BC Bud : Co-Packing Agreement

CO-PACKING AGREEMENT

Effective Date: July 28, 2021

Vancouver, British Columbia, Canada

This Co-Packing Agreement ("Agreement") is made as of the Effective Date by and between the following Parties:

Service Provider:	BevCanna Enterprises Inc. ("Service Provider")
Address:	6401 Sidley Mountain Rd.
	Bridesville, BC V0H 1B0
Tel:	[redacted]
E-mail:	[redacted]
Authorized Officer:	Melise Panetta, President

Client:	The BC Bud Co.
Address:	redacted: personal address]
Tel:	[redacted]
E-mail:	[redacted]
Authorized Officer:	Josh Taylor, Director
WHEREAS:

1. Service Provider is in the business of developing, infusing, packaging, and distributing beverage products infused with Cannabis;
2. Client is in the business of branding and marketing such products; and,
3. The Parties seek an arrangement whereby Client may purchase from Service Provider services provided with quality and compliance aspects of the arrangement addressed in the Quality Agreement between Service Provider and Client executed as of the date of this Agreement ("Quality Agreement").

NOW THEREFORE, in consideration of the promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1. GENERAL OBLIGATIONS OF THE PARTIES

1.1 Purchase and Sale of Service. Client shall buy, and Service Provider shall sell, in quantities set forth pursuant to purchase orders submitted by Client from time-to-time, the co-packing service for Products as identified on Exhibit A attached hereto (which may be amended by mutual consent of the Parties from time-to-time, listing the "Products" covered by this Agreement). This Agreement shall be considered a 'requirements' contract imposing no obligation on Client to purchase any specific quantities of Products, except as set out herein, but requiring Client to obtain such Services from Service Provider as provided herein. All Products shall be processed and manufactured at the Service Provider facility located at 1450 Sidley Camp McKinny Road, Bridesville, British Columbia, or such affiliated facility as Service Provider may be licensed to use for such manufacturing.

Document Ref: KRA9Q-ARZ7H-LYFRH-VMZQE

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1. Licensing and Independent Contractor Status.
2. 1. Licensing. Each Party shall obtain and maintain all licenses and permits required to fulfill its respective obligations under this Agreement at all times. Each Party shall notify the other Party promptly if such Party fails to maintain any required license or permit.
   2. Independent Contractor. The sole relationship of the Parties hereunder shall be that of independent contractors. Neither Party shall have the authority to assume or create any obligation or responsibility on behalf of the other Party.
3. Minimum Purchase, Additions to Product List, and Product Specification.
4. 1. Minimum Purchase. Client agrees to purchase Services from the Service Provider of at least 120,000 beverage units of Products during the twelve months following a successful pilot production, as determined by the Client acting reasonably, by the Service Provider ("Annual MOQ").
   2. Additions to Product List. If Client develops or wishes to market new SKUs associated with different beverage based products not reflected on Exhibit A that it wishes to introduce, Client will give Service Provider the right of first opportunity to manufacture such new SKUs. If Service Provider agrees to add such products to Exhibit A, orders of such products shall be included in the calculation of the Annual MOQ provided that the product format is the same as the initial Products
5. Grant of License to Use Intellectual Property. Client hereby grants to Service Provider a non- exclusive, revocable, limited license to use all applicable trademarks (set out in Exhibit A) (the "Trademarks"), patents, Specifications (as defined in the Quality Agreement), formulas and confidential information related to the Products (collectively the "Intellectual Property") in connection with manufacturing, packaging, and distributing of the Products. In the event of any regulatory or proprietary change invalidating Client's right to use such Intellectual Property for any Product, Client shall solely bear the costs incurred by Service Provider in discontinuing use of such Intellectual Property. At the termination of this Agreement, Service Provider shall immediately return Client's Intellectual Property to Client and cease all use of the Client's Trademarks.
6. Orders. Client's purchase of Services hereunder shall be made pursuant to purchase orders, the blank form of which is attached hereto as Exhibit C (a "Purchase Order"). Client shall submit Purchase Orders to Service Provider pursuant to such procedures as may be mutually and reasonably agreed upon in writing by the parties. Purchase Orders shall specify Products listed on Exhibit A with specificity as to quantity, delivery date, and any other details required by Service Provider. The following shall apply to all Purchase Orders:
   In submitting a Purchase Order, Client must give Service Provider minimum lead time of at least thirty (30) days from Service Provider's receipt of the Purchase Order, or the Deposit as noted in 1.5(c) below, whichever occurs later ("Minimum Lead Time"). Purchase Orders shall not be binding on Service Provider until Service Provider accepts such orders in writing, and acceptance or rejection of a Service Order will be provided to Client within five (5) business days from Service Provider's receipt of the Purchase Order or the Deposit. Notwithstanding the previous sentences, the Service Provider and the Client agree to conduct R&D Activities such as: formula & materials

Document Ref: KRA9Q-ARZ7H-LYFRH-VMZQE

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production validation at the facility, samples production for 3rd party Health Canada accredited stability testing, in respect of the Client's first SKU and, subject to such R&D Activities being successful, as determined by the Client, acting reasonably, to enter into first production runs as soon as commercially reasonable following execution of this Agreement.

1. 1. The minimum quantity of total Product ordered with respect to any one Product in any one Purchase Order shall be stated on Exhibit A.
   2. A deposit of fifty (50%) of the Purchase Order total price shall accompany each Purchase Order (the "Deposit").
   3. In the event of cancellation of a Purchase Order, Client shall purchase all Products already manufactured, and Client shall purchase all ingredients, materials, or packaging already acquired by Service Provider for said Purchase Order. In addition, Client shall pay a cancellation fee of 50% of the original Purchase Order total, and any warehousing fees incurred by Service Provider.
   4. In the event of a proposed modification of a Purchase Order, Service Provider will use commercially reasonable efforts to implement requested changes, with Client making any additional Deposits that may be required. Service Provider shall promptly notify Client if the changes can be accommodated, and if not, Client may agree to continue to with the original Purchase Order or may cancel the Purchase Order and the cancellation process set forth above shall be followed.
2. Rolling Forecasts. To aid Service Provider's production planning, Client shall submit to Service Provider monthly, by the tenth of each month, a rolling forecast of Product requirements for the following ninety (90) day period. Such forecast shall be non-binding, but made in good faith.
3. Delivery and Shipment.
4. 1. Service Provider shall arrange for delivery and shipment to licensed recipients and pass through to Client the costs of all freight relating to shipments, including any warehousing, pallet costs, taxes or duties.
   2. All recipients of shipments shall be licensed to receive the Products under Applicable Law. Service Provider shall not be required to release the order(s) for shipment to Client or to any of Client's third- party designees/successors in interest without reasonable proof that the receiving party is duly licensed under Applicable Law to distribute and/or possess with intent to sell the said products as may be amended from time to time.
5. Warehousing and Extra Handling. Service Provider will make every reasonable effort to warehouse finished product to meet client needs, however the commitment is to warehouse finished Products without charge for up to 24 hours post QA release. Client shall pay all charges related to warehousing of finished products at a licensed facility including transportation to and from. If Client requests extra handling (for example, stuffing literature, attaching coupons, applying stickers, or assembling special boxes or displays), Client shall pay pre-approved additional labor and processing charges for performing such tasks. Such handling charges will be invoiced to Client with a description of the work performed and the amount of time spent.

Document Ref: KRA9Q-ARZ7H-LYFRH-VMZQE

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1.9 Product Dating and Disposition of Goods. All Products manufactured by Service Provider shall contain a dating system or format. Should Client require an Ambient and/or Accelerated Stability Testing for Expiry Dating, Service Provider will perform or cause to be performed such testing, and Client shall pay for the additional expense of such Expiry Dating services. Expiry Dating is not included as a standard service of this Agreement and requires a separate rider/quote. In as much as Applicable Law requires destruction of Cannabis Products by its Expiry Date, the Service Provider may, for unshipped or otherwise undelivered Products ordered by Client within two weeks of their Expiry Date, take commercially reasonable actions to sell or otherwise monetize such Products, with proceeds from such actions being credited toward Client's purchase price. In the event that the product cannot be sold, it shall be destroyed at the Client's sole cost.

2. PAYMENT

1. After the Deposit and the Additional Deposit are paid as provided above, Client shall thereafter pay the remaining balance to Service Provider upon completion of production. In addition, shipping, freight, pallet, warehousing, storage, transportation, fulfillment, handling, overtime, or other charges incurred by Service Provider; Service Provider shall invoice Client and Client shall pay these additional charges within thirty (30) days. Client shall not take any deductions or set- offs from invoices unless specifically authorized to do so in writing by Service Provider. Any undisputed amounts remaining unpaid beyond the applicable due date shall be deemed delinquent and will incur interest charges of two percent (2%) per month, or the legally permitted maximum rate if less than 2% per month.
2. Remittances due to Client. Service Provider shall pay a remittance fee to Client, which is agreed upon wholesale price of each respective provincial distributor(s), less the sum of all costs and applicable taxes, outlined in the Service Purchase Order, including all fees retained by the Sales Partner and Service Provider ("Remittance Fee").
3. Process The Remittance Fee referenced in section 2.2 will be remitted to Client within five (5) business days of receipt of payment from the Sales Partner. The Client shall bear the costs of any reduced price items or returned items from the provincial distribution boards, and/or retailers in the case of Saskatchewan, meaning that any price reductions implemented by provincial boards/retailers and fees paid to provincial boards/retailers for returned Products will be deducted from the Remittance Fees paid to the Client.
4. Retention Fund. In order to provide security to Service Provider with respect to returns of Products from provincisl boards/retailers and price reductions from provincial boards/retailers, Client agrees that Service Provider shall retain $20,000 prior to paying the first Remittance Fee to be paid to Client ("Retention Fund"). If there is price reduction or Product return or any other amounts owing to Service Provider, Service Provider shall be entitled to deduct any such funds owing to the Service Provider from the Retention Fund or to deduct any such funds from the next Remittance Fee owing to the Client. If the Retention Fund goes below $20,000 within 5 business days of any request from Service Provider, Client shall replenish the Retention Fund as required to ensure that fund contains $20,000 failing which Service Provider is not required to make any further payments of Remittance Fees to Client.

Document Ref: KRA9Q-ARZ7H-LYFRH-VMZQE

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1. Currency. All payments made by the Parties to each other under this Agreement shall be made in Canadian Dollars in immediately available and freely transferable funds by means of electronic transfer to the account designated by the recipient Party.
2. Taxes. The costs and fees in this Agreement are exclusive of all applicable taxes. Each Party will be responsible for the payment of and will pay any applicable taxes, duties and levied on that Party from time to time in relation to this Agreement, provided that for greater certainty, no Party shall be responsible for any taxes on the other Party's income. Each Party will charge, collect and timely remit all taxes that it is required to collect and remit under applicable law in connection with this Agreement.

2.7

3. SERVICE PROVIDER'S WARRANTIES AND DISCLAIMER

1. Representations and warranties of Service Provider regarding Product quality are contained in the Quality Agreement. Notwithstanding the foregoing, each of Service Provider's representations and warranties in the Quality Agreement shall exclude any and all Product conditions, qualities and/or characteristics to the extent arising out of or relating to any breach of Client's representations or warranties set forth in this Agreement.
2. EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS AGREEMENT OR THE QUALITY AGREEMENT, NEITHER SERVICE PROVIDER NOR ANY OF ITS DIRECT OR INDIRECT SUBSIDIARIES OR AFFILIATES MAKE ANY, AND HEREBY DISCLAIMS ALL, OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTY OF FITNESS FOR ANY PURPOSE.

4. CLIENT'S WARRANTIES

1. The manufacturing of the Products and the use of the Specifications will not infringe the intellectual property rights of any person.
2. Client has conducted and is conducting and will conduct its business in compliance in all material respects with Applicable Law.
3. Client holds all required licenses, permits, registrations, and qualifications (the "Permits") in all jurisdictions in which it carries on its business which are necessary or desirable to carry on its business, as now conducted and as presently proposed to be conducted.
4. All such Permits are valid and existing in good standing.
5. Client is not aware of any legislation, regulation, rule, or lawful requirements presently in force or proposed to be brought into force which would have a materially adverse effect on Client and/or its business.
6. Client anticipates the ability to renew all of its existing Permits or any other required Permits.

Document Ref: KRA9Q-ARZ7H-LYFRH-VMZQE

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