PesoRama Inc. — M&A Activity 2021

Sep 28, 2021

Fundamental Private Markets

March 8, 2021

PRIVATE AND CONFIDENTIAL

VIA EMAIL

Skyscape Capital Inc. 77 King Street West, Suite 700 TD North Tower Toronto, ON M5K 0A1

Mr. Roger Daher, Chief Executive Officer Attention:

and

PesoRama Inc. 1900, $520 - 3^{rd}$ Avenue SW Calgary, Albert T2P 0R3

Attention: Mr. Rahim Bhaloo, Executive Chairman

Dear Sirs:

Equity Investment in PesoRama Inc. ("PesoRama") in connection with Business Re: Combination with Skyscape Capital Inc. ("Skyscape")

Further to our engagement with Skyscape pursuant to our letter dated November 2, 2020 (the "Original LOI"), we are now writing to both Skyscape and PesoRama to update our proposal to provide financing to both companies in connection with their proposed business combination transaction (the "Business Combination") pursuant to an amalgamation agreement (the "Amalgamation Agreement"). The Business Combination is to be the "qualifying transaction" of Skyscape under applicable TSX Venture Exchange (the "TSXV") policies.

This letter of intent sets forth certain non-binding understandings and certain binding agreements between Fundamental, Skyscape and PesoRama with respect to a financing transaction proposed to be made in connection with the Business Combination as described below.

Since the date of the Original LOI, we have continued our work on the proposed financing and remain highly enthusiastic about the prospect of completing the financing to support the completion of the Business Combination. As you know, Fundamental has extensive experience in the retail sector in Latin America and, in particular, in the discount retail consumer sector. Fundamental believes that it is an ideal strategic investor to assist with the completion of the Business Combination and the continued growth and expansion of PesoRama's business in Mexico. Based on our understanding of PesoRama's business, we believe that our experienced team can assist the management teams of both Skyscape and PesoRama in completing the Business Combination and providing a lead strategic investment that will position the business of the combined entity resulting from the Business Combination (the "Resulting Issuer") for success going forward.

We propose that the financing will proceed as follows:

1. Business Combination

The Concurrent Financing described below is, among other things, subject to the condition that Skyscape and PesoRama complete the Business Combination.

$2.$ Concurrent Financing Transactions

Subject to the conditions set out in this letter of intent, Fundamental and its co-investors would participate in an equity investment (the "Concurrent Financing") in securities of PesoRama for gross proceeds of \$10,000,000 and not less than \$5,000,000, which would be completed no later than March 31, 2021 with funds to be released concurrently with the completion of the Business. Combination. The indicative summary terms of the Concurrent Financing are set out in the term sheet attached hereto as Schedule "A". These indicative summary terms are based on the assumed capitalization of Skyscape, PesoRama and the Resulting Issuer set out in the Amalgamation Agreement.

3. Due Diligence.

Following the execution of this letter of intent. Fundamental and its co-investors, agents and advisors will continue their due diligence investigation of the business, affairs and financial condition of Skyscape and PesoRama, including financial, commercial, marketing, employee, legal, taxation, systems, regulatory and environmental matters.

$4.1$ Exclusivity.

From the date first set forth above until the Termination Date (as hereinafter defined) (the "Exclusivity Period"), Skyscape and PesoRama shall not, directly or indirectly:

• initiate or propose, or attempt, in any way, to initiate or propose, any activities or $(a)$ solicitations in opposition to or in competition with the Business Combination or the Concurrent Financing, and without limiting the generality of the foregoing, not to induce or attempt to induce any other person or group of persons to initiate or participate in an Alternate Transaction (as hereinafter defined), or to undertake any transaction or negotiate any transaction, including an Alternate Transaction, which would be or potentially could be in conflict with the Transactions; or
• provide any information with respect to Skyscape or PesoRama to any other person $(b)$

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for or in furtherance of anything mentioned in item (a) of this Section 4,

provided, however, that the foregoing shall not impede the ability of the board of directors of Skyscape or PesoRama to, without restriction, discharge its fiduciary obligations.

As used in this Section 4, an "Alternative Transaction" means any proposed or actual sale of common shares of Skyscape or PesoRama from treasury or securities convertible into common shares of Skyscape or PesoRama, respectively, whether on a "private placement" basis or otherwise, other than as contemplated by Section 2, or any transaction that would be in opposition to or in competition with the Business Combination or Concurrent Financing.

Notwithstanding the foregoing, during the Exclusivity Period Skyscape and PesoRama may:

• engage with third parties for and complete a bridge financing for PesoRama in the form of $(a)$ debt and/or equity for up to \$6 million; and
• engage with third parties, including Canadian investment banks, to participate in an $(b)$ additional \$5-10 million equity financing on the same economic terms as the Concurrent Financing.

5. Definitive Documentation.

Skyscape and Fundamental shall use their reasonable commercial efforts to negotiate and execute (i) a subscription agreement (the "Subscription Agreement"), and (ii) an investor rights agreement (the "IR Agreement" and together with the Subscription Agreement, the "Definitive Agreements"). The Definitive Agreements will contain covenants, representations and warranties. indemnities, and other terms and conditions typical of agreements negotiated between arm's length parties for transactions of the nature and size of the types contemplated. Further, Fundamental, together with any agent appointed by PesoRama in connection with the Concurrent Financing and PesoRama would also enter into appropriate transaction documents of the type typical for similar financing transactions to the Concurrent Financing.

6. Board Reorganization.

Concurrent with the closing of the Business Combination, the Resulting Issuer will cause an immediate reorganization of the board of directors (the "Board") of the Resulting Issuer such that the Board shall consist of five directors, of which two directors shall be nominees of Fundamental, one director shall be a nominee of Skyscape (who shall be a Canadian resident) and the other two shall be Rahim Bhaloo and Ed Sivitilli, provided that all such nominees shall not be disqualified to serve as director under the provisions of the Business Corporations Act (Ontario).

$7.$ Structuring Fee

In connection with the completion of the Business Combination and the Concurrent Financing (collectively, the "Transactions"), the Resulting Issuer would pay to certain parties a structuring. fee in common shares of the Resulting Issuer in the amount of up to 5% of the value of the Transactions determined based on the deemed price per Skyscape common share so issued pursuant to the Business Combination.

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8. Access

Skyscape and PesoRama will, at all times before the execution of the definitive documentation for the Transactions, permit Fundamental and its representatives to reasonably review the business, financial information, assets and operations of Skyscape and PesoRama. Further, Skyscape and PesoRama will provide Fundamental with such information as Fundamental may reasonably request, and access to such books, records, facilities and personnel as Fundamental may reasonably request.

9. Announcements.

The parties to this letter of intent agree that the contents of this letter of intent and its acceptance by the parties shall be held in strict confidence by the parties and, except as required by applicable securities laws or the rules and regulations of any applicable stock exchange, no disclosure of the contents of this letter of intent shall be made to any person whatsoever other than employees and/or advisors of Skyscape, PesoRama and Fundamental who "need to know" such information for the purpose of proceeding with the Transactions. All public announcements by Skyscape and PesoRama related to the Transactions shall, except as required by applicable securities laws or the rules and regulations of any applicable stock exchanges, be subject to the approval of Fundamental, such approval not to be unreasonable withheld or delayed.

$10.1$ Confidentiality.

The information provided by each of Fundamental, Skyscape and PesoRama, in any form whether written, electronic or verbal, as to financial condition, business, properties, title, assets and affairs (including any material contracts) as may reasonably be requested by the other party, including information contemplated by Section 3 (the "Confidential Information") will be kept confidential by each party, other than information that:

• $(a)$ has become generally available to the public;
• $(b)$ was available to a party or its representatives on a non-confidential basis before the date of this letter of intent: or
• has become available to a party or its representatives on a non-confidential basis from $(c)$ a person who is not, to the knowledge of the party or its representatives, otherwise bound by confidentiality obligations to the provider of such information or otherwise prohibited from transmitting the information to the party or its representatives.

No Confidential Information may be released to third parties without the consent of the provider thereof, except if such information is required to be released by law, court order or stock exchange rule; and Confidential Information may be used solely for the purpose of consummating the transactions contemplated by this letter of intent.

Approvals. The completion of the Transactions contemplated hereby remain subject to 11. such regulatory and TSXV approvals as may be necessary.

12. Governing Law.

This letter of intent shall be governed by the laws of the Province of Ontario and the federal laws of Canada applicable therein. Each of the parties agrees to attorn to the exclusive jurisdiction of the Courts of Ontario.

13. Fees and Expenses.

Each Party shall be responsible for its own fees and expenses in connection with the negotiation of this letter of intent, the definitive documentation and the implementation of the Transactions.

14. Termination.

This letter of intent may be terminated:

• By mutual written consent of Fundamental, PesoRama and Skyscape; (a)
• (b) Upon written notice by any party to the other party if the Definitive Agreements have not been executed by March 31, 2021; or
• The Concurrent Financing and the Business Combination have not been completed on or $(c)$ before June 30, 2021.

provided, however, that the termination of this letter of intent shall not affect the liability of a party for breach of any of the binding provisions of this letter of intent prior to the termination. Upon termination of this letter of intent, the parties shall have no further obligations hereunder, except as stated in Sections 9, 10, 12 and 13, which shall survive any such termination.

15. Binding Provisions.

This letter of intent constitutes a legally binding commitment of Fundamental, PesoRama and Skyscape only with respect to the following:

• The exclusivity provisions set out in Section 4: $(a)$
• $(b)$ Matters relating to access set out in Section 8:
• Matters related to announcements and confidentiality set out in Sections 9 and 10; $(c)$
• $(d)$ The provision with respect to governing law set out in Section 12; and
• The provisions with respect to fees and expenses set out in Section 13. $(e)$

16. General.

This letter of intent may not be assigned by either party without the express written consent of the other Party. Each of the parties agrees to execute and deliver any further documents and instruments, and do all other acts that the other party may reasonably require to evidence, carry out and give full force and effect to the provisions and meaning of this letter of intent.

17. Counterparts.

This letter of intent may be signed in counterparts and by facsimile or email transmission, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument,

18. Redesigning Structure.

The parties will cooperate with each other in redesigning the structure of the Transactions contemplated herein if so requested by the other party, provided that such change would not be to the material economic disadvantage of the party to whom such request is made.

If the foregoing is acceptable, please execute a copy of this letter of intent in the space below and return it to the undersigned by 5:00 p.m. (Toronto time) on March 9, 2021.

[Balance of Page Left Blank]

Yours truly,

FUNDAMENTAL HS, S.C. Per: Authorized Signatory

Acknowledged, agreed to and accepted this $\frac{q}{q}$ day of March 2021.

PESORAMA INC.

Per:

Authorized Signatory

SKYSCAPE CAPITAL INC.

Per:

Authorized Signatory

SCHEDULE "A"

FUNDAMENTAL PRIVATE MARKETS

INVESTMENT IN PESORAMA INC.

TERM SHEET

Date:	March 8, 2021
Issuer:	PesoRama Inc. ("PesoRama").
Investor:	Fundamental Private Markets ("Fundamental") and its co-investors
Principal Agreements:	The following agreements will be entered into by Fundamental, Pesorama and Skyscape Capital Inc. ("Skyscape") on the same date: subscription agreement (the "Subscription Agreement"); and
	investor rights agreement (the "IR Agreement" and together with the ۰ Subscription Agreement, the "Definitive Agreements").

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A. EQUITY INVESTMENT AND RESERVE AND RESERVE TO A RESERVE AND RESERVE TO A RESERVE THE RESERVE TO A RESERVE THE RESERVE THAT A REPORT OF THE RESERVE THAT A REPORT OF THE RESERVE THAT A REPORT OF THE REPORT OF THE RESERVE T

Financing:	Subscription receipts ("Subscription Receipts") at a price to be determined in the context of the market (which is currently contemplated to be \$1.00, subject to adjustment) for gross proceeds of \$10,000,000 and not less than \$5,000,000. Subject to the terms thereof, each Subscription Receipt will be convertible, for no additional consideration, into one unit (a "PesoRama Unit") of PesoRama. immediately prior to the closing of the business combination (the "Business" Combination") between PesoRama and Skyscape pursuant to which Skyscape will acquire all of the outstanding securities of PesoRama in exchange for securities of Skyscape and the resulting public company will be renamed Pesorama Inc. (the "Resulting Issuer"). Each PesoRama Unit will consist of one common share and one warrant of PesoRama, with each warrant exercisable for one additional common share of PesoRama at a price of \$1.25 for a period of two years from the date of issuance of the warrant. Subject to applicable laws and TSXV policies and rules, the common shares and warrants issued by PesoRama pursuant to the conversion of the Subscription Receipts will be exchanged into freely tradeable common shares and warrants of the Resulting Issuer upon completion of the Business Combination.
Required Approvals:	The financing will be subject to approval of the PesoRama board of directors and the TSXV.
Representations and Warranties:	PesoRama and Skyscape will provide customary representations and warranties for a strategic investment of this nature in the Subscription Agreement in respect of general corporate and other matters, including material assets and liabilities and regulatory compliance.

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Closing: The closing of the financing shall occur on or before March 31, 2021 or such other date as Fundamental, PesoRama and Skyscape may agree in writing.

B. INVESTOR RIGHTS

The IR Agreement will contain the following principal terms:

Board Representation:	Concurrent with the closing of the Business Combination, the Resulting Issuer will cause an immediate reorganization of the board of directors (the "Board"). such that the Board shall consist of five directors, of which two directors shall be nominees of Fundamental, one director shall be a nominee of Skyscape and the other two shall be Rahim Bhaloo and Ed Sivitilli. Following the completion of the the Business Combination. Fundamental would continue to be entitled to nominate two individuals to serve as directors of the Resulting Issuer during the term of the IR Agreement.
Other Skyscape Covenants:	The Resulting Issuer will not issue equity securities with voting or other rights superior to the Resulting Issuer Common Shares,
	The Resulting Issuer will use commercially reasonable efforts to maintain the Resulting Issuer's status as a "reporting issuer" not in default and maintain the listing of the The Resulting Issuer Common Shares on the TSXV, the Toronto Stock Exchange or another stock exchange acceptable to Fundamental, provided that the Resulting Issuer shall not be prevented from taking any action which would result in the delisting of the Common Shares from the TSXV as long as the the Resulting Issuer shareholders receive securities listed on an exchange in Canada as a result of the relevant transaction or the the Resulting Issuer shareholders have approved the relevant transaction.
Term:	The IR Agreement will continue in full force and effect until Fundamental and its co-investors cease to have a percentage ownership interest of at least 5.0% on a non-diluted basis (not considering the exercise of options and warrants).
C. MISCELLANEOUS
Press Releases:	Fundamental shall be given the opportunity to review and comment on any press release or other public statement to be issued by Skyscape or PesoRama respecting the transactions contemplated in this term sheet or otherwise concerning Fundamental or its proposed investment in PesoRama.
Due Diligence:	Fundamental will be given a reasonable opportunity to conduct a due diligence investigation of Skyscape and PesoRama. For the purpose of the foregoing, Skyscape will provide to Fundamental such information relating to the business, assets, liabilities and affairs of Skyscape and PesoRama as Fundamental may reasonably request from time to time.
Governing Law:	Each of the Definitive Agreements will be governed by the laws of the Province of Ontario. Each of the parties will attorn exclusively to the non-exclusive jurisdiction of the courts of the Province of Ontario.

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Non-binding PesoRama, Skyscape and Fundamental agree to work in good faith toward Effect: concluding Definitive Agreements as contemplated hereby; however, nothing in this term sheet will be construed as a binding obligation of either party until such Definitive Agreements have been executed.

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