislation ” means the Personal Information and Protection of Electronic Documents Act (Canada), the Personal Health Information Protection Act , 2004 (Ontario) and any other Canadian, federal or provincial, or other Governmental Authority personal information protection legislation, as from time to time enacted or amended.

 

Security Requirements ” means those safeguards and controls set out in Exhibit “D”.

 

Services ” means collectively the services to be provided by Ehave to Collaborator as described and set out in this Agreement and the Exhibits referenced herein.

 

Software ” means Ehave’s proprietary patient and data management software.

 

Solution ” means the Licensed Materials configured for Collaborator in accordance with the specifications set out in Schedule “1”.

 

Source Code ” means the human-readable form of a computer instruction, including, but not limited to, related system documentation, all comments and any procedural code.

 

Specifications ” means, with respect to the Software, the functional specifications for the performance, operation and use of the Software, as set out in the User Documentation.

 

Term ” has the meaning ascribed to it in Section 10.

 

Term Sheet ” has the meaning ascribed to it in Recital D above.

 

Transition out Period ” has the meaning ascribed to it in Section 11(f).

 

Transition-out Services ” has the meaning ascribed to it in Section 11(f).

 

User Documentation ” means the documents, user manuals and guides with respect to the operation, use and functions of the Software, which may be amended or updated by Ehave from time to time.

 

Virus ” means a piece of code usually (but not necessarily) disguised as something else that causes some unexpected and, for the victim, usually undesirable, event and which is designed so that it may automatically spread to other computer users; the term ‘Virus’ will also be deemed to include worms, cancelbots, trojan horses, harmful contaminants (whether self-replicating or not) and nuisance causing or otherwise harmful applets.

 

(b) Headings

 

The division of this Agreement into articles, sections, schedules and other subdivisions, and the inclusion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. The headings in the Agreement are not intended to be full or precise descriptions of the text to which they refer. Unless something in the subject matter or context is inconsistent therewith, references herein to Articles and Sections are to Articles and Sections of this Agreement.

 

(c) Currency

 

Unless otherwise specified, all references to monetary amounts, including the symbol “$”, are in respect of Canadian currency.

 

(d) Exhibits and Schedules

 

The following Exhibits and Schedules are a part of and are integral to this Agreement:

 

  Exhibit “A” - Authorized Users, Term, Fees, Payment Terms and Invoicing
  Exhibit “B” - Help Desk Services
  Exhibit “C” - Service Level Objectives
  Exhibit “D” - Security Requirements
       
  Schedule “1” - Development and Implementation Plan
  Schedule “2” - Collaboration Activities

 

  4 .  

 

 

(e) Entire Agreement

 

This Agreement, together with any other documents to be delivered pursuant hereto, constitutes the entire agreement between the Parties pertaining to the subject matter hereof and supersedes all prior agreements, negotiations, discussions and understandings, written or oral, between the Parties, including the Term Sheet. Except as expressly provided in this Agreement, there are no representations, warranties, conditions other agreements or acknowledgements, whether direct or collateral, express or implied, that form part of or affect this Agreement. The execution of this Agreement has not been induced by, nor do either of the Parties rely upon or regard as material, any representations, warranties, conditions, other agreements or acknowledgements not expressly made in this Agreement or in the other documents to be delivered pursuant hereto.

 

(f) Governing Law:

 

This Agreement shall be governed by, and construed and enforced in accordance with, the laws in force in the Province of Ontario (excluding any conflict of laws rule or principle which might refer such construction to the laws of another jurisdiction). The Parties hereto agree to submit to the exclusive jurisdiction of the courts of the Province of Ontario and waive any objection relating to improper venue or forum non conveniens to the conduct of any proceeding in any such court.

 

(g) Severability:

 

In the event that any provision (or any portion of a provision) of this Agreement shall for any reason be held by a court of competent jurisdiction to be invalid, illegal, or unenforceable for any reason, such invalidity, illegality or unenforceability shall not affect any other provision hereof and this Agreement shall be construed as if such invalid, illegal or unenforceable provision (or portion of a provision) had never been contained herein in regards to that particular jurisdiction.

 

2. COLLABORATION ACTIVITIES

 

The Parties acknowledge that one of the purposes of entering into this Agreement is to enhance the each of the Parties service offerings top their respective customers. In that regard, the Parties agree to perform the Collaboration Activities set out in Schedule “2” attached hereto for the duration of the Term of this Agreement.

 

3. EHAVE SERVICES GENERALLY

 

Subject to the terms and conditions contained in this Agreement and payment of the Fees by Collaborator to Ehave, Ehave shall perform the Services as set out herein to Collaborator in accordance with the terms hereof and the policies and procedures in relation to the Service, which are established by Ehave from time to time. In the event of a conflict between the preceding documents, the following shall be the order of precedence: (i) this Agreement; and (ii) the policies and procedures set out by Ehave from time to time, which may be posted on the Ehave Platform.

 

  5 .  

 

 

4. IMPLEMENTATION

 

(a) Implementation

 

Attached hereto as Schedule “1” is the development and implementation plan (the “ Implementation Plan ”), which sets out the procedures and obligations of each of the Parties in relation to the implementation of the Solution. The Parties acknowledge that at the time of execution of this Agreement that the Implementation Plan may not have been fully developed, but that the development of the detailed Implementation Plan will be the first step in respect of the development and implementation of the Solution, in which case, once approved by the Parties, the Implementation Plan so developed will be attached hereto and shall replace Schedule “1”. Once finalized the Implementation Plan may not be changed or modified by either Party, except in accordance with the procedures set out in Section 4(d).

 

(b) Customizations:

 

Collaborator acknowledges that implementation of the Solution involves configuration of the Licensed Materials, but does not include the development and deployment of any Customizations. If the Implementation Plan requires any Customizations and Ehave agrees to make such Customizations, Collaborator acknowledges and agrees that Ehave shall be the sole and exclusive owner of such Customizations and its Specifications, including all Intellectual Property Rights therein. Any such Customizations developed by Ehave shall form part of and shall be deemed Software for the purposes of this Agreement.

 

(c) Obligations

 

Each of Ehave and Collaborator shall perform their respective obligations and responsibilities set out in the Implementation Plan as necessary to accomplish the configuration and implementation of the Solution. Collaborator acknowledges that the implementation of the Solution requires decisions and input from Collaborator and for Collaborator to perform its obligations thereunder in a timely manner. In the event that Collaborator delays in providing such decisions, input or performance of its obligations, implementation of the Solution shall be correspondingly delayed. Once the implementation of the Solution is completed, Ehave shall notify Collaborator of such completion and that the Solution is ready for testing in accordance with Section 4(e).

 

(d) Change Control Process

 

Either Party may request additions, deletions or amendments in respect of the implementation of the Solution (“ Change ”). Changes shall be requested in writing signed by an authorized representative of the Party requesting the Change (“ Change Request ”). Ehave shall have no obligation to perform, and Collaborator shall have no obligation to pay for, services related to any proposed modification or change unless both Parties have agreed to the modifications or changes in writing in accordance with the procedures set forth herein. The Change Request shall include a reasonably detailed description of the scope and nature of the requested Change. If Collaborator desires a Change, Ehave shall evaluate such change as it relates to the scope of providing the Services and implementing the Solution. As soon as reasonably possible after receipt of Collaborator’ request, Ehave agrees to provide Collaborator with a written estimate of the cost, if any, of the requested Changes. The costs, if any, associated with the development of such estimate shall be borne by Collaborator. Upon Collaborator’ approval of the cost estimate and any additional terms and conditions related to such Changes, including delivery dates and payment terms provided by Ehave, the Parties shall revise the Implementation Plan and it shall replace the Implementation Plan attached hereto as Schedule “1”.

 

  6 .  

 

 

(e) Acceptance

 

The criteria (“ Acceptance Criteria ”) which the Solution is to meet and the procedures by which such criteria are to be tested (“ Acceptance Procedures ”) shall be set out in the Implementation Plan and shall follow the requirements set out in this Section 4(e). Once notified by Ehave that the Solution is ready for acceptance testing, Collaborator shall perform the tests as set out in the Acceptance Procedures. Unless otherwise set out in the Acceptance Procedures, Collaborator shall have ten (10) Business Days to perform the acceptance tests as set out in the Acceptance Procedures and to provide Ehave written notice of acceptance or non-acceptance of the Solution (the “ Acceptance Period ”). Collaborator shall not refuse to accept the Solution unless all or portions of the Solution fail to substantially perform, in any material respect, in accordance with the Acceptance Criteria. Any notice of non-acceptance shall describe the material failure of the Solution in reasonable detail and Collaborator shall provide Ehave with reasonably detailed documentation and explanations, together with underlying data, to substantiate the failure and to reasonably assist Ehave in its efforts to diagnose and correct the failure. If Collaborator gives notice to Ehave of non-acceptance of the Solution then Ehave shall investigate the reported failure in good faith and correct same. If Ehave does not correct the failure within fifteen (15) Business Days after receipt of Collaborator’ notice of non-acceptance, then Collaborator shall at its sole discretion, promptly return to Ehave all copies of the Licensed Materials under the applicable Statement of Work and any other items delivered to Collaborator by Ehave thereunder. If, within such fifteen (15) Business day period, Ehave does correct the failure, then Ehave shall give written notice to Collaborator certifying that the failure has been corrected, and another Acceptance Period of the same duration as the initial Acceptance Period shall begin and shall be governed by the provisions of this Section 4(e) upon delivery of the corrected Solution to Collaborator. If the Acceptance Procedures were conducted three (3) times and the Solution failed to pass the Acceptance Criteria on the third (3rd) try, then, at the discretion of either Party, Ehave may continue to fix the problem or terminate this Agreement in which case, Collaborator shall promptly return to Ehave all copies of the Licensed Materials and any other items delivered to Collaborator by Ehave thereunder.

 

(f) Deployment

 

Once Collaborator provides Ehave written notice of acceptance, Ehave will deploy the Solution by promoting the Solution into production in accordance with, and within the timelines set out, in the Implementation Plan.

 

5. EHAVE SYSTEM

 

(a) Provision and Access to Ehave Platform

 

The Service will require access and use of the Ehave Platform. Ehave shall operate and maintain the Ehave Platform in accordance with the terms of this Agreement, including the Service Level Objectives set out in Exhibit “C” and the Security Requirements set out in Exhibit “D”. Access to the Ehave Platform may be through a secure connection with the public Internet. Collaborator acknowledges and agrees that Ehave is not responsible or liable for any communication over the public Internet.

 

(b) Security Requirements

 

Ehave shall implement and maintain those safeguards and controls set out in Exhibit “D” to deter and for the detection, prevention and correction of any unauthorized intrusion, access or use of the Ehave Platform and Collaborator Data. Collaborator acknowledges and agrees that notwithstanding the Security Requirements, such methods and procedures may not prevent unauthorized electronic intruders to access the Ehave Platform through the Internet or through other form of electronic communication. If such unauthorized electronic intruders are able to bypass Ehave’s security protocols, firewall and safeguards, such unauthorized electronic intruder may change, delete or otherwise corrupt the contents and data contained in the Ehave Server, including the Collaborator Data. Except for the maintenance of appropriate firewall and safeguards in compliance with the Security Requirements, which are designed to frustrate access from unauthorized electronic intruders, Ehave shall not be liable to Collaborator, and hereby disclaims responsibility, with respect to any action, destructive or otherwise, by any unauthorized electronic intruder.

 

  7 .  

 

 

(c) Maintenance

 

From time to time, it will be necessary for Ehave to perform maintenance on the Ehave Platform. Such maintenance includes routine maintenance to ensure the continued provision of the Services through the continued operation of the Ehave Platform or upgrading, updating or enhancing the Ehave Platform. Ehave shall use its commercially reasonable efforts to perform such maintenance at such times to minimize the impact of any downtime of the Ehave Platform to Collaborator. To the extent Ehave is able; Ehave shall notify Collaborator in advance of any scheduled maintenance by posting a message on the Website or by sending an email to the designated Collaborator Service Manager of the scheduled maintenance time and the anticipated duration of such maintenance.

 

(d) Changes to Service

 

Ehave may, at any time, with or without notice to Collaborator (i) make changes that are necessary to comply with applicable safety, security or other statutory requirements or orders from applicable Governmental Authorities; (ii) supplement or make changes to its user documentation and to its rules of operations, access procedures, security and privacy procedures and policies; and (iii) change the components, type and location of the Ehave Platform.

 

(e) Authentication IDs

 

Ehave will provide Collaborator with that number of Authentication IDs as set out in Exhibit “A” to be distributed by Collaborator to its Authorized Users. Collaborator shall control and maintain the security of all Authentication IDs. Collaborator shall be solely responsible for all instructions, commitments and other actions or communications taken under any of Its Authentication IDs. Collaborator shall promptly report to Ehave any errors or irregularities in the Service or the Ehave Platform or any unauthorized use of any part thereof and inform Ehave immediately if any Authentication ID becomes known to any third person who is not authorized to possess such password. Collaborator hereby indemnifies and holds harmless Ehave from any actions, claims, suits, proceeding or damages made against Ehave from a third person as a result of any use of Collaborator's Authentication IDs, whether or not such use is authorized by Collaborator.

 

(f) Collaborator Data

 

Collaborator acknowledges and agrees that Ehave: (i) will not be responsible for the accuracy, completeness or adequacy of any Collaborator Data or the results generated from any Collaborator Data uploaded to the Ehave Platform and processed by the Software; (ii) has no control over any Collaborator Data or the results therefrom; (iii) does not purport to monitor Collaborator Data; and (iv) shall not be responsible to back up or maintain any back up of the Collaborator Data or portion thereof.

 

6. USE OF SERVICES

 

(a) Grant by Ehave

 

Subject to the terms and conditions of this Agreement commencing as of the Effective Date and for the duration of the Term, Ehave hereby grants to Collaborator a non-exclusive, non-transferable, revocable right, for Collaborator' internal business purposes and for that number of permitted Authorized Users as set out in Exhibit “A”, to access the Ehave Platform in accordance with the security protocols as set out herein for the purpose of:

 

  8 .  

 

 

(i) using the Software;

 

(ii) viewing and displaying the User Documentation; and

 

(iii) uploading, processing, viewing, displaying, using and downloading Collaborator Data to and from the Ehave Platform.

 

(b) Restrictions on Use

 

Any rights not granted herein are strictly reserved by Ehave. Collaborator shall not (i) permit, any third Person to use the Licensed Materials, (ii) re-license or sublicense, lease, loan or otherwise distribute the Licensed Materials to any third Person; (iii) process or permit to be processed the data of any other Person, or (iv) use the Licensed Materials or the Service in the operation of a service bureau. Collaborator shall not, and shall not permit others to, reverse engineer, decompile, disassemble or translate any software used by Ehave to deliver the Services, including the Software, or otherwise attempt to view, display or print such software, including the Software's, Source Code.

 

(c) Permitted and Authorized Users

 

Collaborator shall ensure that all Authorized Users are aware of the provisions of this Agreement, including their obligation to comply with the provisions contained herein as it relates to their use of the Services and the Software. Collaborator shall be responsible and liable for the actions and omissions of each Authorized User and their compliance of the provisions herein.

 

(d) Help Desk

 

Ehave shall make available its help desk to support Collaborator and its Authorized Users use of the Services during Business Hours on Business Days in accordance with the provisions set out in Exhibit “B”.

 

7. CUSTOMER'S OBLIGATIONS

 

(a) Grant by Collaborator

 

Collaborator hereby grants to Ehave:

 

(i)          a royalty-free, non-exclusive, non-transferable right and licence to use, copy, store and display the Collaborator Data solely for the purpose of enabling Ehave to perform the Services under this Agreement; and

 

(ii)         a royalty-free, non-exclusive, perpetual right and license to use, copy, store and display Collaborator Data on an aggregated and anonymous basis for the purposes of improving or developing enhancements to the Licensed Materials or improving or enhancing the provision of Services from Ehave.

 

(b)           Collaborator Responsibilities

 

In addition to its other obligations contained in this Agreement, Collaborator shall:

 

(i) be responsible for procuring, installing, operating, supporting and maintaining Collaborator' systems, including computer hardware and software, including browsers, necessary for Collaborator to access the Services (the minimum requirements of which are as stipulated on Exhibit “A”);

 

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(ii) be responsible for procuring and maintaining communication services, including high speed Internet connections between Collaborator' systems and the Ehave Platform;

 

(iii) assign, record and control the issuance and use of all Authentication IDs;

 

(iv) be responsible for the accuracy, completeness and adequacy of all Collaborator Data; for the management, manipulation and processing of Collaborator Data; and their own back up and maintenance of all Collaborator Data beyond what is offered by Ehave;

 

(v) use of the Services, Ehave Platform and Software, by itself and Authorized Users in accordance with Applicable Laws, the terms of this Agreement and the User Documentation; and

 

(vi) comply, at all times, with all applicable legal and regulatory requirements and with Ehave's conduct and security policies in respect of the use of the Services and the Software.

 

(c) Prohibited Activities

 

Collaborator shall not:

 

(i) use the Services for improper or unlawful purposes;

 

(ii) include, or knowingly allow others to include, any Objectionable Content or introduce Viruses to the Ehave Platform and shall institute such security procedures and safeguards as Collaborator deems necessary to prevent the posting, uploading or inclusion of any Objectionable Content or Viruses to the Ehave Platform;

 

(iii) intercept or attempt to intercept any messages transmitted to and from the Ehave Platform that are not intended for Collaborator or any of its Authorized Users;

 

(iv) take any action that imposes an unreasonable or disproportionately large load without unreasonable notice on the Ehave Platform;

 

(v) use the Services or the Software to develop any derivative works or any functionally compatible or competitive software;

 

(vi) copy or download the Software or any other software used by Ehave to provide the Services and which is contained within the Ehave Platform; or

 

(vii) remove any copyright or other proprietary rights notice on the Software or the User Documentation or any copies thereof.

 

(d) Viruses

 

If Ehave, in its absolute discretion, forms the view that any Collaborator Data or any other information or files uploaded by Collaborator or any of its Authorized Users contains or includes a Virus or is considered Objectionable Content, Ehave may remove such Collaborator Data, information or file from the Ehave Platform and take such other action as Ehave deems necessary to protect the integrity and operation of the Services, Ehave Platform and the Software. Any costs associated with such removal may be charged by Ehave to Collaborator. Ehave shall notify Collaborator of its actions under this Section 7(d) as soon as reasonably possible.

 

8. AUDIT RIGHTS

 

(a) Ehave’s Audit Right

 

(i) Ehave reserves the right to monitor and audit Collaborator’s and its Authorized Users’ usage of the Services for the purpose of (among others) ensuring compliance with the terms of this Agreement, including without limitation Section 7(c). Any such audit may be carried out by Ehave or a third party authorised by Ehave, at Ehave’s expense.

 

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(ii) If Ehave’s monitoring activities or its audit pursuant to Section 8(a)(i) reveals that Collaborator’s or any Authorized User’s use of the Services is in contravention of this Agreement, including any Applicable Laws, then Ehave may immediately suspend and discontinue the Services to Collaborator or to that specific End User, at Ehave’s sole discretion and without notice to Collaborator. Ehave shall notify Collaborator of such suspension as soon as reasonably possible, which notice shall set out the circumstances of the suspension. If Collaborator rectifies the situation to Ehave’s satisfaction, then Ehave will reinstate the Services. If Collaborator does not rectify the situation within a reasonable period of time, then it shall be deemed a material breach of this Agreement and Ehave shall be free to terminate this Agreement under Section 11(c) and pursue any remedies available to it.

 

(iii) If the audit pursuant to Section 8(a)(i) reveals the use of the Services by Collaborator is in excess of the permitted level set out in Exhibit “A”; or (ii) any Authentication ID has been provided to a person who is not an Authorized User, or access to the Ehave Platform was otherwise granted to a person who is not an Authorized User, or the number of Authentication IDs granted by Collaborator exceeds the number of Authorized Users set out in Exhibit “A”; Collaborator shall, without delay, pay Ehave the amount of Fees required for such level of use or number of Authorized Users based on Ehave’s then current list price for the Services. In case of unauthorized use of the Services and Software, whether by Collaborator, an Authorized User or another person, Ehave reserves the right to deny access to the Services, the Ehave Platform and/or the Software to Collaborator or such Authorized User or other person, by blocking without prior notification the IP address(es) used to access the Ehave Platform and/or Software by such Authorized User or other person.

 

(b) Collaborator’ Regulatory Audits

 

(i) Ehave shall provide to such auditors (including external auditors and Collaborator’s internal audit staff or agents) as Collaborator may designate in writing, access to the facility at which the Services are being performed, to systems and assets used by Ehave to provide the Services, to all appropriate Ehave personnel and subcontractors, and to the data, records and supporting documentation maintained by Ehave with respect to the Services for the purpose of performing audits and inspections of Ehave to enable Collaborator to satisfy applicable statutory and regulatory requirements or to certify compliance with Applicable Laws, and solely to the extent required to satisfy such requirements. The scope of such audits shall be limited solely to that which is necessary to enable Collaborator to satisfy its statutory or regulatory compliance obligations and may include, without limitation, and when applicable, (i) Ehave’s practices and procedures; (ii) controls as set out and which forms part of the Security Requirements; and (iii) disaster recovery and back-up procedures.

 

(ii) Collaborator and its auditors shall use commercially reasonable efforts to conduct such audits in a manner that will result in a minimum of inconvenience and disruption to Ehave’s business operations. Audits may be conducted only during normal business hours. Collaborator will provide Ehave with reasonable prior written notice of each audit, but with at least thirty (30) calendar days. Collaborator and its auditors will not be entitled to audit (i) data or information of other customers or clients of Ehave; or (ii) any Confidential Information of Ehave that is not necessary for purposes of the audit. Ehave will use commercially reasonable efforts to cooperate in the audit, will provide facilities to conduct the audit, will, to the extent applicable and reasonably practicable, convert any technical records maintained in an electronic format into a readily understandable format, or a format that can be readily understood without need for special equipment or specialized knowledge, will make available on a timely basis the information reasonably required to conduct the audit and will assist the designated employees and agents of Collaborator or its auditors as reasonably necessary. To the maximum extent possible, audits shall be designed and conducted (in such manner and with such frequency) so as not to interfere with the provision of the Services. All information learned or exchanged in connection with the conduct of an audit, as well as the result of any audit, constitutes Ehave Confidential Information. Each Party shall maintain during the Term and thereafter as required by Applicable Law, a complete and accurate set of files, records and books and accounts of their transactions hereunder.

 

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(iii) In addition to the audit referred to in Section 8(b)(i), Ehave acknowledges that Collaborator may be subject to statutory audits and other requests for information from taxation and other Governmental Authorities. Collaborator shall notify Ehave in a timely manner after being contacted by such Governmental Authority regarding such an audit. Ehave shall respond reasonably to any requests from such Governmental Authority regarding Collaborator according to Collaborator’ direction, subject to Ehave’s obligations under Applicable Law. Except as otherwise required by Applicable Law, if Collaborator is contacted by a Governmental Authority regarding such an audit, Ehave may provide information to such Governmental Authority only under the direction of Collaborator. Ehave shall provide such information in a timely manner either to Collaborator or, at Collaborator’ request, directly to the applicable Governmental Authority. As part of this audit process, Ehave may be required to answer questions from Governmental Authorities with respect to its processing of certain transactions for Collaborator. Collaborator shall send a representative to be present at all such discussions with such Governmental Authorities if and to the extent not prohibited by Applicable Law.

 

(iv) Any audits or provision of information under this Section 7(b) will be conducted at Collaborator’ expense.

 

(c) Coordination of Regulatory Audits

 

Collaborator acknowledges that the audits set out in Section 8(b) are disruptive to the provision of the Services. In order to satisfy all audit requests from Collaborator and to Ehave’s other customers; in the event there are multiple requests, Collaborator hereby agrees that Ehave may hire an independent third party auditor to conduct an audit in satisfaction of Section 8(b)(i) and to provide the results of such audit to Collaborator in lieu of Collaborator conducting its own audit pursuant to Section 8(b)(i). Alternatively and if consented to by Ehave, Collaborator shall coordinate with Ehave regarding the timing, scope and processes regarding of any audit conducted by Collaborator under Section 8(b)(i) to minimize any disruption to the Services and duplication of effort with any other similar audit.

 

(d) Security Audit

 

On an annual basis, Ehave shall conduct and provide Collaborator the results of an audit conducted in accordance with the Statement on Standards for Attestation Engagements (SSAE) No. 16, Service Organization Control (SOC) 2 Report type audit or similar audits in respect of its operations. Ehave shall also provide Collaborator written notice and detail of any deficiencies that Ehave’s auditors (whether internal or external) found through the conduct of such audits and the remediation efforts that Ehave shall undergo to rectify such deficiencies.

 

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9. FEES AND PAYMENT

 

(a) Fees

 

Fees, payment terms and invoicing are as set out in Exhibit “A”. The Fees do not include applicable taxes. Ehave shall invoice the Fees and applicable taxes in accordance with the provisions set out in Exhibit “A”. Collaborator agrees to pay the Fees and applicable taxes in accordance with the payment terms as set out in Exhibit “A”.

 

(b) Taxes:

 

Collaborator shall pay any and all taxes, however designated or incurred, which are paid or payable as a result of or otherwise in connection with the transactions contemplated in this Agreement including, without limitation, federal, provincial and local, excise, sales, use, goods and services, harmonized, value added and any taxes or other amounts in lieu thereof, except for any taxes based on Ehave’s net income.

 

(c) Interest on Late Payments:

 

Where Collaborator fails to pay any amount in accordance with the payment terms set out in Exhibit “A”, Ehave shall have the right, in addition to any other rights or remedies available to it, to charge, and Collaborator shall pay, interest on such overdue amounts at the rate of 1% per month calculated daily, compounded monthly (12.68% per annum) both before and after any court judgement in respect of the same from the date such payment was due.

 

10. TERM

 

This term of this Agreement and the rights and obligations of the Parties hereto shall commence as of the Effective Date and shall continue for such period set out in Exhibit “A” attached hereto (the “ Initial Term ”), unless terminated earlier in accordance with the provisions contained herein. Unless either Party notifies the other at least one (1) month prior to the expiration of the Initial Term or the then Renewal Term, this Agreement and the rights and obligations of the Parties hereto shall renew for an additional period of one (1) year (each a “ Renewal Term ”; the Initial Term and any Renewal Terms collectively referred to as the “ Term ”).

 

11. SUSPENSION AND TERMINATION

 

(a) Suspension of Services:

 

In the event that Collaborator does not pay the Fees or any portion thereof, when due, Ehave may immediately suspend Collaborator’s and each of its Authorized Users’ right to receive the Services and access and use of the Software.

 

(b) Collaborator’ Right to Terminate:

 

Subject to Sections 11(e) and 11(g), Collaborator may terminate this Agreement and the rights granted hereunder without prejudice to enforcement of any other legal right or remedy, immediately upon giving written notice of such termination if Ehave:

 

(i) breaches any material provision of this Agreement and such breach continues for a period of twenty (20) Business Days after delivery of a written notice by Collaborator requiring Ehave to correct such failure;

 

(ii) commits a Service Level Termination Event; or

 

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(iii) becomes or is adjudicated insolvent or bankrupt, admits in writing its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; or Ehave applies for or consents to the appointment of any receiver, trustee or similar officer for it or for all or any substantial part of its property; or such receiver, trustee or similar officer is appointed without the consent of Ehave; or Ehave institutes any bankruptcy, insolvency, reorganization, moratorium, arrangement, readjustment or debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, or any such proceeding is instituted against Ehave and is not dismissed within sixty (60) Business Days; or any judgment, writ, warrant or attachment or execution of similar process is issued or levied against a substantial part of Ehave’s property and remains unsatisfied for sixty (60) Business Days.

 

(c) Ehave’s Right to Terminate:

 

Subject to Sections 11(e) and 11(g), Ehave may terminate this Agreement and the rights granted hereunder without prejudice to enforcement of any other legal right or remedy, immediately upon giving written notice of such termination if Collaborator:

 

(i) fails to pay in full any sum owing by it under this Agreement by the due date thereof and such failure continues for a period of ten (10) Business Days after delivery of a written notice by Ehave requiring Collaborator to correct such failure;

 

(ii) infringes the Intellectual Property Rights of Ehave;

 

(iii) breaches any other material provision of this Agreement and such breach continues for a period of twenty (20) Business Days after delivery of a written notice by Ehave requiring Collaborator to correct such failure; or

 

(iv) becomes or is adjudicated insolvent or bankrupt, admits in writing its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; or Collaborator applies for or consents to the appointment of any receiver, trustee or similar officer for it or for all or any substantial part of its property; or such receiver, trustee or similar officer is appointed without the consent of Collaborator; or Collaborator institutes any bankruptcy, insolvency, reorganization, moratorium, arrangement, readjustment or debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, or any such proceeding is instituted against Collaborator and is not dismissed within sixty (60) Business Days; or any judgment, writ, warrant or attachment or execution of similar process is issued or levied against a substantial part of Collaborator’ property and remains unsatisfied for sixty (60) Business Days.

 

(d) Waiver:

 

The waiver by either Party of a breach or default of any provision of this Agreement by the other Party shall not be effective unless in writing and shall not be construed as a waiver of any succeeding breach of the same or of any other provision. Nor shall any delay or omission on the part of either Party to exercise or avail itself of any right, power or privilege by such Party shall constitute a waiver.

 

(e) Effect of Termination:

 

Upon the termination of this Agreement for any reason:

 

(i) the Parties shall implement the Transition-Out Services pursuant to Section 11(f);

 

(ii) Ehave shall terminate and invalidate any Authentication IDs associated with Collaborator and any of its Authorized Users;

 

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(iii) Ehave shall, but not earlier than ten (10) Business Days after the termination or expiration of this Agreement, destroy any copies of the Collaborator Data contained in the Ehave Platform;

 

(iv) Collaborator shall pay to Ehave the full amount of all Fees payable hereunder as of the date of termination, if any, whether already invoiced or not (including any amounts due as late payment charges), and any other monies owing to Ehave hereunder; and

 

(v) each Party will return to the other Party all Confidential Information of the other Party which is then in its possession or control.

 

Collaborator acknowledges and agrees if Collaborator fails to download the Collaborator Data from the Ehave Platform in a timely manner, it may not have access to such information or such information may be destroyed by Ehave in accordance with the terms of this Section 11(e). Subject to Section 11(f), it is Collaborator' responsibility to download and obtain all Collaborator Data prior to the expiration or termination of this Agreement. Ehave shall have no responsibility, or any liability to Collaborator, for maintaining or providing to Collaborator the Collaborator Data or any portion thereof from and after the twentieth (20 th ) Business Day after the termination or expiration of this Agreement.

 

(f) Transition Assistance:

 

Commencing at the earlier of (i) one (1) month prior to the scheduled expiration date of this Agreement; or (ii) the delivery of any notice of termination or non-renewal of this Agreement, and continuing through the effective date of expiration or termination and for a period of twenty (20 Business Days thereafter (the “ Transition-out Period ”), Ehave will, to the extent requested by Collaborator, provide to Collaborator (or at Collaborator's request to Collaborator's designee) such reasonable cooperation, assistance and services to facilitate the orderly wind down, transition and migration of the Services and transfer of the Collaborator Data from Ehave to Collaborator or Collaborator's designee (the “ Transition-out Services ”). Collaborator will continue to pay for Services properly rendered during the Transition-out Period, in each case until they are wound down or discontinued. For additional services and resources required to provide Transition-out Services, the applicable rate card then in effect under this Agreement will apply. As part of the Transition-out Services, Collaborator shall download any and all Collaborator Data contained on the Ehave Platform and store such Collaborator Data on Collaborator's systems.

 

(g) Survival of Covenants:

 

Notwithstanding the termination or expiration of this Agreement for any reason, the covenants set out in this Section 11(g) and in Sections 9(c), 11(e), 11(f), 12, 13, 14, 15, 17, 20(a) and those provisions set out in Section 1 as necessary to interpret the foregoing provisions, of this Agreement shall survive any such termination or expiration.

 

12. OWNERSHIP

 

(a) Ehave’s Ownership

 

Collaborator acknowledges and agrees that, as between Collaborator and Ehave, Ehave owns all worldwide right, title and interest, including all Intellectual Property Rights, in and to: (i) the Ehave Platform; (ii) Software: (iii) User Documentation; and (iv) any modifications, enhancements, upgrades, updates or Customization to the Software or User Documentation. Collaborator does not acquire any rights, title or ownership interests of any kind whatsoever, express or implied, in any of the foregoing other than the licenses granted herein.

 

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(b) Collaborator’ Ownership

 

Ehave acknowledges and agrees that all worldwide right, title and interest including, all Intellectual Property Rights in and to the Collaborator Data shall be the exclusive property of Collaborator. Ehave does not acquire any rights, title or ownership interest of any kind whatsoever, express or implied, in any of the Collaborator Data, other than the license granted herein.

 

13. CONFIDENTIALITY

 

(a) Obligation:

 

Each Party acknowledges that all Confidential Information consists of confidential and proprietary information of the disclosing Party. Each Party shall, and shall cause its employees, agents and contractors to hold Confidential Information of the other Party in confidence, and shall use the same degree of care by instruction, agreement or otherwise, to maintain the confidentiality of the other Party’s Confidential Information that it uses to maintain the confidentiality of its own Confidential Information, but with at least a reasonable degree of care commensurate with the nature and importance of such Confidential Information. Each Party agrees not to make use of Confidential Information other than for the exercise of rights or the performance of obligations under this Agreement, and not to release, disclose, communicate it or make it available to any third person other than employees, agents and contractors of the Party who reasonably need to know it in connection with the exercise of rights or the performance of obligations under this Agreement.

 

(b) Subpoena:

 

In the event that any Party receives a request to disclose all or any part of the Confidential Information under the terms of a valid and effective subpoena or order issued by a court of competent jurisdiction or by a Governmental Authority, such Party agrees to (i) immediately notify the other Party of the existence, terms and circumstances surrounding such a request; (ii) consult with the other Party on the advisability of taking legally available steps to resist or narrow such request; and (iii) if disclosure of such Confidential Information is required, exercise its best [commercially reasonable] efforts to obtain an order or other reliable assurance that confidential treatment will be accorded to such portion of the disclosed Confidential Information which the other Party so designates.

 

(c) Injunctive Relief:

 

Each Party acknowledges and agrees that any unauthorized use or disclosure by it of any of the other Party's Confidential Information, in whole or part, will cause irreparable damage to the disclosing Party, that monetary damages would be an inadequate remedy and that the amount of such damages would be extremely difficult to measure. The receiving Party agrees that the disclosing Party shall be entitled to seek temporary and permanent injunctive relief to restrain the receiving Party from any unauthorized disclosure or use. Nothing in this Agreement shall be construed as preventing the disclosing Party from pursuing any and all remedies available to it for a breach or threatened breach of a covenant made in this Section 13, including the recovery of monetary damages from the receiving Party.

 

14. REPRESENTATIONS, WARRANTIES AND DISCLAIMERS

 

(a) Mutual Representations of the Parties:

 

Each Party represents to the other that:

 

(i) it is a company duly organized, validly existing and in good standing under the laws of its incorporation and it has full power and authority to enter into this Agreement and to perform each and every covenant and agreement herein contained;

 

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(ii) this Agreement has been duly authorized, executed and delivered by it and constitutes a valid, binding and legally enforceable agreement of it;

 

(iii) the execution and delivery of this Agreement, and the performance of the covenants and agreements herein contained, are not, in any manner or to any extent, limited or restricted by, and are not in conflict with, any commercial arrangements, obligations, contract, agreement or instrument to which it is either bound or subject; and

 

(iv) the execution and delivery of this Agreement and the performance of its covenants and agreements herein contained shall comply in all respects with all laws and regulations to which it or its business is subject.

 

(b) Additional representations of Ehave:

 

Ehave represents to Collaborator that Ehave possesses the knowledge, skill and experience necessary for the provision and completion of the Services in accordance with the terms of this Agreement.

 

(c) Warranties

 

Ehave warrants that:

 

(i) it shall perform the Services in a professional and timely manner in accordance with the standards of its industry; and

 

(ii) for the duration of the Term, the Software will substantially operate in accordance with, and have the functions set out in, the Specifications.

 

(d) Exclusion of Other Warranties:

 

Except as otherwise expressly stated in this Agreement, there are no express or implied warranties or conditions in relation to the Service, the Ehave Platform, Software or User Documentation that are the subject matter of this Agreement, including implied warranties or conditions of merchantable quality, fitness for a particular purpose, or non-infringement, or that the services, Ehave Platform, Software or User Documentation will meet Collaborator’ needs or will be available for use at any particular time or will be error free. Under no circumstances will Ehave be liable for the results of Collaborator use or misuse of the Services, including any use contrary to Applicable Law.

 

15. INSURANCE

 

(a) Required Insurance: Ehave shall, at all times during the currency of this Agreement and for a period of one (1) year after the termination or expiration of this Agreement, maintain the following policies of insurance in effect:

 

(i) a comprehensive general liability insurance policy, with minimum coverage of two million dollars dollars ($2,000,000) in the annual aggregate for product liability and completed operations, covering bodily and personal injury, including death, and property damage, including loss of use; and

 

(ii) an information and network technology blended liability insurance policy with an insured limit of at least two million dollars ($2,000,000) in the aggregate.

 

(b) Evidence of Insurance: Upon the execution of this Agreement or at any time at Collaborator' request during the term of this Agreement, Ehave shall provide Collaborator with evidence of the aforementioned insurance coverage in the form of a certificate of insurance acceptable to Collaborator. Ehave will not permit any such insurance policy to lapse. In the event of any material change or cancellation of the required insurance policies, Ehave will provide thirty (30) calendar days' prior written notice to Collaborator and will promptly replace such insurance policy in accordance with this Section 12, without lapse in coverage.

 

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16. INDEMNITIES

 

(a) Intellectual Property Indemnity

 

Ehave shall defend at its own expense any claim, proceeding or suit (a “ Claim ”) brought against Collaborator or any of its Authorized Users to the extent such Claim alleges that any of the Service, Software or User Documentation furnished hereunder infringes any Canadian copyright, patent or registered trademark of a third person, and will indemnify and pay all damages which by final judgment or settlement may be assessed against Collaborator on account of such infringement, provided that:

 

(i) Ehave is given prompt written notice of the Claim or of any allegations or circumstances known to Collaborator which could result in a Claim;

 

(ii) Ehave is given all reasonable information and assistance from Collaborator, at Ehave’s expense, which Ehave may require to defend the Claim;

 

(iii) Ehave is given sole control of the defence of the Claim, and all negotiations for the settlement or compromise thereof; and

 

(iv) the alleged infringement does not result from any non-permitted uses, alterations, modifications or enhancements carried out by Collaborator or on its behalf by a third person.

 

If such Claim has occurred, or in Ehave’s opinion is likely to occur, Ehave may, at its option and expense, either procure for Collaborator the right to continue using the Service, Software or User Documentation or modify the same so that it becomes non-infringing without loss of functionality, or if none of the foregoing alternatives is reasonably available and at Ehave’s discretion, discontinue the Service and use of the Software and refund to Collaborator any pre-paid and unused portion of the Fees paid by Collaborator in respect of use of the Services. The foregoing states the entire obligations of Ehave with respect to any infringement of Intellectual Property Rights of any third Person.

 

(b) Collaborator' Indemnity

 

Collaborator shall defend at its own expense any Claim brought against Ehave, its affiliates, directors, officers, employees and agents, to the extent such Claim: (i) alleges, directly or indirectly, that any Collaborator Data infringes any Canadian copyright, patent or registered trademark of a third person; alleges, directly or indirectly, that the Collaborator Data contains any Objectionable Content; or (iii) is in relation to Collaborator's use of the Service, including contrary to Applicable Law, except however to the extent as Ehave has indemnified Collaborator pursuant to Section 16(a); provided that Collaborator is given:

 

(i) prompt written notice of the Claim or of any allegations or circumstances known to Ehave which could result in a Claim;

 

(ii) all reasonable information and assistance from Ehave, at Collaborator's expense, which Collaborator may require to defend the Claim; and

 

(iii) sole control of the defence of the Claim, and all negotiations for its settlement or compromise thereof.

 

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17. LIMITATION OF LIABILITY

 

(a) Consequential Damages

 

Subject to Section 17(c), in no event shall either Party be liable to the other for any consequential, incidental, exemplary or punitive damages even if advised in advance of the possibility of such damages. Further Ehave shall not be liable to Collaborator for any lost revenue, lost profit or lost savings.

 

(b) Limitation of Direct Damages

 

Subject to Section 17(c), in respect of any claim, demand or action by Collaborator against Ehave or any of its employees, directors, officers, or agents whether based in contract, tort (including negligence), or otherwise, including a breach by Ehave of any of its obligations under this Agreement (whether or not a fundamental breach), the Collaborator’ sole and exclusive remedy shall be to receive from Ehave payment for actual and direct damages to a maximum aggregate amount equal to the amount paid by Collaborator to Ehave in the three (3) months preceding the date of the event.

 

(c) Exceptions to Limitations

 

Notwithstanding Sections 17(a) and 17(b), neither Party excludes or limits any liability for:

 

(i) personal injury or death to the extent that such injury or death results from the negligence or wilful misconduct of a Party or its employees;

 

(ii) fraud, fraudulent misrepresentation or fraudulent concealment;

 

(iii) the Party’s obligations set out in Sections 6(a), 6(b), 6(c), 7(c), 13 or 16; or

 

(iv) Collaborator’ payment obligations contained herein.

 

18. FORCE MAJEURE

 

Except for any obligation to make payments, any delay or failure of either Party to perform its obligations under this Agreement or under any Exhibit attached hereto shall be excused if, and to the extent, that the delay or failure is caused by an event or occurrence beyond the reasonable control of the Party and without its fault or negligence, such as, by way of example and not by way of limitation, acts of God, action by any Governmental Authority (whether valid or invalid), fires, flood, wind storms, explosions, riots, natural disasters, wars, terrorist acts, sabotage, labour problems (including lock-outs, strikes and slow downs, except for any labour problems of the Party claiming a force majeure event), or court order or injunction; provided that written notice of delay (including anticipated duration of the delay) shall be given by the affected Party to the other Party within two (2) Business Days of the affected Party first becoming aware of such event. If requested by the unaffected Party, the affected Party shall, within two (2) Business Days of the request, provide adequate assurances that the delay shall not exceed ten (10) Business Days. In the event that the force majeure event lasts for fifteen (15) Business Days or longer, either Party shall have the option to terminate this Agreement upon written notice to the other without liability.

 

19. DISPUTE RESOLUTION

 

(a) Discussions:

 

Each Party agrees to utilize all reasonable efforts to resolve any dispute, whether arising during the term of this Agreement or at any time after the expiration of termination of this Agreement, which touches upon the validity, construction, meaning, performance or affect this Agreement or the rights and liabilities of the Parties or any matter arising out of or connected with this Agreement, promptly and in an amicable and good faith manner by negotiations between the Parties.

 

  19 .  

 

 

(b) Mediation:

 

Either Party may submit a dispute to mediation by providing written notice to the other Party. In the mediation process, the Parties will try to resolve their differences voluntarily with the aid of a single, impartial mediator, who shall attempt to facilitate negotiations. The mediator shall be selected by agreement of the Parties. If the Parties cannot otherwise agree on a mediator within five (5) Business Days, a single mediator shall be designated by the ADR Institute of Canada, Inc. or any successor organization (“ ADR ”) at the request of a Party. Any mediator so designated must not have a conflict of interest with respect to any Party. The mediation shall be conducted as specified by the mediator and agreed upon by the Parties. The Parties agree to discuss their differences in good faith and to attempt, with the assistance of the mediator, to reach an amicable resolution of the dispute. The mediation shall be treated as a settlement discussion and therefore shall be confidential. The mediator may not testify for either Party in any later proceeding relating to the dispute. No recording or transcript shall be made of the mediation proceedings. Each Party shall bear its own costs and legal fees in the mediation. The Parties shall share the fees and expenses of the mediator equally.

 

(c) Arbitration:

 

Subject to Section 19(d), any dispute that has proceeded through mediation established in Section 19(b) without resolution may be submitted to arbitration. Any arbitration conducted pursuant to this Agreement shall take place in the City of Toronto, Ontario. The costs of the arbitration shall be borne equally by the Parties or as may be specified in the arbitrator's decision. The provisions of the Arbitration Act of Ontario, as amended, except as otherwise provided in this Agreement shall govern the arbitration process. The Parties agree to exclude the appeal provisions of the Arbitration Act, as may be amended from time to time, and in particular, section 45 thereof. The determination arising out of the arbitration process shall be final and binding upon the Parties to the arbitration.

 

(d) Exceptions to Arbitration:

 

The following matters shall be excluded from arbitration under this Agreement:

 

(i)          any disputes involving third Persons;

 

(ii)         breach of confidentiality by either Party; and

 

(iii)        intellectual property claims, whether initiated by third Persons or by one of the Parties to this Agreement.

 

20. MISCELLANEOUS

 

(a) Notice:

 

Every notice or other communication hereunder shall be deemed to have been duly given and made if in writing and if served by personal delivery upon the Party for whom it is intended, if delivered by registered or certified mail, return receipt requested, or by a national courier service, or if sent by fax (receipt of which is confirmed) to the Person at the address set forth below, or such other address as may be designated in writing hereafter, in the same manner, by such Person:

 

  20 .  

 

 

To: Ehave To: Aequus Pharmaceuticals
2020 Winston Park Dr. 200 Granville Street
Suite 201 Suite 2820
Oakville, Ontario Vancouver, BC
Canada Canada
M5H 3E5 V6C 1S4
   
Attention: Prateek Dwivedi, President & CEO Attention: Doug Janzen, Chairman and CEO

 

Any such notification shall be deemed delivered (a) upon receipt, if delivered personally, (b) on the next Business Day, if sent by national courier service for next Business Day delivery or if sent by fax. Any correctly addressed notice or last known address of the other Party that is relied on herein that is refused, unclaimed, or undeliverable because of an act or omission of the Party to be notified as provided herein shall be deemed effective as of the first date that said notice was refused, unclaimed, or deemed undeliverable by the postal authorities by mail, through messenger or commercial express delivery services.

 

(b) Modifications:

 

The Parties may modify this Agreement only upon written agreement.

 

(c) Further Assurances:

 

Each Party shall take such action (including, but not limited to, the execution, acknowledgement and delivery of documents) as may reasonably be requested by the other Party for the implementation or continuing performance of this Agreement.

 

(d) Relationship:

 

The Parties are independent contractors and no other relationship is intended. Nothing herein shall be deemed to constitute either Party as an agent, representative or employee of the other Party, or both Parties as joint venturers or partners for any purpose. Neither Party shall act in a manner that expresses or implies a relationship other than that of independent contractor. Each Party shall act solely as an independent contractor and shall not be responsible for the acts or omissions of the other Party. Neither Party will have the authority or right to represent nor obligate the other Party in any way except as expressly authorized by this Agreement.

 

(e) Enurement:

 

This Agreement shall enure to the benefit of and be binding upon each of the Parties hereto and their permitted successor and assigns.

 

(f) No Assignment:

 

Neither this Agreement nor any rights or obligations hereunder shall be assignable by a Party without the prior written consent of the other Party.

 

(g) Counterparts and Facsimile Execution and Delivery:

 

This Agreement may be executed in counterparts, each of which shall be deemed to be an original and both of which together shall constitute one and the same instrument. To evidence its execution of an original counterpart of this Agreement, a Party may send a copy of its original signature on the execution page hereof to the other Party by facsimile transmission or email and such transmission shall constitute delivery of an executed copy of this Agreement to the receiving Party as of the date of receipt thereof by the receiving Party or such other date as may be specified by the sending Party as part of such transmission.

 

  21 .  

 

 

(h) Language:

 

It is the Parties desire and agreement that this Agreement and all Exhibits and associated documentation be drafted in English. Les Parties conviennent que la présente convention et tous les documents s’y rattachant, soient rédigés en anglais.

 

IN WITNESS WHEREOF, each Party hereto has caused this Agreement to be duly executed as of the date first written above by an officer authorized in that behalf. 

 

EHAVE, INC.   AEQUUS PHARMACEUTICALS INC.
         
per: /s/ Prateek Dwivedi   per: /s/ Doug Janzen
Name: Prateek Dwivedi   Name: Doug Janzen
Title: CEO   Title: Chairman and CEO

 

  22 .  

 

 

EXHIBIT “A”
AUTHORIZED USERS, TERM, FEES, PAYMENT TERMS AND INVOICING

 

This Exhibit “A” is attached to and forms a part of the Services Agreement dated Mach 2, 2017 and made between Ehave, Inc. (“ Ehave ”) and Aequus Pharmaceuticals Inc. (“ Collaborator ”) (the “ Agreement ”).

 

1. USE METRICS

 

Fees will be based on the number of patient records that Collaborator in blocks of 100. Once Collaborator has exceeded the number of patient records for a block, then Collaborator must pay the applicable fee for the next block of patients. Once Collaborator has moved to the next block, it cannot return to a lower level of blocks.

 

2. Expiry Date

 

The Initial Term of this Agreement shall commence on the Effective Date and shall continue for three years.

 

3. Fees

 

For the first block of 100 patient records the fee shall be $40,000 per month. For the second and subsequent blocks of 100 patient records the fee shall be $7,500 per block per month. Collaborator and Ehave to agree on changes to list pricing based on scale, scope and duration of trials based on published trial protocols.

 

Professional Services Fees for consultation and integration deemed out of scope are billed at $150/hour.

 

4. INVOICING AND PAYMENT TERMS

 

(a) Invoicing:

 

Ehave shall invoice Collaborator monthly in arrears.

 

Invoices shall be submitted electronically to the following address:

 

Suite 2820 – 200 Granville Street, Vancouver, BC, Canada, V6C 1S4 or email to Ann Fehr, CFO, Aequus Pharmaceuticals Inc at afehr@aequuspharma.ca

 

(b) Payment Terms:

 

All invoices are payable by Collaborator net 30, however, interest on late payments will accrue only from the date that is 10 calendar days from the date of the invoice.

 

  23 .  

 

 

EXHIBIT “B”
HELP DESK SERVICES

 

This Exhibit “B” is attached to and forms a part of the Software as a Service Agreement dated March 2, 2018 and made between Ehave, Inc. (“ Ehave ”) and Aequus Pharmaceuticals Inc. (“ Collaborator ”) (the “ Agreement ”).

 

1. DEFINITIONS

 

Any capitalized terms not defined in this Exhibit “B” shall have the meaning ascribed to them in the Agreement. In addition to the definitions contained in the main part of the Agreement, the following terms shall have the following meanings for the purposes of this Exhibit “B”:

 

Collaborator Support Person ” shall have the meaning ascribed to it in Section 3 of this Exhibit “B”.

 

Defect ” means any material deviation in the functioning of the Software from, or any failure of the Service or the Ehave Platform to work in accordance with, the specifications as set out in the User Documentation.

 

Problem Notification Time ” means the date and time that Collaborator notifies Ehave of a Defect, as recorded by Ehave.

 

2. SCOPE

 

(a) Inclusion:

 

Support services consist of technical assistance as described in Section 4 of this Exhibit “B”

 

(b) Excluded:

 

Support services do not include:

 

(i) development or any Customizations;

 

(ii) consultation on Collaborator internal operations;

 

(iii) training;

 

(iv) on-site support; and

 

(v) any services not explicitly stated in this Exhibit “B”.

 

Any request for assistance that is not within the scope of the support services shall be subject to a charge per contact.

 

3. CUSTOMER POINT OF CONTACT

 

Collaborator must designate a single staff member who shall be responsible for all day-to-day communications with Ehave for support services. Collaborator will provide the contact name, telephone number and external e-mail address to Ehave, as well as ensure any alternate vacation or illness back up contact information is provided (the “ Collaborator Support Person ”). All calls for support must be directed to the Collaborator Support Person. The Collaborator Support Person shall diagnose the incident and if the Collaborator Support Person determines that the incident is a Defect, then the Collaborator Support Person shall contact Ehave.

 

  24 .  

 

 

4. SERVICE DESK

 

(a) Availability:

 

Ehave’s service desk will be available to respond to queries from Collaborator during Business Hours on Business Days.

 

(b) Classification:

 

When making an initial request for assistance, the Collaborator Support Person shall provide Ehave with an assessment of the severity of the Defect in accordance with the Severity Categories set out below and sufficient amount of information to permit Ehave to replicate the Defect.

 

(c) Response:

 

After Ehave responds to the Collaborator Support Person based on his/her assessment of the Severity Category, Ehave will either confirm or assign a different Severity Category in accordance with the classifications contained in this Section 4(c). Notwithstanding any other provision of this Exhibit “B”, Ehave has final authority in determining the Severity Category of all problems and in determining the priority of repair of Severity Category 1 through Severity Category 2 Defects. After determining the severity of the Defect, Ehave shall commence resolution procedures. Ehave shall respond to a Defect within the time stipulated based on the severity of the Defect. Ehave shall use commercially reasonable efforts to resolve the Defect within the target resolution times based on the severity of the Defect. Target resolution times commence once Ehave has confirmed or determined the Severity Category and communicated it to Collaborator. Section 5 of this Exhibit “B” sets out the descriptions of the Severity Categories, response times and target resolution times and support procedures.

 

5. SEVERITY CATEGORIES

 

(a) Classifications:

 

Defects will be classified using the following definitions:

 

Category   Classification   Definition
         
1   Critical   Collaborator is unable to access the Services
         
2   High   Collaborator is significantly inhibited from working with the Software
         
3   Medium   Collaborator’s use of the Software is impaired, but Collaborator is not unable to process a transaction and a workaround is possible
         
4   Low   Collaborator is able to process a transaction

 

  25 .  

 

 

(b) Support Procedures:

 

After assigning a Severity Category to a Defect, in accordance with Section 5(a) of this Exhibit “B”, Ehave will determine the escalation procedure to be followed, in accordance with the following:

 

(i) Level 0:

 

A technical support specialist works to analyze and verify the problem reported in a Collaborator support query. A service number, bug number or feature request number may be associated with each query. The problem may be broken up into component issues. For Severity Category 1 and 2 problems, if the problem is not resolved at this within 4 Business Hours of Ehave’s response to Collaborator, it will be escalated to Level 1. For severity Category 3 problems, if the problem is not resolved at this Level within 24 Business Hours of Ehave’s response to Collaborator, it will be escalated to Level 1. Severity Category 4 will be resolved at this level only.

 

(ii) Level 1:

 

If initial efforts fail to resolve a problem, the situation is re-evaluated by Ehave in conference with available members of the technical support group. For Severity Category 1 problems, if the problem is not resolved at this Level within 8 Business Hours of escalation to this level, it will be escalated to Level 2. For Severity Category 2 problems, if the problem is not resolved at this Level within [x] Business Hours of escalation to this level, it will be escalated to Level 2. Severity Category 3 will be resolved at this level only.

 

(iii) Level 2:

 

If re-evaluation under Level 1 fails to provide a resolution, the Collaborator will be notified, and the product developer(s) for the Software will be consulted. For Severity Category 1 problems, if the problem is not resolved at this Level within 16 Business Hours of escalation to this level, it will be escalated to Level 3. Severity Category 2 will be resolved at this level only.

 

(iv) Level 3:

 

If the product developer(s) are unable to rectify the problem, the product manager is apprised of the situation and will determine the final course of action.

 

The escalation procedures and Severity Categories set out in this Exhibit “B” are subject to change by Ehave without providing prior notice to the Collaborator. However, at Collaborator' request, Ehave will provide Collaborator with information relating to Ehave’s then current Severity Categories and escalation procedures.

 

  26 .  

 

 

EXHIBIT “C”
SERVICE LEVEL OBJECTIVES

 

This Exhibit “C” is attached to and forms a part of the Software as a Service Agreement dated March 2, 2018 and made between Ehave, Inc. (“ Ehave ”) and Aequus Pharmaceuticals Inc. (“ Collaborator ”) (the “ Agreement ”).

 

1. SERVICE LEVEL OBJECTIVE

 

(a) Objective:

 

Ehave’s objective is to have Service Availability (as defined below) of the Ehave Platform equal to or greater than ninety-nine point nine percent (99.9%).

 

(b) Definition:

 

Any capitalized terms not defined in this Exhibit “C” shall have the meaning ascribed to them in the Agreement. In addition to the definitions contained in the main part of the Agreement, the following terms shall have the following meanings for the purposes of this Exhibit “C”:

 

Service Availability ” is defined as, in any calendar month:

 

Service Minutes – unplanned outages during Service Minutes
Service Minutes

 

where:

 

Service Minutes ” is defined as Minutes of Availability less Scheduled Outage less Other Permitted Outages.

 

Minutes of Availability ” means: (A) the total number of minutes in the applicable calendar month; less (B) that number of minutes in the applicable calendar month for any routine maintenance as set out in in Section 5(c) of the main part of the Agreement.

 

Scheduled Outage ” means, that number of minutes in the applicable calendar month for required repairs, preventative maintenance, system upgrades or other similar activities, which cannot be performed during scheduled routine maintenance windows and which Ehave provided Collaborator reasonable advance notice thereof.

 

Other Permitted Outages ” means any outages caused by: (i) the actions, inactions or omissions of Collaborator, its Authorized Users /or any third person that is not a contractor to Ehave; (ii) circumstances that constitute an event of force majeure under the Agreement; or (iii) unauthorized use or misuse by Collaborator of the Services or breach by the Collaborator of the terms of the Agreement.

 

2. REPORTING AND ESCALATION

 

(a) Reporting:

 

Ehave will provide Collaborator a monthly report describing the System Availability percentage for the Service either: (i) by email following a request from Collaborator for such report; or (ii) through the Service.

 

(b) Escalation:

 

In the event that Ehave fails to meet the Service Availability objective set out in Section 1 of this Exhibit “C” in a particular month, then within ten (10) Business Days from receipt by Ehave from Collaborator of a query regarding such failure, Ehave will submit to Collaborator a written explanation of the failure and a rectification plan to prevent or minimize the likelihood of a recurrence.

 

  27 .  

 

 

EXHIBIT “D”
SECURITY REQUIREMENTS

 

To be agreed upon and updated during first trial.

 

     

 

 

 

SCHEDULE “1”
IMPLEMENTATION PLAN

 

This Schedule “1” is attached to and forms a part of the Software as a Service Agreement dated March 2, 2018 and made between Ehave, Inc. (“ Ehave ”) and Aequus Pharmaceuticals Inc. (“ Collaborator ”) (the “ Agreement ”).

 

To be agreed upon and updated during first trial.

 

     

 

 

SCHEDULE “2”
COLLABORATION ACTIVITIES

 

This Schedule “2” is attached to and forms a part of the Software as a Service Agreement dated March 2, 2018 and made between Ehave, Inc. (“ Ehave ”) and Aequus Pharmaceuticals Inc. (“ Collaborator ” or “ Aequus ”) (the “ Agreement ”).

 

1. Purpose of Collaboration:

 

Aequus and Ehave plan to collaborate on conducting trials both in the traditional pharmaceutical drug regulatory regime and in the medical and recreational cannabis regulatory regime.

 

The initial pharmaceutical drug for such collaboration is for a central nervous system (CNS) condition, to be confirmed with mutual agreement.

 

2. Ehave Responsibilities

 

(a) Ehave shall provide the following reports to facilitate Aequus sales and marketing operations:

 

To be agreed upon and updated during first trial.

 

(b) For the duration of the Term of the Agreement, Ehave will provide aggregate patient data specific to clinical context and patient outcomes for Aequus content, as allowed by consent and standard research ethics approvals. For patients of Aequus where full consent has been obtained, all patient data will be provided to Aequus. Aequus shall own all clinical results and data generated from trials conducted within the partnership, subject to the licenses set out in the Agreement.

 

3. Joint Marketing Activities

 

As soon as possible after the execution of the Agreement, Ehave and Aequus will develop a plan for joint public relation and marketing activities to be performed by each of Ehave and Aequus. Such plan may include:

 

· co-branding content under the each other's brands;

 

· commitment to jointly invest in co-marketing funds to help with market education and to raise awareness of the licensed and co-developed content.

 

     

 

 

Exhibit 4.36

 

Commercial Confidential

 

SERVICES AGREEMENT

 

THIS AGREEMENT is dated for reference the 15 day of January, 2017

 

BETWEEN:

Ehave, Inc. a company incorporated under the laws of the Province of Ontario and having its head office at 250 University Avenue, Suite 200, Toronto, ON M5H 3E5 (the “Company”)

 

OF THE FIRST PART

AND:

NView Management Inc. , company incorporated under the laws of the Province of Ontario and having its head office at 313 Hillhurst Boulevard, Toronto, ON M6B 1M9, (the "Contractor"),

 

WHEREAS the Company is in the business of designing, developing, implementing and marketing software systems and related applications that provide bi-directional mobile and internet access to multiple data sources of patient clinical information (the “Business”), and;

 

AND WHEREAS the Company and the Contractor wish to enter into this Services Agreement under the terms and conditions herein;

 

AND WHEREAS the Contractor may acquire knowledge, experience and expertise, as well as detailed knowledge of the Company’s intellectual property, trade secrets and other property which is and shall be the property of the Company, and the disclosure, loss or, unauthorized use of which would substantially harm the business of the Company;

 

NOW THEREFORE THIS AGREEMENT WITNESSES that for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

ARTICLE 1 - INDEPENDENT CONTRACTOR

 

1.1           The Company hereby engages the Contractor as an independent contractor to provide services as Vice President Corporate and Business Development. These services will be provided on the basis of 5 days per week in response to specific requests for services generally in accordance with the scope of work described in Appendix A. The Contractor hereby accepts such engagement and agrees to provide such services to the best of his ability and in accordance with the terms and conditions of this Agreement.

 

1.2           The Contractor shall at all times be an independent contractor with control over the manner and means of his performance. The Contractor is not an employee, servant or agent of the Company and no partnership, joint venture or agency will be created or will be deemed to be created by this Agreement or by any action of the parties under this Agreement.

 

Contractor Services Agreement – NView Management Inc.   Page 1 of 9

 

 

Commercial Confidential

 

1.3           The Contractor shall not be entitled to rights or privileges applicable to employees of the Company pursuant to this Agreement including, but not limited to, holidays and paid vacation which may be available from time to time between the Company and its employees.

 

1.4          The Contractor shall be responsible for deduction and remittance of all income tax due from him. The Company will pay HST on services labor to the Contractor. Contractor is expected to remit the HST paid to the Canada Customs and Revenue Agency (CCRA).

 

1.5           If at any time the Canada Customs and Revenue Agency (CCRA) or any other competent authority determines that the Contractor is an employee of the Company, then the Company shall immediately commence making all statutorily required withholdings and remittances in respect of payments to the Contractor.

 

1.6          The Company shall not be liable to the Contractor for any damages, liabilities, penalties, interest or costs caused to the Contractor for failure to make any statutorily required source deductions or payments in respect of payments made to the Contractor by the Company under this Agreement. The Contractor shall assume any and all financial and legal responsibility for Canadian tax payments and statutory deductions if any.

 

ARTICLE 2 - SERVICES

 

2.1           It is envisaged that the Contractor will work either on the Company’s premises or at its own premises as agreed from time to time. The Contractor shall provide such services as ordinarily performed by Vice President Corporate and Business Development and as prescribed from time to time by the Company CEO (the “Services”), to whom the Contractor reports and is accountable.

 

2.2           In providing the Services hereunder, the Contractor will provide Services to the Company on a time and materials basis (or under alternative arrangements by agreement with the Company), at the Contractor’s or the Company’s premises, at such specific times as shall be determined by the Company.

 

2.3          The Contractor represents and warrants that he is not subject to any contractual or other restriction or obligation that will in any way limit his activities on behalf of the Company. The Contractor hereby represents and warrants to the Company that he has no continuing obligations to any previous employer with respect to any previous invention, discovery or other item of intellectual property or which requires the Contractor not to disclose any information or data to the Company.

 

2.4           In performing the Services hereunder, the Contractor shall:

 

(a) Act honestly and in good faith in what the Contractor reasonably believes to be in the best interests of the Company;

 

(b) Exercise the degree of care, diligence and skill that a reasonable prudent Contractor would exercise in comparable circumstances; and

 

(c) Generally use his best efforts to promote the business and interests of the Company.

 

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Commercial Confidential

 

2.5           Each party shall indemnify and hold the other party harmless from and against all claims, losses, damages liabilities, costs and expenses (including without limitation reasonable attorneys’ fees) caused by reason of any injury sustained by any person or to any person or property by reason of the negligence or misconduct of such party or any of its agents, employees or representatives, and agrees to pay all sums to be paid or discharged in case of an action or any such damages or injuries.

 

ARTICLE 3 - CONFIDENTIAL INFORMATION

 

3.1          The Contractor acknowledges that as a Contractor of or to the Company, the Contractor will acquire information about the business (the “ Business ”) and affairs of the Company, some of which will include commercially valuable trade secrets, knowledge of intellectual property and other confidential or proprietary information (collectively called “ Confidential Information ”), including without limitation any Developments (as defined hereafter) and the following kinds of information concerning the Company and its Business:

 

(a) Confidential sales and marketing information;

 

(b) Confidential processes, techniques, know how, systems, methods, operating capabilities; and

 

(c) New inventions, devices, discoveries, concepts, ideas, formulae, and improvements, enhancements and modifications thereto, whether patented or not,

 

3.2          For the purposes of this Agreement, Confidential Information does not include information that the Contractor establishes was, or is, already known to the public by means other than by reason of the breach of this Agreement by the Contractor.

 

3.3          The Contractor acknowledges that the Confidential Information, if revealed to others, could be used to the detriment of the Company. Accordingly, during the term of this Agreement and at any time thereafter, the Contractor agrees not to use any of the Confidential Information in a manner detrimental to the Company or to disclose in any manner any Confidential Information to any third party other than:

 

(a) Its employees on a need-to-know basis;

 

(b) To Company directors, officers, bankers, legal and financial advisors in the ordinary course of business;

 

(c) Confidential Information that is required to be disclosed by law or by any governmental or regulatory authority having jurisdiction or in connection with any court proceedings.

 

3.4 The Contractor agrees that documents, copies, records and other materials made or received by the Contractor that pertain to the Business and affairs of the Company, including all Confidential Information and which the Contractor possesses or has under control are the property of the Company and the Contractor agrees to promptly return the same to the Company upon the Contractor ceasing to be a Contractor of the Company or at any time upon the request of the Company.

 

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Commercial Confidential

 

3.5 The Contractor agrees that the Confidential Information is and will remain the exclusive property of the Company. The Contractor also agrees that the Confidential Information:

 

(a) Constitutes a proprietary right which the Company is entitled to protect; and

 

(b) Constitutes information and knowledge not generally known to the trade.

 

3.6          The Contractor understands that the Company has from time to time in its possession information belonging to others or which is claimed by others to be confidential or proprietary and which the Company has agreed to keep confidential. The Contractor agrees that all such information shall be Confidential Information for the purposes of this Agreement.

 

3.7           For purposes of the copyright laws of Canada and the United States of America, to the extent, if any, that such laws are applicable to any Confidential Information, it shall be considered a work made for hire.

 

3.8          The Contractor acknowledges and agrees that any Confidential Information disclosed to the Contractor is in the strictest confidence and the Contractor agrees to maintain and hold in strict confidence all Confidential Information disclosed to him or her. The disclosure of any such Confidential Information by the Contractor in any form whatsoever except as authorized by the Company or permitted under section 3.3 of this Agreement is and shall be considered a fundamental breach of the Contractor’s services arrangement and shall entitle the Company to immediately terminate this Agreement.

 

3.9          The provisions of this Article 3 shall survive termination of this Agreement for a period of three (3) years.

 

ARTICLE - 4 - PROPRIETARY RIGHTS

 

4.1          For the purposes of this Agreement, “ Development ” or “ Developments ” includes, without limitation all:

 

(a) Enhancements, modifications, additions or other improvements to the intellectual property or assets owned, licensed, sold, marketed or used by any of the Company in connection with the Business;

 

(b) Patents, copyrights, trade-marks, trade names, business names, logos, design marks and other proprietary marks; and

 

(c) Inventions, devices, discoveries, concepts, ideas, formulae, know how, processes, techniques, systems, methods and any and all improvements, enhancements and modifications thereto, whether patented or not;

 

Developed, created, generated, contributed to or reduced by practice by the Contractor alone or jointly with others while he is a Contractor to the Company and which results from services performed by the Contractor to or for the Company whether or not conceived, developed, reduced to practice or made during the Contractor’s working hours or on the premises of the Company or which results from the use of the premises or property (including equipment, supplies or Confidential Information) owned, used, leased or licensed by the Company or which reasonably relates to the Business.

 

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Commercial Confidential

 

4.2          The Contractor agrees to make full disclosure to the Company of each Development, promptly upon its creation. If required by the Company, the Contractor will disclose in writing in a logbook or such other form of device provided for such purpose by the Company, the details of all Developments that the Contractor is involved with or responsible for. The Contractor hereby irrevocably assigns and transfers to the Company and agrees that the Company will be the exclusive owner of, all of the Contractor’s right title and interest in and to each Development throughout the world, including all trade secret, patent, copyright, trade-mark, industrial design, and all other intellectual property rights of any kind therein. The Contractor agrees to co-operate fully at all times during and subsequent to the Contractor’s tenure with the Company with respect to the execution of all further documents and the carrying out of all such acts and things as are reasonably requested by any Company to confirm the transfer of ownership of all rights, including all intellectual property rights, effective at or after the time the Development is created and to apply for and obtain patent, copyright, industrial design, trademark and other intellectual property registrations covering the Developments. Any of the Company will be exclusively entitled to make applications for registration of all such rights, in the Company’s sole discretion, in any jurisdictions that the Company deems necessary. The Contractor’s obligations hereunder will continue after he ceases to be an employee, officer, director or Contractor of any Company respecting Developments created during the Contractor’s tenure with the Company. The Contractor will be reimbursed for any reasonable expenses related to the work associated with this Article.

 

The Contractor agrees that he will not acquire any right, title or interest in or to the Confidential Information or the Developments, all of such right title and interest being owned by the Company.

 

4.4          The Contractor hereby waives in whole all moral rights and agrees never to assert any moral rights which the Contractor may have in the Developments, including, without limitation, the right to restrain or claim damages for any distortion, mutilation or other modification or enhancement of the Developments and the right to restrain, use or reproduce the Developments in any context and in connection with any product, service, cause or institution and the Contractor further confirms that the Company may use or alter any such Developments as the Company sees fit in its absolute discretion.

 

4.5          The provisions of this Article 4 shall survive termination of this Agreement.

 

ARTICLE 5 - TERM OF CONTRACT AND TERMINATION

 

5.1          The provision of the Services by the Contractor to the Company pursuant to the terms of this Agreement commences on February 1, 2017 and will continue until July 31, 2017, unless terminated earlier as provided in this section 5 of this Agreement (“Termination Date”).

 

5.2          This Agreement may be terminated by the Contractor upon one month prior written notice to the Company.

 

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Commercial Confidential

 

5.3          This Agreement may be terminated by the Company upon one month prior written notice to the Contractor.

 

5.4          The Company may immediately terminate this Agreement, with no other obligations, upon default by the Contractor in the performance of any of his obligations under this Agreement.

 

5.5          In the event either party terminates this Agreement prior to the expiry of the term of this Agreement, upon receipt of all amounts provided for herein to the Contractor, the Contractor thereby releases and waives any and all claims, demands or debts which the Contractor has or any time hereafter can, shall or may have against the Company and its directors, officers or employees arising out of the provision of Services by the Contractor to the Company and the termination thereof.

 

ARTICLE 6 - REMUNERATION, EXPENSES AND OTHER PAYMENTS

 

6.1          For the term of this Agreement, the Company shall pay the Contractor $16,668 per month.

 

Remuneration will be payable upon receipt of appropriately detailed invoices from the Contractor. In addition, the Company shall reimburse the Contractor for all reasonable pre-approved expenses incurred by the Contractor expressly for the provision of the Services. The Company will be no charge for travel costs to the Offices of the Company. Travel to other locations made at the specific request of the Company, and pre-approved, may be charged at the rates indicated above.

 

6.2          The Contractor shall establish and maintain adequate records of the time (i.e. time sheets) expended in connection with providing the Services.

 

6.3 Where this Agreement provides for reimbursement of expenses incurred by the Contractor expressly for the provision of the Services, the Contractor shall;

 

(a) Establish and maintain books of account of any such expense incurred; and

 

(b) Maintain invoices, receipts and vouchers for any such expenses greater than $15 (Canadian);

 

and the Company shall have free access at all reasonable times to such records, books of account, invoices, receipts and vouchers (including time records maintained pursuant to section 6.2 hereof) for the purposes of copying and/or auditing the same.

 

6.4          Within fifteen days of receipt of an invoice therefore, the Company shall pay or reimburse the Contractor for all reasonable business expenses as pre-approved by the Company.

 

6.5          The Contractor shall whenever practical, but at least once per month, submit an invoice for expenses to be reimbursed with receipts or vouchers to verify all expenses.

 

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Commercial Confidential

 

6.6          When made, the payments provided for in sections 6.1 and 6.4 herein shall be in complete discharge of any and all obligations of the Company to the Contractor in respect of the provision of Services arising out of this Agreement.

 

ARTICLE 7 - CONSIDERATION

 

The Contractor agrees that he has received good, valuable and sufficient consideration for the covenants and agreements made by the Contractor in this Agreement.

 

ARTICLE 8 - GENERAL

 

8.1          This Agreement shall be construed and governed exclusively by the laws in force in the Province of Ontario and the laws of Canada applicable therein and, except as provided in Section 8.4, the courts of Ontario (and Supreme Court of Canada, if necessary) shall have exclusive jurisdiction to hear and determine all disputes arising hereunder. Except as provided in Section 8.4, each of the parties hereto irrevocably attorns to the jurisdiction of said courts and consents to the commencement of proceedings in such courts. This Section shall not be construed to affect the rights of a party to enforce a judgment or award outside said province, including the right to record and enforce a judgment or award in any other jurisdiction .

 

8.2          The Contractor acknowledges and agrees that a breach of the Contractor’s obligations under this Agreement would result in damages to the Company that could not be adequately compensated for by a monetary award. Accordingly, in the event of any such breach by the Contractor, in addition to all other remedies available to the Company at law or in equity, the Company shall be entitled as a matter of right to apply to a Court of competent jurisdiction for such relief by way of restraining order, injunction, decree or otherwise, as may be appropriate to ensure compliance with the provisions of this Agreement.

 

8.3           Each of the parties to this Agreement shall at the request of any other party, and at the expense of the Company, execute and deliver any further documents and do all acts and things as that party may reasonably require in order to carry out the true intent and meaning of this Agreement.

 

8.4          This Agreement shall enure to the benefit of and be binding upon the parties hereto, their permitted assigns and their personal representatives, administrators, heirs and successors.

 

8.5           Failure by any party hereto to insist in any instance upon the strict performance of any one of the covenants contained herein shall not be construed as a waiver or relinquishment of such covenant. No waiver by any party hereto of any such covenant shall be deemed to have been made unless expressed in writing and signed by the waiving party.

 

8.6           The unlawfulness or invalidity or unenforceability of any provision in this Agreement or of any covenant herein contained on the part of any party shall not affect the validity or enforceability of any other provision or covenant hereof or herein contained.

 

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Commercial Confidential

 

8.7           No term or provision hereof may be amended or added except by an instrument in writing signed by all of the parties to this Agreement.

 

8.8           In the event of any conflict between the provisions of this Agreement and any other agreement, verbal or otherwise, between the Company and the Contractor, the provisions of this Agreement shall prevail and govern to the extent permitted by law. The Company and Contractor agree to promptly amend any such other agreements to in order to resolve such conflict in favor of the provisions of this Agreement.

 

8.9             This Agreement may be executed in several counterparts (including by fax), each of which when so executed shall be deemed to be an original and shall have the same force and effect as an original but such counterparts together shall constitute but one and the same instrument.

 

NView Management Inc.   Ehave, Inc.
         
Per: /s/ Scott Woodrow   Per: /s/ Prateek Dwivedi
  Scott Woodrow     Prateek Dwivedi
Title: President   Title: CEO
         
Date: January 15, 2017   Date: January 15, 2017

 

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Appendix A

Contractor Scope of Work / Services

 

To act as the Company’s Vice President of Corporate and Business Development. Responsible for business and corporate development including strategic affairs, investor relations and transition of financial and regulatory reporting.

 

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Exhibit 4.37

 

Ehave Commercial Confidential

 

SERVICES AGREEMENT

 

THIS AGREEMENT is dated for reference the 23 rd day of April, 2018

 

BETWEEN:

Ehave, Inc. a company incorporated under the laws of the Province of Ontario and having its head office at 277 Lakeshore Road East, Suite 203, Oakville, Ontario, L6J 6J3 (the “Company”)

 

OF THE FIRST PART

AND:

 

Dianne Parsons, C.P.A , a sole-proprietor having its head at, 1215 Ironwood Court, Mississauga, Ontario, L5C 3R9, (the "Contractor"),

 

WHEREAS the Company is in the business of designing, developing, implementing and marketing software systems and related applications that provide bi-directional mobile and internet access to multiple data sources of patient clinical information (the “Business”), and;

 

AND WHEREAS the Company and the Contractor wish to enter into this Services Agreement under the terms and conditions herein;

 

AND WHEREAS the Contractor may acquire knowledge, experience and expertise, as well as detailed knowledge of the Company’s intellectual property, trade secrets and other property which is and shall be the property of the Company, and the disclosure, loss or, unauthorized use of which would substantially harm the business of the Company;

 

NOW THEREFORE THIS AGREEMENT WITNESSES that for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

ARTICLE 1 - INDEPENDENT CONTRACTOR

 

1.1 The Company hereby engages the Contractor as an independent contractor to provide services as Controller and CFO. These services will be provided on the basis of the required number of hours per week in response to specific requests for services generally in accordance with the scope of work described in Appendix A. The Contractor hereby accepts such engagement and agrees to provide such services to the best of its ability and in accordance with the terms and conditions of this Agreement.

 

1.2 The Contractor shall at all times be an independent contractor with control over the manner and means of its performance. The Contractor is not an employee, servant or agent of the Company and no partnership, joint venture or agency will be created or will be deemed to be created by this Agreement or by any action of the parties under this Agreement.

 

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1.3          The Contractor shall not be entitled to rights or privileges applicable to employees of the Company pursuant to this Agreement including, but not limited to, holidays and paid vacation which may be available from time to time between the Company and its employees.

 

1.4          The Contractor shall be responsible for deduction and remittance of all income tax due from him. The Company will pay HST on services labor to the Contractor. Contractor is expected to remit the HST paid to the Canada Revenue Agency (CRA).

 

1.5           If at any time the Canada Revenue Agency (CRA) or any other competent authority determines that the Contractor is an employee of the Company, then the Company shall immediately commence making all statutorily required withholdings and remittances in respect of payments to the Contractor.

 

1.6           The Company shall not be liable to the Contractor for any damages, liabilities, penalties, interest or costs caused to the Contractor for failure to make any statutorily required source deductions or payments in respect of payments made to the Contractor by the Company under this Agreement. The Contractor shall assume any and all financial and legal responsibility for Canadian tax payments and statutory deductions if any.

 

ARTICLE 2 - SERVICES

 

2.1           It is envisaged that the Contractor will work either on the Company’s premises or at its own premises as agreed from time to time. The Contractor shall provide such services as ordinarily performed by Controller and CFO and as prescribed from time to time by the Company CEO (the “Services”), to whom the Contractor reports and is accountable.

 

2.2           In providing the Services hereunder, the Contractor will provide Services to the Company on a time and materials basis (or under alternative arrangements by agreement with the Company), at the Contractor’s or the Company’s premises, at such specific times as shall be determined by the Company.

 

2.3           The Contractor represents and warrants that he is not subject to any contractual or other restriction or obligation that will in any way limit its activities on behalf of the Company. The Contractor hereby represents and warrants to the Company that he has no continuing obligations to any previous employer with respect to any previous invention, discovery or other item of intellectual property or which requires the Contractor not to disclose any information or data to the Company.

 

2.4           In performing the Services hereunder, the Contractor shall:

 

(a) Act honestly and in good faith in what the Contractor reasonably believes to be in the best interests of the Company;

 

(b) Exercise the degree of care, diligence and skill that a reasonable prudent Contractor would exercise in comparable circumstances; and

 

(c) Generally use its best efforts to promote the business and interests of the Company.

 

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2.5           Each party shall indemnify and hold the other party harmless from and against all claims, losses, damages liabilities, costs and expenses (including without limitation reasonable attorneys’ fees) caused by reason of any injury sustained by any person or to any person or property by reason of the negligence or misconduct of such party or any of its agents, employees or representatives, and agrees to pay all sums to be paid or discharged in case of an action or any such damages or injuries.

 

ARTICLE 3 - CONFIDENTIAL INFORMATION

 

3.1           The Contractor acknowledges that as a Contractor of or to the Company, the Contractor will acquire information about the business (the “ Business ”) and affairs of the Company, some of which will include commercially valuable trade secrets, knowledge of intellectual property and other confidential or proprietary information (collectively called “ Confidential Information ”), including without limitation any Developments (as defined hereafter) and the following kinds of information concerning the Company and its Business:

 

(a) Confidential sales and marketing information;

 

(b) Confidential processes, techniques, know how, systems, methods, operating capabilities; and

 

(c) New inventions, devices, discoveries, concepts, ideas, formulae, and improvements, enhancements and modifications thereto, whether patented or not,

 

3.2          For the purposes of this Agreement, Confidential Information does not include information that the Contractor establishes was, or is, already known to the public by means other than by reason of the breach of this Agreement by the Contractor.

 

3.3          The Contractor acknowledges that the Confidential Information, if revealed to others, could be used to the detriment of the Company. Accordingly, during the term of this Agreement and at any time thereafter, the Contractor agrees not to use any of the Confidential Information in a manner detrimental to the Company or to disclose in any manner any Confidential Information to any third party other than:

 

(a) Its employees on a need-to-know basis;

 

(b) To Company directors, officers, bankers, legal and financial advisors in the ordinary course of business;

 

(c) Confidential Information that is required to be disclosed by law or by any governmental or regulatory authority having jurisdiction or in connection with any court proceedings.

 

3.4 The Contractor agrees that documents, copies, records and other materials made or received by the Contractor that pertain to the Business and affairs of the Company, including all Confidential Information and which the Contractor possesses or has under control are the property of the Company and the Contractor agrees to promptly return the same to the Company upon the Contractor ceasing to be a Contractor of the Company or at any time upon the request of the Company.

 

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3.5 The Contractor agrees that the Confidential Information is and will remain the exclusive property of the Company. The Contractor also agrees that the Confidential Information:

 

(a) Constitutes a proprietary right which the Company is entitled to protect; and

 

(b) Constitutes information and knowledge not generally known to the trade.

 

3.6          The Contractor understands that the Company has from time to time in its possession information belonging to others or which is claimed by others to be confidential or proprietary and which the Company has agreed to keep confidential. The Contractor agrees that all such information shall be Confidential Information for the purposes of this Agreement.

 

3.7          For purposes of the copyright laws of Canada and the United States of America, to the extent, if any, that such laws are applicable to any Confidential Information, it shall be considered a work made for hire.

 

3.8          The Contractor acknowledges and agrees that any Confidential Information disclosed to the Contractor is in the strictest confidence and the Contractor agrees to maintain and hold in strict confidence all Confidential Information disclosed to him or her. The disclosure of any such Confidential Information by the Contractor in any form whatsoever except as authorized by the Company or permitted under section 3.3 of this Agreement is and shall be considered a fundamental breach of the Contractor’s services arrangement and shall entitle the Company to immediately terminate this Agreement.

 

3.9          The provisions of this Article 3 shall survive termination of this Agreement for a period of three (3) years.

 

ARTICLE - 4 - PROPRIETARY RIGHTS

 

4.1          For the purposes of this Agreement, “ Development ” or “ Developments ” includes, without limitation all:

 

(a) Enhancements, modifications, additions or other improvements to the intellectual property or assets owned, licensed, sold, marketed or used by any of the Company in connection with the Business;

 

(b) Patents, copyrights, trade-marks, trade names, business names, logos, design marks and other proprietary marks; and

 

(c) Inventions, devices, discoveries, concepts, ideas, formulae, know how, processes, techniques, systems, methods and any and all improvements, enhancements and modifications thereto, whether patented or not;

 

Developed, created, generated, contributed to or reduced by practice by the Contractor alone or jointly with others while he is a Contractor to the Company and which results from services performed by the Contractor to or for the Company whether or not conceived, developed, reduced to practice or made during the Contractor’s working hours or on the premises of the Company or which results from the use of the premises or property (including equipment, supplies or Confidential Information) owned, used, leased or licensed by the Company or which reasonably relates to the Business.

 

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4.2          The Contractor agrees to make full disclosure to the Company of each Development, promptly upon its creation. If required by the Company, the Contractor will disclose in writing in a logbook or such other form of device provided for such purpose by the Company, the details of all Developments that the Contractor is involved with or responsible for. The Contractor hereby irrevocably assigns and transfers to the Company and agrees that the Company will be the exclusive owner of, all of the Contractor’s right title and interest in and to each Development throughout the world, including all trade secret, patent, copyright, trade-mark, industrial design, and all other intellectual property rights of any kind therein. The Contractor agrees to co-operate fully at all times during and subsequent to the Contractor’s tenure with the Company with respect to the execution of all further documents and the carrying out of all such acts and things as are reasonably requested by any Company to confirm the transfer of ownership of all rights, including all intellectual property rights, effective at or after the time the Development is created and to apply for and obtain patent, copyright, industrial design, trademark and other intellectual property registrations covering the Developments. Any of the Company will be exclusively entitled to make applications for registration of all such rights, in the Company’s sole discretion, in any jurisdictions that the Company deems necessary. The Contractor’s obligations hereunder will continue after he ceases to be an employee, officer, director or Contractor of any Company respecting Developments created during the Contractor’s tenure with the Company. The Contractor will be reimbursed for any reasonable expenses related to the work associated with this Article.

 

The Contractor agrees that he will not acquire any right, title or interest in or to the Confidential Information or the Developments, all of such right title and interest being owned by the Company.

 

4.4          The Contractor hereby waives in whole all moral rights and agrees never to assert any moral rights which the Contractor may have in the Developments, including, without limitation, the right to restrain or claim damages for any distortion, mutilation or other modification or enhancement of the Developments and the right to restrain, use or reproduce the Developments in any context and in connection with any product, service, cause or institution and the Contractor further confirms that the Company may use or alter any such Developments as the Company sees fit in its absolute discretion.

 

4.5          The provisions of this Article 4 shall survive termination of this Agreement.

 

ARTICLE 5 - TERM OF CONTRACT AND TERMINATION

 

5.1          The provision of the Services by the Contractor to the Company pursuant to the terms of this Agreement commences on April 23, 2018 and will continue until June 30, 2018, unless terminated earlier as provided in this section 5 of this Agreement (“Termination Date”).

 

5.2          This Agreement may be terminated by the Contractor upon one month prior written notice to the Company.

 

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5.3          This Agreement may be terminated by the Company upon one month prior written notice to the Contractor.

 

5.4          The Company may immediately terminate this Agreement, with no other obligations, upon default by the Contractor in the performance of any of its obligations under this Agreement.

 

5.5          In the event either party terminates this Agreement prior to the expiry of the term of this Agreement, upon receipt of all amounts provided for herein to the Contractor, the Contractor thereby releases and waives any and all claims, demands or debts which the Contractor has or any time hereafter can, shall or may have against the Company and its directors, officers or employees arising out of the provision of Services by the Contractor to the Company and the termination thereof.

 

ARTICLE 6 - REMUNERATION, EXPENSES AND OTHER PAYMENTS

 

6.1           For the term of this Agreement, the Company shall pay the Contractor $60 per hour for Controller activities and $105/hour for CFO activities.

 

Remuneration will be payable upon receipt of appropriately detailed invoices from the Contractor. In addition, the Company shall reimburse the Contractor for all reasonable pre-approved expenses incurred by the Contractor expressly for the provision of the Services. The Company will be no charge for travel costs to the Offices of the Company. Travel to other locations made at the specific request of the Company, and pre-approved, may be charged at the rates indicated above.

 

6.2           The Contractor shall establish and maintain adequate records of the time (i.e. time sheets) expended in connection with providing the Services.

 

6.3           Where this Agreement provides for reimbursement of expenses incurred by the Contractor expressly for the provision of the Services, the Contractor shall;

 

(a) Establish and maintain books of account of any such expense incurred; and

 

(b) Maintain invoices, receipts and vouchers for any such expenses greater than $15 (Canadian);

 

and the Company shall have free access at all reasonable times to such records, books of account, invoices, receipts and vouchers (including time records maintained pursuant to section 6.2 hereof) for the purposes of copying and/or auditing the same.

 

6.4          Within thirty days of receipt of an invoice therefore, the Company shall pay or reimburse the Contractor for all reasonable business expenses as pre-approved by the Company.

 

6.5          The Contractor shall whenever practical, but at least once per month, submit an invoice for expenses to be reimbursed with receipts or vouchers to verify all expenses.

 

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6.6          When made, the payments provided for in sections 6.1 and 6.4 herein shall be in complete discharge of any and all obligations of the Company to the Contractor in respect of the provision of Services arising out of this Agreement.

 

ARTICLE 7 - CONSIDERATION

 

The Contractor agrees that he has received good, valuable and sufficient consideration for the covenants and agreements made by the Contractor in this Agreement.

 

ARTICLE 8 - GENERAL

 

8.1          This Agreement shall be construed and governed exclusively by the laws in force in the Province of Ontario and the laws of Canada applicable therein and, except as provided in Section 8.4, the courts of Ontario (and Supreme Court of Canada, if necessary) shall have exclusive jurisdiction to hear and determine all disputes arising hereunder. Except as provided in Section 8.4, each of the parties hereto irrevocably attorns to the jurisdiction of said courts and consents to the commencement of proceedings in such courts. This Section shall not be construed to affect the rights of a party to enforce a judgment or award outside said province, including the right to record and enforce a judgment or award in any other jurisdiction .

 

8.2          The Contractor acknowledges and agrees that a breach of the Contractor’s obligations under this Agreement would result in damages to the Company that could not be adequately compensated for by a monetary award. Accordingly, in the event of any such breach by the Contractor, in addition to all other remedies available to the Company at law or in equity, the Company shall be entitled as a matter of right to apply to a Court of competent jurisdiction for such relief by way of restraining order, injunction, decree or otherwise, as may be appropriate to ensure compliance with the provisions of this Agreement.

 

8.3           Each of the parties to this Agreement shall at the request of any other party, and at the expense of the Company, execute and deliver any further documents and do all acts and things as that party may reasonably require in order to carry out the true intent and meaning of this Agreement.

  

8.4          This Agreement shall enure to the benefit of and be binding upon the parties hereto, their permitted assigns and their personal representatives, administrators, heirs and successors.

 

8.5           Failure by any party hereto to insist in any instance upon the strict performance of any one of the covenants contained herein shall not be construed as a waiver or relinquishment of such covenant. No waiver by any party hereto of any such covenant shall be deemed to have been made unless expressed in writing and signed by the waiving party.

 

8.6           The unlawfulness or invalidity or unenforceability of any provision in this Agreement or of any covenant herein contained on the part of any party shall not affect the validity or enforceability of any other provision or covenant hereof or herein contained.

 

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8.7           No term or provision hereof may be amended or added except by an instrument in writing signed by all of the parties to this Agreement.

 

8.8           In the event of any conflict between the provisions of this Agreement and any other agreement, verbal or otherwise, between the Company and the Contractor, the provisions of this Agreement shall prevail and govern to the extent permitted by law. The Company and Contractor agree to promptly amend any such other agreements to in order to resolve such conflict in favor of the provisions of this Agreement.

 

8.9            This Agreement may be executed in several counterparts (including by fax), each of which when so executed shall be deemed to be an original and shall have the same force and effect as an original but such counterparts together shall constitute but one and the same instrument.

 

      Ehave, Inc.
         
      Per: /s/ Prateek Dwivedi
Per: /s/ Dianne Parsons     Prateek Dwivedi
  Dianne Parsons   Title: CEO
         
Date: April 23, 2018   Date: April 23, 2018

 

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Appendix A

Contractor Scope of Work / Services

 

Controller activities:

Maintain all the necessary reporting to the banks and backup system reports

Maintain the company bank balance and remain cognizant of outstanding checks

Approve invoices that need to be paid

Read and review any documentation attached to checks for approval and accuracy sake

Follow up with customers that are over 45 days old

Make sure all financial statements and tables are correct and precise

Make sure that the owner of the company receives the company bank statement unopened

Reconcile all bank statements and monthly financial reports

Prepare monthly sales and use tax returns

Prepare projections annually and update monthly with actual figures

The controller must coordinate with the auditors and be prepared to surrender documentation if called upon

Coordinate and prepare any schedules required for tax returns

Maintain the renewals on company insurance

 

CFO activities:

Strategic direction of Accounting and Finance functions

Creating and enforcing accounting and finance policies, procedures, and internal controls

Recommendations and corrections with the purpose of ensuring the integrity of financial reports

Managing and overseeing independent auditors

Collaborating with CIO/CTO on technological changes

Overseeing financial system upgrades and changes

Relating with investors

Mitigating business risks

Managing insurance and other financial protections

Retaining, hiring and training accounting and finance

Performing responsibilities for Human Resources

CFO roles/responsibilities may include additional functions.

 

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Exhibit 4.38

 

 

 

LEASE

 

Between

 

LISGAR DEVELOPMENT LIMITED.

 

and

 

ehave INC.

 

 

 

 

 

 

table of contents 

 

ARTICLE 1.00 - DEFINITIONS - 2 -
     
1.1 Defined Terms - 2 -
1.2 Schedules - 7 -
1.3 Agreement to Act Reasonably - 7 -
1.4 Delegation of Authority - 7 -
     
ARTICLE 2.00 – PREMISES - 7 -
     
2.1 Premises - 7 -
2.2 Use of Common Areas - 8 -
2.3 Examination and Acceptance - 8 -
2.4 Measurement of Areas - 8 -
2.5 Landlord’s Work - 8 -
2.6 Tenant’s Work - 9 -
     
ARTICLE 3.00 – TERM - 10 -
     
3.1 Term - 10 -
3.2 Surrender - 10 -
3.3 Fixturing Period - 10 -
3.4 Occupancy - 10 -
3.5 Overholding - 10 -
     
ARTICLE 4.00 – RENT - 11 -
     
4.1 Minimum Rent - 11 -
4.2 Accrual and Adjustments of Rent - 11 -
4.3 Additional Rent Treated as Minimum Rent - 11 -
4.4 Currency and Place of Payment - 11 -
4.5 Rental Arrears - 11 -
4.6 Deposit - 12 -
4.7 Net Lease - 12 -
4.8 Landlord’s Option - 13 -
4.9 Payments - 13 -
4.10 Rent to be Paid without Set-Off - 13 -
4.11 Payment for Special Services by Tenant - 13 -
     
ARTICLE 5.00 - OPERATING COSTS - 13 -
     
5.1 Tenant to Bear Proportionate Share of Operating Costs - 13 -
5.2 Payment of Tenant’s Proportionate Share - 16 -
5.3 Reallocation of Operating Costs - 17 -
     
ARTICLE 6.00 - TAXES - 17 -
     
6.1 Business Taxes of Tenant - 17 -
6.2 Real Property Taxes - 17 -
6.3 Alternate Methods of Taxation - 18 -
6.4 Pro-Rata Adjustment - 18 -
6.5 Appeal of Real Property Tax Assessment - 18 -
6.6 Payment of HST - 19 -
     
ARTICLE 7.00 – UTILITIES - 19 -
     
7.1 Utilities - 19 -
7.2 Meters - 19 -
     
ARTICLE 8.00 - CONTROL OF BUILDING - 19 -
     
8.1 Control of the Development - 19 -
8.2 Parking - 20 -
8.3 Right to Relocate - 21 -
8.4 Lighting Systems - 21 -
8.5 Heating. Ventilating and Air-Conditioning - 21 -
8.6 Janitorial Services and Waste Disposal - 22 -
8.7 Washrooms - 22 -
8.8 Elevator Service - 22 -
8.9 Building Security - 22 -
8.10 Directory Board - 22 -

 

 

 

 

ARTICLE 9.00 - MAINTENANCE AND REPAIRS - 22 -
     
9.1 Tenant’s and Landlord’s Repairs - 22 -
9.2 Repair on Notice - 23 -
9.3 Landlord’s Right to Enter - 24 -
9.4 Alterations or Improvements - 24 -
9.5 Notify Landlord - 26 -
9.6 Maintenance of the Premises - 26 -
9.7 Loading and Unloading - 27 -
9.8 Glass - 27 -
9.9 Pest Extermination - 27 -
9.10 Tenant Not to Overload - 27 -
9.11 Protection of Equipment - 27 -
9.12 Excavation - 27 -
     
ARTICLE 10.00 - USE OF PREMISES - 27 -
     
10.1 Use of Premises - 27 -
10.2 Conduct of Business - 27 -
10.3 Observance of Law - 28 -
10.4 Window Coverings - 28 -
10.5 Rules and Regulations - 28 -
10.6 Energy Conservation - 29 -
10.7 Name of Building - 29 -
10.8 Exhibiting Premises - 29 -
10.9 Access - 29 -
10.10 Telecommunications - 29 -
10.11 Health Emergency - 30 -
     
ARTICLE 11.00 - ENVIRONMENTAL MATTERS - 30 -
     
11.1 Hazardous Substances - 30 -
11.2 Inspection Right - 31 -
11.3 Survival of Obligations - 31 -
     
ARTICLE 12.00 - INSURANCE AND INDEMNIFICATION - 32 -
     
12.1 Tenant’s Insurance - 32 -
12.2 Adverse Impact on Insurance - 33 -
12.3 Landlord’s Insurance - 34 -
12.4 Limitation of the Landlord’s Liability - 34 -
12.5 Indemnification of Landlord - 35 -
12.6 Employees - 36 -
     
ARTICLE 13.00 - ASSIGNING AND SUBLETTING - 36 -
     
13.1 Consent Required - 36 -
13.2 Factors for Consent - 36 -
13.3 Transfers - 36 -
13.4 Corporate Ownership - 38 -
13.5 No Advertising of the Premises - 39 -
13.6 Assignment by Landlord - 39 -
     
ARTICLE 14.00 - CONSTRUCTION AND OTHER LIENS - 39 -
     
14.1 Discharge Of Liens - 39 -
     
ARTICLE 15.00 - FIXTURES AND SIGNS - 39 -
     
15.1 Removal and Restoration by Tenant - 39 -
15.2 Tenant’s Signs - 40 -
15.3 Landlord’s Signs - 40 -
     
ARTICLE 16.00 - STATUS STATEMENT, ATTORNMENT AND SUBORDINATION - 41 -
     
16.1 Status Statement - 41 -
16.2 Attornment - 41 -
16.3 Lease Subordination - 41 -
16.4 Non-Disturbance Agreement - 41 -
16.5 Power of Attorney - 41 -
16.6 Financial and Other Information - 41 -

 

  ii

 

 

ARTICLE 17.00 - DAMAGE, DESTRUCTION OR EXPROPRIATION - 42 -
     
17.1 Destruction - 42 -
17.2 Expropriation - 43 -
     
ARTICLE 18.00 - LANDLORD’S COVENANTS - 43 -
     
18.1 Quiet Enjoyment - 43 -
     
ARTICLE 19.00 - DEFAULT - 43 -
     
19.1 Default - 43 -
19.2 Legal Expenses - 44 -
19.3 Rights Cumulative - 45 -
19.4 Acceptance of Rent - Non-Waiver - 45 -
19.5 No Waiver - 45 -
19.6 Accord and Satisfaction - 45 -
19.7 Distress - 45 -
19.8 Right to Perform - 46 -
19.9 Repayment by the Tenant - 46 -
     
ARTICLE 20.00 – GENERAL - 47 -
     
20.1 Lease Entire Agreement - 47 -
20.2 Impossibility of Performance - 47 -
20.3 Notice - 48 -
20.4 Registration - 48 -
20.5 Interest in Lands - 48 -
20.6 Applicable Law - 49 -
20.7 Interpretation - 49 -
20.8 Gender and Number - 49 -
20.9 Partial Invalidity - 49 -
20.10 Compliance with the Planning Act - 49 -
20.11 Indemnification - 50 -
20.12 Survival of Obligations - 50 -
20.13 No Option - 50 -
20.14 References to Statutes - 50 -
20.15 Approval in Writing - 50 -
20.16 Time - 50 -
20.17 No Adverse Presumption - 50 -
20.18 Successors - 50 -

 

Schedule A - Legal Description of the Lands
Schedule B - Diagram of the Building
Schedule C - Landlord’s Work
Schedule D - Tenant’s Work
Schedule E - Rules and Regulations
Schedule F - Indemnification Agreement- Intentionally Deleted
Schedule G - Insurance Certificate
Schedule H - Authorization- Intentionally Deleted
Schedule I - Special Provisions

 

  iii

 

 

OFFICE LEASE

 

THIS LEASE made as of April 6 th , 2018.

 

BETWEEN :

 

Lisgar Development Limited

 

(the “Landlord”)

 

- and -

 

Ehave Inc.

 

(the “Tenant”)

 

The parties covenant and agree as follows:

 

BASIC PROVISIONS

 

The following are certain basic terms and provisions of this Lease (the “Basic Provisions”), which Basic Provisions form part of this Lease and are in certain instances referred to in subsequent sections of this Lease. Any conflict or inconsistency between the Basic Provisions and the other provisions of this Lease shall be resolved in favour of such other provisions.

 

Address of the Lands:   277 Lakeshore Road East, Oakville, Ontario
     
Suite Number of the Premises:  

204, located on the second (2 nd ) floor of the Building.

 

The Tenant currently occupies suite 203 and wishes to relocate to suite 204. The Landlord agrees to designate suite 204 as suite 203 so that the Tenant may retain their suite number.

     
Rentable Area of the Premises   1,636 square feet.
     
Term:   Two (2) Years, subject to extension in accordance with paragraph 3 on Schedule I;
     
Commencement Date:   May 1 st , 2018
     
Surrender Date:   The day preceding the 2 nd anniversary of the Commencement Date, subject to extension in accordance with paragraph 3 on Schedule I;
     
Early Occupancy:   Provided the Tenant has executed the Lease, should the Tenant wish to occupy all or part of the Premises for its business operations prior to Commencement Date, and so long as the Tenant does not interfere with the Landlord’s ability to complete any leasehold improvements in the Premises, then the Tenant shall be so permitted, provided that the Tenant shall be governed by all applicable terms of the Lease as if the Lease were in full force and effect save and except that no Net Rent or Additional Rent will be payable.

 

Period of the Term   Annual Minimum Rent     Monthly Minimum Rent     Rent Per Square Foot  
Years 1 & 2   $ 24,131.00     $ 2,010.92     $ 14.75  

 

Deposit:  

The Tenant shall top up the balance ($3,955.00) of their current Deposit on suite 203 by $550.00 to equal $4,505.00, to be applied towards the last month’s rent of the Term, with any remainder to be held as security and returned to the Tenant upon final inspection of the space.

 

The Landlord may also use the Deposit in accordance with section 4.6.

     
Permitted Uses:   The Premises may only be used for the purpose of a general business offices.
     
Right to Extend Term:  

The Tenant may extend the Term for a further period of five (5) years in accordance with the provisions of paragraph 3 on Schedule I.

 

 

 

 

 

ARTICLE 1.00 - DEFINITIONS

 

1.1 Defined Terms

 

In this Lease, unless there is something in the subject matter or context inconsistent therewith, the following words and terms, which may be used in the singular or the plural, have the respective meanings given them as follows:

 

“Act” means the Commercial Tenancies Act (Ontario);

 

“Additional Rent” means all sums of money or charges required to be paid by the Tenant under this Lease in addition to Minimum Rent whether or not designated “Additional Rent” and whether payable to the Landlord or to third parties;

 

“Affiliate” means a holding body corporate, affiliate or subsidiary, as those terms are defined in the Business Corporations Act (Ontario) of the relevant Person;

 

“Alterations” means any repairs, replacements, alterations, decorations or improvements to any part of the Premises, including, without limitation, any Tenant’s Work;

 

“Authority” means any federal, provincial or municipal department, board, agency or other authority (including, without limitation, suppliers of public utilities) having or claiming jurisdiction over the Landlord, the Tenant, the Development or the performance of any work on or use of the Development;

 

“Basic Provisions” means those provisions set out under the heading “Basic Provisions” and which precede Article 1.00;

 

“BOMA means the Standard Method for Measuring Floor Area in Office Buildings - American National Standard, as approved June 7, 1996 and known as BOMA Z65.1-1996;

 

“Building” means the building located on the Lands, together with all fixtures (excluding tenant’s trade fixtures), improvements, heating, ventilation, air conditioning, electrical, mechanical, sprinkler and plumbing systems and facilities located in, on or serving such building, and all alterations, additions and replacements thereto;

 

“Business Day” means any day which is not a Saturday, Sunday or a statutory holiday observed in Ontario;

 

“Business Taxes” means all taxes, rates, duties, fees and assessments and other charges of every nature and kind that may be levied, rated, charged or assessed against or in respect of:

 

(a) all improvements, equipment and facilities of the Tenant on or in the Premises or any part or parts thereof; and

 

(b) any and every business carried on or in the Premises or in respect of the use or occupancy thereof by the Tenant or any Transferee,

 

by any lawful Authority, and any and all taxes which may in future be levied in lieu of any of the foregoing, whether foreseen or unforeseen;

 

“Capital Tax” means an amount imputed by the Landlord to the Development in respect of taxes, rates, duties and assessments presently or hereafter levied, rated, charged or assessed from time to time upon the Landlord and payable by the Landlord (or by any corporation on behalf of the Landlord) on account of its or their capital. Capital Tax shall be imputed based on the amount allocated by the Landlord, acting reasonably, to the Development. Capital Tax also means the amount of any capital or place of business tax levied by any government or other applicable taxing authority against the Landlord with respect to the Development whether known as Capital Tax or by any other name;

 

“Carbon Tax” means the aggregate of all taxes, rates, duties, levies, fees, charges and assessments whatsoever, imposed, assessed, levied, confirmed, rated or charged against or in respect of the associated Greenhouse Gas emissions from the consumption in or at the Building of electricity, or of natural gas, propane or any other fossil fuel used to produce energy (such as heat, light or electricity) for the Building or any part of it or levied in lieu thereof, and levied against the Landlord or the Building by any Authority;

 

“Claims” means claims, losses, damages (direct, indirect, consequential or otherwise), suits, judgments, causes of action, legal proceedings, executions, demands, penalties or other sanctions of every nature and kind whatsoever, whether accrued, actual, contingent or otherwise and any and all costs arising in connection therewith, including, without limitation, legal fees and disbursements on a solicitor and his own client basis (including, without limitation, all such legal fees and disbursements in connection with any and all appeals);

 

  - 2 -  

 

 

“Commencement Date” means the date described as such in the Basic Provisions;

 

“Common Areas” means those areas, facilities, improvements, installations, systems and equipment which, from time to time form part of the Development and are not designated or intended by the Landlord to be leased to tenants, or which serve or benefit the Development, regardless of location, and are designated from time to time by the Landlord as part of the Common Areas. Without limiting the generality of the foregoing, the Common Areas shall include the roof, exterior wall assemblies, windows and doors; exterior and interior structural elements, columns and bearing walls, structural floors, foundations and footings and architectural details; the plumbing, electrical, heating, ventilating, air-conditioning and other base Building systems; atriums and their enclosing walls including, without limitation, the windows and glass portions thereof; janitor, mail, telephone, mechanical and electrical rooms; stairways, escalators, elevators and corridors; access roads, truckways, receiving and shipping areas, driveways, ramps, parking facilities and loading docks; sidewalks, walkways and landscaped areas; tenant common and public washrooms; music, fire prevention, security and communication systems; general signage, pylon or monument signs;

 

“CPI means the Consumer Price Index, for all items, published by Statistics Canada (or by any successor thereof or by any other agency designated by the Landlord) for Toronto, or if not published for Toronto, for Ontario, or if not published for Toronto and Ontario, for Canada (or any index published in substitution for the Consumer Price Index or any other replacement index reasonably designated by the Landlord if it is no longer published). In the case of any required substitution, the Landlord shall be entitled to make all necessary conversions for comparison purposes;

 

“Deposit” means the amount, if any, set out opposite the heading “Deposit” in the Basic Provisions,;

 

“Development” means the Building, the Common Areas and the Lands, being known by such name as may be designated by the Landlord from time to time in its sole and absolute discretion;

 

“Environmental Laws” means all Laws regulating, relating to or imposing liability or a standard of conduct concerning the natural or human environment (including air, land, surface water, groundwater, waste, real and personal property, moveable and immoveable property, sustainability, building operations, recycling or resource consumption), public or occupational health and safety and the manufacture, importation, handling, use, reuse, recycling, transportation, storage, disposal, clean-up, elimination and treatment of a substance, hazardous or otherwise;

 

“Event of Default” means any of the following events:

 

(a) the Tenant fails to pay any Rent on the date due under this Lease and such failure continues for 5 Business Days after written notice from the Landlord;

 

(b) the Tenant fails to observe or perform any of the Tenant’s Covenants (other than the payment of Rent) and:

 

(i) fails to remedy such breach within 10 days (or such shorter period as may be provided in this Lease) following the Tenant’s receipt of written notice from the Landlord respecting such breach (in this paragraph (b), the “Rectification Period”); or

 

(ii) if such breach cannot be reasonably remedied within the Rectification Period, the Tenant fails to commence to remedy such breach within the Rectification Period or thereafter fails to proceed diligently to remedy such breach;

 

(c) the Tenant becomes bankrupt or insolvent or takes the benefit of any statute for bankrupt or insolvent debtors or makes any proposal, assignment or arrangement with its creditors (including, without limitation, electing to terminate or disclaim this Lease in connection with a proposal made by the Tenant under the Bankruptcy and Insolvency Act (Canada), the Companies Creditors Arrangements Act (Canada) or any other statute allowing the Tenant to terminate or disclaim this Lease);

 

(d) a receiver or a receiver and manager is appointed for all or a portion of the Tenant’s property;

 

(e) any steps are taken or any actions or proceedings are instituted by the Tenant or by any other party including without limitation any court or Authority having jurisdiction for the dissolution, winding up or liquidation of the Tenant or its assets;

 

(f) the Tenant makes a sale in bulk of all or a substantial portion of its assets other than in conjunction with a Transfer or Permitted Transfer done in accordance with the terms of this Lease;

 

(g) this Lease or any of the Tenant’s assets are taken under a writ of execution;

 

  - 3 -  

 

 

(h) the Tenant effects a Transfer or a Permitted Transfer not done in accordance with the terms of this Lease;

 

(i) the Premises become vacant or unoccupied for a period of 10 consecutive days or more without the consent of the Landlord or the Tenant abandons or attempts to abandon the Premises or disposes of its goods so that there would not after such disposal be sufficient goods of the Tenant on the Premises subject to distress to satisfy Rent for at least 3 months;

 

(j) any insurance policies covering any part of the Development or any occupant thereof are actually or threatened to be cancelled or adversely changed as a result of any use or occupancy of the Premises;

 

(k) the Tenant advises the Landlord that it does not intend to continue operating its business in the Premises; or

 

(l) an Event of Default as defined in this paragraph occurs with respect to any lease or agreement under which the Tenant occupies other premises, if any, in the Building.

 

For clarity, the Landlord shall not be required to give the Tenant any notice in respect of the events described in paragraphs (c) to (l) of this definition, an Event of Default arising immediately upon the occurrence of such an event;

 

“Expert” means any architect, engineer, land surveyor, chartered accountant or other professional consultant, in any case, appointed by the Landlord and, in the reasonable opinion of the Landlord, qualified to perform the specific function for which such Person was appointed;

 

“Health Emergency” means a situation, either real or perceived, in which the Landlord determines, based on what it believes to be reliable advice (including, without limitation, advice from a medical professional or a directive, bulletin, notice or other form of communication from a public health official), that individuals are or may be exposed in or at the Building to imminent danger from any disease, virus or other biological or physical agent which may, in any way, be detrimental to human health (including, without limitation, SARS and avian flu (H5N1) or any variant thereof);

 

“Fixturing Period” means the period of time, if any, specified as such in the Basic Provisions;

 

“Force Majeure” has the meaning given that term in section 20.2;

 

“GTA” means the City of Toronto and the Regional Municipalities of Durham, Halton, Peel and York;

 

“Hazardous Substance” means:

 

(a) any solid, liquid, gaseous or radioactive substance (including radiation) which, when it enters into a Building, exists in a Building or is present in the water supplied to a Building, or when it is released into the environment from a Building or any part thereof or is entrained from one building to another building, or into the water or the natural environment, is likely to cause, at any time, material harm or degradation to any other property or any part thereof, or to the natural environmental or material risk to human health, and includes, without limitation, any flammables, explosives, radioactive materials, asbestos, lead paint, polychlorinated biphenyls, fungal contaminants (including, without limitation, and by way of example, stachybotrys chartarum and other moulds), mercury and its compounds, dioxans and furans, chlordane, chlorofluorocarbons, hydro-chlorofluorocarbons, volatile organic compounds, urea formaldehyde foam insulation, radon gas, chemicals known to cause cancer or reproductive toxicity, pollutants, contaminants, hazardous wastes, toxic or noxious substances or related materials, petroleum and petroleum products;

 

(b) any substance declared to be hazardous or toxic under any Environmental Laws or that does not meet any prescribed standard or criteria made under any present or future Environmental Laws; and

 

(c) any substance, sound, vibration, ray, heat, radiation or odour of which the use, presence in the environment or release into the environment is prohibited, regulated, controlled or licenced under Environmental Laws;

 

“HST” means the goods and services tax imposed under the Excise Tax Act (Canada), and all other goods and services taxes, business transfer taxes, value-added or transaction taxes, sales taxes, harmonized sales taxes, multi-stage sales taxes, use or consumption taxes or any other taxes on the Landlord with respect to the Rent and any other amounts payable by the Tenant to the Landlord under this Lease which may at any time be imposed by an Authority on or in respect of rental or real property, whether characterized as a goods and services tax, sales tax, value-added tax or otherwise;

 

  - 4 -  

 

 

“Indemnifier” means the Person named as such in the Basic Provisions and who has executed or agreed to execute the Indemnification Agreement attached as Schedule F, or who otherwise guarantees the Tenant’s obligations under this Lease, if applicable;

 

“Injury” means, without limitation, bodily injury, personal injury, personal discomfort, mental anguish, shock, sickness, disease, death, false arrest, detention or imprisonment, malicious prosecution, libel, slander, defamation of character, invasion of privacy, wrongful entry or eviction and discrimination, or any of them, as the case may be;

 

“Insured Damage” means that part of any damage occurring to the Premises for which the cost of the repair (less any deductible) is actually recovered by the Landlord under insurance policies required to be carried by the Landlord pursuant to sections 12.3(a)(i) and 12.3(a)(ii), or which would have been recovered had the Landlord taken out such insurance. For clarity, no damage occurring to the any portion of the Premises to be insured by the Tenant pursuant to its obligations in this Lease (including, without limitation, the Leasehold Improvements) shall be considered Insured Damage;

 

“Landlord’s Covenants” means all of the terms, covenants and conditions of this Lease on the part of the Landlord to be observed and performed;

 

“Landlord’s Employees” means the Landlord’s directors, officers, employees, servants, agents and those for whom the Landlord is responsible at law;

 

“Landlord’s Work” means the work, if any, required to be performed by the Landlord as set out in Schedule C;

 

“Lands” means the lands described in Schedule A and which have the municipal address set out in the Basic Provisions;

 

“Laws” means all laws, statutes, ordinances, regulations, by-laws, directions, orders, rules, requirements, directions and guidelines of all Authorities;

 

“Lease” means this document and the Schedules attached to it as originally signed and delivered or as amended from time to time;

 

“Leasehold Improvements” means all items in or serving the Premises and considered at common law as being a leasehold improvement, including, without limitation, all fixtures, improvements, installations, alterations and Alterations from time to time made, erected or installed (whether prior to or following the execution of this Lease) by or on behalf of the Landlord, the Tenant or any previous tenant or occupant of the Premises in, on or which serve the Premises, whether or not easily disconnected or movable and includes all the following, whether or not any of the same are in fact the Tenant’s trade fixtures: doors, partitions and hardware; internal walls; windows; cabling of every nature and kind; lockers; mechanical, electrical and utility installations designed solely to serve the Premises; carpeting, drapes, other floor and window coverings and drapery hardware; heating, ventilating, air conditioning and humidity control equipment; lighting fixtures; built in furniture and furnishings; counters in any way connected to the Premises or to any utility services located therein; and, all items which cannot be removed without damage to the Premises. Leasehold Improvements do not, however, include the Tenant’s trade fixtures (except as otherwise noted above in this definition), free standing furniture and equipment not in any way connected to the Premises or to any utility systems located therein (other than by merely plugging same into the electrical system serving the Premises);

 

“Lease Year” means a period of 12 months commencing on the first day of January in each year except that:

 

(a) the first Lease Year begins on the Commencement Date and ends on the last day of the calendar year in which the Commencement Date occurs; and

 

(b) the last Lease Year of the Term begins on the first day of the calendar year during which the last day of the Term occurs and ends on the last day of the Term,

 

but the Landlord may, from time to time, by written notice to the Tenant specify an annual date upon which each subsequent Lease Year is to commence, in which event the Lease Year which would otherwise be current when such annual date first occurs shall terminate on such date and appropriate adjustments of Rent resulting from any Lease Year being shorter or longer shall be made;

 

“Minimum Rent” means the annual rent payable by the Tenant under section 4.1;

 

“Mortgage” means any mortgage, charge or security instrument (including a deed of trust and mortgage securing bonds and all indentures supplemental thereto) which may now or hereafter affect the Development;

 

“Mortgagee” means the mortgagee, chargee, secured party or trustee for bond-holders, as the case may be, named in a Mortgage;

 

  - 5 -  

 

 

“Normal Business Hours” means the hours from 8:00 a.m. to 6:00 p.m. on Business Days;

 

“Operating Costs” has the meaning given it in section 5.1;

 

“Permitted Transfer” has the meaning given that term in section 13.1 (b);

 

“Permitted Transferee” has the meaning given that term in section 13.1(b);

 

“Permitted Uses” means the uses which may be made of the Premises by the Tenant and any Transferee and which are set out opposite the heading “Permitted Uses” in the Basic Provisions;

 

“Person” means an individual, a corporation, a limited partnership, a general partnership, a trust, a joint stock company, a joint venture, an association, a syndicate, a bank, a trust company, an Authority and any other legal and business entity;

 

“Premises” means the premises demised by the Landlord to the Tenant for the Tenant’s exclusive possession as described in section 2.1;

 

“Prime Rate means the rate of interest per annum established and quoted from time to time by such Canadian Chartered Bank designated from time to time by the Landlord as its reference rate of interest for the determination of interest rates that it charges customers of varying degrees of credit-worthiness for Canadian dollar loans made by it in Toronto, Ontario;

 

“Proportionate Share” means a fraction, the numerator of which is the Rentable Area of the Premises and the denominator of which is the Rentable Area of the Building;

 

“Real Property Taxes” means:

 

(a) all real property taxes, including local improvement rates, levies, commercial concentration levies, rates, duties and assessments whether general or special, ordinary or extraordinary, foreseen or unforeseen, which may be levied or assessed by any lawful Authority against the Development of any part of it and any taxes or other amounts which are imposed instead of, or in addition to, any of the foregoing (whether of the foregoing character or not or whether in existence at the date that this Lease was executed);

 

(b) all costs and expenses incurred by or on behalf of the Landlord for consulting, appraisal, legal and other professional fees and expenses to the extent they are incurred in an attempt to minimize or reduce the amounts described in paragraph (a); and

 

(c) any and all penalties, late payment or interest charges imposed by any relevant taxing Authority as a result of the Tenant’s late payment of any of the amounts described in paragraph (a) of this definition or any instalments thereof, as the case may be;

 

“Rent” means all Minimum Rent and Additional Rent payable by the Tenant pursuant to this Lease;

 

“Rentable Area” has the meaning given that term by BOMA;

 

“Schedules” means the schedules attached to this Lease and which are more particularly described in section 1.2;

 

“Special Services” means items, materials or services provided by the Landlord or its agents for the Tenant or its Transferees in respect of the Premises or the Building, at the specific request of the Tenant or its Transferees or for any other reason so provided and whether or not the cost thereof would otherwise be included in Operating Costs, to the extent supplied or provided for the Tenant or its Transferees in excess of that supplied or provided for tenants generally (or those tenants who share the cost of same) as may be determined by the Landlord acting reasonably or as the Landlord may designate from time to time including, without limitation, hydro, heating, ventilating and air-conditioning provided beyond Normal Business Hours, replacement of tubes, bulbs and ballasts, special janitorial or cleaning services, supervision, repairs, locksmithing and hoisting. For greater clarity and with respect to the Tenant’s use of the Premises beyond Normal Business Hours, the Landlord is limited to charging the Tenant for additional and reasonable out-of-pocket expenses incurred by the Landlord as a direct result of the Tenant’s request for access beyond Normal Business Hours. Save for the reimbursement of Landlord’s direct out-of-pocket expenses, there shall be no charge for after-hours use of the Building’s HVAC system in order to maintain reasonable conditions in the Premises outside Normal Business Hours;

 

“Surrender Date” means the date described as such in the Basic Provisions;

 

“Tenant’s Covenants” means all of the terms, covenants and conditions of this Lease on the part of the Tenant to be observed and performed;

 

  - 6 -  

 

 

“Tenant’s Employees” means the Tenant’s directors, officers, employees, servants, agents and those for whom the Tenant is responsible at law;

 

“Tenant’s Work” means the work, if any, to be performed by the Tenant as set out in Schedule D;

 

“Term” means the term of this Lease as set out in section 3.1 and any Extended Term;

 

“Transfer” means any of:

 

(a) an assignment of this Lease by the Tenant in whole or in part;

 

(b) any arrangement, written or oral, whether by sublease, licence or otherwise, whereby rights to use space within the Premises are granted to any Person (other than the Tenant) from time to time, which rights of occupancy are derived through or under the interest of the Tenant under this Lease; and

 

(c) a mortgage or other encumbrance of this Lease or of all or any part of the Premises, or any interest therein; and

 

“Transferee” means the assignee, subtenant, licensee or other Person allowed by the Tenant to use the Premises and named in a Transfer.

 

Certain terms which have been defined within specific sections of this Lease for use solely within those sections, or the Article within which such section is located, are not referred to above.

 

1.2 Schedules

 

The Schedules to this Lease are as follows:

 

Schedule A - Legal Description of the Lands
Schedule B - Diagram of the Premises
Schedule C - Landlord’s Work
Schedule D - Tenant’s Work
Schedule E - Rules and Regulations
Schedule F - Indemnification Agreement(Not Applicable)
Schedule G - Insurance Certificate
Schedule H - Authorization
Schedule I - Special Provisions

 

The Schedules are incorporated into and form an integral part of this Lease.

 

1.3 Agreement to Act Reasonably

 

Whenever a party (the “Deciding Party”) is making a determination (including, without limitation, a determination of whether or not to provide its consent or approval where the Deciding Party’s consent or approval is required and whether or not reference is made to the Deciding Party making such determination in its sole discretion, or words of similar intent), designation, calculation, estimate, conversion or allocation under this Lease (collectively, a “Decision”), the Deciding Party shall (unless this Lease specifically provides to the contrary) act reasonably and shall not unreasonably delay its decision on whether or not to give its consent. If the Deciding Party decides that it will not provide its consent or approval when requested to do so, it shall provide the party requesting such consent or approval (the “Requesting Party”) with the reasons for its refusal at the same time as it advises the Requesting Party that it refuses to provide its consent or approval. Even though specific sections of this Lease may specifically require a party to act reasonably or not act unreasonably (or words of similar intent) in making a Decision, the absence of such a specific requirement in other sections of this Lease requiring a party to make a Decision will not negate the provisions of this section or be interpreted as though the provisions of this section do not apply to the making of such Decision.

 

1.4 Delegation of Authority

 

The Landlord’s property manager, and such other persons as may be authorized by the Landlord from time to time, may act on behalf of the Landlord in connection with any matter contemplated by this Lease, including, without limitation, the giving of notices to the Tenant.

 

ARTICLE 2.00 - PREMISES

 

2.1 Premises

 

The Landlord hereby demises and leases the Premises to the Tenant and the Tenant hereby leases the Premises from the Landlord on the terms and conditions contained in this Lease. The Premises comprise the suite in the Building described in the Basic Provisions, the location of which on the floor on which the Premises are located is shown marked in diagonal lines on Schedule B. The Rentable Area of the Premises is as set out in the Basic Provisions.

 

  - 7 -  

 

 

2.2 Use of Common Areas

 

The use and occupation by the Tenant of the Premises includes the non-exclusive right of the Tenant and Persons having business with the Tenant, in common with the Landlord, its other tenants, subtenants and all others entitled or permitted by the Landlord to the use of such parts of the Common Areas as may be designated from time to time as being available for general use by tenants and other occupants of the Building and customers and visitors thereto for such limited purposes as may be permitted by the Landlord, from time to time. Except as so permitted by the Landlord, the Tenant has no right to use the Common Areas for any purposes. The Landlord may designate, amend and redesignate the Common Areas from time to time.

 

2.3 Examination and Acceptance

 

The Tenant has examined the Premises and accepts the Premises on an “as is” basis, subject only to completion by the Landlord of the Landlord’s Work, if any. Upon the Landlord’s Work being completed, the Tenant will be deemed to have accepted the Landlord’s Work unless the Tenant delivers a deficiency notice to the Landlord (which must contain reasonable particulars of the deficiencies alleged by the Tenant) within 5 Business Days following the date that the Landlord advises the Tenant that the Landlord’s Work has been completed. If a dispute arises over the deficiencies alleged by the Tenant, the decision of the Landlord’s Expert will be determinative of the issue.

 

2.4 Measurement of Areas

 

(a)          For the purpose of determining the Rent payable hereunder, the Rentable Area of the Premises is deemed to be the amount set out in the Basic Provisions.

 

(b)          The Landlord may from time to time re-measure or re-calculate the Rentable Area of the Premises and may re-adjust the Minimum Rent and the Tenant’s Proportionate Share. Except as otherwise set out in section 2.4(a), the effective date of any such re-adjustment shall be the date on which the Landlord advises the Tenant in writing of the re-measured or re-calculated Rentable Area of the Premises.

 

2.5 Landlord’s Work

 

(a)          The Landlord shall, at its expense, perform the Landlord’s Work in a good and workmanlike manner. Subject to delays caused by Force Majeure and delays caused by the Tenant or the Tenant’s Employees, the Landlord shall use reasonable commercial efforts (without the need for overtime or weekend work) to complete the Landlord’s Work as soon as reasonable possible following the execution of this Lease. If a dispute arises over:

 

(i) the date on which the Landlord’s Work was substantially completed or completed;

 

(ii) whether or not the Landlord was delayed in completing the Landlord’s Work due to Force Majeure, the Tenant or the Tenant’s Employees and/or the length of any such delay,

 

the decision of the Landlord’s Expert will be determinative of the issue. The Tenant is responsible for any additional costs incurred by the Landlord as a result of any delays in completing the Landlord’s Work caused by the Tenant or the Tenant’s Employees and the Tenant shall pay such additional costs to the Landlord within 15 days following receipt of an invoice from the Landlord. The Landlord may have such access to the Premises as it requires in order to complete the Landlord’s Work. If the Tenant is given possession of the Premises prior to the date that the Landlord’s Work is complete, then:

 

(iii) if both the Tenant and the Landlord require access to the same area of the Premises, the Landlord shall have the first right to such area for the purpose of carrying out the Landlord’s Work;

 

(iv) the Tenant shall not interfere with or delay the Landlord or its contractors from completing the Landlord’s Work; and

 

(v) the Tenant shall be under the direction and supervision of the Landlord and its contractors and shall comply with all requirements and directions of the Landlord and its contractors. The Landlord shall not be responsible for the costs of any work to the Premises except for the cost of the Landlord’s Work.

 

(b) If:

 

(i) the Tenant’s use, or intended use, of the Premises requires changes to the Landlord’s Work in order for the Landlord’s Work to comply with applicable Laws or the requirements of any insurer of the Development; or

 

(ii) the Tenant requires any changes to the Landlord’s Work (and the Tenant’s signature on the change order, or other documentation evidencing the changes, shall be conclusive evidence of the Tenant’s agreement to the making of such changes),

 

  - 8 -  

 

 

then the Tenant will be responsible for the cost of such changes to the extent that such changes result in an increase in the cost of the Landlord’s Work (the “Additional Costs”). The Tenant shall pay the Additional Costs shall within 15 days following the date that the Landlord provides the Tenant with an invoice for the Additional Costs.

 

(c)           If the Tenant requires the Landlord to carry out any work in or to the Premises in addition to the Landlord’s Work (the “Additional Work”), and the Landlord agrees to carry out the Additional Work, then the Tenant’s signature on the documentation evidencing the nature of the Additional Work will be conclusive evidence of the Tenant’s agreement to: (i) the Landlord performing the Additional Work; and (ii) pay for the cost of the Additional Work (the “Additional Work Costs”). The Tenant shall pay the Additional Work Costs shall within 15 days following the date that the Landlord provides the Tenant with an invoice for the Additional Work Costs.

 

(d)          If any changes are made to the Additional Work, then the Tenant’s signature on the change order, or other documentation evidencing the changes, shall be conclusive evidence of the Tenant’s agreement to: (i) the making such changes, which shall be deemed to form part of the Additional Work; and (ii) pay for the cost of such changes, all of which shall be deemed to form part of the Additional Work. The Tenant shall pay such additional costs within 15 days following the date that the Landlord provides the Tenant with an invoice for such costs.

 

2.6 Tenant’s Work

 

(a)          Upon being given possession of the Premises (whether exclusive or not), the Tenant shall, at its own expense, diligently carry out and complete the Tenant’s Work. The Tenant will carry out the Tenant’s Work in such manner as will not interfere unreasonably with the performance by the Landlord of the Landlord’s Work and otherwise in accordance with the provisions of this Lease, including, without limitation, the provisions of sections 9.4 and 10.3 and Schedule D.

 

(b)          The Landlord (or an Affiliate of the Landlord) may tender to the Tenant a price for the completion, as the Tenant’s contractor, of the Tenant’s Work (excluding the Tenant’s trade fixtures). If the Landlord’s tender price is within 5% of any other bona fide tender from qualified contractors which the Tenant may receive with respect to the Tenant’s Work (the Tenant hereby agreeing to obtain bona fide tenders for the Tenant’s Work from qualified contractors), then the Tenant shall accept the tender submitted by the Landlord (or its Affiliate) for the Tenant’s Work. All amounts payable by the Tenant under such accepted tender will be considered Additional Rent.

 

(c)          Within 30 days following the completion of the Tenant’s Work the Tenant shall provide the following to the Landlord:

 

(i) a statutory declaration:

 

(A) stating that the Tenant’s Work has been performed in accordance with all of the provisions of the plans and specifications approved by the Landlord and this Lease and that all deficiencies (if any) which the Landlord has brought to the Tenant’s attention have been corrected;

 

(B) stating that there are no construction liens or other liens or encumbrances registered or capable of being registered or otherwise outstanding against the Lands in respect of work, services or materials relating to the Tenant’s Work and that all accounts for work, services or materials relating to the Tenant’s Work have been paid in full;

 

(C) listing each contractor and subcontractor who did work or provided materials in connection with the Tenant’s Work; and

 

(D) confirming the date on which the last work in relation to the Tenant’s Work was performed and materials were supplied;

 

(ii) an itemized list certified by the Tenant showing the costs actually expended by the Tenant for the completion of the Tenant’s Work;

 

(iii) a clearance certificate issued under the Workers Compensation Act in respect of each contractor and subcontractor listed on the aforesaid statutory declaration;

 

(iv) a copy of every occupancy and other permit which may be required by any governmental or other regulatory authority having jurisdiction, to permit the Tenant to occupy and open for business in the Premises; and

 

(v) a certificate of a professional engineer acceptable to the Landlord, certifying that the Tenant’s Work has been carried out in accordance with the plans and specifications as approved by the Landlord and the Landlord’s engineering consultants.

 

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ARTICLE 3.00 - TERM

 

3.1 Term

 

(a)          The Term is the period of time set out in the Basic Provisions as constituting the Term.

 

(b)          The Term commences on the Commencement Date and ends on the Surrender Date, both dates inclusive, unless the Term is otherwise terminated, renewed or extended as provided for in this Lease.

 

(c)           The Landlord may prepare and deliver to the Tenant a Commencement Date notice (the “Commencement Date Notice”). The Commencement Date Notice will specify the Commencement Date and be binding on the Tenant. The Tenant shall sign and return an unamended copy of the Commencement Date Notice to the Landlord within 10 Business Days after receiving it, but if it fails to do so, the Commencement Date will be deemed to have been accepted by the Tenant.

 

3.2 Surrender

 

The Tenant shall, on the last day of the Term, or upon the sooner termination of the Term, peaceably and quietly surrender and deliver vacant possession of the Premises to the Landlord in the condition and state of repair that they were required to be maintained during the Term or as the Landlord may otherwise require in accordance with section 15.1. If the Tenant fails to comply with the foregoing or with its obligations under section 15.1, the Tenant will, at the option of the Landlord, be deemed to be an overholding monthly tenant for so long as it may reasonably take to complete the required repairs, removal, restoration or clean-up (the “Overholding Period”). During the Overholding Period, the Tenant shall pay the Rent required by section 3.4 to be paid by an overholding tenant who is overholding without the consent of the Landlord (the “Overholding Rent”), notwithstanding the fact that the Tenant may have vacated the Premises. For clarity, nothing in this section entitles the Tenant to terminate such monthly tenancy or remain in possession of the Premises as it is the parties intent that the deemed monthly tenancy contemplated by this section only results in an obligation on the part of the Tenant to pay the Overholding Rent during the Overhold Period with the Tenant having no other rights or interest in or to the Premises.

 

3.3 Fixturing Period

 

(a)          Subject to sections 3.3(b) and 3.4, the Tenant may have non-exclusive possession of the Premises during the Fixturing Period for the purpose of performing the Tenant’s Work. During the Fixturing Period, the Tenant is subject to the terms of this Lease and must observe and perform all of the Tenant’s Covenants as if the Term had commenced, other than the obligation to pay Minimum Rent and amounts on account of Operating Costs and Real Property Taxes.

 

(b)          Despite the commencement and running of the Fixturing Period, the Tenant is not entitled to have possession of the Premises until:

 

(i) the Landlord has approved the Tenant’s plans and specifications for the Tenant’s Work; and

 

(ii) the Tenant has obtained all building permits required in order to perform the Tenant’s Work and provided copies of them to the Landlord.

 

3.4 Occupancy

 

Notwithstanding the commencement of the Term or any Fixturing Period, the Tenant may not have access to the Premises until it has provided the Landlord with the following:

 

(a) the insurance certificate required by section 12.1 and the Landlord has approved such certificate;

 

(b) the post-dated cheques or documentation required by section 4.9; and

 

(c) evidence that the utilities for the Premises which are separately metered (if any) have been transferred into the name of the Tenant.

 

3.5 Overholding

 

(a) Upon the expiration of this Lease by the passage of time and the Tenant remaining in possession of the Premises:

 

(i) there is no implied renewal or extension of this Lease;

 

(ii) if the Landlord consents in writing to the Tenant remaining in possession, the Tenant will be deemed, notwithstanding any statutory provision or legal assumption to the contrary, to be occupying the Premises as a monthly tenant, which monthly tenancy may be terminated by either party on 30 days written notice to the other, which 30 day period need not end on the last day of a calendar month;

 

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(iii) if the Landlord does not consent in writing to the Tenant remaining in possession, the Tenant will be deemed, notwithstanding any statutory provision or legal assumption to the contrary, to be occupying the Premises as a tenant at the will of the Landlord, which tenancy may be terminated at any time by the Landlord without the necessity of any notice to the Tenant;

 

(iv) the Tenant shall occupy the Premises on the same terms and conditions as are contained in this Lease (including, without limitation, the obligation to pay Percentage Rent and Additional Rent), save and except that:

 

(A) the Term and the nature of the tenancy are as set out in section 3.5(a)(ii) or 3.5(a)(iii), as the case may be;

 

(B) the Minimum Rent payable by the Tenant is to be paid monthly at a rate equal to twice the amount of monthly Rent which it was responsible for paying to the Landlord during the last 12 months of the Term. Unless the Landlord has otherwise agreed in writing, such Minimum Rent will be payable by the Tenant regardless of whether or not the Landlord fails to request such Minimum Rent and/or accepts the monthly Minimum Rent which the Tenant was paying during the last 12 months of the Term; and

 

(C) the Tenant will not have the benefit of any renewal or extension rights, rights of first refusal, options to purchase, rights granting the Tenant exclusive rights to carry on certain business activities in the Development, or any other personal rights contained in this Lease.

 

(b)           The Tenant is estopped and forever barred from claiming any right to occupy the Premises on terms other than as set out in this section and the Landlord may plead this section in any court proceedings. If section 3.5(a)(iii) is applicable, the Tenant shall indemnify and save harmless the Landlord from all Claims incurred by the Landlord as a result of the Tenant remaining in possession of all or any part of the Premises following the expiry of the Term. Nothing in this section may be interpreted as permitting or giving the Tenant an option to stay in possession of the Premises following the expiry of the Term and the Tenant shall surrender the Premises to the Landlord on the expiry of the Term.

 

ARTICLE 4.00 - RENT

 

4.1 Minimum Rent

 

(a)          The Tenant shall pay, unless otherwise expressly provided in this Lease, yearly and every year during the Term to the Landlord without notice or demand and without abatement, deduction or set-off for any reason the Minimum Rent described in the Basic Provisions.

 

(b)          The annual Minimum Rent is based upon an annual rate per square foot of the Rentable Area of the Premises as set out in the Basic Provisions.

 

(c)          The Minimum Rent is to be paid in advance, in equal monthly instalments on the first day of each and every month during the Term.

 

(d)          If the Basic Provisions include a provision stating that the Tenant is entitled to a Rent Free Period, then, regardless of any other provision of this Lease, the Tenant is not required to pay the Rent that such provision states is not payable by the Tenant during such Rent Free Period.

 

4.2 Accrual and Adjustments of Rent

 

Rent is considered as accruing from day to day under this Lease from the Commencement Date. If, for any reason, it becomes necessary to calculate Rent for an irregular period of less than 1 year or less than 1 calendar month, then an appropriate apportionment and adjustment will be made on a per diem basis based upon a period of 365 days.

 

4.3 Additional Rent Treated as Minimum Rent

 

Additional Rent is recoverable as Minimum Rent, and the Landlord has all rights against the Tenant for default in any such payment as in the case of arrears of Minimum Rent.

 

4.4 Currency and Place of Payment

 

All Rent is payable in lawful money of Canada and is to be paid to the Landlord at the address specified in section 20.3, until such time as the Tenant is otherwise notified in writing by the Landlord.

 

4.5 Rental Arrears

 

(a) If the Tenant fails to pay when due any amount of Rent required to be paid pursuant to this Lease:

 

(i) such Rent bears interest at a rate per annum equal to the Prime Rate plus 5%, calculated and compounded monthly; and

 

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(ii) the Tenant shall pay to the Landlord on demand, an administration fee equal to the greater of: (A) $100.00; and (B) 2% of the amount of Rent in default.

 

Such amounts only become payable upon demand but accrue from the respective due dates of the relevant payments, whether demanded or not, to the date of payment.

 

(b)           If any cheque given by the Tenant to the Landlord in payment of Rent is refused payment by the Tenant’s bank for any reason, the Tenant shall immediately replace such cheque with cash or a certified cheque or bank draft and, in addition, shall pay, as Additional Rent, the sum of $100.00 (plus HST) as a service charge to the Landlord immediately upon demand being made by the Landlord.

 

4.6 Deposit

 

(a)          If the Basic Provisions indicate a Deposit, the Tenant shall pay the Deposit (in the amount described in the Basic Provisions) to the Landlord contemporaneously with the Tenant’s execution of this Lease.

 

(b)         The Landlord shall apply the Deposit in accordance with the Basic Provisions.

 

(c)         The Landlord may also use the Deposit to secure the fulfilment of all of the Tenant’s Covenants (including, without limitation, the payment of all amounts payable by the Tenant under this Lease) and all damages and losses which the Landlord may suffer or incur as a result of this Lease being terminated by the Landlord or disclaimed in any bankruptcy or insolvency proceedings relating to the Tenant or any assignee of the Tenant, including, without limitation, all amounts which would have been payable under this Lease but for such termination or disclaimer. Without limiting the generality of the foregoing, the Deposit shall secure and may, at the Landlord’s option, be applied on account of any one or more of the following:

 

(i) unpaid Rent, including, without limitation, any amount which would have become payable under this Lease to the date of the expiry of this Lease had this Lease not been terminated or disclaimed in any bankruptcy or insolvency proceedings;

 

(ii) the prompt and complete performance of all of the Tenant’s Covenants in addition to the payment of Rent;

 

(iii) the indemnification of the Landlord for any losses, costs or damages incurred by the Landlord arising out of any failure by the Tenant to observe and perform any of the Tenant’s Covenants;

 

(iv) the performance of any obligation which the Tenant would have been obligated to perform to the date of the expiry of this Lease had this Lease not been terminated or disclaimed in any bankruptcy or insolvency proceedings; and

 

(v) the losses or damages suffered by the Landlord as a result of the termination of this Lease or the disclaimer of this Lease in any bankruptcy or insolvency proceedings.

 

(d)         If the Landlord uses all or part of the Deposit (except in accordance with section 4.6(b)), the Tenant shall, within 3 Business Days following written demand being made by the Landlord, pay to the Landlord the amount required to reimburse it for the amount so applied by way of certified cheque or bank draft, failing which an Event of Default will be deemed to have occurred.

 

(e)         Within 90 days following the expiration of this Lease, the Landlord shall refund to the Tenant any portion of the Deposit not used by the Landlord after application by the Landlord to any damage incurred by the Landlord as a result of the Tenant failing to observe and perform the Tenant’s Covenants. For certainty, the provisions of this section shall survive the expiry of this Lease.

 

(f)          The Landlord will be discharged from any liability to the Tenant with respect to the Deposit if it is transferred to any purchaser of the Landlord’s interest in the Premises or Lease.

 

(g)          The provisions of this section shall be deemed to be a separate agreement distinct and independent of this Lease and which shall survive the termination of this Lease or the disclaimer of this Lease in any bankruptcy or insolvency proceedings. Accordingly, the rights of the Landlord under this section shall continue in full force and effect and shall not be waived, released, discharged, impaired or affected by reason of the termination of this Lease by the Landlord or the disclaimer of this Lease in any bankruptcy or insolvency proceedings.

 

(h) The Landlord will not be required to pay interest to the Tenant on any part of the Deposit.

 

4.7 Net Lease

 

Except as otherwise stated in this Lease:

 

(a) this Lease is a completely carefree and absolutely net lease to the Landlord;

 

(b) the Landlord is not responsible during the Term for any costs, charges, taxes (except the Landlord’s income taxes), expenses or outlays of any nature whatsoever arising from or relating to the Premises or the Development, or the use and occupancy of them, or their contents or the business carried on in them; and

 

  - 12 -  

 

 

(c) the Tenant shall pay all charges, impositions, costs, expenses and outlays of every nature and kind relating to the Premises and its Proportionate Share of all charges, impositions, costs, expenses and outlays of every nature and kind relating to the Development.

 

4.8 Landlord’s Option

 

(a)            The Landlord may, at its option, estimate from time to time any Additional Rent and such estimated amount is payable in monthly instalments in advance on the days upon which Minimum Rent is payable hereunder, with annual adjustments in the manner set out in section 5.2. Notices to the Tenant of such estimated amount need not include particulars of any such amounts. The Landlord may at its option, apply any sums received from or due to the Tenant against any amounts due and payable hereunder in such manner as the Landlord sees fit.

 

(b)            The Landlord estimates, but does not guarantee, that the Tenant’s Proportionate Share of Operating Costs and Real Property Taxes will be $14.49 per square foot of the Rentable Area of the Premises per annum for the calendar year 2018. For clarity, such estimate has no bearing on, and is not to be taken into account in determining, the actual amount of the Operating Costs and Real Property Taxes actually payable by the Tenant pursuant to the other provisions of this Lease and in no way limits the amounts payable by the Tenant pursuant to the other terms of this Lease.

 

4.9 Payments

 

The Tenant shall deliver to the Landlord prior to the Commencement Date and at least 15 days prior to the commencement of each Lease Year a series of monthly post-dated cheques for the Lease Year forthcoming, for the aggregate of the monthly payments of Minimum Rent and any payments of Additional Rent estimated by the Landlord in advance. Alternatively, the Landlord may require the Tenant to sign such documentation as the Landlord may require, from time to time, in order to permit the Landlord to automatically debit the Tenant’s bank account on a monthly basis in amounts equal to the monthly instalments of Rent payable by the Tenant. The Tenant shall sign and return all such documentation to the Landlord within 10 days of the Landlord requesting same in writing.

 

4.10 Rent to be Paid without Set-Off

 

Except to the extent specifically permitted by the terms of this Lease, the Tenant shall pay all Rent without set-off, abatement, or deduction for any reason or cause whatsoever, including, without limitation, by reason of section 35 of the Act, the benefits of which are expressly waived by the Tenant.

 

4.11 Payment for Special Services by Tenant

 

The Tenant shall pay to the Landlord the cost of the Special Services provided by the Landlord plus a sum equal to 15% of such cost representing the Landlord’s administrative fee. At the option of the Landlord, the Tenant shall pay the cost of any part of the Special Services, plus such administrative fee:

 

(a) within 15 days after the Landlord provides the Tenant with an invoice for such Special Services; or

 

(b) at the times and in the same manner as the Tenant is required to pay its Proportionate Share of Operating Costs, including, without limitation, estimation and re-estimation by the Landlord and final determination thereof.

 

ARTICLE 5.00 - OPERATING COSTS

 

5.1 Tenant to Bear Proportionate Share of Operating Costs

 

(a)           During the Term the Tenant shall pay to the Landlord as Additional Rent its Proportionate Share of all expenses, costs, fees, rentals, disbursements and outlays of every nature and kind incurred, accrued, paid or payable by or on behalf of the Landlord in respect of owning, operating, maintaining, servicing, repairing, restoring, renewing, renovating, improving, rebuilding, replacing, expanding, extending, altering, equipping, insuring, cleaning, lighting, security, policing, supervising, managing and administering the Development, or any part of it (the “Operating Costs”). Operating Costs will be determined in accordance with generally accepted accounting practices used in the commercial real estate industry and without duplication. Without limiting the generality of the foregoing, Operating Costs will include the following:

 

(i) the cost of all insurance maintained by the Landlord in respect of the Development or its operation and the cost of any deductible amounts payable by the Landlord in respect of any insured risk or claim;

 

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(ii) the cost of maintenance, repair and janitorial service for the Development, including, without limitation, snow removal, window cleaning, garbage and waste collection and disposal and the cost of operating and maintaining any merchandise holding and receiving areas and truck docks;

 

(iii) lighting, electricity, public and private utilities, loudspeakers, public address and musical broadcasting systems, all fire equipment and the cost of electricity of any signs considered by the Landlord to be a part of the Common Areas;

 

(iv) periodic redecoration, renovation, reconstruction and improvements to the Common Areas, including, without limitation, the cost of striping, patching and repaving parking facilities serving the Development;

 

(v) policing, security, supervision and traffic control;

 

(vi) amounts paid for all labour and/or wages and other payments made to janitors, caretakers and other employees (including, without limitation, wages of a building manager) or any independent contractors involved in the repair, supervision, care, maintenance or cleaning of the Development, including contributions and premiums for fringe benefits, unemployment and workers’ compensation insurance, pension plan contributions and similar premiums and contributions;

 

(vii) the cost to the Landlord of the rental of any equipment, furniture, installations, systems and signs and the cost of building supplies used by the Landlord in the operation, maintenance and servicing of the Development;

 

(viii) heating, air-conditioning and ventilation of the Building and the Common Areas and all water, fuel, hydro and other utilities consumed in the Building and Common Areas, including costs, charges and imposts related to such utilities to the extent such costs, charges and imposts are not recovered from tenants pursuant to provisions similar to section 7.1;

 

(ix) the costs:

 

(A) of repairing, operating and maintaining the Development and equipment serving the Development and of all replacements and modifications to the Development or such equipment, including those made by the Landlord in order to comply with Laws affecting the Development;

 

(B) incurred by the Landlord in installing energy conservation equipment or systems, security systems, life safety systems and all other systems which may be installed in the Development for the general benefit of the tenants in the Building;

 

(C) incurred by the Landlord in making alterations, replacements or additions to the Development intended to reduce operating costs, improve the operation of the Development or maintain its operation as a first class Development; and

 

(D) incurred to replace machinery or equipment which by its nature requires periodic replacement,

 

all to the extent that such costs are fully chargeable in the Landlord’s fiscal year in which they are incurred in accordance with generally accepted accounting practices in the commercial real estate industry and to the extent that such costs are of a capital nature and:

 

(E) do not exceed $20,000.00, the Landlord shall be deemed to be acting in accordance with generally accepted accounting practices in the commercial real estate industry if it elects to charge such costs in the Landlord’s fiscal year in which they are incurred; or

 

(F) exceed $20,000.00, the Landlord shall depreciate or amortize such costs in accordance with section 5.1(a)(x).

 

Despite the foregoing, the foregoing costs will not be included in Operating Costs to the extent that such costs are paid for out of the contingency reserve referred to in section 5.1(a)(xii);

 

(x) depreciation or amortization of those capital costs described in section 5.1(a)(ix) as having to be depreciated or amortized and all other capital costs incurred by the Landlord in connection with the Development (whether prior to or subsequent to the Commencement Date) and which the Landlord determines should be depreciated or amortized in accordance with accepted practices in the commercial real estate industry (otherwise such capital costs may be included in Operating Costs in the Lease Year in which they are incurred). The Landlord shall depreciate or amortize the costs to be depreciated or amortized in accordance with the foregoing over the useful life of the items for which the costs were incurred or over such other period as the Landlord, acting in accordance with accepted practices in the commercial real estate industry, may determine. The Landlord shall include in the Operating Costs for each Lease Year, the amount of the amortized costs attributable to such Lease Year. Despite the foregoing, the foregoing costs will not be included in Operating Costs to the extent that such costs are paid for out of the contingency reserve referred to in section 5.1(a)(xii);

 

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(xi) interest calculated at 2 percentage points above the Prime Rate upon the undepreciated or unamortized balance of the costs referred to in section 5.1(a)(x);

 

(xii) an amount which the Landlord estimates from time to time is required to establish and maintain a contingency reserve fund to be applied in payment or partial payment of the costs and expenses of repairs and replacements to paved areas, the roof and other portions of the Building and the Common Areas and any other major repairs or replacements which the Landlord determines from time to time are to be paid for out of the contingency reserve fund;

 

(xiii) auditing, accounting, legal and other professional and consulting fees and disbursements incurred by the Landlord in the operation of the Development;

 

(xiv) all business taxes, if any, from time to time payable by the Landlord in respect of its operations in the Development;

 

(xv) all Capital Tax as it relates to or is attributed by the Landlord to the Development;

 

(xvi) all Carbon Taxes;

 

(xvii) the HST payable by the Landlord on the purchase of goods and services included in Operating Costs (excluding any such HST which will be available to the Landlord when claimed as a credit or a refund in determining the Landlord’s net tax liability on account of HST, but only to the extent that such HST is included in Operating Costs);

 

(xviii) office expenses, supplies, furnishings and the fair rental value of space (having regard to rentals prevailing from time to time for similar space) in the Building, if any, occupied by the Landlord or the Landlord’s property manager for the on-site management, supervision or administration of the Development. If such space is used by the Landlord to provide management, supervisory or administrative services to buildings or developments in addition to the Development, then the Landlord will allocate such costs between the Development and such other buildings or developments on a fair and equitable basis;

 

(xix) office expenses, supplies, furnishings and the fair rental value of space (having regard to rentals prevailing from time to time for similar space), if any, occupied by the Landlord or the Landlord’s property manager for management, supervisory or administrative purposes related to the Development, and costs and expenses attributable to off-site computer, accounting and other support services to the extent provided for the operation, management and administration of the Development. If such space is used by the Landlord to provide management, supervisory or administrative services to buildings or developments in addition to the Development, then the Landlord will allocate such costs between the Development and such other buildings or developments on a fair and equitable basis;

 

(xx) costs of complying with the provisions of any development, site plan or other agreement with the local or regional municipality and/or with any utility or provider of services to the Development (excluding costs of compliance arising from or in connection with any breach by the Landlord of any of the owner's obligations under any such agreement), including, without limitation, the Landlord's costs in connection with the issuance of or maintenance of any letters of credit or other security required to be issued to such local or regional municipality, utility or service provider pursuant to the terms of any such agreement in respect of the Development;

 

(xxi) the cost of conducting environmental audits of the Lands and the cost of any investigating, testing, monitoring, removing, enclosing, encapsulating or abating any Hazardous Substance which is in or about the Development or any part thereof or which has entered the environment from the Development, if the Landlord is required to do so by any applicable Laws or Authorities or if, in the Landlord’s opinion, it is harmful or hazardous to any Person or to the Development or any part thereof or to the environment;

 

(xxii) the cost of any property management or maintenance contract;

 

(xxiii) all costs in the nature of any of the foregoing:

 

(A) incurred by the Landlord in consequence of its interest in the Development such as maintaining, repairing, replacing, cleaning and clearing of ice and snow from sidewalks, roads, adjacent property and the like; and

 

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(B) incurred or contributed, as determined by the Landlord in its sole discretion, in respect of all facilities and services whether or not off-site, including, without limitation, loading areas and docks, parking facilities, ramps, driveways, roads, rights-of-way and landscaped areas, which benefit the Development including, without limitation, those shared by users of the Development and the users of any other property and all costs to the extent incurred or contributed to by the Landlord in respect of the Development or the Landlord’s interest in the Development, whether or not such costs are incurred directly in respect of the Development;

 

(xxiv) an administrative and supervisory fee equal to 15% percent of Operating Costs (other than this administrative and supervisory fee) and the Real Property Taxes applicable to the Development.

 

(b) The Landlord shall exclude or deduct (if originally included) from the Operating Costs, as the case may be:

 

(i) all amounts which would otherwise be included in Operating Costs but which are recovered by the Landlord from tenants in the Building as a result of any act, omission, default or negligence of such tenants;

 

(ii) such of the Operating Costs as are recovered from insurance proceeds, to the extent such recovery represents reimbursements for costs previously included in Operating Costs;

 

(iii) any principal, interest or other carrying charges or mortgage payments or other financing costs in respect of the Development;

 

(iv) rent payable by the Landlord to the owners of the Development under any lease of the Lands or the Building or any part thereof less any amounts payable to the lessor thereunder in respect and to the extent (but only to the extent) of costs which the Landlord would itself have incurred if the Landlord were such owner;

 

(v) any and all costs of structural repairs or replacements required to remedy structural defects in the Development;

 

(vi) legal and other professional fees incurred in connection with the leasing of space in the Building or in enforcing leases of tenants in the Building;

 

(vii) all income and corporate taxes of the Landlord; and

 

(viii) such repairs or replacements arising from damages covered by Landlord’s insurance or warranties.

 

(c)           Operating Costs may be attributed by the Landlord in its sole discretion to the various components of the Development in accordance with reasonable and current practices and on the basis consistent with the nature of the particular costs being attributed, and the costs so attributed may be allocated to the tenants of such components accordingly.

 

(d)          If the Building is less than 100% occupied or operational during any period, the Landlord may adjust those Operating Costs which vary with the use and occupancy of rentable premises in the Building to what they would have been, in the Landlord’s reasonable estimation, if the Building had been 100% occupied or operational for such period so that such Operating Costs are fairly allocated to the tenants actually obtaining the benefit of the services associated with such Operating Costs. For clarity, nothing in this section permits the Landlord to recover more than 100% of any cost or expense comprising Operating Costs.

 

5.2 Payment of Tenant’s Proportionate Share

 

(a)          The Operating Costs may be estimated by the Landlord for a period no greater than 12 months and the Tenant shall pay to the Landlord as Additional Rent, one-twelfth of such estimated payments in advance during such period together with the monthly instalments of Minimum Rent. Despite the foregoing, as soon as bills for all or any portion of the said amounts are received, the Landlord may bill the Tenant for its relevant share of the said amounts (less all amounts previously paid by the Tenant on the basis of the Landlord’s estimate which have not already been so applied) and the Tenant shall pay the Landlord such amount as Additional Rent on demand.

 

(b)         Following the end of the period for which such estimated payments have been made, the Landlord will deliver to the Tenant a statement (the “Statement”) containing:

 

(i) reasonable particulars of the actual Operating Costs and the Real Property Taxes for such period;

 

(ii) the Tenant’s Proportionate Share of the Operating Costs;

 

(iii) a statement of the Real Property Taxes payable by the Tenant pursuant to section 6.3; and

 

(iv) the Utilities payable by the Tenant pursuant to section 7.1(c).

 

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The Landlord shall use reasonable efforts to deliver the Statement to the Tenant within 120 days following the end of the relevant period, but its failure to do so will not preclude the Landlord from subsequently delivering the Statement and from making any necessary adjustments. After the delivery of a Statement, the Landlord may subsequently render supplemental statements if it subsequently discovers errors or omissions in the amounts previously charged to the Tenant or if there are any changes to the Real Property Taxes and the parties shall make the appropriate adjustment in the same manner as set out in section 5.2(c).

 

(c) If the Statement shows that the Tenant has paid:

 

(i) more than the amount actually payable by it (the difference being called the “Excess”), then, provided the Tenant is not in default of any of the Tenant’s Covenants, the Excess will be applied by the Landlord against the next succeeding instalments of the Operating Costs and Real Property Taxes payable by the Tenant. If there is any Excess for the last year of the Term, the Excess will be refunded by the Landlord to the Tenant at the same time as the Landlord delivers the Statement for the last year of the Term, provided the Tenant is not in default of any of the Tenant’s Covenants. If the Tenant is in default of any of the Tenant’s Covenants, then the Landlord shall hold the Excess until such time as the default is rectified. If the default is a rental default, the Landlord may apply the Excess against the Rent in arrears. If the default is not a rental default, the Landlord may apply the Excess against the costs incurred by the Landlord if the Landlord elects to rectify the default, in whole or in part. Upon the default being rectified, the Landlord will either apply the Excess against the next succeeding instalments of the Operating Costs and Real Property payable to the Landlord or refund any remaining amount of the Excess to the Tenant; or

 

(ii) less than the amount actually payable by it (the difference being called the “Deficiency”), the Tenant shall pay the Deficiency within 15 days following the date it receives the Statement from the Landlord.

 

(d)          The Tenant has 60 days from the date that the Landlord delivers the Statement to the Tenant to deliver to the Landlord written notice setting out in detail any objections it may have to the Statement and the reasons therefor, failing which the Tenant will be deemed to have accepted the Statement which will then be conclusive and binding upon the Tenant.

 

5.3 Reallocation of Operating Costs

 

If the Landlord determines that there should be a disproportionate allocation of Operating Costs among all tenants of the Development, the Tenant consents to an appropriate adjustment being made to its share of the Operating Costs pursuant to such determination of the Landlord, which determination will be binding on all tenants of the Development.

 

ARTICLE 6.00 - TAXES

 

6.1 Business Taxes of Tenant

 

(a) The Tenant shall, on or before their due date, pay to the relevant Authorities all Business Taxes.

 

(b)          If the Tenant or any Person occupying the whole or any part of the Premises elects to have the Premises or any part thereof assessed for separate school taxes, the Tenant shall pay to the Landlord as soon as the amount of the separate school taxes is ascertained, any amount by which the separate school taxes exceed the amount which would have been payable for school taxes had such election not been made as aforesaid, and any loss, costs, charges and expenses suffered by the Landlord may be collected by the Landlord as Additional Rent.

 

(c)          The Tenant shall, upon request of the Landlord from time to time, deliver to the Landlord for inspection, receipts for payment of all Business Taxes and will furnish such other information in connection therewith as the Landlord may reasonably require.

 

6.2 Real Property Taxes

 

(a)          The Tenant shall pay as Additional Rent to the Landlord, or to the taxing Authorities if the Landlord so directs, and discharge in each year during the Term and within the times provided for by the taxing Authorities:

 

(i) all Real Property Taxes levied, rated, charged or assessed from time to time, respectively, against the Premises or any part thereof, on the basis of a separate real property tax bill and separate real property assessment notices rendered by any lawful taxing Authority; and

 

(ii) the Tenant’s Proportionate Share of all Real Property Taxes levied, rated, charged or assessed from time to time, respectively, against the Common Areas, or any part thereof, on the basis of a separate real property tax bill and separate real property assessment notices rendered by any lawful taxing Authority.

 

If there are no such separate tax bills and assessment notices, but there are available to the Landlord working papers and calculations made by the taxing Authorities from which separate assessments may, in the Landlord’s opinion, be determined, then the Landlord may elect to make such separate assessments based on such working papers and calculations, in which case such determinations made by the Landlord will be deemed to be separate tax bills and assessments for the purpose of this section.

 

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(b)          If there are not actual or deemed separate real property tax bills and separate real property assessment notices for the Premises and the Common Areas, the Tenant shall pay to the Landlord, as Additional Rent, its Proportionate Share of all Real Property Taxes levied, rated, charged or assessed from time to time against the Development.

 

(c)          The Tenant shall provide the Landlord, within 10 days after receipt by the Tenant, a copy of any separate tax bills and assessment notices for the Premises or any part thereof. If the Landlord requires the Tenant to pay Real Property Taxes directly to the relevant taxing Authority, the Tenant shall promptly deliver to the Landlord receipts evidencing the payment of all such Real Property Taxes and furnish such other information in connection therewith as the Landlord reasonably requires.

 

(d)          If the assessments and tax bills for the Real Property Taxes applicable to the Development involve lands and/or buildings that do not form part of the Development, then the Landlord will, acting reasonably, allocate the Real Property Taxes between the Development and such other lands and the amount allocated by the Landlord to the Development will be conclusive and binding upon the Tenant and be deemed to be the amount assessed against the Development. For clarity, the Landlord shall not allocate the Real Property Taxes in a manner that permits the Landlord to recover more than 100% of the Real Property Taxes.

 

(e)          If the Landlord does not require the Tenant to pay the Real Property Taxes to the relevant taxing Authority, the Tenant shall pay the amounts payable under section 6.2(a) or 6.2(b), as the case may be, according to estimates or revised estimates made by the Landlord from time to time in respect of each Lease Year. The Tenant’s payments will be made in advance on the first day of each month in monthly amounts and for such periods as determined by the Landlord. Until such time as the Landlord advises otherwise, the Real Property Taxes payable for each Lease Year shall be payable in 12 equal monthly instalments, commencing on January 1 in each Lease Year and ending on December 31 in each Lease Year, subject to a pro rata adjustment in respect of any Lease Year which does not commence on January 1 or end on December 31.

 

(f) If:

 

(i) there are not actual or deemed separate real property tax bills and separate real property assessment notices for the Premises and the Common Areas;

 

(ii) less than 100% of the Rentable Area in the Building has been leased by the Landlord to third parties and is vacant during any period; and

 

(iii) the Landlord is able to obtain a reduction in the Real Property Taxes for the Development due to such vacancies as described in section 6.2(f)(ii) (and the decision to seek such a reduction will be determined by the Landlord in its sole discretion),

 

then, for the purposes of section 6.2(b), the Real Property Taxes on the Development will be deemed to be the amount that they would have been if 100% of the Rentable Area in the Building had been fully leased to third parties.

 

6.3 Alternate Methods of Taxation

 

If, during the Term, the method of taxation is altered so that the whole or any part of the Real Property Taxes now levied, rated, assessed or imposed on real estate and improvements are levied, assessed, rated or imposed wholly or partially as a capital levy or on the rents received or otherwise, or if any tax, assessment, levy, imposition or charge, in lieu thereof is imposed upon the Landlord, then all such taxes, assessments, levies, impositions and charges shall be included within the Tenant’s obligation to pay its Proportionate Share of Real Property Taxes as set out in section 6.2.

 

6.4 Pro-Rata Adjustment

 

If any taxation year during the Term of this Lease is less than 12 calendar months, the Tenant’s Proportionate Share of Real Property Taxes shall be subject to a per diem pro-rata adjustment.

 

6.5 Appeal of Real Property Tax Assessment

 

(a)          The Landlord may defer payment of Real Property Taxes, or defer compliance with any statute, law, by-law, regulation or ordinance in connection with the levying of any such Real Property Taxes, in each case, to the fullest extent permitted by law, so long as it shall diligently prosecute any contest, appeal or assessment on which such tax is based. The Tenant shall co-operate with the Landlord in respect of any such contest, appeal or assessment and shall provide the Landlord with all relevant information, documents and consents required by the Landlord.

 

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(b)          The Tenant may, with the prior written consent of the Landlord, appeal or contest any separate assessment of the Real Property Taxes for the Premises, in each case, to the fullest extent permitted by law, so long as it shall diligently prosecute any contest, appeal or assessment on which such tax is based. If the Tenant obtains the Landlord’s written consent, the Tenant will deliver to the Landlord whatever security for the payment of Real Property Taxes the Landlord considers advisable and will keep the Landlord informed of its progress from time to time and upon the request of the Landlord. The Tenant may not appeal the Real Property Taxes for: (i) the Common Areas; or (ii) the Development if there is a single assessment for the Development.

 

6.6 Payment of HST

 

The Tenant shall pay to the Landlord all HST payable on the Rent (including, without limitation, accelerated Rent), which payment shall be made at the same time as the Rent to which the HST relates is to be paid in accordance with the terms of this Lease. Regardless of any other provision of this Lease to the contrary, the amounts payable by the Tenant under this section shall be deemed not to be Rent, but the Landlord shall have all of the same remedies for and rights of recovery for such amounts as it has for the recovery of Rent under this Lease, including, without limitation, the right to distrain against the Tenant’s property.

 

ARTICLE 7.00 - UTILITIES

 

7.1 Utilities

 

(a)          Throughout the Term, the Tenant shall pay as Additional Rent and discharge all rates and charges (the “Charges”) for electric charges, air-conditioning, ventilation, water, gas, light, heat, power, telephone, television and other public utilities and services supplied to or used on or in connection with the Premises or in connection with the business or occupation of the Tenant (the “Utilities”) and indemnify and keep indemnified the Landlord and the Premises from and against any and all Claims in respect thereof.

 

(b) If the Premises are separately metered for any Utilities, then the Tenant shall:

 

(i) cause the account for each of the separately metered Utilities to be registered in the name of the Tenant throughout the Term by no later than the earlier of the Commencement Date and the date that the Tenant takes possession (exclusive or non-exclusive) of the Premises;

 

(ii) pay all such Utilities to the relevant utility supplier by the relevant due date; and

 

(iii) provide the Landlord with copies of the bills for the Utilities within 10 Business Days following the Tenant’s receipt of a written request, from time to time, from the Landlord.

 

(c)          If the Premises are not separately metered for any Utilities, then the Landlord will make an equitable allocation of the Utilities, as determined by the Landlord, acting reasonably, among the tenants of the Building and the Tenant will pay for the costs of such Utilities (together with the costs incurred by the Landlord in determining or allocating the Utilities) allocated to it. The Landlord will estimate such Utilities payable by the Tenant for a period no greater than 12 months and the Tenant shall pay to the Landlord as Additional Rent, one-twelfth of such estimated payments in advance during such period together with the monthly instalments of Minimum Rent. The Landlord may revise such estimate from time to time.

 

(d)         Notwithstanding any other provision of this Lease, the Tenant shall commence paying the Charges for all Utilities consumed upon the Premises commencing on the earlier of the Commencement Date, the Fixturing Period and the date that possession of the Premises (which need not be exclusive) is given to the Tenant.

 

7.2 Meters

 

The Tenant shall pay the cost of installing and maintaining any meters installed at the request of the Landlord or the Tenant to measure the usage of Utilities in the Premises. No meter may be installed in the Premises by the Tenant without the Landlord’s consent.

 

ARTICLE 8.00 - CONTROL OF BUILDING

 

8.1 Control of the Development

 

(a)          The Development is at all times subject to the exclusive control and management of the Landlord. The Landlord will operate and maintain the Development in such manner as the Landlord, in its sole discretion, determines from time to time. Without limiting the generality of the foregoing, the Landlord may:

 

(i) construct, maintain and operate lighting facilities and heating, ventilating, and air-conditioning systems;

 

(ii) police and supervise the Development;

 

(iii) close all or any portion of the Common Areas to such extent as may, in the opinion of the Landlord’s counsel, be legally sufficient to prevent a dedication thereof or the accrual of any rights to any Person or the public therein;

 

(iv) grant, modify and terminate easements or other agreements pertaining to the use and maintenance of all or any part or parts of the Development;

 

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(v) obstruct or close off all or any part of the Development or parts thereof for the purpose of maintenance or repair, or for any other reason deemed necessary by the Landlord;

 

(vi) employ all personnel including supervisory personnel and managers necessary for the operation, maintenance and control of the Development, the Tenant acknowledging that the Development may be managed by the Landlord or such other Person or Persons as the Landlord designates from time to time;

 

(vii) use part of the Common Areas, from time to time, for merchandising, display, decorations, entertainment and structures designed for special features and promotional activities;

 

(viii) control access through entrances, driveways, ramps, and roads including, without limitation, designating entrances, driveways, ramps and/or roads for the use of particular Person or Persons;

 

(ix) designate the areas and entrances and the times in, through and at which loading and unloading of goods shall be done;

 

(x) control, supervise and regulate the delivery or shipping of merchandise, supplies and fixtures to and from the Premises in such manner as in the sole judgment of the Landlord is necessary for the proper operation of the Premises and the Development;

 

(xi) make any changes or additions to the pipes, conduits, utilities and other services in the Premises which service the Premises or other premises in the Building;

 

(xii) from time to time restrict and prohibit parking in the Development by the Tenant, its agents, employees, customers and other invitees, and other Person or Persons;

 

(xiii) from time to time, change the area, level, location, arrangement and use of the Common Areas;

 

(xiv) construct other buildings, structures or improvements in the Development and/or make alterations thereof or additions thereto, or subtractions therefrom or re-arrangements thereof and/or enclose any open portion of the Common Areas, and/or create any outdoor or indoor malls or any combination thereof, and/or build additional storeys on any building or buildings in the Development and build adjoining same;

 

(xv) construct multiple deck or elevated or underground parking facilities;

 

(xvi) re-locate or re-arrange the various buildings, parking areas and all other Common Areas from those existing at the Commencement Date;

 

(xvii) do such things as are required to comply with the laws, by-laws, regulations, orders or directives of all governmental or regulatory authorities having jurisdiction; and

 

(xviii) do such other things with reference to the Development as, in the use of good business judgment, the Landlord determines to be advisable.

 

(b) In exercising any of its foregoing rights, the Landlord:

 

(i) may enter upon the Premises to make such changes to same as the Landlord in its sole discretion deems necessary in connection with any changes to the Development and the Common Areas;

 

(ii) shall use reasonable commercial efforts to minimize interference with the Tenant’s business operations on the Premises;

 

(iii) shall make any such changes as expeditiously as reasonably possible,

 

and the Tenant will not be entitled to any abatement in Rent or compensation for any inconvenience, nuisance or discomfort occasioned thereby and nothing in this Lease is deemed or construed to impose upon the Landlord any obligation, responsibility or liability whatsoever for the care, maintenance or repair of the Premises, or any part thereof, except as set out above.

 

(c)         Any entry by the Landlord upon the Premises in accordance with the provisions of this section is not a re-entry or a breach of any covenant for quiet enjoyment contained in this Lease and will not affect the Tenant’s obligation to observe and perform the Tenant’s Covenants.

 

8.2 Parking

 

(a)         The Landlord agrees to allow the Tenant a minimum of two (2) unreserved stalls in the parking garage of the Building at a cost which shall be based on the prevailing rates (currently one hundred and fifty for dollars and forty nine cents ($154.49)) per month per stall to the Tenant during the term of the Lease and any subsequent renewals and extensions, as it may be extended or renewed. The Tenant acknowledges that the Landlord retains the services of a third party manager for all parking garage administration and related services.

 

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(b) The Landlord or the Operator may:

 

(i) from time to time to establish, modify and enforce reasonable rules and regulations with respect to any Parking Facilities:

 

(ii) expand, reduce, or change the area, level, location and arrangement of the Parking Facilities;

 

(iii) temporarily obstruct or close off all or any part of the Parking Facilities for the purpose of maintenance or repair;

 

(iv) impose charges for the use of the Parking Facilities by visitors to the Development;

 

(v) prohibit the Tenant and its employees, suppliers and customers from parking in specific areas of the Parking Facilities;

 

(vi) designate tenant parking areas in the Parking Facilities, in which case the Tenant and its employees must park their vehicles only in such parking areas; and

 

(vii) do and perform such other acts in and to the Parking Facilities as may, in their judgment, be advisable with a view towards the improvement of the convenience of and use of the Building by tenants, their employees and invitees.

 

(c)          If any individual permitted by the Tenant to use the Tenant’s parking spaces fails to comply with the provisions of this Lease in respect of the Parking Facilities (including without limitation the rules and regulations from time to time applicable to the Parking Facilities), then the Landlord may terminate or suspend the privileges of the offending party to use the Parking Facilities, but the exercise of such right by Landlord will not limit or affect the Tenant’s obligation to pay for the parking spaces that it has taken or limit or affect the rights of other individuals authorized by the Tenant to use the Tenant’s parking spaces.

 

(d)         The Tenant shall participate in any parking ticket validation plan or similar plan as may be from time to time instituted by the Landlord or its agents.

 

(e)          The Landlord is not responsible for theft of or damage to any vehicles in the Parking Facility or articles left in the vehicles.

 

(f) The Landlord may remove vehicles in the Parking Facilities which the Landlord determines have been abandoned.

 

8.3 Right to Relocate

 

The Landlord and Tenant will negotiate the terms of any relocation, should the Landlord wish to relocate the Tenant during the Term of this Lease.

 

8.4 Lighting Systems

 

The Landlord has the exclusive right to replace bulbs, tubes and ballasts in the lighting system in the Premises, on either an individual or a group basis. The Tenant shall pay the cost of such replacement as Additional Rent at the same time as Minimum Rent is payable, or as otherwise directed by the Landlord. The Landlord may impose additional charges for changing specialty lighting.

 

8.5 Heating. Ventilating and Air-Conditioning

 

(a)          The Landlord shall provide heating, ventilating and air-conditioning to the Premises to an extent sufficient to heat, ventilate and/or cool the Premises at all times during Normal Business Hours for normal occupancy, except during or when prevented by reason of maintenance, repairs, failure of electricity or other causes beyond the reasonable control of the Landlord. The Landlord will use all reasonable efforts to respond to the Tenant’s requests regarding the temperature in the Premises as soon as reasonably possible.

 

(b)          The Landlord is not responsible for any inadequacy of the performance of the systems for the provision of such services if the number of persons per square foot (square metre) of the floor area of the Premises or the amount of electricity consumed in the Premises exceeds the guidelines established by the Landlord from time to time, or if the Tenant’s Leasehold Improvements, equipment or furniture interfere with the proper operation of such systems or if the Tenant fails to properly shade windows exposed to the sun. If the Landlord, in its discretion, elects to make any changes (including rebalancing) to such systems as a result of any such excess or improper use or arrangement of the Premises, then:

 

(i) the Tenant shall pay the cost of such changes (plus 15% of such cost representing the Landlord’s administrative fee) to the Landlord within 30 days following the Tenant’s receipt of an invoice; and

 

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(ii) if, in the opinion of the Landlord, such changes result in maintenance costs or Operating Costs in excess of those which would have occurred had such changes not been made, the Landlord may estimate the amount of such excess and such amount shall will not be included in Operating Costs but the Landlord may invoice the Tenant, from time to time, for such amount and the Tenant shall pay such invoices within 30 days following receipt of same.

 

8.6 Janitorial Services and Waste Disposal

 

(a)          The Landlord shall provide janitorial services to the Premises and the Building. Such janitorial services will be those typically provided by landlords of office buildings similar to the Building in the GTA. The Landlord may, in its sole discretion, amend or vary services as experience and conditions may dictate.

 

(b)          The Landlord is not responsible for any act, omission or negligence on the part of any Person or Persons employed or retained by the Landlord to perform such work and will not be liable for any damage or injury to property or Persons in connection therewith.

 

(c)           The Tenant shall grant the persons performing such services access to all parts of the Premises in order to perform such janitorial services and will leave the Premises in a reasonably tidy condition at the end of each day to permit the performance of such services. If any part of the Premises is not accessible to such persons, then Landlord will not be required to provide janitorial services to such parts of the Premises.

 

8.7 Washrooms

 

The Tenant and the Tenant’s Employees may use the washrooms in the Common Areas.

 

8.8 Elevator Service

 

The Landlord shall provide elevator service in the Building during Normal Business Hours (and at least 1 elevator outside of Normal Business Hours) for use by the Tenant in common with others lawfully using same, except when prevented by reason of maintenance, repairs, failure of electricity or other causes beyond the reasonable control of the Landlord. All Persons using the elevators in the Building do so at their sole risk and the Landlord is not liable for any Claims that may be made by any such Persons in connection with their use of the elevators in the Building.

 

8.9 Building Security

 

(a)          The Landlord shall provide security for the Building to a standard consistent, from time to time, with good quality office buildings similar to the Building in the GTA.

 

(b)          The Landlord shall provide and maintain a card access security system to the Building which monitors all entrance doors and shall provide the Tenant, at the Tenant’s sole cost, with the necessary cards for its employees and visitors. The Tenant shall have the right to install its own card access system for the Premises which will be compatible with the Landlord’s system.

 

(c)          The Tenant, acting reasonably and at its own expense, may install in and for the Premises such security devices and systems which it deems to be useful or necessary, including burglar alarms and locks, provided that it provides that the Landlord with all necessary keys, codes and other access devices so as to allow the Landlord to have access to the Premises in the event of an emergency or in connection with the exercise of its rights and remedies in this Lease or at law.

 

(d)          The Tenant, the Tenant’s Employees and those having business with the Tenant at the Premises must comply with the Landlord’s security requirements for the Building.

 

8.10 Directory Board

 

The Tenant’s name and location in the Building shall be posted on all directory boards in the Building and with plaque signage at suite entry door with style and materials of suite entry signage to be agreed. These signs shall be at the Landlord’s cost and installed by the Landlord. Any future changes the Tenant may request shall be at the cost of the Tenant.

 

ARTICLE 9.00 - MAINTENANCE AND REPAIRS

 

9.1 Tenant’s and Landlord’s Repairs

 

(a)          If the Development or any part of it becomes damaged or destroyed through the negligence, carelessness or misuse by the Tenant, the Tenant’s Employees or anyone permitted by it to be in the Development, or through it or them in any way stopping up or injuring the heating apparatus, water pipes, drainage pipes, or other equipment or part of the Development, the expense of the necessary repairs, replacements or alterations shall be borne by the Tenant who shall pay the same to the Landlord as Additional Rent forthwith upon demand.

 

(b) Subject to sections 9.4 and 17.1, the Tenant shall, at all times during the Term at its sole cost and expense:

 

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(i) keep and maintain the Premises in good order, first-class condition and repair (which includes periodic painting and decorating and preventative maintenance) as would a prudent owner; and

 

(ii) make and carry out all needed maintenance, repairs and replacements to and for the whole of the Premises (including all appurtenances, fixtures, equipment and contents, including, without limitation, all entrances, windows and glass other than that forming part of the exterior walls of the Building or the enclosing walls of any atriums thereof, partitions, doors, store fronts, signs (both interior and exterior) and leasehold improvements),

 

so as to maintain same to a standard consistent with premises in a first class office building. The Tenant shall make all needed repairs and replacements with due diligence and dispatch.

 

(c) The Tenant’s obligation to repair and maintain the Premises do not extend to:

 

(i) repairs and maintenance necessitated by reasonable wear and tear to the Premises which would not be repaired by a careful and prudent owner of a first class building of the same type as the Building;

 

(ii) repairs to be made by the Landlord pursuant to section 9.1(d); and

 

(iii) Insured Damage.

 

(d)           Subject to section 17.1, the Landlord shall at all times throughout the Term, but subject to the other provisions of this Lease, maintain and repair or cause to be maintained and repaired the following:

 

(i) the structure of the Building (including the Premises) including, without limitation, the footings and foundations, structural columns and beams, exterior walls, bearing walls, subfloors and roof structure;

 

(ii) the Common Areas (including, without limitation, the elevators in the Building); and

 

(iii) Insured Damage.

 

The timing and all aspects of the carrying out of such repairs, replacements and maintenance is within the sole discretion of the Landlord. The Landlord may, subject to section 5.1(b), include the costs of such maintenance, repairs and replacements in the Operating Costs. If, however, any such maintenance, repairs or replacements are necessitated as a result of:

 

(iv) the negligence, omission or wilful acts of the Tenant or the Tenant’s Employees; or

 

(v) the application of applicable Laws as a result of the business carried on by the Tenant in the Premises,

 

then (except in the case of Insured Damage) the Tenant will be responsible for the cost of such maintenance, repairs and replacements (together with the Landlord’s administrative fee of 15% of such costs) (collectively, the “Repair Costs”). If required by the Landlord, the Tenant shall provide a deposit to the Landlord equal to the Landlord’s estimate of the Repair Costs (the “Repair Deposit”) and the Landlord shall be under no obligation to undertake the relevant maintenance, repairs or replacements until such time as it receives the Repair Deposit. If the Repair Costs are to be paid by the Tenant, then upon completion of the repairs the Landlord will provide the Tenant with an invoice for the Repair Costs and:

 

(vi) to the extent that the Repair Costs exceed the Repair Deposit actually received by the Landlord (if any), the Tenant shall pay such excess to the Landlord within 20 days following the date that the Tenant receives such invoice; or

 

(vii) to the extent that the Repair Costs are less than the Repair Deposit actually received by the Landlord (if any), the Landlord shall pay the deficiency to the Tenant within 20 days following the date that the Tenant receives such invoice.

 

(e)         Except as expressly set out in this Lease, the Landlord is not responsible for making any repairs or replacements in and to the Premises of any nature or kind whatsoever.

 

9.2 Repair on Notice

 

The Tenant shall commence to repair upon 15 days’ notice in writing from the Landlord (or such shorter period as may be required by the Landlord, acting reasonably) but the Landlord’s failure to give notice shall not relieve the Tenant from its obligation to repair. If, after receiving such notice, the Tenant refuses or neglects to perform the repairs required by section 9.1 to the reasonable satisfaction of the Landlord, the Landlord may, but shall not be obligated to, make such repairs without liability to the Tenant for any loss or damage that may accrue to the Tenant’s merchandise, fixtures or other property or to the Tenant’s business by reason thereof and upon completion thereof, the Tenant shall pay, as Additional Rent, the Landlord’s costs for making any such repairs plus the Landlord’s administrative fee of 15% of such costs.

 

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9.3 Landlord’s Right to Enter

 

(a)          The Landlord and the Landlord’s Employees may, at all reasonable times and on at least 24 hours prior notice (except in the case of an emergency, real or apprehended, when no notice is required), enter the Premises for the purpose of:

 

(i) viewing the state of repair and maintenance of the Premises. The Tenant shall comply with all requirements of the Landlord with respect to the care, maintenance and repair thereof, provided that they are not inconsistent with Tenant’s obligations contained in section 9.1;

 

(ii) making such repairs and replacements as are the Landlord’s obligations under this Lease;

 

(iii) making such repairs and replacements as are the Tenant’s obligations pursuant to the terms of this Lease and which the Tenant is in default of making after the expiry of the 15 day notice period referred to in section 9.2;

 

(iv) making changes and additions to the pipes, conduits, wiring and ducts in the Premises where necessary to serve other premises in the Building; or

 

(v) for any other purpose necessary to enable the Landlord to perform the Landlord’s Covenants or exercise its rights under this Lease.

 

(b)          The Landlord may bring onto the Premises all materials required in order for it to exercise its rights in this section 9.3.

 

(c)           In order to effect any maintenance, repairs, replacements, alterations or improvements which are the Landlord’s obligation under this Lease, or which the Landlord is entitled to carry out pursuant to this Lease, the Landlord may, without any liability whatsoever and without thereby constituting an interference with the Tenant’s rights under this Lease or a breach by the Landlord of this Lease, and without thereby entitling the Tenant to any rights in respect thereof, temporarily suspend or modify the provision of Utilities to the Premises.

 

(d) In exercising its rights in this section, the Landlord shall:

 

(i) do so as expeditiously as reasonably possible;

 

(ii) endeavour to minimize the interference with the Tenant’s business operations in the Premises; and

 

(iii) in the case of the exercise of its rights under section 9.3(c) (other than in the case of an emergency, real or apprehended), give the Tenant at least 2 Business Days prior written notice and endeavour to coordinate the timing of any suspension of Utilities with the Tenant.

 

(e)          The Tenant shall not be entitled to any abatement in Rent as a result of the Landlord exercising its rights in this section 9.3. The Landlord shall not be liable for any damage caused to any property located in the Premises as a result of the Landlord exercising its rights in this section 9.3.

 

(f)           If the Tenant is not present to open and permit an entry into the Premises, the Landlord or the Landlord’s Employees may, using reasonable force, exercise the Landlord’s rights in section 9.3(a) to enter the Premises without rendering the Landlord or the Landlord’s Employees liable therefor, and without affecting or releasing the Tenant from the observance and performance of any of the Tenant’s Covenants.

 

(g)          Nothing in this section shall impose upon the Landlord any obligation, responsibility or liability for the care, maintenance or repair of the Premises, except as specifically provided in this Lease.

 

9.4 Alterations or Improvements

 

(a)          The Tenant will not commence nor make any Alterations to any part of the Premises without the Landlord’s prior written consent. Despite the foregoing, the Tenant does not require the Landlord’s consent to carry out any interior Alterations:

 

(i) for which a building permit is not required by applicable Laws,

 

but the Tenant must give the Landlord prior written notice of its intention to make such Alterations and otherwise comply with the provisions of this section in performing such Alterations.

 

(b) If any proposed Alterations:

 

(i) affect the structure of the Premises or the Building or the roof of the Building;

 

(ii) affect any part of the Premises which may be under warranty to the Landlord;

 

  - 24 -  

 

 

(iii) affect any of the electrical, plumbing, mechanical, heating, ventilating or air-conditioning systems or other base Building systems thereof, or otherwise require compatibility with the Landlord’s systems;

 

(iv) are to be installed outside of the Premises;

 

(v) are installed within the Premises but are part of the Common Areas; or

 

(vi) affect the Common Areas, the exterior doors of the Premises or the perimeter walls of the Premises including, without limitation, the windows or glass portions thereof,

 

then the Landlord may:

 

(vii) require such Alterations to be performed by the Landlord or its contractors, but at the Tenant’s sole cost and expense. The Tenant shall pay all such costs and expenses, including, without limitation, the cost of all Experts retained by the Landlord (plus a sum equal to 15% of all such costs representing the Landlord’s administrative fee), within 15 days of receiving an invoice from the Landlord; and/or

 

(viii) refuse its consent to the proposed Alterations.

 

(c)           No Alterations by or on behalf of the Tenant shall be permitted which may weaken or endanger the structure or adversely affect the condition or operation of the Premises or the Building or diminish the value thereof, or restrict or reduce the Landlord’s coverage for municipal zoning purposes.

 

(d) Prior to commencing any Alterations, the Tenant shall submit to the Landlord:

 

(i) details of the proposed Alterations, including, without limitation, drawings and specifications prepared by qualified architects or engineers;

 

(ii) such indemnification against liens, costs, damages and expenses as the Landlord shall reasonably require; and

 

(iii) evidence satisfactory to the Landlord that the Tenant has obtained all necessary consents, permits, licences and inspections from all Authorities having jurisdiction.

 

(e) All Alterations by the Tenant shall be:

 

(i) at the sole cost of the Tenant;

 

(ii) performed by competent workmen who are approved by the Landlord and whose labour union affiliations are compatible with others employed by the Landlord and its contractors and who are fully covered by the Workplace Safety and Insurance Board of Ontario. However, the Tenant must retain the Landlord’s base building mechanical, electrical and structural engineering consultants to ensure compatibility of the Building Systems and the Alterations;

 

(iii) performed in a good and workmanlike manner in accordance with the approved drawings and specifications, all applicable Laws and the very best standards of practice;

 

(iv) subject to the reasonable supervision and direction of the Landlord;

 

(v) completed as expeditiously as possible with good quality, new materials; and

 

(vi) done in accordance with any design criteria manual which the Landlord may have created for the Building. In the event of any express conflict between the provisions of this Lease and the provisions of such design criteria manual, the provisions of this Lease shall prevail in all cases.

 

(f) During the making of the Alterations, the Tenant shall:

 

(i) remove, or cause its contractors to remove, all garbage and debris in connection with the Alterations from the Premises daily and place same into garbage containers for that purpose. If any such garbage or debris is removed by the Landlord’s forces, then the Landlord may invoice the Tenant for the costs of doing so and such invoice must be paid by the Tenant within 15 days following receipt of such invoice;

 

(ii) carry builder’s all risks insurance satisfactory to the Landlord, acting reasonably, and provide the Landlord with a certificate of insurance certifying that the Tenant has taken out such insurance, which certificate must be signed by or on behalf of the insurer and be in a form acceptable to the Landlord. The Tenant may not commence any Alterations until the Landlord has approved such insurance certificate; and

 

(iii) retain on the Premises one set of the Tenant's plans with the Landlord’s approval endorsed thereon.

 

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(g)         The Tenant is responsible for all costs incurred by the Landlord (including, without limitation, fees of architects, engineers and designers) incurred in dealing with Tenant’s request for Landlord’s consent to any Alterations, whether or not such consent is granted, and in inspecting and supervising any such Alterations, together with a management fee in the amount of:

 

(i) in connection with all other Alterations, 15% of the costs of the Alterations.

 

The Tenant shall pay such costs and management fee to the Landlord within 15 days following the Tenant’s receipt of an invoice for such costs and management fee.

 

(h)         Any Alterations made by the Tenant without the prior written consent of the Landlord or which are not in accordance with the drawings and specifications approved by the Landlord shall, if requested by the Landlord, be promptly removed by the Tenant at its expense and the Premises restored to their previous condition, failing which the Landlord may do and the Tenant shall pay the Landlord the Landlord’s costs in doing so, plus an administrative fee equal to 15% of such costs, within 15 days following receipt of an invoice from the Landlord.

 

(i)          Upon completion of any Alterations, the Tenant shall provide to the Landlord as-built drawings for the Premises and shall secure all applicable statutory declarations and certificates of inspection, approval and occupancy and provide evidence of same to the Landlord.

 

(j)          Under no circumstances shall the Tenant, its employees, agents, contractors, suppliers or workmen enter onto the roof of the Building or make any opening in the roof of the Premises in connection with the performance of any Alterations or for any other reason whatsoever.

 

(k)          The Tenant shall furnish to the Landlord within 15 days following demand, a statutory declaration or other evidence satisfactory to the Landlord stating that there no liens or other encumbrances have been registered against title to the Lands in connection with the Alterations and that all accounts for work, services and materials have been paid in full with respect to all of Alterations. The Tenant shall also furnish to the Landlord within 15 days following demand, any other information requested by the Landlord regarding the supply of work, services and materials in connection with the performance of the Alterations, including without limitation details of the costs actually expended by Tenant in the performance of the Alterations.

 

(l)           The opinion in writing of the Landlord’s Expert shall be binding on both the Landlord and Tenant respecting all matters of dispute regarding the Alterations, including, without limitation, the state of completion and whether or not the Alterations are completed in a good and workmanlike manner and in accordance with Tenant’s plans and specifications for the Alterations and with the provisions of this section.

 

(m)         Notwithstanding any consents granted by the Landlord to any proposed Alterations, such consents relate only to the general acceptability of the proposed Alterations and that by giving such consents, the Landlord shall not be deemed to have any direct or indirect interest, responsibility or liability with respect to such Alterations or the design, installation or maintenance of same or for the payment of same, all of which shall be the sole responsibility of the Tenant. Without limiting the generality of the foregoing, and notwithstanding any notices which the Landlord may receive from the Tenant’s contractors or subcontractors, the Landlord shall not be liable, and no lien or other encumbrance shall attach to the Landlord’s interest in the Development, pursuant to the Construction Lien Act (Ontario) or any other Laws, in respect of materials supplied or work done by Tenant or on behalf of Tenant (including if done by or on the direction of the Landlord pursuant to its rights in this section) or related to any Alterations, and Tenant shall so notify or cause to be notified all its contractors and subcontractors. The Tenant shall indemnify and save harmless the Landlord from any Claims suffered or incurred by the Landlord which arise out of the performance of the Alterations. The Tenant acknowledges and agrees that the provision of any materials, work or services performed by the Landlord at Tenant’s expense in respect of any Alterations or pursuant to any provision of this Lease shall be deemed to be provided by the Landlord on the Tenant’s behalf as the Tenant’s contractor.

 

9.5 Notify Landlord

 

The Tenant shall give immediate notice in writing to the Landlord of any damage caused to the Premises or the Development upon such damage becoming known to the Tenant. If the Landlord is responsible for repairing any such damage and the Tenant fails to give notice of such damage to the Landlord in accordance with its preceding obligation, the Tenant shall be liable for such of the costs incurred by the Landlord in repairing such damage as can be shown to be directly attributable to such failure on the part of the Tenant (including, without limitation, additional costs incurred by the Landlord in repairing such damage and which would not have been incurred had the Tenant given notice of such damage to the Landlord in accordance with its obligations in this section).

 

9.6 Maintenance of the Premises

 

The Tenant shall keep, operate and maintain the Premises in a clean and sanitary condition having regard to the nature of the business operations being carried on therein and shall leave the Premises in a reasonably tidy condition at the end of each day. The Tenant shall be responsible for the cost of removing all of its trash and refuse arising from the Tenant’s Work and the stocking and operation of its business in the Premises.

 

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9.7 Loading and Unloading

 

The Tenant shall ensure that all deliveries or movement of heavy articles to and from the Premises shall be made only by doorways or corridors designated by the Landlord for such purpose.

 

9.8 Glass

 

The Tenant shall pay the cost of replacement with equal quality and size of any glass broken on the Premises including outside windows and doors of the perimeter of the Premises (including perimeter of the windows in the exterior walls) during the Term and any Fixturing Period provided that any window breakage is caused by the Tenant’s negligence.

 

9.9 Pest Extermination

 

The Landlord shall engage the services of a pest extermination contractor to provide pest extermination services in the Building at such intervals as the Landlord may require and the costs of such contractor may be included in Operating Costs.

 

9.10 Tenant Not to Overload

 

The Tenant shall not:

 

(a) bring upon the Premises or any part thereof, any machinery, equipment, article or thing that by reason of its weight, size or use, might in the opinion of the Landlord damage the Premises;

 

(b) overload the floors of the Premises;

 

(c) overload any of the utility, electrical, mechanical or structural systems in or servicing the Premises;

 

(d) place anything on or suspend anything from the roof structure or the building structure any loads whatsoever without first obtaining the Landlord’s prior written consent, which consent may be unreasonably and arbitrarily withheld.

 

If any damage is caused to the Premises by any machinery, equipment, object or thing or by its overloading, or by any act, neglect, or misuse on the part of the Tenant, the Tenant will forthwith repair the same, or at the option of the Landlord, pay the Landlord forthwith on demand the cost of making good the same together the Landlord’s administrative fee of 15% of such costs.

 

9.11 Protection of Equipment

 

The Tenant shall protect from damage all of the heating and air-conditioning apparatus, water, gas and drain pipes, water closets, sinks and accessories thereof in or about the Premises and keep same free from all obstructions that might prevent their free working and give to the Landlord prompt written notice of any accident to or defects in same or any of their accessories. Any damage resulting from misuse or failure to protect same shall be the sole responsibility of the Tenant. The Tenant specifically undertakes to install and maintain at its sole cost and expense, fire extinguishers and such other fire protection equipment as is deemed reasonably necessary or desirable by the Landlord or any governmental or insurance body.

 

9.12 Excavation

 

If an excavation is made or authorized upon the Lands or land adjacent to the Lands, the Tenant shall grant the Persons making or authorized to make such excavation permission to enter upon the Premises for the purpose of doing such work as the Landlord considers necessary to preserve the walls of the Building from injury or damage and to support the same in an appropriate manner, without giving rise to any claim for damages or indemnification against the Landlord or for any abatement in Rent.

 

ARTICLE 10.00 - USE OF PREMISES

 

10.1 Use of Premises

 

The Premises may only be used for the Permitted Uses and may not be used, in whole or in part, for any other business or purpose.

 

10.2 Conduct of Business

 

The Tenant shall conduct its business in the Premises in a reputable and first class manner. The Tenant acknowledges and agrees that it is only one of many tenants in the Building and, accordingly, the Tenant will conduct its business in the Premises in the best interests of the Building as a whole. In the conduct of its business, the Tenant shall:

 

  - 27 -  

 

 

(a) not do, nor suffer or permit to be done, any acts which may damage the Development or be a nuisance or menace to the Landlord or to other tenants in the Building;

 

(b) not do, nor suffer or permit to be done, any act in or about the Development which hinders or interrupts the flow of traffic to, in and from the Building and not do, nor suffer or permit anything to be done which will in any way obstruct the free movement of persons doing business in the Building with any tenant or other occupant in the Building;

 

(c) not commit or suffer or permit to be committed any waste upon the Premises;

 

(i) not sell, or permit the sale of, counterfeit goods;

 

(ii) not engage in acts or activities (including, without limitation, the sale of goods or services) which may infringe the intellectual property rights of third parties;

 

(d) not obstruct any conduit, wiring, pipe, duct, access panel and the like or do or omit to do any other thing which would unreasonably restrict access to any Building system or facility including, without limitation, heating, ventilating or air-conditioning units or equipment;

 

(e) not use any loud speakers, television, phonographs, radios or other devices in a manner so that they can be heard or seen outside of the Premises;

 

(f) not engage in any business, conduct or practice which, in the Landlord's reasonable opinion, may harm the business or reputation of the Landlord or reflect unfavourably on the Building or its tenants and, if the Landlord determines that the Tenant is engaging in any such business, conduct or practice, the Tenant shall immediately cease same upon receipt of written notice from the Landlord instructing the Tenant to stop such business, conduct or practice.

 

10.3 Observance of Law

 

The Tenant shall, at its sole cost and expense, and subject to the other provisions of this Lease, promptly:

 

(a) observe and comply with all provisions of all Laws now or hereafter in force which pertain to or affect the Premises, the Tenant’s use of the Premises or the conduct of any business in the Premises, or the making of any repairs, replacements, alterations, additions, changes, substitutions or improvements of or to the Premises;

 

(b) observe and comply with all police, fire and sanitary regulations imposed by any Authority or made by fire insurance underwriters; and

 

(c) carry out all modifications, alterations or changes of or to the Premises and the Tenant’s conduct of business in or the use of the Premises which are required by any Authority.

 

10.4 Window Coverings

 

Without the prior written consent of the Landlord, the Tenant shall not install any blinds, drapes, curtains or any other window coverings in the Premises and shall not remove, add to or change the blinds, drapes, curtains or other window coverings installed by the Landlord from time to time. The Tenant shall keep all window coverings open or closed at various times as the Landlord may from time to time reasonably direct by the rules and regulations or otherwise, to the extent that closing or opening the window coverings is required for the Tenant’s comfort.

 

10.5 Rules and Regulations

 

The Tenant and the Tenant’s Employees are bound by, and shall observe the rules and regulations attached as Schedule E and such further and other rules and regulations made hereafter by the Landlord relating to the Development of which notice in writing shall be given by the Landlord to the Tenant. The Landlord may from time to time amend or supplement the rules and regulations or adopt and promulgate additional rules and regulations applicable to the Development, including, without limitation, rules and regulations for the operation and maintenance of the Common Areas, business hours of the Building, lighting of premises and display sign and other matters relating to the establishment of a proper image for the Development, which rules and regulations may differentiate between different types of businesses in the Building. All such rules and regulations are deemed to be incorporated into and form part of this Lease, but if there is a conflict between such rules and regulations and the other provisions of this Lease, such other provisions of this Lease will prevail. The Landlord will not be responsible to the Tenant for the non-observance or violation of any provisions of such rules and regulations or of the terms of any other lease of premises in the Building, and is under no obligation to enforce any such provisions.

 

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10.6 Energy Conservation

 

The Tenant shall cooperate with the Landlord regarding any programs and procedures undertaken by the Landlord, either voluntarily or by reason of legal, regulatory or insurance requirements, for environmental improvement, pollution control, waste recycling, energy conservation and similar matters.

 

10.7 Name of Building

 

The Tenant will not refer to the Building by any name other than such name as may be designated from time to time by the Landlord as the name of the Building and the Tenant may use the name of the Building for the business address of the Tenant and for no other purpose without the written consent of the Landlord.

 

10.8 Exhibiting Premises

 

The Landlord and the Landlord’s Employees shall be entitled to, at all reasonable times and on at least 24 hours prior notice to the Tenant, enter upon the Premises in order to exhibit them to such Persons as the Landlord may determine.

 

10.9 Access

 

The Tenant may have access to the Premises throughout the Term, subject to the Landlord’s reasonable security requirements and the other provisions of this Lease.

 

10.10 Telecommunications

 

(a)          The Tenant may utilize a telecommunication service provider of its choice with the Landlord’s prior written consent, subject to the provisions of this Lease and the following:

 

(i) the Landlord shall incur no expense or liability whatsoever with respect to any aspect of the provision of telecommunication services, including without limitation, the cost of installation, service, materials, repairs, maintenance, removal, interruption or loss of telecommunication service;

 

(ii) the Landlord must first reasonably determine that there is sufficient space in the risers of the Building for the installation of the service provider’s wiring and cross connect;

 

(iii) the Tenant shall indemnify and hold harmless the Landlord for all Claims suffered or incurred by Landlord caused by or arising out of, either directly or indirectly, any acts or omissions by the service provider or the telecommunication equipment that the Tenant arranges to have installed in the Building and the Premises;

 

(b)         The Tenant is be responsible for the costs associated with the supply and installation of telephone, computer and other communication equipment and systems and related wiring within the Premises to the boundary of the Premises for hook up or other integration with telephone and other communication equipment and systems of a telephone or other communication service provider, which equipment and systems of the service provider are located or are to be located in the Building pursuant to the Landlord’s standard form of licence agreement and, subject to the provisions of section 15.1 for the removal of same.

 

(c)          The Landlord shall supply space in Building’s risers and space on floor(s) of the Building in which the Premises are located, the location of which shall be designated by the Landlord, to telecommunication service providers who have entered into the Landlord’s standard form of licence agreement for the purpose, without any cost or expense to the Landlord therefor, of permitting installation in such risers and on such floor(s) of telephone and other communication services and systems (including data cable patch panels) to the Premises at a point designated by the Landlord.

 

(d)          The Landlord has the right to assume control of wiring, cables and other telecommunication equipment in the Building and may designate them as part of the Common Areas.

 

(e)          The Tenant will not install or use any telecommunication equipment (including, without limitation, any wireless equipment, antennae or related equipment) that creates a health hazard or that interferes with the operating systems of the Building or the telecommunication equipment of the Landlord or other occupants of the Building.

 

(f) If the Tenant sets up a wireless network within the Premises then:

 

(i) the Tenant shall cooperate fully with the Landlord and others if any spectrum management requirements or programs are put in place to ensure that radio frequencies, channels and unlicensed portions of the radio frequency spectrum operate harmoniously within the Building and do not cause any interference with telecommunications or systems outside of the Building;

 

  - 29 -  

 

 

(ii) the Tenant may be required to pay an equitable share, determined by the Landlord, of the costs incurred by the Landlord for spectrum management, as well as costs of monitoring, inspecting, investigating, and obtaining reports relating to wireless equipment usage; and

 

(iii) the Tenant will abide by any recommendations made by the Landlord’s Experts relating to spectrum management and the mitigation of interference, security and reception issues.

 

(g)          The Tenant acknowledges that the Landlord makes no representation concerning, and assumes no responsibility for, any telecommunications or telecommunications equipment of the Tenant or for managing, controlling or protecting telecommunications of the Tenant. The Tenant is fully responsible for satisfying itself concerning all aspects of the Building, its operations and those of its occupants having regard to telecommunication matters and related equipment and will indemnify the Landlord against all Claims relating to disruption that are made by third parties with whom the Tenant or occupants of the Premises communicate via telecommunications.

 

(h)         The Tenant shall not resell telecommunication services (wireless or otherwise) using equipment situated on the Premises or in the Building.

 

(i)           The Tenant will not permit any personnel employed by it or any occupant of the Premises to engage in so called “hacking” or other unauthorized use of telecommunication or wireless facilities in, adjacent to or serving the Building or any of its occupants.

 

10.11 Health Emergency

 

If the Landlord determines that a Health Emergency exists:

 

(a) the Landlord may:

 

(i) amend, supplement or otherwise enforce any existing health emergency rules or regulations in existence;

 

(ii) pass additional rules and regulations; and

 

(iii) impose restrictions to mitigate or minimize the effects of a Health Emergency by controlling access to parts of the Building, imposing sanitization requirements (including, without limiting the generality of the foregoing, requiring the Tenant to decontaminate all or any part of the Premises) and implementing health precautions consistent with advice from any authority having jurisdiction including, without limitation, medical experts or public health officials.

 

(b) the Landlord will not be considered to be in default under this Lease by reason of:

 

(i) anything it does pursuant to section 10.11(a); or

 

(ii) any decision it makes in good faith in response to a Health Emergency,

 

and will not be liable in contract, tort or any other basis of liability, statutory or otherwise, by reason of any action, omission or failure to act in connection with or as a result of a Health Emergency.

 

(c) the Landlord will not be in default of any of the Landlord’s Covenants if it determines that it needs to suspend, reduce or restrict access to the Building or the services that it is obligations under this Lease to provide, including, without limitation, janitorial services.

 

ARTICLE 11.00 - ENVIRONMENTAL MATTERS

 

11.1 Hazardous Substances

 

(a)          Without limiting the provisions of section 10.3, the Tenant shall, at its sole cost, comply with all Environmental Laws and all environmental policies which may be established by the Landlord from time to time in respect of the use, treatment, handling, clean up and disposal of Hazardous Substances.

 

(b)          The Tenant may not bring or allow to be present in the Premises any Hazardous Substances, other than those Hazardous Substances normally used in business offices. The Tenant shall properly contain and handle all Hazardous Substances within the Premises and dispose of same in accordance with all applicable Environmental Laws.

 

(c)           The Tenant shall not use any Hazardous Substances in a manner which may cause or contribute to an adverse environmental effect upon the Premises, the Lands, any other lands or to the environment.

 

(d)           The Tenant is solely responsible and liable for any clean-up and remediation required by the Landlord or any Authority having jurisdiction of any Hazardous Substances which the Tenant, the Tenant’s Employees or any Transferee caused or allowed to be brought into or released from the Premises.

 

  - 30 -  

 

 

(e)           All Hazardous Substances brought or allowed onto the Lands during the Term by the Tenant, the Tenant’s Employees or a Transferee shall, despite any other provision of this Lease to the contrary and any expiry, termination or disclaimer of this Lease, be and remain the property and sole responsibility of the Tenant regardless of the degree or manner of affixation of such Hazardous Substances to the Premises.

 

(f)           If the Tenant is required by any applicable Environmental Laws to maintain environmental and operating documents and records, including, without limitation, permits and licenses (collectively, “Environmental Records”), the Tenant shall maintain all requisite Environmental Records in accordance with all applicable Environmental Laws. The Landlord may inspect all Environmental Records at any time during Term on 24 hours’ prior written notice.

 

(g)          Upon the expiry of the Term, or at such other times as may be required by any lawful Authority, the Tenant shall remove all Hazardous Substances from the Premises which were placed, brought or allowed onto the Premises during the Term by the Tenant, the Tenant’s Employees or any Transferee and carry out all remediation work necessitated as a result of such removal, all at the Tenant’s sole cost and expense. If the removal of any such Hazardous Substances from the Premises is prohibited by any Environmental Laws, the Tenant shall take whatever action is required to ensure compliance with any Environmental Laws.

 

(h)          As between the Landlord and the Tenant, the only Hazardous Substances for which the Landlord is responsible are those Hazardous Substances:

 

(i) brought on to the Premises by the Landlord or the Landlord’s Employees; and

 

(ii) which were located on the Premises prior to the Tenant taking possession of the Premises.

 

The Landlord’s responsibility is, however, limited to:

 

(iii) such clean-up, encapsulation or removal of such Hazardous Substances as may be lawfully required by a governmental Authority or lawfully required in order for Tenant to carry on business in the Premises; and

 

(iv) all costs, fines and penalties (whether levied against the Landlord or the Tenant) relating to such Hazardous Substances and levied by an Authority having jurisdiction

 

11.2 Inspection Right

 

(a)          The Landlord may enter the Premises for the purpose of causing an environmental audit of the Premises to be carried out, the scope and extent of such audit to be determined by the Landlord in its sole discretion, and in connection with such audit, the Landlord may:

 

(i) conduct tests and environmental assessments or appraisals;

 

(ii) remove samples from the Premises;

 

(iii) examine and make copies of any relevant documents or records relating to the Premises; and

 

(iv) interview the Tenant’s Employees.

 

(b)          The scope and breadth of any such environmental audit will be determined by the Landlord in its sole discretion. The Tenant will be responsible for the cost of any such audit if such audit reveals a breach by the Tenant of the Tenant’s Covenants relating to Hazardous Substances contained in this Lease, in which case the Tenant will be responsible for the cost of such audit, same to be paid by the Tenant to the Landlord within 30 days following the Tenant receiving an invoice on account of such costs from the Landlord.

 

(c)          If any audit reveals any breach by the Tenant of the Tenant’s Covenants contained in this Lease, the Tenant shall immediately take such steps as are necessary so as to rectify such breach.

 

11.3 Survival of Obligations

 

For clarity, the obligations of the Tenant under this Article relating to Hazardous Substances shall survive the expiry, repudiation or earlier termination of this Lease. To the extent that the performance of such obligation requires access to or entry upon the Premises or the Lands, or any part thereof, following such expiry, repudiation or earlier termination:

 

(a) the Tenant may only have such entry and access at such times and upon such terms and conditions as the Landlord may from time to time specify; and/or

 

(b) the Landlord may undertake the performance of any necessary work in order to complete such obligations of the Tenant, but having commenced such work, the Landlord shall have no obligation to the Tenant to complete such work and may require the Tenant to do so. All costs incurred by the Landlord in undertaking such work, together with an administrative fee of 15%, shall be paid by the Landlord to the Tenant within 20 days following delivery to the Tenant of an invoice for such work.

 

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ARTICLE 12.00 - INSURANCE AND INDEMNIFICATION

 

12.1 Tenant’s Insurance

 

(a)           The Tenant shall, at its sole cost and expense, take out and keep in full force and effect throughout the Term and any period when it is in possession of the Premises, the following insurance:

 

(i) “all-risks” insurance (including flood and earthquake) upon property of every description and kind owned by the Tenant, or for which the Tenant is legally liable, or installed by or on behalf of the Tenant, including, without limitation, stock-in-trade, furniture, fittings, installations, signs, alterations, additions, partitions and fixtures and anything in the nature of a Leasehold Improvement in the Premises (regardless of when or who installed same), all of the foregoing in an amount of not less than the full replacement cost thereof without deduction for depreciation. Such insurance shall be subject to an agreed amount clause and with a contingent liability from enforcement of building by-laws endorsement and an inflation protection endorsement. If there is a dispute regarding the amount of full replacement cost, the decision of the Landlord or its Mortgagee will be conclusive. The Landlord and every Mortgagee shall be named as an additional insured on such insurance policies. Such insurance policies may contain reasonable deductibles in amounts acceptable to the Landlord, acting reasonably;

 

(ii) commercial general liability insurance on an occurrence basis against claims for personal injury, bodily injury, contractual liability, “all-risks” tenants’ legal liability for the full replacement costs of the Premises (without depreciation and including the loss of its use), employer’s liability and owners’ and contractors’ protective insurance coverage with respect to the Premises and the Common Areas. The coverage under such insurance is to include the use, activities and operations in the Premises by the Tenant and any other Person and the use, activities and operations in any other part of the Development by the Tenant or any of the Tenant’s Employees or its contractors, subcontractors or agents. Such policies shall be written on a comprehensive basis with limits of not less than $2,000,000.00 for any one occurrence, or such higher limits as the Landlord or its Mortgagee may reasonably require from time to time. The Landlord, the Landlord’s property manager (if any) and the Mortgagee shall be named as additional insureds in such insurance policies;

 

(iii) business interruption insurance in an amount which will reimburse the Tenant for direct or indirect loss of earnings attributable to all perils insured against in section 12.1(a)(i) and other perils commonly insured against by prudent tenants or attributable to prevention of access to the Premises or the Building as a result of such perils and which shall include provision for the payment of the Rent required hereunder and be in a profits form of coverage with an indemnity period of not less than 12 months;

 

(iv) broad form comprehensive boiler and machinery insurance on a blanket repair and replacement cost basis with limits for each accident in an amount at least equal to the replacement cost (without depreciation) of all Leasehold Improvements and of all boilers, pressure vessels, heating, ventilating and air-conditioning equipment and miscellaneous electrical apparatus owned or operated by the Tenant (other than equipment owned by the Landlord) or by others (other than the Landlord) on behalf of the Tenant in the Premises or that relates to or serves the Premises, subject to an agreed amount clause. The Landlord and every Mortgagee shall be named as an additional insured. The Tenant shall only be required to carry such insurance if it has in the Premises equipment that would be covered by such insurance;

 

(v) exterior glass insurance; and

 

(vi) any other form or forms of insurance as the Tenant or the Landlord or the Mortgagee may reasonably require from time to time in amounts and for insurance risks against which a prudent tenant would protect itself.

 

The Tenant is responsible for the payment of all insurance premiums for the insurance policies required by this section and for all deductibles payable under the insurance policies required by this section.

 

(b) All policies required by this section shall:

 

(i) be with insurers acceptable to the Landlord;

 

(ii) be in a form satisfactory to the Landlord;

 

(iii) contain an endorsement requiring the insurers under such policies to notify the Landlord in writing at least 30 days after any material change or cancellation thereof;

 

(iv) contain a waiver in favour of the Landlord, the Landlord’s property manager and any Mortgagee of any breach of warranty clause such that the insurance policies in question will not be invalidated in respect of the interests of the Landlord and any Mortgagee by reason of a breach by the Tenant of any warranty contained in such policies; and

 

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(v) contain a clause stating that the Tenant’s insurance policy will be considered as primary insurance and will not call into contribution any other insurance that may be available to the Landlord.

 

(c)          All property, boiler and machinery and business interruption insurance required pursuant to this section shall contain a waiver of any rights of subrogation which the insurers of the Tenant may have against the Landlord and the Landlord’s Employees whether the damage is caused by the act, omission or negligence of the Landlord or the Landlord’s Employees. All property and boiler and machinery insurance shall:

 

(i) contain a dispute loss agreement clause;

 

(ii) contain the Mortgagee’s standard form of mortgage clause; and

 

(iii) name the Landlord as the first loss payee in respect of the Leasehold Improvements in the Premises.

 

(d)         Prior to the earlier of the commencement of any Fixturing Period and the Commencement Date, and within 10 days following the Landlord’s written request from time to time, the Tenant shall furnish to the Landlord:

 

(i) a certificate of insurance in the form attached as Schedule “H” signed by the Tenant’s insurers or the authorized representative of the insurer; or

 

(ii) if required by the Landlord or any Mortgagee, certified copies of all such policies.

 

In no event shall the Tenant be entitled to have possession of the Premises until such time as such certificate or certified copies, as the case may be, are received and approved by the Landlord. The Tenant shall provide written evidence of the continuation of such policies not less than 10 days prior to their respective expiry dates. No review, approval or acceptance of any insurance policy or certificate by the Landlord will in any way alter the Landlord’s rights under this Lease or the Tenant’s obligations under this section

 

If:

 

(iii) the Tenant fails to take out or maintain any of the insurance required by this section; or

 

(iv) any of the insurance required by this section is not approved by the Landlord and the Tenant fails to rectify the situation within 48 hours after written notice by the Landlord that it does not approve of such insurance,

 

the Landlord shall have the right, but not the obligation, to: (A) terminate this Lease; or (B) effect the insurance required by this section, and to pay the cost of premiums therefor. In such event, the Tenant shall pay to the Landlord, as Additional Rent, the amount so paid by the Landlord, plus 15% thereof as an administrative charge, on demand.

 

(e)          Regardless of any other provision of this Lease to the contrary, the Tenant hereby releases and waives any and all Claims against the Landlord and the Landlord’s Employees with respect to occurrences to be insured against by the Tenant in accordance with its obligations under this Lease and whether any such Claims arise as a result of the negligence or otherwise of the Landlord or the Landlord’s Employees.

 

(f)          In case of loss or damage under the Tenant’s insurance, the proceeds of insurance for the Leasehold Improvements in the Premises shall be and are hereby assigned and made payable to the Landlord as first loss payee. If the Tenant is not in default of its obligations under this Lease, the Landlord shall, upon the Tenant’s written request, release such proceeds to the Tenant in progress payments at stages determined by a certificate of the Landlord’s Expert stating that repairs to each such stage have been satisfactorily completed free of liens by the Tenant. If the Tenant is in default of its obligations under this Lease, the Landlord shall be entitled to retain such proceeds without liability to the Tenant for interest or otherwise until the default has been, in the opinion of the Landlord, remedied. If the Tenant fails to make such repairs, the Landlord may perform the repairs and apply the proceeds to the cost thereof. If the Lease is terminated upon the happening of any damage or any destruction as provided for in Article 17.00 or for any other reason, all such proceeds of insurance shall be retained by the Landlord for the Landlord’s own use.

 

12.2 Adverse Impact on Insurance

 

(a)          If any of the Landlord’s insurance premiums are increased by reason of anything done or omitted or permitted to be done by the Tenant or by anyone permitted by the Tenant to be upon the Premises, the Tenant shall be responsible for paying the full amount of such increase. The Tenant shall pay such increase within 15 days after invoices for such additional premiums are rendered by the Landlord. In determining the Tenant’s responsibility for any increased cost of insurance as aforesaid, a statement issued by the organization, company or insurer establishing the insurance premiums or rates for the relevant insurance policies stating the reasons for such increase shall be conclusive evidence in determining the Tenant’s responsibility for same.

 

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(b)          If any insurance on any part of the Development is cancelled or threatened to be cancelled by the insurer by reason of the use or occupation of the Premises or any part thereof by the Tenant or by any Transferee or by anyone permitted by the Tenant to be upon the Premises, and if the Tenant fails to remedy the condition giving rise to the cancellation or threatened cancellation within 48 hours after notice thereof by the Landlord, the Landlord may, at its option, in addition to any other remedy it may have, terminate this Lease by notice in writing to the Tenant and thereupon Rent and any other payments for which the Tenant is liable under this Lease shall be apportioned and paid in full to the date of such termination and the Tenant shall immediately deliver up possession of the Premises to the Landlord and the Landlord may re-enter and take possession of same.

 

12.3 Landlord’s Insurance

 

(a)          The Landlord shall take out and maintain the insurance specified in sections 12.3(a)(i), 12.3(a)(ii), 12.3(a)(iii) and 12.3(a)(iv) throughout the Term and may take out the insurance contemplated by section 12.3(a)(v) at such times as the Landlord may determine:

 

(i) “all-risks” property insurance on the Building and all property owned by the Landlord relative to the Development for an amount not less than replacement cost thereof from time to time (including foundations), against loss or damage by perils or hereafter from time to time embraced by or defined in a standard all-risk insurance policy including but not limited to fire, explosion, impact by air craft or vehicles, lightning, riot, vandalism, malicious acts, smoke, leakage from defective equipment, wind storm, hail, collapse, flood or earthquake;

 

(ii) boiler, pressure vessels, air-conditioning equipment and miscellaneous electrical apparatus and machinery insurance on the equipment contained in the Building which is owned by the Landlord and on a broad form blanket cover repair and replacement basis;

 

(iii) “all-risk” rent and rental value insurance insuring loss of insurable gross profits attributable to the perils insured against by the Landlord, including loss of rent and other amounts receivable from tenants in the Development (assuming full occupancy of the Building), including, without limitation, the Rent payable under this Lease, for an indemnity period of not less than 12 months;

 

(iv) commercial general liability insurance on an occurrence basis with respect to the Landlord’s operations in the Development, such coverage to include the Landlord’s Employees and its contractors, subcontractors and agents while working on behalf of the Landlord. Such policy shall contain a limit of not less than $2,000,000.00 per occurrence and in the aggregate; and

 

(v) any other form or forms of insurance as the Landlord or its Mortgagee may reasonably require from time to time for insurance risks and in amounts against which a prudent landlord would protect itself.

 

(b)         All such insurance policies may contain such deductibles as would be carried by a prudent owner of a similar development.

 

(c)          Despite the Landlord’s covenants in section 12.3(a) and the Tenant’s contributions towards the cost of the Landlord’s insurance:

 

(i) no insurable interest is conferred upon the Tenant under any policies of insurance carried by the Landlord;

 

(ii) the Tenant is not entitled to share in or receive the benefit of any portion of any insurance proceeds received by the Landlord; and

 

(iii) the Tenant is not relieved of any liability arising from or contributed to by its negligence or wilful acts or omissions.

 

The Landlord is not accountable to the Tenant regarding the use of any insurance proceeds arising from any claim, and the Landlord is not obliged on account of such contributions to apply such proceeds to the repair or restoration of that which was insured, unless otherwise provided in this Lease. If the Tenant wishes to receive indemnity by way of insurance for any property, work or thing whatever, the Tenant shall insure same for its own account and shall not look to the Landlord for reimbursement or recovery in the event of loss or damage from any cause, whether or not the Landlord has insured same and recovered therefor.

 

12.4 Limitation of the Landlord’s Liability

 

The Landlord is not liable or responsible in any way to the Tenant or to any other Person for and the Tenant hereby releases the Landlord in respect of:

 

(a) any Injury arising from or out of any occurrence on, in or relating to the Development or any loss or damage to property (including loss of use thereof) of the Tenant or any other Person located in, on or around the Development however caused;

 

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(b) without limiting the generality of the provisions of section 12.4(a), any Injury to the Tenant or any other Person or loss or damage to property resulting from: strikes; lockouts; war; riots; insurrection; Acts of God; fire; smoke; explosions; falling or defective plaster, ceiling tiles, fixtures or signs; broken glass; steam; fumes; vapours; odours; dust; dirt; cinders; grease; acid; oil; any noxious, offensive or excessive liquids, solids or gases; any Hazardous Substance; debris; vibration; radiation; air or noise pollution; theft; vandalism; breakage; vermin; electricity; electrical or other wiring, computer or electronic equipment or systems malfunction or stoppage; water; rain; floods; flooding; freezing; earthquake, tornado or hurricane; wind; snow; sleet; hail; frost; ice; excessive heat or cold; sewage; sewer backup; toilet overflow; leaks or discharges from any part of the Building, or from any pipes, sprinklers, appliances, equipment, electrical or other wiring, plumbing fixtures, roof, windows, skylights, doors, trap doors or subsurface of any floor or ceiling of any part of the Building or from the street or any other place, or by dampness or climatic conditions or from any other cause whatsoever;

 

(c) any Injury, loss or damage caused by other tenants or any Person in the Development or by occupants of adjacent property thereto, or by the public, or by construction or renovation, or by any private, public or quasi-public work, or by interruption, cessation or failure of any public or other utility service or any other cause whatsoever;

 

(d) any Injury to the Tenant or any other Person or any loss or damage suffered to the Premises or the contents thereof by reason of the Landlord or its representatives entering the Premises to undertake any work therein, or to exercise any of the Landlord’s rights or remedies hereunder, or to fulfil any of the Landlord’s obligations hereunder, or in the case of emergency;

 

(e) all Claims of every nature and kind (including, without limitation, damages for personal discomfort or illness) resulting from or contributed to by any interruption or cessation of or failure in the supply of any Utilities or heating, ventilating, air-conditioning and humidity control or the elevators in the Building; or

 

(f) any Injury, loss or damage insured against or required to be insured against by the Tenant pursuant to this Lease.

 

(g) Notwithstanding the various limitations of liability noted in section 12.4, the Landlord is liable for any injury, loss or damage to the Tenant caused by the gross negligence of the Landlord.

 

All property of the Tenant kept or stored on the Premises shall be so kept or stored at the risk of the Tenant only and the Tenant shall hold the Landlord harmless from and against Claims arising out of damages to same, including, but not limited to, any subrogation claims by the Tenant’s insurers.

 

12.5 Indemnification of Landlord

 

The Tenant shall indemnify the Landlord and save it harmless from and against any and all Claims in connection with:

 

(a) any Injury referred to in section 12.4 or any loss or damage to property referred to in section 12.4;

 

(b) all Claims of the Tenant and Persons permitted by it to be on the Premises by reason of the suspension, non-operation, or failure for any period of time of any Utilities, heating, ventilating, air-conditioning or humidity control;

 

(c) the failure of the Tenant to observe and perform any of the Tenant’s Covenants;

 

(d) the occupancy or use by the Tenant of the Premises, including, without limitation, the conduct and operation by the Tenant of its business on the Premises;

 

(e) any Hazardous Substance being brought into, produced or maintained in, or discharged from, the Premises during the Term;

 

(f) any occurrence in or around the Common Areas caused, in whole or in part, by the act, failures, omissions or negligence of the Tenant or the Tenant’s Employees; and

 

(g) any occurrence on the Premises however caused.

 

In case the Landlord, without actual fault on its part, is made a party to any litigation commenced by or against the Tenant, the Tenant shall protect and hold the Landlord harmless and shall pay all costs and expenses, including legal fees on a solicitor and his own client basis, incurred or paid by the Landlord in connection therewith.

 

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12.6 Employees

 

(a)          Every indemnity, exclusion or release of liability by the Tenant in this Lease and every waiver of subrogation contained in any of the Tenant’s insurance policies extend to and benefit the Landlord, the Landlord’s Mortgagee, any management company employed by the Landlord to manage the Property and all of their respective servants, agents, directors, officers, employees and those for whom the Landlord is in law responsible (collectively, the “Landlord Beneficiaries”). The Landlord is the agent or trustee of the Landlord Beneficiaries solely to the extent necessary for the Landlord Beneficiaries to take the benefit of this section, but the is under no obligation to take any steps or actions on behalf of the Landlord Beneficiaries to enable them to obtain the benefits of this section unless it chooses to do so in its sole and absolute discretion.

 

(b)          Every indemnity, exclusion or release of liability by the Landlord in this Lease and every waiver of subrogation contained in any of the Landlord’s insurance policies extend to and benefit the Tenant and the Tenant’s Employees. The Tenant is the agent or trustee of the Tenant’s Employees solely to the extent necessary for the Tenant’s Employees to take the benefit of this section, but the Tenant is under no obligation whatsoever to take any steps or actions on behalf of the Tenant’s Employees to enable them to obtain the benefits of this section unless it chooses to do so in its sole and absolute discretion.

 

ARTICLE 13.00 - ASSIGNING AND SUBLETTING

 

13.1 Consent Required

 

(a)          The Tenant may not effect a Transfer without the prior written consent of the Landlord in each instance, which consent will not be unreasonably or arbitrarily withheld and the decision as to whether or not such consent will be given will not be unreasonably delayed. The consent by the Landlord to any Transfer to a Transferee, if granted, will not constitute a waiver of the necessity for such consent to any subsequent Transfer. This prohibition against a Transfer includes a prohibition against any Transfer by operation of law. No Transfer will occur by reason of a failure by the Landlord to reply to a request by the Tenant for consent to a Transfer.

 

13.2 Factors for Consent

 

Despite the fact that the Landlord may not unreasonably or arbitrarily withhold its consent to a Transfer, the Landlord will be considered to be reasonably withholding its consent if its reason or reasons for doing so is or are based upon all or any of the following factors:

 

(a) any factor which a court of law would consider to be reasonable;

 

(b) the Tenant is in default of any of the Tenant’s Covenants;

 

(c) there is an outstanding Event of Default;

 

(d) the Transferee not having, in the Landlord’s opinion, a satisfactory financial covenant or business history;

 

(e) the failure of the Transferee to provide such guarantees or other security as may be required by the Landlord to guarantee or secure the Transferee’s obligations pursuant to any document evidencing the Transfer and its obligations under this Lease;

 

(f) the Transferee, its principals or any partnership or corporation in which the Transferee or its principals was a member or a shareholder at the time (other than a public corporation described in section 13.4) having become bankrupt or insolvent or having defaulted (other than by a minor technical default which shall be determined by the Landlord acting reasonably) under the terms of any lease for premises whether leased from the Landlord or other Persons;

 

(g) the rent to be charged by the Tenant to the Transferee being less than the Rent;

 

(h) the Transferee does not intend to actually use and occupy the Premises in accordance with the terms of this Lease;

 

(i) the Transferee being an existing tenant of the Landlord;

 

(j) the Landlord having available for leasing to the Transferee other premises in the Development; or

 

(k) the giving of such consent would cause the Landlord to be in breach of restrictive or exclusive use clauses granted by the Landlord to other tenants in the Building.

 

13.3 Transfers

 

(a)           If the Tenant intends to effect a Transfer, in whole or in part, the Tenant shall provide the Landlord with prior written notice of its intention to effect a Transfer, which written notice shall set out the name of the proposed Transferee and its principals and be accompanied by:

 

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(i) such information regarding the proposed Transferee as the Landlord may reasonably require in order to determine whether or not to consent to the proposed Transfer, including, without limitation, information concerning the principals of the Transferee, a detailed breakdown of the proposed Transferee’s, and its principals’, prior business experience, complete credit, financial and business information regarding the proposed Transferee and its principals and an original copy of all documents and agreements relating to the proposed Transfer; and

 

(ii) the Landlord’s then current non-refundable administrative fee for considering the Tenant’s request for consent (currently being $1,000.00, plus HST). Such fee excludes any legal fees and disbursements which the Landlord may incur in connection with a request for its consent.

 

The Landlord shall not be required to consider any request for its consent until such time as it has received all of the preceding information and monies. The Landlord will, within 15 days after having received such written notice and all such necessary information and monies, notify the Tenant in writing either that:

 

(iii) it consents (subject to the Tenant complying with all of the provisions of this section 13.3 on its part to be complied with) or does not consent to the Transfer; or

 

(iv) it elects to cancel this Lease in preference to giving its consent. If the proposed Transfer relates to only a part of the Premises, the Landlord’s right to cancel this Lease will relate only to such part and, in such event, the Tenant will, at its sole cost and expense, arrange for the partitioning of the Premises so as to separate the part being proposed to be transferred from the remainder of the Premises, subject to the provisions of section 9.4. If the Landlord elects to cancel this Lease, the Tenant will notify the Landlord in writing within 15 days thereafter of the Tenant’s intention either to refrain from such Transfer or to accept the cancellation of this Lease. If the Tenant fails to advise the Landlord within such 15 day period or if it advises the Landlord that it accepts the Landlord’s cancellation of this Lease, this Lease will be terminated upon the thirtieth day following the date that the Landlord advised the Tenant in writing of its decision to cancel this Lease and the Tenant will, on such date, deliver up possession of the Premises in accordance with all of the provisions of this Lease relating to the surrender of the Premises at the expiration of the Term and all Rent shall be adjusted to the date of such termination. If the Tenant advises the Landlord that it intends to refrain from such Transfer, the Landlord’s election to cancel this Lease will become null and void in such instance.

 

(b)          If there is a Transfer of this Lease, the Landlord may collect Rent from the Transferee and apply the net amount collected to the Rent required to be paid pursuant to this Lease, but no acceptance by the Landlord of any payments by a Transferee shall be deemed a waiver of the obligation to obtain the Landlord’s consent to a Transfer, or the acceptance of the Transferee as tenant, or a release of the Tenant from the further performance by the Tenant of the Tenant’s Covenants.

 

(c)           Any document evidencing an assignment will be prepared by the Landlord or its solicitors. Any document evidencing the Landlord’s consent to a Transfer will be prepared by the Landlord or its solicitors.

 

(d)           All legal costs incurred by the Landlord with respect to a request by the Tenant for the Landlord’s consent to a proposed Transfer shall be paid by the Tenant to the Landlord upon demand, and, in any event, prior to the Landlord giving its consent. For clarity, the Tenant shall pay such costs whether or not the Landlord consents to the proposed Transfer. The Tenant shall provide to the Landlord such deposit on account of the Landlord’s legal cost as the Landlord or its solicitors may require prior to the Landlord instructing its solicitors to deal with the proposed Transfer.

 

(e)           Every Transfer is conditional upon the Tenant and the Transferee executing an agreement with the Landlord providing for the following:

 

(i) the Transferee’s agreement to be bound by all of the Tenant’s Covenants as if such Transferee had originally executed this Lease as tenant;

 

(ii) if the Transferee is not an assignee, the Transferee’s agreement that, at the Landlord’s option, all of the Transferee’s right, title and interest in and to the Premises absolutely terminates upon the surrender, release, disclaimer or merger of this Lease, notwithstanding the provisions of sections 17, 21 and 39(2) of the Act;

 

(iii) amending the Lease to:

 

(A) incorporate such terms, covenants and conditions as are necessary so that this Lease will be in accordance with the Landlord’s then-standard form of lease in use by the Landlord for multi-tenant buildings at the time of the Transfer;

 

(B) provide that all of the Minimum Rent specified in the Basic Provisions shall be increased to equal the amount obtained by multiplying the Minimum Rent by a fraction, which has as its numerator the CPI for the last month immediately preceding the Transfer and as its denominator the CPI for the month in which the Commencement Date occurred, provided that in no event shall the Minimum Rent ever be less than the Minimum Rent specified in the Basic Provisions. For clarity, if the Basic Provisions contemplate increases in Minimum Rent at the times shown in the Basic Provisions, then the CPI increase contemplated by this provision shall apply to every such increase in the Minimum Rent as shown in the Basic Provisions; and

 

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(C) delete any options to renew or extend the Term, any rights of first refusal or options on additional space in the Development, any restrictive covenants in favour of the Tenant or any other special rights granted to the Tenant in this Lease.

 

If the Tenant effects a Transfer without entering into the agreement contemplated by this section 13.3(e), then this Lease shall be deemed to be amended in accordance with the foregoing provisions of this section 13.3(e)(iii) effective the date of such Transfer.

 

(f)           If, as a result of any Transfer, the Tenant is entitled, directly or indirectly, as a result of such Transfer to receive a rent, payment, fee or any other consideration, in the form of cash, negotiable instrument, goods, services or in other form whatsoever, which is greater than the Minimum Rent payable hereunder to the Landlord, then the Tenant shall pay any such excess to the Landlord forthwith within 10 days after receipt thereof by the Tenant from time to time. The Tenant shall immediately make available to the Landlord upon request all of the Tenant’s books, records and documentation so as to enable the Landlord to verify the receipt or the amount of any such excess.

 

(g)          All amounts payable by the Tenant pursuant to this Lease up to the effective date of the Transfer, including, without limitation, all amounts required to be paid by the Tenant pursuant to this section 13.3, shall be paid in full to the Landlord prior to the Landlord executing the document affecting the Transfer and evidencing its consent thereto, and until such time as the said amounts are paid in full, the Landlord shall be under no obligation to give its consent to the Transfer or execute the document effecting the Transfer and evidencing its consent thereto. Where any such amounts cannot be finally determined at that time, the Tenant shall deposit with the Landlord an amount reasonably estimated by the Landlord to cover such undetermined amounts, such amount to be held by the Landlord without any liability for interest thereon until the estimated amounts become finally determined by the Landlord, at which time the appropriate adjustments shall be made.

 

(h)          Notwithstanding the effective date of any permitted Transfer as between the Tenant and the Transferee, all Rent for the month in which such effective date occurs shall be paid in advance by the Tenant so that the Landlord shall not be required to accept partial payments of Rent for such month from either the Tenant or any Transferee.

 

(i)            If this Lease is disclaimed or terminated by any trustee in bankruptcy of any Transferee or by the Transferee in accordance with its rights under the Bankruptcy and Insolvency Act (Canada) or the Companies Creditors Arrangement Act (Canada), the Tenant shall not be released from its obligations under this Lease, as amended by the document affecting the Transfer, and the Tenant shall, from the date of such disclaimer or termination, continuously, actively and diligently carry on business in the Premises pursuant to the terms of this Lease for the balance of the Term. The Tenant’s obligations under this section shall survive any such disclaimer or termination.

 

(j)           The Landlord has no liability for any losses, damages (direct, indirect, consequential, economic or otherwise), costs or expenses incurred by the Tenant as a result of the Landlord unreasonably withholding its consent to any Transfer. The Tenant’s only remedy in connection with the Landlord unreasonably withholding its consent to a proposed Transfer is to bring an application to the courts (after giving the Landlord the prescribed notice under the Rules of Civil Procedure) for a declaration that such Transfer should be allowed.

 

(k)           Notwithstanding any Transfer permitted or consented to by the Landlord, the Tenant shall not be released from its obligation to observe and perform the Tenant’s Covenants and the Tenant shall be jointly and severally liable with the Transferee for the performance of the Tenant’s Covenants.

 

13.4 Corporate Ownership

 

(a)           If the Tenant is a corporation or if the Landlord consented to a Transfer of this Lease to a corporation, any transfer or issue by sale, assignment, bequest, inheritance, operation of law or other disposition, or by subscription, from time to time of all or any part of the corporate shares of the Tenant or of any direct or indirect parent corporation of the Tenant which results in any change in the present effective voting control of the Tenant by the Person holding such voting control at the date of execution of this Lease (or at the date a Transfer of this Lease to a corporation is permitted) shall, for the purposes of this Article 13.00, be deemed a Transfer and the provisions of sections 13.1, 13.2 and 13.3 shall apply, mutatis mutandis, to the fullest extent possible even though there will not be a Transferee. For clarity, any consent of the Landlord will be conditional upon the Tenant entering into an agreement with the Landlord of the type referred to in section 13.3(e)(iii).

 

(b)          If the Tenant does not acquire the prior written consent of the Landlord as required by section 13.1 to a Transfer of the type described in section 13.4(a) or if, in connection with such a Transfer, the Tenant does not enter into the agreement contemplated by section 13.3(e)(iii), then without limiting any of the Landlord’s rights and remedies against the Tenant: (i) this Lease shall be deemed to be amended in the manner contemplated by section 13.3(e)(iii) effective the date of such Transfer; and (ii) the Landlord may, but shall not be obligated to, terminate this Lease upon 5 days’ written notice to the Tenant given up to 60 days after the date the Landlord becomes aware of such Transfer. The Tenant shall make available to the Landlord, or its lawful representatives, all corporate books and records of the Tenant for inspection at all reasonable times, in order to ascertain whether there has been any change in control.

 

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(c)          The preceding provisions of this section 13.4 do not apply to the Tenant if at the time of a Transfer contemplated by section 13.4(a):

 

(i) the Tenant is a public corporation whose shares are traded and listed on any recognized stock exchange in Canada or in the United States; or

 

(ii) the Tenant is a private corporation but is controlled by a public corporation defined as aforesaid,

 

so long as in either case prior to or as soon as reasonably possible thereafter, the Landlord has received assurances satisfactory to the Landlord that there will be a continuity of the existing management of the Tenant, and of its business practices and policies notwithstanding any such sale, transfer or other disposition of controlling shares.

 

13.5 No Advertising of the Premises

 

The Tenant shall not print, publish, post, display or broadcast any notice or advertisement to the effect that the Premises are for lease or for sale or otherwise advertise the proposed sale or lease of the whole or any part of the Premises and shall not permit any broker or other party to do any of the foregoing, unless the complete text and format of any such notice, advertisement or offer is first approved in writing by the Landlord. Without in any way restricting or limiting the Landlord’s right to refuse any text or format on other grounds, no text proposed by the Tenant shall contain any reference to the rental rate of the Premises.

 

13.6 Assignment by Landlord

 

In the event of the sale or lease by the Landlord of the Development or any part thereof, or the assignment by the Landlord of this Lease or any interest of the Landlord hereunder, and to the extent that such purchaser or assignee assumes the Landlord’s Covenants, the Landlord shall, thereupon and without further agreement, be freed and relieved of all liability with respect to the Landlord’s Covenants.

 

ARTICLE 14.00 - CONSTRUCTION AND OTHER LIENS

 

14.1 Discharge Of Liens

 

The Tenant shall promptly pay all of its contractors and suppliers and shall do any and all things necessary so as to minimize the possibility of a lien attaching to the Lands and should any such lien be made or filed, the Tenant shall discharge it within 10 days following the date of the registration of such lien, provided however that the Tenant may contest the validity of any such lien and in so doing shall obtain an order of a court of competent jurisdiction discharging the lien from the title to the Lands by payment into Court or by furnishing to the Landlord security satisfactory to the Landlord in nature and amount against all loss or damage which the Landlord might suffer or incur thereby. If the Tenant shall fail to discharge any lien, then in addition to any other right or remedy of the Landlord, the Landlord may, but it shall not be so obligated, discharge the lien by paying the amount claimed to be due into Court and the amount paid by the Landlord together with all costs and expenses including solicitor’s fees (on a solicitor and his client basis) incurred for the discharge of the lien shall be due and payable by the Tenant to the Landlord as Additional Rent on demand.

 

ARTICLE 15.00 - FIXTURES AND SIGNS

 

15.1 Removal and Restoration by Tenant

 

(a)          All Alterations made to the Premises by the Tenant, or made by the Landlord on the Tenant’s behalf, whether before or after the Commencement Date (including, without limitation, all electrical, computer and telephone cabling), shall become the property of the Landlord immediately upon their installation in the Premises and without compensation to the Tenant. No plumbing, heating, ventilation, air-conditioning or lighting equipment, light fixtures, wiring or electric panels and services, floor coverings affixed to the floor of the Premises, internal stairways (if any) and doors, other building services or Leasehold Improvements (including, without limitation, computer and telephone cabling) shall be removed from the Premises, except in accordance with section 9.4 and except that the Tenant:

 

(i) shall remove its trade fixtures at the end of the Term, but if the Tenant is in default of any of the Tenant’s Covenants, it may only remove its trade fixtures if the Landlord consents to the Tenant removing them;

 

(ii) shall, at the end of the Term, remove such of the Leasehold Improvements (including, without limitation, computer and telephone cabling) and Alterations in the Premises as the Landlord advises the Tenant in writing (either before or after the expiration of the Term) that it requires to be removed. Despite the foregoing, the Tenant will not have to remove any Leasehold Improvements or Alterations that the Landlord may have agreed in writing do not have to be removed;

 

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(iii) may remove its trade fixtures during the Term in the usual and normal course of its business and with the prior written consent of the Landlord, if such trade fixtures have become excess for the Tenant’s purposes or the Tenant is substituting new and similar trade fixtures, provided the Tenant is not in default hereunder;

 

(iv) shall, at the end of the Term, remove from the Premises all of its (whether owned or leased) equipment, inventory, furniture and other personal property not affixed to the Premises; and

 

(v) shall, at the end of the Term, remove from the Building all exterior and interior signs (other than Building standard signage erected by the Landlord) which the Tenant caused to be erected,

 

all such items being removed being called a “Removable Item” or “Removable Items”. The Tenant shall, in the case of every removal of a Removable Item, either during or at the end of the Term, make good any damage caused to the Premises or the Building by the installation and removal of any Removable Item, all at the Tenant’s sole cost and expense. The Tenant shall also, if required by the Landlord (either before or after the expiration of the Term), restore the Premises to the condition in which they existed on the earlier of the date on which the Landlord provided the Tenant with possession of the Premises and the Commencement Date, reasonable wear and tear excepted (not inconsistent with the maintenance of the Premises as a first class industrial building), including the restoration of such standard fixtures as may have been installed by the Landlord and which were removed or altered by the Tenant.

 

(b)          If the Tenant does not remove the Removable Items which it is required to remove pursuant to section 15.1(a) at the expiration or earlier termination of the Term, the Removable Items remaining on the Premises beyond the end of the Term (or such part of them as the Landlord may designate) shall be deemed abandoned and, to the extent not otherwise the property of the Landlord, become the property of the Landlord and the Landlord may use them, retain them, destroy them, sell them (on such terms as the Landlord may determine, which need not be reasonable) or otherwise deal with them in such manner as the Landlord determines in its sole and absolute discretion, all without any obligation, compensation or duty to account to the Tenant. For clarity, if the Landlord sells any Removable Items in accordance with the foregoing, the Landlord shall be entitled to retain all proceeds received from such sale for its own account and without any duty to account to the Tenant. The Landlord may also remove such of the Removable Items as the Landlord may designate and store them at the Tenant’s risk and expense. The Tenant shall indemnify and save harmless the Landlord:

 

(i) for the costs of removing the Removable Items from the Premises and for the repair and restoration of the Premises caused by the removal of the Removable Items; and

 

(ii) from all Claims made by third parties against the Landlord in connection with the Landlord dealing with the Removable Items in accordance with the terms of this section.

 

Despite the foregoing, in no event will any Hazardous Substances be deemed to become the Landlord’s property (unless the Landlord was responsible for any Hazardous Substances being located on the Premises) but they will otherwise be considered Removable Items.

 

15.2 Tenant’s Signs

 

(a)          The Tenant may not paint, affix or display any sign, fixture, advertisement, notice, lettering or decoration on any part of the Lands or the exterior part of the Development or in any part of the Premises which is visible from the exterior of the Premises without the prior written consent of the Landlord as regards the size, content, location and manner of affixation of such signs, failing they shall be immediately removed by the Tenant upon written notice from the Landlord. All signs installed by the Tenant must comply with all applicable Laws. The Landlord may institute a sign policy for tenants of the Development from time to time and same shall be incorporated as an integral part of this Lease. The Landlord may erect all of the Tenant’s signs in or on the Development and the cost of the signs and their installation will be paid by the Tenant as Additional Rent on demand together with 15% of the cost of such installation representing the Landlord’s overhead.

 

(b)          The Landlord will cause a sign showing the name of the Tenant to be placed upon any directory board maintained in the lobby of the Building and on the floor on which the Premises are located (unless the Premises comprise the entire floor), at the cost of the Tenant. Any change to any such sign upon any directory board shall be made at the cost of the Tenant. The colour, size, style, character and material of any such sign shall be such as the Landlord shall determine in conformity with the signage criteria of the Landlord for the Development.

 

15.3 Landlord’s Signs

 

The Landlord may at any time during the:

 

(a) last 6 months of the Term, place upon the Premises a sign stating that the Premises are “For Lease”;

 

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(b) Term, place upon the exterior of the Building or the Lands stating the Development is “For Sale”.

 

Such signs shall be of reasonable dimensions and shall be reasonably placed so as not to interfere with the Tenant’s business, and the Tenant shall not remove such notice, or permit same to be removed.

 

ARTICLE 16.00 - STATUS STATEMENT, ATTORNMENT AND SUBORDINATION

 

16.1 Status Statement

 

The Tenant shall, at the request of the Landlord, execute and deliver to the Landlord a statement in writing, in the form supplied by the Landlord and addressed to the Person(s) required by the Landlord, certifying that the Lease is unmodified and in full force and effect (or if modified, stating the modification and that the Lease is in full force and effect as modified); the Commencement Date; the amount of Rent then being paid under this Lease; the dates to which Rent has been paid; whether or not there is any existing default on the part of the Landlord of which the Tenant is aware; and any other particulars regarding this Lease, the Premises, the Building, the Lands or the Indemnification Agreement (if any) as the Landlord may require. The Tenant shall execute and return such statement to the Landlord within 10 days following the date that the request for such statement was made, failing which the Landlord may sign such statement on behalf of the Tenant, in which case the Tenant may not dispute the validity or accuracy of the matters contained in such statement.

 

16.2 Attornment

 

If proceedings are brought for the foreclosure of, or if there is exercise of the power of sale under any Mortgage of, the Development and/or the Lands, the Tenant shall attorn to the Mortgagee or the purchaser upon any such foreclosure or sale and recognize such Mortgagee or the purchaser as the landlord under this Lease. The Tenant shall execute, within 15 days following the Landlord’s written request, such instruments or certificates to carry out the intent of this section 16.2 as shall be requested by the Landlord, or such Mortgagee or purchaser.

 

16.3 Lease Subordination

 

This Lease and all of the Tenant’s rights under this Lease are subject and subordinate to all Mortgages registered on title to the Lands on the date when the parties execute this Lease (and to all advances made or subsequently made upon the security thereof and all renewals, modifications and extensions thereof). If required by the Landlord or any future Mortgagee, this Lease will be deemed to be subject and subordinate to all future Mortgages registered on title to the Lands after the date the parties execute this Lease (and to all advances made or hereafter to be made upon the security thereof and all renewals, modifications and extensions thereof). The Tenant agrees to execute, within 15 days following the written request of the Landlord or a Mortgagee, an agreement or instrument confirming such subordination.

 

16.4 Non-Disturbance Agreement

 

If requested in writing by the Tenant, the Landlord will request from each of its Mortgagees a non-disturbance agreement in favour of the Tenant. Such non-disturbance agreement shall be on the Mortgagee’s standard form and will, among other things, provide that if the Mortgagee enforces its security, the Tenant will be entitled to remain in possession of the Premises in accordance with the terms of this Lease provided that no Event of Default occurs. If the Tenant wishes to make changes to a Mortgagee’s standard form of non-disturbance agreement, the Tenant shall negotiate such changes directly with the Mortgagee. All costs incurred by the Landlord in connection with attempting to obtain such non-disturbance agreements, including, without limitation, all legal costs and any amounts charged by the Mortgagee, shall be paid for by the Tenant on demand being made by the Landlord. For clarity, all such costs shall be paid by the Tenant regardless of whether or not the Landlord obtains the said non-disturbance agreements. The Tenant shall provide to the Landlord such deposit on account of such costs as the Landlord may reasonably require prior to the Landlord attempting to obtain such non-disturbance agreements.

 

16.5 Power of Attorney

 

The Tenant hereby irrevocably constitutes the Landlord the agent or attorney of the Tenant for the purpose of executing the documents contemplated by sections 16.1, 16.2and 16.3 and for making application at any time and from time to time to register postponements of this Lease in favour of Mortgages in order to give effect to the provisions of section 16.2 and section 16.3. The Landlord shall only exercise such power of attorney if the Tenant fails to execute and return to the Landlord the document requested within 15 days after the Landlord requests the Tenant in writing to sign same. The Tenant may not dispute the validity or effectiveness of any document signed by the Landlord in accordance with this section 16.5 and this section may be pleaded by the Landlord as a complete estoppel against any Claims brought by the Tenant seeking to dispute or challenge the validity or effective of any document signed by the Landlord in accordance with this section.

 

16.6 Financial and Other Information

 

In the Event of Default, the Tenant shall, within 10 days following the Landlord’s written request, provide the Landlord with:

 

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(a) copies of such of the Tenant’s and the Indemnifier’s (if any) financial statements as the Landlord may require.

 

ARTICLE 17.00 - DAMAGE, DESTRUCTION OR EXPROPRIATION

 

17.1 Destruction

 

If at any time during the Term the Building is damaged or destroyed by fire, lightning or tempest or by other casualty (the date of such damage or destruction being called the “Damage Date”), then the following provisions apply:

 

(a) if:

 

(i) the damage or destruction renders 30% percent or more of the Rentable Area of the Building wholly unfit for occupancy or it is impossible or unsafe to use and occupy it;

 

(ii) in the opinion of the Landlord the Building is damaged or destroyed to such a material extent or the damage or destruction is of such a nature that the Building must be or should be totally or partially demolished, whether or not the Premises are damaged or destroyed and whether the Premises are to be reconstructed in whole or in part or not;

 

(iii) the damage or destruction is caused by an uninsured peril (being a peril not covered under the insurance to be maintained by the Landlord pursuant to this Lease); or

 

(iv) if any Mortgagee exercises its rights under its Mortgage to apply all or part of the insurance proceeds received, or receivable, by the Landlord on account of such damage or destruction so that there would not be sufficient insurance proceeds to pay for the estimated cost (as estimated by the Landlord) of the Landlord’s Reconstruction (as defined below),

 

the Landlord may at its option terminate this Lease by giving to the Tenant notice in writing of such termination within 60 days following the Damage Date, in which event this Lease and the Term hereby demised shall cease and be at an end as of the Damage Date and the Rent shall be apportioned and paid in full to the Damage Date;

 

(b) if the damage or destruction is such that the Premises are rendered wholly unfit for occupancy or it is impossible or unsafe to use and occupy them, and if in either event, the damage, in the opinion of the Landlord cannot be repaired with reasonable diligence within 120 days from the Damage Date, then the Landlord may terminate this Lease by giving to the Tenant notice in writing of such termination within 60 days of the Damage Date, in which event this Lease and the Term hereby demised will cease and be at an end as at the Damage Date and the Rent will be apportioned and paid in full to the Damage Date. If neither the Landlord nor the Tenant terminates this Lease, the Landlord shall do the Landlord’s Reconstruction and the Minimum Rent (but not Additional Rent) will abate (to the extent of insurance recoveries received by the Landlord) from the Damage Date until the earlier of:

 

(i) the date on which the Landlord has completed the Landlord’s Reconstruction; and

 

(ii) the date that the Tenant recommences its business operations in the Premises,

 

the “Abatement Period”. The term “Landlord’s Reconstruction” in this Article 17.00 means the reconstruction or repair of those items (other than Leasehold Improvements) insured under the insurance carried by the Landlord pursuant to sections 12.3(a)(i) and 12.3(a)(ii), but excluding any items to be covered under the insurance to be maintained by the Tenant pursuant to section 12.1;

 

(c) if the damage or destruction is such that the Premises are wholly unfit for occupancy or if it is impossible or unsafe to use or occupy it, but if in either event the damage, in the opinion of the Landlord, can be repaired with reasonable diligence within 120 days from the Damage Date, the Landlord will do the Landlord’s Reconstruction and the Minimum Rent (but not Additional Rent) will abate (to the extent of insurance recoveries received by the Landlord) throughout the Abatement Period;

 

(d) if this Lease is not terminated in accordance with the preceding provisions of this section 17.1 and the damage or destruction is such that a portion of the Premises is capable of being partially used for the purposes for which it is hereby demised, then notwithstanding the preceding provisions of this section 17.1, the Minimum Rent (but not Additional Rent) will abate proportionately (to the extent of insurance recoveries received by the Landlord) to the part of the Premises rendered untenantable throughout the Abatement Period;

 

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(e) if the Landlord elects to repair, reconstruct or rebuild the Building in accordance with the provisions of this Article 17.00, it is acknowledged and agreed by the Tenant that the Landlord may use plans and specifications and working drawings in connection therewith which are different from those used in the original construction of the Building; and

 

(f) the decision of the Landlord’s Expert as to the time in which the Building and/or the Premises can or cannot be repaired, the state of tenantability of the Premises and/or the Building and as to the date on which the Landlord’s Reconstruction is completed, shall be final and binding on the parties. The Landlord shall use reasonable efforts to cause its Expert to advise the Landlord and the Tenant of the length of time it will take to repair the damage to the Building and/or the Premises as soon as possible following the Damage Date.

 

17.2 Expropriation

 

(a)          If during the Term all or any part of the Premises are expropriated by any lawful expropriating Authority, or purchased under threat of such taking, this Lease shall automatically terminate on the date on which the expropriating Authority takes possession of the Premises.

 

(b) If during the Term:

 

(i) all or any part of the Development is expropriated by any lawful expropriating Authority or purchased under the threat of such taking; and

 

(ii) the Landlord determines that substantial alteration or reconstruction of the Development is necessary or desirable as a result of such expropriation or purchase,

 

then, whether or not the Premises are or may be affected, the Landlord may terminate this Lease by giving the Tenant at least 60 days’ written notice of such termination within 60 days of such taking or purchase. If the Landlord exercises its right of termination hereunder, this Lease shall terminate on the date stated in the notice.

 

(c) On the date that the Lease terminates in accordance with section 17.2(a) or (b):

 

(i) the Tenant shall surrender to Landlord the Premises and this Lease; and

 

(ii) the Landlord may re-enter and take possession of the Premises and the provisions of section (b) shall apply.

 

(d)          Each party shall have the right to recover from the expropriating Authority, but not from the other, such compensation as may be separately available to each party from the expropriating Authority by reason of such expropriation or taking. The Tenant shall take no steps or actions which would compromise the Landlord’s claim against the expropriating Authority. No party shall assert any Claims against the other arising out of such expropriation or taking.

 

ARTICLE 18.00 - LANDLORD’S COVENANTS

 

18.1 Quiet Enjoyment

 

If the Tenant observes and performs the Tenant’s Covenants, the Landlord covenants and agrees that the Tenant may peaceably possess and enjoy the Premises for the Term without any hindrance, interruption or disturbance from the Landlord or any other Person lawfully claiming by, from or under the Landlord.

 

ARTICLE 19.00 - DEFAULT

 

19.1 Default

 

(a) On the occurrence of an Event of Default:

 

(i) the Landlord may re-enter the Premises and expel all Persons and remove all property from the Premises. Such property may be removed and sold or disposed of by the Landlord in such manner as the Landlord in its sole and absolute discretion deems advisable or it may be stored in a public warehouse or elsewhere at the cost and for the account of the Tenant, all without service of notice or resort to legal process and without the Landlord being considered guilty of trespass or becoming liable for any loss or damage which may be occasioned thereby including any such loss or damage caused by the negligence of the Landlord or its servants and agents. If the Landlord sells such property, the Landlord may retain all proceeds received from such sale for its own account, but the Landlord will apply such proceeds against the damages suffered by the Landlord as a result of such re-entry. Despite the foregoing, the Landlord shall not sell such property for 5 Business Days following the date of its re-entry and the Tenant shall be entitled to remove such property from the Premises during such 5 day period under the Landlord’s supervision; and

 

(ii) the full amount of the current month’s Rent together with the next 3 month’s Rent becomes immediately due and payable as accelerated Rent.

 

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(b)          If the Landlord elects to re-enter the Premises or if it takes possession pursuant to legal proceedings or pursuant to any notice provided for by law, the Landlord may either:

 

(i) terminate this Lease. The Landlord may effect such termination by written notice to Tenant (a “Termination Notice”), it being understood and agreed to by the Tenant that actual possession of the Premises shall not be required to effect a termination of this Lease and that the delivery of a Termination Notice to the Tenant alone shall be sufficient. Such Termination Notice may, in the Landlord’s sole discretion, permit the Tenant to remain on the Premises as a tenant at will, which tenancy at will may be terminated at any time by either party without any prior notice. The Tenant agrees that, if Landlord serves a Termination Notice which, among other things, permits Tenant to remain in possession of the Premises as a tenant at will, this Lease will thereupon be terminated and the Tenant shall be a tenant at will and that the Landlord may re-enter the Premises at any time thereafter without further notice; or

 

(ii) as agent for the Tenant and without terminating this Lease, make any alterations and repairs which the Landlord, in its sole and absolute discretion, deems necessary in order to re-let the Premises, or any part thereof, as agent for the Tenant for such term or terms (which may be for a term extending beyond the Term) and at such rent and upon such other terms, covenants and conditions as the Landlord in its sole and absolute discretion considers advisable. Upon each such re-letting all rent received by the Landlord will be applied as follows:

 

(A) first to the payment of any indebtedness other than Rent due hereunder;

 

(B) second, to the payment of any costs and expenses of re-letting, including brokerage fees and solicitors’ fees and the costs of all alterations and repairs to the Premises which the Landlord, in its sole and absolute discretion, deems necessary in order to re-let the Premises;

 

(C) third, to the payment of Rent due and unpaid hereunder; and

 

(D) the residue, if any, will be held by the Landlord and applied in payment of future Rent as same becomes due and payable hereunder.

 

If the rent received from such re-letting during any month is less than that payable by the Tenant under the terms of this Lease, the Tenant will pay any such deficiency in advance on the first day of each month. If the Landlord has other premises available in the Development for lease, the Landlord shall be under no obligation whatsoever to first re-let, or attempt to re-let, the Premises ahead of such other available premises and the Landlord shall be entitled to lease all such other available premises prior to re-letting the Premises, and in so leasing such other available premises, the Landlord will not be in breach of any obligation on its part, if any, to mitigate its losses upon re-entering or taking possession of the Premises. The Landlord shall in no way be responsible or liable for any failure to re-let the Premises or any part thereof, or for any failure to collect any Rent due upon any such re-letting. Notwithstanding any re-entry or re-letting without termination of this Lease, the Landlord may at any time thereafter elect to terminate this Lease for the previous breach.

 

No re-entry or taking possession of the Premises by the Landlord will be construed as an election on its part to terminate this Lease unless a written notice of such intention is given to the Tenant.

 

(c)           If the Landlord terminates this Lease, in addition to any other remedies it may have, the Landlord may recover from the Tenant all damages it incurs by reason of the Tenant’s breach, including, without limitation, the cost of recovering the Premises, brokerage fees and solicitors’ fees, the cost of all tenant inducements, alterations and repairs to the Premises which the Landlord, in its sole and absolute discretion, deems necessary in order to re-let the Premises and the worth at the time of such termination of the excess, if any, of the amount of Rent required to be paid pursuant to this Lease for the remainder of the Term (had this Lease not been terminated) over the then rental value of the Premises, as determined by the Landlord, for the remainder of the Term (had this Lease not been terminated), all of which amounts shall be immediately due and payable by the Tenant to the Landlord. Upon any termination of this Lease, the Landlord shall be entitled to retain all of the monetary deposits provided by the Tenant as liquidated damages on account of the minimum amount of damages which the parties agree the Landlord will suffer as a result of such termination, all without the necessity for any legal proceedings and without prejudice to the Landlord’s right to claim and recover such additional damages as the Landlord may suffer or incur. In no circumstances whatsoever shall the Landlord be required to return the said deposits or any part thereof to the Tenant.

 

19.2 Legal Expenses

 

If the Landlord seeks the assistance of legal counsel to recover possession of the Premises, re-let the Premises, recover Rent, or because of the breach of any of the other Tenant’s Covenants, or to advise the Landlord on any of the foregoing matters, the Tenant shall pay to the Landlord all legal expenses incurred by the Landlord on demand.

 

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19.3 Rights Cumulative

 

The rights and remedies given to the Landlord in this Lease are distinct, separate and cumulative, and no one of them, whether or not exercised by the Landlord shall be deemed to be in exclusion of any other rights or remedies provided in this Lease or by law or in equity.

 

19.4 Acceptance of Rent - Non-Waiver

 

No receipt of monies by the Landlord from the Tenant after the cancellation or termination of this Lease in any lawful manner shall reinstate, continue or extend the Term, or affect any notice previously given to the Tenant or operate as a waiver of the right of the Landlord to enforce the payment of Rent then due or thereafter falling due, or operate as a waiver of the right of the Landlord to recover possession of the Premises by proper suit, action, proceedings or other remedy. After the service of any notice to terminate or cancel this Lease and the expiration of any time therein specified or after the commencement of any suit, action, proceeding or other remedy, or after a final order or judgment for possession of the Premises, the Landlord may demand, receive and collect any monies due, or thereafter falling due without in any manner affecting such notice, suit, action, proceeding, order or judgment. Any and all such monies so collected shall be deemed payments on account of the use and occupation of the Premises or at the election of the Landlord on account of the Tenant’s liability hereunder.

 

19.5 No Waiver

 

No condoning or waiver by either the Landlord or Tenant of any default or breach by the other at any time or times in respect of any of the Landlord’s Covenants or the Tenant’s Covenants, respectively, to be performed or observed by the other shall be deemed or construed to operate as a waiver of the Landlord’s or Tenant’s rights under this Lease, as the case may be, in respect of any continuing or subsequent default or breach nor so as to defeat or affect in any way the rights or remedies of the Landlord or Tenant under this Lease, as the case may be, in respect of any such continuing or subsequent default or breach. Unless expressly waived in writing, the failure of the Landlord or the Tenant to insist in any one or more cases upon the strict performance of any of the Landlord’s Covenants or the Tenant’s Covenants, respectively, to be performed or observed by the other shall not be deemed or construed to operate as a waiver for the future strict performance or observance of such Landlord’s Covenants or Tenant’s Covenants, as the case may be. The subsequent acceptance of Rent hereunder by the Landlord shall not be deemed to be a waiver of any preceding breach by the Tenant of any of the Tenant’s Covenants regardless of the Landlord’s knowledge of such preceding breach at the time of its acceptance of such Rent.

 

19.6 Accord and Satisfaction

 

No payment by the Tenant or receipt by the Landlord of a lesser amount than the Rent herein stipulated shall be deemed to be other than on account of the earlier stipulated Rent, nor shall any endorsement or statement on any cheque or any letter accompanying any cheque or payment as Rent be deemed an accord and satisfaction, and the Landlord may accept such cheque or payment without prejudice to the Landlord’s rights to recover the balance of such Rent or pursue any other remedy provided in this Lease.

 

19.7 Distress

 

(a)          The Tenant hereby waives and renounces the benefit of any present or future laws, statutory or otherwise, taking away or limiting or purporting to take away or limit the Landlord’s right of distress and the Tenant hereby agrees with the Landlord that, notwithstanding any such laws, all goods, chattels and inventory (collectively, the “Goods”) from time to time on the Premises shall be subject to distress for Rent and the fulfilment of all of the Tenant’s obligations under this Lease in the same manner as if such laws had not been made. Upon the Landlord effecting a distress, this provision may be pleaded as an estoppel against any Claims which the Tenant, or any Person claiming through the Tenant, may bring against the Landlord in respect of any distress levied by the Landlord.

 

(b)          In addition to any other rights of the Landlord to distrain, the Landlord shall have the right to distrain on all of the Goods on the Premises, including, without limitation, all heavy or connected machinery and equipment. The Landlord may without notice to the Tenant exercise any right of distress on the Premises and for such purpose the Tenant agrees that the Landlord may enter the Premises by any means which the Landlord in its sole and absolute discretion deems necessary, including, without limiting the generality of the foregoing, by using any keys in the Landlord’s possession to unlock any locks preventing access to the Premises or by the use of such force as the Landlord in its sole and absolute discretion deems necessary, including, without limitation, the breaking of any lock, door or window or other point of entry into the Premises. The Landlord shall have the right to lock the Premises, change any locks on the Premises and by any means exclude the Tenant from all or any parts of the Premises and the Landlord shall not thereby be terminating this Lease in the absence of an express written notice terminating this Lease. The Tenant hereby consents to being excluded by the Landlord from all or any parts of the Premises for the purpose of the Landlord exercising its right of distress and acknowledges and agrees that such exclusion shall not constitute a termination of this Lease in the absence of an express written notice from the Landlord terminating this Lease. The Landlord may exercise any right of distress at any time during the day or night and on any day of the week whether or not the Premises are occupied by any Person at the time.

 

  - 45 -  

 

 

(c)          The Tenant agrees that a distress of all of the Goods may be effected by written notice posted in or on the Premises, whether or not the Landlord locks or otherwise secures such Goods from the Tenant on the Premises or elsewhere. If the Landlord effects a distress by written notice or by any other means, the Tenant agrees not to use, remove or permit to be used or removed any distrained Goods and not to interfere with the Landlord’s exercise of its right of distress.

 

(d)          The Tenant agrees that the Landlord’s exercise of any right of distress as permitted hereby or at law shall not: (i) constitute a trespass or breach of any express or implied term of this Lease or render the Landlord subject to any legal proceeding, or (ii) render the Landlord liable or responsible in any way to the Tenant or any other Person for any act, fault, default, negligence, breach or omission of the Landlord or its bailiffs, agents, servants, employees or any other Persons, or for any occurrence or for any cause whatsoever, including, without limitation, any Injury to the Tenant or others or for any loss or damage to any property of the Tenant or others.

 

(e)          In exercising any right of distress, the Landlord may distrain against all or any Goods, irrespective of whether, or of the degree to which, the distress may be excessive and the Tenant waives any and all rights and remedies in respect thereof. In exercising any right of distress, the Landlord may hold all distrained Goods without limit in time and the Tenant waives any and all rights and remedies in respect thereof.

 

(f)           In addition to others entitled to do so, the Landlord and its agents and employees shall have the right without notice to the Tenant to purchase any Goods on the Premises distrained by the Landlord.

 

(g)          The Tenant shall indemnify and hold harmless the Landlord from and against any and all Claims arising out of the exercise by the Landlord of any of its rights under this section 19.7.

 

(h)          Removal by the Tenant of its goods outside of the ordinary course of the Tenant’s business, or without the Tenant having given the Landlord at least 10 days written notice of the intended removal, shall be deemed to be a fraudulent or clandestine act.

 

(i)           The Tenant shall sign and deliver to the Landlord an undated Authorization in the form attached as Schedule H contemporaneously with its execution of this Lease, and at such other times as the Landlord may require in writing, in which case the Tenant will sign and return such undated Authorization within 10 days following the Landlord’s written request. The Tenant hereby: (i) authorizes the Landlord to insert such date in the Authorization as the Landlord determines from time to time; and (ii) acknowledges and agrees that the Landlord may provide such Authorization to the relevant taxing Authorities in order to obtain information from such taxing Authorities as to the amount of provincial sales taxes (including penalties and interest) owing by the Tenant to such taxing Authority. The Landlord shall only be entitled to use such Authorization if there are outstanding arrears of Rent and then only to obtain information on such taxes (including penalties and interest) owing by the Tenant and for which the Landlord may become liable for paying (in whole or in part) in connection with the process of distraining upon any of the Goods.

 

(j)           The rights given to the Landlord pursuant to this section are in addition to, and not in replacement of, its common law right to distrain upon the Goods and this section shall in no way derogate from or in any way impair the Landlord’s common law right to distrain upon the Goods.

 

19.8 Right to Perform

 

If the Tenant fails to comply with any of the Tenant’s Covenants (the “Unperformed Covenants”) and such failure continues after the Landlord has given the Tenant prior written notice of such failure and the cure period set out in such notice has expired, then the Landlord may, at its option, and without waiving or releasing the Tenant from the strict performance of the Tenant’s Covenants, perform such of the Unperformed Covenants as the Landlord considers desirable in such manner and to such extent as the Landlord considers desirable and in doing so may pay any necessary and incidental costs and expenses. All amounts paid by the Landlord in exercising its rights in this section, plus an administrative fee equal to 15% of the amounts so paid by the Landlord, together with interest thereon at the rate provided for in section 4.5 calculated from the date of the making of the payment by the Landlord, shall be deemed Additional Rent and shall be paid by the Tenant within 5 days of demand being made on the Tenant for the payment of same.

 

19.9 Repayment by the Tenant

 

If during the original Term:

 

(a) the Tenant becomes bankrupt or insolvent or takes the benefit of any statute for bankrupt or insolvent debtors or makes any proposal, assignment or arrangement with its creditors (including, without limitation, electing to terminate or disclaim this Lease in connection with a proposal made by the Tenant under the Bankruptcy and Insolvency Act (Canada), the Companies Creditors Arrangements Act (Canada) or any other statute allowing the Tenant to terminate or disclaim this Lease); or

 

(b) this Lease is terminated for any reason,

 

then the Tenant shall pay to the Landlord:

 

  - 46 -  

 

 

(c) the Rent which the Tenant was not required to pay during the Rent free period described in the Basic Provisions; and

 

(d) the unearned portion of:

 

(i) the Allowance; and

 

(ii) all real estate commissions and legal fees paid by the Landlord in connection with the negotiation of and entering into of this Lease,

 

(collectively, the “Costs”). Such unearned portion shall be determined in accordance with the following formula: Costs x R ÷ T, where:

 

(iii) “R” means the number of days remaining in the Term as of the date of the termination or disclaimer; and

 

(iv) “T” means the total number of days in the Term (including any Extended Term),

 

within 10 days following the date of such termination or disclaimer, the amount payable being deemed to be Rent in arrears immediately prior to the date of such termination or disclaimer.

 

ARTICLE 20.00 - GENERAL

 

20.1 Lease Entire Agreement

 

This Lease constitutes the entire agreement between the parties pertaining to the subject matter of this Lease and supersedes all prior agreements, offers to lease, understandings, negotiations and discussions, whether oral or written, of the parties. This Lease may not be modified or amended except pursuant to an agreement in writing executed by the Landlord and the Tenant. There are no representations, warranties, covenants, inducements, conditions or other agreements, whether oral or written, express or implied, forming part of or in any way affecting or relating to this Lease, the Development, the Premises, the business which may be carried on in the Premises or the sales which may be expected from such business, except as expressly set out in this Lease. Without limiting the generality of the foregoing, the Tenant specifically acknowledges and agrees that the Landlord has not made any representations or warranties to the Tenant regarding whether the Tenant’s intended use of the Premises is permitted by the applicable zoning, the Tenant having independently satisfied itself with respect to this matter prior to signing this Lease. All representations, warranties, covenants, inducements, conditions and other agreements made by either party or their representatives which are relied upon by the other party are contained in this Lease and each party disclaims reliance on any other representations, warranties, covenants, inducements, conditions or agreements.

 

20.2 Impossibility of Performance

 

Regardless of any other provision of this Lease, if either party is bona fide delayed or hindered in or prevented from the performance of any term, covenant or act required under this Lease (an “Affected Obligation”) by reason of:

 

(a) being unable to obtain the material, goods, equipment, service, utility or labour required to enable it to perform such obligation;

 

(b) not being able to obtain any required permission or authority;

 

(c) strikes, walkouts, labour troubles, blockades or industrial disturbances;

 

(d) power failures, fluctuations or non-availability;

 

(e) restrictive Laws or the orders or directions of any Authority (unless given as a result of a party’s failure to comply with any Laws);

 

(f) riots, insurrections, war, warlike operations, sabotage, terrorism, invasion or rebellion;

 

(g) abnormal weather conditions or abnormal subsurface conditions;

 

(h) acts of God; or

 

(i) any other reason or event (other than the financial impecuniosity of a party), whether of the foregoing character or not, which is not the fault of the party delayed in performing work or doing acts required under this Lease,

 

(collectively, “Force Majeure”), then the performance of the Affected Obligation shall be excused for the period of the delay and the party so delayed shall be entitled to perform the Affected Obligation within the appropriate time period after the expiration of the period of such delay and the other party shall not be entitled to any compensation for any inconvenience, loss, damage, nuisance or discomfort thereby occasioned. However, the financial impecuniosity of a party shall not entitle such party to the benefit of this section and the provisions of this section do not operate to excuse the Tenant from its obligation to pay Rent when due. The parties agree that the party claiming the benefit of Force Majeure shall inform the other party in writing promptly on learning of such delay (but the failure to do so shall not deprive such party of the benefit of this provision or subject such party to any liability to the other party) and shall, where possible, use commercially reasonable efforts to mitigate the effect of such delay.

 

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20.3 Notice

 

Any notice or other communication required or permitted to be given by this Lease shall be in writing and shall be effectively given if:

 

(a) delivered personally;

 

(b) sent by prepaid courier service;

 

(c) sent by registered mail; or

 

(d) sent via email,

 

in the case of notice to:

 

(e) the Landlord at: 277 Lakeshore Road East, Suite 200, Oakville, Ontario L6J 1H9

 

Attention: Grant Gorchynski  Email: grant@lisgardev.ca

 

(f) the Tenant at: the Premises

 

or at such other address as the party to whom such notice or other communication is to be given shall have advised the party giving same in the manner provided in this section, provided that notice by the Landlord to the Tenant shall be sufficiently given if sent to the Premises notwithstanding any other address which the Tenant may give to the Landlord. Any notice or other communication delivered personally or by prepaid courier service shall be deemed to have been given and received on the day it is so delivered at such address, provided that if such day is not a Business Day such notice or other communication shall be deemed to have been given and received on the next following Business Day. Any notice or other communication sent by registered mail shall be deemed to have been given and received on the third Business Day following the date of mailing. Any notice or other communication transmitted by fax shall be deemed to have been given and received on the day of its transmission provided that such day is a Business Day and such transmission is completed before 5:00 p.m. on such day, failing which such notice or other communication shall be deemed to have been given and received on the first Business Day after its transmission. Regardless of the foregoing, if there is a mail stoppage or labour dispute or threatened labour dispute which has affected or could affect normal mail delivery by Canada Post, then no notice or other communication may be delivered by registered mail. If two or more Persons are named as Tenant, such notice or other communication given hereunder shall be sufficiently given if sent in the foregoing manner to any one of such Persons.

 

20.4 Registration

 

The Tenant may not register this Lease or permit anyone acting on the Tenant’s behalf to register it. The Tenant may, however, register a notice of lease (the “Notice”) which only discloses the Premises, the Term, the Commencement Date, the renewal or extension rights, if any, and the parties to this Lease. In no event shall the Notice disclose the financial terms of this Lease (including, without limitation, the Rent) nor exhibit the Lease or any part of it. The Notice shall be subject to the approval of the Landlord’s solicitors, at the Tenant’s expense, such approval to be obtained prior to the Notice being registered on title to the Lands. The Tenant shall, at its sole cost and expense, discharge any Notice which it registers on title to the Lands within 20 days following the expiration or earlier termination of this Lease. If the Tenant fails to discharge any such Notice within the time period set out above, the Landlord (or its lawyers) may do so and the Tenant:

 

(a) consents to the Landlord and the Landlord’s lawyers signing such documentation as may be required to discharge the Notice (and, in the case of the Landlord’s lawyers, making all legal statements which are required to be made in order to obtain such discharge);

 

(b) releases all Claims which it may have against the Landlord and the Landlord’s lawyers for discharging the Notice in accordance with the provisions of this section; and

 

(c) shall reimburse the Landlord for all costs incurred by the Landlord in discharging the Notice within 30 days following the Tenant’s receipt of an invoice from the Landlord.

 

20.5 Interest in Lands

 

The Tenant will look solely to the interest of the Landlord in the Development for the collection or satisfaction of any money or judgement which the Tenant may recover against the Landlord and the Tenant will not look for the collection or satisfaction of any such money or judgement from any of the other assets of the Landlord or of any person who is at any time a partner, joint venturer or co-tenant with the Landlord in the Development.

 

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20.6 Applicable Law

 

This Lease is to be construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable in the Province of Ontario and is to be treated in all respects as an Ontario contract. Each of the parties irrevocably attorns to the exclusive jurisdiction of the courts of the Province of Ontario.

 

20.7 Interpretation

 

In this Lease:

 

(a) “herein”, “hereof”, “hereunder”, “hereafter” and similar expressions refer to this Lease and not to any particular section, paragraph or other portion thereof, unless there is something in the subject matter or context inconsistent therewith;

 

(b) all of the provisions of this Lease are to be construed as covenants and agreements as though the words importing such covenants and agreements were used in each separate paragraph hereof;

 

(c) the term “however caused” includes, without limitation, the negligence of the Landlord and the Landlord’s Employees; and

 

(d) the Table of Contents, Article numbers, Article headings, section numbers, section headings appearing within the body of this Lease have been inserted as a matter of convenience and for reference only and in no way define, limit or enlarge the scope or meaning of this Lease or of any provision of this Lease.

 

20.8 Gender and Number

 

The grammatical changes required to make the provisions of this Lease apply in the plural sense, and to make the said provisions apply to corporations, firms, partnerships or individuals, male or female, will be assumed as though in each case fully expressed. If the Tenant consists of more than one Person, the Tenant’s Covenants shall be deemed to be joint and several and covenants of each such Person. If the Tenant is a partnership (the “Tenant Partnership”) each Person who is presently a member of the Tenant Partnership, and each Person that becomes a member of any successor Tenant Partnership, shall be and continue to be liable jointly and severally for the performance of the Tenant’s Covenants, whether or not such Person ceases to be a member of such Tenant Partnership or successor Tenant Partnership.

 

20.9 Partial Invalidity

 

If for any reason whatsoever any term, covenant or condition of this Lease, or the application thereof to any Person, firm or corporation or circumstance, is to any extent held or rendered invalid, unenforceable or illegal, then such term, covenant or condition:

 

(a) is deemed to be independent of the remainder of the Lease and to be severable and divisible therefrom, and its validity, unenforceability or illegality does not affect, impair or invalidate the remainder of the Lease or any part thereof; and

 

(b) continues to be applicable to and enforceable to the fullest extent permitted by law against any Person and circumstance other than those as to which it has been held or rendered invalid, unenforceable or illegal.

 

20.10 Compliance with the Planning Act

 

It is an express condition of this Lease that the provisions of section 50 of the Planning Act (Ontario), as amended or replaced from time to time, be complied with if applicable in law. Until any necessary consent to this Lease is obtained, the Term (including any extensions or renewals thereof) and the Tenant’s rights and entitlement granted by this Lease shall be deemed not to exceed a period of 21 years less a day from the Commencement Date. The Tenant shall apply diligently to prosecute such application for such consent upon the execution of this Lease by both the Landlord and the Tenant, and the Tenant shall be responsible for all costs, expenses, taxes and levies imposed, charged or levied as a result of such application and in order to obtain such consent. The Tenant shall at all times keep the Landlord informed of its progress in obtaining such consent and the Landlord shall cooperate with the Tenant in regard to such application, but at the sole expense of the Tenant. Notwithstanding the foregoing, the Landlord reserves the right at any time, at the Tenant’s expense, to apply for such consent in lieu of the Tenant and the Tenant’s application is hereby expressly made subject to any application which the Landlord intends to make.

 

  - 49 -  

 

 

20.11 Indemnification- Intentionally deleted

 

20.12 Survival of Obligations

 

(a) If the Tenant is in default of any of the Tenant’s Covenants at the time this Lease expires or is terminated:

 

(i) the Tenant shall remain fully liable for the performance of such Tenant’s Covenants; and

 

(ii) all of the Landlord’s rights and remedies in respect of such failure shall remain in full force and effect,

 

all of which shall be deemed to have survived such expiration or termination of this Lease.

 

(b) Regardless of the expiry or earlier termination of this Lease:

 

(i) every indemnity, exclusion or release of liability and waiver of subrogation contained in this Lease or in any of the Tenant’s insurance policies; and

 

(ii) those provisions of this Lease which are intended to have effect beyond the end of the Term,

 

shall survive the expiration or termination of this Lease and continue in full force and effect.

 

20.13 No Option

 

The Tenant acknowledges and agrees that: (a) the provision of this Lease (whether in blank form, with the particulars inserted or with negotiated amendments included) by the Landlord to the Tenant for examination by the Tenant; (b) any negotiations between the Landlord and the Tenant regarding this Lease; or (c) the submission of this Lease duly signed by the Tenant (whether or not accompanied by any deposits or rent payments) to the Landlord, shall not give the Tenant any right, interest or option in or to the Premises. The Tenant will only acquire a right and interest in the Premises, and this Lease will only become effective as a lease, upon the execution of this Lease by both the Landlord and the Tenant and the delivery of a fully executed copy of this Lease (and, if an Indemnification Agreement is attached to this Lease, the Indemnification Agreement) by the Landlord to the Tenant. Upon the Tenant signing and providing the Lease to the Landlord, the Tenant shall be deemed to have made an offer to lease the Premises on the terms contained in such Lease which offer shall be irrevocable for a period of 30 days following the date that the Landlord receives such signed copy of the Lease.

 

20.14 References to Statutes

 

Any reference to a statute in this Lease includes a reference to all regulations made pursuant to such statute, all amendments made to such statute and regulations in force from time to time and to any statute or regulation which may be passed and which has the effect of supplementing or superseding such statute or regulations.

 

20.15 Approval in Writing

 

Wherever the Landlord’s consent is required to be given under this Lease or wherever the Landlord must approve any act or performance by the Tenant, such consent or approval, as the case may be, shall not be effective unless same is in writing.

 

20.16 Time

 

Time shall be of the essence of this Lease and every part of it, except as may be expressly provided to the contrary in this Lease, and no extension or variation of this Lease shall operate as a waiver of this provision. When calculating the period of time within which or following which any act is to be done or step taken pursuant to this Lease, unless this Lease provides to the contrary, the date which is the reference date in calculating such period shall be excluded.

 

20.17 No Adverse Presumption

 

This Lease has been negotiated and approved by the parties and, notwithstanding any rule or maxim of law or construction to the contrary, any ambiguity or uncertainty will not be construed against either of the parties by reason of the authorship of any of the provisions of this Lease.

 

20.18 Successors

 

All rights and liabilities herein given to, or imposed upon, the respective parties hereto shall extend to and bind the several respective heirs, executors, administrators, successors and assigns of the said parties. No rights, however, shall enure to the benefit of any Transferee of the Tenant unless the Transfer to such Transferee has been effected in accordance with the provisions of Article 13.00.

 

IN WITNESS WHEREOF the parties have executed this Lease.

 

  - 50 -  

 

 

Lisgar Development Limited   Ehave Inc.
             
Per: /s/ Grant Gorchynski   Per: /s/ Prateek Dwivedi
  Name: Grant Gorchynski     Name: Prateek Dwivedi
  Title: Chief Operating Officer     Title: CEO

 

  - 51 -  

 

 

SCHEDULE A

 

LEGAL DESCRIPTION OF THE LANDS

 

LT C & F, BLK 8, PL 1; PT LT B, BLK 8, PL 1, PART 4, 19, 20, 20R3220; OAKVILLE

 

 

 

 

SCHEDULE B

 

DIAGRAM OF THE PREMISES’ LOCATION

 

 

 

 

 

SCHEDULE C

 

LANDLORD’S WORK

 

The Landlord shall provide the Premises “as is” to the Tenant at Lease commencement, but agrees to, at its sole expense and to a standard consistent with the Building, complete the following work in the Premises in a good workmanlike manner and in accordance with all requirements of applicable laws, by-laws, building codes, rules and regulations.

 

(a) Supply and install four (4) paint grade doors, passage locksets and hinges and paint doors to match existing door color;

 

(b) Steam clean carpets throughout entire suite;

 

(c) Repair minor deficiencies in the kitchen area (ie. loose backsplash, re-install sink);

 

(d) Interior touch up painting throughout the suite;

 

(e) The Landlord will look into reactivating the key access scan system any cost associated with such reactivation shall be at the cost of the Tenant.

 

(f) Landlord shall ensure all electrical, lighting and ceiling systems, HVAC, and mechanical systems are in good working order;

 

(g) Landlord shall leave the Premises clean and free of rubbish.

 

All data wiring shall be the responsibility of the Tenant.

 

 

 

 

SCHEDULE D

 

TENANT’S WORK

 

The Tenant’s Work consists of such work, other than the Landlord’s Work, that the Tenant requires to be made to or in the Premises in order for the Tenant to be able to carry on its business operations in the Premises. Without limiting the generality of the foregoing, the Tenant’s Work includes the following:

 

(REFERENCE SECTION 2.6)

 

 

 

 

SCHEDULE E

 

RULES AND REGULATIONS

 

1. The Landlord may prohibit any persons from entering the Building except during Normal Business Hours unless such person has a key to the premises to which such person seeks entry or a pass in a form to be approved by the Landlord. Any person who is permitted to enter the Building at any time other than during Normal Business Hours shall register in the manner prescribed by the Landlord. The Landlord shall be under no responsibility for failure to enforce this rule.

 

2. Any areas of the Building not set aside for leasing from time to time by the Landlord shall be used only for their intended purposes. The Tenant shall not use any entrance or exits, passageway, corridor, lobby, sidewalk, ramp, stairway, escalator or elevator except for ingress to and egress from the Premises. The Tenant shall not obstruct such areas in any way and shall not deposit any footwear, waste, garbage or refuse therein. The Landlord may remove at the expense of the Tenant any such obstruction without notice or obligation to the Tenant. The Landlord reserves the right to restrict or prohibit canvassing, soliciting or peddling in the Building.

 

3. All plumbing fixtures shall be used only for their intended purposes and no sweeping, rubbish, rags, ashes or other substances shall be thrown therein. The Tenant shall not permit any toilet or drain to be obstructed. Taps shall be turned off when not in use.

 

4. The Premises may not be used for any residential purpose including sleeping accommodation and cooking, the storage of any personal effects or articles not required for the use of the Premises in accordance with the Lease or the storage of any inflammable, explosive or dangerous materials.

 

5. No birds or animals may be kept on the Premises or brought into the Building. No musical instruments or sound producing equipment or amplifier may be operated in a manner which may be heard outside the Premises.

 

6. No drapes or window coverings may be installed on any exterior windows of the Premises without the prior written consent of the Landlord. Any drapes or window coverings so approved must not interfere with the climate control central system of the Building and must present a uniform exterior appearance for the Building.

 

7. The Tenant shall not obstruct or interfere with access to janitorial and electrical closets or heating, ventilating or air-conditioning ducts or equipment in the Premises. In the event of any such obstruction or interference the Tenant will be responsible for the cost of providing access to the same.

 

8. The Tenant shall leave the Premises in a reasonably tidy condition at the end of each business day.

 

9. The Tenant shall not mark, drill into, bore or cut or in any way damage or deface the walls, ceilings or floors of the Premises. No wires, pipes or conduits shall be installed in the Premises without the prior written approval of the Landlord. No broadloom or carpeting shall be affixed to the Premises by means of a non-soluble adhesive or similar product. The Tenant shall at its own expense install and maintain pads to protect any carpet in the Premises under all furniture so that the furniture does not crush the carpet.

 

10. No safe, heavy equipment, bulky materials or office furniture or equipment shall be brought into or removed from the Building except during such hours and by such means as the Landlord may approve. The Landlord may prohibit the installation in the Premises of any safe or equipment which exceeds the load-bearing capacity of the floor of the Premises.

 

11. No machine dispensing food, beverage or merchandise for sale shall be installed in the Premises without the prior written approval of the Landlord which may be arbitrarily withheld. No food, beverage or merchandise shall be delivered to the Premises except during such hours and by persons authorized by the Landlord.

 

12. The Tenant shall not hinder or prevent window cleaners from cleaning the windows of the Premises during Normal Business Hours.

 

13. The directory board for the Building, the style thereof and the lettering thereon and the manner and order in which the names are displayed thereon shall be within the sole discretion of the Landlord.

 

14. No cleaning, maintaining, replacement or servicing of the whole or any part of the Premises including electric lighting fixtures shall be done or performed by any person or persons other than persons employed by the Landlord. Only Building standard fluorescent tubes may be used in the Premises.

 

15. No additional locks may be placed upon, nor shall changes be made to the existing locks in any doors of the Premises without the prior written consent of the Landlord. All additional locks must conform to the master keying system for the Building established by the Landlord. Additional keys to the door locks shall be obtained from the Landlord at the cost of the Tenant.

 

16. The Tenant may use, in common with the other tenants of the Building, any mail chute and mail box in the Building provided that such use is entirely at the Tenant’s own risk and that the Landlord will not be liable or responsible for any loss or damage resulting from or in consequence of the Tenant’s use of such mail chute or mail box.

 

17. All loading and unloading of goods shall be done only at such times, in the areas and through the entrances designated for such purposes from time to time by the Landlord. Any movers or moving company moving furniture or equipment in or out of the Premises shall be approved of by the Landlord and shall make prior arrangements with the Landlord as to the times of such moving of furniture or equipment. The Tenant shall ensure and guarantee the prompt payment to the Landlord for the cost of repairing any damage in the Building caused by such movement of furniture or equipment.

 

18. In so far as these Rules and Regulations in this Schedule may be in conflict with provisions contained in the remainder of the Lease, the provisions in the remainder of the Lease shall govern.

 

 

 

 

SCHEDULE F

 

INDEMNIFICATION AGREEMENT

 

Intentionally Deleted

 

 

 

 

SCHEDULE G

 

INSURANCE CERTIFICATE

 

TO: Lisgar Development Limited (the “Landlord”)

 

RE: Ehave Inc. (the “Insured”) - Lease made as of April 6 th , 2018 (the “Lease”) between the Landlord and the Insured for Premises known as 277 Lakeshore Road, Suite 203 (the “Premises”)

 

 

The undersigned hereby certifies, on behalf of and as agent for _______________________________ (the “Insurer”), that:

 

the undersigned and the Insurer have received and reviewed the Lease;

 

the Insured has taken out the insurance required by section 12.1 of the Lease and that such insurance complies with the requirements of section 12.1 of the Lease; and

 

the Landlord may rely upon this Certificate as being binding on the undersigned and the Insurer.

 

The undersigned also certifies that it has the express right and authority to bind the Insurer to the terms of this Insurance Certificate. Execution of this Insurance Certificate may be evidenced by way of a faxed or a photocopied signed copy of this Insurance Certificate or other electronically transmitted signed copy of this Insurance Certificate and any such signature on such copy of this Insurance Certificate will be deemed to constitute an originally signed copy of this Insurance Certificate.

 

Dated ___________________

 

_________________________ [Name of insurance broker] ,

 

as agent for _________________________ [Name of Insurance Company]

 

Per:____________________________________

 

 

 

 

SCHEDULE H

 

AUTHORIZATION

 

Intentionally Deleted

 

 

 

 

SCHEDULE I

 

SPECIAL PROVISIONS

 

1. Interpretation

 

In this Schedule I, all references to: a section is deemed to refer to the applicable section of the Lease to which this Schedule I is attached; and, a paragraph is deemed to refer to the applicable paragraph of this Schedule I.

 

2. Conditions to Exercise of Rights

 

The Tenant may only exercise its rights if:

 

(a) the Tenant is not in default of any of the Tenant’s Covenants;

 

(b) the Tenant has not become insolvent or bankrupt, and has not made any assignment for the benefit of creditors and has not, becoming bankrupt or insolvent, taken the benefit of any Act now or hereafter in force for bankrupt or insolvent debtors;

 

(c) a petition in bankruptcy has not been filed against the Tenant and a receiving order has not been made against the Tenant, and no proceedings have been commenced respecting the winding up or termination of the existence of the Tenant; and

 

(d) no receiver or other person has taken possession or effective control of the assets or business of the Tenant or a substantial portion thereof pursuant to any security or other agreement or by any other means whatsoever, and there are no outstanding writs of execution against the Tenant.

 

3. Right to Extend the Term

 

(a)          The Tenant may extend the Term for an additional period of five (5) years (such extended period being called the “Extended Term”), provided that:

 

(i) it is entitled to do so pursuant to paragraph 2; and

 

(ii) it advises the Landlord in writing that it wishes to extend the Term not more than 12 months and not less than 6 months prior to the expiration of the original Term, failing which this right to extend shall be rendered null and void.

 

(b)         If the Tenant exercises its right to extend the Term in accordance with the foregoing, the Lease shall be read as if the original Term was for a period of seven (7) years commencing on the Commencement Date and:

 

(i) the Minimum Rent during the Extended Term will be the prevailing fair market rental value of the Premises for a term commensurate with the Extended Term determined as of the commencement of the Extended Term, as established by the mutual agreement of the Landlord and the Tenant. If the Minimum Rent for the Extended Term has not been mutually agreed upon by the Landlord and the Tenant at least 3 months prior to the commencement of the Extended Term, the Minimum Rent for the Extended Term will be determined by arbitration by a single arbitrator chosen by the Landlord and the Tenant, and if they cannot agree upon the arbitrator within 5 days after the written request for arbitration by either party to the other, either party may apply to a judge for the appointment of an arbitrator in accordance with the provisions of the Arbitration Act, 1991 (Ontario). The provisions of the Arbitration Act, 1991 will govern the arbitration and the arbitrator’s decision will be final and binding on the parties. The arbitrator will be instructed to render its decision no later than 15 days prior to the commencement of the Extended Term. If the Minimum Rent for the Extended Term has not been determined by the commencement of the Extended Term, then:

 

(A) the Tenant shall pay the Minimum Rent being requested by the Landlord; and

 

(B) upon the Minimum Rent for the Extended Term being determined, any adjustments in Minimum Rent will be made effective the commencement of the Extended Term and will be paid by the relevant party within 15 days following the date of such determination.

 

All documents and proceedings with respect to the arbitration are to be kept confidential by each of the parties. Each party is responsible for its own costs in connection with the arbitration and the costs of the arbitrator will be shared equally by the parties; and

 

(c) For clarity, upon the Tenant exercising its within right to extend the Term:

 

(i) the Tenant will not be entitled to further extend the Term;

 

 

 

 

(ii) the Landlord will not be required to perform the Landlord’s Work, if any, and the Tenant will not be required to perform the Tenant’s Work; and

 

(iii) the Tenant will not be entitled to any fixturing period, leasehold improvement allowance, tenant inducement or rent free period.

 

(d)          The exercise of the within right to extend is solely within the control of the Tenant and nothing contained in this Lease, including, without limitation, this Schedule, obligates or requires the Landlord to remind the Tenant to exercise the within right to extend.

 

4. Option to Expand/Right of First Refusal

 

Provided the Tenant is not in default, the Tenant shall have the right of first refusal to lease contiguous premises located next door (Suite 207) on an “as is” basis (hereinafter referred to as the “Additional Premises”), in accordance with and subject to the provisions of this paragraph. Prior to offering the Additional Premises to any other party, the Landlord will provide the Tenant notice of the Additional Premises that it wishes to let, the date it will be available for occupancy and the term for which the Landlord intends to let such premises. The Tenant will have ten (10) Business Days following its receipt of the Landlord’s notice in which to decide whether or not it wishes to take such premises and lease on the terms and conditions set out in the Landlord’s notice. If within the ten (10) business day period the Tenant does not enter into an agreement to lease the Additional Premises for a term beginning immediately upon such premises becoming available, the Landlord will be free to let such premises to a third party.

 

  - 2 -  

 

 

Exhibit 12.1

 

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER UNDER SECTION 302 OF THE SARBANES-OXLEY ACT

 

I, Prateek Dwivedi, certify that:

 

1. I have reviewed this annual report on Form 20-F of Ehave, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

 

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

 

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

 

Date: June 13, 2018  
   
/s/ Prateek Dwivedi  
Prateek Dwivedi  
Chief Executive Officer  

 

 

 

 

Exhibit 12.2

 

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER UNDER SECTION 302 OF THE SARBANES-OXLEY ACT

 

I, Dianne Parsons, certify that:

 

1. I have reviewed this annual report on Form 20-F of Ehave, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

 

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

 

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

 

Date: June 13, 2018

 

/s/ Dianne Parsons  
Dianne Parsons  
Acting Chief Financial Officer  

 

 

 

 

Exhibit 13.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER UNDER SECTION 906 OF THE SARBANES-OXLEY ACT

 

Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Ehave, Inc. (the “Company”) hereby certifies, to such officer’s knowledge that:

 

1. The accompanying Annual Report on Form 20-F of the Company for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: June 13, 2018

 

/s/ Prateek Dwivedi  
Prateek Dwivedi  
Chief Executive Officer  

 

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference to any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

 

 

 

Exhibit 13.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER UNDER SECTION 906 OF THE SARBANES-OXLEY ACT

 

Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Ehave, Inc. (the “Company”) hereby certifies, to such officer’s knowledge that:

 

1. The accompanying Annual Report on Form 20-F of the Company for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: June 13, 2018

 

/s/ Dianne Parsons  
Dianne Parsons  
Acting Chief Financial Officer  

 

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference to any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.