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Promissory Note Conversion Agreementfor Canadian Noteholders

Agreement and Plan of Merger

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QUEST SOLUTION, INC. | Quest Solution, Inc

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Governing Law: Delaware     Date: 8/22/2016
Industry: Oil and Gas Operations     Sector: Energy

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Exhibit 10.2




THIS PROMISSORY NOTE CONVERSION AGREEMENT (this “ Agreement ”) is entered into as of June 17, 2016 by and between Quest Solution, Inc. , a Delaware corporation (the “ Company ”), and ___________, a Canadian corporation (“ Noteholder ”).


W I T N E S S E T H:


WHEREAS, the Company has executed a Subordinated Promissory Note in favor of Noteholder in the original aggregate principal amount of $_________, a copy of which is attached hereto as Exhibit A (the “ Company Note ”); and


WHEREAS, the current outstanding principal and interest amount due under the Company Note (including principal and accrued but unpaid interest) is $_________, which the Company and Noteholder desire to convert into shares of Series C Preferred Stock, $1.00 par value of the Company (the “ Preferred Stock ”).


NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt, sufficiency and adequacy of which is hereby acknowledged, the parties hereby agree as follows:




Conversion to Preferred Stock . Notwithstanding any term or provision of the Notes to the contrary, this Agreement shall be effective when it is accepted and countersigned by the Company (the “ Effective Date ”) and the entire amount outstanding under the Notes (including principal and accrued but unpaid interest) shall be converted into shares of Preferred Stock (each, a “ Share ” and collectively, the “ Shares ”), at a conversion rate of one Share for each $1.00 of principal and accrued but unpaid interest due under the Notes through the Effective Date, which, for purposes of this Agreement, Noteholder and the Company agree shall be equal to an aggregate of __________ Shares of Preferred Stock. Upon the Effective Date and return of the original Notes as described below, the Company shall instruct its transfer agent to issue such shares of Preferred Stock to Noteholder at the address on the signature page hereto.






Return of Notes; Release . Upon the Effective Date, the Notes shall be deemed to be cancelled, paid in full and of no further force or effect and Noteholder shall have no rights thereunder. Upon the execution of this Agreement, Noteholder shall return the original Notes to the Company marked “CANCELLED: PAID IN FULL”, to be held by the Company until the Effective Date. As of the Effective Date, Noteholder and Company hereby forever releases, discharges, acquits and forever forgives the other party and respective its shareholders, directors, officers, employees and agents from any and all claims, suits, actions, demands, liabilities and proceedings of every nature and description, known and unknown, arising out of or pursuant to the Notes.






Restricted Stock . The Preferred Stock to be issued hereunder has not been registered with the Securities and Exchange Commission or with the securities regulatory authority of any state. Preferred Stock is subject to restrictions imposed by federal and state securities laws and regulations on transferability and resale, and may not be transferred assigned or resold except as permitted under the Securities Act of 1933, as amended (the “ 1933 Act ”), and the applicable state securities laws, pursuant to registration thereunder or exemption therefrom.






Company Representations and Warranties . As of the date hereof, the Company hereby represents and warrants to Noteholder that:







Organization . The Company is a corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware.






Authority and Validity . The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary action required on the part of the Company, and no other proceedings on the part of the Company are necessary to authorize this Agreement or for the Company to perform its obligations under this Agreement. This Agreement constitutes the lawful, valid and legally binding obligation of the Company, enforceable in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles regardless of whether such enforceability is considered in a proceeding at law or in equity.






Valid Issuance of Preferred Stock . The Shares, when issued and delivered in accordance with the terms hereof, will be duly and validly authorized and issued, fully paid and nonassessable.






No Violation or Conflict . The execution, delivery and performance of this Agreement and the transactions contemplated hereby do not (i) violate, conflict with or result in the breach of any provision of the Company’s Certificate of Incorporation or the Company’s Amended and Restated Bylaws, adopted September 29, 2003 (the “ Bylaws ”), (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable the Company or any of its assets, properties or businesses, or (iii) conflict with, result in any breach of, constitute a default (or event that with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of any encumbrance on any of the assets or properties of the Company, pursuant to any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which the Company is a party except, in the case of clauses (ii) and (iii), to the extent that such conflicts, breaches, defaults or other matters would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Company.






Governmental/Regulatory Consents and Approvals . Except for filings under federal and foreign securities laws and, if required, FINRA rules and regulations, the execution, delivery and performance of this Agreement by the Company does not, and the consummation of the transactions contemplated hereby do not and will not, require any permits, consents, approvals, orders, authorizations of, or declarations to or filings with any federal, state, local or foreign government or regulatory authority, which has not already been obtained, effected or provided.




Noteholder Representations and Warranties . As of the date hereof, Noteholder hereby represents and warrants to the Company that:




Noteholder is the beneficial owner of the Notes free and clear of any liens, security interests, encumbrances or other like items and is conveying good title to the Notes to the Company. Excluding an additional promissory note in the original aggregate principal amount of __________ dated _____________, the Notes are the only Promissory Notes that Noteholder holds in relation to Company and that there is no further indebtedness owed by the Company to Noteholder.







Noteholder, either alone or with the assistance of the appropriate professional advisors, is a sophisticated investor, is able to fend for himself/herself/itself in the transactions contemplated by this Agreement and has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of this investment. Noteholder has the ability to accept the high risk and lack of liquidity inherent in this type of investment. Noteholder’s financial condition is such that Noteholder can afford to bear the economic risk of holding Preferred Stock, and to suffer a complete loss of Noteholder’s investment in the Company represented by Preferred Stock.










has had, and continues to have, access to detailed information with respect to the business, financial condition, results of operations and prospects of the Company;






has received or has been provided access to all material information concerning an investment in the Company; and






has been given the opportunity to obtain any additional information or documents from, and to ask questions and receive answers of, the officers, directors and representatives of the Company to the extent necessary to evaluate the merits and risks related to an investment in the Company represented by Preferred Stock.




As a result of Noteholder’s study of the aforementioned information and Noteholder’s prior overall experience in financial matters, and Noteholder’s familiarity with the nature of businesses such as the Company, Noteholder is properly able to evaluate the capital structure of the Company, the business of the Company and the risks inherent therein.






Noteholder is an “accredited investor” (as said term is defined in Rule 501(a) (17 C.F.R. § 230.501) promulgated under the 1933 Act. Noteholder has accurately completed the Investor Questionnaire attached hereto as Exhibit B . Noteholder is an “accredited investor” as that term is defined in National Instrument 45-106 and Noteholder has accurately completed the Canadian Accredited Investor Certificate attached hereto as Exhibit C . The undersigned agrees to provide any additional documents and information that the Board of Directors of the Company shall reasonably request for purposes of determining whether the undersigned is an accredited investor.






Noteholder understands that nothing in this Agreement or any materials presented to Noteholder in connection with the issuance of the Shares constitutes legal, tax or investment advice. Noteholder has consulted such legal, tax and investment advisors and made such investigations as it, it its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Shares.






No person or entity acting on behalf of, or under the authority of, Noteholder is or will be entitled to any broker’s, finder’s or similar fees or commission payable by the Company.






Noteholder has all necessary power and authority to execute and deliver this Agreement and become an owner of the Shares. All action on Noteholder’s part required for the lawful execution and delivery of this Agreement has been taken. Upon its execution and delivery, this Agreement will be a valid and binding obligation of Noteholder, enforceable in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights, and (b) as limited by general principles of equity that restrict the availability of equitable remedies.







The Shares are being acquired for Noteholder’s own account without the participation of any other person, with the intent of holding the Shares for investment and without the intent of participating, directly or indirectly, in a distribution of the Shares and not with a view to, or for resale in connection with, any distribution of the Shares or any portion thereof, nor is Noteholder aware of the existence of any distribution of the Company’s securities, and Noteholder does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person with respect to any of the Shares.






The Shares were not offered to Noteholder by means of any form of general solicitation, general advertising or publicly disseminated advertisements or sales literature, nor is Noteholder aware of any offers made to other persons by such means.






For purposes of the application of state securities laws, if Noteholder is an individual, then Noteholder resides in the state or province identified in the address of Noteholder set forth on the signature page hereto; if Noteholder is a partnership, corporation, limited liability company or other entity, then the office or offices of Noteholder in which its investment decision was made is located at the address or addresses of Noteholder set forth on the signature page hereto.






Noteholder acknowledges (a) that the undersigned’s purchase of the Shares will be a highly speculative investment, (b) the tax implication of his/her/its purchase, and (c) the undersigned must continue to bear the economic risk of the investment in the Shares for an indefinite period and recognizes that the Shares will be:




issued without registration under any state or federal law relating to the registration of securities for sale;






issued in reliance on one or more exemptions from registration under the 1933 Act, including, without limitation, those contained in Sections 3(b)(1), 4(a)(2) or 4(a)(5) thereof and Rules 505 and 506 under Regulation D; and






issued in reliance on one or more exemptions from the prospectus requirements under applicable Canadian securities laws.




Noteholder agrees:




The Shares will not be offered for sale, sold, or transferred other than pursuant to (i) an exemption from the prospectus requirements under applicable Canadian securities laws; (ii) an effective registration under the 1933 Act or in a transaction otherwise in compliance with the 1933 Act; and (iii) evidence satisfactory to the Company of compliance with the applicable securities laws of other jurisdictions. The Company shall be entitled to rely upon an opinion of counsel satisfactory to it with respect to compliance with the above laws.








Noteholder realizes that (a) the Shares have not been registered under the 1933 Act, each Share is characterized under the 1933 Act as a “restricted security” and, therefore, the Shares cannot be sold or transferred unless the Shares are subsequently registered under the 1933 Act or an exemption from registration is available and (b) the Company will be under no obligation to register the Shares or to comply with any exemption available for sale of the Shares without registration, and the information or conditions necessary to permit routine sales of securities of the Company under Rule 144 of the 1933 Act are not now available, and no assurance has been given that they will become available. The Company is under no obligation to act in any manner so as to make Rule 144 available with respect to the Shares. The Company is not being registered as an “investment company” as defined in Section 3(a) of the Investment Company Act of 1940, as amended 15 U.S.C. § 80a-51, et. seq. There is presently no public market for the Shares and Noteholder would most likely not be able to liquidate Noteholder’s investment in the event of an emergency or to pledge the Shares as collateral security for loans. Noteholder’s financial condition is such that it is unlikely that Noteholder would need to dispose of any of the Shares in the foreseeable future. Consistent with the foregoing, Noteholder represents that Noteholder is familiar with Rule 144 and understands the resale limitations imposed by Rule 144 and by the 1933 Act.




The Company may, if it so desires, refuse to permit the transfer of the Shares unless the request for transfer is accompanied by an opinion of cou

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