o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Ontario, Canada
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N/A
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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720 King St. W., Suite 320
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Toronto, Ontario
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M5V 2T3
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(Address of principal executive offices)
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(Zip Code)
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Title of Each Class
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Trading Symbol
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Name of Each Exchange on Which Registered
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Common Shares, no par value
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CRON
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The Nasdaq Stock Market LLC
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Large accelerated filer
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x
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Accelerated filer
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o
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Non-accelerated filer
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o
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Smaller reporting company
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o
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Emerging growth company
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o
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Table of Contents
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PART I
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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PART II
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8
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Item 9
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Item 9A.
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Item 9B.
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PART III
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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PART IV
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Item 15.
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•
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laws and regulations and any amendments thereto applicable to our business and the impact thereof, including uncertainty regarding the application of United States (“U.S.”) state and federal law to U.S. hemp (including CBD) products and the scope of any regulations by the U.S. Federal Drug Administration (the “FDA”), the U.S. Federal Trade Commission (the “FTC”), the U.S. Patent and Trademark Office (the “PTO”) and any state equivalent regulatory agencies over U.S. hemp (including CBD) products;
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expectations regarding the regulation of the U.S. hemp industry in the U.S., including the promulgation of regulations for the U.S. hemp industry by the U.S. Department of Agriculture (the “USDA”);
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the grant, renewal and impact of any license or supplemental license to conduct activities with cannabis or any amendments thereof;
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our international activities and joint venture interests, including required regulatory approvals and licensing, anticipated costs and timing, and expected impact;
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the ability to successfully create and launch brands and further create, launch and scale U.S. hemp-derived consumer products, including through the Redwood Acquisition (as defined herein), and cannabis products in jurisdictions where such products are legal and that we currently operate in;
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the benefits, viability, safety, efficacy, dosing and social acceptance of cannabis, including CBD and other cannabinoids;
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•
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the anticipated benefits and impact of the Altria Investment (as defined herein);
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the potential exercise of the Altria Warrant (as defined herein), pre-emptive rights and/or top-up rights in connection with the Altria Investment, including proceeds to us that may result therefrom;
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expectations regarding the use of proceeds of equity financings, including the proceeds from the Altria Investment;
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the legalization of the use of cannabis for medical or adult-use in jurisdictions outside of Canada, the related timing and impact thereof and our intentions to participate in such markets, if and when such use is legalized;
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expectations regarding the potential success of, and the costs and benefits associated with, our joint ventures, strategic alliances and equity investments, including the strategic partnership (the “Ginkgo Strategic Partnership”) with Ginkgo Bioworks, Inc. (“Ginkgo”);
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our ability to execute on our strategy and the anticipated benefits of such strategy;
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the ongoing impact of the legalization of additional cannabis product types and forms for adult-use in Canada, including federal, provincial, territorial and municipal regulations pertaining thereto, the related timing and impact thereof and our intentions to participate in such markets;
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the future performance of our business and operations;
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our competitive advantages and business strategies;
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the competitive conditions of the industry;
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the expected growth in the number of customers using our products;
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our ability or plans to identify, develop, commercialize or expand our technology and research and development (“R&D”) initiatives in cannabinoids, or the success thereof;
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expectations regarding acquisitions and the anticipated benefits therefrom, including the Redwood Acquisition and the acquisition of certain assets from AFI (as defined herein);
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expectations regarding revenues, expenses and anticipated cash needs;
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expectations regarding cash flow, liquidity and sources of funding;
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expectations regarding capital expenditures;
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the expansion of our production and manufacturing, the costs and timing associated therewith and the receipt of applicable production and sale licenses;
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the expected growth in our growing, production and supply chain capacities;
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expectations regarding the resolution of litigation and other legal proceedings;
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expectations with respect to future production costs;
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expectations with respect to future sales and distribution channels;
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the expected methods to be used to distribute and sell our products;
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our future product offerings;
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the anticipated future gross margins of our operations;
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accounting standards and estimates;
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expectations regarding our distribution network; and
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expectations regarding the costs and benefits associated with our contracts and agreements with third parties, including under our third-party supply and manufacturing agreements.
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growing a portfolio of iconic brands that resonate with consumers;
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developing a diversified global sales and distribution network;
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establishing an efficient global supply chain; and
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creating and monetizing disruptive intellectual property in the industries in which we operate.
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Joint Venture
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Jurisdiction
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Ownership Interest(i)
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Cronos Israel (ii)
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Israel
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70%/90%
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Cronos Growing Company Inc. (“Cronos GrowCo”) (iii)
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Canada
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50%
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NatuEra S.à.r.l. (“NatuEra”) (iv)
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Colombia
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50%
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MedMen Canada Inc. (“MedMen Canada”) (v)
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Canada
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50%
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(i)
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We define ownership interest as the proportionate share of net income to which we are entitled; equity interest may differ from ownership interest shown above. We consolidate the financial results of Cronos Israel and account for our other joint ventures under the equity method of accounting.
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(ii)
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A strategic joint venture with Kibbutz Gan Shmuel (“Gan Shmuel”), an Israeli agricultural collective settlement, for the production, manufacture and global distribution of medical cannabis, consisting of a cultivation company (Cronos Israel G.S. Cultivations Ltd.), a manufacturing company (Cronos Israel G.S. Manufacturing Ltd.), a distribution company (Cronos Israel G.S. Store Ltd.) and a pharmacies company (Cronos Israel G.S. Pharmacies Ltd., collectively, “Cronos Israel”). We hold a 70% equity interest in the cultivation company and a 90% equity interest in each of the manufacturing, distribution and pharmacies companies.
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(iii)
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A strategic joint venture with a group of investors led by Bert Mucci (the “Greenhouse Partners”), a Canadian large-scale greenhouse operator. Each of Cronos Group and the Greenhouse Partners owns a 50% equity interest in the joint venture, Cronos GrowCo, and has equal representation on its board of directors.
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(iv)
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A strategic joint venture with an affiliate of Agroidea SAS (“AGI”), a Colombian agricultural services provider. Each of the Company and AGI owns a 50% equity interest in the joint venture, NatuEra. Cronos Group has three manager nominees on the board of managers of NatuEra, while AGI has four manager nominees on the board of managers. NatuEra intends to develop, cultivate, manufacture, and export cannabis-based medical and consumer products for the Latin American and global markets.
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(v)
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A strategic joint venture with MedMen Enterprises USA, LLC (“MedMen”) for retail in provinces in Canada that permit private retail. Each of the Company and MedMen owns a 50% equity interest in the joint venture, MedMen Canada, and has equal representation on the board of directors of MedMen Canada.
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•
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production, distribution, sales and marketing outside of the geographic markets that we currently participate in (in jurisdictions which have passed legislation to legalize the production, distribution and possession of cannabis and cannabis products at all relevant levels of government); and
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the export of cannabis and cannabis products to third parties outside of the geographic markets that we currently participate in that permit the import of such products.
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Brand Positioning
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Wellness
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Premium Adult-Use, Terpene-Rich
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Mainstream Adult-Use
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Luxury Adult Consumer Goods
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Mass Market
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Product Offering
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Dried Cannabis, Cannabis Tinctures
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Dried Cannabis, Cannabis Tinctures, Pre-Rolls, Vaporizers
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Dried Cannabis, Pre-Rolls, Vaporizers
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U.S. hemp-derived Supplements, Cosmetics
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In Development (not yet offered for sale)
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Geographic Availability
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Canada, Germany and Australia
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Canada
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Canada
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U.S.
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Anticipated U.S.
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•
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consolidate or merge into or with another person or enter into any similar business combination;
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acquire any shares or similar equity interests, instruments convertible into or exchangeable for shares or similar equity interests, assets, business or operations with an aggregate value of more than C$100,000,000, in a single transaction or a series of related transactions;
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subject to certain exceptions, adopt any plan or proposal for a complete or partial liquidation, dissolution or winding up of the Company or any of our significant subsidiaries, or any reorganization or recapitalization of the Company or any of our significant subsidiaries, or commence any claim seeking relief under any applicable laws relating to bankruptcy, insolvency, conservatorship or relief of debtors;
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sell, transfer, cause to be transferred, exclusively license, lease, pledge or otherwise dispose of any of our or any of our significant subsidiaries’ assets, business or operations in the aggregate with a value of more than C$60,000,000;
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except as required by applicable law, make any changes to our policy with respect to the declaration and payment of any dividends on our common shares;
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subject to certain exceptions, enter into any contract or other agreement, arrangement, or understanding with respect to, or consummate, any transaction or series of related transactions between us or any of our subsidiaries, on the one hand, and any related parties, on the other hand, involving consideration or any other transfer of value required to be disclosed pursuant to Item 404 of Regulation S-K promulgated pursuant to the United States Securities Act of 1933, as amended (the “Securities Act”);
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enter into any contract or other agreement, arrangement or understanding with respect to, or consummate, any transaction or series of related transactions between us or any of our subsidiaries, on the one hand, and certain specified persons; or
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engage in the production, cultivation, advertisement, marketing, promotion, sale or distribution of cannabis or any Related Products and Services (as defined herein) in any jurisdiction, including the U.S., where such activity is prohibited by applicable law as of the date of the Investor Rights Agreement (subject to certain limitations).
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develop, produce, manufacture, cultivate, advertise, market, promote, sell or distribute any cannabis or products derived from or intended to be used in connection with cannabis or services intended to relate to cannabis (such products and services, collectively, “Related Products and Services”) anywhere in the world, other than (A) pursuant to any Commercial Arrangement (as defined under “- Commercial Arrangements” below), or (B) pursuant to a contract approved by an independent committee of our Board (or, at any time when Altria Nominees do not represent a majority of the Board, if fully disclosed to and approved by a majority of the independent members of the Board), entered into by and among or by and between, us and/or one or more of our subsidiaries, on the one hand, and any one or more members of the Altria Group, on the other hand (such other contract, an “Approved Company Agreement”);
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acquire or make any investment in or otherwise beneficially own any interests in, or lend any money or provide any guarantee to, any person that develops, produces, manufactures, cultivates, advertises, markets, promotes, sells and/or distributes cannabis or any Related Products and Services, other than (A) pursuant to any Commercial Arrangement, on the terms and subject to the conditions of the Investor Rights Agreement, Subscription Agreement and the Altria Warrant Certificate, or (B) to us and/or any of our subsidiaries, so long as any such acquisition or investment is pursuant to an Approved Company Agreement;
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use or allow the use of any of their respective trade names, trademarks, trade secrets or other intellectual property rights in connection with any person that develops, produces, manufactures, cultivates, advertises, markets, promotes, sells and/or distributes cannabis or any Related Products and Services, other than (A) pursuant to any Commercial Arrangement, or on the terms and subject to the conditions of the Investor Rights Agreement, Subscription Agreement, the Altria Warrant Certificate and the Commercial Arrangement, or (B) to us and/or any of our subsidiaries, so long as any such use of trade names, trademarks, trade secrets or other intellectual property rights with us and/or any of our subsidiaries is pursuant to an Approved Company Agreement; or
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contract with or arrange for any third-party (other than us or any of our subsidiaries) to do any of the foregoing.
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on the exercise, conversion or exchange of our convertible securities issued prior to the date of the Investor Rights Agreement or on the exercise, conversion or exchange of our convertible securities issued after the date of the Investor Rights Agreement in compliance with the terms of the Investor Rights Agreement, in each case, excluding any of our convertible securities owned by any member of the Altria Group;
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pursuant to any share incentive plan of the Company;
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on the exercise of any right granted by us pro rata to all shareholders to purchase additional common shares and/or other securities of the Company (other than a right issued in a rights offering in which Altria had the right to participate);
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in connection with bona fide bank debt, equipment financing or non-equity interim financing transactions with our lenders, in each case, with an equity component; or
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in connection with bona fide acquisitions (including acquisitions of assets or rights under a license or otherwise), mergers or similar business combination transactions or joint ventures undertaken and completed by us, in each case,
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the Company may be subject to “Warning Letters,” fines, penalties, administrative sanctions, settlements, injunctions, product recalls and/or other enforcement actions arising from civil, administrative or other proceedings initiated that could adversely affect the Company’s business, financial condition, operating results, liquidity, cash flow and operational performance;
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the profits or revenues derived therefrom could be subject to money laundering statutes, including the Money Laundering Control Act, which could result in significant disruption to our U.S. hemp business operations and involve significant costs, expenses or other penalties; and
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the Company’s suppliers, service providers and distributors may elect, at any time, to breach or otherwise cease to participate in supply, service or distribution agreements, or other relationships, on which the Company’s operations rely.
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lack of effectiveness of any formulation or delivery system during clinical trials;
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discovery of serious or unexpected toxicities or side effects experienced by trial participants or other safety issues;
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slower than expected subject recruitment and enrollment rates in clinical trials;
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delays or inability in manufacturing or in obtaining sufficient quantities of materials for use in clinical trials due to regulatory and manufacturing constraints;
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delays in obtaining regulatory authorization to commence a trial, including licenses required for obtaining and using cannabis for research, either before or after a trial is commenced;
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unfavorable results from ongoing pre-clinical studies and clinical trials;
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patients or investigators failing to comply with study protocols;
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patients failing to return for post-treatment follow-up at the expected rate;
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sites participating in an ongoing clinical study withdraw, requiring us to engage new sites; and
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third-party clinical investigators declining to participate in our clinical studies, not performing the clinical studies on the anticipated schedule, or acting in ways inconsistent with the established investigator agreement, clinical study protocol or good clinical practices.
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actual or anticipated fluctuations in our results of operations;
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changes in estimates of our future results of operations by us or securities research analysts;
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changes in the economic performance or market valuations of other companies that investors deem comparable to us;
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additions or departures of our executive officers and other key personnel;
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transfer restrictions on outstanding common shares;
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sales of additional common shares or the perception in the market that such sales might occur;
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significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors;
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news reports relating to trends, concerns or competitive developments, regulatory changes or enforcement actions and other related issues in our industry or target markets;
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investors’ general perception of us and the public’s reaction to our press releases, our other public announcements and our filings with the SEC and Canadian securities regulators;
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reports by industry analysts, investor perceptions, and market rumors or speculation; and
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negative announcements by our customers, competitors or suppliers regarding their own performance.
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Date
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Cronos Group Inc.
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S&P 500
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Peer Group
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February 27, 2018
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$
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100.00
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$
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100.00
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$
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100.00
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March 2018
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$
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88.32
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$
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97.46
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$
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105.23
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June 2018
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$
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85.56
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$
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100.81
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$
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116.32
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September 2018
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$
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145.93
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$
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108.58
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$
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171.53
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December 2018
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$
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136.35
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$
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93.90
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$
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88.95
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March 2019
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$
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241.86
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$
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106.71
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$
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137.15
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June 2019
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$
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209.71
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$
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111.31
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$
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119.16
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September 2019
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$
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118.77
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$
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113.20
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$
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70.01
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December 2019
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$
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100.66
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$
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123.46
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$
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56.05
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Date
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Cronos Group Inc.
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S&P 500
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Peer Group
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||||||
December 16, 2014
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$
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100.00
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$
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100.00
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$
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100.00
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December 2014
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$
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100.00
|
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$
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99.75
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$
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100.05
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December 2015
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$
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39.38
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$
|
101.13
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$
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107.88
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December 2016
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$
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185.00
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$
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113.22
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$
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214.34
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December 2017
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$
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1,217.50
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$
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137.94
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$
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502.14
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December 2018
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$
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1,797.50
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$
|
131.89
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$
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390.70
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December 2019
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$
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1,246.25
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$
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173.42
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$
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246.19
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As of February 27, 2020
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Issued and outstanding shares
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Common shares
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348,817,472
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Potentially issuable shares
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Stock options
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14,149,502
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Warrants
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18,066,662
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Restricted stock units
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732,972
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Altria Warrant
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77,514,993
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Exercisable Top-up Rights
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716,956
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Total potentially issuable shares
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111,181,085
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Total outstanding and potentially issuable shares
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459,998,557
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Exhibit Number
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Exhibit Description
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2.1
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3.1
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3.2
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4.1*
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4.2*
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10.1
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10.2
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10.3
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10.4*
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10.5†
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10.6†*
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10.7†*
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10.8†*
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10.9†*
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10.10†*
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10.11†*
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10.12†*
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10.13†*
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10.14†*
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10.15†*
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10.16†*
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10.17†*
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10.18†*
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10.19†*
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10.20†*
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10.21†*
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10.22†*
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10.23†*
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10.24†*
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|
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14.1*
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|
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21.1*
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|
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24.1*
|
|
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31.1*
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|
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31.2*
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*
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Filed herewith.
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CRONOS GROUP INC.
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By:
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/s/ Michael Gorenstein
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Michael Gorenstein
President and Chief Executive Officer
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Date: March 2, 2020
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Name
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Title
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Date
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/s/ Michael Gorenstein
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Director, Chairman, President and Chief Executive Officer
(Principal Executive Officer and Director)
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March 2, 2020
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Michael Gorenstein
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/s/ Jerry Barbato
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Chief Financial Officer
(Principal Financial Officer)
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March 2, 2020
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Jerry Barbato
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/s/ Puneet Mathur
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Vice President, Controller
(Principal Accounting Officer)
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March 2, 2020
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Puneet Mathur
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/s/ James Rudyk
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Director
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March 2, 2020
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James Rudyk
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/s/ Jody Begley
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Director
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March 2, 2020
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Jody Begley
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/s/ Jason Adler
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Director
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March 2, 2020
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Jason Adler
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/s/ Bronwen Evans
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Director
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March 2, 2020
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Bronwen Evans
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/s/ Murray Garnick
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Director
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March 2, 2020
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Murray Garnick
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/s/ Bruce Gates
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Director
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March 2, 2020
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Bruce Gates
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•
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the acquisition of our Common Shares by a person in the ordinary course of that person’s business as a trader or dealer in securities;
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•
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the acquisition of control of us in connection with the realization of security granted for a loan or other financial assistance and not for any purpose related to the provisions of the Investment Canada Act; and
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•
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the acquisition of control of us by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control in fact of us, through ownership of our Common Shares, remains unchanged.
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A.
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Ginkgo and Cronos are parties to that certain Collaboration and License Agreement dated September l, 2018 (the “Original Agreement”), pursuant to which, among other things, Ginkgo and Cronos agreed to jointly research and collaborate to Develop Collaboration Strains to Scale Up and Manufacture Target Cannabinoids; and
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B.
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the Parties desire to amend certain terms of the Original Agreement such that Ginkgo takes on greater responsibility for: 1) additional Development activities prior to Scale Up of a Cronos Product, including lab-scale fermentation and downstream process development activities related to activities necessary to produce and recover a Crones Product from a fermentation process; 2) enabling Scale Up; and 3) enabling Manufacturing.
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1.
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Definitions. Capitalized terms not defined in this First Amendment have the meanings given such terms in the Original Agreement.
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2.
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Amendments.
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(a)
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Article 1 of the Original Agreement is hereby amended by inserting a new Section 1.138, Section 1.139, and Section 1.140 as follows:
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1.138
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“Audit” has the meaning ascribed to such term in Section 2.15.
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1.139
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“Audit Report” has the meaning ascribed to such term in Section 2.15.
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1.140
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“Fully Burdened Cost” has the meaning ascribed to such term in Exhibit B.
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1.141
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“Transfer Price” has the meaning ascribed to such term in Exhibit B.
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1.142
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“Work Order” means a description of services and additional relevant details mutually agreed upon in a document executed by each of the Parties, pursuant to which Ginkgo will, subject to and pursuant to this Agreement (including Section 2.15), itself or, subject to Section 2.11, through one or more Affiliates or Third Parties, perform a set of services defined therein related to the Development (beyond or modifying the work described in a separate, fully executed TDP), Scale Up or Manufacture, including the facilitation thereof which may involve the establishment of a facility and related operations for such Development, Scale Up or Manufacture, of one or more Cronos Products from a Collaboration Strain. Each Work Order executed by the Parties shall be deemed to be incorporated by reference in this Agreement. The first Work Order is included herein as Exhibit C and shall be deemed approved upon execution of the First Amendment.
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(b)
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Section 2.3(b) of the Original Agreement is hereby amended and restated in its entirety to be read as follows:
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(c)
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Section 2.4(b) of the Original Agreement is hereby amended and restated in its entirety to be read as follows:
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(d)
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The scope of the Scale Up Transfer in Section 2.8(b) of the Original Agreement and the Manufacture Transfer in Section 2.8(c) of the Original Agreement may be modified and qualified by the content of an applicable Work Order.
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(e)
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Article 2 of the Original Agreement is hereby amended by adding a new Section 2.15 as follows:
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(f)
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Article 2 of the Original Agreement is hereby amended by adding a new Section 2.16 as follows:
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(g)
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Section 4.3 of the Original Agreement is hereby amended and restated in its entirety to be read as follows:
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(h)
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Article 5 of the Original Agreement is hereby amended by adding a new Section 5.8 as follows:
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(a)
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Transfer Price. As consideration for any work performed under a Work Order, Cronos hereby agrees to pay to Ginkgo the amount equal to the Transfer Price of all such activities performed under such Work Order, as set forth in an invoice pursuant to Section 5.8(b).
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(b)
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Invoicing & Reconciliation. As more specifically set forth in Exhibit B, following the end of each calendar month during the Term in which there is an active Work Order, Ginkgo will submit to Cronos an invoice setting forth the Transfer Price to be paid based on the services provided during such calendar month in connection with any active Work Order. Invoices will be submitted electronically to Cronos at Accounts Payable (ap.thecronosgroup.com). Payment of all amounts owed by Cronos pursuant to this Section 5.8 will be remitted to Ginkgo on or before forty five (45) days from the date the invoice therefor is received by Cronos. The foregoing will not limit Ginkgo's right
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Participant:
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Grant Date:
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[●]
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Number of Options:
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[●]
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Exercise Price:
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$[●]/Option
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Vesting Schedule:
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[●]
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Expiry:
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[●]
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1.
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his or her participation under the Plan is voluntary;
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2.
|
he or she has received a copy of the Plan which was applicable at the time of this grant of Options and that no amendment to the Plan thereafter shall affect any right granted to him or her in respect of the Options, except if such amendment is approved by the Participant or is required in order to comply with changes to any relevant law or regulation applicable with respect to the Plan, the Options or the Shares; and
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3.
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he or she has read and understands the Plan and accepts to be bound by the provisions thereof and the terms and conditions of this Option Certificate.
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(a)
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all of the Option Shares; or
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Registration Name and Address:
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Mailing Address (if different from Registration):
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|
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1.1
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This First Amendment is supplemental to the Plan and shall form one agreement with the Plan. The Plan and this First Amendment shall be read together and have effect as though all of the provisions thereof and hereof were contained in one instrument.
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1.2
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Capitalized terms used herein and not otherwise defined shall have the meanings given to them in the Plan.
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1.
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SCOPE.
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2.
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ISSUANCE OF OPTIONS.
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3.
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TRUSTEE.
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4.
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THE OPTIONS.
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5.
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FAIR MARKET VALUE.
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6.
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EXERCISE OF OPTIONS.
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8.
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TAX CONSEQUENCES.
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9.
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ISRAELI PARTICIPANT'S UNDERTAKINGS.
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10.
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DEFINITIONS.
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10.7.
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“ITA” means the Israeli Tax Authority.
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10.9.
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“102 Award” means an Option granted to Employees pursuant to Section
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10.14.
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“Non-Employee” means an Israeli Participant other than an Employee.
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Participant:
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Grant Date:
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[•]
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Number of Options:
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[•]
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Tax Status of Option
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[Capital Gain Award; Section 102]
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Exercise Price:
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$[•]/Share
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Vesting Schedule:
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[Vesting in 16 quarterly installments, but subject to the Plan].
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Expiry:
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[5 years], unless terminated or expired earlier in accordance with the Plan.
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1.
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his or her participation under the Plan is voluntary;
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2.
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he or she has received a copy of the Plan which was applicable at the time of this grant of Options and that no amendment to the Plan thereafter shall affect any right granted to him or her in respect of the Options, except if such amendment is approved by the Participant, or does not materially adversely affect the Participant’s rights or is required in order to comply with changes to any relevant law or regulation applicable with respect to the Plan, the Options or the Shares; and
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3.
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after having an adequate opportunity to review the above terms, including the Plan and the Trust Agreement and seek advice of legal counsel, he or she agrees to and accepts all of the terms and conditions of this Israeli Option Certificate, the Plan and the Trust Agreement, and he or she hereby further declares and acknowledges, by his or her signature below, that: (i) he or she fully understands Section 102, the Rules and regulations promulgated thereunder apply to the Option specified in this Israeli Option Certificate, (ii) he or she understands the provisions of Section 102, the tax track chosen and the implications thereof, and (iii) the Option shall also be subject to the terms of the Plan, the option Certificate, the Trust Agreement and applicable law; and
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4.
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he or she has read and understands the Plan and accepts to be bound by the provisions thereof and the terms and conditions of this Israeli Option Certificate.
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5.
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Participant:
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[]
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Grant Date:
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[]
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Number of Options:
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[]
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Tax Status of Option
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[3(i) Options]
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Exercise Price:
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$[]/Share
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Vesting Schedule:
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[Vesting in 16 quarterly installments, but subject to the Plan].
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Expiry:
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[5 years], unless terminated or expired earlier in accordance with the Plan.
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1.
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his or her participation as a beneficiary of Options granted under the Plan is voluntary;
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2.
|
he or she has received a copy of the Plan which was applicable at the time of this grant of Options and that no amendment
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3.
|
after having an adequate opportunity to review the above terms, including the Plan and seek advice of legal counsel, he or she agrees to and accepts all of the terms and conditions of this Israeli Option Certificate and the Plan, and he or she hereby further declares and acknowledges, by his or her signature below, that: (i) he or she fully understands that Section 3(i) apply to the Option specified in this Israeli Option Certificate, (ii) he or she understands the provisions of Section 3(i), the tax track chosen and the implications thereof, and (iii) the Option shall also be subject to the terms of the Plan, the option Certificate and applicable law; and
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4.
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he or she has read and understands the Plan and accepts to be bound by the provisions thereof and the terms and conditions of this Israeli Option Certificate.
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□ Cash Exercise of Options
purchase shares in the capital of the Company that are issuable pursuant to the Options (the “Option Shares”) and hereby (circle one): (a) subscribes for all of the Option Shares; or (b)subscribes for number of Option Shares.
The Exercise Price per Option is __________and the aggregate Exercise Price for all of the Options being exercised is ________(the “Aggregate Exercise Price”).
Payment: With this notice, the undersigned is delivering the Aggregate Exercise Price by certified cheque or
bank draft payable to Cronos Group Inc. or wire transfer to an account specified by the Company.
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□ Certificated Shares (paper certificate)
Lost paper certificates may be subject to a replacement fee, levied by the transfer agent, equal to 3% of the market value of the aggregate shares represented by the certificate at the time the loss is reported, or other fee then in force under the transfer agent’s policies. In accordance with Section 102 the shares shall be registered on the name of the Trustee for the benefit of the undersigned and be deposited and/or controlled by the Trustee all in accordance with Section 102.
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OR
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□Direct Registration Statement (electronically registered). In accordance with Section 102 the shares shall be registered on the name of the Trustee for the benefit of the undersigned and be deposited and/or controlled by the Trustee all in accordance with Section 102.
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Registration Name and Address:
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Mailing Address (if different):
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[Trustee name for the benefit of the undersigned]
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N/A
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With the Trustee Address in Israel.
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1.1
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When used herein, the following terms shall have the following meanings:
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(i)
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the consummation of any transaction or series of transactions including any reorganization, recapitalization, statutory share exchange, consolidation, amalgamation, arrangement, merger or issue of voting shares in the capital of the Company, the result of which is that any Person or group of Persons acting jointly or in concert for purposes of such transaction or series of transactions becomes the beneficial owner, directly or indirectly, of more than 50% of the voting securities in the capital of the entity resulting from such transaction or series of transactions or the entity that acquired all or substantially all of the business or assets of the Company in a transaction or series of transactions described in paragraph (ii) below (in each case, the “Surviving Company”) or the ultimate parent entity that has beneficial ownership of sufficient voting power to elect a majority of the board of directors (or analogous governing body) of the Surviving Company (the “Parent Company”), measured by voting power of the outstanding voting securities eligible to elect members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) rather than number of securities (but shall not include the creation of a holding company or other transaction that does not involve any substantial change in the proportion of direct or indirect beneficial ownership of the voting securities of the Company prior to the consummation of the transaction or series of transactions), provided that the exercise by Altria Summit LLC (or any of its Affiliates) of the Purchased Warrant (as defined in the Subscription Agreement by and among the Company, Altria Summit LLC and Altria Group, Inc. dated as of December 7, 2018) shall not constitute a Change of Control pursuant to this clause (i);
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(ii)
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the direct or indirect sale, transfer or other disposition, in one or a series of transactions, of all or substantially all of the business or assets of the Company, taken as a whole, to any Person or group of Persons acting jointly or in concert for purposes of such transaction or series of transactions (other than to any Affiliates of the Company); or
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(iii)
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Incumbent Directors during any consecutive 12-month period ceasing to constitute a majority of the Board of the Company (for the purposes of this paragraph, an “Incumbent Director” shall mean any member of the Board who is a member of the Board immediately prior to the occurrence of a contested election of directors of the Company).
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2.1
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Purpose: The principal purposes of the Plan are to:
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(a)
|
allow Participants to participate in the growth and development of the Company by providing them with the opportunity to acquire Shares;
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(b)
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promote the long-term alignment of interests between Participants and present and/or future holders of Shares; and
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(c)
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assist the Company to attract, retain and incent eligible persons with the knowledge, experience and expertise required to act as employees, officers and directors of, and consultants providing services to, the Company.
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2.2
|
Administration:
|
(a)
|
The Plan shall be administered by the Board.
|
(b)
|
The Board shall have the sole and complete authority (i) to approve the selection of Participants, (ii) to grant Options in such form as it shall determine, (iii) to grant Share Appreciation Rights in accordance with Section 3.1(b), (iv) to
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(c)
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To the extent permitted by law, the Board may from time to time delegate to the Committee all or any of the powers conferred on the Board under the Plan. In such event, the Committee shall exercise the delegated powers in the manner and on the terms authorized by the Board. Where the Board has so delegated any powers to the Committee, any reference under the Plan, in connection with such power, to the “Board” shall be read as to the “Committee”. The Board shall also be permitted to hire administrators, custodians or similar service providers to assist it in the administration of the Plan. Any decision made or action taken by the Committee arising out of or in connection with the administration or interpretation of the Plan in this context shall be final and conclusive.
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2.3
|
Selection for Participation: Participants shall be selected from the directors, officers, key employees and service providers (including consultants) of the Company and its Affiliates. In approving this selection, the Board shall consider such factors as it deems relevant, subject to the provisions of the Plan.
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2.4
|
Shares Subject to the Plan:
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(a)
|
Subject to adjustment as provided for in Sections 4.1 and 4.2 below, the maximum number of Shares that may be issued or issuable under the Plan shall be the lesser of (i) 34,881,747 and (ii) a number of Shares equal to 10% of the number of issued and outstanding Shares on a non-diluted basis at any time; provided that, in any event, the number of Shares issued or issuable under all Security Based Compensation Arrangements shall not exceed 10% on a non-diluted basis.
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(b)
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No fractional shares shall be issued upon the exercise of any Option and, if as a result of any adjustment, a Participant would become entitled to a fractional share, such Participant shall have the right to purchase only the next lowest whole number of Shares and no payment or other adjustment will be made for the fractional interest.
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(c)
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Notwithstanding any other provision of this Plan or any agreement relating to Options, no Options shall be granted under this Plan if together with any other Security Based Compensation Arrangements established or maintained by the Company or its Affiliates such grant of Options could result, at any time, in the aggregate number of Shares (i) issued to Insiders within any one-year period or (ii) issuable to Insiders at any time exceeding 10% of the issued and outstanding Shares (on a non-diluted basis); provided, however, that the number of Options or Share Appreciation Rights that may be granted to any Participant in any one calendar year shall not exceed 10% of the issued and outstanding Shares (on a non-diluted basis).
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(d)
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No Option shall be granted to any Non-Executive Director if such grant would, at the time of the grant, result in: (i) the aggregate number of Shares reserved for issuance to all Non-Executive Directors under the Plan and all other Security Based Compensation Arrangements exceeding 1% of the total number of Shares then issued and outstanding; (ii) the aggregate Value of Options granted to the Non-Executive Director during the Company’s fiscal year exceeding $100,000; or (iii) the aggregate Value of Options and, in the case of Security Based Compensation Arrangements that do not provide for the granting of options (“Full Value Awards”), the grant date value of Shares granted to the Non-Executive Director during the Company’s fiscal year exceeding $150,000, provided that any Full Value Award elected to be received by a Non-Executive Director, in the Non-Executive Director’s discretion, in place of the same value of foregone cash compensation from the Company shall not be counted toward the foregoing $150,000 limit and provided further that this Section 2.4(d) shall not apply to one-time initial grants to a new director who would be a Non-Executive Director upon joining the Board as compensation for serving on the Board.
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(e)
|
If any Options terminate, expire or are cancelled as contemplated by the Plan without the Participant having received any benefit therefrom, the number of Shares underlying such Options so terminated, expired or cancelled shall again become available under the Plan.
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(f)
|
Shares shall be deemed to have been used in settlement of awards whether or not they are actually delivered; provided, that if Shares issued upon exercise, vesting, or settlement of an award, including any Option, are surrendered or tendered to the Company in payment of the Exercise Price or any taxes required to be withheld in respect of an award in accordance with the terms and conditions of the Plan and any applicable Option Certificate, such surrendered or tendered Shares shall not become available again under the Plan and the aggregate number of Shares underlying any exercised Option or Share Appreciation Right shall in no event become available again under the Plan.
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2.5
|
Option Certificates: All grants of Options under the Plan shall be evidenced by an Option Certificate. Such Option Certificates shall be subject to the applicable provisions of the Plan and shall clearly set out the Exercise Term in addition to such other
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2.6
|
Non-transferability: Subject to Section 3.7, Options granted under the Plan may only be exercised by a Participant personally and no assignment or transfer of Options whether voluntary, involuntary, by operation of law or otherwise, shall vest any interest or right in such Options whatsoever in any assignee or transferee, but immediately upon any assignment or transfer, or any attempt to make the same, such Options shall terminate and be of no further effect. Notwithstanding this Section 2.6, a Participant may assign or transfer one or more Options, in compliance with such terms as the Board may determine, to a personal holding corporation wholly-owned by such Participant or to a registered retirement savings plan established for the sole benefit of such Participant, provided that upon any such permitted assignment or transfer, the transferred Options shall be deemed for purposes of the Plan to continue to be held by the Participant, and shall continue to be subject to the terms and conditions of the Plan as if the Participant remained the sole holder thereof.
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3.1
|
Award of Options and Share Appreciation Rights:
|
(a)
|
The Board may, from time to time, subject to the provisions of the Plan and such other terms and conditions as the Board may prescribe, award Options to any Participant and the Company shall enter into an Option Certificate with each Participant substantially in the form attached hereto as Schedule A or in any other form approved by the Board.
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(b)
|
At the sole discretion of the Board, the Board may grant to a Participant in respect of an Option awarded to the Participant, either at the time of grant of the Option or at a subsequent time, a number of rights (each a “Share Appreciation Right”) equal to the number of Shares then underlying the Option, which number shall be fixed on the date of grant of the Share Appreciation Rights, subject to adjustment pursuant to Article 4 on the same basis as the number of Shares underlying the Option. The grant of a Share Appreciation Right shall be subject to the terms of the Plan and the terms and conditions of the Option in respect of which it is granted (except as the context or the Plan otherwise require) and such other terms and conditions as the Board may prescribe (including any acceleration of vesting pursuant to Article 4) and shall be evidenced in the Option Certificate in respect of the related Option or an amendment to such Option Certificate. Each Share Appreciation Right shall entitle the Participant to surrender to the Company, unexercised, the right to subscribe for Shares pursuant to the related Option and to receive from the Company that number of Shares, rounded down to the next whole Share, with a Fair Market Value on the date of exercise of each such Share Appreciation Right that is equal to the difference between such Fair Market Value and the Exercise Price under the related Option, multiplied by the number of Shares that cease to be available under the Option as a result of the exercise of the Share Appreciation Right, subject to satisfaction of applicable withholding taxes and other source deductions. Upon the exercise of a Share Appreciation Right in respect of a Share covered by an Option such Option shall be cancelled and shall be of no further force or effect in respect of such Share. Share Appreciation Rights shall be exercisable by a Participant or his or her legal representative only to the extent that the related Option is exercisable. Unexercised Share Appreciation Rights shall terminate when the related Option is exercised or the Option terminates in accordance with this Plan and the applicable Option Certificate.
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3.2
|
Exercise Term:
|
(a)
|
Subject to any vesting conditions imposed by the Board in its discretion at any time and from time to time, Options granted to Participants may only be exercisable by the Participant if such conditions of vesting have been satisfied.
|
(b)
|
The maximum term during which Options may be exercised shall be determined by the Board, but in no event shall the Exercise Term of an Option exceed seven (7) years from the date of its grant; provided that if at any time the end of the Exercise Term of an Option should be determined to occur either during a Blackout Period or within ten Business Days following a Blackout Period, the end of the term shall be deemed to be extended to the date that is the tenth Business Day following the date of expiry of such Blackout Period. Notwithstanding the foregoing sentence or otherwise, in no event, including as a result of any Blackout Period, shall the date of expiry of any Option granted to a US Taxpayer be extended beyond the original expiration of the Exercise Term if such Option has an Exercise Price that is less than the Fair Market Value of the Shares on the date of the proposed extension.
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(c)
|
Subject to Sections 3.2(a) and 3.2(b), the provisions of the Plan and the Option Certificate, Options may be exercised by means of giving an Exercise Notice addressed to the Company or its designee (including third-party administrators) in accordance with the terms of the Option and the Option Certificate accompanied by payment of the Exercise Price and any applicable required withholding taxes in accordance with Section 3.4.
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(d)
|
All Options granted under the Plan to US Taxpayers shall be non-qualified stock options for the purposes of the Code unless the Option Certificate expressly states otherwise.
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3.3
|
Exercise Price: The Exercise Price of any Option shall be the Fair Market Value on the date such Option is granted. For the avoidance of doubt and notwithstanding anything to the contrary, any Option issued to a US Taxpayer shall have an Exercise Price that is no less than Fair Market Value on the date of grant which in all events shall be determined in accordance with Section 409A of the Code.
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3.4
|
Payment of Exercise Price: Subject to the terms of the Plan, no Shares shall be issued or transferred with respect to the exercise of an Option until the Participant has paid the Exercise Price to the Company in full, and an amount equal to any U.S. federal, state, non-U.S. federal, provincial, and local income and employment taxes, social contributions, and any other tax-related items required to be withheld. Unless otherwise stated in the Option Certificate, the Exercise Price and all applicable required withholding taxes shall be payable (i) by certified cheque or bank draft payable to the Company or wire transfer to an account specified by the Company or (ii) by such other method as elected by the Participant and that the Committee may permit, in its sole discretion, including without limitation: (A) in the form of other property having a fair market value on the date of exercise equal to the Exercise Price and all applicable required withholding taxes; (B) if there is a public market for the Shares at such time, by means of a broker-assisted “cashless exercise” pursuant to which the Company or its designee (including third-party administrators) is delivered a copy of irrevocable instructions to a stockbroker to sell the Shares otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the Exercise Price and all applicable required withholding taxes against delivery of the Shares to settle the applicable trade; or (C) by means of a “net exercise” procedure effected by withholding the minimum number of Shares otherwise deliverable in respect of an Option that are needed to pay for the Exercise Price and all applicable required withholding taxes; provided that Participants who are subject to income tax under the Income Tax Act (Canada) with respect to their Options shall not be permitted to surrender Shares acquired under any Options in payment of the Exercise Price or withholding taxes or to exercise their Options by means of a “net exercise” procedure as described in clause (C) above. In all events of cashless or net exercise, any fractional Shares shall be settled in cash.
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3.5
|
Share Certificates: As soon as practicable after receipt of any Exercise Notice and full payment with respect to the exercise of an Option, the Company shall issue to the eligible Participant either a certificate or certificates representing the acquired Shares or uncertificated Shares.
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3.6
|
Termination of Employment for Cause: Where a Participant’s employment with the Company or an Affiliate of the Company is terminated for cause (as such term is defined in a written employment agreement between the Participant and the Company or an Affiliate thereof (as applicable), or where no such agreement exists or such agreement does not contain a definition, as defined in law), each Option granted to that Participant that has vested as at the Termination Date and each Option granted to that Participant that has not vested as at the Termination Date shall, subject to the discretion of the Board, immediately terminate and cease to be exercisable.
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3.7
|
Death: In the event of the death of a Participant, each Option granted to that Participant that has not then vested shall, subject to the discretion of the Board, immediately terminate and, notwithstanding Section 2.6, all Options which have vested may be exercised by the Participant’s estate at any time within six months from the date of death, or for such longer period of time as the Board may determine but in no event later than the expiration of the original Exercise Term of such Option.
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3.8
|
Termination of Employment for Other than Cause or Death: Where a Participant’s employment with the Company or an Affiliate of the Company terminates for any reason other than as contemplated in Sections 3.6 or 3.7 above, or in the event a Director is not re-elected to the Board of Directors, each Option granted to that Participant that has not then vested shall, subject to the discretion of the Board, immediately terminate as at the Termination Date. In such cases, all Options granted to such Participants that have vested as at the Termination Date may be exercised by the Participant at any time within six months of the Termination Date, or for such longer period of time as the Board may determine but in no event later than the expiration of the original Exercise Term of such Option.
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3.9
|
No Compensation for Forfeiture: For greater certainty, Participants shall have no right to receive Shares or any payment as compensation, damages or otherwise with respect to any Options or Share Appreciation Rights that expire or terminate hereunder without becoming exercisable or without being exercised.
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4.1
|
General: The existence of any Options shall not affect in any way the right or power of the Company or its shareholders (i) to make or authorize any adjustment, recapitalization, reorganization or any other change in the Company’s capital structure or its business, or any amalgamation, combination, merger or consolidation involving the Company including to undertake a Change of Control, (ii) to create or issue any bonds, debentures, shares of any class or other securities of the Company or the rights and conditions attaching thereto or (iii) to effect the dissolution or liquidation of the Company or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of similar character or otherwise.
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4.2
|
Reorganization of Company’s Capital: Notwithstanding any other provision of the Plan, in the event of any change in the Shares by reason of any stock dividend, split, recapitalization, reclassification, amalgamation, arrangement, merger, consolidation, combination or exchange of Shares or distribution of rights to holders of Shares or any other form of corporate reorganization whatsoever, an equitable adjustment shall be made to the number of Shares which may be acquired on the exercise of any outstanding Options and/or an adjustment to the Exercise Price shall be made; provided that, notwithstanding the foregoing or otherwise, any adjustment to an Option issued to a US Taxpayer shall be made in accordance with the requirements of Section 409A of the Code. Notwithstanding the foregoing, a decision of the Board in respect of any and all matters falling within the scope of this Section 4.2 shall be final and without recourse on the part of any Participant and his or her heirs or legal representatives.
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4.3
|
Change of Control: Subject to Section 4.4, if the Company proposes to undertake a Change of Control, the Board may, in its discretion, accelerate the vesting of all outstanding Options to provide that, notwithstanding the vesting provisions of such Options or any Option Certificate, each such outstanding Option shall be fully vested and either (as determined by the Board in its discretion) (i) may be conditionally exercisable for Shares or (ii) may be conditionally surrendered for a cash payment equal to the difference between the per Share consideration receivable by shareholders of the Company in connection with the transaction resulting in the Change of Control and the Exercise Price multiplied by the number of Shares that may be acquired under the particular Option, upon (or where permitted by the Board, prior to) the completion of the Change of Control, provided that the Board shall not, in any case, authorize the exercise or surrender of Options pursuant to this Section 4.3 beyond the expiration of the original Exercise Term of the Options. Where the Board elects to exercise its discretion to accelerate vesting of Options, the Company shall give written notice of any proposed Change of Control to each Participant at least 14 days prior to the expected date of the Change of Control. Upon the giving of any such notice, the Participants shall be entitled to exercise or surrender all or any portion of their outstanding Options, as applicable, at any time within the period specified in the notice and conditional upon completion of the Change of Control (subject to such extension of such specified period as the Board may determine in its sole discretion, not to exceed the expiration of the Option). Unless the Board determines otherwise (in its discretion), upon the expiration of the notice period referred to above, all rights of the Participants to exercise or surrender any outstanding Options, whether vested or unvested, shall terminate and all such Options shall immediately expire and cease to have any further force or effect, subject to the completion of the relevant Change of Control.
|
4.4
|
Termination of Employment following Change of Control: If, in connection with a Change of Control, the Board does not accelerate the vesting of Options in accordance with Section 4.3, and the Options continue, or are assumed, or rights equivalent to the Options are substituted for the Options by the Surviving Company or Parent Company (or an Affiliate thereof), and subject to the terms of the Option Certificate in respect of the Options and any written employment agreement between the Participant and the Company, or the Surviving Company or Parent Company, or an Affiliate of the Company, or a successor thereto, in the event a Participant’s employment is terminated by the Company, or the Surviving Company or Parent Company, or an Affiliate of the Company, or a successor thereto, without cause in the twenty-four (24) month period following the Change of Control, all unvested Options or substituted rights outstanding on the Participant’s Termination Date shall immediately vest, and the Participant may exercise such vested Options or substituted rights until the earlier of the expiration of the original Exercise Term of such Option (or the Option for which the right was substituted) and twelve (12) months following the Participant’s Termination Date, following which any unexercised Options or substituted rights shall terminate and cease to be exercisable.
|
4.5
|
Issue by Company of Additional Shares: Except as expressly provided in this Article 4, the issue by the Company of shares of any class, or securities convertible into shares of any class, for money, services or property either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of Shares which may be acquired on the exercise of any outstanding Options or the Exercise Price under such Options.
|
5.1
|
Legal Requirement: The Company shall not be obligated to grant any Options if the issuance or exercise thereof would constitute a violation by the Participant or the Company of any provisions of any applicable laws or regulatory requirements or the applicable rules of any Exchange on which the Shares are listed and posted for trading.
|
5.2
|
Rights of Participant: The Plan shall not give any employee the right to be employed by, or to continue to be employed by, the Company or any of its Affiliates. No Participant shall have any rights as a shareholder of the Company in respect of Shares issuable on the exercise of rights to acquire Shares under any Option or Shares issuable pursuant to Section 3.1(b) hereof until the allotment and issuance to the Participant of such Shares.
|
5.3
|
Interpretation: Whenever the Board is to exercise its discretion in the administration of terms and conditions of this Plan the term “discretion” shall mean the “sole and absolute discretion” of the Board.
|
5.4
|
Amendment or Discontinuance:
|
(a)
|
The Board may amend, suspend or terminate the Plan, in whole or in part, at any time, and, if suspended or terminated, the Plan shall govern the rights and obligations of the Company and the holders of Options, as applicable, with respect to all then-outstanding Options, provided that no such amendment, suspension or termination may:
|
(i)
|
be made without obtaining any necessary regulatory or shareholder approvals if such approval is required by applicable securities laws or the applicable rules of any Exchange on which the Shares are listed and posted for trading; or
|
(ii)
|
materially adversely affect the rights of any Participant who holds outstanding Options at the time of any such amendment, as determined by the Board acting in good faith, without the consent of the Participant.
|
(b)
|
Notwithstanding Section 5.4(a), approval by a majority of votes cast by holders of Shares present and voting in person or by proxy at a meeting of shareholders of the Company shall be required for the following:
|
(i)
|
any increase in the maximum number of Shares issuable by the Company under the Plan (other than pursuant to Section 4.1 or Section 4.2);
|
(ii)
|
any amendment that would reduce the Exercise Price at which Options may be granted below the minimum price currently provided for in Section 3.3 of the Plan;
|
(iii)
|
any amendment that would increase or delete the percentage limits on the aggregate number of Shares issuable or that could be issued to Insiders pursuant to Section 2.4(c);
|
(iv)
|
any amendment that would increase or delete the maximum term during which Options may be exercised pursuant to the Plan to be greater than 7 years, as set forth in Section 3.2(b);
|
(v)
|
subject to Section 3.2(b), any amendment that would extend the Exercise Term of any outstanding Option;
|
(vi)
|
any amendment that would reduce the Exercise Price of an outstanding Option (other than as may result from adjustments contemplated by Article 4 of the Plan) including a cancellation of an Option and re-grant of an Option to the same Participant in conjunction therewith, constituting a reduction of the Exercise Price of the Option;
|
(vii)
|
any exchange for cash or other entitlements, by the Company and a Participant, of an Option for which the Exercise Price is equal to, or less than, the Fair Market Value of a Share on the date of such exchange;
|
(viii)
|
any amendment that would permit transfers or assignments to persons not currently permitted under the Plan;
|
(ix)
|
any amendment to the definition of “Participant” or any amendment that would expand the scope of those persons eligible to participate in the Plan;
|
(x)
|
any amendment to increase the Value of Options granted, or delete the percentage limit relating to Shares issuable, in each case, to Non-Executive Directors in Section 2.4(d);
|
(xi)
|
any amendment to Section 2.4(f) that would allow the Board to reduce the aggregate number of Shares that may be issued under this Plan in respect of the exercise of a Share Appreciation Right by less than one whole Share;
|
(xii)
|
amend the Plan to provide for other types of compensation through equity issuance; and
|
(xiii)
|
amend Section 5.4(a) or this Section 5.4(b), other than as permitted by the requirements of each Exchange on which the Shares are listed and posted for trading.
|
(c)
|
For greater certainty, the Board may, subject to Section 5.4(a), from time to time, by resolution, make any amendments to the Plan or any Option granted under the Plan, other than the items specified in Section 5.4(b), without shareholder approval.
|
5.5
|
Indemnification: Subject to the requirements of the Business Corporations Act (Ontario), every director of the Company shall at all times be indemnified and saved harmless by the Company from and against all costs, charges and expenses whatsoever including any income tax liability arising from any such indemnification, which such director may sustain or incur by reason of any action, suit or proceeding, proceeded or threatened against the director, otherwise than by the Company or any successor thereto, for or in respect of any act done or omitted by the director in respect of the Plan, such costs, charges and expenses to include any amount paid to settle such action, suit or proceeding or in satisfaction of any judgement rendered therein, provided that the act was done or omitted by the director in good faith.
|
5.6
|
Effective Date: The Plan was initially effective as of June 28, 2018, being the date on which it was approved by the shareholders of the Company, and shall remain in effect through the tenth anniversary of such effective date and no further awards shall be
|
5.7
|
Governing Law: The Plan and, unless otherwise explicitly so provided in the Option Certificate, all Option Certificates shall be governed and interpreted in accordance with the laws of the Province of Ontario and any actions, proceedings or claims in any way pertaining to the Plan shall be commenced in the courts of the Province of Ontario.
|
5.8
|
US Taxes: Notwithstanding any provision of the Plan to the contrary, solely with respect to US Taxpayers it is intended that any awards granted or payments made under the Plan either be exempt from or comply with Section 409A of the Code, and all provisions of the Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A of the Code. Each US Taxpayer is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or for the account of such US Taxpayer in connection with the Plan or any other plan maintained by the Company (including any taxes and penalties under Section 409A of the Code), and neither the Company nor any subsidiary of the Company shall have any obligation to indemnify or otherwise hold such US Taxpayer (or any beneficiary) harmless from any or all of such taxes or penalties.
|
5.9
|
Withholding: The Company may withhold from any amount payable to a Participant, either under this Plan or otherwise, such amount as may be necessary to enable the Company to comply with the applicable requirements of any federal, provincial, state or local law, or any administrative policy of any applicable tax authority, relating to the withholding of tax or any other required deductions with respect to Options hereunder (“Withholding Obligations”). The Company shall also have the right in its discretion to satisfy any liability for any Withholding Obligations by selling, or causing a broker to sell, on behalf of any Participant or causing any Participant to sell such number of Shares issued to the Participant sufficient to fund the Withholding Obligations (after deducting any commissions payable to the broker). The Company may require a Participant, as a condition to exercise of an Option, to make such arrangements as the Company may require so that the Company can satisfy applicable Withholding Obligations on terms and conditions determined by the Company in its sole discretion, including, without limitation, requiring the Participant to (i) remit the amount of any such Withholding Obligations to the Company in advance; (ii) reimburse the Company for any such Withholding Obligations; or (iii) cause a broker who sells Shares acquired by the Participant under the Plan on behalf of the Participant to withhold from the proceeds realized from such sale the amount required to satisfy any such Withholding Obligations and to remit such amount directly to the Company.
|
Participant:
|
[•]
|
Grant Date:
|
[•]
|
Number of Options/Share Appreciation Rights:
|
[•]
|
Exercise Price:
|
$[•]/Option
|
Vesting Schedule:
|
[Vesting in 16 quarterly installments, but subject to the Plan].
|
Expiry:
|
[7 years], unless terminated or expired earlier in accordance with the Plan.
|
Other Terms:
|
Notwithstanding anything to the contrary in the Plan, the exercise by Altria Summit LLC (or any of its affiliates) of the Purchased Warrant (as defined in the Investor Rights Agreement between the Company and Altria Group, Inc. (as may be amended or otherwise modified in accordance with its terms)) shall not constitute a “Change of Control” (as defined in the Plan) and any provisions regarding accelerated vesting, including Sections 4.3 and 4.4 of the Plan, shall not apply to the Options and Share Appreciation Rights in connection with the exercise by Altria Summit LLC (or any of its affiliates) of the Purchased Warrant.
|
|
CRONOS GROUP INC.
|
By:
|
|
|
Authorized signatory
|
1.
|
his or her participation under the Plan is voluntary;
|
2.
|
he or she has received a copy of the Plan which was applicable at the time of this grant of Options and Share Appreciation Rights and that no amendment to the Plan thereafter shall affect any right granted to him or her in respect of the Options and the Share
|
3.
|
he or she has read and understands the Plan and accepts to be bound by the provisions thereof and the terms and conditions of this Option Certificate.
|
|
Participant Name:
|
□Cash Exercise of Options
purchase shares in the capital of the Company that are issuable pursuant to the Options (the “Option Shares”) and hereby (circle one):
(a)subscribes for all of the Option Shares; or
(b)subscribes for number of Option Shares.
The Exercise Price per Option is and the aggregate Exercise Price for all of the Options being exercised is (the “Aggregate Exercise Price”).
Payment: With this notice, the undersigned is delivering the Aggregate Exercise Price by certified cheque or bank draft payable to Cronos Group Inc. or wire transfer to an account specified by the Company.
|
||
OR
|
||
□Share Appreciation Rights (or commonly referred to as “cashless exercise”) exercise Share Appreciation Rights (“SARs”) in respect of the Options and hereby (circle one):
(a)subscribes for all of the SARs Shares (defined below); or
(b)subscribes for SARs Shares (defined below); or
hereby surrenders the same number of unexercised Options under the Option Certificate.
The number of shares delivered by the Company pursuant to a SARs exercise (the “SARs Shares”) will be calculated based on the Fair Market Value (as defined in the Plan) on the day the SARs Shares are issued (the “FMV”) as follows (fractional rounded down to the nearest whole number):
|
||
|
(FMV - Exercise Price) * # of SARs exercised
|
|
FMV
|
□Certificated Shares (paper certificate)
Lost paper certificates may be subject to a replacement fee, levied by the transfer agent, equal to 3% of the market value of the aggregate shares represented by the certificate at the time the loss is reported, or other fee then in force under the transfer agent’s policies.
|
OR
|
□Direct Registration Statement (electronically registered)
|
Registration Name and Address:
|
|
Mailing Address (if different):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Email address)
|
|
|
|
Dated:
|
|
|
|
|
|
|
|
(Signature of the Participant)
|
|
|
|
(Name of the Participant - in block letters)
|
|
|
1.
|
SCOPE.
|
2.
|
ISSUANCE OF OPTIONS.
|
3.
|
TRUSTEE.
|
4.
|
THE OPTIONS.
|
5.
|
FAIR MARKET VALUE.
|
6.
|
EXERCISE OF OPTIONS.
|
7.
|
INTEGRATION OF SECTION 102 AND TAX ASSESSING OFFICER’S PERMIT.
|
8.
|
TAX CONSEQUENCES.
|
9.
|
ISRAELI PARTICIPANT’S UNDERTAKINGS.
|
10.
|
DEFINITIONS.
|
Participant:
|
|
Grant Date:
|
[•]
|
Number of Options:
|
[•]
|
Tax Status of Option
|
[Capital Gain Award; Section 102]
|
Exercise Price:
|
$[•]/Share
|
Vesting Schedule:
|
[Vesting in 16 quarterly installments, but subject to the Plan].
|
Expiry:
|
[7 years], unless terminated or expired earlier in accordance with the Plan.
|
Other Terms:
|
Notwithstanding anything to the contrary in the Plan, the exercise by Altria Summit LLC (or any of its affiliates) of the Purchased Warrant (as defined in the Investor Rights Agreement between the Company and Altria Group, Inc. (as may be amended or otherwise modified in accordance with its terms)) shall not constitute a “Change of Control” (as defined in the Plan) and any provisions regarding accelerated vesting, including Sections 4.3 and 4.4 of the Plan, shall not apply to the Options and Share Appreciation Rights in connection with the exercise by Altria Summit LLC (or any of its affiliates) of the Purchased Warrant.
|
|
CRONOS GROUP INC.
|
By:
|
|
|
Authorized signatory
|
1.
|
his or her participation under the Plan is voluntary;
|
2.
|
he or she has received a copy of the Plan which was applicable at the time of this grant of Options and that no amendment to the Plan thereafter shall affect any right granted to him or her in respect of the Options, except if such amendment is approved by the Participant, or does not materially adversely affect the Participant’s rights or is required in order to comply with changes to any relevant law or regulation applicable with respect to the Plan, the Options or the Shares; and
|
3.
|
after having an adequate opportunity to review the above terms, including the Plan and the Trust Agreement and seek advice of legal counsel, he or she agrees to and accepts all of the terms and conditions of this Israeli Option Certificate, the Plan and the Trust Agreement, and he or she hereby further declares and acknowledges, by his or her signature below, that: (i) he or she fully understands Section 102, the Rules and regulations promulgated thereunder apply to the Option specified in this Israeli Option Certificate, (ii) he or she understands the provisions of Section 102, the tax track chosen and the implications thereof, and (iii) the Option shall also be subject to the terms of the Plan, the option Certificate, the Trust Agreement and applicable law; and
|
4.
|
he or she has read and understands the Plan and accepts to be bound by the provisions thereof and the terms and conditions of this Israeli Option Certificate.
|
|
Participant Name:
|
Participant:
|
[•]
|
Grant Date:
|
[•]
|
Number of Options:
|
[•]
|
Tax Status of Option
|
[3(i) Options]
|
Exercise Price:
|
$[•]/Share
|
Vesting Schedule:
|
[Vesting in 16 quarterly installments, but subject to the Plan].
|
Expiry:
|
[7 years], unless terminated or expired earlier in accordance with the Plan.
|
Other Terms:
|
Notwithstanding anything to the contrary in the Plan, the exercise by Altria Summit LLC (or any of its affiliates) of the Purchased Warrant (as defined in the Investor Rights Agreement between the Company and Altria Group, Inc. (as may be amended or otherwise modified in accordance with its terms)) shall not constitute a “Change of Control” (as defined in the Plan) and any provisions regarding accelerated vesting, including Sections 4.3 and 4.4 of the Plan, shall not apply to the Options and Share Appreciation Rights in connection with the exercise by Altria Summit LLC (or any of its affiliates) of the Purchased Warrant.
|
|
CRONOS GROUP INC.
|
By:
|
|
|
Authorized signatory
|
1.
|
his or her participation as a beneficiary of Options granted under the Plan is voluntary;
|
2.
|
he or she has received a copy of the Plan which was applicable at the time of this grant of Options and that no amendment to the Plan thereafter shall affect any right granted in respect of the Options, except if such amendment is approved by the Participant, or does not materially adversely affect the Participant’s rights (as trustee for his or her benefit) or is required in order to comply with changes to any relevant law or regulation applicable with respect to the Plan, the Options or the Shares; and
|
3.
|
after having an adequate opportunity to review the above terms, including the Plan and seek advice of legal counsel, he or she agrees to and accepts all of the terms and conditions of this Israeli Option Certificate and the Plan, and he or she hereby further declares and acknowledges, by his or her signature below, that: (i) he or she fully understands that Section 3(i) apply to the Option specified in this Israeli Option Certificate, (ii) he or she understands the provisions of Section 3(i), the tax track chosen and the implications thereof, and (iii) the Option shall also be subject to the terms of the Plan, the option Certificate and applicable law; and
|
4.
|
he or she has read and understands the Plan and accepts to be bound by the provisions thereof and the terms and conditions of this Israeli Option Certificate.
|
|
Participant Name:
|
□Cash Exercise of Options
purchase shares in the capital of the Company that are issuable pursuant to the Options (the “Option Shares”) and hereby (circle one):
(a)subscribes for all of the Option Shares; or
(b)subscribes for number of Option Shares.
The Exercise Price per Option is and the aggregate Exercise Price for all of the Options being exercised is (the “Aggregate Exercise Price”).
Payment: With this notice, the undersigned is delivering the Aggregate Exercise Price by certified cheque or bank draft payable to Cronos Group Inc. or wire transfer to an account specified by the Company.
|
DELIVERY:
The undersigned requests that the Company registers and delivers (pick one):
|
□Certificated Shares (paper certificate)
Lost paper certificates may be subject to a replacement fee, levied by the transfer agent, equal to 3% of the market value of the aggregate shares represented by the certificate at the time the loss is reported, or other fee then in force under the transfer agent’s policies.
|
OR
|
□Direct Registration Statement (electronically registered). In accordance with Section 102 the shares shall be registered on the name of the Trustee for the benefit of the undersigned and be deposited and/or controlled by the Trustee all in accordance with Section 102.
|
Registration Name and Address:
[Trustee name for the benefit of the undersigned]
|
N/A
|
Mailing Address (if different):
With the Trustee Address in Israel.
|
|
|
|
|
|
|
|
|
|
Dated:
|
|
|
|
(Signature of the Participant)
|
|
(Name of the Participant - in block letters)
|
(a)
|
to promote a greater alignment of long-term interests between Non-Executive Directors and Shareholders; and
|
(b)
|
to provide a compensation system for Non-Executive Directors that, together with the other Director compensation mechanisms of the Company, is reflective of the responsibility, commitment and risk accompanying membership on the Board and the performance of the duties required of the various committees of the Board.
|
(a)
|
“Account” means the account maintained by the Company in its books for each Non-Executive Director to record the DSUs credited to such Non-Executive Director under the Plan;
|
(b)
|
“Affiliate” has the meaning given to that term in National Instrument 45-106 - Prospectus and Registration Exemptions, as such instrument may be amended, supplemented or replaced from time to time, subject to the term “issuer” in such instrument being ascribed the same meaning as the term “person” in such instrument;
|
(c)
|
“Annual Remuneration” means all amounts ordinarily payable in cash to a Non- Executive Director by the Company in respect of the services provided by the Non-Executive Director to the Company in connection with such Non-Executive Director’s service on the Board in a fiscal year, including without limitation (i) the Annual Retainer; (ii) the fee for serving as a member of a Board committee; and (iii) the fee for chairing a Board committee, which amounts shall, unless otherwise determined by the Board or the Committee, be payable Quarterly in arrears. “Annual Remuneration” shall exclude any meeting fees payable in respect of attendance at individual meetings and amounts received by a Non- Executive Director as a reimbursement for expenses incurred in attending meetings;
|
(d)
|
“Annual Retainer” means the annual base retainer fee payable to a Non- Executive Director by the Company for serving as a director;
|
(e)
|
“Applicable Law” means any applicable provision of law, domestic or foreign, including, without limitation, applicable securities legislation, together with all regulations, rules, policy statements, rulings, notices, orders or other instruments promulgated thereunder and Stock Exchange Rules;
|
(f)
|
“Beneficiary” means an individual who, on the date of a Non-Executive Director’s death, is the person who has been designated in accordance with Section 4.7 and the laws applying to the Plan, or where no such individual has been validly designated by the Non-Executive Director, or where the individual does not survive the Non-Executive Director, the Non-Executive Director’s legal representative;
|
(g)
|
“Board” means the Board of Directors of Cronos Group Inc.;
|
(h)
|
“Change of Control” means:
|
(i)
|
the consummation of any transaction or series of transactions including any reorganization, recapitalization, statutory share exchange, consolidation, amalgamation, arrangement, merger or issue of voting shares in the capital of the Company, the result of which is that any Person or group of Persons acting jointly or in concert for purposes of such transaction or series of transactions becomes the beneficial owner, directly or indirectly, of more than 50% of the voting securities in the capital of the entity resulting from such transaction or series of transactions or the entity that acquired all or substantially all of the business or assets of the Company in a transaction or series of transactions described in paragraph (ii) below (in each case, the “Surviving Company”) or the ultimate parent entity that has beneficial ownership of sufficient voting power to elect a majority of the board of directors (or analogous governing body) of the Surviving Company (the “Parent Company”), measured by voting power of the outstanding voting securities eligible to elect members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) rather than number of securities (but shall not include the creation of a holding company or other transaction that does not involve any substantial change in the proportion of direct or indirect beneficial ownership of the voting securities of the Company prior to the consummation of the transaction or series of transactions), provided that the exercise by Altria Summit LLC (or any of its Affiliates) of the Purchased Warrant (as defined in the Subscription Agreement by and
|
(ii)
|
the direct or indirect sale, transfer or other disposition, in one or a series of transactions, of all or substantially all of the business or assets of the Company, taken as a whole, to any Person or group of Persons acting jointly or in concert for purposes of such transaction or series of transactions (other than to any Affiliates of the Company); or
|
(iii)
|
Incumbent Directors during any consecutive 12-month period ceasing to constitute a majority of the Board of the Company (for the purposes of this paragraph, an “Incumbent Director” shall mean any member of the Board who is a member of the Board immediately prior to the occurrence of a contested election of directors of the Company).
|
(a)
|
“Code” means the United States Internal Revenue Code of 1986, as amended, and any applicable United States Treasury Regulations and other binding regulatory guidance thereunder;
|
(b)
|
“Committee” means the Compensation Committee of the Board, or such other committee of the Board as is designated by the Board, by way of resolution, adoption of a policy or committee mandate, or otherwise, to administer the Plan from time to time;
|
(c)
|
“Company” means Cronos Group Inc. and includes any successor corporation thereto;
|
(d)
|
“Conversion Date” means the date used to determine the Fair Market Value of a Deferred Share Unit for purposes of determining the number of Deferred Share Units to be credited to a Non-Executive Director under Section 2.3, which date shall, subject to variation as determined by the Board, generally be the last day of each Quarter and, in any event, shall not be earlier than the first business day of the year in respect of which the Deferred Share Units are being provided;
|
(e)
|
“Cronos Entity” has the meaning ascribed thereto in Section 4.12;
|
(f)
|
“Deferred Share Unit” or “DSU” means a unit credited by the Company to a Non-Executive Director by way of a bookkeeping entry in the books of the Company, as determined by the Board, pursuant to the Plan, the value of which at any particular date shall be the Fair Market Value at that date;
|
(g)
|
“Director” means a member of the Board;
|
(h)
|
“DSU Award Agreement” means a written agreement setting out the terms of any DSU award under Section 2.3.2 in the form of Schedule B hereto, or such other form as may be prescribed by the Board from time to time;
|
(i)
|
“Election Notice” means the written election under Section 2.2 to receive Deferred Share Units, in the form of Schedule A hereto, or such other form as may be prescribed by the Board from time to time;
|
(j)
|
“Entitlement Date” has the meaning ascribed thereto in Section 3.1;
|
(k)
|
“Fair Market Value” means with respect to a particular date, (i) if the Shares are traded on the Toronto Stock Exchange, the closing price as reported by the Toronto Stock Exchange on the immediately preceding Trading Day and (ii) if the Shares are not traded on the Toronto Stock Exchange, the value as determined by the Board in good faith taking into account applicable legal and tax requirements.
|
(l)
|
“Non-Executive Director” means a Director who is not an employee of the Company or any Related Company, and includes any non-executive Chair of the Board
|
(m)
|
“Person” means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency, authority or entity however designated or constituted;
|
(n)
|
“Plan” means this Deferred Share Unit Plan, as it may be amended from time to time;
|
(o)
|
“Quarter” means a fiscal quarter of the Company, which, until changed by the Company, shall be the three-month period ending March 31, June 30, September 30 and December 31 in any year and “Quarterly” means each “Quarter”;
|
(p)
|
“Related Company” means a corporation related to the Company for the purposes of the Income Tax Act (Canada);
|
(q)
|
“Share” means the common shares of Cronos Group Inc.;
|
(r)
|
“Stock Exchange” means the Toronto Stock Exchange and the Nasdaq Global Market, or if the Shares are not
|
(s)
|
“Stock Exchange Rules” means the applicable rules of any Stock Exchange upon which shares of the Company are listed;
|
(t)
|
“Termination Date” means, with respect to a Non-Executive Director, the earliest date on which he/she has ceased to hold the office of Director for any reason whatsoever, including the death of the Non-Executive Director and is not an employee of the Company or a Related Company; provided that, solely with respect to any Non-Executive Director who is a U.S. Taxpayer, such cessation of services is also a “separation from service” within the meaning of Section 409A of the Code such that it is reasonably anticipated that no further services will be performed;
|
(u)
|
“Trading Day” means any date on which the Toronto Stock Exchange is open for the trading of Shares and on which Shares are actually traded; and
|
(v)
|
“U.S. Taxpayer” means a Non-Executive Director who is a citizen or permanent resident of the United States for purposes of the Code or a Non-Executive Director for whom the compensation under this Plan would otherwise be subject to income tax under the Code.
|
(a)
|
A person who is a Non-Executive Director on the effective date of the Plan may elect to receive a percentage (as specified in the Election Notice) of his or her Annual Remuneration earned after such effective date of the Plan in Deferred Share Units, cash or combination of Deferred Share Units and cash by completing and delivering to the Secretary of the Company an initial Election Notice by no later than 30 days after the effective date of the Plan, which shall apply to the Non-Executive Director’s Annual Remuneration earned in Quarters that commence after the date the election is made.
|
(b)
|
A person who becomes a Non-Executive Director during a year may elect to receive a percentage (as specified in the Election Notice) of his or her Annual Remuneration earned in Quarters that commence after the date the election is made in Deferred Share Units, cash or combination of Deferred Share Units and cash by completing and delivering to the Secretary of the Company an Election Notice. An Election Notice shall not be effective to require that Annual Remuneration earned in the year in which the individual becomes a Non- Executive Director be provided in the form of Deferred Share Units if (i) such Election Notice is not completed and delivered to the Secretary of the Company within 30 days after the individual becomes a Non-Executive Director; or (ii) the individual previously participated in, or was eligible to participate in, this Plan or any other plan that is required to be aggregated with this Plan for purposes of Section 409A of the Code.
|
(c)
|
A Non-Executive Director who has previously made an election under this Section 2.2, or who has never made any election under the Plan but who was previously eligible to do so, may elect to receive a percentage (as specified in the Election Notice) of his or her Annual Remuneration for subsequent calendar years in Deferred Share Units, cash or combination of Deferred Share Units and cash by completing and delivering to the Secretary of the Company a new Election Notice on or before the day immediately preceding the first day of the calendar year for which such new Election Notice is to take effect.
|
(d)
|
The Board may prescribe election forms for use by Non-Executive Directors who are residents of a jurisdiction other than Canada that differ from the election forms it prescribes for use by Canadian resident Non-Executive Directors where the Board determines it is necessary or desirable to do so to obtain comparable treatment for the Plan, the Non-Executive Directors or the Company under the laws or regulatory policies of such other jurisdiction as is provided under the laws and regulatory policies of Canada and its Provinces, provided that no election form prescribed for use by a non-resident of Canada shall contain terms that would cause the Plan to cease to meet the requirements of paragraph 6801(d) of the regulations under the Income Tax Act (Canada) and any successor to such provisions.
|
(e)
|
For greater certainty, if the Company establishes a policy for members of the Board with respect to the acquisition and / or holding of Shares and / or Deferred Share Units, each Non-Executive Director shall ensure that any election he or she makes under this Section 2.2 complies with such policy.
|
(a)
|
Any unvested Deferred Share Units will immediately and automatically vest upon the date a Change of Control becomes effective.
|
(b)
|
In the event a Non-Executive Director’s Termination Date is within twelve (12) months following a Change of Control, the Board may, in its discretion, determine that, as of the Non-Executive Director’s Entitlement Date(s), the Non- Executive Director or his or her Beneficiary, as the case may, shall receive a payment in cash of an aggregate amount equal to the product of (i) the price attributed to the Shares in connection with the transaction resulting in the Change of Control (or the fair market value of a Share at the time of such transaction as determined by the Board in good faith if no Share price was in fact established for purposes of such transaction) multiplied by (ii) the number of Deferred Share Units being settled as of the applicable Entitlement Date. Where an amount is in respect of a Non-Executive Director’s Deferred Share Units is paid pursuant to this Section 3.6, no amount shall be payable pursuant to Section 3.2.
|
I.
|
Election:
|
|
Amount
|
Percentage in DSUs
|
Percentage in Cash*
|
Annual Remuneration
|
$
|
%
|
%
|
II.
|
Acknowledgement
|
1.
|
I have received and reviewed a copy of the terms of the Plan and agree to be bound by them.
|
2.
|
I will not be able to cause the Company or any Related Company to redeem DSUs granted under the Plan until the date specified in the Plan following my Termination Date.
|
3.
|
When DSUs credited to my Account pursuant to this election are redeemed in accordance with the terms of the Plan after my Termination Date, income tax and other withholdings as required will arise at that time. Upon redemption of the DSUs, the Company will make all appropriate withholdings as required by law at that time.
|
4.
|
The value of the DSUs is based on the value of the common shares of the Company and therefore is not guaranteed.
|
5.
|
This election is irrevocable until changed with respect to future Annual Remuneration in accordance with Section 2.2 (c) of the Plan.
|
6.
|
The foregoing is only a brief outline of certain key provisions of the Plan. In the event of any discrepancy between the terms of the Plan and the terms of this Election Notice, the terms of the Plan shall prevail. All capitalized expressions used herein shall have the same meaning as in the Plan unless otherwise defined above.
|
I.
|
Agreement and Grant
|
II.
|
Vesting
|
III.
|
Acknowledgement
|
1.
|
He/she has received and reviewed a copy of the terms of the Plan and this Agreement and agrees to be bound by them.
|
2.
|
Only DSUs that vest in accordance with Part II above may be redeemed by the Non-Executive Director or his/her Beneficiary.
|
3.
|
He/she will not be able to cause the Company or any Related Company thereof to redeem DSUs referred to in Part I above or any additional DSUs credited to the Non-Executive Director’s Account pursuant to Section 2.4 of the Plan in respect of such DSUs until the date specified in Section 3.1 of the Plan following his/her Termination Date.
|
4.
|
When DSUs referred to in Part I above and additional DSUs credited to the Non- Executive Director’s Account pursuant to this election are redeemed in accordance with the terms of the Plan after he/she is no longer either a director or employee of the Company or any Related Company thereof, income tax and other withholdings as required will arise at that time. Upon redemption of the DSUs, the Company will make all appropriate withholdings as required by law at that time.
|
5.
|
The value of the DSUs is based on the value of the common shares of the Company and therefore is not guaranteed.
|
6.
|
In the event of any discrepancy between the terms of the Plan and the terms of this Agreement, the terms of the Plan shall prevail. All capitalized expressions used herein shall have the same meaning as in the Plan unless otherwise specified herein.
|
1.1
|
Employment - The Executive shall continue to be employed with PharmaCan as Chief Executive Officer of the Corporation (the “CEO”), subject to the terms and conditions of this Agreement. The Executive shall report to the Board of Directors of the Corporation (the “Board”).
|
1.2
|
Responsibilities and Duties - As CEO, the Executive shall perform the duties as are consistent with the Executive’s role as CEO and such other duties reasonably assigned by the Board of PharmaCan from time to time.
|
1.3
|
Loyalty - The Executive agrees to act in the best interests of PharmaCan at all times and to faithfully discharge his duties and responsibilities hereunder. The Executive shall devote an appropriate amount of his time to the business and affairs of the Corporation having regard to the Executive’s position and duties and the nature of the Corporation’s operations. The Executive agrees that he will not undertake any additional business or occupation or become a director, officer, employee or agent of any other entity without obtaining prior written approval from the Corporation. The Executive hereby represents and warrants that he has disclosed to the Corporation any outside employment or consulting work or any other offices or directorships held by him on the Effective Date as outlined in Schedule “A” attached to this Agreement. The Corporation hereby approves the Executive’s continued involvement in these roles. The Executive further agrees to comply with any employment policies or practices of PharmaCan that may be implemented and disclosed in writing to the Executive from time to time as such policies or practices may be subsequently amended by PharmaCan.
|
1.4
|
Restrictive Covenant - The Executive hereby agrees to execute the Confidentiality/Non Competition/Non-Solicitation Agreement attached to this Agreement as Schedule “B”.
|
1.5
|
Location of Work - The Parties agree that the Executive shall perform his duties and responsibilities as CEO from both the Company’s office in Toronto, Ontario, and from the Executive’s home office in New York, New York. The Corporation agrees that the Executive shall not be required to be present in Canada for more than 165 days in any calendar year for purposes of his employment.
|
2.1
|
Base Salary - For his services, the Executive shall receive an annual gross base salary at the rate of USD $200,000.00 (the “Base Salary”) per calendar year (to be calculated on a pro rata basis for partial years), less applicable statutory deductions and withholdings, which shall be payable by PharmaCan in accordance with its normal payroll practices. The Executive shall be eligible for future reviews or adjustments in his Base Salary as shall be determined by the Board in its sole and absolute discretion; provided, however, that in no event shall the Base Salary be decreased. Notwithstanding the Effective Date of this Agreement, the Executive shall be paid his Base Salary retroactive to the date he commenced providing his services to the Corporation on May 16, 2016.
|
2.2
|
Bonus - The Executive may also be eligible to receive an annual bonus (to be calculated on a pro rata basis for partial years) as a lump sum cash payment and/or annual options to purchase additional common shares, within 90 days following the end of each calendar year (the “Bonus”). The granting of this Bonus shall be conditional upon the Executive’s performance and such factors as increase in share price, growth in net asset value, growth of the Corporation, balance sheet position, and such further an other considerations as the Compensation Committee may establish from time to time in its sole discretion. Subject to Section 3.4 of this Agreement, in order to be eligible for the Bonus, the Executive must be “Actively Employed” on the bonus payout date. For the purposes of this Agreement, “Actively Employed” means that the Executive must be employed by the Corporation and must not have resigned or given notice of intent to resign, and, in the event that the Executive’s employment is terminated for any reason, “Actively Employed” shall include only the period up to the Executive’s last day of work plus the period of statutory notice (if any) required by the Employment Standards Act, 2000 or any successor or amended legislation (the “ESA”). The Bonus is subject to required deductions and withholdings and is not considered to be vested or earned until granted.
|
2.3
|
Group Benefits - The Executive shall be eligible to participate in any group health or other insurance benefit plans that may be provided by PharmaCan to its employees (the “Group Benefits”) in accordance with the terms and conditions of the applicable plans. The Parties acknowledge and agree that PharmaCan may amend or discontinue any group benefit plan for its employees, or change benefit carriers, from time to time in its sole and absolute discretion. ln the event the Executive is ineligible to participate in the Group Benefits, PharmaCan will reimburse the Executive for the premium cost of private plan coverage, to be obtained by him, to a maximum of $20,000 CAD per year.
|
2.4
|
Vacation - The Executive shall be eligible to earn four (4) weeks of paid vacation in each calendar year. Vacation shall be taken by the Executive in the year in which it is earned and may not be carried over into the following calendar year, subject only to any requirements under the ESA. The Executive shall take his vacation at a time or times reasonable for each of the Parties in the circumstances, taking into account the business requirements of the Corporation and the need for timely performance of the Executive’s duties and responsibilities pursuant to this Agreement.
|
2.5
|
Directors and Officers Liability Insurance - The Executive shall receive coverage under the Corporation’s liability insurance policy for directors and officers in accordance with the terms of such policy, as it may be amended by PharmaCan from time to time.
|
2.6
|
Expenses - The Executive shall also be reimbursed for reasonable expenses actually and properly incurred by him in connection with the performance of the Executive’s duties and responsibilities hereunder, including business entertainment, travel and other similar items, and any pre-approved professional fees and professional courses. PharmaCan shall reimburse the Executive for any business expenses that are actually and properly incurred in accordance with the Corporation’s normal expense policies and/or practices, as they are amended from time to time, and upon the Executive providing appropriate receipts or other vouchers to the Corporation in support of such expense claims.
|
2.7
|
Professional Services - The Executive shall be reimbursed for reasonable expenses actually incurred by him in respect of his employment with PharmaCan including, without limitation, legal fees incurred by him for the purpose of obtaining immigration advice, tax advice and accounting advice in respect of his employment with PharmaCan, and annual tax return services in Canada and the United States. The Executive shall provide appropriate receipts or other vouchers to the Corporation in support of such professional services expense claims before receiving reimbursement.
|
3.1
|
Termination by Executive - The Executive may voluntarily resign his employment at any time by giving PharmaCan three (3) months of prior written notice of his resignation. The Parties agree that this notice period is provided for the sole benefit of PharmaCan and, as such, the Corporation may waive the Executive’s notice in whole or in part by providing the Executive with Base Salary in lieu of notice and continued Group Benefits coverage or reimbursement for benefits in accordance with section 2.4 above up to the effective date of his resignation. Upon his resignation, the Executive shall have no entitlement to further compensation, except for (i) unpaid Base Salary (or payment of Base Salary in lieu of notice, as applicable) and any unused vacation earned to the effective date of his resignation, and (ii) any other minimum rights, benefits or entitlements owing to the Executive under the ESA. All of the Executive’s Group Benefits coverage or reimbursement for benefits in accordance with section 2.4 above shall immediately cease upon the effective date of the Executive’s resignation and the Executive shall have no entitlement whatsoever to any Bonus or other payments, subject only to any further or other minimum requirements under the ESA. This section is subject to the terms of a resignation of a Change of Control set out below in section 3.5 of this Agreement.
|
3.2
|
Termination by PharmaCan for Just Cause - PharmaCan may terminate the Executive’s employment for Just Cause at any time, immediately and without notice or compensation in lieu of notice, except for unpaid Base Salary and vacation earned and any other minimum rights, benefits or entitlements owing to the Executive under the ESA. All of the Executive’s Group Benefits coverage or reimbursement for benefits in accordance with section 2.4 above shall cease immediately upon the effective date of the Executive’s termination of employment for Just Cause and the Executive shall have no entitlement whatsoever to any Bonus or other payments, subject only to any further or other minimum requirements under the ESA.
|
3.2.1
|
the continued gross neglect or wilful failure by the Executive to substantially perform his duties as President (except by reason of any bona fide disability), which failure is not cured within fifteen (15) days of receipt of written notice from PharmaCan thereof;
|
3.2.2
|
the Executive’s gross misconduct involving the property, business or affairs of PharmaCan;
|
3.2.4
|
any material conflict of interest involving the Executive, unless fully disclosed to PharmaCan in advance and provided that any such conflict has been expressly waived and/or consented to in writing by PharmaCan;
|
3.2.5
|
the Executive’s material breach of this Agreement, which breach, if curable, is not cured within fifteen (15) days of written notice from PharmaCan;
|
3.2.6
|
any material and repeated failure by the Executive to comply with the policies, rules and regulations of PharmaCan (which failure is not cured within fifteen (15) days of receipt of written notice from PharmaCan thereof); or
|
3.2.7
|
any other conduct that is determined by a court or administrative tribunal of competent jurisdiction to constitute just cause at law for the termination of the Executive’s employment.
|
3.3
|
Cessation of Employment upon Death or Disability - The Parties agree that the Executive’s employment shall cease and this Agreement shall terminate automatically upon the Executive’s death or, at the discretion of PharmaCan, upon the Executive’s Disability. In the event that the Executive’s employment ceases pursuant to this Section 3.3, the Executive (or the Executive’s estate, as applicable) shall be eligible to receive (i) any unpaid Base Salary and vacation earned to the date that his employment ceases, and (ii) any other minimum rights, benefits or entitlements owing to the Executive under the ESA. In the event that the Executive’s employment ceases because of his death, all of the Executive’s Group Benefits coverage or reimbursement for benefits in accordance with section 2.4 above shall immediately cease upon his death, subject only to any further or minimum requirements under the ESA.
|
3.4
|
Termination by PharmaCan Without Just Cause - If the Executive’s employment is terminated by PharmaCan without Just Cause, subject to section 3.5, the following provisions shall apply:
|
3.4.1
|
The Executive shall be eligible to receive (i) all unpaid Base Salary earned to the effective date of the Executive’s termination without Just Cause, (ii) a pro-rated Bonus for the period worked in the year of the termination (calculated as described below); (iii) any unused vacation earned for the period up to the effective date of the Executive’s termination without Just Cause or until
|
3.4.2
|
PharmaCan shall provide the Executive with a severance payment equal to twelve (12) months of his Base Salary and Bonus (calculated as described below), to the extent permitted by the ESA (which shall include and be in full satisfaction of his termination pay and severance pay under the ESA), which shall be payable within 30 days of the date of termination and shall be subject to applicable statutory deductions and withholdings. The Bonus payable pursuant to this section will be determined by the Corporation acting reasonably, after consulting with the Executive, taking into consideration the performance of the Corporation and the Executive in the year of the termination.
|
3.4.3
|
The Executive shall also remain eligible to participate in the Group Benefits plans provided to him by the Corporation or receive reimbursement for benefits in accordance with section 2.4 above for twelve (12) months from the date of termination, subject to plan terms and the agreement of the insurer. The Executive acknowledges that upon such date, all of his Group Benefits coverage shall immediately cease.
|
3.5
|
Termination Following a Change of Control - In the event that a Change of Control occurs, and (a) the termination of the Executive’s employment without Just Cause by PharmaCan occurs within 4 months prior to the Change of Control or 12 months following the Change of Control or (b) the Executive provides written notice of his resignation for a resignation effective within 4 to 12 months following a Change of Control, then the Executive shall, in lieu of any other entitlement under this Article 3, receive (i) the entitlements set out in Section 3.4.1 above; (ii) the amount set out in Section 3.4.2 above but multiplied by a factor of two (2); and (iii) the entitlements set out in Section 3.4.3 above. Additionally, if the Executive’s employment is terminated pursuant to this Section 3.5, the Parties agree that any options to purchase common shares of the Corporation that have been previously granted by the Corporation to the Executive that have not yet vested shall immediately vest and continue to be exercisable by the Executive in accordance with the terms and conditions of the Stock Options Plan. The Parties agree that the Executive shall have the benefit of this accelerated vesting provision and continued rights of exercise despite the termination of his employment, notwithstanding any term or condition to the contrary that is contained in the Stock Options Plan (or in the applicable grant of options) or in this Agreement.
|
(a)
|
the closing of a transaction or a series of related transactions undertaken in any form whatsoever involving a share acquisition, merger, consolidation, combination, share issuance, share exchange, reorganization of the Corporation or other extraordinary transaction with respect to the Corporation pursuant to which a third party, or third parties who are acting as a group, acquire more than 50% of the total voting power represented by the outstanding securities to which are attached the right to vote at all meetings of shareholders (the “Voting Securities”) of the Corporation, regardless of whether calculated on a fully diluted or an outstanding basis (provided that the same measure is used in both the numerator and denominator) or, if the outstanding Voting Securities are converted or exchanged in the transaction or series of related transactions into securities of a third party, more than 50% of the total voting power represented by the outstanding Voting Securities of the third party; or
|
(b)
|
the closing of a direct or indirect acquisition by a third party, or third parties acting as a group, of substantially all of the Corporation’s assets; or
|
(c)
|
more than 50% of the members of the board of directors of the Corporation in office (i) were not directors of the Corporation on the same day in the immediately preceding calendar year and (ii) were not proposed by the directors of the Corporation existing prior to their appointment or election; or
|
(d)
|
the board of directors of the Corporation by resolution deem that a Change of Control has occurred.
|
3.6.2
|
For purposes of this definition, a third party does not include any affiliate of the Corporation. The date of occurrence of (i) or (ii) is the effective date of the Change of Control.
|
3.7
|
Full and Final Satisfaction - The Executive agrees that any pay in lieu of notice paid to him pursuant to this Agreement shall, to the extent permitted by the ESA, count towards any severance pay owing to him under the ESA. The Parties agree that the termination entitlements set out in this Article 3 will be provided in full and final satisfaction of the Corporation’s obligations
|
3.8
|
Termination of Outstanding Options on Without Just Cause Termination - In the event that the Executive’s employment is terminated by PharmaCan without Just Cause or he is given notice of termination without Just Cause by PharmaCan (regardless of the reason for termination), the Executive’s options will be treated in accordance with the Stock Option Plan, subject to any terms that are superseded by this Agreement, which terms prevail over any stock option plan, grant agreement or otherwise.
|
3.9
|
Termination of Outstanding Options on Termination by Executive or Just Cause Termination - In the event that the Executive gives notice of resignation or the Executive’s employment is terminated by PharmaCan for Just Cause, the Executive’s outstanding unvested options shall lapse and have no value, with no liability to the Executive in respect of such options, and vested options will terminate within ninety (90) days of the date the Executive gives notice of resignation or the Executive’s employment is terminated by PharmaCan for Just Cause unless exercised, regardless of any notice period required by law. In the event of any conflict between this Agreement and any Stock Option Plan or otherwise, this Agreement prevails and supersedes.
|
3.10
|
Return of Property and Confidential Information - Upon the termination of the Executive’s employment for any reason, or otherwise upon the request of PharmaCan, the Executive agrees to immediately surrender to PharmaCan any of the Corporation’s property in his control or possession, including, without limitation, any access passes, equipment, corporate credit cards, cellular telephone/BlackBerry, laptop computer, keys, computer or voice mail passwords and any Confidential Information together with any copies or reproductions thereof. Further, the Executive undertakes that he shall also immediately transfer to PharmaCan or, upon request of the Corporation, to permanently delete and/or destroy (unless prohibited by law), any files on any computer system, retrieval system, database, electronic storage device, USB key, smartphone or Cloud account that is not in the possession or control of PharmaCan that may contain any Confidential Information, and that is not otherwise being returned to PharmaCan pursuant to this paragraph.
|
3.11
|
Resignation of Offices and Directorships - Upon the termination or cessation of the Executive’s employment, the Executive shall immediately resign from any other offices or directorships that he may then hold in PharmaCan or any of its subsidiaries or affiliates. The Executive confirms that he shall provide any such resignation(s) in writing, and in a form to be provided to him by the Corporation.
|
3.12
|
Co-operation and Assistance with Regulatory and Litigation Matters - The Executive agrees that following the termination of the Executive’s employment for any reason, the Executive will cooperate with and assist PharmaCan at its expense in connection with any investigation, regulatory matter, legal dispute, lawsuit or arbitration in which PharmaCan is a subject, target or party and as to which the Executive may have pertinent information. The Executive agrees to be reasonably available for preparation for hearings, proceedings or litigation and for attendance at any pre-trial discoveries and trials. PharmaCan agrees to make every reasonable effort to provide the Executive with reasonable notice in the event that the Executive’s participation is required. PharmaCan agrees to reimburse reasonable out-of-pocket costs, including lost wages on a per-diem basis, incurred by the Executive as the direct result of the Executive’s participation, provided that such out-of-pocket costs are supported by appropriate documentation and have prior authorization of PharmaCan. The Executive further agrees to perform all acts and execute any and all documents that may be necessary to carry out the provisions of this Section 3.11.
|
4.1
|
Assignment of Work Product - The Executive further undertakes that he will promptly make full written disclosure to the Corporation, will hold in trust for the sole right and benefit of the Corporation, and to the extent the Corporation is not the owner thereof, hereby assigns to the Corporation, or its designee, all of the Executive’s right, title, and interest in and to any and all inventions, works of authorship (including without limitation, any artistic or literary works), developments, improvements, designs, discoveries, trademarks or trade secrets, or other business or technical information, whether or not patentable or registrable under patent, copyright or similar laws, that the Executive had previously solely or jointly conceived or developed or created or reduced to practice, or may solely or jointly conceive or develop or create or reduce to practice, or cause to be conceived or developed or created or reduced to practice, in the course of his employment with the Corporation, or with the use of the equipment, supplies, facilities, Confidential Information or intellectual property of the Corporation (collectively referred
|
4.2
|
Maintenance of Records - The Executive agrees to keep and maintain adequate, current, accurate, and authentic written records of all Work Product. The records will be in the form of notes, sketches, drawings, electronic files, reports, or any other format that may be specified by the Corporation. Further, the Executive agrees that the records are and will be available to and remain the sole property of the Corporation at all times.
|
4.3
|
Patent and Copyright Registrations - The Executive further agrees to assist the Corporation, or its designee, at the Corporation’s expense, in every proper way to secure the Corporation’s rights in the Work Product and any rights relating thereto in any and all countries, including the disclosure to the Corporation of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments and all other instruments which the Corporation shall deem proper or necessary in order to apply for, register, obtain, maintain, defend, and enforce such rights and in order to assign and convey to the Corporation, its successors, assigns, and nominees the sole and exclusive rights, title and interest in and to such Work Product and any rights relating thereto, and testifying in a suit or other proceeding relating to such Work Product and any rights relating thereto. The Executive further agrees that his obligation to execute or cause to be executed, when it is in his power to do so, any such instrument or papers shall continue after the termination of this Agreement. If the Corporation is unable because of the Executive’s mental or physical incapacity or for any other reason to secure the Executive’s signature with respect to any Work Product including, without limitation, to apply for or to pursue any application for any patents or copyright registrations covering such Work Product, then the Executive hereby irrevocably designates and appoints the Chairman of the Board of the Corporation (or such other Corporation representative as may be designated by the Corporation from time to time) as his agent and attorney in fact, to act for and in his behalf and stead to execute and file any papers, oaths and to do all other lawfully permitted acts with respect to such Work Product with the same legal force and effect as if executed by the Executive. The Executive confirms that this power of attorney, being coupled with an interest, is irrevocable.
|
5.1
|
The Parties agree that the Executive may act for and render executive and advisory services for and on behalf of third parties other than PharmaCan during the term of this Agreement, provided that:
|
5.1.1
|
the Executive must be available to perform his duties under this Agreement on behalf of PharmaCan for the minimum number of hours each week as may be required, or otherwise agreed as between the Parties;
|
5.1.2
|
the Executive represents and warrants that he shall not perform or provide any services competitive to the Company’s Business, as such term is defined in the Confidentiality/Non-Competition/Non-Solicitation Agreement attached as Schedule “B” to this Agreement; and
|
5.1.3
|
the Executive shall not perform any services for and on behalf of the third party that would create a material conflict of interest in respect of his responsibilities and obligations to PharmaCan, irrespective of whether such responsibilities or obligations arise under this Agreement or at common law or otherwise.
|
6.1.2
|
The Executive has read and he understands the terms of this Agreement and the obligations contained herein;
|
6.1.3
|
The Executive received good and adequate consideration for entering into this Agreement, the receipt and sufficiency of which is hereby acknowledged; and
|
6.1.4
|
The Executive has obtained, or had the opportunity to obtain, independent legal advice prior to executing this Agreement.
|
7.1
|
Notices - Any demand, notice or other communication to be made or given in connection with this Agreement shall be made or given by (i) personal delivery, (ii) mailed by registered mail, postage prepaid with return receipt requested, (iii) delivered by overnight or same-day courier service, or (iv) facsimile or email transmission, to the address set forth below or at such other address as designated by notice by either Party to the other. Notices delivered personally or by overnight or same-day courier service are deemed to be given and received as of the date of actual receipt. Notices mailed by registered mail are deemed to be given and received three business days after mailing. Notices delivered by facsimile or email transmission are deemed to be given and received on the next business day following the date that the facsimile or email transmission is sent.
|
8.1
|
Entire Agreement - This Agreement constitutes the entire agreement between the Parties with respect to the Executive’s employment and supersede all prior agreements, understandings, negotiations and discussions between them, whether oral or written. There are no conditions, warranties, representations or other agreements between the Parties (whether oral or written, express or implied, statutory or otherwise) except as specifically set out in this Agreement.
|
8.2
|
Amendment and Waiver - No amendment to this Agreement shall be valid or binding unless set forth in writing and duly executed by the Parties. No waiver of any breach of any term or provision of this Agreement shall be effective or binding unless made in writing and signed by the Party purporting to give the same and, unless otherwise provided in the written waiver, shall be limited to the specific breach waived.
|
8.3
|
Severability - Each article, section and paragraph of this Agreement is a separate and distinct covenant and is severable from all other separate and distinct covenants. If any covenant or provision herein contained is determined by a body of competent jurisdiction to make such a determination to be void or unenforceable in whole or in part, it shall be deemed severed from this Agreement and such determination will not impair or affect the validity or enforceability of any other covenant or provision contained in this Agreement. The remaining provisions of this Agreement will be valid, enforceable and remain in full force and effect.
|
8.4
|
Employment Standards - The Parties hereby express their intent to comply fully with the ESA. If any provision of this Agreement purports to waive or contract out of a minimum right, benefit or entitlement under the ESA, that provision shall instead be deemed to provide such minimum right, benefit or entitlement.
|
8.5
|
Assignment - This Agreement may be assigned by PharmaCan or to any third party in connection with any sale, merger, amalgamation or other corporate restructuring or reorganization of PharmaCan, provided that there is no material change in any of the terms and conditions of the Executive’s employment and/or this Agreement and this Agreement is binding on the assignee. The Executive may not assign this Agreement or any of the Executive’s rights and obligations hereunder.
|
8.6
|
Governing Law - This Agreement shall be governed by and interpreted in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.
|
8.7
|
Headings - The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof.
|
8.8
|
Independent Legal Advice - The Executive acknowledges that he has obtained independent legal advice with respect to the execution of this Agreement, and that the Executive has read, understands, and agrees with all of the terms and conditions contained in this Agreement.
|
8.9
|
Counterparts - PharmaCan and the Executive agree that this Agreement may be executed in any number of counterparts, each of which when executed and delivered is an original (including any counterpart that is executed by a Party and is transmitted to the other Party by facsimile or email transmission), and all of which when taken together constitute one and the same instrument.
|
(a)
|
“Affiliate” shall have the meaning attributed thereto in the Business Corporations Act (Ontario) in force as at the date hereof;
|
(b)
|
“Associate” shall have the meaning attributed thereto in the Business Corporations Act (Ontario) in force as at the date hereof;
|
(c)
|
“Business Day” means a day other than a Saturday, Sunday or any day other than Saturday or Sunday on which the principal commercial banks located at Toronto, Ontario are not open for business during normal banking hours;
|
(d)
|
“Confidential Information” means any and all confidential or proprietary information concerning the Company’s Business and the property, business or affairs of the Company, including without limitation, all information relating to existing, contemplated and potential services, business plans or forecasts, marketing techniques, customers or potential customers, suppliers, packages, markets, contracts, products, strategies, financial information, costs, pricing practices, technology, trade secrets, intellectual property, systems, inventions, developments, applications, methodologies and know-how of the Company, whether reduced to written form, contained on disks or other media, or ascertained by inspection or verbal communication or demonstration, or otherwise made available, but excluding information that:
|
(i)
|
is as of the date of this Agreement or subsequently becomes generally available to the public, other than through a breach of this Agreement; or
|
(ii)
|
becomes available to me on a non-confidential basis from a source other than the Company or any of the Predecessors or any of their respective subsidiaries or affiliates, provided that such information is not subject to an existing confidentiality agreement between any third party and the Company or any of the Predecessors or any of their respective subsidiaries or affiliates; or
|
(iii)
|
is required to be disclosed by operation of law or by the decision or order of a court or administrative tribunal of competent jurisdiction.
|
(e)
|
“Person” means any individual, firm, corporation, unlimited liability company, partnership, limited liability partnership, joint venture, trust, unincorporated association, unincorporated syndicate, any governmental authority and any other legal or business entity;
|
1.2
|
Whenever used in this Agreement, words importing the singular number only shall include the plural, and vice versa, and words importing the masculine gender shall include the feminine gender.
|
Title
|
Date
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Identifying Number or Brief Description
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1.
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Position
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1.1
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The Executive will be employed in the position of Chief Financial Officer, commencing on April 15, 2019 or such other date as agreed between the Executive and the Company.
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2.
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Location
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2.1
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The Executive shall be based primarily in the Company’s location in Toronto, Ontario, with business travel as reasonably required to perform the Executive’s duties hereunder. The Company may at its discretion relocate the Executive’s principal office or place of work at any time within 100 kilometres of its current location, and the Executive acknowledges and agrees that this shall not constitute a constructive termination of the Executive’s employment or Good Reason (as defined below) and the Executive agrees not to make any claim or demand to the contrary.
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3.
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Work Authorizations
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3.1
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It is a condition of this Agreement and the Executive’s employment that the Executive shall be able to work in lawfully in Canada. However, it is understood and agreed that the Executive’s position may require that the Executive work abroad, as needed by the Company. The Executive’s employment with the Company is therefore also conditional upon the securing of all necessary visas, work permits and other authorizations that may be required to enter and/or to work in any of the countries in which the Executive may be assigned to work or visit during the term of employment. The Company shall provide reasonable assistance in respect of immigration matters. Despite such assistance, the Company cannot guarantee when or whether the Executive’s application for a work permit, visa, permanent residence status or other immigration status or documents will be approved. Should the necessary authorizations that permit the Executive to legally work in Canada or in any other jurisdiction in which the Executive will be required to work not be obtained, this Agreement shall be null and void and of no force or effect. At any time, should necessary authorizations that permit the Executive to legally work in Canada or any other jurisdiction in which the Executive will be required to work or visit expire without the possibility of renewal, the Executive’s employment shall come to an end and shall be treated by the Company as a termination without Just Cause (as defined below).
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4.
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Employment Duties
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4.1
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The Executive shall perform such duties and exercise such powers as are normally associated with or incidental and ancillary to the Executive’s position and as may be assigned to the Executive from time to time. In fulfilling his/her duties to the Company, the Executive shall be instructed by and shall regularly report to the CEO. The Executive’s duties, hours of work, location of employment and reporting relationships may be adjusted from time to time by the Company to meet changing business and operational needs. Without limiting the foregoing, the Executive shall:
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(a)
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devote his/her full working time and attention during normal business hours and such other times as may be reasonably required to the business and affairs of the Company and shall not, without the prior written consent of the CEO, undertake any other business or occupation or public office;
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(b)
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perform those duties that may be assigned to the Executive diligently, honestly, and faithfully to the best of the Executive’s ability and in the best interest of the Company;
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(c)
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abide by all Company policies, as instituted and amended from time to time including but not limited to, the Cronos Group Employee Handbook;
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(d)
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use best efforts to promote the interests and goodwill of the Company and not knowingly do, or permit to be done, anything which may be prejudicial to the Company’s interests, it being understood and agreed that the Executive is a fiduciary of the Company and owes fiduciary obligations to the Company that are not extinguished by this Agreement; and
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(e)
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identify and immediately report to the CEO any gross misrepresentations or violations of the Cronos Group Employee Handbook or applicable law by the Company or its management.
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5.
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Compensation and Benefits
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5.1
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Base Salary. The Company shall pay the Executive an annual base salary of CAD300,000 less applicable deductions and withholdings (“Base Salary”). The Executive’s base salary shall be paid by direct deposit on a bi-weekly basis (as may be amended from time to time), in accordance with the Company’s payroll practices. Any changes to Base Salary shall be at the sole discretion of the Company.
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5.2
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Annual Performance Bonus. In addition to the Executive’s annual Base Salary, the Executive shall be eligible to participate in the Company’s annual cash bonus plan as may be in effect from time to time, and to receive an annual bonus, subject to the terms and conditions of that plan as determined by the Company at its sole discretion. The Executive’s annual target bonus opportunity shall initially be 100% of Base Salary, provided that the actual bonus amount, if any, will be determined pursuant to the terms of the applicable annual bonus plan. Nothing in this Agreement guarantees that the Company will maintain an annual bonus plan, and the Company reserves the right to amend or terminate any annual bonus plan established or adopted at any time, without notice or further obligation (subject only to the minimum requirements of applicable employment standards legislation, if any). The Executive must be actively employed by the Company through the applicable payment date in order to be eligible for any annual bonus for that year, subject only to the minimum requirements of applicable employment standards legislation, unless provided otherwise pursuant to the applicable annual cash bonus plan. For certainty, if the Executive’s employment is terminated by the Company with or without Just Cause, or the Executive resigns or otherwise terminates employment for any reason, regardless of any applicable notice period, pay in lieu of notice, severance payment or similar amount, the Executive shall be entitled to no annual bonus or any part thereof for the year in which the Executive ceases the Executive’s active employment or thereafter, or damages in lieu thereof, subject only to the minimum requirements of applicable employment standards legislation or unless provided otherwise pursuant to the applicable annual cash bonus plan. There shall be no guarantee of a bonus in any given year.
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5.3
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Long-Term Incentive Opportunity. The Executive shall be eligible to receive annual grants of equity-based awards over shares of Cronos Group with an initial target incentive opportunity of CAD400,000 (based on the grant date fair value of such awards), provided that the actual amount, if any, of the grants shall be determined by the board of directors of Cronos Group (the “Board”) at its sole discretion. Any such equity-based grants shall be governed by the terms and conditions of the equity award plan or any other applicable plan of Cronos Group and/or the applicable award agreement. Such plan or plans may be amended from time to time at Cronos Group’s sole discretion. In the event of the cessation of the Executive’s employment for any reason, the Executive’s entitlements in respect of any equity-based awards shall be governed by the terms and conditions of the applicable equity award plan, any other applicable plan and the applicable award agreement. Subject to the express minimum requirements of applicable employment standards legislation, if any, the Executive shall not be eligible for any further grants of equity-based awards following the effective date of termination or damages in lieu thereof, regardless of any applicable notice period, pay in lieu of notice, severance payment or similar amount.
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5.4
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Group Insured Benefits. The Executive shall be eligible to participate in the Company's benefits programs for health and dental, life insurance, disability and other benefits as may be available to the employees of the Company from time to time, subject to the terms and conditions of the applicable plan document. The Company reserves the right to alter, amend or discontinue all
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5.5
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Vacation. The Executive shall be entitled accrue, on a pro-rata basis, four (4) weeks’ paid vacation per year. The Executive shall take vacation time at such times as are approved in advance by the Company. Vacation time entitlement shall be prorated for the period of the Executive’s active employment in the calendar year that the Executive commences and terminates employment, subject to the minimum requirements of applicable employment standards legislation. Vacation may be carried forward until March 31 of the following year after which time it shall be forfeited to the extent it exceeds the minimum vacation entitlement provided for under applicable employment standards legislation. Vacation shall be earned but shall not be taken during the first three (3) months of the Executive’s employment.
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5.6
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Business Expenses. The Executive shall be reimbursed for all reasonable travel and other out-of-pocket expenses properly incurred by the Executive from time to time in connection with performance of the Executive’s duties. The Executive shall furnish to the Company on a monthly basis and in accordance with any of the Company’s policies or procedures for expense reimbursement all invoices or statements in respect of expenses for which the Executive seeks reimbursement.
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5.7
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Deductions and Withholdings. The Company shall make such deductions and withholdings from the Executive’s remuneration and any other payments or benefits provided to the Executive pursuant to this Agreement as may be required by law.
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6.
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Termination of Employment
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6.1
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Termination by the Executive. The Executive may terminate his/her employment with the Company at any time by providing the Company with at least three (3) months of notice in writing. If, upon receipt of the Executive’s resignation (or any later date during such notice period), the Company terminates the Executive’s employment before the date the resignation was to be effective, the Company shall, in full satisfaction of its obligations to the Executive: (a) pay the Executive’s Base Salary and vacation pay accrued until the date the resignation was to be effective up to a maximum of three (3) months; (b) reimburse the outstanding expenses properly incurred by the Executive until the date the Executive’s employment ceases; and (c) provide the Executive with such other compensation and benefits that are expressly required pursuant to applicable employment standards legislation, if any. In such circumstances the Executive shall be ineligible for any pro-rated bonus for the year of termination, and any entitlements in respect of any equity-based awards shall be governed by the terms and conditions of the applicable equity award plan, any other applicable plan and the applicable award agreement.
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6.2
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Termination by the Company for Just Cause or on Death or Disability. The Company may terminate the Executive’s employment at any time for Just Cause without prior notice or in the event of the Executive’s death or Disability (as defined below). On the termination of the Executive’s employment for Just Cause or on the Executive’s death or Disability, this Agreement and the Executive’s employment shall terminate and the Company shall, in full satisfaction of its obligations to the Executive: (a) pay the Executive’s Base Salary and vacation pay accrued until the date the Executive’s employment ceases; (b) reimburse the outstanding expenses properly incurred by the Executive until the date the Executive’s employment ceases; and (c) provide the Executive with such other compensation and benefits that are expressly required pursuant to applicable employment standards legislation, if any. In such circumstances the Executive shall be ineligible for any pro-rated bonus for the year of termination, and any entitlements in respect of equity-based awards shall be governed by the terms and conditions of the applicable equity award plan, any other applicable plan and the applicable award agreement. For the purposes of this Agreement, (A) “Just Cause” means: (i) any act or omission constituting “just cause” for dismissal without notice under applicable law; (ii) the Executive’s repeated failure or refusal to perform the Executive’s principal duties and responsibilities after notice from the CEO or other officer of the Company; (iii) misappropriation of the funds or property of the Company; (iv) use of alcohol or drugs in violation of the Company’s policies on such use or that interferes with the Executive’s obligations under this Agreement, continuing after a single warning (subject to the Company’s obligations under applicable human rights legislation); (v) the indictment, arrest or conviction in a court of law for, or the entering of a plea of guilty to, a summary or indictable offence or any crime involving moral turpitude, fraud, dishonesty or theft (subject to the Company’s obligations under applicable human rights legislation); (vi) the misuse of Company computers or computer network systems for non-Company business; (vii) engaging in any act (including, without restriction, an act of sexual harassment as determined by the Company) which is a violation of any law, regulation or Company policy; or (viii) any wilful or intentional act which injures or could reasonably be expected to injure the reputation, business or business relationships of the Company, and (B) “Disability” means a physical or mental incapacity of the Executive that has prevented the Executive from performing the duties customarily assigned to the Executive for 180 calendar days, whether or not consecutive, out of any twelve (12) consecutive months and that in the opinion of the Company, acting on the basis of advice from a duly qualified medical practitioner, is likely to continue to a similar degree.
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6.3
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Termination by the Company without Just Cause or Resignation for Good Reason on Change of Control. The Company may terminate the Executive’s employment at any time without Just Cause, on providing thirty (30) days’ written notice to the Executive. The Executive may resign the Executive’s employment for Good Reason (as defined below) within twenty-four (24) months of the occurrence of a Change in Control (as defined below), on providing thirty (30) days’ written notice to the Company. If the Company terminates the Executive’s employment without Just Cause or if the Executive resigns his employment for Good Reason within twenty-four (24) months of the occurrence of a Change of Control, and if the Executive signs and delivers and
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(a)
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pay the Executive’s Base Salary and accrued but unpaid vacation pay in accordance with applicable employment standards legislation;
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(b)
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reimburse the Executive’s expenses properly incurred until the date the Executive’s employment ceases;
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(c)
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in lieu of notice, pay the Executive the greater of (i) one (1) month of the Executive’s annual base salary in effect at the time of termination for each completed year of service with the Company, to a maximum of twelve (12) months of base salary, payable by way of lump sum payment within sixty (60) days following such termination, and (ii) the minimum termination pay and severance pay entitlements of the Executive pursuant to applicable employment standards legislation.
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(d)
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continue the Executive’s group insured benefits, if any, until the end of the notice period calculated under (c) above or the date on which the Executive obtains alternate benefit coverage, whichever occurs first, subject to the terms and conditions of the benefit plans, as amended from time to time, and the minimum requirements of applicable employment standards legislation. If the Company is unable for any reason to continue its contributions to the benefit plans as set out in this Agreement, it shall pay the Executive an amount equal to the Company’s required contributions to such benefit plans on behalf of the Executive for such period. The Executive agrees that he/she is required to notify the Company when he/she obtains alternate life, medical and dental benefit coverage; and
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(e)
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determine the Executive’s entitlements in respect of equity-based awards in accordance with the terms and conditions of the applicable equity award plan, any other applicable plan and the applicable award agreement.
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(a)
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the consummation of any transaction or series of transactions including any reorganization, recapitalization, statutory share exchange, consolidation, amalgamation, arrangement, merger or issue of voting shares in the capital of Cronos Group, the result of which is that any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, association, joint-stock company, estate, trust, organization, governmental authority or other entity of any kind or nature (“Person”) or group of Persons acting jointly or in concert for purposes of such transaction or series of transactions becomes the beneficial owner, directly or indirectly, of more than 50% of the voting securities in the capital of the entity resulting from such transaction or series of transactions or the entity that acquired all or substantially all of the business or assets of Cronos Group in a transaction or series of transactions described in paragraph (ii) below (in each case, the “Surviving Company”) or the ultimate parent entity that has beneficial ownership of sufficient voting power to elect a majority of the board of directors (or analogous governing body) of the Surviving Company (the “Parent Company”), measured by voting power of the outstanding voting securities eligible to elect members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) rather than number of securities (but shall not include the creation of a holding company or other transaction that does not involve any substantial change in the proportion of direct or indirect beneficial ownership of the voting securities of Cronos Group prior to the consummation of the transaction or series of transactions), provided that the exercise by Altria Summit LLC (or any of its affiliates) of the Purchased Warrant (as defined in the Subscription Agreement by and among Cronos Group Inc., Altria Summit LLC and Altria Group, Inc. dated as of December 7, 2018) shall not constitute a Change of Control pursuant to this clause (a);
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(b)
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the direct or indirect sale, transfer or other disposition, in one or a series of transactions, of all or substantially all of the business or assets of Cronos Group, taken as a whole, to any person or group of persons acting jointly or in concert for purposes of such transaction or series of transactions (other than to any affiliates of Cronos Group); or
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(c)
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Incumbent Directors during any consecutive twelve (12) month period ceasing to constitute a majority of the Board of Cronos Group (for the purposes of this paragraph, an “Incumbent Director” shall mean any member of the Board who is a member of the Board immediately prior to the occurrence of a contested election of directors of Cronos Group).
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(a)
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the assignment to the Executive of duties materially different than the duties assigned to the Executive hereunder;
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(b)
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a material diminution in the Executive’s title, status, seniority, reporting relationship, responsibilities or authority;
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(c)
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a material reduction in the Executive’s Base Salary; or
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(d)
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the relocation of the Executive’s primary work location, except as permitted by Section 2.1.
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6.4
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Resignation on Termination. The Executive agrees that upon any termination of employment with the Company for any reason the Executive shall immediately tender resignation from any position the Executive may hold as an officer or director of the Company and take all steps necessary to remove Executive from any and all designated positions under any applicable laws, including without limitation, the Cannabis Act (Canada) and the regulations thereunder, as the same may be amended from time to time, or any subsidiary or affiliate of the Company. In the event that the Executive fails to comply with this obligation within three (3) days of the Executive's termination or resignation, the Executive hereby irrevocably authorizes the Company to appoint a Person in the Executive's name and on the Executive's behalf to sign or execute any documents and/or do all things necessary or requisite to give effect to such resignation.
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6.5
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Compliance with Laws. The Executive understands and agrees that the entitlements under this Section 6 are provided in full satisfaction of the Executive’s entitlements to notice of termination, pay in lieu of notice, and severance pay, if any, under applicable employment standards legislation, this Agreement, any employee benefit plan sponsored or maintained by the Company or any of its affiliates, applicable law (including the common law) or otherwise.
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7.
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Restrictive Covenants
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7.1
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Non-Disclosure. The Executive acknowledges and agrees that:
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(a)
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during the term of the Executive’s employment, the Executive may be given access to or may become acquainted with confidential and proprietary information of the Company and its affiliates and related entities and third parties to which the Company and its affiliates and related entities may have any obligations of non-disclosure or confidentiality, including but not limited to: trade secrets; know-how; Intellectual Property (as defined below); Employee Inventions (as defined below), Invention Records (as defined below), existing and contemplated work product resulting from or related to projects performed or to be performed by or for the Company; programs and program modules; processes; algorithms; design concepts; system designs; production data; test data; research and development information; information regarding the acquisition, protection, enforcement and licensing of proprietary rights; technology; joint ventures; business, accounting, engineering and financial information and data; marketing and development plans and methods of obtaining business; forecasts; future plans and strategies of the Company; pricing, cost, billing and fee arrangements and policies; quoting procedures; special methods and processes; lists and/or identities of customers, suppliers, vendors and contractors; the type, quantity and specifications of products and services purchased, leased, licensed or received by the Company and/or any of its customers, suppliers, or vendors; internal personnel and financial information; business and/or personal information about any senior staff members of the Company or any Person with which the Company enters a strategic alliance or any other partnering arrangements; vendor and supplier information; the manner and method of conducting the Company’s business; the identity or nature of relationship of any persons or entities associated with or engaged as consultants, advisers, agents, distributors or sales representatives (the “Confidential Information”) the disclosure of any of which to competitors of the Company or to the general public, or the use of same by the Executive or any competitor of the Company, would be highly detrimental to the interests of the Company;
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(b)
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disclosure or use of Confidential Information, other than in connection with the Company’s business or as specifically authorized by the Company, will be highly detrimental to the business and interests of the Company and could result in serious loss of business and damage to it. Accordingly, the Executive specifically agrees to hold all Confidential Information in strictest confidence, and the Executive agrees that the Executive shall not, without the Company’s prior written consent, disclose, divulge or reveal to any person, or use for any purpose other than for the exclusive benefit of the Company, any Confidential Information, in whatever form contained; provided that the foregoing shall not apply to information (except for personal information about identifiable individuals) that: (i) was known to the public prior to its disclosure to the Executive; (ii) becomes generally known to the public subsequent to disclosure to the Executive other than by reason of the Executive’s breach of this Section; (iii) becomes available to the Executive from a source independent of the Company; or (iv) the Executive is specifically required to disclose by applicable law or legal process (provided that the Executive provides the Company with prompt advance written notice of the contemplated disclosure and cooperates with the Company in seeking a protective order or other appropriate protection of such information); and
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(c)
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the Executive shall deliver to the Company, immediately upon termination of employment (for any reason and regardless of whether the Executive or the Company terminate the employment) or at any time the Company so requests: (i) any and all documents, files, notes, memoranda, models, databases, computer files and/or other computer programs reflecting any Confidential Information whatsoever or otherwise relating to the Company’s business; (ii) lists or other documents regarding customers, suppliers, or vendors of the Company or leads or referrals to prospective business deals; and (iii) any computer equipment, home office equipment, automobile or other business equipment belonging to the Company that the Executive may then possess or have under the Executive’s control.
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(d)
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For the avoidance of doubt, nothing in this Agreement limits, restricts or in any other way affects the Executive communicating with any governmental authority or entity concerning matters relevant to the governmental authority or entity. The Executive and the Company agree that no confidentiality or other obligation the Executive owes to the Company prohibits the Executive from reporting possible violations of law or regulation to any governmental authority or entity under any applicable whistleblower protection provision of applicable Canadian, U.S. Federal or U.S. State law or regulation (including Section 21F of the Securities Exchange Act of 1934 or Section 806 of the Sarbanes-Oxley Act of 2002) or requires the Executive to notify the Company of any such report. The Executive is hereby notified that the immunity provisions in Section 1833 of title 18 of the United States Code provide that an individual cannot be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made (i) in confidence to federal, state or local government officials, either directly or indirectly, or to an attorney, and is solely for the purpose of reporting or investigating a suspected violation of the law, (ii) under seal in a complaint or other document filed in a lawsuit or other proceeding, or (iii) to the Executive’s attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law (and the trade secret may be used in the court proceedings for such lawsuit) as long as any document containing the trade secret is filed under seal and the trade secret is not disclosed except pursuant to court order.
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7.2
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Intellectual Property
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(a)
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In this section, the term “Germplasm” means any living or preserved biological tissue or material which may be used for the purpose of plant breeding and/or propagation, including but not limited to plants, cuttings, seeds, clones, cells, tissues, plant materials, and genetic materials (including but not limited to nucleic acids, genes, promoters, reading frames, regulatory sequences, terminators, chromosomes whether artificial or natural, and vectors).
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(b)
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The Executive agrees to promptly disclose to the Company (including to the Executive’s manager) all ideas, suggestions, discoveries, designs, works, developments, improvements, processes, formulas, data, techniques, know-how, confidential and proprietary information, trade secrets, inventions and improvements, and any other intellectual property rights, including with respect to, but not limited to, Germplasm, and whether or not any of the foregoing are registrable as patents, industrial designs, copyrights, trademarks or plant breeder rights (collectively, “Intellectual Property”) which the Executive may author, make, conceive, develop, discover, or reduce to practice, solely, jointly or in common with other employees, during the Executive’s employment with the Company and which relate to the business activities of the Company (“Employee Inventions”). The Executive agrees to maintain as confidential any Employee Inventions, and not to make application for registration of rights in respect of such unless it is at the request and direction of the Company. Intellectual Property coming within the scope of the business of the Company made and/or developed by the Executive while in the employ of the Company, whether or not conceived or made during regular working hours and whether or not the Executive is specifically instructed to make or develop the same, shall be for the benefit of the Company and shall be considered to have been made pursuant to this Agreement and shall be deemed Employee Inventions and shall immediately become exclusive property of the Company. The Executive must keep, maintain, and make available to the Company complete and up-to-date records relating to any such Intellectual Property, and agree that all such records are the sole and absolute property of the Company.
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(c)
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The Executive hereby assigns and transfers, and shall assign and transfer, to the Company, the Executive’s entire right, title and interest in and to any and all Employee Inventions, and the Executive agrees to execute and deliver to the Company any and all instruments necessary or desirable to accomplish the foregoing and, in addition, to do all lawful acts which may be necessary or desirable to assist the Company to obtain and enforce protection of Employee Inventions. The Executive shall, at the request and cost of the Company, and for no additional compensation or consideration from the Company, sign, execute, make and do all such deeds, documents, acts and things as the Company and its duly authorized agents may reasonably require: (i) to apply for, obtain and vest in the name of the Company alone (unless the Company otherwise directs) patents, letters patent, copyrights, plant breeders rights, or other analogous protection in any country throughout the world and when so obtained or vested to renew and restore the same; (ii) to perfect or evidence ownership by the Company or its designees of any and all Employee Inventions, in form suitable for recordation in the United States, Canada, and any other patent office; (iii) to defend any opposition proceedings of any type whatsoever in respect of such applications, and any opposition proceedings or petitions or applications of any type whatsoever for revocation of such patents, letters patent, copyright or other analogous protection, whether such proceedings are brought before a court or any administrative body; and (iv) to defend and/or assert the Company’s rights in any Intellectual Property against any third party. For greater certainty, all materials related to Employee Inventions (including notes, records and correspondence, whether written or electronic) (collectively, “Invention Records”) are the property of the Company, which the Executive shall provide to the Company upon request. Invention Records shall not be removed from Company premises without the prior written consent of the Company. The Executive further waives all moral rights in and to any Employee Inventions and all work the Executive produced during the course of the Executive’s employment.
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(e)
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In the course of performing duties pursuant to this Agreement, the Executive shall only use Germplasm provided by the Company, and the Executive agrees that any such Germplasm provided by the Company remains the sole property of the Company and that such Germplasm shall not be removed from Company premises without the prior written consent of the Company.
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(e)
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The Executive represents and warrants that the Executive does not possess any Intellectual Property or Germplasm of any third party, including but not limited to any prior employer or competitor of the Company, and the Executive shall not acquire and/or use Intellectual Property or Germplasm of any third party in the course of performing duties pursuant to this Agreement and shall not bring any Germplasm of any third party onto Company premises.
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7.3
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Non-Competition. The Executive shall not at any time during the Executive’s employment with the Company and for a period of one (1) year following the termination of this Agreement and the Executive’s employment with the Company for any reason, either individually or in partnership or jointly or in conjunction with any Person as principal, agent, consultant, employee, partner, director, shareholder (other than an investment of less than five (5) per cent of the shares of a company traded on a registered stock exchange or traded in the over the counter market in Canada), or in any other capacity whatsoever:
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(a)
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engage in employment or enter into a contract to do work related to the research into, development, cultivation, production, supply, sales or marketing of cannabis or cannabis derived products; or the development or provision of any services (including, but not limited to, technical and product support, or consultancy or customer services) which relate to cannabis or cannabis derived products (the “Business”); or
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(b)
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have any financial or other interest (including by way of royalty or other compensation arrangements) in or in respect of the business of any Person which carries on the Business; or
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(c)
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advise, lend money to or guarantee the debts or obligations of any Person which carries on the Business;
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7.4
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Non-Solicitation of Customers. The Executive shall not, during the Executive’s employment and for the one (1) year period immediately following the termination of the Executive’s employment for any reason, whether alone or for or in conjunction with any Person or entity, whether as an employee, partner, director, principal, agent, consultant or in any other capacity whatsoever, directly or indirectly solicit or attempt to solicit any Customer or Prospective Customer for the purpose of obtaining the business of any Customer or Prospective Customer of the Company or persuading any such Customer or Prospective Customer to cease to do business with or reduce the amount of business it would otherwise provide to the Company or its affiliates. For the purpose of this Agreement, “Customer” means any Person which is a current customer or has been a customer of the Company or an affiliate of the Company during the term of the Executive’s employment with the Company but in the event of the cessation of the Executive’s employment “Customer” shall include only those current customers of the Company or an affiliate of the Company with whom the Executive had direct contact or access to Confidential Information by virtue of the Executive’s role as an employee of the Company at any time during the twelve (12) month period preceding the date of the cessation of the Executive’s employment; “direct contact” means direct communications with or by the Executive, whether in Person or otherwise, for purposes of servicing, selling, or marketing on behalf of the Company, but only if such communications are more than trivial in nature, and in any case excluding bulk or mass marketing communications directed to multiple customers; and, “Prospective Customer” means any organization, individual or entity which has been actively contacted and solicited for its business by representatives of the Company or affiliates of the Company, but in the event of the cessation of the Executive’s employment within the twelve (12) month period immediately preceding the date of the cessation of the Executive’s employment, with the involvement and knowledge of the Executive.
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7.5
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Non-Solicitation of Employees. The Executive shall not, during the Executive’s employment and for two (2) years following the termination of the Executive’s employment for any reason, whether alone or for or in conjunction with any Person or entity, whether as an employee, partner, director, principal, agent, consultant or in any other capacity whatsoever, directly or indirectly solicit or assist in the solicitation of any employee of the Company or an affiliate of the Company to leave such employment.
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7.6
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Disclosure. During the Executive’s employment with the Company, the Executive shall promptly disclose to the Board full information concerning any interest, direct or indirect, of the Executive (whether as owner, shareholder, partner, lender or other investor, director, officer, employee, consultant or otherwise) or any member of the Executive’s immediate family, in any business which is reasonably known to the Executive to purchase or otherwise obtain services or products from, or to sell or otherwise provide services or products to the Company or to any of their respective suppliers or Customers.
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7.7
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Other Employment. During the Executive’s employment with the Company, the Executive shall not, except as a representative of the Company or with the prior written approval of the Executive’s manager, whether paid or unpaid, be directly or indirectly engaged, concerned or have any financial interest in any capacity in any other business, trade, professional or occupation (or the setting up of any business, trade, profession or occupation).
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7.8
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Return of Materials. All files, forms, brochures, books, materials, written correspondence (including email and instant messages), memoranda, documents, manuals, computer disks, software products and lists (including financial and other
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8.
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General
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8.1
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Reasonableness of Restrictions and Covenants. The Executive hereby confirms and agrees that the covenants and restrictions contained in this Agreement, including, without limitation, those contained in Section 7, are reasonable and valid the Executive further acknowledges and agrees that the Company may suffer irreparable injury in the event of any breach by the Executive of the obligations under any such covenant or restriction. Accordingly, the Executive hereby acknowledges and agrees that damages would be an inadequate remedy at law in connection with any such breach and that the Company shall therefore be entitled, in addition to any other right or remedy which it may have at law, in equity or otherwise, to temporary and permanent injunctive relief enjoining and restraining the Executive from any such breach.
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8.2
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Survival. Section 7 and this Section survive the termination of this Agreement and the Executive’s employment for any reason whatsoever.
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8.3
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Entire Agreement. This is the entire agreement between the Company and the Executive on the subject matters addressed herein. There are no representations, warranties or collateral agreements, whether written or oral, outside of this written Agreement. This Agreement and the terms and conditions of employment contained herein supersede and replace any prior understandings or discussions between the Executive and the Company regarding the Executive’s employment.
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8.4
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Withholding Taxes. The Company may withhold from any amounts or benefits payable under this Agreement income taxes and payroll taxes that are required to be withheld pursuant to any applicable law or regulation.
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8.5
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Section 409A Compliance. To the extent applicable, this Agreement is intended to comply with the requirements of Section 409A of the United States Internal Revenue Code of 1986, as amended (together with the applicable regulations thereunder, “Section 409A”). To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A or to the extent any provision in this Agreement must be modified to comply with Section 409A (including, without limitation, Treasury Regulation 1.409A-3(c)), such provision shall be read, or shall be modified (with the mutual consent of the parties, which consent shall not be unreasonably withheld), as the case may be, in such a manner so that all payments due under this Agreement shall comply with Section 409A. For purposes of Section 409A, each payment made under this Agreement shall be treated as a separate payment. In no event may Executive, directly or indirectly, designate the calendar year of payment. Notwithstanding any provision of this Agreement to the contrary, if necessary to comply with the restriction in Section 409A(a)(2)(B) concerning payments to “specified employees” (as defined in Section 409A) any payment on account of the Executive’s separation from service that would otherwise be due hereunder within six months after such separation shall nonetheless be delayed until the first business day of the seventh month following the Executive’s date of termination and the first such payment shall include the cumulative amount of any payments that would have been paid prior to such date if not for such restriction. Notwithstanding anything contained herein to the contrary, the Executive shall not be considered to have terminated employment with the Company for purposes of this Agreement unless he would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A.
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8.6
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Amendments. This Agreement may only be amended by written agreement executed by the Company and the Executive. However, changes to the Executive’s position, duties, vacation, benefits and compensation, over time in the normal course, do not affect the validity or enforceability of the Agreement.
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8.7
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Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable in the Province of Ontario. The Company and the Executive each irrevocably consent to the exclusive jurisdiction of the courts of Ontario and the courts of Ontario shall have the sole and exclusive jurisdiction to entertain any action arising under this Agreement.
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8.8
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Severability. If any provision in this Agreement is determined to be invalid or unenforceable, such provision shall be severed from this Agreement, and the remaining provisions shall continue in full force and effect. If for any reason any court of competent jurisdiction will find any provisions of this Agreement unreasonable in duration or geographic scope or otherwise, the Executive and the Company agree that the restrictions and prohibitions contained herein will be effective to the fullest extent allowed under applicable law in such jurisdiction.
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8.9
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Assignment. The Company may assign this Agreement to an affiliate or subsidiary, and it enures to the benefit of the Company, its successors or assigns.
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8.10
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Independent Legal Advice. The Executive acknowledges that the Executive has been encouraged to obtain independent legal advice regarding the execution of this Agreement, and that the Executive has either obtained such advice or voluntarily chosen
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8.11
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Waiver. No waiver of any of the provisions of this Agreement shall be effective or binding, unless made in writing and signed by the party purporting to give the same. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions, whether or not similar, nor shall such waiver constitute a continuing waiver, unless expressly stated otherwise.
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8.12
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Conditions. This Agreement and the Executive’s continued employment hereunder is conditional on the Company’s satisfaction (determined in the Company’s sole discretion) that the Executive has met the legal requirements to perform the Executive’s role, including but not limited to satisfactory results of Health Canada or any other applicable security clearance checks and criminal record checks and other reference checks that the Company performs. The Executive acknowledges and agrees that in signing this Agreement, and providing the Company with the necessary documentation to perform the checks required for the Executive’s role and with references, the Executive is providing consent to the Company or its agent, to performs such checks and contact the references the Executive provided to the Company.
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8.13
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Prior Restrictions. By signing below, the Executive represents that the Executive is not bound by the terms of any agreement with any Person which restricts in any way the Executive’s hiring by the Company and the performance of the Executive’s expected job duties; the Executive also represents that, during the Executive’s employment with the Company, the Executive shall not disclose or make use of any confidential information of any other persons or entities in violation of any of their applicable policies or agreements and/or applicable law.
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8.14
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Counterparts. This Agreement may be executed in one or more counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by electronic transmission, including in portable document format (.pdf), shall be deemed as effective as delivery of an original executed counterpart of this Agreement.
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HORTICAN INC.
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By:
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/s/ Michael Gorenstein
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Name: Michael Gorenstein
Title: Chief Executive Officer
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CRONOS GROUP INC.
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By:
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/s/ Michael Gorenstein
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Name: Michael Gorenstein
Title: Chief Executive Officer
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EXECUTIVE
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/s/ Jerry Barbato
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Name: Jerry Barbato
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1.1
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Definitions
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(1)
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“Board” means the board of directors of the Company;
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(2)
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“Date of Termination” means the last date upon which the Employee provides active service to the Company as a result of the termination of his or her employment.
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1.2
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Sections and Headings
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2.1
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Employment
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2.2
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Location
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3.1
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Employment Duties
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(a)
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devote the Employee’s full time and attention and best efforts during normal business hours and such other times as may be reasonably required to the business and affairs of the Company and shall not, without the prior written consent of the Board, undertake any other business or occupation or public office which may detract from the proper and timely performance of his duties hereunder;
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(b)
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perform those duties that may be assigned to the Employee diligently and faithfully to the best of his abilities and in the best interest of the Company;
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(c)
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use his best efforts to promote the interests and goodwill of the Company and not knowingly do, or permit to be done, anything which may be prejudicial to the Company’s interests; and
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(d)
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identify and immediately report to the Board and the Chairman of the Board any gross misrepresentations by the Company or its management.
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3.2
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Variation of Duties
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3.3
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Reporting
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4.1
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Base Salary
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4.2
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Performance Bonus
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4.3
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Stock Options
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4.4
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Group Insured Benefits
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4.5
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Vacation
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4.6
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Signing Bonus
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4.7
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Business Expenses
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4.8
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Deductions and Withholdings
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5.1
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Termination by the Company
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5.2
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Termination by the Employee
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5.3
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Resignation on Termination
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5.4
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Termination Where Employee Disabled
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6.1
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Non-Disclosure
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(a)
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in the course of performing the Employee’s duties and responsibilities hereunder, the Employee will have access to and will be entrusted with detailed confidential information and trade secrets (printed or otherwise) concerning past, present, future and contemplated plans, products, services, operations and procedures of the Company, including without limitation, information relating to preferences, needs and requirements of past, present and prospective clients, customers, suppliers and employees of the Company (collectively, “Trade Secrets”), the disclosure of any of which to competitors of the Company or to the general public, or the use of same by the Employee or any competitor of the Company, would be highly detrimental to the interests of the Company;
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(b)
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in the course of performing his or her duties and responsibilities hereunder, the Employee will be a representative of the Company to its and their customers, clients and suppliers and as such will have significant responsibility for maintaining and enhancing the goodwill of the Company with such customers, clients and suppliers and would not have, except by virtue of employment with the Company, developed a close and direct relationship with the customers, clients and suppliers of the Company; and
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(c)
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the right to maintain the confidentiality of the Trade Secrets, the right to preserve the goodwill of the Company and the right to the benefit of any relationship that has developed between the Employee and the customers, clients and suppliers of the Company because of the Employee’s employment with the Company constitute proprietary rights of the Company which the Company is entitled to protect.
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6.2
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Intellectual Property
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(a)
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The Employee shall disclose to the Company all ideas, suggestions, discoveries, inventions and improvements (collectively, “Intellectual Property”) which the Employee may make solely, jointly or in common with other employees, during the Employee’s employment with the Company and which relate to the business activities of the Company. Intellectual Property corning within the scope of the business of the Company made and/or developed by the Employee while in the employ of the Company, whether or not conceived or made during regular working hours and whether or not the Employee is specifically instructed to make or develop the same, shall be for the benefit of the Company and shall be considered to have been made pursuant to this Agreement and shall immediately become exclusive property of the Company;
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(b)
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The Employee shall assign and transfer to the Company the Employee’s entire right, title and interest in and to any and all Intellectual Property and the Employee agrees to execute and deliver to the Company any and all instruments necessary or desirable to accomplish the foregoing and, in addition, to do all lawful acts which may be necessary or desirable to assist the Company to obtain and enforce protection of Intellectual Property; and
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(c)
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The Employee waives all moral rights over any Intellectual Property and all work produced by the Employee during the course of the Employee’s employment.
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6.3
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Non-Competition
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6.4
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Non-Solicitation of Customers
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6.5
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Non-Solicitation of Employees
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6.6
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Disclosure
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6.7
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Return of Materials
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7.1
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Reasonableness of Restrictions and Covenants
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7.2
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Waiver
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7.3
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Benefit of Agreement
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7.4
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Notices
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(a)
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If to the Employee:
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(b)
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If to the Company:
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7.5
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Severability
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7.6
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Entire Agreement
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7.7
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Governing Law
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7.8
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Acknowledgments
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(a)
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the Employee has had sufficient time to review and consider this Agreement thoroughly;
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(b)
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the Employee has read and understands the terms of this Agreement and the Employee’s obligations hereunder,
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(c)
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the Employee has obtained independent legal advice concerning the interpretation and defect of this Agreement; and
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(d)
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this Agreement is entered into voluntarily and without any duress.
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7.9
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Assignment
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7.10
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Resolution of Disputes by Arbitration
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Witness:
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/s/ Michele Yeo
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/s/ Xiuming Shum
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Xiuming Shum
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Print Name: Michele Yeo
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HORTICAN INC.
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Per: /s/ Michael Gorenstein
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(I have the authority to bind the Company)
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1.
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Position
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1.1
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The Executive will be employed in the position of Executive Vice President Legal and Regulatory Affairs, commencing on May 21, 2019 or such other date as agreed between the Executive and the Company and the Executive’s original start date with the Company will continue to be recognized for all employment-related purposes.
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2.
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Location
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2.1
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The Executive shall be based primarily in the Company’s location in Toronto, Ontario, with business travel as reasonably required to perform the Executive’s duties hereunder. The Company may at its discretion relocate the Executive’s principal office or place of work at any time within 100 kilometres of its current location, and the Executive acknowledges and agrees that this shall not constitute a constructive termination of the Executive’s employment or Good Reason (as defined below) and the Executive agrees not to make any claim or demand to the contrary.
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3.
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Work Authorizations
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3.1
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It is a condition of this Agreement and the Executive’s employment that the Executive shall be able to work in lawfully in Canada. However, it is understood and agreed that the Executive’s position may require that the Executive work abroad, as needed by the Company. The Executive’s employment with the Company is therefore also conditional upon the securing of all necessary visas, work permits and other authorizations that may be required to enter and/or to work in any of the countries in which the Executive may be assigned to work or visit during the term of employment. The Company shall provide reasonable assistance in respect of immigration matters. Despite such assistance, the Company cannot guarantee when or whether the Executive’s application for a work permit, visa, permanent residence status or other immigration status or documents will be approved. Should the necessary authorizations that permit the Executive to legally work in Canada or in any other jurisdiction in which the Executive will be required to work not be obtained, this Agreement shall be null and void and of no force or effect. At any time, should necessary authorizations that permit the Executive to legally work in Canada or any other jurisdiction in which the
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4.
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Employment Duties
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4.1
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The Executive shall perform such duties and exercise such powers as are normally associated with or incidental and ancillary to the Executive’s position and as may be assigned to the Executive from time to time. In fulfilling his/her duties to the Company, the Executive shall be instructed by and shall regularly report to the CEO. The Executive’s duties, hours of work, location of employment and reporting relationships may be adjusted from time to time by the Company to meet changing business and operational needs. Without limiting the foregoing, the Executive shall:
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(a)
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devote his/her full working time and attention during normal business hours and such other times as may be reasonably required to the business and affairs of the Company and shall not, without the prior written consent of the CEO, undertake any other business or occupation or public office;
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(b)
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perform those duties that may be assigned to the Executive diligently, honestly, and faithfully to the best of the Executive’s ability and in the best interest of the Company;
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(c)
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abide by all Company policies, as instituted and amended from time to time including but not limited to, the Cronos Group Employee Handbook;
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(d)
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use best efforts to promote the interests and goodwill of the Company and not knowingly do, or permit to be done, anything which may be prejudicial to the Company’s interests, it being understood and agreed that the Executive is a fiduciary of the Company and owes fiduciary obligations to the Company that are not extinguished by this Agreement; and
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(e)
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identify and immediately report to the CEO any gross misrepresentations or violations of the Cronos Group Employee Handbook or applicable law by the Company or its management.
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5.
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Compensation and Benefits
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5.1
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Base Salary. The Company shall pay the Executive an annual base salary of CAD300,000 less applicable deductions and withholdings (“Base Salary”). The Executive’s base salary shall be paid by direct deposit on a bi-weekly basis (as may be amended from time to time), in accordance with the Company’s payroll practices. Any changes to Base Salary shall be at the sole discretion of the Company.
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5.2
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Annual Performance Bonus. In addition to the Executive’s annual Base Salary, the Executive shall be eligible to participate in the Company’s annual cash bonus plan as may be in effect from time to time, and to receive an annual bonus, subject to the terms and conditions of that plan as determined by the Company at its sole discretion. The Executive’s annual target bonus opportunity shall initially be 100% of Base Salary, provided that the actual bonus amount, if any, will be determined pursuant to the terms of the applicable annual bonus plan. Nothing in this Agreement guarantees that the Company will maintain an annual bonus plan, and the Company reserves the right to amend or terminate any annual bonus plan established or adopted at any time, without notice or further obligation (subject only to the minimum requirements of applicable employment standards legislation, if any). The Executive must be actively employed by the Company through the applicable payment date in order to be eligible for any annual bonus for that year, subject only to the minimum requirements of applicable employment standards legislation, unless provided otherwise pursuant to the applicable annual cash bonus plan. For certainty, if the Executive’s employment is terminated by the Company with or without Just Cause, or the Executive resigns or otherwise terminates employment for any reason, regardless of any applicable notice period, pay in lieu of notice, severance payment or similar amount, the Executive shall be entitled to no annual bonus or any part thereof for the year in which the Executive ceases the Executive’s active employment or thereafter, or damages in lieu thereof, subject only to the minimum requirements of applicable employment standards legislation or unless provided otherwise pursuant to the applicable annual cash bonus plan. There shall be no guarantee of a bonus in any given year.
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5.3
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Long-Term Incentive Opportunity. The Executive shall be eligible to receive annual grants of equity-based awards over shares of Cronos Group with an initial target incentive opportunity of CAD400,000 (based on the grant date fair value of such awards), provided that the actual amount, if any, of the grants shall be determined by the board of directors of Cronos Group (the “Board”) at its sole discretion. Any such equity-based grants shall be governed by the terms and conditions of the equity award plan or any other applicable plan of Cronos Group and/or the applicable award agreement. Such plan or plans may be amended from time to time at Cronos Group’s sole discretion. In the event of the cessation of the Executive’s employment for any reason, the Executive’s entitlements in respect of any equity-based awards shall be governed by the terms and conditions of the applicable equity award plan, any other applicable plan and the applicable award agreement. Subject to the express minimum requirements of applicable employment standards legislation, if any, the Executive shall not be eligible for any further grants of options following the effective date of termination or damages in lieu thereof, regardless of any applicable notice period, pay in lieu of notice, severance payment or similar amount.
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5.4
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Group Insured Benefits. The Executive shall be eligible to participate in the Company's benefits programs for health and dental, life insurance, disability and other benefits as may be available to the employees of the Company from time to time, subject to the terms and conditions of the applicable plan document. The Company reserves the right to alter, amend or discontinue all benefits, coverages, plans and programs referred to in this paragraph, without advance notice or other obligation, subject only to the minimum requirements of applicable employment standards legislation.
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5.5
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Vacation. The Executive shall be entitled accrue, on a pro-rata basis, four (4) weeks’ paid vacation per year. The Executive shall take vacation time at such times as are approved in advance by the Company. Vacation time entitlement shall be prorated for the period of the Executive’s active employment in the calendar year that the Executive commences and terminates employment, subject to the minimum requirements of applicable employment standards legislation. Vacation may be carried forward until March 31 of the following year after which time it shall be forfeited to the extent it exceeds the minimum vacation entitlement provided for under applicable employment standards legislation. Vacation shall be earned but shall not be taken during the first three (3) months of the Executive’s employment.
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5.6
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Business Expenses. The Executive shall be reimbursed for all reasonable travel and other out-of-pocket expenses properly incurred by the Executive from time to time in connection with performance of the Executive’s duties. The Executive shall furnish to the Company on a monthly basis and in accordance with any of the Company’s policies or procedures for expense reimbursement all invoices or statements in respect of expenses for which the Executive seeks reimbursement.
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5.7
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Deductions and Withholdings. The Company shall make such deductions and withholdings from the Executive’s remuneration and any other payments or benefits provided to the Executive pursuant to this Agreement as may be required by law.
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6.
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Termination of Employment
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6.1
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Termination by the Executive. The Executive may terminate his/her employment with the Company at any time by providing the Company with at least three (3) months of notice in writing. If, upon receipt of the Executive’s resignation (or any later date during such notice period), the Company terminates the Executive’s employment before the date the resignation was to be effective, the Company shall, in full satisfaction of its obligations to the Executive: (a) pay the Executive’s Base Salary and vacation pay accrued until the date the resignation was to be effective up to a maximum of three (3) months; (b) reimburse the outstanding expenses properly incurred by the Executive until the date the Executive’s employment ceases; and (c) provide the Executive with such other compensation and benefits that are expressly required pursuant to applicable employment standards legislation, if any. In such circumstances the Executive shall be ineligible for any pro-rated bonus for the year of termination, and any entitlements in respect of any equity-based awards shall be governed by the terms and conditions of the applicable equity award plan, any other applicable plan and the applicable award agreement.
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6.2
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Termination by the Company for Just Cause or on Death or Disability. The Company may terminate the Executive’s employment at any time for Just Cause without prior notice or in the event of the Executive’s death or Disability (as defined below). On the termination of the Executive’s employment for Just Cause or on the Executive’s death or Disability, this Agreement and the Executive’s employment shall terminate and the Company shall, in full satisfaction of its obligations to the Executive: (a) pay the Executive’s Base Salary and vacation pay accrued until the date the Executive’s employment ceases; (b) reimburse the outstanding expenses properly incurred by the Executive until the date the Executive’s employment ceases; and (c) provide the Executive with such other compensation and benefits that are expressly required pursuant to applicable employment standards legislation, if any. In such circumstances the Executive shall be ineligible for any pro-rated bonus for the year of termination, and any entitlements in respect of equity-based awards shall be governed by the terms and conditions of the applicable equity award plan, any other applicable plan and the applicable award agreement. For the purposes of this Agreement, (A) “Just Cause” means: (i) any act or omission constituting “just cause” for dismissal without notice under applicable law; (ii) the Executive’s repeated failure or refusal to perform the Executive’s principal duties and responsibilities after notice from the CEO or other officer of the Company; (iii) misappropriation of the funds or property of the Company; (iv) use of alcohol or drugs in violation of the Company’s policies on such use or that interferes with the Executive’s obligations under this Agreement, continuing after a single warning (subject to the Company’s obligations under applicable human rights legislation); (v) the indictment, arrest or conviction in a court of law for, or the entering of a plea of guilty to, a summary or indictable offence or any crime involving moral turpitude, fraud, dishonesty or theft (subject to the Company’s obligations under applicable human rights legislation); (vi) the misuse of Company computers or computer network systems for non-Company business; (vii) engaging in any act (including, without restriction, an act of sexual harassment as determined by the Company) which is a violation of any law, regulation or Company policy; or (viii) any wilful or intentional act which injures or could reasonably be expected to injure the reputation, business or business relationships of the Company, and (B) “Disability” means a physical or mental incapacity of the Executive that has prevented the Executive from performing the duties customarily assigned to the Executive for 180 calendar days, whether or not consecutive, out of any twelve (12) consecutive months and that in the opinion of the Company, acting on the basis of advice from a duly qualified medical practitioner, is likely to continue to a similar degree.
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6.3
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Termination by the Company without Just Cause or Resignation for Good Reason on Change of Control. The Company may terminate the Executive’s employment at any time without Just Cause, on providing thirty (30) days’ written notice to the Executive. The Executive may resign the Executive’s employment for Good Reason (as defined below) within twenty-four (24)
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(a)
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pay the Executive’s Base Salary and accrued but unpaid vacation pay in accordance with applicable employment standards legislation;
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(b)
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reimburse the Executive’s expenses properly incurred until the date the Executive’s employment ceases;
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(c)
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in lieu of notice, pay the Executive the greater of (i) one (1) month of the Executive’s annual base salary in effect at the time of termination for each completed year of service with the Company, to a maximum of twelve (12) months of base salary, payable by way of lump sum payment within sixty (60) days following such termination, and (ii) the minimum termination pay and severance pay entitlements of the Executive pursuant to applicable employment standards legislation.
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(d)
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continue the Executive’s group insured benefits, if any, until the end of the notice period calculated under (c) above or the date on which the Executive obtains alternate benefit coverage, whichever occurs first, subject to the terms and conditions of the benefit plans, as amended from time to time, and the minimum requirements of applicable employment standards legislation. If the Company is unable for any reason to continue its contributions to the benefit plans as set out in this Agreement, it shall pay the Executive an amount equal to the Company’s required contributions to such benefit plans on behalf of the Executive for such period. The Executive agrees that he/she is required to notify the Company when he/she obtains alternate life, medical and dental benefit coverage; and
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(e)
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determine the Executive’s entitlements in respect of equity-based awards in accordance with the terms and conditions of the applicable equity award plan, any other applicable plan and the applicable award agreement.
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a.
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the consummation of any transaction or series of transactions including any reorganization, recapitalization, statutory share exchange, consolidation, amalgamation, arrangement, merger or issue of voting shares in the capital of Cronos Group, the result of which is that any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, association, joint-stock company, estate, trust, organization, governmental authority or other entity of any kind or nature (“Person”) or group of Persons acting jointly or in concert for purposes of such transaction or series of transactions becomes the beneficial owner, directly or indirectly, of more than 50% of the voting securities in the capital of the entity resulting from such transaction or series of transactions or the entity that acquired all or substantially all of the business or assets of Cronos Group in a transaction or series of transactions described in paragraph (ii) below (in each case, the “Surviving Company”) or the ultimate parent entity that has beneficial ownership of sufficient voting power to elect a majority of the board of directors (or analogous governing body) of the Surviving Company (the “Parent Company”), measured by voting power of the outstanding voting securities eligible to elect members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) rather than number of securities (but shall not include the creation of a holding company or other transaction that does not involve any substantial change in the proportion of direct or indirect beneficial ownership of the voting securities of Cronos Group prior to the consummation of the transaction or series of transactions), provided that the exercise by Altria Summit LLC (or any of its affiliates) of the Purchased Warrant (as defined in the Subscription Agreement by and among Cronos Group Inc., Altria Summit LLC and Altria Group, Inc. dated as of December 7, 2018) shall not constitute a Change of Control pursuant to this clause (a);
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b.
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the direct or indirect sale, transfer or other disposition, in one or a series of transactions, of all or substantially all of the business or assets of Cronos Group, taken as a whole, to any person or group of persons acting jointly or in concert for purposes of such transaction or series of transactions (other than to any affiliates of Cronos Group); or
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c.
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Incumbent Directors during any consecutive twelve (12) month period ceasing to constitute a majority of the Board of Cronos Group (for the purposes of this paragraph, an “Incumbent Director” shall mean any member of the Board who is a member of the Board immediately prior to the occurrence of a contested election of directors of Cronos Group).
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(a)
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the assignment to the Executive of duties materially different than the duties assigned to the Executive hereunder;
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(b)
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a material diminution in the Executive’s title, status, seniority, reporting relationship, responsibilities or authority;
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(c)
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a material reduction in the Executive’s Base Salary; or
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(d)
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the relocation of the Executive’s primary work location, except as permitted by Section 2.1.
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6.4
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Resignation on Termination. The Executive agrees that upon any termination of employment with the Company for any reason the Executive shall immediately tender resignation from any position the Executive may hold as an officer or director of the Company and take all steps necessary to remove Executive from any and all designated positions under any applicable laws, including without limitation, the Cannabis Act (Canada) and the regulations thereunder, as the same may be amended from time to time, or any subsidiary or affiliate of the Company. In the event that the Executive fails to comply with this obligation within three (3) days of the Executive's termination or resignation, the Executive hereby irrevocably authorizes the Company to appoint a Person in the Executive's name and on the Executive's behalf to sign or execute any documents and/or do all things necessary or requisite to give effect to such resignation.
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6.5
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Compliance with Laws. The Executive understands and agrees that the entitlements under this Section 6 are provided in full satisfaction of the Executive’s entitlements to notice of termination, pay in lieu of notice, and severance pay, if any, under applicable employment standards legislation, this Agreement, any employee benefit plan sponsored or maintained by the Company or any of its affiliates, applicable law (including the common law) or otherwise.
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7.
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Restrictive Covenants
|
7.1
|
Non-Disclosure. The Executive acknowledges and agrees that:
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(a)
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during the term of the Executive’s employment, the Executive may be given access to or may become acquainted with confidential and proprietary information of the Company and its affiliates and related entities and third parties to which the Company and its affiliates and related entities may have any obligations of non-disclosure or confidentiality, including but not limited to: trade secrets; know-how; Intellectual Property (as defined below); Employee Inventions (as defined below), Invention Records (as defined below), existing and contemplated work product resulting from or related to projects performed or to be performed by or for the Company; programs and program modules; processes; algorithms; design concepts; system designs; production data; test data; research and development information; information regarding the acquisition, protection, enforcement and licensing of proprietary rights; technology; joint ventures; business, accounting, engineering and financial information and data; marketing and development plans and methods of obtaining business; forecasts; future plans and strategies of the Company; pricing, cost, billing and fee arrangements and policies; quoting procedures; special methods and processes; lists and/or identities of customers, suppliers, vendors and contractors; the type, quantity and specifications of products and services purchased, leased, licensed or received by the Company and/or any of its customers, suppliers, or vendors; internal personnel and financial information; business and/or personal information about any senior staff members of the Company or any Person with which the Company enters a strategic alliance or any other partnering arrangements; vendor and supplier information; the manner and method of conducting the Company’s business; the identity or nature of relationship of any persons or entities associated with or engaged as consultants, advisers, agents, distributors or sales representatives (the “Confidential Information”) the disclosure of any of which to competitors of the Company or to the general public, or the use of same by the Executive or any competitor of the Company, would be highly detrimental to the interests of the Company;
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(b)
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disclosure or use of Confidential Information, other than in connection with the Company’s business or as specifically authorized by the Company, will be highly detrimental to the business and interests of the Company and could result in serious loss of business and damage to it. Accordingly, the Executive specifically agrees to hold all Confidential Information in strictest confidence, and the Executive agrees that the Executive shall not, without the Company’s prior written consent, disclose, divulge or reveal to any person, or use for any purpose other than for the exclusive benefit of the Company, any Confidential Information, in whatever form contained; provided that the foregoing shall not apply to information (except for personal information about identifiable individuals) that: (i) was known to the public prior to its disclosure to the Executive; (ii) becomes generally known to the public subsequent to disclosure to the Executive other than by reason of the Executive’s breach of this Section; (iii) becomes available to the Executive from a source independent of the Company; or (iv) the Executive is specifically required to disclose by applicable law or legal process (provided that the Executive provides the Company with prompt advance written notice of the contemplated disclosure and cooperates with the Company in seeking a protective order or other appropriate protection of such information); and
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(c)
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the Executive shall deliver to the Company, immediately upon termination of employment (for any reason and regardless of whether the Executive or the Company terminate the employment) or at any time the Company so requests: (i) any and all documents, files, notes, memoranda, models, databases, computer files and/or other computer programs reflecting any Confidential Information whatsoever or otherwise relating to the Company’s business; (ii) lists or other documents regarding customers, suppliers, or vendors of the Company or leads or referrals to prospective business deals; and (iii) any computer equipment, home office equipment, automobile or other business equipment belonging to the Company that the Executive may then possess or have under the Executive’s control.
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(d)
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For the avoidance of doubt, nothing in this Agreement limits, restricts or in any other way affects the Executive communicating with any governmental authority or entity concerning matters relevant to the governmental authority or entity. The Executive and the Company agree that no confidentiality or other obligation the Executive owes to the Company prohibits the Executive from reporting possible violations of law or regulation to any governmental authority or entity under any applicable whistleblower protection provision of applicable Canadian, U.S. Federal or U.S. State law or regulation (including Section 21F of the Securities Exchange Act of 1934 or Section 806 of the Sarbanes-Oxley Act of 2002) or requires the Executive to notify the Company of any such report. The Executive is hereby notified that the immunity provisions in Section 1833 of title 18 of the United States Code provide that an individual cannot be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made (i) in confidence to federal, state or local government officials, either directly or indirectly, or to an attorney, and is solely for the purpose of reporting or investigating a suspected violation of the law, (ii) under seal in a complaint or other document filed in a lawsuit or other proceeding, or (iii) to the Executive’s attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law (and the trade secret may be used in the court proceedings for such lawsuit) as long as any document containing the trade secret is filed under seal and the trade secret is not disclosed except pursuant to court order.
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7.2
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Intellectual Property
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(a)
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In this section, the term “Germplasm” means any living or preserved biological tissue or material which may be used for the purpose of plant breeding and/or propagation, including but not limited to plants, cuttings, seeds, clones, cells, tissues, plant materials, and genetic materials (including but not limited to nucleic acids, genes, promoters, reading frames, regulatory sequences, terminators, chromosomes whether artificial or natural, and vectors).
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(b)
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The Executive agrees to promptly disclose to the Company (including to the Executive’s manager) all ideas, suggestions, discoveries, designs, works, developments, improvements, processes, formulas, data, techniques, know-how, confidential and proprietary information, trade secrets, inventions and improvements, and any other intellectual property rights, including with respect to, but not limited to, Germplasm, and whether or not any of the foregoing are registrable as patents, industrial designs, copyrights, trademarks or plant breeder rights (collectively, “Intellectual Property”) which the Executive may author, make, conceive, develop, discover, or reduce to practice, solely, jointly or in common with other employees, during the Executive’s employment with the Company and which relate to the business activities of the Company (“Employee Inventions”). The Executive agrees to maintain as confidential any Employee Inventions, and not to make application for registration of rights in respect of such unless it is at the request and direction of the Company. Intellectual Property coming within the scope of the business of the Company made and/or developed by the Executive while in the employ of the Company, whether or not conceived or made during regular working hours and whether or not the Executive is specifically instructed to make or develop the same, shall be for the benefit of the Company and shall be considered to have been made pursuant to this Agreement and shall be deemed Employee Inventions and shall immediately become exclusive property of the Company. The Executive must keep, maintain, and make available to the Company complete and up-to-date records relating to any such Intellectual Property, and agree that all such records are the sole and absolute property of the Company.
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(c)
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The Executive hereby assigns and transfers, and shall assign and transfer, to the Company, the Executive’s entire right, title and interest in and to any and all Employee Inventions, and the Executive agrees to execute and deliver to the Company any and all instruments necessary or desirable to accomplish the foregoing and, in addition, to do all lawful acts which may be necessary or desirable to assist the Company to obtain and enforce protection of Employee Inventions. The Executive shall, at the request and cost of the Company, and for no additional compensation or consideration from the Company, sign, execute, make and do all such deeds, documents, acts and things as the Company and its duly authorized agents may reasonably require: (i) to apply for, obtain and vest in the name of the Company alone (unless the Company otherwise directs) patents, letters patent, copyrights, plant breeders rights, or other analogous protection in any country throughout the world and when so obtained or vested to renew and restore the same; (ii) to perfect or evidence ownership by the Company or its designees of any and all Employee Inventions, in form suitable for recordation in the United States, Canada, and any other patent office; (iii) to defend any opposition proceedings of any type whatsoever in respect of such applications, and any opposition proceedings or petitions or applications of any type whatsoever for revocation of such patents, letters patent, copyright or other analogous protection, whether such proceedings are brought before a court or any administrative body; and (iv) to defend and/or assert the Company’s rights in any Intellectual Property against any third party. For greater certainty, all materials related to Employee Inventions (including notes, records and correspondence, whether written or electronic) (collectively, “Invention Records”) are the property of the Company, which the Executive shall provide to the Company upon request. Invention Records shall not be removed from Company premises without the prior written consent of the Company. The Executive further waives all moral rights in and to any Employee Inventions and all work the Executive produced during the course of the Executive’s employment.
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(e)
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In the course of performing duties pursuant to this Agreement, the Executive shall only use Germplasm provided by the Company, and the Executive agrees that any such Germplasm provided by the Company remains the sole property of the Company and that such Germplasm shall not be removed from Company premises without the prior written consent of the Company.
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(e)
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The Executive represents and warrants that the Executive does not possess any Intellectual Property or Germplasm of any third party, including but not limited to any prior employer or competitor of the Company, and the Executive shall not acquire and/or use Intellectual Property or Germplasm of any third party in the course of performing duties pursuant to this Agreement and shall not bring any Germplasm of any third party onto Company premises.
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7.3
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Non-Competition. The Executive shall not at any time during the Executive’s employment with the Company and for a period of one (1) year following the termination of this Agreement and the Executive’s employment with the Company for any reason, either individually or in partnership or jointly or in conjunction with any Person as principal, agent, consultant, employee, partner, director, shareholder (other than an investment of less than five (5) per cent of the shares of a company traded on a registered stock exchange or traded in the over the counter market in Canada), or in any other capacity whatsoever:
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(a)
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engage in employment or enter into a contract to do work related to the research into, development, cultivation, production, supply, sales or marketing of cannabis or cannabis derived products; or the development or provision of any services (including, but not limited to, technical and product support, or consultancy or customer services) which relate to cannabis or cannabis derived products (the “Business”); or
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(b)
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have any financial or other interest (including by way of royalty or other compensation arrangements) in or in respect of the business of any Person which carries on the Business; or
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(c)
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advise, lend money to or guarantee the debts or obligations of any Person which carries on the Business;
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7.4
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Non-Solicitation of Customers. The Executive shall not, during the Executive’s employment and for the one (1) year period immediately following the termination of the Executive’s employment for any reason, whether alone or for or in conjunction with any Person or entity, whether as an employee, partner, director, principal, agent, consultant or in any other capacity whatsoever, directly or indirectly solicit or attempt to solicit any Customer or Prospective Customer for the purpose of obtaining the business of any Customer or Prospective Customer of the Company or persuading any such Customer or Prospective Customer to cease to do business with or reduce the amount of business it would otherwise provide to the Company or its affiliates. For the purpose of this Agreement, “Customer” means any Person which is a current customer or has been a customer of the Company or an affiliate of the Company during the term of the Executive’s employment with the Company but in the event of the cessation of the Executive’s employment “Customer” shall include only those current customers of the Company or an affiliate of the Company with whom the Executive had direct contact or access to Confidential Information by virtue of the Executive’s role as an employee of the Company at any time during the twelve (12) month period preceding the date of the cessation of the Executive’s employment; “direct contact” means direct communications with or by the Executive, whether in Person or otherwise, for purposes of servicing, selling, or marketing on behalf of the Company, but only if such communications are more than trivial in nature, and in any case excluding bulk or mass marketing communications directed to multiple customers; and, “Prospective Customer” means any organization, individual or entity which has been actively contacted and solicited for its business by representatives of the Company or affiliates of the Company, but in the event of the cessation of the Executive’s employment within the twelve (12) month period immediately preceding the date of the cessation of the Executive’s employment, with the involvement and knowledge of the Executive.
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7.5
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Non-Solicitation of Employees. The Executive shall not, during the Executive’s employment and for two (2) years following the termination of the Executive’s employment for any reason, whether alone or for or in conjunction with any Person or entity, whether as an employee, partner, director, principal, agent, consultant or in any other capacity whatsoever, directly or indirectly solicit or assist in the solicitation of any employee of the Company or an affiliate of the Company to leave such employment.
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7.6
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Disclosure. During the Executive’s employment with the Company, the Executive shall promptly disclose to the Board full information concerning any interest, direct or indirect, of the Executive (whether as owner, shareholder, partner, lender or other investor, director, officer, employee, consultant or otherwise) or any member of the Executive’s immediate family, in any business which is reasonably known to the Executive to purchase or otherwise obtain services or products from, or to sell or otherwise provide services or products to the Company or to any of their respective suppliers or Customers.
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7.7
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Other Employment. During the Executive’s employment with the Company, the Executive shall not, except as a representative of the Company or with the prior written approval of the Executive’s manager, whether paid or unpaid, be directly or indirectly engaged, concerned or have any financial interest in any capacity in any other business, trade, professional or occupation (or the setting up of any business, trade, profession or occupation).
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7.8
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Return of Materials. All files, forms, brochures, books, materials, written correspondence (including email and instant messages), memoranda, documents, manuals, computer disks, software products and lists (including financial and other
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8.
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General
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8.1
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Reasonableness of Restrictions and Covenants. The Executive hereby confirms and agrees that the covenants and restrictions contained in this Agreement, including, without limitation, those contained in Section 7, are reasonable and valid the Executive further acknowledges and agrees that the Company may suffer irreparable injury in the event of any breach by the Executive of the obligations under any such covenant or restriction. Accordingly, the Executive hereby acknowledges and agrees that damages would be an inadequate remedy at law in connection with any such breach and that the Company shall therefore be entitled, in addition to any other right or remedy which it may have at law, in equity or otherwise, to temporary and permanent injunctive relief enjoining and restraining the Executive from any such breach.
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8.2
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Survival. Section 7 and this Section survive the termination of this Agreement and the Executive’s employment for any reason whatsoever.
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8.3
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Entire Agreement. This is the entire agreement between the Company and the Executive on the subject matters addressed herein. There are no representations, warranties or collateral agreements, whether written or oral, outside of this written Agreement. This Agreement and the terms and conditions of employment contained herein supersede and replace any prior understandings or discussions between the Executive and the Company regarding the Executive’s employment.
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8.4
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Withholding Taxes. The Company may withhold from any amounts or benefits payable under this Agreement income taxes and payroll taxes that are required to be withheld pursuant to any applicable law or regulation.
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8.5
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Section 409A Compliance. To the extent applicable, this Agreement is intended to comply with the requirements of Section 409A of the United States Internal Revenue Code of 1986, as amended (together with the applicable regulations thereunder, “Section 409A”). To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A or to the extent any provision in this Agreement must be modified to comply with Section 409A (including, without limitation, Treasury Regulation 1.409A-3(c)), such provision shall be read, or shall be modified (with the mutual consent of the parties, which consent shall not be unreasonably withheld), as the case may be, in such a manner so that all payments due under this Agreement shall comply with Section 409A. For purposes of Section 409A, each payment made under this Agreement shall be treated as a separate payment. In no event may Executive, directly or indirectly, designate the calendar year of payment. Notwithstanding any provision of this Agreement to the contrary, if necessary to comply with the restriction in Section 409A(a)(2)(B) concerning payments to “specified employees” (as defined in Section 409A) any payment on account of the Executive’s separation from service that would otherwise be due hereunder within six months after such separation shall nonetheless be delayed until the first business day of the seventh month following the Executive’s date of termination and the first such payment shall include the cumulative amount of any payments that would have been paid prior to such date if not for such restriction. Notwithstanding anything contained herein to the contrary, the Executive shall not be considered to have terminated employment with the Company for purposes of this Agreement unless he would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A.
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8.6
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Amendments. This Agreement may only be amended by written agreement executed by the Company and the Executive. However, changes to the Executive’s position, duties, vacation, benefits and compensation, over time in the normal course, do not affect the validity or enforceability of the Agreement.
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8.7
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Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable in the Province of Ontario. The Company and the Executive each irrevocably consent to the exclusive jurisdiction of the courts of Ontario and the courts of Ontario shall have the sole and exclusive jurisdiction to entertain any action arising under this Agreement.
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8.8
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Severability. If any provision in this Agreement is determined to be invalid or unenforceable, such provision shall be severed from this Agreement, and the remaining provisions shall continue in full force and effect. If for any reason any court of competent jurisdiction will find any provisions of this Agreement unreasonable in duration or geographic scope or otherwise, the Executive and the Company agree that the restrictions and prohibitions contained herein will be effective to the fullest extent allowed under applicable law in such jurisdiction.
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8.9
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Assignment. The Company may assign this Agreement to an affiliate or subsidiary, and it enures to the benefit of the Company, its successors or assigns.
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8.10
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Independent Legal Advice. The Executive acknowledges that the Executive has been encouraged to obtain independent legal advice regarding the execution of this Agreement, and that the Executive has either obtained such advice or voluntarily chosen
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8.11
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Waiver. No waiver of any of the provisions of this Agreement shall be effective or binding, unless made in writing and signed by the party purporting to give the same. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions, whether or not similar, nor shall such waiver constitute a continuing waiver, unless expressly stated otherwise.
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8.12
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Conditions. This Agreement and the Executive’s continued employment hereunder is conditional on the Company’s satisfaction (determined in the Company’s sole discretion) that the Executive has met the legal requirements to perform the Executive’s role, including but not limited to satisfactory results of Health Canada or any other applicable security clearance checks and criminal record checks and other reference checks that the Company performs. The Executive acknowledges and agrees that in signing this Agreement, and providing the Company with the necessary documentation to perform the checks required for the Executive’s role and with references, the Executive is providing consent to the Company or its agent, to performs such checks and contact the references the Executive provided to the Company.
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8.13
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Prior Restrictions. By signing below, the Executive represents that the Executive is not bound by the terms of any agreement with any Person which restricts in any way the Executive’s hiring by the Company and the performance of the Executive’s expected job duties; the Executive also represents that, during the Executive’s employment with the Company, the Executive shall not disclose or make use of any confidential information of any other persons or entities in violation of any of their applicable policies or agreements and/or applicable law.
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8.14
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Counterparts. This Agreement may be executed in one or more counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by electronic transmission, including in portable document format (.pdf), shall be deemed as effective as delivery of an original executed counterpart of this Agreement.
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HORTICAN INC.
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By:
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/s/ Michael Gorenstein
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Name: Michael Gorenstein
Title: Chief Executive Officer
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CRONOS GROUP INC.
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By:
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/s/ Michael Gorenstein
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Name: Michael Gorenstein
Title: Chief Executive Officer
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EXECUTIVE
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/s/ Xiuming Shum
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Name: Xiuming Shum
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1.
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Position
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1.1
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The Executive will be employed in the position of Chief Executive Officer of the Company, as of the Effective Time or such other date as agreed between the Executive and the Company.
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1.2
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Subject to Section 7.2 of this Agreement, in the event that: (a) the Executive’s employment with Laurel Canyon Associates, LLC, a California limited liability company (“LCA”) terminates or that certain Agreement for Provisions of Services between
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2.
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Location
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2.1
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The Executive shall be based primarily in the Company’s location in Los Angeles, California, with business travel as reasonably required to perform the Executive’s duties hereunder. The Company may at its discretion relocate the Executive’s principal office or place of work at any time within 20 miles of its current location, and the Executive acknowledges and agrees that this shall not constitute a constructive termination of the Executive’s employment for Good Reason (as defined below) and the Executive agrees not to make any claim or demand to the contrary.
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3.
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Employment Duties
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3.1
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The Executive shall perform such duties and exercise such powers as are normally associated with the Executive’s position and as may be assigned to the Executive from time to time. In fulfilling his duties to the Company, the Executive shall be instructed by and shall regularly report to the Chief Executive Officer of Cronos Group (the “CEO”). The Executive’s duties, hours of work, location of employment and reporting relationships may not be materially adjusted except as mutually agreed to by the Company and the Executive. Without limiting the foregoing, the Executive shall:
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(a)
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devote all of his working time and attention during normal business hours and such other times as may be reasonably necessary to the business and affairs of the Company and shall not, without the prior written consent of the CEO, undertake any other business or occupation or public office; provided however, that the Executive may, with the prior written consent of the CEO (such consent not to be unreasonably withheld), serve on the board(s) of directors of non-profit organizations that provide services outside the scope of the Company’s business or businesses similar or ancillary thereto;
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(b)
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perform those duties that are consistent with the Executive’s position that may be reasonably and lawfully assigned to the Executive diligently, honestly and faithfully to the best of the Executive’s ability and in the best interest of the Company and Cronos Group;
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(c)
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abide by all Company and Cronos Group policies made available to the Executive, as instituted and amended from time to time including, without limitation, the Cronos Group Employee Handbook, the current copy of which has been provided to the Executive in tandem with this Agreement; and
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(d)
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use reasonable best efforts to promote the interests and goodwill of the Company and not knowingly do anything which may materially harm the Company’s and Cronos Group’s interests, it being understood that the Executive is a fiduciary of the Company and Cronos Group and owes fiduciary obligations to the Company and Cronos Group that are not extinguished by this Agreement.
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4.
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Compensation and Benefits
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4.1
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Base Salary. The Company shall pay the Executive an annual base salary of US $250,000 less applicable required deductions and withholdings (the “Base Salary”). The Base Salary shall be paid by direct deposit on a bi-weekly basis (as may be amended from time to time), in accordance with the Company’s payroll practices. The Base Salary shall be subject to increases, but not decreases, and the Company shall review the Executive’s Base Salary from time to time to determine the amount, if any, of such increases.
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4.2
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Long-Term Incentive Opportunity. As soon as practicable after the Effective Time, the Board shall grant the Executive a one-time grant of equity-based awards of US $4,250,000 (based on the grant date fair value of such award), which will be comprised of restricted share units, vesting on the third anniversary of the grant date, as set forth in the applicable award agreement. Any such equity-based grants shall be governed by the terms and conditions of the Employment Inducement Award Plan and/or the applicable award agreement. In the event of the cessation of the Executive’s employment for any reason, the Executive’s entitlements in respect of any equity-based awards shall be governed by the terms and conditions of the applicable Employment Inducement Award Plan and the applicable award agreement. Subject to the express minimum requirements of applicable employment standards legislation, if any, and the terms and conditions of the awards, the Executive shall not be eligible for any further grants of equity-based awards following the effective date of termination or damages in lieu thereof, regardless of any applicable notice period, pay in lieu of notice, severance payment or similar amount.
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4.3
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Group Insured Benefits. The Executive shall be eligible to participate in the benefits programs for health and dental, life insurance, disability and other benefits on a basis that is no less favorable than similarly situated members of senior management of the Company from time to time, subject to the terms and conditions of the applicable plan document. The Company reserves the right to alter, amend or discontinue all benefits, coverages, plans, and programs referred to in this paragraph, without advance notice, subject to the requirements of applicable employment standards legislation.
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4.4
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Vacation. The Executive shall be entitled to accrue, on a pro-rata basis, four weeks’ paid vacation per year. The Executive shall take vacation time at such times as are approved in advance by the Company (such approval not to be unreasonably withheld). Vacation time entitlement shall be pro-rated for the period of the Executive’s active employment in the calendar year that the Executive commences and terminates employment, subject to the minimum requirements of applicable employment standards legislation.
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4.5
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Business Expenses. The Executive shall be reimbursed for all reasonable travel and other out-of-pocket expenses properly incurred by the Executive from time to time in connection with performance of the Executive’s duties in accordance with Cronos Group’s travel policy applicable to similarly situated members of management. The Executive shall furnish to the Company on a monthly basis and in accordance with any of the Company’s policies or procedures for expense reimbursement all invoices or statements in respect of expenses for which the Executive seeks reimbursement.
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4.6
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Deductions and Withholdings. The Company shall make such deductions and withholdings from the Executive’s remuneration and any other payments or benefits provided to the Executive pursuant to this Agreement as required by Law.
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5.
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Termination of Employment
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5.1
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Termination by the Executive. The Executive may terminate his employment with the Company at any time by providing the Company with at least sixty days’ written notice. If, upon receipt of the Executive’s resignation (or any later date during such notice period), the Company terminates the Executive’s employment before the date the resignation was to be effective, the Company shall, in full satisfaction of its obligations to the Executive: (a) pay the Executive’s Base Salary and vacation pay accrued until the date the resignation was to be effective up to a maximum of three months; (b) reimburse the outstanding expenses properly incurred by the Executive until the date the Executive’s employment ceases; and (c) provide the Executive with such other compensation and benefits that are expressly required pursuant to applicable employment standards legislation, if any. In such circumstances, any entitlements in respect of any equity-based awards shall be governed by the terms and conditions of the applicable Employment Inducement Award Plan and the applicable award agreement.
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5.2
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Termination by the Company for Just Cause or on Death or Disability. The Company may terminate the Executive’s employment at any time for Just Cause upon written notice or in the event of the Executive’s death or Disability (as defined below). On the termination of the Executive’s employment for Just Cause or on the Executive’s death or Disability, this Agreement and the Executive’s employment shall terminate and the Company shall, in full satisfaction of its obligations to the Executive: (a) pay the Executive’s Base Salary and vacation pay accrued until the date the Executive’s employment ceases; (b) reimburse the outstanding and documented expenses properly incurred by the Executive until the date the Executive’s employment ceases; and (c) provide the Executive with such other compensation and benefits that are required pursuant to applicable employment standards legislation, if any. In such circumstances, any entitlements in respect of equity-based awards shall be governed by the terms and conditions of the applicable Employment Inducement Award Plan and the applicable award agreement. For the purposes of this Agreement, (A) “Just Cause” means: (i) any act or omission constituting “just cause” for dismissal without notice under Law, if applicable; (ii) the Executive’s repeated failure or refusal to perform the Executive’s principal duties and responsibilities after notice from the CEO or other officer of Cronos Group; (iii) misappropriation of the funds or property of the Company; (iv) the use of alcohol or drugs in violation of the Company’s or Cronos Group’s policies on such use or that interferes with the Executive’s obligations under this Agreement, continuing after a single warning (subject to the Company’s obligations under applicable human rights legislation); (v) the indictment, arrest or conviction in a court of law for, or the entering of a plea of guilty to, a summary or indictable offence or any crime involving moral turpitude, fraud, dishonesty or theft (subject to the Company’s obligations under applicable human rights legislation); (vi) engaging in any act (including, without limitation, an act of sexual harassment as determined by Cronos Group) which is a violation of any Law or Company or Cronos Group policy; (vii) any wilful or intentional act which injures or could reasonably be expected to injure the reputation, business or business relationships of the Company, Cronos Group or their respective affiliates; or (viii) the Executive’s breach of this Agreement or the Confidentiality, Non-Competition and Non-Solicitation Agreement, and (B) “Disability” means a physical or mental incapacity of the Executive that has prevented the Executive from performing the duties customarily assigned to the Executive for 180 calendar days, whether or not consecutive, out of any twelve consecutive months and that in the opinion of a duly qualified medical practitioner selected by Cronos Group and the Executive (or the Executive’s representative), is likely to continue to a similar degree.
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5.3
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Termination by the Company without Just Cause or Resignation for Good Reason.
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(a)
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The Company may terminate the Executive’s employment at any time without Just Cause, on providing sixty days’ written notice to the Executive. The Executive may resign the Executive’s employment for Good Reason (as defined below), on providing written notice to the Company. If the Company terminates the Executive’s employment without Just Cause, or if the Executive resigns his employment for Good Reason, and if the Executive signs and delivers and does not revoke a release in favor of the Company in the form attached as Exhibit A to this Agreement to the Company in consideration of amounts in excess of the Executive’s minimum entitlements under applicable employment standards legislation, the Company, shall, in full satisfaction of its obligations to the Executive:
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(i)
|
pay the Executive’s Base Salary and accrued but unpaid vacation pay in accordance with applicable employment standards legislation;
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(ii)
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reimburse the Executive’s documented expenses properly incurred until the date the Executive’s employment ceases;
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(iii)
|
pay the Executive the greater of (A) one month of the Executive’s annual base salary in effect at the time of termination for each completed year of service with the Company or any of its then-current or prior Subsidiaries or Affiliates, to a maximum of twelve months of base salary, (such length of time the “Severance Period”) payable by way of lump sum payment within sixty days following such termination, and (B) the minimum termination pay and severance pay entitlements of the Executive pursuant to applicable employment standards legislation;
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(iv)
|
continue the Executive’s group insured benefits, if any, for the longer of the Severance Period or the date on which the Executive obtains alternate benefit coverage, whichever occurs first, subject to the terms and conditions of the benefit plans, as amended from time to time, and the minimum requirements of applicable employment standards legislation. If the Company is unable for any reason to continue its contributions to the benefit plans as set out in this Agreement, it shall pay the Executive an amount equal to the Company’s required contributions to such benefit plans on behalf of the Executive for such period. The Executive agrees that he is required to notify the Company when he obtains alternate life, medical and dental benefit coverage; and
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(v)
|
determine the Executive’s entitlements in respect of equity-based awards in accordance with the terms and conditions of the applicable Employment Inducement Award Plan and the applicable award agreement.
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(b)
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In this Agreement, “Good Reason” means the occurrence of any of the following events without the Executive’s consent, except in each case for any isolated, immaterial and inadvertent action not taken in bad faith and which is remedied by the Company within thirty days after a written notice thereof by the Executive (provided that such notice must be given to the Company within ninety days of the Executive becoming aware of such condition):
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(i)
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the assignment to the Executive of duties materially different than the duties assigned to the Executive hereunder;
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(ii)
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a material diminution in the Executive’s title, status, seniority, reporting relationship, responsibilities or authority;
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(iii)
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a reduction in the Executive’s Base Salary;
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(iv)
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the failure of the Company to timely provide the benefit described in Section 4.2 of this Agreement; and
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(v)
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the relocation of the Executive’s primary work location except as permitted by Section 2.1 of this Agreement.
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5.4
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Resignation on Termination. The Executive agrees that upon any termination of employment with the Company for any reason the Executive shall promptly tender resignation from any position the Executive may hold as an officer or director of the Company, Cronos Group or any subsidiary thereof and take all steps reasonably necessary to remove the Executive from any and all designated positions under any applicable Laws. In the event that the Executive fails to comply with this obligation within ten days of the Executive’s termination or resignation, the Executive hereby authorizes the Company to appoint a Person in the Executive’s name and on the Executive’s behalf to sign or execute any documents necessary or requisite to give effect to such resignation.
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5.5
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Compliance with Laws. The Executive understands and agrees that the entitlements under this Section 5 are provided in satisfaction of the Executive’s entitlements to notice of termination, pay in lieu of notice and severance pay, if any, under applicable employment standards legislation, this Agreement, any employee benefit plan sponsored by the Company or any of its affiliates, applicable Law or otherwise.
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6.
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Restrictive Covenants
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6.1
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Nothing contained herein shall adversely affect or impair the Company’s or Cronos Group’s right to enforce any of the restrictive covenants or other post-employment obligations contained in the Confidentiality, Non-Competition and Non-Solicitation Agreement, or any other agreement to which the Executive is a party or otherwise bound. The Executive agrees that the restrictive covenants and other post-employment obligations under the Confidentiality, Non-Competition and Non-Solicitation Agreement are and shall remain in effect and enforceable in accordance with the terms of the Confidentiality, Non-Competition and Non-Solicitation Agreement, and the Executive hereby reaffirms the existence and reasonableness of those obligations. The Executive agrees that his obligations under this Agreement are in addition to, and shall not supersede, modify or otherwise affect, his obligations under the Confidentiality, Non-Competition and Non-Solicitation Agreement, if any.
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6.2
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Intellectual Property.
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(a)
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In this Section 6.2, the term “Germplasm” means any living or preserved biological tissue or material which may be used for the purpose of plant breeding and/or propagation, including, without limitation, plants, cuttings, seeds, clones, cells, tissues, plant materials and genetic materials (including, without limitation, nucleic acids, genes, promoters, reading frames, regulatory sequences, terminators, chromosomes whether artificial or natural and vectors). For the purposes of this Agreement, “Intellectual Property” means any and all intellectual property and proprietary rights existing in any jurisdiction throughout the world, including any rights in: (i) patents, patent applications of any kind, patent rights, industrial designs, industrial design applications, industrial design rights, inventions, discoveries and invention disclosures (whether or not patented), and any divisionals, continuations, continuations-in-part, reissues, renewals, reexaminations and extensions of any of the foregoing; (ii) trademarks, service marks, trade names, trade dress, logos, packaging designs, slogans and other indicia of source, and registrations and applications for registration of any of the foregoing and any renewals thereof, together with any goodwill symbolized thereby (iii) Internet domain names and URLs, and registrations and applications for registration of any of the foregoing and any renewals thereof; (iv) social media profiles, accounts and handles, and services related thereto, including those made available through Facebook, Twitter, Instagram, SnapChat and other similar platforms; (v) copyrightable works (including with respect to software and compilations of data), whether published or unpublished, including all copyrights, copyright registrations and applications; (vi) know-how, trade secrets, confidential or proprietary information and data or database rights, including with respect to any formulae, recipes, processes, techniques or designs; (vii) plant varieties and applications and registrations for plant varietals issued by or pending before any Governmental Authority, including under the Plant Variety Protection Act (United States) or the Plant Breeders’ Rights Act (Canada); and (viii) circuit topographies, database rights and software.
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(b)
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The Executive agrees to promptly disclose to the Company (including, without limitation, to the Executive’s manager) all Intellectual Property, including with respect to, but without limitation, Germplasm, and whether or not any of the foregoing are registrable, which the Executive authors, makes, conceives, develops, discovers or reduces to practice, solely, jointly or in common with other employees, during the Executive’s employment with the Company, and which directly relate to the business activities of the Company, Cronos Group or any of their respective affiliates (“Employee Inventions”). The Executive agrees to maintain as confidential any Employee Inventions unless and until made generally public by the Company or Cronos Group, and not to make application for registration of rights in respect of any Employee Inventions unless it is at the request and direction of the Company or Cronos Group. Intellectual Property coming within the scope of the business of the Company, Cronos Group or any of their respective affiliates made and/or developed by the Executive while in the employ of the Company, whether or not conceived or made during regular working hours and whether or not the Executive is specifically instructed to make or develop the same, shall be for the benefit of the Company, Cronos Group or any of their respective affiliates and shall be considered to have been made pursuant to this Agreement and shall be deemed Employee Inventions and shall immediately become exclusive property of the Company.
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(c)
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The Executive further acknowledges that all Employee Inventions are “work made for hire” (to the extent permitted by applicable Law) owned exclusively by the Company and that the Executive has been compensated for such Employee Inventions by the Executive’s salary, commissions and other benefits, unless regulated otherwise by Law. To the extent such Employee Inventions are not “work made for hire” or otherwise not owned automatically and exclusively by the Company or Cronos Group any of their respective affiliates as a matter of Law, then to the extent permitted under by applicable Law, the Executive hereby irrevocably assigns and transfers, and shall assign and transfer, to the Company, the Executive’s entire right, title and interest in and to any and all Employee Inventions, and the Executive agrees to execute and deliver to the Company any and all instruments necessary or reasonably desirable to accomplish the foregoing and, in addition, to do all lawful acts which may be necessary or reasonably desirable to assist the Company to obtain and enforce protection of Employee Inventions. If and to the extent the foregoing assignment cannot be effected as a matter of law with respect to any Employee Inventions, the Executive hereby grants to the Company an exclusive, perpetual, fully-paid, royalty-free, irrevocable, worldwide, fully-transferable, fully sublicensable (on multiple levels) license to use, modify, display, perform, make, have made, copy, make derivative works, import, export, distribute and otherwise exploit such Employee Inventions for any purpose. The Executive shall, at the written request and cost of the Company, and for no additional compensation or consideration from the Company, Cronos Group or any of their respective affiliates, sign, execute, make and do all such deeds, documents, acts and things as the Company and its duly authorized agents may reasonably require: (i) to apply for, obtain and vest in the name of the Company alone (unless the Company otherwise directs) registered rights in any Employee Inventions, including any patents, industrial designs, letters patent, copyrights, plant breeders’ rights, trademarks, service marks or other analogous protection in any country throughout the world and when so obtained or vested to renew and restore the same; (ii) to perfect or evidence ownership by the Company or its designees of any and all Employee Inventions, in form suitable for recordation in the United States, Canada and any other intellectual property office anywhere in the world; (iii) to defend any opposition proceedings of any type whatsoever in respect of such applications, and any opposition proceedings or petitions or applications of any type whatsoever for revocation of such Employee Inventions, whether such proceedings are brought before a court or any administrative body; (iv) to defend and/or assert the Company’s,
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(d)
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In the course of performing duties pursuant to this Agreement, the Executive shall only use Germplasm provided by or approved by the Company, and the Executive agrees that any such Germplasm provided by the Company remains the sole property of the Company and that such Germplasm shall not be removed from Company premises without the prior written consent of the Company.
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(e)
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The Executive represents and warrants that the Executive does not possess any Intellectual Property or Germplasm of any third party, including, without limitation, any prior employer or competitor of the Company, Cronos Group, or any of their respective affiliates (other than Intellectual Property of a prior employer now owned or controlled by the Company, Cronos Group, or an affiliate of Cronos Group), and the Executive shall not acquire and/or use Intellectual Property or Germplasm of any third party in the course of performing duties pursuant to this Agreement and shall not bring any Germplasm of any third party onto premises of the Company, Cronos Group or any of their respective affiliates.
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6.3
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Disclosure. During the Executive’s employment with the Company, the Executive shall promptly disclose to the Board full information concerning any interest, direct or indirect, of the Executive (whether as owner, shareholder, partner, lender or other investor, director, officer, employee, consultant or otherwise) or any member of the Executive’s immediate family, in any business which is reasonably known to the Executive to purchase or otherwise obtain services or products from, or to sell or otherwise provide services or products to the Company or to any of its suppliers or customers.
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6.4
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Return of Materials. The Executive reaffirms and acknowledges his obligations to comply with the provisions set forth in Section 2(b) of the Confidentiality, Non-Competition and Non-Solicitation Agreement.
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7.
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General
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7.1
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Reasonableness of Restrictions and Covenants. The Executive hereby confirms and agrees that the covenants and restrictions contained in this Agreement, including, without limitation, those contained in Section 6 of this Agreement and those set forth in the Confidentiality, Non-Competition and Non-Solicitation Agreement, are reasonable and valid. The Executive further acknowledges and agrees that the Company or Cronos Group or their respective affiliates may suffer irreparable injury in the event of any breach by the Executive of the obligations under any such covenant or restriction. Accordingly, the Executive hereby acknowledges and agrees that damages would be an inadequate remedy at law in connection with any such breach and that the Company or Cronos Group shall therefore be entitled, in addition to any other right or remedy which it may have at law, in equity or otherwise, to temporary and permanent injunctive relief enjoining and restraining the Executive from any such breach.
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7.2
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Survival. Section 6 of this Agreement and this Section 7 shall survive the termination of this Agreement and the Executive’s employment for any reason whatsoever.
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7.3
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Entire Agreement. Along with the Confidentiality, Non-Competition and Non-Solicitation Agreement and the Lockup Agreement, this is the entire agreement between the Company, Cronos Group and the Executive on the subject matters addressed herein. There are no representations, warranties or collateral agreements, whether written or oral, outside of this written Agreement or the Confidentiality, Non-Competition and Non-Solicitation Agreement and the Lockup Agreement. This Agreement, the Confidentiality, Non-Competition and Non-Solicitation Agreement and the Lockup Agreement and the terms and conditions of employment contained herein supersede and replace any prior understandings or discussions between the Executive, and LCA or the Company, respectively, regarding the Executive’s employment with LCA, or services to the Company pursuant to the Services Agreement.
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7.4
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Withholding Taxes. The Company may withhold from any amounts or benefits payable under this Agreement income taxes and payroll taxes that are required to be withheld pursuant to any applicable Law.
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7.5
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Section 409A Compliance. To the extent applicable, this Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and the applicable regulations thereunder (“Section 409A”). To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A or to the extent any provision in this Agreement must be modified to comply with Section 409A (including, without limitation, Treasury Regulation 1.409A-3(c)), such provision shall be read, or shall be modified (with the mutual consent of the parties hereto, which consent shall not be unreasonably withheld), as the case may be, in such a manner so that all payments due under this Agreement shall comply with Section 409A. For purposes of Section 409A, each payment made under this Agreement shall be treated as a
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7.6
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Amendments. This Agreement may only be amended by written agreement executed by the Company, Cronos Group and the Executive. However, changes to the Executive’s position, duties, vacation, benefits and compensation, over time in the normal course in accordance with, and subject to the terms and conditions set forth in, this Agreement, do not affect the validity or enforceability of the Agreement.
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7.7
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Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California and the laws of the United States applicable in the State of California. The Company and the Executive each irrevocably consent to the exclusive jurisdiction of the courts of California and the courts of California shall have the sole and exclusive jurisdiction to entertain any action arising under this Agreement.
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7.8
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Severability. If any provision in this Agreement is determined to be invalid or unenforceable, such provision shall be severed from this Agreement, and the remaining provisions shall continue in full force and effect. If for any reason any court of competent jurisdiction will find any provisions of this Agreement unreasonable in duration or geographic scope or otherwise, the Executive and the Company agree that the restrictions and prohibitions contained herein will be effective to the fullest extent allowed under applicable Law in such jurisdiction.
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7.9
|
Assignment. The Company and Cronos Group may assign this Agreement to an affiliate or subsidiary thereof with the consent of the Executive (such consent not to be unreasonably withheld), and it enures to the benefit of the Company, Cronos Group, and their respective successors or assigns.
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7.10
|
Independent Legal Advice. The Executive acknowledges that the Executive has been encouraged to obtain independent legal advice regarding the execution of this Agreement, and that the Executive has either obtained such advice or voluntarily chosen not to do so, and hereby waives any objections or claims the Executive may make resulting from any failure on the Executive’s part to obtain such advice.
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7.11
|
Waiver. No waiver of any of the provisions of this Agreement shall be effective or binding, unless made in writing and signed by the party hereto purporting to give the same. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions, whether or not similar, nor shall such waiver constitute a continuing waiver, unless expressly stated otherwise.
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7.12
|
Conditions. This Agreement and the Executive’s continued employment hereunder is conditional on the Executive meeting the legal requirements to perform the Executive’s role, including, without limitation, the Executive’s reasonably satisfactory results of any applicable security clearance checks or criminal record checks. For the avoidance of doubt, in the event that (a) the Executive no longer meets the legal requirements to perform his or her duties under this Agreement pursuant to applicable Law (not including any legal requirements set forth in the definition of Just Cause contained herein), and (b) the Company terminates the Executive’s employment in connection with such legal requirement deficiency, then such termination will not constitute a termination for Just Cause under this Agreement.
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7.13
|
Prior Restrictions. By signing below, the Executive represents that the Executive is not bound by the terms of any agreement with any Person which restricts in any way the Executive’s hiring by the Company and the performance of the Executive’s expected job duties.
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7.14
|
Counterparts. This Agreement may be executed in one or more counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by electronic transmission, including in portable document format (.pdf), shall be deemed as effective as delivery of an original executed counterpart of this Agreement.
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|
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REDWOOD WELLNESS, LLC
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||
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By:
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/s/ Cynthia Capobianco
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Name: Cynthia Capobianco
Title: Vice President
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CRONOS GROUP INC.
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||
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By:
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/s/ Michael Gorenstein
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EXECUTIVE
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||
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Robert Rosenheck
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1.
|
Grant of Restricted Share Units. The Company hereby grants the Participant 366,486 Restricted Share Units (hereinafter referred to as the “RSUs”), which are subject to restrictions set forth below.
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2.
|
Vesting of Restricted Share Units. Subject to the terms and conditions of this Agreement and the Plan, the RSUs shall vest on the third (3rd) anniversary of the Grant Date (the “Vesting Date”), provided, that the Participant remains employed at the Company or an Affiliate through such date. Upon the Vesting Date, the RSUs shall promptly (but not later than thirty (30) calendar days thereafter) be paid out in Shares. Prior to the vesting, expiration, or other termination of these RSUs, the Participant shall have the right to receive dividend equivalent payments based on the regular cash dividends paid or distributed on the underlying Shares, which dividend equivalents shall be paid to the Participant in cash upon the date that regular cash dividends are paid to shareholders.
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3.
|
Termination of Employment. In the event that prior to the Vesting Date, the Participant’s employment terminates because of death or Disability (as defined in the Participant’s Employment Agreement), by the Company or its Affiliate without Just Cause or by the Participant for Good Reason, the RSUs shall vest and promptly (but not later than thirty (30) calendar days thereafter) be paid out in Shares. Except as set forth in paragraph 4 below, in the event that a Participant’s employment with the Company is terminated for any reason other than death, Disability, without Just Cause or for Good Reason prior to the Vesting Date, then the RSUs shall be forfeited for no consideration.
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4.
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Change in Control. In the event of a Change in Control, the provisions set forth in Section 9 of the Plan will apply.
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5.
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Employment. Nothing in the Agreement shall interfere with or limit in any way the right of the Company to terminate the Participant’s employment in accordance with the terms of the Participant’s applicable Employment Agreement nor confer upon any Participant any right to continue in the employ of the Company.
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6.
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Withholding Taxes. The Participant acknowledges and agrees that the Company has the right to deduct from any payments due to the Participant any Federal, state, or local taxes required by law to be withheld with respect to the RSUs.
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7.
|
Compliance with Securities Laws. The Participant acknowledges that the rights of the Participant to transfer Shares shall be subject to compliance with the requirement of federal and state securities laws, including, but not limited to, Rule 144 under the United States Securities Act of 1933, as amended.
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8.
|
Governing Law. The Plan and this Agreement, and all matter which reference is made herein shall be governed by and interpreted in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein.
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9.
|
Binding Effect. This Agreement shall be binding upon and inure to the benefit of any successors to the Company and all persons lawfully claiming under Participant.
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By:
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Authorized Signatory
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1.
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Position
|
1.1
|
The Executive will be employed in the position of Chief Operating Officer commencing on June 12, 2018 or such other start date as agreed between the Executive and the Company.
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2.
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Location
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2.1
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The Executive will generally work out of the Company’s locations in Toronto and Stayner, Ontario, with business travel as reasonably required to perform the Executive’s duties hereunder. The Company may at its discretion relocate the Executive’s principal office or place of work at any time within 100 kilometres of its current location, and the Executive acknowledges and agrees that this shall not constitute a constructive termination of the Executive’s employment and the Executive agrees not to make any claim or demand to the contrary.
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3.
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Work Authorizations
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3.1
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The Executive will be based primarily in the Company’s Toronto and Stayner locations, and it is a condition of this Agreement and the Executive’s employment that the Executive shall be able to work in lawfully in Canada. However, it is understood and agreed that the Executive’s position may require that the Executive work abroad, as needed by the Company. The Executive’s employment with the Company is therefore also conditional upon the securing of all necessary visas, work permits and other authorizations that may be required to enter and/or to work in any of the countries in which the Executive may be assigned to work or visit during the term of employment. The Company will provide reasonable assistance in respect of immigration matters. Despite such assistance, the Company cannot guarantee when or whether the Executive’s application for a work permit, visa, permanent residence status or other immigration documents will be approved. Should the necessary authorizations that permit the Executive to legally work in Canada or in any other jurisdiction in which the Executive will be required to work not be obtained, this Agreement will be null and void and of no force or effect. At any time, should necessary authorizations that permit the Executive to legally work in Canada or any other jurisdiction in which the Executive will be required to work, or visit expire without the possibility of renewal, the Executive’s employment will come to an end and shall be treated by the Company as a termination without just cause pursuant to Section 6.3 of this Agreement.
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4.
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Employment Duties
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4.1
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The Executive shall perform such duties and exercise such powers as are normally associated with or incidental and ancillary to the Executive’s position and as may be assigned to the Executive from time to time. In fulfilling his/her duties to the Company, the Executive will be instructed by and will regularly report to the Chief Executive Officer (the “CEO”). The Executive’s duties, hours of work, location of employment and reporting relationships may be adjusted from time to time by the Company to meet changing business and operational needs. Without limiting the foregoing, the Executive shall:
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(a)
|
devote his/her full working time and attention during normal business hours and such other times as may be reasonably required to the business and affairs of the Company and shall not, without the prior written consent of the CEO, undertake any other business or occupation or public office;
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(b)
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perform those duties that may be assigned to the Executive diligently, honestly, and faithfully to the best of the Executive’s ability and in the best interest of the Company;
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(c)
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abide by all Company policies, as instituted and amended from time to time including but not limited to, the Code of Business Conduct and Ethics (the “Code”), the Insider Trading Policy, the Anti-Fraud Policy, the Equal Employment Opportunity Policy, the Disclosure Policy, the Harassment and Violence in the Workplace Policy and the Substance Use Policy;
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(d)
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use best efforts to promote the interests and goodwill of the Company and not knowingly do, or permit to be done, anything which may be prejudicial to the Company’s interests, it being understood and agreed that the Executive is a fiduciary of the Company and owes fiduciary obligations to the Company that are not extinguished by this Agreement; and
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(e)
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identify and immediately report to the CEO any gross misrepresentations or violations of the Code or applicable law by the Company or its management.
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5.
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Compensation and Benefits
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5.1
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Base Salary. The Company will pay the Executive an annual base salary of CAD $225,000 less applicable deductions and withholdings (“Base Salary”). The Executive’s base salary will be paid by direct deposit on a bi-weekly basis (as may be amended from time to time), in accordance with the Company’s payroll practices. The Company may review the Executive’s Base Salary from time to time. Any changes to Base Salary will be at the sole discretion of the Company.
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5.2
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Performance Bonus. In addition to the Executive’s annual Base Salary, the Executive will be eligible to participate in the Company’s annual bonus plan if and when such plan is established or adopted by the Company, and to receive an annual bonus, subject to the terms and conditions of that plan as determined by the Company at its sole discretion. Nothing in this Agreement guarantees that the Company will establish or adopt an annual bonus plan, and the Company reserves the right to amend or terminate any annual bonus plan established or adopted at any time, without notice or further obligation (subject only to the minimum requirements of applicable employment standards legislation, if any). The Executive must be actively employed by the Company through to the end of the calendar or fiscal year for which it is awarded in order to be eligible for any annual bonus for that year, subject only to the minimum requirements of applicable employment standards legislation. For certainty, if the Executive’s employment is terminated by the Company for just cause, or the Executive resigns, or the Executive’s employment terminates on any other basis (including without just cause), the Executive will be entitled to no annual bonus or any part thereof for the year in which the Executive ceases the Executive’s active employment or thereafter, subject only to the minimum requirements of applicable employment standards legislation. There will be no guarantee of a bonus in any given year.
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5.3
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Stock Options. The Executive may be eligible to receive grants of options to purchase shares in the Company or affiliated companies, which may include grants of options to purchase shares in Cronos Group. The amount of the grants will be determined by the board of directors of Cronos Group (the “Board”) at its sole discretion. The grants of such options will be governed by the terms and conditions of the Cronos Group stock option plan or any other applicable plan and/or the applicable award agreement. Such plan or plans may be amended from time to time at the Company’s sole discretion. In the event of the cessation of the Executive’s employment for any reason, the Executive’s entitlements in respect of stock options shall be governed by the terms and conditions of the Cronos Group stock option plan, any other applicable plan and the applicable award agreement. The Executive will not be eligible for any further grants of options following the effective date of termination.
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5.4
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Group Insured Benefits. The Executive acknowledges and agrees that the Executive shall not be eligible to participate in any Company benefits programs for health and dental, life insurance, disability and similar benefits. In lieu of such participation,
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5.5
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Vacation. The Executive will be entitled accrue, on a pro-rata basis, 3 weeks’ paid vacation per year. The Executive shall take vacation time at such times as are approved in advance by the Company. Vacation time entitlement will be prorated for the period of the Executive’s active employment in the calendar year that the Executive commences and terminates employment, subject to the minimum requirements of applicable employment standards legislation. Vacation may be carried forward until March 31 of the following year after which time it will be forfeited to the extent it exceeds the minimum vacation entitlement provided for under applicable employment standards legislation. Vacation will be earned but will not be taken during the first three (3) months of the Executive’s employment.
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5.6
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Perquisites. The Executive will receive the following perquisites: tax preparation assistance from an accounting firm designated by the Company.
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5.7
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Business Expenses. The Executive shall be reimbursed for all reasonable travel and other out-of-pocket expenses properly incurred by the Executive from time to time in connection with performance of the Executive’s duties. The Executive shall furnish to the Company on a monthly basis and in accordance with any of the Company’s policies or procedures for expenses reimbursement all invoices or statements in respect of expenses for which the Executive seeks reimbursement.
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5.8
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Deductions and Withholdings. The Company shall make such deductions and withholdings from the Executive’s remuneration and any other payments or benefits provided to the Executive pursuant to this Agreement as may be required by law.
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6.
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Termination of Employment
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6.1
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Termination by the Executive. The Executive may terminate his/her employment with the Company at any time by providing the Company with at least three (3) months of notice in writing. If, upon receipt of the Executive’s resignation, the Company terminates the Executive’s employment before the date the resignation was to be effective, the Company will, in full satisfaction of its obligations to the Executive: (a) pay the Executive’s Base Salary and vacation pay accrued until the date the resignation was to be effective up to a maximum of three months; and (b) reimburse the outstanding expenses properly incurred by the Executive until the date the Executive’s employment ceases. In such circumstances the Executive will be ineligible for any prorated bonus for the year of termination, and any entitlements in respect of stock options shall be governed by the terms and conditions of the Company’s stock option plan, any other applicable plan and the applicable award agreement.
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6.2
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Termination by the Company for Just Cause or on Death or Disability. The Company may terminate the Executive’s employment at any time for just cause without prior notice or in the event of the Executive’s death or disability. On the termination of the Executive’s employment for just cause or on the Executive’s death or disability, this Agreement and the Executive’s employment shall terminate and the Company will, in full satisfaction of its obligations to the Executive: (a) pay the Executive’s Base Salary and vacation pay accrued until the date the Executive’s employment ceases; (b) reimburse the outstanding expenses properly incurred by the Executive until the date the Executive’s employment ceases; and (c) provide the Executive with such other compensation and benefits that are expressly required pursuant to applicable employment standards legislation, if any. In such circumstances the Executive will be ineligible for any pro-rated bonus for the year of termination, and any entitlements in respect of stock options shall be governed by the terms and conditions of the Company’s stock option plan, any other applicable plan and the applicable award agreement. For the purposes of this Agreement, (A) “just cause” means: (i) any act or omission constituting “just cause” for dismissal without notice under the common law; (ii) the Executive’s repeated failure or refusal to perform the Executive’s principal duties and responsibilities after notice from the CEO; (iii) misappropriation of the funds or property of the Company; (iv) use of alcohol or drugs in violation of the Company’s policies on such use or that interferes with the Executive’s obligations under this Agreement, continuing after a single warning (subject to the Company’s obligations under human rights legislation); (v) the indictment or conviction in a court of law for, or the entering of a plea of guilty to, a summary or indictable offence or any crime involving -fraud, dishonesty or theft (subject to the Company’s obligations under human rights legislation); (vi) the misuse of Company computers or computer network systems for non Company business; (vii) engaging in any act (including, without restriction, an act of sexual harassment as determined by the Company) which is a violation of any law, regulation or Company policy; or (viii) any wilful or intentional act which injures or could reasonably be expected to injure the reputation, business or business relationships of the Company, and (B) “disability” means a physical or mental incapacity of the Executive that has prevented the Executive from performing the duties customarily assigned to the Executive for 180 calendar days, whether or not consecutive, out of any twelve (12) consecutive months and that in the opinion of the Company, acting on the basis of advice from a duly qualified medical practitioner, is likely to continue to a similar degree.
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6.3
|
Termination by the Company without Just Cause or Resignation for Good Reason on Change of Control. The Company may terminate the Executive’s employment at any time without just cause, on providing written notice to the Executive. The Executive may resign the Executive’s employment for Good Reason (as defined below) within twenty-four (24) months of the
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(a)
|
pay the Executive’s base salary and accrued but unpaid vacation pay in accordance with applicable employment standards legislation;
|
(b)
|
reimburse the Executive’s expenses properly incurred until the date the Executive’s employment ceases;
|
(c)
|
in lieu of notice, pay the Executive the greater of (i) twelve (12) months of the Executive’s Base Salary, payable by way of lump sum payment or salary continuance at the Company’s option, and (ii) the minimum termination pay and severance pay entitlements of the Executive pursuant to applicable employment standards legislation, provided, however, that if the notice period for which pay in lieu is provided to the Executive under this Section 6.3(c) is less than the non-competition period set out in Section 7.3 hereof, the notice period will be extended to be equal to the non-competition period and the Executive shall receive the Executive’s annual base salary in effect at the time of termination for the balance of the non-competition period.
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(d)
|
continue the Executive’s group insured benefits, if any, until the end of the notice period calculated under (c) above or the date on which the Executive obtains alternate benefit coverage, whichever occurs first, subject to the terms and conditions of the benefit plans, as amended from time to time. If the Company is unable for any reason to continue its contributions to the benefit plans as set out in this Agreement, it will pay the Executive an amount equal to the Company’s required contributions to such benefit plans on behalf of the Executive for such period. The Executive agrees that he/she is required to notify the Company when he/she obtains alternate life, medical and dental benefit coverage; and
|
(e)
|
determine the Executive’s entitlements in respect of stock options in accordance with the terms and conditions of the Company’s stock option plan, any other applicable plan and the applicable award agreement.
|
(a)
|
the consummation of any transaction or series of transactions including any reorganization, recapitalization, statutory share exchange, consolidation, amalgamation, arrangement, merger or issue of voting shares in the capital of the Company, the result of which is that any Person or group of Persons acting jointly or in concert for purposes of such transaction or series of transactions becomes the beneficial owner, directly or indirectly, of more than 50% of the voting securities in the capital of the entity resulting from such transaction or series of transactions or the entity that acquired all or substantially all of the business or assets of the Company in a transaction or series of transactions described in paragraph (ii) below (in each case, the “Surviving Company”) or the ultimate parent entity that has beneficial ownership of sufficient voting power to elect a majority of the board of directors (or analogous governing body) of the Surviving Company (the “Parent Company”), measured by voting power of the outstanding voting securities eligible to elect members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) rather than number of securities (but shall not include the creation of a holding company or other transaction that does not involve any substantial change in the proportion of direct or indirect beneficial ownership of the voting securities of the Company prior to the consummation of the transaction or series of transactions);
|
(b)
|
the direct or indirect sale, transfer or other disposition, in one or a series of transactions, of all or substantially all of the business or assets of the Company, taken as a whole, to any Person or group of Persons acting jointly or in concert for purposes of such transaction or series of transactions (other than to any Affiliates of the Company); or
|
(c)
|
Incumbent Directors during any consecutive 12-month period ceasing to constitute a majority of the Board of the Company (for the purposes of this paragraph, an “Incumbent Director” shall mean any member of the Board who is a member of the Board immediately prior to the occurrence of a contested election of directors of the Company).
|
(a)
|
the assignment to the Executive of duties materially different than the duties assigned to the Executive hereunder;
|
(b)
|
a material diminution in the Executive’s title, status, seniority, reporting relationship, responsibilities or authority;
|
(c)
|
any reduction in the Executive’s Base Salary or any material reduction in any other forms of the Executive’s compensation; or
|
(d)
|
the relocation of the Executive’s primary work location, except as permitted by Section 2.1.
|
6.4
|
Resignation on Termination. The Executive agrees that upon any termination of employment with the Company for any reason the Executive shall immediately tender resignation from any position the Executive may hold as an officer or director of the Company, or any subsidiary or affiliate of the Company. In the event that the Executive fails to comply with this obligation within three (3) days of the Executive’s termination or resignation, the Executive hereby irrevocably authorizes the Company to appoint a person in the Executive’s name and on the Executive’s behalf to sign or execute any documents and/or do all things necessary or requisite to give effect to such resignation.
|
6.5
|
Compliance with Laws. The Executive’s entitlements under this Section 6 are provided in full satisfaction of the Executive’s entitlements to notice of termination, pay in lieu of notice, and severance pay, if any, under applicable employment standards legislation, this Agreement, the common law or otherwise.
|
7.
|
Restrictive Covenants
|
7.1
|
Non-Disclosure. The Executive acknowledges and agrees that:
|
(a)
|
during the term of the Executive’s employment, the Executive may be given access to or may become acquainted with confidential and proprietary information of the Company and its affiliates and related entities, including but not limited to: trade secrets; know-how; Intellectual Property (as defined below); Employee Inventions (as defined below), Invention Records (as defined below), existing and contemplated work product resulting from or related to projects performed or to be performed by or for the Company; programs and program modules; processes; algorithms; design concepts; system designs; production data; test data; research and development information; information regarding the acquisition, protection, enforcement and licensing of proprietary rights; technology; joint ventures; business, accounting, engineering and financial information and data; marketing and development plans and methods of obtaining business; forecasts; future plans and strategies of the Company; pricing, cost, billing and fee arrangements and policies; quoting procedures; special methods and processes; lists and/or identities of customers, suppliers, vendors and contractors; the type, quantity and specifications of products and services purchased, leased, licensed or received by the Company and/or any of its customers, suppliers, or vendors; internal personnel and financial information; business and/or personal information about any senior staff members of the Company or any person or company with which the Company enters a strategic alliance or any other partnering arrangements; vendor and supplier information; the manner and method of conducting the Company’s business; the identity or nature of relationship of any persons or entities associated with or engaged as consultants, advisers, agents, distributors or sales representatives (the “Confidential Information”) the disclosure of any of which to competitors of the Company or to the general public, or the use of same by the Executive or any competitor of the Company, would be highly detrimental to the interests of the Company;
|
(b)
|
disclosure or use of Confidential Information, other than in connection with the Company’s business or as specifically authorized by the Company, will be highly detrimental to the business and interests of the Company and could result in serious loss of business and damage to it. Accordingly, the Executive specifically agrees to hold all Confidential Information in strictest confidence, and the Executive agrees that the Executive will not, without the Company’s prior written consent, disclose, divulge or reveal to any person, or use for any purpose other than for the exclusive benefit of the Company, any Confidential Information, in whatever form contained; provided that the foregoing shall not apply to information (except for personal information about identifiable individuals) that: (i) was known to the public prior to its disclosure to the Executive; (ii) becomes generally known to the public subsequent to disclosure to the Executive other than by reason of the Executive’s breach of this Section; (iii) becomes available to the Executive from a source independent of the Company; or (iv) the Executive is specifically required to disclose by applicable law or legal process (provided that the Executive provides the Company with prompt advance written notice of the contemplated disclosure and cooperates with the Company in seeking a protective order or other appropriate protection of such information).
|
(c)
|
the Executive will deliver to the Company, immediately upon termination of employment (for any reason and regardless of whether the Executive or the Company terminate the employment) or at any time the Company so requests: (i) any and all documents, files, notes, memoranda, models, databases, computer files and/or other computer programs reflecting any Confidential Information whatsoever or otherwise relating to the Company’s business; (ii) lists or other documents regarding customers, suppliers, or vendors of the Company or leads or referrals to prospective business deals; and (iii) any computer equipment, home office equipment, automobile or other business equipment belonging to the Company that the Executive may then possess or have under the Executive’s control.
|
7.2
|
Intellectual Property
|
(a)
|
In this section, the term “Germplasm” means any living or preserved biological tissue or material which may be used for the purpose of plant breeding and/or propagation, including but not limited to plants, cuttings, seeds, clones, cells, tissues, plant materials, and genetic materials (including but not limited to nucleic acids, genes, promoters, reading frames, regulatory sequences, terminators, chromosomes whether artificial or natural, and vectors).
|
(b)
|
The Executive agrees to promptly disclose to the Company (including to the Executive’s manager) all ideas, suggestions, discoveries, designs, works, developments, improvements, processes, formulas, data, techniques, know-how, confidential and proprietary information, trade secrets, inventions and improvements, including with respect to, but not limited to, Germplasm, and whether or not any of the foregoing are registrable as patents, industrial designs, copyrights, trademarks or plant breeder rights (collectively, “Intellectual Property”) which the Executive may author, make, conceive, develop, discover, or reduce to practice, solely, jointly or in common with other employees, during the Executive’s employment with the Company and which relate to the business activities of the Company (“Employee Inventions”). The Executive agrees to maintain as confidential any Employee Inventions, and not to make application for registration of rights in respect of such unless it is at the request and direction of the Company. Intellectual Property coming within the scope of the business of the Company made and/or developed by the Executive while in the employ of the Company, whether or not conceived or made during regular working hours and whether or not the Executive is specifically instructed to make or develop the same, shall be for the benefit of the Company and shall be considered to have been made pursuant to this Agreement and shall be deemed Employee Inventions and shall immediately become exclusive property of the Company. The Executive must keep, maintain, and make available to the Company complete and up-to-date records relating to any such Intellectual Property, and agree that all such records are the sole and absolute property of the Company.
|
(c)
|
The Executive shall assign and transfer to the Company the Executive’s entire right, title and interest in and to any and all Intellectual Property and the Executive agrees to execute and deliver to the Company any and all instruments necessary or desirable to accomplish the foregoing and, in addition, to do all lawful acts which may be necessary or desirable to assist the Company to obtain and enforce protection of Intellectual Property. The Executive shall, at the request and cost of the Company, and for no additional compensation or consideration from the Company, sign, execute, make and do all such deeds, documents, acts and things as the Company and its duly authorized agents may reasonably require: (i) to apply for, obtain and vest in the name of the Company alone (unless the Company otherwise directs) letters patent, copyrights, plant breeders rights, or other analogous protection in any country throughout the world and when so obtained or vested to renew and restore the same; (ii) to perfect or evidence ownership by the Company or its designees of any and all Employee Inventions, in form suitable for recordation in the United States, Canada, and any other patent office; (iii) to defend any opposition proceedings of any type whatsoever in respect of such applications, and any opposition proceedings or petitions or applications of any type whatsoever for revocation of such letters patent, copyright or other analogous protection, whether such proceedings are brought before a court or any administrative body; and (iv) to defend and/or assert the Company’s rights in any Intellectual Property against any third party. For greater certainty, all materials related to Employee Inventions (including notes, records and correspondence, whether written or electronic) (collectively, “Invention Records”) are the property of the Company, which the Executive shall provide to the Company upon request. Invention Records shall not be removed from Company premises without the prior written consent of the Company;
|
(d)
|
By the Executive’s signature below, the Executive hereby assigns and transfers to the Company all Employee Inventions (including all associated Intellectual Property), and the Executive further waives all moral rights over any Intellectual Property and all work the Executive produced during the course of the Executive’s employment;
|
(e)
|
In the course of performing duties pursuant to this Agreement, the Executive shall only use Germplasm provided by the Company, and the Executive agrees that any such Germplasm provided by the Company remains the sole property of the Company and that such Germplasm shall not be removed from Company premises without the prior written consent of the Company;
|
(f)
|
The Executive represents and warrants that the Executive does not possess any Intellectual Property or Germplasm of any third party, including but not limited to any prior employer or competitor of the Company, and the Executive shall not acquire and/or use Intellectual Property or Germplasm of any third party in the course of performing duties pursuant to this Agreement and shall not bring any Germplasm of any third party onto Company premises.
|
7.3
|
Non-Competition. The Executive shall not at any time during the Executive’s employment with the Company and for a period of twelve (12) months following the termination of this Agreement and the Executive’s employment with the Company for any reason, either individually or in partnership or jointly or in conjunction with any person as principal, agent, consultant, employee,
|
(a)
|
engage in employment or enter into a contract to do work related to the research into, development, cultivation, production, supply, sales or marketing of cannabis or cannabis derived products; or the development or provision of any services (including, but not limited to, technical and product support, or consultancy or customer services) which relate to cannabis or cannabis derived products (the “Business”); or
|
(b)
|
have any financial or other interest (including by way of royalty or other compensation arrangements) in or in respect of the business of any person which carries on the Business; or
|
(c)
|
advise, lend money to or guarantee the debts or obligations of any person which carries on the Business;
|
7.4
|
Non-Solicitation of Customers. The Executive will not, during the Executive’s employment and for the one (1) year period immediately following the termination of the Executive’s employment for any reason, whether alone or for or in conjunction with any person or entity, whether as an employee, partner, director, principal, agent, consultant or in any other capacity whatsoever, directly or indirectly solicit or attempt to solicit any Customer or Prospective Customer of the Company for the purpose of obtaining the business of any Customer or Prospective Customer of the Company or persuading any such Customer or Prospective Customer to cease to do business with or reduce the amount of business it would otherwise provide to the Company. For the purpose of this Agreement, “Customer” means any organization, individual or entity which is a current customer or has been a customer of the Company during the term of the Executive’s employment with the Company but in the event of the cessation of the Executive’s employment “Customer” shall include only those current customers of the Company with whom the Executive had direct contact or access to Confidential Information by virtue of the Executive’s role as an employee of the Company at any time during the twelve-month period preceding the date of the cessation of the Executive’s employment; “direct contact” means direct communications with or by the Executive, whether in person or otherwise, for purposes of servicing, selling, or marketing on behalf of the Company, but only if such communications are more than trivial in nature, and in any case excluding bulk or mass marketing communications directed to multiple customers; and, “Prospective Customer” means any organization, individual or entity which has been actively contacted and solicited for its business by representatives of the Company, in the event of the cessation of the Executive’s employment within the twelve-month period immediately preceding the date of the cessation of the Executive’s employment, with the involvement and knowledge of the Executive.
|
7.5
|
Non-Solicitation of Employees. The Executive will not (except with the prior written consent of the Board), during the Executive’s employment and for one (1) year following the termination of the Executive’s employment for any reason, whether alone or for or in conjunction with any person or entity, whether as an employee, partner, director, principal, agent, consultant or in any other capacity whatsoever, directly or indirectly solicit or assist in the solicitation of any employee of the Company to leave such employment.
|
7.6
|
Disclosure. During the Executive’s employment with the Company, the Executive shall promptly disclose to the Board full information concerning any interest, direct or indirect, of the Executive (whether as owner, shareholder, partner, lender or other investor, director, officer, employee, consultant or otherwise) or any member of the Executive’s immediate family, in any business which is reasonably known to the Executive to purchase or otherwise obtain services or products from, or to sell or otherwise provide services or products to the Company or to any of their respective suppliers or Customers.
|
7.7
|
Other Employment. During the Executive’s employment with the Company, the Executive shall not, except as a representative of the Company or with the prior written approval of the Executive’s manager, whether paid or unpaid, be directly or indirectly engaged, concerned or have any financial interest in any capacity in any other business, trade, professional or occupation (or the setting up of any business, trade, profession or occupation).
|
7.8
|
Return of Materials. All files, forms, brochures, books, materials, written correspondence (including email and instant messages), memoranda, documents, manuals, computer disks, software products and lists (including financial and other information and lists of customers, suppliers, products and prices) pertaining to the Company which may come into the Executive’s possession or control shall at all times remain the property of the Company. Upon termination of the Executive’s employment for any reason, the Executive agrees to immediately deliver to the Company all such property of the Company in the Executive’s possession or directly or indirectly under the Executive’s control. The Executive agrees not to make, for the Executive’s personal or business use or that of any other person, reproductions or copies of any such property or other property of the Company.
|
8.
|
General
|
8.1
|
Reasonableness of Restrictions and Covenants. The Executive hereby confirms and agrees that the covenants and restrictions contained in this Agreement, including, without limitation, those contained in Section 7, are reasonable and valid the Executive further acknowledges and agrees that the Company may suffer irreparable injury in the event of any breach by the Executive of the obligations under any such covenant or restriction. Accordingly, the Executive hereby acknowledges and agrees that damages would be an inadequate remedy at law in connection with any such breach and that the Company shall therefore be entitled, in addition to any other right or remedy which it may have at law, in equity or otherwise, to temporary and permanent injunctive relief enjoining and restraining the Executive from any such breach.
|
8.2
|
Survival. Section 7 and this Section survive the termination of this Agreement and the Executive’s employment for any reason whatsoever.
|
8.3
|
Entire Agreement. This is the entire agreement between the Company and the Executive on the subject matters addressed herein. There are no representations, warranties or collateral agreements, whether written or oral, outside of this written Agreement. This Agreement and the terms and conditions of employment contained herein supersede and replace any prior understandings or discussions between the Executive and the Company regarding the Executive’s employment.
|
8.4
|
Amendments. This Agreement may only be amended by written agreement executed by the Company and the Executive. However, changes to the Executive’s position, duties, vacation, benefits and compensation, over time in the normal course, do not affect the validity or enforceability of the Agreement.
|
8.5
|
Governing Law. This Agreement will be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable in the Province of Ontario. The Company and the Executive each irrevocably attorn to the exclusive jurisdiction of the courts of Ontario and the courts of Ontario shall have the sole and exclusive jurisdiction to entertain any action arising under this Agreement.
|
8.6
|
Severability. If any provision in this Agreement is determined to be invalid or unenforceable, such provision will be severed from this Agreement, and the remaining provisions will continue in full force and effect.
|
8.7
|
Assignment. The Company may assign this Agreement to an affiliate or subsidiary, and it enures to the benefit of the Company, its successors or assigns.
|
8.8
|
Independent Legal Advice. The Executive acknowledge that the Executive has been encouraged to obtain independent legal advice regarding the execution of this Agreement, and that the Executive has either obtained such advice or voluntarily chosen not to do so, and hereby waives any objections or claims the Executive may make resulting from any failure on the Executive’s part to obtain such advice.
|
8.9
|
Waiver. No waiver of any of the provisions of this Agreement shall be effective or binding, unless made in writing and signed by the party purporting to give the same. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions, whether or not similar, nor shall such waiver constitute a continuing waiver, unless expressly stated otherwise.
|
8.10
|
Conditions. This Agreement and the Executive’s employment hereunder is conditional on the Company’s satisfaction (determined in the Company’s sole discretion) that the Executive has met the legal requirements to perform the Executive’s role, including but not limited to satisfactory results of Health Canada security clearance checks and criminal record checks and other reference checks that the Company performs. The Executive acknowledges and agrees that in signing this Agreement, and providing the Company with the necessary documentation to perform the checks required for the Executive’s role and with references, the Executive is providing consent to the Company or its agent, to performs such checks and contact the references the Executive provided to the Company.
|
8.11
|
Prior Restrictions. By signing below, the Executive represents that the Executive is not bound by the terms of any agreement with any person or entity which restricts in any way the Executive’s hiring by the Company and the performance of the Executive’s expected job duties; the Executive also represents that, during the Executive’s employment with the Company, the Executive will not disclose or make use of any Confidential Information of any other persons or entities in violation of any of their applicable policies or agreements and/or applicable law.
|
HORTICAN INC.
|
||
|
||
By
|
/s/ Michael Gorenstein
|
|
|
Name:
|
Michael Gorenstein
|
|
Title:
|
Authorized Signatory
|
SIGNED AND DELIVERED
in the presence of
|
|
|
|
/s/ David Hsu
|
|
Witness Signature
|
Name
|
|
|
June 6, 2018
|
|
Witness Print Name
|
Date
|
1.
|
Position
|
1.1
|
The Executive will continue to be employed in the position of Chief Operating Officer and the Executive’s original start date with the Company will continue to be recognized for all employment-related purposes.
|
2.
|
Location
|
2.1
|
The Executive shall be based primarily in the Company’s location in Toronto, Ontario, with business travel as reasonably required to perform the Executive’s duties hereunder. The Company may at its discretion relocate the Executive’s principal office or place of work at any time within 100 kilometres of its current location, and the Executive acknowledges and agrees that this shall not constitute a constructive termination of the Executive’s employment or Good Reason (as defined below) and the Executive agrees not to make any claim or demand to the contrary.
|
3.
|
Work Authorizations
|
3.1
|
It is a condition of this Agreement and the Executive’s employment that the Executive shall be able to work in lawfully in Canada. However, it is understood and agreed that the Executive’s position may require that the Executive work abroad, as needed by the Company. The Executive’s employment with the Company is therefore also conditional upon the securing of all necessary visas, work permits and other authorizations that may be required to enter and/or to work in any of the countries in which the Executive may be assigned to work or visit during the term of employment. The Company shall provide reasonable assistance in respect of immigration matters. Despite such assistance, the Company cannot guarantee when or whether the Executive’s application for a work permit, visa, permanent residence status or other immigration status or documents will be approved. Should the necessary authorizations that permit the Executive to legally work in Canada or in any other jurisdiction in which the Executive will be required to work not be obtained, this Agreement shall be null and void and of no force or effect. At any time, should necessary authorizations that permit the Executive to legally work in Canada or any other jurisdiction in which the
|
4.
|
Employment Duties
|
4.1
|
The Executive shall perform such duties and exercise such powers as are normally associated with or incidental and ancillary to the Executive’s position and as may be assigned to the Executive from time to time. In fulfilling his/her duties to the Company, the Executive shall be instructed by and shall regularly report to the CEO. The Executive’s duties, hours of work, location of employment and reporting relationships may be adjusted from time to time by the Company to meet changing business and operational needs. Without limiting the foregoing, the Executive shall:
|
(a)
|
devote his/her full working time and attention during normal business hours and such other times as may be reasonably required to the business and affairs of the Company and shall not, without the prior written consent of the CEO, undertake any other business or occupation or public office;
|
(b)
|
perform those duties that may be assigned to the Executive diligently, honestly, and faithfully to the best of the Executive’s ability and in the best interest of the Company;
|
(c)
|
abide by all Company policies, as instituted and amended from time to time including but not limited to, the Cronos Group Employee Handbook;
|
(d)
|
use best efforts to promote the interests and goodwill of the Company and not knowingly do, or permit to be done, anything which may be prejudicial to the Company’s interests, it being understood and agreed that the Executive is a fiduciary of the Company and owes fiduciary obligations to the Company that are not extinguished by this Agreement; and
|
(e)
|
identify and immediately report to the CEO any gross misrepresentations or violations of the Cronos Group Employee Handbook or applicable law by the Company or its management.
|
5.
|
Compensation and Benefits
|
5.1
|
Base Salary. The Company shall pay the Executive an annual base salary of CAD390,000 less applicable deductions and withholdings (“Base Salary”). The Executive’s base salary shall be paid by direct deposit on a bi-weekly basis (as may be amended from time to time), in accordance with the Company’s payroll practices. Any changes to Base Salary shall be at the sole discretion of the Company. Effective 13th May 2019.
|
5.2
|
Annual Performance Bonus. In addition to the Executive’s annual Base Salary, the Executive shall be eligible to participate in the Company’s annual cash bonus plan as may be in effect from time to time, and to receive an annual bonus, subject to the terms and conditions of that plan as determined by the Company at its sole discretion. The Executive’s annual target bonus opportunity shall initially be 100% of Base Salary, provided that the actual bonus amount, if any, will be determined pursuant to the terms of the applicable annual bonus plan. Nothing in this Agreement guarantees that the Company will maintain an annual bonus plan, and the Company reserves the right to amend or terminate any annual bonus plan established or adopted at any time, without notice or further obligation (subject only to the minimum requirements of applicable employment standards legislation, if any). The Executive must be actively employed by the Company through the applicable payment date in order to be eligible for any annual bonus for that year, subject only to the minimum requirements of applicable employment standards legislation, unless provided otherwise pursuant to the applicable annual cash bonus plan. For certainty, if the Executive’s employment is terminated by the Company with or without Just Cause, or the Executive resigns or otherwise terminates employment for any reason, regardless of any applicable notice period, pay in lieu of notice, severance payment or similar amount, the Executive shall be entitled to no annual bonus or any part thereof for the year in which the Executive ceases the Executive’s active employment or thereafter, or damages in lieu thereof, subject only to the minimum requirements of applicable employment standards legislation or unless provided otherwise pursuant to the applicable annual cash bonus plan. There shall be no guarantee of a bonus in any given year.
|
5.3
|
Long-Term Incentive Opportunity. The Executive shall be eligible to receive annual grants of equity-based awards over shares of Cronos Group with an initial target incentive opportunity of CAD520,000 (based on the grant date fair value of such awards), provided that the actual amount, if any, of the grants shall be determined by the board of directors of Cronos Group (the “Board”) at its sole discretion. Any such equity-based grants shall be governed by the terms and conditions of the equity award plan or any other applicable plan of Cronos Group and/or the applicable award agreement. Such plan or plans may be amended from time to time at Cronos Group’s sole discretion. In the event of the cessation of the Executive’s employment for any reason, the Executive’s entitlements in respect of any equity-based awards shall be governed by the terms and conditions of the applicable equity award plan, any other applicable plan and the applicable award agreement. Subject to the express minimum requirements of applicable employment standards legislation, if any, the Executive shall not be eligible for any further grants of options following the effective date of termination or damages in lieu thereof, regardless of any applicable notice period, pay in lieu of notice, severance payment or similar amount.
|
5.4
|
Group Insured Benefits. The Executive shall be eligible to participate in the Company's benefits programs for health and dental, life insurance, disability and other benefits as may be available to the employees of the Company from time to time, subject to the terms and conditions of the applicable plan document. The Company reserves the right to alter, amend or discontinue all benefits, coverages, plans and programs referred to in this paragraph, without advance notice or other obligation, subject only to the minimum requirements of applicable employment standards legislation.
|
5.5
|
Vacation. The Executive shall be entitled accrue, on a pro-rata basis, four (4) weeks’ paid vacation per year. The Executive shall take vacation time at such times as are approved in advance by the Company. Vacation time entitlement shall be prorated for the period of the Executive’s active employment in the calendar year that the Executive commences and terminates employment, subject to the minimum requirements of applicable employment standards legislation. Vacation may be carried forward until March 31 of the following year after which time it shall be forfeited to the extent it exceeds the minimum vacation entitlement provided for under applicable employment standards legislation. Vacation shall be earned but shall not be taken during the first three (3) months of the Executive’s employment.
|
5.6
|
Business Expenses. The Executive shall be reimbursed for all reasonable travel and other out-of-pocket expenses properly incurred by the Executive from time to time in connection with performance of the Executive’s duties. The Executive shall furnish to the Company on a monthly basis and in accordance with any of the Company’s policies or procedures for expense reimbursement all invoices or statements in respect of expenses for which the Executive seeks reimbursement.
|
5.7
|
Deductions and Withholdings. The Company shall make such deductions and withholdings from the Executive’s remuneration and any other payments or benefits provided to the Executive pursuant to this Agreement as may be required by law.
|
6.
|
Termination of Employment
|
6.1
|
Termination by the Executive. The Executive may terminate his/her employment with the Company at any time by providing the Company with at least three (3) months of notice in writing. If, upon receipt of the Executive’s resignation (or any later date during such notice period), the Company terminates the Executive’s employment before the date the resignation was to be effective, the Company shall, in full satisfaction of its obligations to the Executive: (a) pay the Executive’s Base Salary and vacation pay accrued until the date the resignation was to be effective up to a maximum of three (3) months; (b) reimburse the outstanding expenses properly incurred by the Executive until the date the Executive’s employment ceases; and (c) provide the Executive with such other compensation and benefits that are expressly required pursuant to applicable employment standards legislation, if any. In such circumstances the Executive shall be ineligible for any pro-rated bonus for the year of termination, and any entitlements in respect of any equity-based awards shall be governed by the terms and conditions of the applicable equity award plan, any other applicable plan and the applicable award agreement.
|
6.2
|
Termination by the Company for Just Cause or on Death or Disability. The Company may terminate the Executive’s employment at any time for Just Cause without prior notice or in the event of the Executive’s death or Disability (as defined below). On the termination of the Executive’s employment for Just Cause or on the Executive’s death or Disability, this Agreement and the Executive’s employment shall terminate and the Company shall, in full satisfaction of its obligations to the Executive: (a) pay the Executive’s Base Salary and vacation pay accrued until the date the Executive’s employment ceases; (b) reimburse the outstanding expenses properly incurred by the Executive until the date the Executive’s employment ceases; and (c) provide the Executive with such other compensation and benefits that are expressly required pursuant to applicable employment standards legislation, if any. In such circumstances the Executive shall be ineligible for any pro-rated bonus for the year of termination, and any entitlements in respect of equity-based awards shall be governed by the terms and conditions of the applicable equity award plan, any other applicable plan and the applicable award agreement. For the purposes of this Agreement, (A) “Just Cause” means: (i) any act or omission constituting “just cause” for dismissal without notice under applicable law; (ii) the Executive’s repeated failure or refusal to perform the Executive’s principal duties and responsibilities after notice from the CEO or other officer of the Company; (iii) misappropriation of the funds or property of the Company; (iv) use of alcohol or drugs in violation of the Company’s policies on such use or that interferes with the Executive’s obligations under this Agreement, continuing after a single warning (subject to the Company’s obligations under applicable human rights legislation); (v) the indictment, arrest or conviction in a court of law for, or the entering of a plea of guilty to, a summary or indictable offence or any crime involving moral turpitude, fraud, dishonesty or theft (subject to the Company’s obligations under applicable human rights legislation); (vi) the misuse of Company computers or computer network systems for non-Company business; (vii) engaging in any act (including, without restriction, an act of sexual harassment as determined by the Company) which is a violation of any law, regulation or Company policy; or (viii) any wilful or intentional act which injures or could reasonably be expected to injure the reputation, business or business relationships of the Company, and (B) “Disability” means a physical or mental incapacity of the Executive that has prevented the Executive from performing the duties customarily assigned to the Executive for 180 calendar days, whether or not consecutive, out of any twelve (12) consecutive months and that in the opinion of the Company, acting on the basis of advice from a duly qualified medical practitioner, is likely to continue to a similar degree.
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6.3
|
Termination by the Company without Just Cause or Resignation for Good Reason on Change of Control. The Company may terminate the Executive’s employment at any time without Just Cause, on providing thirty (30) days’ written notice to the Executive. The Executive may resign the Executive’s employment for Good Reason (as defined below) within twenty-four (24)
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(a)
|
pay the Executive’s Base Salary and accrued but unpaid vacation pay in accordance with applicable employment standards legislation;
|
(b)
|
reimburse the Executive’s expenses properly incurred until the date the Executive’s employment ceases;
|
(c)
|
in lieu of notice, pay the Executive the greater of (i) one (1) month of the Executive’s annual base salary in effect at the time of termination for each completed year of service with the Company, to a maximum of twelve (12) months of base salary, payable by way of lump sum payment within sixty (60) days following such termination, and (ii) the minimum termination pay and severance pay entitlements of the Executive pursuant to applicable employment standards legislation.
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(d)
|
continue the Executive’s group insured benefits, if any, until the end of the notice period calculated under (c) above or the date on which the Executive obtains alternate benefit coverage, whichever occurs first, subject to the terms and conditions of the benefit plans, as amended from time to time, and the minimum requirements of applicable employment standards legislation. If the Company is unable for any reason to continue its contributions to the benefit plans as set out in this Agreement, it shall pay the Executive an amount equal to the Company’s required contributions to such benefit plans on behalf of the Executive for such period. The Executive agrees that he/she is required to notify the Company when he/she obtains alternate life, medical and dental benefit coverage; and
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(e)
|
determine the Executive’s entitlements in respect of equity-based awards in accordance with the terms and conditions of the applicable equity award plan, any other applicable plan and the applicable award agreement.
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a.
|
the consummation of any transaction or series of transactions including any reorganization, recapitalization, statutory share exchange, consolidation, amalgamation, arrangement, merger or issue of voting shares in the capital of Cronos Group, the result of which is that any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, association, joint-stock company, estate, trust, organization, governmental authority or other entity of any kind or nature (“Person”) or group of Persons acting jointly or in concert for purposes of such transaction or series of transactions becomes the beneficial owner, directly or indirectly, of more than 50% of the voting securities in the capital of the entity resulting from such transaction or series of transactions or the entity that acquired all or substantially all of the business or assets of Cronos Group in a transaction or series of transactions described in paragraph (ii) below (in each case, the “Surviving Company”) or the ultimate parent entity that has beneficial ownership of sufficient voting power to elect a majority of the board of directors (or analogous governing body) of the Surviving Company (the “Parent Company”), measured by voting power of the outstanding voting securities eligible to elect members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) rather than number of securities (but shall not include the creation of a holding company or other transaction that does not involve any substantial change in the proportion of direct or indirect beneficial ownership of the voting securities of Cronos Group prior to the consummation of the transaction or series of transactions), provided that the exercise by Altria Summit LLC (or any of its affiliates) of the Purchased Warrant (as defined in the Subscription Agreement by and among Cronos Group Inc., Altria Summit LLC and Altria Group, Inc. dated as of December 7, 2018) shall not constitute a Change of Control pursuant to this clause (a);
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b.
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the direct or indirect sale, transfer or other disposition, in one or a series of transactions, of all or substantially all of the business or assets of Cronos Group, taken as a whole, to any person or group of persons acting jointly or in concert for purposes of such transaction or series of transactions (other than to any affiliates of Cronos Group); or
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c.
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Incumbent Directors during any consecutive twelve (12) month period ceasing to constitute a majority of the Board of Cronos Group (for the purposes of this paragraph, an “Incumbent Director” shall mean any member of the Board who is a member of the Board immediately prior to the occurrence of a contested election of directors of Cronos Group).
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(a)
|
the assignment to the Executive of duties materially different than the duties assigned to the Executive hereunder;
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(b)
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a material diminution in the Executive’s title, status, seniority, reporting relationship, responsibilities or authority;
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(c)
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a material reduction in the Executive’s Base Salary; or
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(d)
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the relocation of the Executive’s primary work location, except as permitted by Section 2.1.
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6.4
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Resignation on Termination. The Executive agrees that upon any termination of employment with the Company for any reason the Executive shall immediately tender resignation from any position the Executive may hold as an officer or director of the Company and take all steps necessary to remove Executive from any and all designated positions under any applicable laws, including without limitation, the Cannabis Act (Canada) and the regulations thereunder, as the same may be amended from time to time, or any subsidiary or affiliate of the Company. In the event that the Executive fails to comply with this obligation within three (3) days of the Executive's termination or resignation, the Executive hereby irrevocably authorizes the Company to appoint a Person in the Executive's name and on the Executive's behalf to sign or execute any documents and/or do all things necessary or requisite to give effect to such resignation.
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6.5
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Compliance with Laws. The Executive understands and agrees that the entitlements under this Section 6 are provided in full satisfaction of the Executive’s entitlements to notice of termination, pay in lieu of notice, and severance pay, if any, under applicable employment standards legislation, this Agreement, any employee benefit plan sponsored or maintained by the Company or any of its affiliates, applicable law (including the common law) or otherwise.
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7.
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Restrictive Covenants
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7.1
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Non-Disclosure. The Executive acknowledges and agrees that:
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(a)
|
during the term of the Executive’s employment, the Executive may be given access to or may become acquainted with confidential and proprietary information of the Company and its affiliates and related entities and third parties to which the Company and its affiliates and related entities may have any obligations of non-disclosure or confidentiality, including but not limited to: trade secrets; know-how; Intellectual Property (as defined below); Employee Inventions (as defined below), Invention Records (as defined below), existing and contemplated work product resulting from or related to projects performed or to be performed by or for the Company; programs and program modules; processes; algorithms; design concepts; system designs; production data; test data; research and development information; information regarding the acquisition, protection, enforcement and licensing of proprietary rights; technology; joint ventures; business, accounting, engineering and financial information and data; marketing and development plans and methods of obtaining business; forecasts; future plans and strategies of the Company; pricing, cost, billing and fee arrangements and policies; quoting procedures; special methods and processes; lists and/or identities of customers, suppliers, vendors and contractors; the type, quantity and specifications of products and services purchased, leased, licensed or received by the Company and/or any of its customers, suppliers, or vendors; internal personnel and financial information; business and/or personal information about any senior staff members of the Company or any Person with which the Company enters a strategic alliance or any other partnering arrangements; vendor and supplier information; the manner and method of conducting the Company’s business; the identity or nature of relationship of any persons or entities associated with or engaged as consultants, advisers, agents, distributors or sales representatives (the “Confidential Information”) the disclosure of any of which to competitors of the Company or to the general public, or the use of same by the Executive or any competitor of the Company, would be highly detrimental to the interests of the Company;
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(b)
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disclosure or use of Confidential Information, other than in connection with the Company’s business or as specifically authorized by the Company, will be highly detrimental to the business and interests of the Company and could result in serious loss of business and damage to it. Accordingly, the Executive specifically agrees to hold all Confidential Information in strictest confidence, and the Executive agrees that the Executive shall not, without the Company’s prior written consent, disclose, divulge or reveal to any person, or use for any purpose other than for the exclusive benefit of the Company, any Confidential Information, in whatever form contained; provided that the foregoing shall not apply to information (except for personal information about identifiable individuals) that: (i) was known to the public prior to its disclosure to the Executive; (ii) becomes generally known to the public subsequent to disclosure to the Executive other than by reason of the Executive’s breach of this Section; (iii) becomes available to the Executive from a source independent of the Company; or (iv) the Executive is specifically required to disclose by applicable law or legal process (provided that the Executive provides the Company with prompt advance written notice of the contemplated disclosure and cooperates with the Company in seeking a protective order or other appropriate protection of such information); and
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(c)
|
the Executive shall deliver to the Company, immediately upon termination of employment (for any reason and regardless of whether the Executive or the Company terminate the employment) or at any time the Company so requests: (i) any and all documents, files, notes, memoranda, models, databases, computer files and/or other computer programs reflecting any Confidential Information whatsoever or otherwise relating to the Company’s business; (ii) lists or other documents regarding customers, suppliers, or vendors of the Company or leads or referrals to prospective business deals; and (iii) any computer equipment, home office equipment, automobile or other business equipment belonging to the Company that the Executive may then possess or have under the Executive’s control.
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(d)
|
For the avoidance of doubt, nothing in this Agreement limits, restricts or in any other way affects the Executive communicating with any governmental authority or entity concerning matters relevant to the governmental authority or entity. The Executive and the Company agree that no confidentiality or other obligation the Executive owes to the Company prohibits the Executive from reporting possible violations of law or regulation to any governmental authority or entity under any applicable whistleblower protection provision of applicable Canadian, U.S. Federal or U.S. State law or regulation (including Section 21F of the Securities Exchange Act of 1934 or Section 806 of the Sarbanes-Oxley Act of 2002) or requires the Executive to notify the Company of any such report. The Executive is hereby notified that the immunity provisions in Section 1833 of title 18 of the United States Code provide that an individual cannot be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made (i) in confidence to federal, state or local government officials, either directly or indirectly, or to an attorney, and is solely for the purpose of reporting or investigating a suspected violation of the law, (ii) under seal in a complaint or other document filed in a lawsuit or other proceeding, or (iii) to the Executive’s attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law (and the trade secret may be used in the court proceedings for such lawsuit) as long as any document containing the trade secret is filed under seal and the trade secret is not disclosed except pursuant to court order.
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7.2
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Intellectual Property
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(a)
|
In this section, the term “Germplasm” means any living or preserved biological tissue or material which may be used for the purpose of plant breeding and/or propagation, including but not limited to plants, cuttings, seeds, clones, cells, tissues, plant materials, and genetic materials (including but not limited to nucleic acids, genes, promoters, reading frames, regulatory sequences, terminators, chromosomes whether artificial or natural, and vectors).
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(b)
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The Executive agrees to promptly disclose to the Company (including to the Executive’s manager) all ideas, suggestions, discoveries, designs, works, developments, improvements, processes, formulas, data, techniques, know-how, confidential and proprietary information, trade secrets, inventions and improvements, and any other intellectual property rights, including with respect to, but not limited to, Germplasm, and whether or not any of the foregoing are registrable as patents, industrial designs, copyrights, trademarks or plant breeder rights (collectively, “Intellectual Property”) which the Executive may author, make, conceive, develop, discover, or reduce to practice, solely, jointly or in common with other employees, during the Executive’s employment with the Company and which relate to the business activities of the Company (“Employee Inventions”). The Executive agrees to maintain as confidential any Employee Inventions, and not to make application for registration of rights in respect of such unless it is at the request and direction of the Company. Intellectual Property coming within the scope of the business of the Company made and/or developed by the Executive while in the employ of the Company, whether or not conceived or made during regular working hours and whether or not the Executive is specifically instructed to make or develop the same, shall be for the benefit of the Company and shall be considered to have been made pursuant to this Agreement and shall be deemed Employee Inventions and shall immediately become exclusive property of the Company. The Executive must keep, maintain, and make available to the Company complete and up-to-date records relating to any such Intellectual Property, and agree that all such records are the sole and absolute property of the Company.
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(c)
|
The Executive hereby assigns and transfers, and shall assign and transfer, to the Company, the Executive’s entire right, title and interest in and to any and all Employee Inventions, and the Executive agrees to execute and deliver to the Company any and all instruments necessary or desirable to accomplish the foregoing and, in addition, to do all lawful acts which may be necessary or desirable to assist the Company to obtain and enforce protection of Employee Inventions. The Executive shall, at the request and cost of the Company, and for no additional compensation or consideration from the Company, sign, execute, make and do all such deeds, documents, acts and things as the Company and its duly authorized agents may reasonably require: (i) to apply for, obtain and vest in the name of the Company alone (unless the Company otherwise directs) patents, letters patent, copyrights, plant breeders rights, or other analogous protection in any country throughout the world and when so obtained or vested to renew and restore the same; (ii) to perfect or evidence ownership by the Company or its designees of any and all Employee Inventions, in form suitable for recordation in the United States, Canada, and any other patent office; (iii) to defend any opposition proceedings of any type whatsoever in respect of such applications, and any opposition proceedings or petitions or applications of any type whatsoever for revocation of such patents, letters patent, copyright or other analogous protection, whether such proceedings are brought before a court or any administrative body; and (iv) to defend and/or assert the Company’s rights in any Intellectual Property against any third party. For greater certainty, all materials related to Employee Inventions (including notes, records and correspondence, whether written or electronic) (collectively, “Invention Records”) are the property of the Company, which the Executive shall provide to the Company upon request. Invention Records shall not be removed from Company premises without the prior written consent of the Company. The Executive further waives all moral rights in and to any Employee Inventions and all work the Executive produced during the course of the Executive’s employment.
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(e)
|
In the course of performing duties pursuant to this Agreement, the Executive shall only use Germplasm provided by the Company, and the Executive agrees that any such Germplasm provided by the Company remains the sole property of the Company and that such Germplasm shall not be removed from Company premises without the prior written consent of the Company.
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(e)
|
The Executive represents and warrants that the Executive does not possess any Intellectual Property or Germplasm of any third party, including but not limited to any prior employer or competitor of the Company, and the Executive shall not acquire and/or use Intellectual Property or Germplasm of any third party in the course of performing duties pursuant to this Agreement and shall not bring any Germplasm of any third party onto Company premises.
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7.3
|
Non-Competition. The Executive shall not at any time during the Executive’s employment with the Company and for a period of one (1) year following the termination of this Agreement and the Executive’s employment with the Company for any reason, either individually or in partnership or jointly or in conjunction with any Person as principal, agent, consultant, employee, partner, director, shareholder (other than an investment of less than five (5) per cent of the shares of a company traded on a registered stock exchange or traded in the over the counter market in Canada), or in any other capacity whatsoever:
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(a)
|
engage in employment or enter into a contract to do work related to the research into, development, cultivation, production, supply, sales or marketing of cannabis or cannabis derived products; or the development or provision of any services (including, but not limited to, technical and product support, or consultancy or customer services) which relate to cannabis or cannabis derived products (the “Business”); or
|
(b)
|
have any financial or other interest (including by way of royalty or other compensation arrangements) in or in respect of the business of any Person which carries on the Business; or
|
(c)
|
advise, lend money to or guarantee the debts or obligations of any Person which carries on the Business;
|
7.4
|
Non-Solicitation of Customers. The Executive shall not, during the Executive’s employment and for the one (1) year period immediately following the termination of the Executive’s employment for any reason, whether alone or for or in conjunction with any Person or entity, whether as an employee, partner, director, principal, agent, consultant or in any other capacity whatsoever, directly or indirectly solicit or attempt to solicit any Customer or Prospective Customer for the purpose of obtaining the business of any Customer or Prospective Customer of the Company or persuading any such Customer or Prospective Customer to cease to do business with or reduce the amount of business it would otherwise provide to the Company or its affiliates. For the purpose of this Agreement, “Customer” means any Person which is a current customer or has been a customer of the Company or an affiliate of the Company during the term of the Executive’s employment with the Company but in the event of the cessation of the Executive’s employment “Customer” shall include only those current customers of the Company or an affiliate of the Company with whom the Executive had direct contact or access to Confidential Information by virtue of the Executive’s role as an employee of the Company at any time during the twelve (12) month period preceding the date of the cessation of the Executive’s employment; “direct contact” means direct communications with or by the Executive, whether in Person or otherwise, for purposes of servicing, selling, or marketing on behalf of the Company, but only if such communications are more than trivial in nature, and in any case excluding bulk or mass marketing communications directed to multiple customers; and, “Prospective Customer” means any organization, individual or entity which has been actively contacted and solicited for its business by representatives of the Company or affiliates of the Company, but in the event of the cessation of the Executive’s employment within the twelve (12) month period immediately preceding the date of the cessation of the Executive’s employment, with the involvement and knowledge of the Executive.
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7.5
|
Non-Solicitation of Employees. The Executive shall not, during the Executive’s employment and for two (2) years following the termination of the Executive’s employment for any reason, whether alone or for or in conjunction with any Person or entity, whether as an employee, partner, director, principal, agent, consultant or in any other capacity whatsoever, directly or indirectly solicit or assist in the solicitation of any employee of the Company or an affiliate of the Company to leave such employment.
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7.6
|
Disclosure. During the Executive’s employment with the Company, the Executive shall promptly disclose to the Board full information concerning any interest, direct or indirect, of the Executive (whether as owner, shareholder, partner, lender or other investor, director, officer, employee, consultant or otherwise) or any member of the Executive’s immediate family, in any business which is reasonably known to the Executive to purchase or otherwise obtain services or products from, or to sell or otherwise provide services or products to the Company or to any of their respective suppliers or Customers.
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7.7
|
Other Employment. During the Executive’s employment with the Company, the Executive shall not, except as a representative of the Company or with the prior written approval of the Executive’s manager, whether paid or unpaid, be directly or indirectly engaged, concerned or have any financial interest in any capacity in any other business, trade, professional or occupation (or the setting up of any business, trade, profession or occupation).
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7.8
|
Return of Materials. All files, forms, brochures, books, materials, written correspondence (including email and instant messages), memoranda, documents, manuals, computer disks, software products and lists (including financial and other
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8.
|
General
|
8.1
|
Reasonableness of Restrictions and Covenants. The Executive hereby confirms and agrees that the covenants and restrictions contained in this Agreement, including, without limitation, those contained in Section 7, are reasonable and valid the Executive further acknowledges and agrees that the Company may suffer irreparable injury in the event of any breach by the Executive of the obligations under any such covenant or restriction. Accordingly, the Executive hereby acknowledges and agrees that damages would be an inadequate remedy at law in connection with any such breach and that the Company shall therefore be entitled, in addition to any other right or remedy which it may have at law, in equity or otherwise, to temporary and permanent injunctive relief enjoining and restraining the Executive from any such breach.
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8.2
|
Survival. Section 7 and this Section survive the termination of this Agreement and the Executive’s employment for any reason whatsoever.
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8.3
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Entire Agreement. This is the entire agreement between the Company and the Executive on the subject matters addressed herein. There are no representations, warranties or collateral agreements, whether written or oral, outside of this written Agreement. This Agreement and the terms and conditions of employment contained herein supersede and replace any prior understandings or discussions between the Executive and the Company regarding the Executive’s employment.
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8.4
|
Withholding Taxes. The Company may withhold from any amounts or benefits payable under this Agreement income taxes and payroll taxes that are required to be withheld pursuant to any applicable law or regulation.
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8.5
|
Section 409A Compliance. To the extent applicable, this Agreement is intended to comply with the requirements of Section 409A of the United States Internal Revenue Code of 1986, as amended (together with the applicable regulations thereunder, “Section 409A”). To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A or to the extent any provision in this Agreement must be modified to comply with Section 409A (including, without limitation, Treasury Regulation 1.409A-3(c)), such provision shall be read, or shall be modified (with the mutual consent of the parties, which consent shall not be unreasonably withheld), as the case may be, in such a manner so that all payments due under this Agreement shall comply with Section 409A. For purposes of Section 409A, each payment made under this Agreement shall be treated as a separate payment. In no event may Executive, directly or indirectly, designate the calendar year of payment. Notwithstanding any provision of this Agreement to the contrary, if necessary to comply with the restriction in Section 409A(a)(2)(B) concerning payments to “specified employees” (as defined in Section 409A) any payment on account of the Executive’s separation from service that would otherwise be due hereunder within six months after such separation shall nonetheless be delayed until the first business day of the seventh month following the Executive’s date of termination and the first such payment shall include the cumulative amount of any payments that would have been paid prior to such date if not for such restriction. Notwithstanding anything contained herein to the contrary, the Executive shall not be considered to have terminated employment with the Company for purposes of this Agreement unless he would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A.
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8.6
|
Amendments. This Agreement may only be amended by written agreement executed by the Company and the Executive. However, changes to the Executive’s position, duties, vacation, benefits and compensation, over time in the normal course, do not affect the validity or enforceability of the Agreement.
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8.7
|
Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable in the Province of Ontario. The Company and the Executive each irrevocably consent to the exclusive jurisdiction of the courts of Ontario and the courts of Ontario shall have the sole and exclusive jurisdiction to entertain any action arising under this Agreement.
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8.8
|
Severability. If any provision in this Agreement is determined to be invalid or unenforceable, such provision shall be severed from this Agreement, and the remaining provisions shall continue in full force and effect. If for any reason any court of competent jurisdiction will find any provisions of this Agreement unreasonable in duration or geographic scope or otherwise, the Executive and the Company agree that the restrictions and prohibitions contained herein will be effective to the fullest extent allowed under applicable law in such jurisdiction.
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8.9
|
Assignment. The Company may assign this Agreement to an affiliate or subsidiary, and it enures to the benefit of the Company, its successors or assigns.
|
8.10
|
Independent Legal Advice. The Executive acknowledges that the Executive has been encouraged to obtain independent legal advice regarding the execution of this Agreement, and that the Executive has either obtained such advice or voluntarily chosen
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8.11
|
Waiver. No waiver of any of the provisions of this Agreement shall be effective or binding, unless made in writing and signed by the party purporting to give the same. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions, whether or not similar, nor shall such waiver constitute a continuing waiver, unless expressly stated otherwise.
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8.12
|
Conditions. This Agreement and the Executive’s continued employment hereunder is conditional on the Company’s satisfaction (determined in the Company’s sole discretion) that the Executive has met the legal requirements to perform the Executive’s role, including but not limited to satisfactory results of Health Canada or any other applicable security clearance checks and criminal record checks and other reference checks that the Company performs. The Executive acknowledges and agrees that in signing this Agreement, and providing the Company with the necessary documentation to perform the checks required for the Executive’s role and with references, the Executive is providing consent to the Company or its agent, to performs such checks and contact the references the Executive provided to the Company.
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8.13
|
Prior Restrictions. By signing below, the Executive represents that the Executive is not bound by the terms of any agreement with any Person which restricts in any way the Executive’s hiring by the Company and the performance of the Executive’s expected job duties; the Executive also represents that, during the Executive’s employment with the Company, the Executive shall not disclose or make use of any confidential information of any other persons or entities in violation of any of their applicable policies or agreements and/or applicable law.
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8.14
|
Counterparts. This Agreement may be executed in one or more counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by electronic transmission, including in portable document format (.pdf), shall be deemed as effective as delivery of an original executed counterpart of this Agreement.
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HORTICAN INC.
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||
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By:
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/s/ Michael Gorenstein
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Name: Michael Gorenstein
Title: Chief Executive Officer
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CRONOS GROUP INC.
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||
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By:
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/s/ Michael Gorenstein
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Name: Michael Gorenstein
Title: Chief Executive Officer
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EXECUTIVE
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||
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/s/ David Hsu
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Name: David Hsu
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1.
|
Position
|
1.1
|
The Executive will be employed in the position of Chief Commercial Officer, commencing on May 15, 2019 or such other date as agreed between the Executive and the Company.
|
2.
|
Location
|
2.1
|
The Executive shall be based primarily in the Company’s location in Toronto, Ontario, with business travel as reasonably required to perform the Executive’s duties hereunder. The Company may at its discretion relocate the Executive’s principal office or place of work at any time within 100 kilometres of its current location, and the Executive acknowledges and agrees that this shall not constitute a constructive termination of the Executive’s employment or Good Reason (as defined below) and the Executive agrees not to make any claim or demand to the contrary.
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3.
|
Work Authorizations
|
3.1
|
It is a condition of this Agreement and the Executive’s employment that the Executive shall be able to work in lawfully in Canada. However, it is understood and agreed that the Executive’s position may require that the Executive work abroad, as needed by the Company. The Executive’s employment with the Company is therefore also conditional upon the securing of all necessary visas, work permits and other authorizations that may be required to enter and/or to work in any of the countries in which the Executive may be assigned to work or visit during the term of employment. The Company shall provide reasonable assistance in respect of immigration matters. Despite such assistance, the Company cannot guarantee when or whether the Executive’s application for a work permit, visa, permanent residence status or other immigration status or documents will be approved. Should the necessary authorizations that permit the Executive to legally work in Canada or in any other jurisdiction in which the Executive will be required to work not be obtained, this Agreement shall be null and void and of no force or effect. At any time, should necessary authorizations that permit the Executive to legally work in Canada or any other jurisdiction in which the Executive will be required to work or visit expire without the possibility of renewal, the Executive’s employment shall come to an end and shall be treated by the Company as a termination without Just Cause (as defined below).
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4.
|
Employment Duties
|
4.1
|
The Executive shall perform such duties and exercise such powers as are normally associated with or incidental and ancillary to the Executive’s position and as may be assigned to the Executive from time to time. In fulfilling his/her duties to the Company, the Executive shall be instructed by and shall regularly report to the CEO. The Executive’s duties, hours of work, location of employment and reporting relationships may be adjusted from time to time by the Company to meet changing business and operational needs. Without limiting the foregoing, the Executive shall:
|
(a)
|
devote his/her full working time and attention during normal business hours and such other times as may be reasonably required to the business and affairs of the Company and shall not, without the prior written consent of the CEO, undertake any other business or occupation or public office;
|
(b)
|
perform those duties that may be assigned to the Executive diligently, honestly, and faithfully to the best of the Executive’s ability and in the best interest of the Company;
|
(c)
|
abide by all Company policies, as instituted and amended from time to time including but not limited to, the Cronos Group Employee Handbook;
|
(d)
|
use best efforts to promote the interests and goodwill of the Company and not knowingly do, or permit to be done, anything which may be prejudicial to the Company’s interests, it being understood and agreed that the Executive is a fiduciary of the Company and owes fiduciary obligations to the Company that are not extinguished by this Agreement; and
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(e)
|
identify and immediately report to the CEO any gross misrepresentations or violations of the Cronos Group Employee Handbook or applicable law by the Company or its management.
|
5.
|
Compensation and Benefits
|
5.1
|
Base Salary. The Company shall pay the Executive an annual base salary of CAD175,000 less applicable deductions and withholdings (“Base Salary”). The Executive’s base salary shall be paid by direct deposit on a bi-weekly basis (as may be amended from time to time), in accordance with the Company’s payroll practices. Any changes to Base Salary shall be at the sole discretion of the Company. This is effective 13th May 2019.
|
5.2
|
Annual Performance Bonus. In addition to the Executive’s annual Base Salary, the Executive shall be eligible to participate in the Company’s annual cash bonus plan as may be in effect from time to time, and to receive an annual bonus, subject to the terms and conditions of that plan as determined by the Company at its sole discretion. The Executive’s annual target bonus opportunity shall initially be 86% of Base Salary, provided that the actual bonus amount, if any, will be determined pursuant to the terms of the applicable annual bonus plan. Nothing in this Agreement guarantees that the Company will maintain an annual bonus plan, and the Company reserves the right to amend or terminate any annual bonus plan established or adopted at any time, without notice or further obligation (subject only to the minimum requirements of applicable employment standards legislation, if any). The Executive must be actively employed by the Company through the applicable payment date in order to be eligible for any annual bonus for that year, subject only to the minimum requirements of applicable employment standards legislation, unless provided otherwise pursuant to the applicable annual cash bonus plan. For certainty, if the Executive’s employment is terminated by the Company with or without Just Cause, or the Executive resigns or otherwise terminates employment for any reason, regardless of any applicable notice period, pay in lieu of notice, severance payment or similar amount, the Executive shall be entitled to no annual bonus or any part thereof for the year in which the Executive ceases the Executive’s active employment or thereafter, or damages in lieu thereof, subject only to the minimum requirements of applicable employment standards legislation or unless provided otherwise pursuant to the applicable annual cash bonus plan. There shall be no guarantee of a bonus in any given year.
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5.3
|
Long-Term Incentive Opportunity. The Executive shall be eligible to receive annual grants of equity-based awards over shares of Cronos Group with an initial target incentive opportunity of CAD175,000 (based on the grant date fair value of such awards), provided that the actual amount, if any, of the grants shall be determined by the board of directors of Cronos Group (the “Board”) at its sole discretion. Any such equity-based grants shall be governed by the terms and conditions of the equity award plan or any other applicable plan of Cronos Group and/or the applicable award agreement. Such plan or plans may be amended from time to time at Cronos Group’s sole discretion. In the event of the cessation of the Executive’s employment for any reason, the Executive’s entitlements in respect of any equity-based awards shall be governed by the terms and conditions of the applicable equity award plan, any other applicable plan and the applicable award agreement. Subject to the express minimum requirements of applicable employment standards legislation, if any, the Executive shall not be eligible for any further grants of options following the effective date of termination or damages in lieu thereof, regardless of any applicable notice period, pay in lieu of notice, severance payment or similar amount.
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5.4
|
Group Insured Benefits. The Executive shall be eligible to participate in the Company's benefits programs for health and dental, life insurance, disability and other benefits as may be available to the employees of the Company from time to time, subject to the terms and conditions of the applicable plan document. The Company reserves the right to alter, amend or discontinue all
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5.5
|
Vacation. The Executive shall be entitled accrue, on a pro-rata basis, four (4) weeks’ paid vacation per year. The Executive shall take vacation time at such times as are approved in advance by the Company. Vacation time entitlement shall be prorated for the period of the Executive’s active employment in the calendar year that the Executive commences and terminates employment, subject to the minimum requirements of applicable employment standards legislation. Vacation may be carried forward until March 31 of the following year after which time it shall be forfeited to the extent it exceeds the minimum vacation entitlement provided for under applicable employment standards legislation. Vacation shall be earned but shall not be taken during the first three (3) months of the Executive’s employment.
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5.6
|
Business Expenses. The Executive shall be reimbursed for all reasonable travel and other out-of-pocket expenses properly incurred by the Executive from time to time in connection with performance of the Executive’s duties. The Executive shall furnish to the Company on a monthly basis and in accordance with any of the Company’s policies or procedures for expense reimbursement all invoices or statements in respect of expenses for which the Executive seeks reimbursement.
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5.7
|
Deductions and Withholdings. The Company shall make such deductions and withholdings from the Executive’s remuneration and any other payments or benefits provided to the Executive pursuant to this Agreement as may be required by law.
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6.
|
Termination of Employment
|
6.1
|
Termination by the Executive. The Executive may terminate his/her employment with the Company at any time by providing the Company with at least three (3) months of notice in writing. If, upon receipt of the Executive’s resignation (or any later date during such notice period), the Company terminates the Executive’s employment before the date the resignation was to be effective, the Company shall, in full satisfaction of its obligations to the Executive: (a) pay the Executive’s Base Salary and vacation pay accrued until the date the resignation was to be effective up to a maximum of three (3) months; (b) reimburse the outstanding expenses properly incurred by the Executive until the date the Executive’s employment ceases; and (c) provide the Executive with such other compensation and benefits that are expressly required pursuant to applicable employment standards legislation, if any. In such circumstances the Executive shall be ineligible for any pro-rated bonus for the year of termination, and any entitlements in respect of any equity-based awards shall be governed by the terms and conditions of the applicable equity award plan, any other applicable plan and the applicable award agreement.
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6.2
|
Termination by the Company for Just Cause or on Death or Disability. The Company may terminate the Executive’s employment at any time for Just Cause without prior notice or in the event of the Executive’s death or Disability (as defined below). On the termination of the Executive’s employment for Just Cause or on the Executive’s death or Disability, this Agreement and the Executive’s employment shall terminate and the Company shall, in full satisfaction of its obligations to the Executive: (a) pay the Executive’s Base Salary and vacation pay accrued until the date the Executive’s employment ceases; (b) reimburse the outstanding expenses properly incurred by the Executive until the date the Executive’s employment ceases; and (c) provide the Executive with such other compensation and benefits that are expressly required pursuant to applicable employment standards legislation, if any. In such circumstances the Executive shall be ineligible for any pro-rated bonus for the year of termination, and any entitlements in respect of equity-based awards shall be governed by the terms and conditions of the applicable equity award plan, any other applicable plan and the applicable award agreement. For the purposes of this Agreement, (A) “Just Cause” means: (i) any act or omission constituting “just cause” for dismissal without notice under applicable law; (ii) the Executive’s repeated failure or refusal to perform the Executive’s principal duties and responsibilities after notice from the CEO or other officer of the Company; (iii) misappropriation of the funds or property of the Company; (iv) use of alcohol or drugs in violation of the Company’s policies on such use or that interferes with the Executive’s obligations under this Agreement, continuing after a single warning (subject to the Company’s obligations under applicable human rights legislation); (v) the indictment, arrest or conviction in a court of law for, or the entering of a plea of guilty to, a summary or indictable offence or any crime involving moral turpitude, fraud, dishonesty or theft (subject to the Company’s obligations under applicable human rights legislation); (vi) the misuse of Company computers or computer network systems for non-Company business; (vii) engaging in any act (including, without restriction, an act of sexual harassment as determined by the Company) which is a violation of any law, regulation or Company policy; or (viii) any wilful or intentional act which injures or could reasonably be expected to injure the reputation, business or business relationships of the Company, and (B) “Disability” means a physical or mental incapacity of the Executive that has prevented the Executive from performing the duties customarily assigned to the Executive for 180 calendar days, whether or not consecutive, out of any twelve (12) consecutive months and that in the opinion of the Company, acting on the basis of advice from a duly qualified medical practitioner, is likely to continue to a similar degree.
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6.3
|
Termination by the Company without Just Cause or Resignation for Good Reason on Change of Control. The Company may terminate the Executive’s employment at any time without Just Cause, on providing thirty (30) days’ written notice to the Executive. The Executive may resign the Executive’s employment for Good Reason (as defined below) within twenty-four (24) months of the occurrence of a Change in Control (as defined below), on providing thirty (30) days’ written notice to the Company. If the Company terminates the Executive’s employment without Just Cause or if the Executive resigns his employment for Good Reason within twenty-four (24) months of the occurrence of a Change of Control, and if the Executive signs and delivers and
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(a)
|
pay the Executive’s Base Salary and accrued but unpaid vacation pay in accordance with applicable employment standards legislation;
|
(b)
|
reimburse the Executive’s expenses properly incurred until the date the Executive’s employment ceases;
|
(c)
|
in lieu of notice, pay the Executive the greater of (i) one (1) month of the Executive’s annual base salary in effect at the time of termination for each completed year of service with the Company, to a maximum of twelve (12) months of base salary, payable by way of lump sum payment within sixty (60) days following such termination, and (ii) the minimum termination pay and severance pay entitlements of the Executive pursuant to applicable employment standards legislation.
|
(d)
|
continue the Executive’s group insured benefits, if any, until the end of the notice period calculated under (c) above or the date on which the Executive obtains alternate benefit coverage, whichever occurs first, subject to the terms and conditions of the benefit plans, as amended from time to time, and the minimum requirements of applicable employment standards legislation. If the Company is unable for any reason to continue its contributions to the benefit plans as set out in this Agreement, it shall pay the Executive an amount equal to the Company’s required contributions to such benefit plans on behalf of the Executive for such period. The Executive agrees that he/she is required to notify the Company when he/she obtains alternate life, medical and dental benefit coverage; and
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(e)
|
determine the Executive’s entitlements in respect of equity-based awards in accordance with the terms and conditions of the applicable equity award plan, any other applicable plan and the applicable award agreement.
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a.
|
the consummation of any transaction or series of transactions including any reorganization, recapitalization, statutory share exchange, consolidation, amalgamation, arrangement, merger or issue of voting shares in the capital of Cronos Group, the result of which is that any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, association, joint-stock company, estate, trust, organization, governmental authority or other entity of any kind or nature (“Person”) or group of Persons acting jointly or in concert for purposes of such transaction or series of transactions becomes the beneficial owner, directly or indirectly, of more than 50% of the voting securities in the capital of the entity resulting from such transaction or series of transactions or the entity that acquired all or substantially all of the business or assets of Cronos Group in a transaction or series of transactions described in paragraph (ii) below (in each case, the “Surviving Company”) or the ultimate parent entity that has beneficial ownership of sufficient voting power to elect a majority of the board of directors (or analogous governing body) of the Surviving Company (the “Parent Company”), measured by voting power of the outstanding voting securities eligible to elect members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) rather than number of securities (but shall not include the creation of a holding company or other transaction that does not involve any substantial change in the proportion of direct or indirect beneficial ownership of the voting securities of Cronos Group prior to the consummation of the transaction or series of transactions), provided that the exercise by Altria Summit LLC (or any of its affiliates) of the Purchased Warrant (as defined in the Subscription Agreement by and among Cronos Group Inc., Altria Summit LLC and Altria Group, Inc. dated as of December 7, 2018) shall not constitute a Change of Control pursuant to this clause (a);
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b.
|
the direct or indirect sale, transfer or other disposition, in one or a series of transactions, of all or substantially all of the business or assets of Cronos Group, taken as a whole, to any person or group of persons acting jointly or in concert for purposes of such transaction or series of transactions (other than to any affiliates of Cronos Group); or
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c.
|
Incumbent Directors during any consecutive twelve (12) month period ceasing to constitute a majority of the Board of Cronos Group (for the purposes of this paragraph, an “Incumbent Director” shall mean any member of the Board who is a member of the Board immediately prior to the occurrence of a contested election of directors of Cronos Group).
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(a)
|
the assignment to the Executive of duties materially different than the duties assigned to the Executive hereunder;
|
(b)
|
a material diminution in the Executive’s title, status, seniority, reporting relationship, responsibilities or authority;
|
(c)
|
a material reduction in the Executive’s Base Salary; or
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(d)
|
the relocation of the Executive’s primary work location, except as permitted by Section 2.1.
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6.4
|
Resignation on Termination. The Executive agrees that upon any termination of employment with the Company for any reason the Executive shall immediately tender resignation from any position the Executive may hold as an officer or director of the Company and take all steps necessary to remove Executive from any and all designated positions under any applicable laws, including without limitation, the Cannabis Act (Canada) and the regulations thereunder, as the same may be amended from time to time, or any subsidiary or affiliate of the Company. In the event that the Executive fails to comply with this obligation within three (3) days of the Executive's termination or resignation, the Executive hereby irrevocably authorizes the Company to appoint a Person in the Executive's name and on the Executive's behalf to sign or execute any documents and/or do all things necessary or requisite to give effect to such resignation.
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6.5
|
Compliance with Laws. The Executive understands and agrees that the entitlements under this Section 6 are provided in full satisfaction of the Executive’s entitlements to notice of termination, pay in lieu of notice, and severance pay, if any, under applicable employment standards legislation, this Agreement, any employee benefit plan sponsored or maintained by the Company or any of its affiliates, applicable law (including the common law) or otherwise.
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7.
|
Restrictive Covenants
|
7.1
|
Non-Disclosure. The Executive acknowledges and agrees that:
|
(a)
|
during the term of the Executive’s employment, the Executive may be given access to or may become acquainted with confidential and proprietary information of the Company and its affiliates and related entities and third parties to which the Company and its affiliates and related entities may have any obligations of non-disclosure or confidentiality, including but not limited to: trade secrets; know-how; Intellectual Property (as defined below); Employee Inventions (as defined below), Invention Records (as defined below), existing and contemplated work product resulting from or related to projects performed or to be performed by or for the Company; programs and program modules; processes; algorithms; design concepts; system designs; production data; test data; research and development information; information regarding the acquisition, protection, enforcement and licensing of proprietary rights; technology; joint ventures; business, accounting, engineering and financial information and data; marketing and development plans and methods of obtaining business; forecasts; future plans and strategies of the Company; pricing, cost, billing and fee arrangements and policies; quoting procedures; special methods and processes; lists and/or identities of customers, suppliers, vendors and contractors; the type, quantity and specifications of products and services purchased, leased, licensed or received by the Company and/or any of its customers, suppliers, or vendors; internal personnel and financial information; business and/or personal information about any senior staff members of the Company or any Person with which the Company enters a strategic alliance or any other partnering arrangements; vendor and supplier information; the manner and method of conducting the Company’s business; the identity or nature of relationship of any persons or entities associated with or engaged as consultants, advisers, agents, distributors or sales representatives (the “Confidential Information”) the disclosure of any of which to competitors of the Company or to the general public, or the use of same by the Executive or any competitor of the Company, would be highly detrimental to the interests of the Company;
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(b)
|
disclosure or use of Confidential Information, other than in connection with the Company’s business or as specifically authorized by the Company, will be highly detrimental to the business and interests of the Company and could result in serious loss of business and damage to it. Accordingly, the Executive specifically agrees to hold all Confidential Information in strictest confidence, and the Executive agrees that the Executive shall not, without the Company’s prior written consent, disclose, divulge or reveal to any person, or use for any purpose other than for the exclusive benefit of the Company, any Confidential Information, in whatever form contained; provided that the foregoing shall not apply to information (except for personal information about identifiable individuals) that: (i) was known to the public prior to its disclosure to the Executive; (ii) becomes generally known to the public subsequent to disclosure to the Executive other than by reason of the Executive’s breach of this Section; (iii) becomes available to the Executive from a source independent of the Company; or (iv) the Executive is specifically required to disclose by applicable law or legal process (provided that the Executive provides the Company with prompt advance written notice of the contemplated disclosure and cooperates with the Company in seeking a protective order or other appropriate protection of such information); and
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(c)
|
the Executive shall deliver to the Company, immediately upon termination of employment (for any reason and regardless of whether the Executive or the Company terminate the employment) or at any time the Company so requests: (i) any and all documents, files, notes, memoranda, models, databases, computer files and/or other computer programs reflecting any Confidential Information whatsoever or otherwise relating to the Company’s business; (ii) lists or other documents regarding customers, suppliers, or vendors of the Company or leads or referrals to prospective business deals; and (iii) any computer equipment, home office equipment, automobile or other business equipment belonging to the Company that the Executive may then possess or have under the Executive’s control.
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(d)
|
For the avoidance of doubt, nothing in this Agreement limits, restricts or in any other way affects the Executive communicating with any governmental authority or entity concerning matters relevant to the governmental authority or entity. The Executive and the Company agree that no confidentiality or other obligation the Executive owes to the Company prohibits the Executive from reporting possible violations of law or regulation to any governmental authority or entity under any applicable whistleblower protection provision of applicable Canadian, U.S. Federal or U.S. State law or regulation (including Section 21F of the Securities Exchange Act of 1934 or Section 806 of the Sarbanes-Oxley Act of 2002) or requires the Executive to notify the Company of any such report. The Executive is hereby notified that the immunity provisions in Section 1833 of title 18 of the United States Code provide that an individual cannot be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made (i) in confidence to federal, state or local government officials, either directly or indirectly, or to an attorney, and is solely for the purpose of reporting or investigating a suspected violation of the law, (ii) under seal in a complaint or other document filed in a lawsuit or other proceeding, or (iii) to the Executive’s attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law (and the trade secret may be used in the court proceedings for such lawsuit) as long as any document containing the trade secret is filed under seal and the trade secret is not disclosed except pursuant to court order.
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7.2
|
Intellectual Property
|
(a)
|
In this section, the term “Germplasm” means any living or preserved biological tissue or material which may be used for the purpose of plant breeding and/or propagation, including but not limited to plants, cuttings, seeds, clones, cells, tissues, plant materials, and genetic materials (including but not limited to nucleic acids, genes, promoters, reading frames, regulatory sequences, terminators, chromosomes whether artificial or natural, and vectors).
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(b)
|
The Executive agrees to promptly disclose to the Company (including to the Executive’s manager) all ideas, suggestions, discoveries, designs, works, developments, improvements, processes, formulas, data, techniques, know-how, confidential and proprietary information, trade secrets, inventions and improvements, and any other intellectual property rights, including with respect to, but not limited to, Germplasm, and whether or not any of the foregoing are registrable as patents, industrial designs, copyrights, trademarks or plant breeder rights (collectively, “Intellectual Property”) which the Executive may author, make, conceive, develop, discover, or reduce to practice, solely, jointly or in common with other employees, during the Executive’s employment with the Company and which relate to the business activities of the Company (“Employee Inventions”). The Executive agrees to maintain as confidential any Employee Inventions, and not to make application for registration of rights in respect of such unless it is at the request and direction of the Company. Intellectual Property coming within the scope of the business of the Company made and/or developed by the Executive while in the employ of the Company, whether or not conceived or made during regular working hours and whether or not the Executive is specifically instructed to make or develop the same, shall be for the benefit of the Company and shall be considered to have been made pursuant to this Agreement and shall be deemed Employee Inventions and shall immediately become exclusive property of the Company. The Executive must keep, maintain, and make available to the Company complete and up-to-date records relating to any such Intellectual Property, and agree that all such records are the sole and absolute property of the Company.
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(c)
|
The Executive hereby assigns and transfers, and shall assign and transfer, to the Company, the Executive’s entire right, title and interest in and to any and all Employee Inventions, and the Executive agrees to execute and deliver to the Company any and all instruments necessary or desirable to accomplish the foregoing and, in addition, to do all lawful acts which may be necessary or desirable to assist the Company to obtain and enforce protection of Employee Inventions. The Executive shall, at the request and cost of the Company, and for no additional compensation or consideration from the Company, sign, execute, make and do all such deeds, documents, acts and things as the Company and its duly authorized agents may reasonably require: (i) to apply for, obtain and vest in the name of the Company alone (unless the Company otherwise directs) patents, letters patent, copyrights, plant breeders rights, or other analogous protection in any country throughout the world and when so obtained or vested to renew and restore the same; (ii) to perfect or evidence ownership by the Company or its designees of any and all Employee Inventions, in form suitable for recordation in the United States, Canada, and any other patent office; (iii) to defend any opposition proceedings of any type whatsoever in respect of such applications, and any opposition proceedings or petitions or applications of any type whatsoever for revocation of such patents, letters patent, copyright or other analogous protection, whether such proceedings are brought before a court or any administrative body; and (iv) to defend and/or assert the Company’s rights in any Intellectual Property against any third party. For greater certainty, all materials related to Employee Inventions (including notes, records and correspondence, whether written or electronic) (collectively, “Invention Records”) are the property of the Company, which the Executive shall provide to the Company upon request. Invention Records shall not be removed from Company premises without the prior written consent of the Company. The Executive further waives all moral rights in and to any Employee Inventions and all work the Executive produced during the course of the Executive’s employment.
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(e)
|
In the course of performing duties pursuant to this Agreement, the Executive shall only use Germplasm provided by the Company, and the Executive agrees that any such Germplasm provided by the Company remains the sole property of the Company and that such Germplasm shall not be removed from Company premises without the prior written consent of the Company.
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(e)
|
The Executive represents and warrants that the Executive does not possess any Intellectual Property or Germplasm of any third party, including but not limited to any prior employer or competitor of the Company, and the Executive shall not acquire and/or use Intellectual Property or Germplasm of any third party in the course of performing duties pursuant to this Agreement and shall not bring any Germplasm of any third party onto Company premises.
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7.3
|
Non-Competition. The Executive shall not at any time during the Executive’s employment with the Company and for a period of one (1) year following the termination of this Agreement and the Executive’s employment with the Company for any reason, either individually or in partnership or jointly or in conjunction with any Person as principal, agent, consultant, employee, partner, director, shareholder (other than an investment of less than five (5) per cent of the shares of a company traded on a registered stock exchange or traded in the over the counter market in Canada), or in any other capacity whatsoever:
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(a)
|
engage in employment or enter into a contract to do work related to the research into, development, cultivation, production, supply, sales or marketing of cannabis or cannabis derived products; or the development or provision of any services (including, but not limited to, technical and product support, or consultancy or customer services) which relate to cannabis or cannabis derived products (the “Business”); or
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(b)
|
have any financial or other interest (including by way of royalty or other compensation arrangements) in or in respect of the business of any Person which carries on the Business; or
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(c)
|
advise, lend money to or guarantee the debts or obligations of any Person which carries on the Business;
|
7.4
|
Non-Solicitation of Customers. The Executive shall not, during the Executive’s employment and for the one (1) year period immediately following the termination of the Executive’s employment for any reason, whether alone or for or in conjunction with any Person or entity, whether as an employee, partner, director, principal, agent, consultant or in any other capacity whatsoever, directly or indirectly solicit or attempt to solicit any Customer or Prospective Customer for the purpose of obtaining the business of any Customer or Prospective Customer of the Company or persuading any such Customer or Prospective Customer to cease to do business with or reduce the amount of business it would otherwise provide to the Company or its affiliates. For the purpose of this Agreement, “Customer” means any Person which is a current customer or has been a customer of the Company or an affiliate of the Company during the term of the Executive’s employment with the Company but in the event of the cessation of the Executive’s employment “Customer” shall include only those current customers of the Company or an affiliate of the Company with whom the Executive had direct contact or access to Confidential Information by virtue of the Executive’s role as an employee of the Company at any time during the twelve (12) month period preceding the date of the cessation of the Executive’s employment; “direct contact” means direct communications with or by the Executive, whether in Person or otherwise, for purposes of servicing, selling, or marketing on behalf of the Company, but only if such communications are more than trivial in nature, and in any case excluding bulk or mass marketing communications directed to multiple customers; and, “Prospective Customer” means any organization, individual or entity which has been actively contacted and solicited for its business by representatives of the Company or affiliates of the Company, but in the event of the cessation of the Executive’s employment within the twelve (12) month period immediately preceding the date of the cessation of the Executive’s employment, with the involvement and knowledge of the Executive.
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7.5
|
Non-Solicitation of Employees. The Executive shall not, during the Executive’s employment and for two (2) years following the termination of the Executive’s employment for any reason, whether alone or for or in conjunction with any Person or entity, whether as an employee, partner, director, principal, agent, consultant or in any other capacity whatsoever, directly or indirectly solicit or assist in the solicitation of any employee of the Company or an affiliate of the Company to leave such employment.
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7.6
|
Disclosure. During the Executive’s employment with the Company, the Executive shall promptly disclose to the Board full information concerning any interest, direct or indirect, of the Executive (whether as owner, shareholder, partner, lender or other investor, director, officer, employee, consultant or otherwise) or any member of the Executive’s immediate family, in any business which is reasonably known to the Executive to purchase or otherwise obtain services or products from, or to sell or otherwise provide services or products to the Company or to any of their respective suppliers or Customers.
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7.7
|
Other Employment. During the Executive’s employment with the Company, the Executive shall not, except as a representative of the Company or with the prior written approval of the Executive’s manager, whether paid or unpaid, be directly or indirectly engaged, concerned or have any financial interest in any capacity in any other business, trade, professional or occupation (or the setting up of any business, trade, profession or occupation).
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7.8
|
Return of Materials. All files, forms, brochures, books, materials, written correspondence (including email and instant messages), memoranda, documents, manuals, computer disks, software products and lists (including financial and other
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8.
|
General
|
8.1
|
Reasonableness of Restrictions and Covenants. The Executive hereby confirms and agrees that the covenants and restrictions contained in this Agreement, including, without limitation, those contained in Section 7, are reasonable and valid the Executive further acknowledges and agrees that the Company may suffer irreparable injury in the event of any breach by the Executive of the obligations under any such covenant or restriction. Accordingly, the Executive hereby acknowledges and agrees that damages would be an inadequate remedy at law in connection with any such breach and that the Company shall therefore be entitled, in addition to any other right or remedy which it may have at law, in equity or otherwise, to temporary and permanent injunctive relief enjoining and restraining the Executive from any such breach.
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8.2
|
Survival. Section 7 and this Section survive the termination of this Agreement and the Executive’s employment for any reason whatsoever.
|
8.3
|
Entire Agreement. This is the entire agreement between the Company and the Executive on the subject matters addressed herein. There are no representations, warranties or collateral agreements, whether written or oral, outside of this written Agreement. This Agreement and the terms and conditions of employment contained herein supersede and replace any prior understandings or discussions between the Executive and the Company regarding the Executive’s employment.
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8.4
|
Withholding Taxes. The Company may withhold from any amounts or benefits payable under this Agreement income taxes and payroll taxes that are required to be withheld pursuant to any applicable law or regulation.
|
8.5
|
Section 409A Compliance. To the extent applicable, this Agreement is intended to comply with the requirements of Section 409A of the United States Internal Revenue Code of 1986, as amended (together with the applicable regulations thereunder, “Section 409A”). To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A or to the extent any provision in this Agreement must be modified to comply with Section 409A (including, without limitation, Treasury Regulation 1.409A-3(c)), such provision shall be read, or shall be modified (with the mutual consent of the parties, which consent shall not be unreasonably withheld), as the case may be, in such a manner so that all payments due under this Agreement shall comply with Section 409A. For purposes of Section 409A, each payment made under this Agreement shall be treated as a separate payment. In no event may Executive, directly or indirectly, designate the calendar year of payment. Notwithstanding any provision of this Agreement to the contrary, if necessary to comply with the restriction in Section 409A(a)(2)(B) concerning payments to “specified employees” (as defined in Section 409A) any payment on account of the Executive’s separation from service that would otherwise be due hereunder within six months after such separation shall nonetheless be delayed until the first business day of the seventh month following the Executive’s date of termination and the first such payment shall include the cumulative amount of any payments that would have been paid prior to such date if not for such restriction. Notwithstanding anything contained herein to the contrary, the Executive shall not be considered to have terminated employment with the Company for purposes of this Agreement unless he would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A.
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8.6
|
Amendments. This Agreement may only be amended by written agreement executed by the Company and the Executive. However, changes to the Executive’s position, duties, vacation, benefits and compensation, over time in the normal course, do not affect the validity or enforceability of the Agreement.
|
8.7
|
Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable in the Province of Ontario. The Company and the Executive each irrevocably consent to the exclusive jurisdiction of the courts of Ontario and the courts of Ontario shall have the sole and exclusive jurisdiction to entertain any action arising under this Agreement.
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8.8
|
Severability. If any provision in this Agreement is determined to be invalid or unenforceable, such provision shall be severed from this Agreement, and the remaining provisions shall continue in full force and effect. If for any reason any court of competent jurisdiction will find any provisions of this Agreement unreasonable in duration or geographic scope or otherwise, the Executive and the Company agree that the restrictions and prohibitions contained herein will be effective to the fullest extent allowed under applicable law in such jurisdiction.
|
8.9
|
Assignment. The Company may assign this Agreement to an affiliate or subsidiary, and it enures to the benefit of the Company, its successors or assigns.
|
8.10
|
Independent Legal Advice. The Executive acknowledges that the Executive has been encouraged to obtain independent legal advice regarding the execution of this Agreement, and that the Executive has either obtained such advice or voluntarily chosen
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8.11
|
Waiver. No waiver of any of the provisions of this Agreement shall be effective or binding, unless made in writing and signed by the party purporting to give the same. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions, whether or not similar, nor shall such waiver constitute a continuing waiver, unless expressly stated otherwise.
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8.12
|
Conditions. This Agreement and the Executive’s continued employment hereunder is conditional on the Company’s satisfaction (determined in the Company’s sole discretion) that the Executive has met the legal requirements to perform the Executive’s role, including but not limited to satisfactory results of Health Canada or any other applicable security clearance checks and criminal record checks and other reference checks that the Company performs. The Executive acknowledges and agrees that in signing this Agreement, and providing the Company with the necessary documentation to perform the checks required for the Executive’s role and with references, the Executive is providing consent to the Company or its agent, to performs such checks and contact the references the Executive provided to the Company.
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8.13
|
Prior Restrictions. By signing below, the Executive represents that the Executive is not bound by the terms of any agreement with any Person which restricts in any way the Executive’s hiring by the Company and the performance of the Executive’s expected job duties; the Executive also represents that, during the Executive’s employment with the Company, the Executive shall not disclose or make use of any confidential information of any other persons or entities in violation of any of their applicable policies or agreements and/or applicable law.
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8.14
|
Counterparts. This Agreement may be executed in one or more counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by electronic transmission, including in portable document format (.pdf), shall be deemed as effective as delivery of an original executed counterpart of this Agreement.
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|
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HORTICAN INC.
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||
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By:
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/s/ Michael Gorenstein
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Name: Michael Gorenstein
Title: Chief Executive Officer
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CRONOS GROUP INC.
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||
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By:
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/s/ Michael Gorenstein
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|
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Name: Michael Gorenstein
Title: Chief Executive Officer
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EXECUTIVE
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||
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/s/ William Lawrence Hilson
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Name: William Lawrence Hilson
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COMPANY:
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The Peace Naturals Project Inc.
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By:
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Name: Mark Gobuty
|
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Title: Chief Executive Officer
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VENDOR:
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Hillhurst Management Inc.
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By:
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Name: William Hilson
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Consultant
|
|
1.
|
Transition Period. For the period from today until the Separation Date, you will assist with the transition of your duties and responsibilities as may reasonably be requested by the Company. You will continue to receive your current compensation and benefits during this period.
|
2.
|
Payments.
|
(a)
|
Severance. The Company will provide you with a lump sum payment of $200,000.00, less applicable statutory deductions and withholdings, representing six (6) months of your base salary.
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(b)
|
Short-Term Incentive Compensation. Under the terms and conditions of the Agreement, you are not eligible for a bonus in respect of the 2019 fiscal year. Notwithstanding the foregoing, the Company will provide you with a lump sum payment of $200,000.00, less applicable statutory deductions and withholdings, in lieu of your eligibility for a 2019 bonus.
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(c)
|
Expenses. The Company will reimburse you for any expenses properly incurred up to Separation Date, subject to the terms and conditions of the Cronos Group Employee Travel and Expense Policy.
|
3.
|
Benefits. The Company will continue to make contributions on your behalf toward life insurance, medical and dental benefits until June 30, 2020, or the date on which you obtain alternate benefit coverage, whichever occurs first, subject to the terms and conditions of the benefit plans, as amended from time to time, and the minimum requirements of the ESA. You will be required to notify the Company when you obtain alternate benefit coverage. All other benefit coverage, including disability benefit coverage, will end on the Separation Date. The Company strongly recommends that you take whatever steps you feel appropriate to obtain replacement coverage when your existing coverage ceases.
|
4.
|
Equity. In accordance with the terms and conditions of the Agreement, your entitlements in respect of any equity-based awards shall be governed by the terms and conditions of the applicable equity award plan, any other applicable plan, and the applicable award agreement(s). Notwithstanding the foregoing, any options that have been issued to you and are unvested as of the Separation Date shall vest on an accelerated basis on the Separation Date. Subject to the requirements of the ESA, you will not be eligible for any further grants of equity-based awards. Options may be exercised in accordance with the terms and conditions of the applicable equity award plan, any other applicable plan, and the applicable award agreement(s), by the earlier of: (i) the date on which each such option’s original exercise term expires, and (ii) June 30, 2020.
|
5.
|
Tax Return Filing Services. At your request, the Company will make arrangements for you to access tax return preparation services to be provided by a provider, as selected by the Company in its sole discretion, up to a maximum cost to the Company of $5,000.00. These services will be available to you for six (6) months following the Separation Date. Please contact Claire Silvester if you would like to access these services.
|
6.
|
Outplacement Services. At your request, the Company will make arrangements for you to access the services of an outplacement consulting company, as selected by the Company in its sole discretion, up to a maximum cost to the Company of $1,500.00. These services will be available to you for six (6) months following the Separation Date. Please contact Claire Silvester if you would like to access these services.
|
7.
|
Return of property. You are required to immediately return to the Company all of the Company’s property in your possession or in the possession of your family or agents including, without limitation, the Company’s computers, smartphones, files, client files, customer lists, sales material, credit cards, access cards, office keys, equipment and all other property belonging to or provided to you by the Company that is in your possession. To the extent any Company property resides on your personal computer hardware or software, including on any hard-drives, discs or other electronic storage media, you agree to make a copy of such property and deliver it to the Company, and immediately thereafter permanently destroy such property so that it is irretrievable. You agree to provide the Company with all passwords to any electronic systems or data you deliver to the Company.
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8.
|
Non-Disclosure. This offer is confidential. You agree not to disclose the existence or terms of this offer to any party other than as required by law or to your solicitor, tax or financial advisor or immediate family on the condition that they keep this offer confidential.
|
9.
|
Post-Employment Obligations. You acknowledge your continuing obligations under the Agreement, which obligations survive the termination of your employment with the Company. These obligations include your commitments not to: (i) disclose or use any confidential information relating to the business or affairs of the Company; and (ii) not to solicit the Company’s customers and employees in accordance with the terms and conditions of the Agreement. If you wish to engage in any activities prohibited under section 7.3 of the Agreement, you must submit a written request to Claire Silvester with a detailed description of the proposed activities, and respond to any follow up questions that the Company may have in respect of the activities. The Company will consider any such request and determine, in its sole discretion, whether to approve the request. Any such approval will be provided in writing.
|
10.
|
Non-Disparagement. You agree not to speak or act in a manner that would be reasonably expected to disparage or defame or damage the goodwill of the Company or its affiliates, or the business or personal reputations of any of its officers, directors, partners, agents, employees, clients or suppliers, and further agree not to engage in any other depreciating conduct or communications with respect to Company or its affiliates including, without limitation, on social media.
|
11.
|
Cooperation with Investigations and Litigation. You agree, upon the Company’s reasonable request, to reasonably cooperate with the Company in any investigation, litigation, arbitration or regulatory proceeding regarding events that occurred during your tenure with the Company or its affiliates, including by making yourself reasonably available to consult with the Company’s counsel, to provide information and to give testimony. The Company will reimburse you for reasonable out-of-pocket expenses that you incur in extending such cooperation, so long as you provide satisfactory documentation of the expenses.
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12.
|
Release. In addition to the above conditions, all payments referenced in this letter are conditional upon you signing, in the presence of a witness and no earlier than close of business on the Separation Date, the attached Full and Final Release, and returning an original signed copy of the same to Claire Silvester by no later than close of business on January 3, 2020.
|
13.
|
Currency and Withholdings. All payments referenced in this letter will be paid in Canadian dollars, and subject to withholding taxes required by applicable law and statutory and authorized deductions.
|
14.
|
Ongoing Compliance. The obligation to pay the payments referenced in this letter is conditional upon your ongoing compliance with your obligations in this letter. If you breach any of your obligations to the Company, the terms of this enhanced severance package and the attached Full and Final Release will continue to be binding, however, all payments referenced in this letter will cease, the Company will be under no obligation to make any further payments, and the Company will be entitled to repayment of all payments made under this enhanced severance package, except as required by the ESA.
|
15.
|
Severability. If any provision of this enhanced severance package or its application in any circumstance is restricted, prohibited or unenforceable, the provision shall be ineffective only to the extent of the restriction, prohibition or unenforceability, without invalidating the remaining provisions of this enhanced severance package and without affecting its application to other circumstances.
|
16.
|
Enurement. The agreement, which includes the attached Full and Final Release, shall enure to the benefit of and be binding upon you and the Company and our respective successors and assigns, including, without limitation, your heirs, executors, administrators and personal representatives.
|
17.
|
Entire Agreement. This letter, together with the attached Full and Final Release, sets forth the entire agreement between you and the Company regarding the terms of your enhanced severance package and you are not relying upon any representations or promises that are not expressly included in this letter.
|
18.
|
Governing Law. This letter and the attached Full and Final Release will be governed by and construed in accordance with the laws of the Province of Ontario, and laws of Canada applicable in the Province of Ontario.
|
SIGNED AND DELIVERED
in the presence of:
/s/ Lillian Du
Witness’ Signature
Lillian Du
Print Name of Witness
6280 W. 3rd Street, 90036 USA
Address of Witness
|
/s/ David Hsu
DAVID HSU
|
|
|
1.
|
Transition Period. For the period from today until the Separation Date, you will assist with the transition of your duties and responsibilities as may reasonably be requested by the Company. You will continue to receive your current compensation and benefits during this period.
|
2.
|
Payments.
|
(a)
|
Severance. The Company will provide you with a lump sum payment of $87,500.00, less applicable statutory deductions and withholdings, representing six (6) months of your base salary.
|
(b)
|
Short-Term Incentive Compensation. Under the terms and conditions of the Agreement, you are not eligible for a bonus in respect of the 2019 fiscal year. Notwithstanding the foregoing, the Company will provide you with a lump sum payment of $80,000.00, less applicable statutory deductions and withholdings, in lieu of your eligibility for a 2019 bonus.
|
(c)
|
Expenses. The Company will reimburse you for any expenses properly incurred up to Separation Date, subject to the terms and conditions of the Cronos Group Employee Travel and Expense Policy.
|
3.
|
Benefits. The Company will continue to make contributions on your behalf toward life insurance, medical and dental benefits until June 30, 2020, or the date on which you obtain alternate benefit coverage, whichever occurs first, subject to the terms and conditions of the benefit plans, as amended from time to time, and the minimum requirements of the ESA. You will be required to notify the Company when you obtain alternate benefit coverage. All other benefit coverage, including disability benefit coverage, will end on the Separation Date. The Company strongly recommends that you take whatever steps you feel appropriate to obtain replacement coverage when your existing coverage ceases.
|
4.
|
Equity. In accordance with the terms and conditions of the Agreement, your entitlements in respect of any equity-based awards shall be governed by the terms and conditions of the applicable equity award plan, any other applicable plan, and the applicable award agreement(s). Notwithstanding the foregoing, any options that have been issued to you and are unvested as of the Separation Date shall vest on an accelerated basis on the Separation Date. Subject to the requirements of the ESA, you will not be eligible for any further grants of equity-based awards. Options may be exercised in accordance with the terms and conditions of the applicable equity award plan, any other applicable plan, and the applicable award agreement(s), by the earlier of: (i) the date on which each such option’s original exercise term expires, and (ii) June 30, 2020.
|
5.
|
Outplacement Services. At your request, the Company will make arrangements for you to access the services of an outplacement consulting company, as selected by the Company in its sole discretion, up to a maximum cost to the Company of $1,500.00. These services will be available to you for six (6) months following the Separation Date. Please contact Claire Silvester if you would like to access these services.
|
6.
|
Return of property. You are required to immediately return to the Company all of the Company’s property in your possession or in the possession of your family or agents including, without limitation, the Company’s computers, smartphones, files, client files, customer lists, sales material, credit cards, access cards, office keys, equipment and all other property belonging to or provided to you by the Company that is in your possession. To the extent any Company property resides on your personal computer hardware or software, including on any hard-drives, discs or other electronic storage media, you agree to make a copy of such property and deliver it to the Company, and immediately thereafter permanently destroy such property so that it is irretrievable. You agree to provide the Company with all passwords to any electronic systems or data you deliver to the Company.
|
7.
|
Non-Disclosure. This offer is confidential. You agree not to disclose the existence or terms of this offer to any party other than as required by law or to your solicitor, tax or financial advisor or immediate family on the condition that they keep this offer confidential.
|
8.
|
Post-Employment Obligations. You acknowledge your continuing obligations under the Agreement, which obligations survive the termination of your employment with the Company. These obligations include your commitments not to: (i) disclose or use any confidential information relating to the business or affairs of the Company; and (ii) not to solicit the Company’s customers and employees in accordance with the terms and conditions of the Agreement. If you wish to engage in any activities prohibited under section 7.3 of the Agreement, you must submit a written request to Claire Silvester with a detailed description of the proposed activities, and respond to any follow up questions that the Company may have in respect of the activities. The Company will consider any such request and determine, in its sole discretion, whether to approve the request. Any such approval will be provided in writing.
|
9.
|
Non-Disparagement. You agree not to speak or act in a manner that would be reasonably expected to disparage or defame or damage the goodwill of the Company or its affiliates, or the business or personal reputations of any of its officers, directors, partners, agents, employees, clients or suppliers, and further agree not to engage in any other depreciating conduct or communications with respect to Company or its affiliates including, without limitation, on social media.
|
10.
|
Cooperation with Investigations and Litigation. You agree, upon the Company’s reasonable request, to reasonably cooperate with the Company in any investigation, litigation, arbitration or regulatory proceeding regarding events that occurred during your tenure with the Company or its affiliates, including by making yourself reasonably available to consult with the Company’s counsel, to provide information and to give testimony. The Company will reimburse you for reasonable out-of-pocket expenses that you incur in extending such cooperation, so long as you provide satisfactory documentation of the expenses.
|
11.
|
Release. In addition to the above conditions, all payments referenced in this letter are conditional upon you signing, in the presence of a witness and no earlier than close of business on the Separation Date, the attached Full and Final Release, and returning an original signed copy of the same to Claire Silvester by no later than close of business on January 3, 2020.
|
12.
|
Currency and Withholdings. All payments referenced in this letter will be paid in Canadian dollars, and subject to withholding taxes required by applicable law and statutory and authorized deductions.
|
13.
|
Ongoing Compliance. The obligation to pay the payments referenced in this letter is conditional upon your ongoing compliance with your obligations in this letter. If you breach any of your obligations to the Company, the terms of this enhanced severance package and the attached Full and Final Release will continue to be binding, however, all payments referenced in this letter will cease, the Company will be under no obligation to make any further payments, and the Company will be entitled to repayment of all payments made under this enhanced severance package, except as required by the ESA.
|
14.
|
Severability. If any provision of this enhanced severance package or its application in any circumstance is restricted, prohibited or unenforceable, the provision shall be ineffective only to the extent of the restriction, prohibition or unenforceability, without invalidating the remaining provisions of this enhanced severance package and without affecting its application to other circumstances.
|
15.
|
Enurement. The agreement, which includes the attached Full and Final Release, shall enure to the benefit of and be binding upon you and the Company and our respective successors and assigns, including, without limitation, your heirs, executors, administrators and personal representatives.
|
16.
|
Entire Agreement. This letter, together with the attached Full and Final Release, sets forth the entire agreement between you and the Company regarding the terms of your enhanced severance package and you are not relying upon any representations or promises that are not expressly included in this letter.
|
17.
|
Governing Law. This letter and the attached Full and Final Release will be governed by and construed in accordance with the laws of the Province of Ontario, and laws of Canada applicable in the Province of Ontario.
|
SIGNED AND DELIVERED
in the presence of:
/s/ Shira Wood
Witness’ Signature
Shira Wood
Print Name of Witness
49 Hawarden, Toronto
Address of Witness
|
/s/ William Hilson
WILLIAM HILSON
|
|
|
A.
|
The Indemnified Party is or was a director and/or an officer of the Corporation or an Other Entity (as defined below), or serves or served in a capacity similar thereto for the Corporation or an Other Entity.
|
B.
|
The Corporation considers it desirable and in its best interests to enter into this Agreement to set out the circumstances and manner in which the Indemnified Party may be indemnified in respect of liabilities or expenses which the Indemnified Party may incur as a result of the Indemnified Party serving or having served as a director or an officer of the Corporation or an Other Entity, or in a capacity similar thereto in respect of the Corporation or an Other Entity, or because of that association with the Corporation or other Entity.
|
1.
|
Definitions. In this Agreement:
|
2.
|
Indemnity. Except as prohibited by applicable law, including the Act, and subject to Section 4 of this Agreement, the Corporation hereby agrees to indemnify and hold harmless the Indemnified Party, as well as his or her heirs and legal representatives, to the fullest extent permitted by applicable law, including the Act, from and against any and all Losses which the Indemnified Party may suffer, sustain, incur or be required to pay as a result of, or in connection with any Claim, provided that:
|
a)
|
the Indemnified Party acted honestly and in good faith with a view to the best interests of the Corporation or Other Entity, as the case may be;
|
b)
|
in the case of a Claim that involves a criminal or administrative suit, action, litigation, claim, prosecution, investigation, inquiry, hearing or other proceeding that is enforced by monetary penalty, the Indemnified Party had reasonable grounds for believing that the Indemnified Party’s conduct was lawful; and
|
c)
|
if the Claim involves a suit, action, litigation, claim, prosecution, investigation, inquiry, hearing or other proceeding by or on behalf of the Corporation or Other Entity, as the case may be, to procure a judgment in its favour against the Indemnified Party, a court of competent jurisdiction shall have approved the Indemnified Party’s indemnification or hold harmless obligations, the application for such approval to be made by the Corporation at its expense and as soon as reasonably practicable (or, following any delay (as determined by the Indemnified Party), by the Indemnified Party, at the expense of the Corporation).
|
3.
|
Indemnity for Costs in Enforcing Rights. To the fullest extent allowable under applicable law, the Corporation shall also indemnify against, and shall make any Cost Advance requested by the Indemnified Party subject to and in accordance with Section 5 of this Agreement, any Costs actually and reasonably paid or incurred by the Indemnified Party in connection with any action or proceeding by the Indemnified Party for (i) indemnification or reimbursement of any Costs, or payment of any Cost Advance, by the Corporation under any provision of this Agreement, or under any other agreement or provision of the Corporation’s constating documents now or hereafter in effect relating to or in connection with a Claim or other matter for which the Indemnified Party may be entitled to indemnification or hold harmless obligations hereunder and (ii) recovery under any directors’ and officers’ liability insurance policies maintained by the Corporation (including the Policy), regardless of whether the Indemnified Party ultimately is determined to be entitled to such indemnification or insurance recovery, as the case may be. The Indemnified Party shall be required to reimburse the Corporation if a court of competent jurisdiction determines that such action brought by the Indemnified Party was frivolous or not made in good faith. For the avoidance of doubt, the Indemnified Party shall be required to reimburse the Corporation for any amounts received under this Section 3 related to the matters contemplated by Section 4 of this Agreement or any Claim that is not entitled to indemnification under Section 2 of this Agreement.
|
4.
|
Indemnity Limitations. Notwithstanding anything to the contrary set forth in this Agreement, under no circumstances shall the Corporation be liable or have an obligation to indemnify or hold harmless the Indemnified Party under this Agreement: (a) if and to the extent applicable, for the Indemnified Party’s reimbursement to the Corporation of any bonus or other incentive-based or equity-based compensation previously received by the Indemnified Party or payment of any profits realized by the Indemnified Party from the sale of securities of the Corporation, as required in each case under the Securities Exchange Act of 1934 (as amended) (the “Exchange Act”) (including any such reimbursements under Section 304 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) (as amended) in connection with an accounting restatement of the Corporation or the payment to the Corporation of profits arising from the purchase or sale by the Indemnified Party of securities in violation of Section 306 of Sarbanes-Oxley); (b) for any amounts
|
5.
|
Cost Advances. The Corporation shall at the request of the Indemnified Party make all Cost Advances to the Indemnified Party promptly following receipt of such request, to the fullest extent permitted by applicable law. Each such request for Cost Advances by the Indemnified Party shall be in writing and shall include: (i) a written affirmation of the Indemnified Party’s good faith belief that the Indemnified Party is entitled to indemnification or hold harmless obligations hereunder, together with particulars of the Costs to be covered by the proposed Cost Advance (for greater certainty, the Indemnified Party shall not be required to provide any documentation or information to the extent that the provision thereof would undermine or otherwise jeopardize solicitor-client or litigation privilege, provided that the Indemnified Party shall cooperate with the Corporation in good faith to facilitate the sharing of such information and/or documentation that would not jeopardize solicitor-client and/or litigation privilege); and (ii) a written undertaking by the Indemnified Party to repay all Cost Advances if and to the extent that it is determined by a court of competent jurisdiction that the Indemnified Party is not entitled to indemnification or hold harmless obligations hereunder or that the payment of such Costs is prohibited by applicable law. Such written undertaking to repay Cost Advances shall be accepted without reference to the Indemnified Party’s ability to repay the Cost Advances, shall be unsecured and no interest shall be charged thereon. For the avoidance of doubt, the Indemnified Party shall be required to repay all Cost Advances to the extent any are made in connection with any Claim related to the matters contemplated by Section 4 of this Agreement.
|
6.
|
Taxes. For greater certainty, a Claim subject to indemnification or hold harmless obligations hereunder shall include any taxes, including any assessment, reassessment, claim or other amount for taxes, charges, duties, levies, imposts or similar amounts, including any interest and penalties in respect thereof, to which the Indemnified Party may be subject or which the Indemnified Party may suffer or incur as a result of, in respect of, arising out of or referable to any indemnification or hold harmless obligations of the Indemnified Party by the Corporation pursuant to this Agreement, including, if applicable, the payment of insurance premiums or any payment made by an insurer under an insurance policy, if such payment is deemed to constitute a taxable benefit or otherwise be or become subject to any tax or levy.
|
7.
|
Partial Indemnification. If the Indemnified Party is entitled to indemnification or hold harmless obligations by the Corporation under the provisions of this Agreement or as determined by a court of competent jurisdiction for a portion of the Losses incurred in respect of a Claim but not for the total amount thereof, the Corporation shall indemnify and hold harmless the Indemnified Party for the portion thereof to which the Indemnified Party is so entitled.
|
8.
|
Notice of Claim. The Indemnified Party shall notify the Corporation, and likewise the Corporation shall notify the Indemnified Party, in writing as soon as practicable upon receiving or being served with any demand, statement of claim, writ, assessment, reassessment, notice of motion, application, information, charges, indictment, subpoena, summons, investigation order or other document or communication commencing, threatening or continuing any Claim against which the Indemnified Party may be indemnified and held harmless or seek Cost Advances under this Agreement. Such notice shall include a copy of the document or communication initiating or threatening the Claim, a description of the Claim or threatened Claim, a summary of the facts giving rise to the Claim or threatened Claim and, if possible, an estimate of any potential liability arising under the Claim or threatened Claim. Failure by the Indemnified Party to so notify the Corporation shall not relieve the Corporation from liability under this Agreement except and only to the extent that such failure actually prejudices the Corporation.
|
9.
|
Legal Counsel. Except in respect of an suit, action, litigation, claim, investigation, inquiry, hearing or proceeding by or on behalf of the Corporation or Other Entity, as the case may be, to procure a judgment in its favour against the Indemnified Party, the Corporation may, and upon the written request of the Indemnified Party shall, promptly after receiving from or delivering to the Indemnified Party written notice of any Claim or threatened Claim as required by Section 8 of this Agreement, assume conduct of the defence thereof in a timely manner and retain legal counsel on behalf of the Indemnified Party, provided that such legal counsel is satisfactory to the Indemnified Party, acting reasonably, to represent the Indemnified Party in respect of the Claim. In the event the Corporation assumes conduct of the defence on behalf of the Indemnified Party as contemplated by this Section 9, the Indemnified Party hereby
|
10.
|
Additional Legal Counsel. The Indemnified Party shall have the right to employ separate legal counsel of the Indemnified Party’s choosing in addition to or instead of, as the case may be, the legal counsel retained by the Corporation as provided by Section 9 of this Agreement in connection with any Claim or other matter for which the Indemnified Party may be entitled to indemnification or hold harmless obligations hereunder and to participate in the defence thereof provided the fees and disbursements of such additional counsel shall be at the Indemnified Party’s expense unless, in respect of such Claim or other matter, any of the following applies, in which case the legal fees and disbursements of such additional counsel shall be paid by the Corporation on behalf of the Indemnified Party: (i) the Corporation has agreed in writing to pay the fees for such additional counsel; (ii) the Corporation has not appointed counsel to assume the conduct of the defence of such Claim or other matter in a timely manner; (iii) the Corporation has appointed counsel that is not satisfactory to the Indemnified Party, acting reasonably; or (iv) the Indemnified Party has reasonably determined that there may be a conflict of interest between the Indemnified Party and the Corporation in the defence of such Claim or other matter.
|
11.
|
No Presumption as to Absence of Good Faith. Unless a court of competent jurisdiction otherwise decided that the Indemnified Party is not entitled to be fully or partially indemnified or held harmless hereunder, the determination of any Claim by judgment, order, settlement or conviction (whether with or without court approval), or upon a plea of nolo contendere or its equivalent, shall not, in and of itself, create any presumption for the purposes of this Agreement that the Indemnified Party is not entitled to indemnity hereunder.
|
12.
|
Settlement of Claim. No admission of liability and no settlement of any Claim in a manner adverse to the Indemnified Party shall be made without the consent of the Indemnified Party, unless, in the case of a settlement by the Corporation, such settlement: (i) includes an unconditional release of the Indemnified Party from all liability arising out of such Claim; and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of the Indemnified Party.
|
13.
|
Other Rights and Remedies Unaffected. The rights to indemnification or hold harmless obligations and payment provided in this Agreement shall not derogate from or exclude or be diminished by any other rights to which the Indemnified Party may be entitled under any provision of the Act or otherwise under applicable law, the articles of the Corporation (as amended or otherwise modified from time to time pursuant to its terms and applicable law) or the by-laws of the Corporation (as amended or otherwise modified from time to time pursuant to its terms and applicable law), the constating documents of an Other Entity, any applicable policy of insurance (including but not limited to any directors’ and officers’ liability insurance policy, including the Policy), guarantee or third-party indemnity, any vote of securityholders of the Corporation or an Other Entity, or otherwise, both as to matters arising out of the Indemnified Party’s capacity as a director or officer of the Corporation or Other Entity, or in a capacity similar thereto for the Corporation or an Other Entity, or as to matters arising out of any other capacity in which the Indemnified Party may act for or on behalf of the Corporation; provided, however, that, notwithstanding anything to the contrary set forth in this Agreement, the Corporation shall not be liable or have any obligation under this Agreement to the Indemnified Party in respect of any Losses or Cost Advances to the extent the Indemnified Party has otherwise received any payments under any insurance policy (including the Policy), the articles of the Corporation (as amended or otherwise modified from time to time pursuant to its terms and applicable law) or the by-laws of the Corporation (as amended or otherwise modified from time to time pursuant to its terms and applicable law), pursuant to any other contractual or legal indemnification or similar rights the Indemnified Party may be entitled to or otherwise of the amounts otherwise indemnifiable by the Corporation under this Agreement.
|
14.
|
Insurance Policy.
|
15.
|
Retroactive Effect. The right to be indemnified and held harmless or to the reimbursement or advancement of expenses pursuant to this Agreement is intended to be retroactive and shall be available with respect to events occurring prior to the execution hereof. For greater certainty, the rights of the Indemnified Party hereunder shall vest irrevocably at the time of his or her appointment as a director or officer or in any capacity similar thereto of the Corporation or an Other Entity.
|
16.
|
Cooperation. The Corporation and the Indemnified Party shall, from time to time, provide such information and cooperate with the other, as the other may reasonably request, in respect of all matters under this Agreement. The Indemnified Party shall cooperate fully with the Corporation and its insurers and provide any required information with respect to any matters relevant to or arising under any claims by the Corporation under any policy of directors’ and officers’ liability insurance in respect of or related to a Claim under this Agreement. Without limiting the foregoing, the Indemnified Party and his or her advisors shall at all times be entitled to review during regular business hours all documents, records and other information with respect to the Corporation which are under the Corporation’s control and which may be reasonably necessary in order for the Indemnified Party to defend against any Claim that relates to, arises from or is based on the Indemnified Party having acted in his or her capacity as a director or officer of the Corporation or an Other Entity or by reason of that association with the Corporation or an Other Entity, provided that the Indemnified Party shall maintain all such information in strictest confidence except to the extent necessary for the Indemnified Party’s defence. Nothing contained herein shall abrogate any legal privilege (solicitor/client, litigation or otherwise) that may be asserted by the Corporation in respect of such documents, records or information to object to disclosure to the Indemnified Party.
|
17.
|
Effective Time. This Agreement shall be deemed to have effect as and from the first date that the Indemnified Party became a director or officer of the Corporation or an Other Entity, or began serving in a capacity similar thereto for the Corporation or an Other Entity.
|
18.
|
Insolvency. The liability of the Corporation under this Agreement shall not be affected, discharged, impaired, mitigated or released by reason of the discharge or release of the Indemnified Party in any bankruptcy, insolvency, receivership or other similar proceeding of creditors. The rights of the Indemnified Party under this Agreement shall not be prejudiced or impaired by permitting or consenting to any assignment in bankruptcy, receivership, insolvency or any other creditor’s proceedings of or against the Corporation or by the winding-up or dissolution of the Corporation.
|
19.
|
Subrogation. In the event of payment to the Indemnified Party under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnified Party. Without limiting the generality of Section 16 of this Agreement, the Indemnified Party shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Corporation to effectively bring suit to enforce such rights.
|
20.
|
Multiple Proceedings. No suit, action, litigation, claim, prosecution, investigation, inquiry, hearing or other proceeding brought or instituted under this Agreement and no recovery pursuant thereto shall be a bar or defence to any further suit, action, litigation, claim, prosecution, investigation, inquiry, hearing or other proceeding which may be brought under this Agreement.
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21.
|
Term. This Agreement shall survive and continue indefinitely after the Indemnified Party has ceased to act as a director or officer of the Corporation and all Other Entities, and in all capacities similar thereto for the Corporation and all Other Entities.
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22.
|
Deeming Provision. The Indemnified Party shall be deemed to have acted or be acting at the specific request of the Corporation upon the Indemnified Party’s being appointed or elected as a director or officer of the Corporation or an Other Entity, or into a capacity similar thereto for the Corporation or an Other Entity.
|
23.
|
Miscellaneous.
|
a)
|
Assignment. No party hereto may assign this Agreement or any rights or obligations under this Agreement without the prior written consent of the other parties hereto and any attempted or purported assignment in violation of this Section 23(a) shall be null and void. This Agreement shall enure to the benefit of and be binding upon the parties hereto and their successors (including any successor by reason of amalgamation or other Control Transaction, as applicable), heirs, legal representatives and permitted assigns.
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b)
|
Amendments and Waivers. No supplement, modification, amendment or waiver or termination of this Agreement and, unless otherwise specified, no consent or approval by any party hereto, shall be binding unless executed in writing by the party to be bound thereby.
|
c)
|
Notices. Any notice, consent or approval required or permitted to be given in connection with this Agreement (for the purposes of this Section 23.c), a “Notice”) shall be in writing and shall be sufficiently given if delivered, whether in person, by courier service or other personal method of delivery, or if transmitted by e-mail:
|
(a)
|
in the case of a Notice to the Indemnified Party at:
|
(b)
|
in the case of a Notice to the Corporation at:
|
d)
|
Severability. If any part of this Agreement or the application of such part to any person, entity or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such part to any other or person or circumstance, shall not be affected thereby and each provision of this Agreement shall be valid and enforceable to the fullest extent permitted by applicable law.
|
e)
|
Further Assurances. The Corporation and the Indemnified Party shall, with reasonable diligence, do all such further acts, deeds or things and execute and deliver all such further documents as may be necessary or advisable for the purpose of assuring and conferring on the Indemnified Party the rights hereby created or intended, and of giving effect to and carrying out the intention or facilitating the performance of the terms of this Agreement.
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f)
|
Governing Law. This Agreement is a contract made under and shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein. The parties hereto hereby irrevocably submit and attorn to the jurisdiction of the courts of the Province of Ontario with respect to all matters arising out of or relating to this Agreement and all matters, agreements or documents contemplated by this Agreement. The parties hereto hereby irrevocably waive any objections they may have to the venue being in such courts including any claim that any such venue is in an inconvenient forum and appoint, to the extent such party is not otherwise subject to service of process in the Province of Ontario, [AGENT FOR SERVICE OF PROCESS], [ADDRESS], [CITY], Ontario, [POSTAL CODE] as its agent in the Province of Ontario for acceptance of legal process in connection with any such action or proceeding against any such party with the same legal force and validity as if served upon such party personally within the Province of Ontario.
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g)
|
Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all other prior and contemporaneous agreements, negotiations, understandings, representations and warranties, whether oral or written, with respect to such matters.
|
h)
|
Interpretation. The headings in this Agreement are for reference only and shall not affect the meaning or interpretation of this Agreement. Unless the context otherwise requires, words importing the singular shall include the plural and vice versa and words importing any gender shall include all genders and the words “including” and “includes” are meant to be illustrative and not limiting.
|
i)
|
Execution and Delivery. This Agreement may be executed by the parties hereto in counterparts and may be executed and delivered by facsimile and all such counterparts and facsimiles together shall constitute one and the same agreement.
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Version 2018B
|
TABLE OF CONTENTS
|
TABLE OF CONTENTS
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•
|
Does the action comply with the Code and other Cronos Group policies?
|
•
|
Is the action legal?
|
•
|
Does it feel right and am I comfortable with the decision?
|
•
|
Am I confident that I don’t need to consult anyone else?
|
•
|
Would the person I respect most support this decision?
|
•
|
Have I applied the “newspaper test” (e.g., how would it look on the front page)?
|
•
|
Am I confident our shareholders and external partners would react positively?
|
•
|
mentoring or counseling
|
•
|
verbal warning
|
•
|
suspension
|
•
|
focused training
|
•
|
written warning or reprimand
|
•
|
termination
|
STANDARDS OF CONDUCT
|
•
|
marketing or selling a process you developed at Cronos Group; and
|
•
|
investing in the technology of a third party you meet because of your position at Cronos Group, in which Cronos Group also may have an interest in investing.
|
RESPONSIBILITIES TO EACH OTHER AS COLLEAGUES
|
RESPONSIBILITIES TO OUR COMMUNITIES AND PARTNERS
|
•
|
When we talk about things of value, they can include cash, gifts, promises, meals and entertainment, travel, and hiring relatives of a third party.
|
•
|
There is no exception for small amounts. Even small payments can violate the law and may be unethical.
|
•
|
We may encounter intense pressure to make improper payments in countries where extraordinary competition exists. We should be particularly vigilant not to be tempted by statements that these kinds of practices are common, customary or condoned.
|
•
|
It is important for all of us to note that our policies prohibit improper payments to any third party, whether they are government officials or in the private sector, and the receipt of improper payments or gifts.
|
RESPONSIBILITIES TO COMPLY WITH THE LAW AND
THIS CODE, AND REPORT NON-COMPLIANCE
|
REPORTING CODE AND NON-CODE CONCERNS AT CRONOS-OPERATED SITES AND OFFICES
|
•
|
An alleged misstatement in Cronos Group’s publicly released financial statements;
|
•
|
An alleged misrepresentation in Cronos Group’s other public disclosures;
|
•
|
Any other matter that could reasonably be expected to result in a restatement of Cronos Group’s publicly released financial statements;
|
•
|
Alleged bribery of a government official or other alleged violation of anti-corruption laws;
|
•
|
Known or suspected cases of severe human rights violations;
|
•
|
Known or suspected fraud that involves a potential cost or loss to Cronos Group;
|
•
|
Known or suspected fraud, regardless of amount, that involves an officer of Cronos Group;
|
•
|
Known or suspected fraud, regardless of amount, that involves an employee who has a significant role in Cronos Group’s internal controls, which include the Chief Executive Officer, other senior executives and financial officers, members of the Board, other senior personnel at Cronos Group, employees who work in internal audit, finance and accounting or legal functions, and other employees who are designated as holding positions of trust; or
|
•
|
An event or series of events indicative of a deterioration in the overall internal control environment at a Cronos Group site or office, including a known or suspected incident or repeated incidents which indicate significant or systemic non-compliance with applicable regulatory requirements.
|
•
|
to the Legal Department, in person or by telephone or email;
|
•
|
through the Compliance Hotline;
|
•
|
for matters regarding accounting, internal accounting controls and other auditing matters, to the Audit Committee;
|
•
|
for matters involving the Chief Executive Office or any other senior executive or financial officer of Cronos Group, to any member of the Board (and to the General Counsel and the Compliance Hotline).
|
COMPLIANCE HOTLINE
|
•
|
a confidential reporting service operated by an outside service provider;
|
•
|
available to all employees, as well as contractors and suppliers; and
|
•
|
available 24 hours a day, 365 days per year.
|
•
|
check on the status of the report;
|
•
|
ask questions or add comments; or
|
•
|
upload information to support his or her report, such as documents, email messages, pictures, audio or video files.
|
APPENDIX 1: POLICY REVISION HISTORY
|
Date
|
Requested By
|
Updated By
|
Summary of Revisions
|
February 2, 2018
|
Board of Directors
|
Legal (Xiuming Shum)
|
Original Version
|
November 1, 2018
|
N/A
|
Legal (Xiuming Shum)
|
Version 2018B: general update
|
Subsidiaries
|
State or other jurisdiction of incorporation or organization
|
Hortican Inc.
|
Canada
|
Peace Naturals Project Inc.
|
Canada
|
Cronos Global Holdings Inc.
|
Canada
|
Cronos Canada Holdings Inc.
|
Canada
|
Original BC Ltd.
|
Canada
|
Cronos Malta Holdings Limited
|
Malta
|
Cronos Device Labs Ltd.
|
Israel
|
Cronos Israel G.S. Store Ltd.
|
Israel
|
Cronos Israel G.S. Cultivation Ltd.
|
Israel
|
Cronos Israel G.S. Pharmacy Ltd.
|
Israel
|
Cronos Israel G.S. Manufacturing Ltd.
|
Israel
|
Cronos Group Celtic Holdings Ltd.
|
Ireland
|
Cronos Group USA Holdings Company Limited
|
British Columbia
|
Cronos USA Holdings Inc.
|
Delaware, USA
|
Cronos USA Client Services LLC
|
Delaware, USA
|
Zeus Cannabinoids LLC
|
Delaware, USA
|
Redwood Wellness, LLC
|
Delaware, USA
|
Redwood IP Holding, LLC
|
Delaware, USA
|
Redwood Retail, LLC
|
California, USA
|
Redwood Operations CA, LLC
|
California, USA
|
Thanos Holdings Ltd. d/b/a Cronos Fermentation
|
British Columbia
|
1.
|
I have reviewed this Annual Report on Form 10‑K of Cronos Group Inc.; and
|
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.
|
|
|
/s/ Michael Gorenstein
|
|
Michael Gorenstein
|
|
President and Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
1.
|
I have reviewed this Annual Report on Form 10‑K of Cronos Group Inc.; and
|
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.
|
|
|
/s/ Jerry Barbato
|
|
Jerry Barbato
|
|
Chief Financial Officer
|
|
(Principal Financial Officer)
|
|