Medicus Pharma Ltd F-1, filed May 29, 2024
Medicus Pharma Ltd. (MDCX)
As filed with the U.S. Securities and Exchange Commission on May 28, 2024.
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM F-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
MEDICUS PHARMA LTD.
(Exact name of Registrant as specified in its charter)
______________________________
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Ontario, Canada |
2834 |
Not Applicable |
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(State or other jurisdiction of |
(Primary Standard Industrial |
(I.R.S. Employer |
|
incorporation or organization) |
Classification Code Number) |
Identification Number) |
Suite 3400 - 100 King St W
Toronto, ON M5X 1A4, Canada
Telephone: (610) 636-0184
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Medicus Pharma Inc.
300 Conshohocken State Road, Suite 200
Conshohocken, PA 19428
Telephone (610) 540-7515
(Name, address, including zip code, and telephone number, including area code,
of agent of service)
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Copies to: |
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Christopher J. Cummings |
Aaron Sonshine Bennett Jones LLP 3400 One First Canadian Place P.O. Box 130, Toronto, ON M5X 1A4 Telephone: (416) 777-6448 |
M. Ali Panjwani, Esq. Pryor Cashman LLP |
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earliest effective registration statement for the same offering ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.
Emerging growth company ☒
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
† The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board Accounting Standards Codification after April 5, 2012.
____________________________
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the Registration Statement filed with the U.S. Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion, Dated , 2024
Preliminary Prospectus
Units
Each Unit Consisting of
One Common Share
and
One Warrant to Purchase One Common Share
Medicus Pharma Ltd.
We are offering units (each, a "Unit") at an offering price of per Unit, each Unit consisting of one common share of Medicus Pharma Ltd. (the "Company"), no par value, and one warrant to purchase one common share (each, a "warrant"). Each warrant is immediately exercisable for one of our common shares at an exercise price of $ per share (or 100% of the price of each Unit sold in the offering) and will expire years from the date of issuance. The Units will not be certificated and the common shares and warrants comprising the Units are immediately separable and will be issued separately in this offering. The underwriters may also purchase up to common shares and/or warrants from us within 45 days of the date of this prospectus to cover over-allotments, if any.
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Prior to this offering, there has been no public market in the United States for our Units, common shares or warrants. We expect that the initial public offering price will be between $ and $ per Unit.
We intend to apply to list our common shares and the warrants on the (the "U.S. Exchange") under the symbols "MDCX" and "MDCXW," respectively. There can be no assurance that we will be successful in listing our common shares or warrants on the U.S. Exchange. This offering will occur only if the U.S. Exchange approves the listing of our common shares or warrants.
Our common shares are listed in Canada on the TSX Venture Exchange under the symbol “MDCX.” The closing price of our common shares on the TSX Venture Exchange on May 27, 2024 was C$2.01, which is equivalent to approximately $1.54 at an exchange rate of C$1.3636 to $1.00. Prices of our common shares as reported on the TSX Venture Exchange may not be indicative of the prices of our common shares if our common shares were traded on the U.S. Exchange.
We are an "emerging growth company" under applicable U.S. Securities and Exchange Commission rules and will be eligible for reduced public company disclosure requirements. See "Prospectus Summary-Implications of Being an Emerging Growth Company."
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Investing in our securities involves risks. See "Risk Factors" beginning on page 8 of this prospectus.
| Per Unit | Total | ||
| Initial public offering price | $ | $ | |
| Underwriting discounts and commissions(1) | $ | $ | |
| Proceeds, before expenses | $ | $ |
(1) We have also agreed to reimburse the underwriters for certain expenses. For additional underwriting compensation information, see "Underwriting" on page 132.
We have granted a 45-day option to the underwriters, exercisable one or more times in whole or in part, to purchase up to an additional common shares and/or warrants at the public offering price, less the underwriting discounts payable by us, solely to cover over-allotments, if any.
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the common shares and warrants against payment as set forth under "Underwriting" on or about , 2024.
______________________
|
Maxim Group LLC |
Brookline Capital Markets |
The date of this prospectus is , 2024
______________________
TABLE OF CONTENTS
Neither we, nor the underwriters have authorized anyone to provide any information or to make any representations other than the information contained in this prospectus, any amendment or supplement to this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we may have referred you. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters have not authorized any other person to provide you with different or additional information. Neither we nor the underwriters are making an offer to sell the common shares or the warrants in any jurisdiction where the offer or sale is not permitted. This offering is being made in the United States and elsewhere solely on the basis of the information contained in this prospectus. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or any sale of the common shares or the warrants. Our business, financial condition, results of operations and prospects may have changed since the date on the front cover of this prospectus. This prospectus is not an offer to sell or the solicitation of an offer to buy the common shares or the warrants in any circumstances under which such offer or solicitation is unlawful.
For investors outside the United States: Neither we nor any of the underwriters have done anything that would permit this offering or the possession or distribution of this prospectus in any jurisdiction where action for those purposes is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, this offering of Units and the distribution of this prospectus outside the United States.
Unless the context otherwise requires, in this prospectus, the term(s) "we", "us", "our", "Company", "our company", "Medicus," and "our business" refer to Medicus Pharma Ltd. and our subsidiaries.
MARKET, INDUSTRY AND OTHER DATA
This prospectus contains estimates, projections and other information concerning our industry, our business, and the markets for our products. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from our own internal estimates and research as well as from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, and similar sources.
In addition, assumptions and estimates of our and our industry's future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in "Risk Factors." These and other factors could cause our future performance to differ materially from our assumptions and estimates. See "Cautionary Statement Regarding Forward-Looking Statements."
PRESENTATION OF FINANCIAL INFORMATION
Unless otherwise indicated, the consolidated financial statements and related notes included in this prospectus have been prepared in accordance with the International Financial Reporting Standards, or IFRS ("IFRS"), as issued by the International Accounting Standards Board, or IASB ("IASB"). None of the consolidated financial statements in this prospectus were prepared in accordance with U.S. generally accepted accounting principles. Our functional currency is U.S. dollars.
EXCHANGE RATE INFORMATION
In this prospectus, all dollar amounts referenced, unless otherwise indicated, are expressed in U.S. dollars and are referred to as "$" or "U.S.$". Canadian dollars are referred to as "C$". The following table sets out, for the periods indicated, the high, low, and period end indicative rates of exchange for US$1.00 expressed in Canadian dollars as published by the Bank of Canada:
| Year ended December 31, 2023 (C$) |
Year ended December 31, 2022 (C$) |
||
| As at end of period | 1.3226 | 1.3544 | |
| Low for the period | 1.3128 | 1.2451 | |
| High for the period | 1.3875 | 1.3856 | |
| Average rate for the period | 1.3497 | 1.3013 |
On May 27, 2024, the daily average exchange rate for Canadian dollars in terms of the U.S. dollar, as quoted by the Bank of Canada, was $1.00 = C$1.3636.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this prospectus regarding our strategy, future operations, regulatory process, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. The words "believe", "anticipate", "intend", "expect", "target", "goal", "estimate", "plan", "assume", "may", "will", "predict", "project", "would", "could" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
The forward-looking statements in this prospectus include, but are not limited to, statements about:
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our ability to achieve and sustain profitability;
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our ability to compete effectively in selling our products, if approved;
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our ability to expand, manage and maintain our direct sales and marketing organizations;
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our actual financial results may vary significantly from forecasts and from period to period;
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our estimates regarding anticipated operating losses, future revenues, capital requirements and our needs for additional financing;
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our ability to market, commercialize, achieve market acceptance for and sell our products and product candidates;
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market risks regarding consolidation in the healthcare industry;
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the willingness of healthcare providers to purchase our products if coverage, reimbursement and pricing from third party payors for procedures using our products significantly declines;
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our ability to adequately protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;
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the regulatory and legal risks, and certain operating risks, that our international operations subject us to;
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the fact that product quality issues or product defects may harm our business;
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any product liability claims; and
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the progress, timing and completion of our research, development and preclinical studies and clinical trials for our products and product candidates.
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this prospectus, particularly the factors described in the "Risk Factors" section of this prospectus, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.
You should read this prospectus and the documents that we have filed as exhibits to the registration statement of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about us, including those listed in the sections of this prospectus entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this prospectus.
We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this prospectus and is qualified in its entirety by the more detailed information and consolidated financial statements and the related notes thereto included elsewhere in this prospectus. This summary does not contain all the information you should consider before investing in our securities. You should read this entire prospectus carefully, including "Risk Factors", "Management's Discussion and Analysis of Financial Condition and Results of Operations", and our consolidated financial statements and the related notes thereto included elsewhere in this prospectus, before making an investment decision.
Overview
Our Company
We are a biotech/life sciences company focused on accelerating the clinical development programs of novel and disruptive therapeutic assets.
Through our wholly owned subsidiary, SkinJect, Inc. ("SkinJect"), we focus on the development of a drug delivery system using novel dissolvable microneedle arrays for the treatment of non-melanoma skin cancers. Prior to the Company's acquisition of SkinJect, our business was undertaken by SkinJect as a stand-alone entity. References to our business as conducted at a date prior to the completion of the Business Combination (as defined below) relate to the business undertakings of SkinJect.
For information on the Business Combination, see "Corporate History and Information."
Our Strategy
Our principal purpose is to advance the clinical development program of SkinJectTM (the "Product"), a novel, minimally invasive treatment for common forms of non-melanoma skin cancer. We also seek to opportunistically identify, evaluate and acquire accretive assets, properties or businesses.
In January 2024, we submitted to the U.S. Food and Drug Administration (the "FDA") a Phase 2 Investigational New Drug ("IND") clinical protocol to non-invasively treat basal cell carcinoma of the skin using the Product.
We may also trial the Product on other forms of skin cancer beyond basal cell carcinoma. Specifically, it may be trialed against squamous cell carcinoma, cutaneous T-cell lymphoma, as well as pre-cancerous lesions, among other clinical indications, subject to the Company having the capital resources available to do so, without any need to amend or expand the scope of the Company's existing licenses.
In addition, our business strategy opportunistically includes the acquisition of other accretive clinical stage life sciences and biotechnology companies. While we have not identified any potential acquisitions at this time, nor have we entered into any agreement, letter of intent or other similar document with respect to any proposed acquisition.
For additional information regarding the business of the Company and the regulatory environment in which it operates, please refer to the prospectus under the heading "Our Business."
Our Strengths
Our key competitive strengths include:
- A senior management team, led by Dr. Raza Bokhari, that has deep experience in medicine, and pharmaceutical science as well as a proven track record in business development and entrepreneurship.
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SkinJectTM is expected to be a cost-effective and non-invasive alternative to surgery for the most common form of cancer worldwide.
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Potential to treat a range of other common non-melanoma skin cancers as well as pre-cancerous lesions.
Summary Risk Factors
Investing in our securities involves risk. Our ability to execute our strategy is also subject to certain risks. The risks described in "Risk Factors" in this prospectus may cause us to not realize the full benefits of our strengths or may cause us to be unable to successfully execute all or part of our strategy. Some of the more significant risks include the following:
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our ability to achieve and sustain profitability;
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our ability to compete effectively in selling our products;
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our ability to expand, manage and maintain our direct sales and marketing organizations;
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our actual financial results may vary significantly from forecasts and from period to period;
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our estimates regarding anticipated operating losses, future revenues, capital requirements and our needs for additional financing;
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our ability to market, commercialize, achieve market acceptance for and sell our products and product candidates;
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market risks regarding consolidation in the healthcare industry;
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the willingness of healthcare providers to purchase our products if coverage, reimbursement and pricing from third party payors for procedures using our products significantly declines;
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our ability to adequately protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;
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the regulatory and legal risks, and certain operating risks, that our international operations subject us to;
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the fact that product quality issues or product defects may harm our business;
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any product liability claims; and
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the progress, timing and completion of our research, development and preclinical studies and clinical trials for our products and product candidates.
Please see "Risk Factors" for a discussion of these and other factors you should consider before making an investment in our common shares and warrants.
Corporate Structure
An organizational chart showing our basic corporate structure is set forth below (both subsidiaries are 100% owned by Medicus Pharma Ltd.):
Corporate History and Information
Our company (formerly, Interactive Capital Partners Corporation) was incorporated pursuant to the Business Corporations Act (Ontario) on April 30, 2008 under the name Interactive Capital Partners Corporation. Prior to the Business Combination (as defined below), the Company existed as a shell company and had no business operations.
On September 29, 2023, the Company completed a business combination (the "Business Combination") with SkinJect, a company existing under the laws of Pennsylvania. The Business Combination was completed pursuant to a business combination agreement dated May 12, 2023, as amended, among the Company, SkinJect and RBX Capital, LP, and resulted in a reverse takeover of Interactive Capital Partners Corporation (the Company as it existed prior to the Business Combination) by the former shareholders of SkinJect, with SkinJect becoming a wholly owned operating subsidiary of the Company, and the Company being renamed "Medicus Pharma Ltd."
On October 11, 2023, the Company (as it exists after the Business Combination) commenced trading on the TSX Venture Exchange ("TSXV").
The Company's registered and head office is located at One First Canadian Place, 100 King Street West, Suite 3400, Toronto, Ontario M5X 1A4, Canada.
Our website address is www.medicuspharma.com. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website to be part of this prospectus or in deciding whether to purchase our securities. Our agent for service of process in the United States is Medicus Pharma Inc.
Implications of Being a Foreign Private Issuer
Upon effectiveness of this registration statement, we will be considered a "foreign private issuer" as defined in Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"). In our capacity as a foreign private issuer, we are exempt from certain rules under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and "short-swing" profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of our common shares. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. domestic issuers whose securities are registered under the Exchange Act. In addition, we are not required to comply with Regulation FD, which restricts the selective disclosure of material information.
We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held by U.S. residents and any of the following three circumstances applies: (1) the majority of our executive officers or directors are U.S. citizens or residents, (2) more than 50% of our assets are located in the United States or (3) our business is administered principally in the United States.
As a foreign private issuer, we have taken advantage of certain reduced disclosure and other requirements in this prospectus and may elect to take advantage of other reduced reporting requirements in future filings. Accordingly, the information contained herein or that we provide shareholders may be different than the information you receive from other public companies in which you hold equity securities. See "Risk Factors - We will be a foreign private issuer and, as a result, we will not be subject to U.S. proxy rules and will be subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company."
Implications of Being an Emerging Growth Company
As a company with less than $1.235 billion in revenues during our last fiscal year, we qualify as an "emerging growth company" as that term is defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). As an emerging growth company we expect to take advantage of specified reduced reporting requirements that are otherwise applicable generally to public companies. These reduced reporting requirements include, but are not limited to:
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not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended ("Sarbanes-Oxley Act");
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reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements and registration statements; and
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an exemption from the requirements to obtain a non-binding advisory vote on executive compensation or stockholder approval of any golden parachute arrangements.
We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the completion of this offering. However, if certain events occur prior to the end of such five-year period, including if we become a "large accelerated filer," our annual gross revenues exceed $1.235 billion or we issue more than $1 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.
The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. As an emerging growth company, we intend to take advantage of an extended transition period for complying with new or revised accounting standards as permitted by the JOBS Act. We have elected to take advantage of certain of the reduced disclosure obligations in this prospectus and in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information in this prospectus and that we provide to our shareholders in the future may be different than what you might receive from other public reporting companies in which you hold equity interests.
THE OFFERING
This summary highlights information presented in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all the information you should consider before investing in our securities. You should carefully read this entire prospectus before investing in our securities including "Risk Factors" and our consolidated financial statements.
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Issuer |
Medicus Pharma Ltd. |
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Securities offered |
Units, each Unit consisting of one of our common shares and one warrant to purchase one of our common shares. Each warrant will have an exercise price of $ per share (100% of the public offering price of the Units), will be exercisable immediately and will expire years from the date of issuance. The Units will not be certificated or issued in stand-alone form. The common shares and the warrants comprising the Units are immediately separable upon issuance and will be issued separately in this offering. |
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Over-allotment option |
We have granted the underwriters the right to purchase up to an additional |
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Common shares to be outstanding after this offering |
common shares ( common shares if the underwriters' over-allotment option from us is exercised in full for common shares and none of the warrants issued in this offering are exercised). |
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Use of Proceeds |
We intend to use the net proceeds from this offering to fund our clinical trials for treatment of basal cell carcinoma using our doxorubicin tip loaded dissolvable microarray needle skinpatch. We may also use funds to support our portfolio expansion strategy which may include additional regulatory filings for marketing approval of the Product, both for geographical expansion and the extension of the potential indications for the Product. We will use the remainder of the net proceeds for general corporate purposes and working capital. See "Use of Proceeds." |
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Voting rights |
Each outstanding common share will be entitled to one vote on all matters submitted to a vote of shareholders. |
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Listings |
We intend to apply to list our common shares on the U.S. Exchange under the symbol "MDCX" and "MDCXW," respectively. Our common shares are listed in Canada on the TSX Venture Exchange under the symbol "MDCX." There can be no assurance that we will be successful in listing our common shares and the warrants on the U.S. Exchange. This offering will occur only if the U.S. Exchange approves the listing of our common shares and the warrants. |
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Dividend policy |
We do not anticipate that we will declare or pay dividends in the foreseeable future on our common shares. Instead, we anticipate that all of our earnings will be used for the operation and growth of our business. Any future determination to declare cash dividends would be subject to the discretion of our board of directors and would depend upon various factors, including our results of operations, financial condition and liquidity requirements, restrictions that may be imposed by applicable law and our contracts and other factors deemed relevant by our board of directors. |
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Risk factors |
See "Risk Factors" and the other information included in this prospectus for a discussion of factors you should consider before deciding to invest in our common shares and warrants. |
Except as otherwise noted, all information contained in this prospectus assumes:
- no exercise of the option granted to the underwriters to purchase up to additional common shares and additional warrants to cover over- allotments, if any, in connection with the offering;
- a U.S. initial public offering price of $ per Unit, which is the midpoint of the price range set forth on the cover page of this prospectus;
- no purchase of common shares or warrants in this offering by directors, officers or existing shareholders; and
- no exercise of our outstanding options (as described herein) or the warrants offered in this offering.
The number of common shares that will be outstanding after this offering is based on common shares outstanding as of , 2024.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following tables set forth our selected historical consolidated financial information. You should read the selected historical consolidated financial information in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus.
We have derived the selected consolidated statement of operations information for the years ended December 31, 2022, and 2023 and the selected consolidated balance sheet information as of December 31, 2022, and 2023 from our audited consolidated financial statements included elsewhere in this prospectus. Our consolidated financial statements have been prepared in accordance with IFRS and our consolidated financial statements are presented in U.S. dollars, except where indicated otherwise. Our historical results are not necessarily indicative of the results that should be expected in any future period.
CONSOLIDATED STATEMENT OF OPERATIONS
| Years Ended December 31, | ||||||
| 2023 | 2022 | |||||
| $ | $ | |||||
| Operating expenses | ||||||
| General and administrative | 2,366,202 | 332,032 | ||||
| Research and development | 193,578 | 646,384 | ||||
| Share-based compensation | 146,671 | - | ||||
| Total operating expenses | 2,706,451 | 978,416 | ||||
| Loss from operations | (2,706,451 | ) | (978,416 | ) | ||
| Finance expense, net | 500,579 | 713,966 | ||||
| Listing expense | 3,271,462 | - | ||||
| Net loss and comprehensive loss for the year | (6,478,492 | ) | (1,692,382 | ) | ||
| Loss per share - basic and diluted | (0.93 | ) | (0.45 | ) | ||
| Weighted average number of common shares | ||||||
| outstanding - basic and diluted | 6,959,018 | 3,769,800 | ||||
CONSOLIDATED BALANCE SHEET DATA
| December 31, 2023 | December 31, 2022 | |||||
| $ | $ | |||||
| Assets | ||||||
| Current assets | ||||||
| Cash | 1,719,338 | 267,652 | ||||
| Prepaids | 173,719 | 15,000 | ||||
| Total Current assets | 1,893,057 | 282,652 | ||||
| Liabilities | ||||||
| Current liabilities | ||||||
| Accounts payable and accrued liabilities | 781,609 | 99,794 | ||||
| Note payable | - | 150,000 | ||||
| Convertible promissory notes | - | 1,381,499 | ||||
| Derivative liability | - | 774,074 | ||||
| Preferred share liability | - | 10,075,317 | ||||
| Total current liabilities | 781,609 | 12,480,684 | ||||
| Total liabilities | 781,609 | 12,480,684 | ||||
| Shareholders' equity (deficiency) | ||||||
| Share capital | 19,835,839 | 194,538 | ||||
| Contributed surplus | 146,671 | - | ||||
| Deficit | (18,871,062) | (12,392,570) | ||||
| Total shareholders’ equity (deficiency) | 1,111,448 | (12,198,032) | ||||
| Total liabilities and shareholders’ equity (deficiency) | 1,893,057 | 282,652 |
RISK FACTORS
You should carefully consider the risks described below and all other information contained in this prospectus before making an investment decision. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected. In that event, the trading price of our securities could decline, and you may lose part or all of your investment. This prospectus also contains forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors, including the risks described below and elsewhere in this prospectus.
We have a limited operating history, which may make it difficult to evaluation our current business and predict our future performance.
We have a limited operating history and, in particular, no history of earnings; we have not paid any dividends and we are unlikely to pay any dividends in the immediate or foreseeable future. Our success will depend to a large extent on the expertise, ability, judgement, discretion, integrity and good faith of our management.
As we are at an early stage of product development, we have not generated revenues to date. We expect to spend a significant amount of capital to fund research and development and clinical trials. As a result, we expect that our operating expenses will increase significantly and, consequently, we will need to generate significant revenues to become profitable. Even if we do become profitable, we may not be able to sustain or increase profitability on a quarterly or annual basis. We cannot predict when, if ever, we will be profitable. There can be no assurances that our products will be capable of being produced in commercial quantities at reasonable costs, or be successfully marketed.
We have a novel technology with uncertain market acceptance.
The Product is at an early stage of development, with uncertain market acceptance. Product approval, should this be achieved, does not infer that the Product will garner a good market price or be reimbursed by public or private insurers. Further, there are no guarantees that the Product will be positively received by the target patient population. The acceptability of the product to regulators, payors and patients will depend on the relative risk versus benefit of the product as proven in clinical trials, the acceptability of the price, and the relative attractiveness as compared to other treatments.
We could also suffer the consequences of non-compliance or breaches by licensors in connection with our license agreements. Such non-compliance or breaches by such third parties could in turn result in breaches or defaults under our agreements with our other collaboration partners, and we could be found liable for damages or lose certain rights, including rights to develop and/or commercialize our product. Loss of our rights to any license granted to us in the future, or the exclusivity rights provided therein, could harm our financial condition and operating results.
Our intellectual property is held under third-party licenses.
Our intellectual property is held under a third-party license and we may require additional third-party licenses to effectively develop and manufacture our key products or future technologies. There can be no assurance as to the availability or cost of such additional licenses. A substantial number of patents have already been issued to other biotechnology and pharmaceutical companies. To the extent that valid third-party patent rights cover our products or services, we or our strategic collaborators would be required to seek licenses from the holders of these patents in order to manufacture, use or sell these products and services, and payments under them would reduce our profits from these products and services. It is not possible to predict the extent to which we may wish or be required to acquire rights under such patents, the availability and cost of acquiring such rights, and whether a license to such patents will be available on acceptable terms or at all. There may be patents in the United States or in foreign countries or patents issued in the future that are unavailable to license on acceptable terms. Our inability to obtain such licenses may hinder or eliminate an ability to manufacture and market products.
If we breach any of the agreements under which we license rights to intellectual property, we could lose license rights that are important to our business. Our current license agreement may not provide an adequate remedy for any breach by the licensor.
The University of Pittsburgh may terminate our license agreement in certain circumstances.
The License Agreement (as defined herein) is our main asset and the basis for the development of the Product. The University of Pittsburgh of the Commonwealth System of Higher Education (the "University") has the right to terminate the License Agreement if breaches are not cured within 30 days of our receipt of notice thereof from the University or in certain insolvency-related situations or if we cease to carry out our business. There can be no assurance that we will be able to comply with the License Agreement following the offering or that the University will grant any necessary waivers if we are unable to do so. The obligations under the License Agreement principally require the trial of the Product on specified timelines. If the University were to terminate the License Agreement our assets would essentially be rendered worthless and it would have a material adverse effect on our ability to pursue our business objective.
For information on the License Agreement, see "Our Business -- Patents and Proprietary Information."
Our technology may not be successful for its intended use.
Although the SkinJect Phase 1 study indicated that the patch is safe and well-tolerated, there is no guarantee that the Phase 2 study will produce similar results or that the Product will ultimately be brought to market or, if it does, that it will be positively received or obtain favorable pricing, which could have a material adverse effect on our results of operations.
Future technology will require regulatory approval, which is costly and we may not be able to obtain it and we may fail to obtain regulatory approvals or only obtain approvals for limited uses or indications.
Market authorization of the Product falls under the regulatory purview of the FDA and other equivalent regulatory bodies worldwide. There can be no assurance that these regulatory bodies will approve the Product in the manner or time frame suggested. Although we intend to work with regulatory consultants and third parties knowledgeable in the area, we cannot ensure that it will obtain market authorization in a timely manner, or at all. Market authorization may also be contingent on a less competitive product label, which would negatively impact revenue.
Changes in methods of manufacturing or formulation may result in additional costs or delay.
As the Product is developed through further clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation, are altered along the way in an effort to optimize processes and results. Such changes carry the risk that they will not achieve these intended objectives. Any of these changes could cause the Product to perform differently and affect the results of future clinical trials conducted with the altered materials. This could delay completion of clinical trials, require the conduct of bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of the Product and jeopardize our ability, or our strategic partners' ability, to commence product sales and generate revenue.
The manufacture of the Product is complex. We or our third-party manufacturers may encounter difficulties in production. If we encounters any such difficulties, our ability to supply the Product for clinical trials or, if approved, for commercial sale could be delayed or halted entirely.
The manufacture of biopharmaceutical products is complex and requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. The process of manufacturing the Product is susceptible to product loss due to contamination, equipment failure or improper installation or operation of equipment, vendor or operator error, contamination and inconsistency in yields, variability in product characteristics and difficulties in scaling the production process. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects and other supply disruptions. If microbial, viral or other contaminations are discovered in the Product or in the manufacturing facilities in which the Product is made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. Any adverse developments affecting manufacturing operations for the Product, if any are approved, may result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls, or other interruptions in the supply of our products. We may also have to take inventory write-offs and incur other charges and expenses for products that fail to meet specifications, undertake costly remediation efforts or seek more costly manufacturing alternatives.
We rely on external contract research organizations to provide clinical and nonclinical research services and agreements with these organizations of which one agreement is currently in place.
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell the Product, if approved, we may be unable to generate any product revenue.
To successfully commercialize the Product, we will need to build out sales and marketing capabilities, either on our own or with others. The establishment and development of our own commercial team or the establishment of a contract field force to market the Product will be expensive and time-consuming and could delay launch. Moreover, we cannot be certain that we will be able to successfully develop this capability. We may seek to enter into collaborations with other entities to use their established marketing and distribution capabilities, but we may be unable to enter into such agreements on favorable terms, if at all. If any current or future collaborators do not commit sufficient resources to commercialize the Product, or we are unable to develop the necessary capabilities on our own, we may be unable to generate sufficient revenue to sustain our business. We may compete with many companies that currently have extensive, experienced and well-funded marketing and sales operations to recruit, hire, train and retain marketing and sales personnel. Without an internal team or the support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.
We rely on key personnel.
Our success depends in large measure on certain key personnel, including our chief executive officer, Dr. Raza Bokhari. The loss of the services of such key personnel could have a material adverse effect on us. The contributions of these individuals to our operations immediately after this offering are likely to be of central importance. In addition, the competition for qualified personnel in the biotech industry is intense and there can be no assurance that we will be able to continue to attract and retain all personnel necessary for the development and operation of our business. Investors must rely upon the ability, expertise, judgment, discretion, integrity and good faith of ours management. Other biotechnology companies with which we compete for qualified personnel have greater financial and other resources, different risk profiles and a longer history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than those that we have to offer. If we are unable to continue to attract and retain high-quality personnel, the rate of and success with which we can develop and commercialize the Product would be limited.
As a technology-driven company, intellectual input from key management and personnel is critical to achieve our business objectives. Consequently, our ability to retain these individuals and attract other qualified individuals is critical to our success. The loss of the services of key individuals might significantly delay or prevent achievement of our business objectives. In addition, because of a relative scarcity of individuals with the high degree of education and scientific achievement required for our business, competition among biotech companies for qualified employees is intense and, as a result, we may not be able to attract and retain such individuals on acceptable terms, or at all.
SkinJect also has relationships with scientific collaborators at academic and other institutions, some of whom conduct research at SkinJect's request or assist SkinJect in formulating the SkinJect's research and development strategies. These scientific collaborators are not SkinJect employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. In addition, even though SkinJect's collaborators are required to sign confidentiality agreements prior to working, they may have arrangements with other companies to assist such other companies in developing technologies that may prove competitive to us.
Incentive provisions for our key executives include base salary and the granting of stock options that vest over time, designed to encourage such individuals to stay with us. However, a low share price could render such agreements of little value to our key executives. In such event, our key executives could be susceptible to being hired away by our competitors who could offer a better compensation package. If we are unable to attract and retain key personnel our business, financial conditions and results of operations may be adversely affected.
We may not be able to successfully execute our business strategy.
The execution of our business strategy poses many challenges and is based on a number of assumptions. If we experience significant regulatory delays, supply chain disruptions, cost overruns on our programs, or if our business plan is more costly than we anticipate, certain research and development activities may be delayed or eliminated, resulting in changes or delays to our commercialization plans, or we may be compelled to secure additional funding (which may or may not be available) to execute our business strategy. We cannot predict with certainty future revenues or results from operations. If the assumptions on which our revenue or expenditure forecasts are based change, the benefits of our business strategy may change as well.
We will require additional financing in the future, which may not be available on favorable terms or at all.
The development of our business is expected to require additional financing. Failure to obtain sufficient financing may result in the delay or indefinite postponement of our business plans. The initial primary source of funding available to us consists of equity and short-term debt financing. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favorable to us.
The ongoing volatility in global capital markets has generally made the raising of capital by equity or debt financing more difficult. Access to financing has been negatively impacted by ongoing global economic risks and increased inflation. We will require substantial additional funds for further research and development, and the marketing and sale of our technology. We may attempt to raise additional funds for these purposes through public or private equity or debt financing, collaborations with other therapeutic companies, government grants or other sources. There can be no assurance that additional funding or partnerships will be available on terms acceptable to us and which would foster the successful commercialization of the Product. If additional funds are raised through further issuances of equity or convertible debt securities, existing shareholders could suffer significant dilution, and any new equity securities issued could have rights, preferences and privileges superior to those of the common shares or terms superior to those of the warrants. Any debt financing secured in the future could involve restrictive covenants relating to capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital or to pursue business opportunities, including potential acquisitions. If adequate funds are not obtained, we may be required to reduce, curtail or discontinue operations.
We have had negative operating cash flows since inception and expect to incur losses for the foreseeable future.
We have had negative cash flow from operating activities and has incurred operating losses since its inception. We anticipate that we will continue to incur losses for the foreseeable future, and we expect these losses to increase as we continue our research and development of, and seek regulatory approvals for, our product candidates, prepare for and begin to commercialize any approved product candidates and add infrastructure and personnel to support our product development efforts and operations as a public company. The net losses and negative cash flows incurred to date, together with expected future losses, have had, and likely will continue to have, an adverse effect on our shareholders' deficit and working capital. The amount of future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue.
To the extent that we have negative operating cash flow in future periods, we may need to allocate a portion of our cash reserves to fund such negative cash flow. We may also be required to raise additional funds through the issuance of equity or debt securities. There can be no assurance that we will be able to generate positive cash flow from our operations or that additional capital or other types of financing will be available when needed or on terms favorable to us.
We are in a highly competitive industry which is continuously evolving with technological changes.
We are engaged in an industry that is highly competitive, evolving and characterized by technological change. As a result, it is difficult for us to predict whether, when and by whom new competing technologies or new competitors may enter the market. We face competition from companies with strong positions in certain markets we are currently targeting, and in new markets and regions we may enter. Some of these companies have significantly greater financial, technical, human, research and development, and marketing resources than us. We cannot assure that we will be able to compete effectively against current and future competitors who may discover and develop products in advance of us that are more effective than those developed by us. As a consequence, our current and future technologies may become obsolete or uncompetitive, resulting in adverse effects on revenue, margins and profitability. In addition, competition or other competitive pressures may result in price reductions, reduced margins or loss of market share, any of which could have a material adverse effect on our business, financial condition or results of operations. To the extent that new or improved pharmaceutical drug treatments are introduced that demonstrate better long-term efficacy and safety, patients and physicians may further delay the introduction of patches, such as the Product, if approved, in the skin cancer treatment continuum. the Product could also face competition from other formulations or devices that deliver chemotherapeutic agents on an extended basis.
Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staffs and experienced commercial and manufacturing organizations. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in competitors. As a result, these companies may obtain regulatory approval more rapidly than us are able and may be more effective in selling and marketing their products as well. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis drug products or drug delivery technologies that are more effective or less costly than the Product.
We believe that our ability to compete effectively depends upon many factors both within and beyond our control, including:
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the usefulness, ease of use, performance and reliability of our technology compared to our competitors;
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the activity and tolerability of the Product, including relative to marketed products and product candidates in development by third parties;
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the ability to distinguish safety and efficacy from existing, alternative therapies;
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the timing for the Product to complete clinical development and receive market approval;
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acceptance of the Product by patients, physicians and other health providers,
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our ability to monetize our technology;
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the selection of licensing partners for our technology with the necessary skills and resources to drive uptake;
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our marketing and selling efforts;
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our financial condition and results of operations;
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the ability to maintain a good relationship with regulatory authorities;
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the price of our future products, including in comparison to branded or generic competitors;
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whether coverage and adequate levels of reimbursement are available under private and governmental health insurance plans,
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acquisitions or consolidations within our industry, which may result in more formidable competitors;
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our ability to protect our intellectual property rights,
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our ability to attract, retain and motivate talented employees;
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our ability to cost-effectively manage and grow our operations; and
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our reputation and brand strength relative to that of our competitors.
Our future success will depend on our ability to continually enhance and develop the Product.
There is a broad pipeline of potential new therapies for skin cancer. The market is characterized by rapid technological change and the possibility of frequent new product introductions. Accordingly, our future success depends upon our ability to enhance the Product and to develop, introduce and sell the most accurate products at competitive prices. The development of new technologies and products involves time, substantial costs and risks. Our ability to successfully develop new technologies depends in large measure on our ability to maintain a technically skilled research and development staff and to adapt to technological changes and advances in the industry.
The success of new product introductions depends on a number of factors including the efficacy and safety as demonstrated in clinical trials, the ability to demonstrate the impact of real world evidence, timely and successful product development, the timing and market introduction of competitive products, market acceptance, the effective management of purchase commitments and inventory levels in line with anticipated product demand, the availability of pharmaceutical components in appropriate quantities and costs to meet anticipated demand, the risk that new products may have quality or other defects in the early stages of introduction and our ability to manage distribution and production issues related to new product introductions, the clinical indications for which the product is approved, acceptance by physicians, the medical community and patients of the product as a safe and effective treatment, the ability to distinguish safety and efficacy from existing, less expensive alternative therapies, the convenience of prescribing, administrating and initiating patients on the product, the potential and perceived advantages and/or value of the product over alternative treatments, the cost of treatment in relation to alternative treatments, including any similar generic treatments, the availability of coverage and adequate reimbursement by third-party payors and government authorities to support the product's pricing, the prevalence and severity of adverse side effects and the effectiveness of sales and marketing efforts.
If we are unable, for any reason, to enhance, develop, introduce and sell new products in a timely manner, or at all, in response to changing market conditions or customer requirements or otherwise, our business would be harmed.
If we are unable to differentiate the Product from existing therapies for treatment of skin cancer, or if the FDA or other applicable regulatory authorities approve generic products that compete with the Product, the ability to successfully commercialize the Product would be adversely affected.
Although the Phase 1 study provides preliminary evidence of complete clinical response, it is possible that we will receive data from additional clinical trials or in a post marketing setting from physician and patient experiences with the commercial product that does not continue to support such interpretations. It is also possible that the FDA, physicians and healthcare payers will not agree with our interpretation of existing and future clinical trial data. If we are unable to demonstrate the value of the Product based on clinical data, patient experience, as well as real world evidence, the opportunity for the Product to maintain premium pricing and be commercialized successfully would be adversely affected.
Additionally, the FDA or other applicable regulatory authorities may approve other generic products that could compete with the Product if we cannot adequately protect it with our patent portfolio. For example, in the US, once an NDA is approved, the product covered thereby becomes a "listed drug" which can, in turn, be cited by potential competitors in support of approval of an abbreviated new drug application ("ANDA"). The FDCA, FDA regulations and other applicable regulations and policies provide incentives to manufacturers to create modified, non-infringing versions of a drug to facilitate the approval of an ANDA or other application for generic substitutes. These manufacturers might only be required to conduct a relatively inexpensive study to show that their product has the same active ingredient(s), dosage form, strength, route of administration, conditions of use, or labeling as our product candidate and that the generic product is bioequivalent to us, meaning it is absorbed in the body at the same rate and to the same extent as the Product. These generic equivalents, which must meet the same quality standards as branded pharmaceuticals, would be significantly less costly than ours to bring to market and companies that produce generic equivalents are generally able to offer their products at lower prices. Thus, after the introduction of a generic competitor, a significant percentage of the sales of any branded product is typically lost to the generic product. Accordingly, competition from generic equivalents to our products would materially adversely impact our ability to successfully commercialize the Product.
A variety of risks associated with potential international business relationships could materially adversely affect our business.
We may enter into agreements with third parties for the development and commercialization of the Product in international markets. If we do so, we would be subject to additional risks related to entering into international business relationships, including:
● differing regulatory requirements in other countries including, among others, marketing approval, pricing, reimbursement and sales and marketing practices;
● potentially reduced protection for intellectual property rights;
● potential for so-called parallel importing, which is when a local seller, faced with higher local prices, opts to import goods from a foreign market with lower prices, rather than buying them locally;
● unexpected changes in tariffs, trade barriers and regulatory requirements;
● economic weakness, including inflation, or political instability in foreign economies and markets;
● compliance with tax, employment, immigration and labor laws for employees traveling and working abroad;
● foreign taxes;
● foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other risks incident to doing business in another country;
● workforce uncertainty in countries where labor unrest is more common than in Canada or the United States;
● production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad or supply chain disruptions; and
● business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters, including earthquakes, volcanoes, typhoons, floods, tsunamis, hurricanes and fires.
These and other risks may materially adversely affect our ability to develop and commercialize products in international markets and may harm our business.
Collaboration arrangements we may enter into in the future may not be successful.
We may seek future partnerships, collaborations and other strategic transactions to maximize the commercial potential of the Product. We may enter into such arrangements on a selective basis depending on the merits of retaining commercialization rights for ourself as compared to entering into selective collaboration arrangements with leading pharmaceutical or biotechnology companies, both in the United States and internationally. We face competition in seeking appropriate collaborators. Moreover, collaboration arrangements are complex and time consuming to negotiate, document and implement. We may not be successful in our efforts to establish and implement collaborations or other alternative arrangements should we choose to enter into such arrangements. The terms of any collaborations or other arrangements that we may establish may not be favorable to us.
Any future collaborations that we enter into may not be successful. The success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborators.
Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations.
Disagreements between parties to a collaboration arrangement regarding clinical development and commercialization matters could lead to delays in the development process or commercialization of our product candidate and, in some cases, termination of the collaboration arrangement. These disagreements can be difficult to resolve if neither of the parties has final decision-making authority.
Collaborations with pharmaceutical or biotechnology companies and other third parties often are terminated or allowed to expire by the other party. Any such termination or expiration could adversely affect us financially and could harm our business reputation.
We may acquire businesses or products, or form strategic alliances in the future, and we may not realize the benefits of such acquisitions or alliances.
We may acquire additional businesses or products, form strategic alliances or create joint ventures with third parties that we believe will complement or augment our existing business. If we acquire businesses with promising markets or technologies, we may not be able to realize the benefit of acquiring such businesses if we are unable to successfully integrate them with our existing operations and company culture. We may encounter numerous difficulties in developing, manufacturing and marketing any new products resulting from a strategic alliance or acquisition that delay or prevent us from realizing their expected benefits or enhancing our business. We cannot assure you that, following any such acquisition, we will achieve the expected synergies to justify the transaction. In addition, we may require significant additional funds to either acquire such businesses or products or to commercialize them, which may result in significant dilution to shareholders or the incurrence of significant indebtedness by us.
We do not have any long-term customer commitments.
We may negotiate clinical and/or commercial supply agreements for the Product or product sub-components. At the time of this prospectus, there are no long-term commitments from customers for the Product. Because we do not have long-term contracts for the Product, management may not accurately predict future revenue streams and there may be no assurance that customers would continue to use our products, or that we would be able to replace departing potential customers with new potential customers that provide us with comparable revenue.
Our business and operations would suffer in the event of computer system failures, cyberattacks, or a deficiency in our cyber security.
Despite the implementation of security measures, our internal computer systems, and those of the third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our commercialization or further development of our technology. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development or the commercialization of our products could be delayed or disrupted.
We may fail to manage growth successfully which may adversely impact operating results.
Our failure to manage our growth successfully may adversely impact our operating results. Our ability to manage growth will require us to continue to build our operational, financial and management controls, contracting relationships, marketing and business development plans and controls and reporting systems and procedures. Our ability to manage our growth will also depend in large part upon a number of factors, including the ability for us to rapidly:
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expand our internal and operational and financial controls significantly so that we can maintain control over operations;
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attract and retain qualified technical personnel in order to continue to develop reliable and flexible products and provide services that respond to evolving customer needs;
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build a sales team to keep customers and channel partners informed regarding the technical features issues and key selling points of our products and services;
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develop support capacity for customers as sales increase; and
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build a channel network to create an expanding presence in the evolving marketplace for our products and services.
An inability to achieve any of these objectives could harm our business, financial condition and results of operations.
Any products we develop will be subject to extensive, lengthy and uncertain regulatory requirements, which could adversely affect the ability to obtain regulatory approval in a timely manner, or at all.
It is understood that pharmacologic therapies are subject to an extensive, lengthy and unpredictable regulatory approval process by the FDA and equivalent regulatory bodies in other countries. This entails significant investment in time and resources, with no guarantee on the outcome or timeframe. We may encounter significant delays or excessive costs in our efforts to secure necessary market authorizations. Even if approved, the different regulatory bodies have numerous regulations governing the manufacturing, labeling, distributing, marketing, promotion and advertising after product approval. The regulatory requirements governing new technologies might be subject to change, and the products themselves may be subject to substantial review by the FDA and/or other governmental regulatory authorities that could prevent or delay approval of these products. Regulatory constraints ultimately imposed on our products, if approved, could limit our ability to commercialize, thus impacting on our financial condition and results.
Manufacture and marketing of the Product is subject to government regulation. In most countries, we will be required to complete extensive non-clinical studies and clinical trials to demonstrate the safety and efficacy of the Product in order to apply for regulatory approval to market the product. Prior to marketing approval in the United States, required steps include non-clinical (animal and laboratory) testing; performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the Product in the intended target population; performance of a consistent and reproducible manufacturing process intended for commercial use; and successful filing and approval of an NDA. These processes are costly and the timeframe and success are uncertain and may be out of our control. We also have no control over the extent of approval, which can be restricted to specific jurisdictions and/or conditions on the product label and limit our revenues.
Once approved, we will be subjected to continuing regulatory review, including adverse event reporting requirements and the FDA's general prohibition against promoting products for unapproved uses. We may also have other forms of post approval commitments, such as clinical trials or enhanced safety reporting and commitments. Failure to comply with any post-approval requirements can have consequences including warning letters, product seizures, recalls, substantial fines, injunctions, withdrawal of approvals, operating restrictions and criminal prosecutions. Any of these enforcement actions, any unanticipated changes in existing regulatory requirements or the adoption of new requirements, or any safety issues that arise with any approved products, could negatively impact on our ability to market products and generate revenues and thus our ability to continue our operations.
We also may be restricted or prohibited from marketing or manufacturing a product, even after obtaining product approval, if previously unknown problems with the product or our manufacturer are subsequently discovered. Moreover, we cannot provide assurance that newly discovered or developed safety issues will not arise following any regulatory approval. If our product is used by a large patient population, serious adverse events may occur from time to time that initially may seem unconnected to the treatment, and only when it repeatedly occurs over a period of time does the treatment become suspect as having a causal relationship to the adverse event. Any safety issues could cause us to suspend or cease marketing of our approved products, possibly subject us to substantial liabilities, and adversely affect our ability to generate revenues.
We may not be able to obtain marketing approval.
Even if we complete the necessary non-clinical studies and clinical trials, the marketing approval process is expensive, time-consuming, and uncertain and may prevent us from obtaining approvals for the commercialization of the Product. If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize, or will be delayed in commercializing, the Product, and our ability to generate revenue will be materially impaired.
We rely on the protection of intellectual property rights.
Our commercial success depends to a significant degree upon our ability to develop new or improved technologies, instruments and products, and to obtain patents or other intellectual property rights or statutory protection for these technologies and products in Canada, the United States and other countries, such as the countries in the European Union and Asia. We intend to patent concepts, components, processes, industrial designs and methods, and other inventions and technologies that we considers to have commercial value or that will likely give us a competitive advantage. Despite devoting resources to the research and development of proprietary technology, we may not be able to develop new technology that is patentable or protectable. Further, patents issued to us, if any, could be challenged, held invalid or unenforceable, or be circumvented and may not provide us with necessary or sufficient protection or a competitive advantage.
In addition, despite our efforts to protect and maintain our patents competitors and other third parties may be able to design around our patents, if so awarded, or develop products similar to our products that are not within the scope of such patents. Finally, patents provide certain statutory protection only for a limited period of time that varies depending on the jurisdiction and type of patent. The statutory protection term of our patents expire between 2030 and 2035 and, thereafter, the underlying technology of such patents will be allowed to be used by any third party, including our competitors. Moreover, the inventions covered by patents may be free to be used in countries for which there is no patent protection. A number of our competitors and other third parties have been issued patents, or may have filed patent applications, or may obtain additional patents or other intellectual property rights for technologies similar to those that we have developed, used or commercialized, or may develop, use or commercialize, in the future. As certain patent applications in the United States and other countries are maintained in secrecy for a period of time after filing, and as publication or public awareness of new technologies often lags behind actual discoveries, we cannot be certain that we have been the first to develop the technology covered by our pending patent applications. In addition, the disclosure in our patent applications, including in respect of the utility of our claimed inventions, may not be sufficient to meet the statutory requirements for patentability in all cases. As a result, we can provide no assurance that our patent applications will result in valid or enforceable patents.
Prosecution and protection of the rights sought in patent applications and patents can be costly and uncertain, often involve complex legal and factual issues and consume significant time and resources. In addition, the breadth of claims allowed in our future patents, their enforceability and our ability to protect and maintain them cannot be predicted with any certainty. The laws of certain countries may not protect intellectual property rights to the same extent as the laws of Canada or the United States Even if our patents are held to be valid and enforceable in a certain jurisdiction, any legal proceedings that we may initiate against third parties to enforce such patents will likely be expensive, take significant time and divert management's attention from other business matters. We can provide no assurance that any of our pending patent applications will provide any protectable, maintainable or enforceable rights or competitive advantages to it.
Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
Once granted, patents may remain open to invalidity challenges including opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices or similar proceedings for a given period after allowance or grant, during which time third parties can raise objections against such grant. In the course of such proceedings, which may continue for a protracted period of time, the patent owner may be compelled to limit the scope of the allowed or granted claims thus attacked or may lose the allowed or granted claims altogether.
In addition, the degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, provide a barrier to entry against our competitors or potential competitors, or permit us to maintain our competitive advantage. Moreover, if a third party has intellectual property rights that cover the practice of our technology, we may not be able to fully exercise or extract value from our intellectual property rights. The following examples are illustrative:
● others may be able to make product that is similar to product candidates we intend to commercialize that is not covered by the patents that we own;
● we, or any collaborators might not have been the first to make or reduce to practice the inventions covered by the issued patents or pending patent applications that we own;
● we or any collaborators might not have been the first to file patent applications covering certain of our inventions;
● others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;
● it is possible that our pending patent applications will not lead to issued patents;
● issued patents that we own may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges;
● our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; and we may not develop additional proprietary technologies that are patentable;
● third parties performing manufacturing or testing for us using our products or technologies could use the intellectual property of others without obtaining a proper license;
● parties may assert an ownership interest in our intellectual property and, if successful, such disputes may preclude us from exercising exclusive rights over that intellectual property;
● we may not develop additional proprietary technologies that are patentable;
● we may not be able to obtain and maintain necessary licenses on commercially reasonable terms, or at all; and
● the patents of others may harm our business.
Should any of these events occur, they could significantly harm our business and results of operations. We can provide no assurance that we will be successful in protecting, maintaining or enforcing our intellectual property rights. If we are not successful in protecting, maintaining or enforcing our intellectual property rights, then our business, operating results and financial condition could be materially adversely affected.
We may not be able to enforce our intellectual property rights throughout the world.
The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of Canada and the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, particularly developing countries, do not favour the enforcement of patents and other intellectual property protection, especially those relating to life sciences.
To the extent that we have obtained or are able to obtain patents or other intellectual property rights in any foreign jurisdictions, it may be difficult for us to stop the infringement of our patents or the misappropriation of other intellectual property rights. For example, some foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the availability of certain types of patent rights and enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit.
Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate.
Many countries, including European Union countries, India, Japan and China, have compulsory licensing laws under which a patent owner may be compelled under specified circumstances to grant licenses to third parties. In those countries, we may have limited remedies if patents are infringed or if we are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop.
Guidelines and recommendations published by various organizations can reduce the use of products that we may commercialize.
Government agencies promulgate regulations and guidelines directly applicable to us and our products. In addition, professional societies, practice management groups, private health and science foundations and organizations involved in various diseases from time to time may also publish guidelines or recommendations to the healthcare and patient communities with respect to specific products. Recommendations of government agencies or these other groups or organizations may relate to such matters as usage, dosage, route of administration and use of concomitant therapies. Recommendations or guidelines that do not recognize our future products, suggest limitations or inadequacies of our future products, or suggest the use of competitive or alternative products as the standard of care to be followed by patients and healthcare providers, could result in decreased use or adoption of our future products.
Recent patent reform legislation in the United States.
On September 16, 2011, the Leahy-Smith America Invents Act (the "Leahy-Smith Act") was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. In particular, under the Leahy-Smith Act, the United States transitioned in March 2013 to a "first to file" system in which the first inventor to file a patent application will be entitled to the patent.
Further, the Leahy-Smith Act also includes significant changes in the way patent applications will be prosecuted and may also affect patent litigation. These include allowing third parties to submit prior art during patent prosecution by the U.S. Patent and Trademark Office ("USPTO"), and additional procedures to attack the validity of a patent in post-grant proceedings including opposition, derivation, re-examination, inter partes review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope or enforceability of, or invalidate, our patent rights, which could adversely affect our competitive position.
Patent reform legislation in the United States, including the Leahy-Smith Act, could increase those uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. The Leahy-Smith Act was signed into law on September 16, 2011, and includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted, redefine prior art and provide more efficient and cost-effective avenues for competitors to challenge the validity of patents. These include allowing third -party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings. After March 15, 2013, under the Leahy-Smith Act, the United States transitioned to a first inventor to file system in which, assuming that the other statutory requirements are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications, our ability to obtain future patents, and the enforcement or defense of our issued patents, all of which could harm our business, financial condition, results of operations and prospects.
Moreover, we may be subject to a third-party pre-issuance submission of prior art to the USPTO or become involved in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our owned patent rights. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. Moreover, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Without patent protection for our current or future product candidates, we may be open to competition from generic versions of such products. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
If we do not obtain protection under the Hatch-Waxman Amendments by obtaining data exclusivity, our business may be harmed.
Our commercial success will largely depend on our ability to obtain market exclusivity in the United States and other countries with respect to our drug candidates and their target indications. Depending upon the timing, duration and specifics of FDA marketing approval of our drug candidates, certain of our product candidates may be eligible for marketing exclusivity. The Federal Food, Drug, and Cosmetic Act ("FDCA") provides three years of marketing exclusivity for an NDA, or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example new indications, dosages, dosage forms or strengths of an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations and prohibits the FDA from approving an ANDA, or a 505(b)(2) NDA submitted by another company with overlapping conditions associated with the new clinical investigations for the three-year period. Clinical investigation exclusivity does not prohibit the FDA from approving ANDAs for drugs containing the original active agent. The three-year exclusivity will not delay the submission or approval of an NDA for the same drug. However, an applicant submitting an NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.
If we are unable to obtain such marketing exclusivity for our product candidates, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data to obtain approval of competing products and launch their product earlier than might otherwise be the case.
Risk of reduced or eliminated patent protection from non-compliance with regulatory requirements.
Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which non-compliance can result in unenforceability, invalidity, abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in unenforceability, invalidity, abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we or any future licensors fail to maintain the patents and patent applications covering the Product, our competitive position would be adversely affected.
We may infringe the intellectual property rights of others.
Our commercial success depends, in part, upon it not infringing or violating intellectual property rights owned by others. The industry in which we compete has participants that own, or claim to own, intellectual property. We cannot determine with certainty whether any existing third-party patents, or the issuance of any new third-party patents, would require us to alter our technologies or products, obtain licenses or cease certain activities, including the sale of certain products.
We may in the future receive claims from third parties asserting infringement and other related claims. Litigation may be necessary to determine the scope, enforceability and validity of third-party intellectual property rights or to protect, maintain and enforce our intellectual property rights. Some of our competitors have, or are affiliated with companies having, substantially greater resources than we have, and these competitors may be able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we can. Regardless of whether claims that it is infringing or violating patents or other intellectual property rights have any merit, those claims could:
● adversely affect our relationships with current or future distributors and dealers of our products;
● adversely affect our reputation with customers;
● be time-consuming and expensive to evaluate and defend;
● cause product shipment delays or stoppages; divert management's attention and resources;
● subject us to significant liabilities and damages;
● require us to enter into royalty or licensing agreements; or
● require us to cease certain activities, including the sale of products.
If it is determined that we have infringed, violated or is infringing or violating a patent or the intellectual property right of any other person or if we are found liable in respect of any other related claim, then, in addition to being liable for potentially substantial damages, we may be prohibited from developing, using, distributing, selling or commercializing certain of our technologies and products unless we obtain a license from the holder of the patent or other intellectual property right. We can provide no assurance that we will be able to obtain any such license on a timely basis or on commercially favorable terms, or that any such licenses will be available, or that workarounds will be feasible and cost-efficient. If we do not obtain such a license or find a cost-efficient workaround, our business, operating results and financial condition could be materially adversely affected and we could be required to cease related business operations in some markets and restructure our business to focus on our continuing operations in other markets.
Our general liability insurance expires on September 29, 2024. There can be no assurance that we will be able to renew our liability insurance on favourable terms or at all.
We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent, which might harm our ability to develop and market our products.
We cannot guarantee that any of our patent searches or analyses, including the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third-party patent and pending application in the United States and abroad that is or may be relevant to or necessary for the commercialization of our product candidates in any jurisdiction. Patent applications in the United States and elsewhere are not published until approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. In addition, U.S. patent applications filed before November 29, 2000 and certain U.S. patent applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Therefore, patent applications covering our products could have been filed by others without our knowledge. Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our product candidates or the use of our products.
The scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patent's prosecution history. Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect, which may negatively impact our ability to market our products. We may incorrectly determine that our products are not covered by a third-party patent or may incorrectly predict whether a third party's pending application will issue with claims of relevant scope. Our determination of the expiration date of any patent in the United States or abroad that we consider relevant may be incorrect, and our failure to identify and correctly interpret relevant patents may negatively impact our ability to develop and market our products.
If we fail to identify and correctly interpret relevant patents, we may be subject to infringement claims. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims. If we fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing any of our products that are held to be infringing. We might, if possible, also be forced to redesign products or services so that we no longer infringe the third-party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.
We may become involved in lawsuits to protect or enforce our patents or our other intellectual property rights, which could be expensive, time consuming and unsuccessful.
Competitors may infringe or otherwise violate our patents or our other intellectual property rights. To counter infringement or unauthorized use, we may be required to file legal claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. As a result, we cannot predict with certainty how much protection, if any, will be given to our patents if we attempt to enforce them and they are challenged in court. Further, even if we prevail against an infringer in U.S. district court, there is always the risk that the infringer will file an appeal and the district court judgment will be overturned at the appeals court and/or that an adverse decision will be issued by the appeals court relating to the validity or enforceability of our patents. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing. The initiation of a claim against a third party may also cause the third party to bring counter claims against us such as claims asserting that our patents are invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-enablement or lack of written description or statutory subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant material information from the USPTO, or made a materially misleading statement, during prosecution. Third parties may also raise similar validity claims before the USPTO in post-grant proceedings such as ex parte reexaminations, inter partes review, or post-grant review, or oppositions or similar proceedings outside the United States, in parallel with litigation or even outside the context of litigation. The outcome following legal assertions of invalidity and unenforceability is unpredictable. We cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of any future patent protection on our current or future product candidates.
We may not be able to detect or prevent misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States. Our business could be harmed if in litigation the prevailing party does not offer us a license on commercially reasonable terms. Any litigation or other proceedings to enforce our intellectual property rights may fail, and even if successful, may result in substantial costs and distract our management and other employees.
Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could harm the price of our common shares and our warrants.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities and have a harmful effect on the success of our business.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could adversely impact the price of our common shares and our warrants. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. In addition, the uncertainties associated with litigation could compromise our ability to raise the funds necessary to continue our clinical trials and internal research programs. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace, including compromising our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties, or enter into development collaborations that would help us commercialize our product candidates, if approved.
Because of the expense and uncertainty of litigation, we may not be in a position to enforce our intellectual property rights against third parties.
Because of the expense and uncertainty of litigation, we may conclude that even if a third party is infringing our issued patent, any patents that may be issued as a result of our pending or future patent applications or other intellectual property rights, the risk-adjusted cost of bringing and enforcing such a claim or action may be too high or not in the best interest of our company or our shareholders. In such cases, we may decide that the more prudent course of action is to simply monitor the situation or initiate or seek some other non-litigious action or solution.
We may need to license intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.
The issuance of a patent does not give us the right to practice the patented invention. A third party may hold intellectual property, including patent rights, that are important or necessary to the development of our product candidates. Third parties may also have blocking patents that could prevent us from marketing our products or practicing our own patented technology. It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our drug candidates, in which case we would be required to obtain a license from these third parties on commercially reasonable terms. Such a license may not be available, or it may not be available on commercially reasonable terms, in which case our business would be harmed.
The risks described elsewhere pertaining to our intellectual property rights also apply to any intellectual property rights that we may in-license, and any failure by us or our potential licensors to obtain, maintain, defend and enforce these rights could harm our business. In some cases we may not have control over the prosecution, maintenance or enforcement of the patents that we may license, and may not have sufficient ability to provide input into the patent prosecution, maintenance and defense process with respect to such patents, and our potential licensors may fail to take the steps that we believe are necessary or desirable in order to obtain, maintain, defend and enforce the licensed patents.
We may be subject to claims arising from consultants or contractors misappropriating intellectual property.
Many of our consultants and contractors were previously or are concurrently employed at or engaged by biotechnology companies, and/or other pharmaceutical companies, including our competitors or potential competitors, or academic research institutions. Some of these consultants and contractors, including each member of our senior management or our other employees, may have executed proprietary rights, nondisclosure and non-competition agreements in connection with such previous or concurrent employment. We may be subject to claims that we or our consultants and contractors have used or disclosed the intellectual property and other proprietary information or know-how or trade secrets of others in their work for us. Litigation may be necessary to defend against these claims. We are not aware of any threatened or pending claims related to these matters or concerning agreements with our senior management, or other of our employees, consultants and contractors, but litigation may be necessary in the future to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, or personnel or access to consultants and contractors. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.
In addition, while our policy is to require our consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, which may result in claims by or against us related to the ownership of such intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our management and scientific personnel.
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.
Because we expect to rely on third parties to manufacture our product candidates, and we expect to continue to collaborate with third parties on the development of our product candidates, we must, at times, share trade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors, employees, third-party contractors and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, including our trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Any disclosure, either intentional or unintentional, by our employees, the employees of third parties with whom we share our facilities or third-party consultants and vendors that we engage to perform research, clinical trials or manufacturing activities, or misappropriation by third parties (such as through a cybersecurity breach) of our trade secrets or proprietary information could enable competitors to duplicate or surpass our technological achievements, thus eroding our competitive position in our market. Further, adequate remedies may not exist in the event of unauthorized use or disclosure. Given that our proprietary position is based, in part, on our know- how and trade secrets, a competitor's discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may harm our business and results of operations.
In addition, these agreements typically restrict the ability of our advisors, employees, third- party contractors and consultants to publish data potentially relating to our trade secrets, although our agreements may contain certain limited publication rights. Policing unauthorized use of our intellectual property is difficult, expensive and time-consuming, and we may be unable to determine the extent of any unauthorized use. Moreover, enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time- consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of our agreements with third parties, independent development or publication of information by any of our third-party collaborators. A competitor's discovery of our trade secrets would impair our competitive position and have an adverse impact on our business.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patents for our product candidates, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect our trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Monitoring unauthorized uses and disclosures of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual property will be effective. In addition, we may not be able to obtain adequate remedies for any such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.
We use hazardous chemicals and biological materials in their business. Any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly.
Our product manufacturing, research and development, and testing activities involve the controlled use of hazardous materials, including chemicals and biological materials. We cannot eliminate the risks of accidental contamination or the accidental discharge of these materials, or any resulting injury from such an event. We may be subjected to litigation for any injury that results from our use or the use by third parties of these materials, and our liability may exceed our insurance coverage and our total assets. Our use, manufacture, storage, handling and disposal of these hazardous materials and specified waste products, as well as the discharge of pollutants into the environment and human health and safety matters, are governed by federal, state, provincial and local legislation. We are also subject to various laws and regulations relating to safe working conditions, laboratory and manufacturing practices. Our operations may require that environmental permits and approvals be issued by applicable government agencies, which can be costly and time-consuming to attain. These regulations and legislation can change, or new ones come into place, due to future legislative or administrative actions. These events could cause us to incur additional expense or restrict our operations. Compliance with environmental laws and regulations, current or future, may be expensive and prohibitive for our research, development or production efforts. Failure to comply could incur substantial costs and liabilities, including civil or criminal fines and penalties, clean-up costs or capital expenditures to achieve and maintain compliance.
If product liability lawsuits are brought against us then we may incur substantial liabilities and may be required to limit commercialization of the Product, if approved, and any other future products.
We face a potential risk of product liability as a result of distribution of our product candidate for testing and commercialization of the Product. For example, we may face claims if use of the Product allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in product quality, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourself against product liability claims, we may incur substantial liabilities or be required to limit commercialization of the product subject to such claims. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
● decreased demand for current and future products;
● injury to our reputation;
● costs to defend any related litigation;
● diversion of management's time and our resources;
● product recalls, withdrawals or labeling, marketing or promotional restrictions;
● loss of revenue;
● inability to commercialize the Product and other products, if approved;
● decline in our stock price; and
● exposure to adverse publicity.
Although we currently have product liability insurance in place, we do not know whether the limits of the insurance will be sufficient to satisfy any claims should they arise. We may not have sufficient resources to pay for any liabilities resulting from a claim excluded from or beyond the limits of, our insurance coverage. If we cannot successfully defend ourselves against a product liability claim, we may incur substantial liabilities.
Our employees, independent contractors, principal investigators, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading, which could significantly harm our business.
We are exposed to the risk that employees, independent contractors, principal investigators, consultants, commercial partners and vendors may engage in fraudulent or other illegal activity, fraud or other misconduct. Misconduct by these parties could include intentional, reckless or negligent conduct or disclosure of unauthorized activities to us that violates: (i) the law and regulations of the FDA and non-U.S. regulators, including those laws that require the reporting of true, complete and accurate information to the FDA and non-U.S. regulators, (ii) healthcare fraud and abuse laws and regulations in the United States and elsewhere and (iii) laws that require the true, complete and accurate reporting of financial information or data. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Misconduct in violation of these laws may also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter misconduct by our executives, employees, consultants and other third parties, and any precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourself or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in national healthcare programs, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
We may be subject to securities litigation, which is expensive and could divert management attention.
The market price of our common shares and our warrants may be volatile, and in the past companies that have experienced volatility in the market price of their shares have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management's attention and resources, which could adversely impact our business. Any adverse determination in litigation could also subject us to significant liabilities.
We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.
We rely on trade secrets to protect our proprietary technological advances and know-how, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our consultants, contractors, outside scientific collaborators, sponsored researchers and other advisors, including the third parties we rely on to manufacture the product, to protect our trade secrets and other proprietary information. However, any party with whom we have executed such an agreement may breach that agreement and disclose our proprietary information, including our trade secrets.
Accordingly, these agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights. In addition, others may independently discover our trade secrets and proprietary information. Failure to obtain or maintain trade secret protection could enable competitors to use our proprietary information to develop products that compete with our products or cause additional, material adverse effects upon our competitive business position and financial results.
Lawsuits relating to intellectual property infringement will be costly and time consuming.
We may be required to initiate litigation to enforce or defend our intellectual property rights. These lawsuits can be very time consuming and costly. There is a substantial amount of litigation involving patent and other intellectual property rights in the pharmaceutical industry generally. Such litigation or proceedings could substantially increase our operating expenses and reduce the resources available for development activities or any future sales, marketing or distribution activities.
In infringement litigation, any award of monetary damages we receive may not be commercially valuable. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information and trade secrets could be compromised by disclosure during litigation. Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically last for years before they are resolved. Further, any claims we assert against a perceived infringer could provoke these parties to assert counterclaims against us alleging that we have infringed their patents. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
In addition, our patents and patent applications could face other challenges, such as interference proceedings, opposition proceedings, reissue, inter partes review, re-examination proceedings, third-party submissions of prior art, and other forms of post-grant review. Any of these challenges, if successful, could result in the invalidation of, or in a narrowing of the scope or preventing the issuance of, any of our patents and patent applications subject to challenge. Any of these challenges, regardless of their success, would likely be time consuming and expensive to defend and resolve and would divert our management and scientific personnel's time and attention.
In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the market price of our common shares and our warrants.
Intellectual property disputes could distract our personnel from their normal responsibilities.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the market price of our common shares and our warrants. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings.
Our directors may serve as directors of other biotech companies and may have conflicts of interest.
Certain of our directors and executive officers may, from time to time, be employed by or affiliated with organizations which have entered into agreements or will enter into agreements with us. As disputes may arise between these organizations and us, or certain of these organizations may undertake or have undertaken research with our competitors, there exists the possibility for such persons to be in a position of conflict. We cannot assure that any decision or recommendation made by these persons involving us will be made in accordance with his or her duties and obligations to deal fairly and in good faith with us and such other organizations.
Our business is affected by macroeconomic conditions.
Various macroeconomic factors could adversely affect our business and the results of our operations and financial condition, including changes in inflation, interest rates and foreign currency exchange rates, and overall economic conditions and uncertainties, including those resulting from political instability and the current and future conditions in the global financial markets. For instance, if inflation or other factors were to significantly increase our business costs, it may not be feasible to pass through price increases to patients. Interest rates, the liquidity of the credit markets and the volatility of the capital markets could also affect the value of our investments and our ability to liquidate our investments in order to fund our operations, if necessary.
Interest rates and the ability to access credit markets could also adversely affect the ability of payors and distributors to purchase, pay for and effectively distribute our products if and when approved. Similarly, these macroeconomic factors could affect the ability of our current or potential future contract manufacturers, sole-source or single-source suppliers, or licensees to remain in business or otherwise manufacture or supply our products. Failure by any of them to remain in business could affect our ability to manufacture our products.
We may be responsible for corruption and anti-bribery law violations.
Our business activities are subject to the to the U.S. Foreign Corrupt Practices Act (the "FCPA") and other anti-bribery and anti-corruption laws of the United States and other countries in which we operate, as well as U.S. and certain foreign export controls and trade sanctions which generally prohibit companies and company employees from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business.
Our employees or other agents may, without our knowledge and despite our efforts, engage in prohibited conduct under our policies and procedures and the FCPA or other anti-bribery laws for which we may be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.
We are subject to foreign exchange risks.
As we grow and do business in foreign markets, including the United States and Europe, it is quite possible that transactions will take place in foreign currencies. At this point we do not participate in hedging activities. Although we cannot predict the effect of possible foreign exchange losses in the future, if such losses occurred, they could have a material adverse effect on our business, results of operation, and financial condition. In addition, fluctuations in exchange rates could affect the pricing of our products and negatively influence customer demand.
We are subject to taxation risks and changing rules by different tax authorities.
Tax examinations are often complex as tax authorities may disagree with the treatment of items reported by us, the result of which could have a material adverse effect on our financial condition and results of operations.
We believe that we will be treated as a U.S. corporation for U.S. federal income tax purposes.
As discussed more fully under "U.S. Federal Income Tax Considerations," we believe that, pursuant to Section 7874 of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), even though we are organized as a corporation under the laws of Ontario, Canada, the Company will be treated as a U.S. domestic corporation for all purposes of the Code. The Company will therefore be taxed as a U.S. domestic corporation for U.S. federal income tax purposes. As a result, the Company will be subject to U.S. federal income tax on its worldwide income. The Company is also subject to tax in Canada. It is unclear how the foreign tax credit rules under the Code will operate in certain circumstances, given our treatment as a U.S. domestic corporation for U.S. federal income tax purposes and the taxation of the Company in Canada. Accordingly, it is possible that we will be subject to double taxation with respect to all or part of our taxable income.
In addition, if the Company pays dividends to a Non-U.S. Holder, as defined in the discussion under the heading "U.S. Federal Income Tax Considerations," it will be required to withhold U.S. income tax at the rate of 30%, or such lower rate as may be provided in an applicable income tax treaty. Each investor is urged to consult its own tax adviser regarding the U.S. federal income tax position of the Company and the tax consequences of holding our common shares and our warrants.
We are subject to a number of risks and hazards, of which not all of them may be sufficiently insured for.
Our business will be subject to a number of risks and hazards generally, including general liability. Such occurrences could result in damage to property, inventory, facilities, personal injury or death to end-customers or operators, damage to our properties or the properties of others, monetary losses and possible legal liability. Although we maintain insurance to protect against certain risks in such amounts as we consider to be reasonable, our insurance will not cover all the potential risks associated with our operations. We may also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. We might also become subject to liability which may not be insured against or which we may elect not to insure against because of premium costs or other reasons. Losses from these events may cause us to incur significant costs that could have a material adverse effect upon our financial performance and results of operations.
Risks related to health epidemics and pandemics.
Unfavorable global conditions, including as a result of health and safety concerns related to the coronavirus outbreak, could adversely affect our business, financial condition or results of operations. Our operations could be adversely affected by general conditions in the global economy, including conditions that are outside of our control, such as the impact of health and safety concerns from the recent coronavirus (COVID-19) outbreak. The most recent global financial crisis caused by the coronavirus outbreak has resulted in extreme volatility and disruptions in the capital and credit markets. A weak or declining economy could also strain our supply channels.
Risks Related to Marketing, Reimbursement, Healthcare Regulations and Ongoing Regulatory Compliance
Coverage and reimbursement may be limited or unavailable in certain market segments for the Product, which could make it difficult for us to sell the Product profitably.
The success of the Product, if approved, depends on the availability of adequate coverage and reimbursement from third-party payors, including government agencies. There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. Coverage may be more limited than the purposes for which a therapeutic is approved by the FDA or comparable regulatory authorities in other jurisdictions.
In the United States and some other jurisdictions, patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid in the United States and commercial payors are critical to new product acceptance.
Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which drugs and treatments they will cover and the amount of reimbursement. In the United States, the principal decisions about reimbursement for new medicines are typically made by CMS an agency within the United States.
Department of Health and Human Services. CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare, and private payors often follow CMS' coverage decisions. Other jurisdictions have agencies, such as the National Institute for Health and Care Excellence in the United Kingdom, that evaluate the use and cost effectiveness of therapies, which impact the utilization and price of the medicine in such jurisdiction.
In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors. As a result, obtaining coverage and reimbursement approval of a product from a government or other third-party payor is a time consuming and costly process that could require Medicus to provide to each payor supporting scientific, clinical and cost effectiveness data for the use of products on a payor-by-payor basis, with no assurance that coverage and adequate reimbursement will be obtained. Even if Medicus obtains coverage for a given product, the resulting reimbursement payment rates might not be adequate for Medicus to maintain pricing sufficient to achieve or sustain profitability or may require copayments that patients find unacceptably high.
Medicus intends to seek approval to market the Product in different jurisdictions, which could include the Canada and other selected foreign jurisdictions in addition to the United States. If Medicus obtains approval in any of these jurisdictions for the Product, Medicus will be subject to rules and regulations in those jurisdictions. Market acceptance and sales of the Product will depend significantly on the availability of adequate coverage and reimbursement from third party payors for the Product and may be affected by existing and future health care reform measures.
Our relationship with healthcare providers and physicians and third-party payors will be subject to applicable antikickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare providers, physicians and third-party payors in the United States, Canada, and elsewhere play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. If we obtain FDA approval for any product candidates and begin commercializing those products in the United States, our current and future arrangements with healthcare providers, third-party payors, customers, and others may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations. In particular, the research of product candidates, as well as the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer incentive programs and other business or financial arrangements.
The applicable U.S. federal, state and other healthcare laws and regulations laws that may affect our ability to operate include, but are not limited to:
● the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual, or the purchase, lease, order, arrangement, or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. A person or entity can be found guilty of violating the statute without actual knowledge of the statute or specific intent to violate it. The term remuneration has been interpreted broadly to include anything of value. Further, courts have found that if "one purpose" of renumeration is to induce referrals, the federal Anti-Kickback statute is violated. Violations are subject to significant civil and criminal fines and penalties for each violation, plus up to three times the remuneration involved, imprisonment, and exclusion from government healthcare programs. In addition, a claim submitted for payment to any federal healthcare program that includes items or services that were made as a result of a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act, or FCA. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers, among others, on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution;
● the federal civil and criminal false claims laws, including the FCA, and civil monetary penalty laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, false, fictitious or fraudulent claims for payment to, or approval by Medicare, Medicaid, or other federal healthcare programs; knowingly making, using, or causing to be made or used, a false record or statement material to a false, fictitious or fraudulent claim or an obligation to pay or transmit money or property to the federal government; or knowingly concealing or knowingly and improperly avoiding, decreasing or concealing an obligation to pay money to the federal government. A claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim under the FCA. Manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to "cause" the submission of false or fraudulent claims. The FCA also permits a private individual acting as a "whistleblower" to bring qui tam actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery or settlement. When an entity is determined to have violated the FCA, the government may impose civil fines and penalties for each false claim, plus treble damages, and exclude the entity from participation in Medicare, Medicaid and other federal healthcare programs;
● the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private), and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false fictitious or fraudulent statement or entry in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of violating HIPAA fraud provisions without actual knowledge of the statute or specific intent to violate it;
● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, which impose, among other things, certain requirements relating to the privacy, security and transmission of individually identifiable health information on certain covered healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their respective "business associates," those independent contractors or agents of covered entities that create, receive, maintain, transmit or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys' fees and costs associated with pursuing federal civil actions. In addition, there are additional federal, state and non-U.S. laws which govern the privacy and security of health and other personal information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts;
● the federal Physician Payments Sunshine Act, created under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or, collectively, the Affordable Care Act, and its implementing regulations, which require manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program (with certain exceptions) to report annually to CMS information related to direct or indirect payments and other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by the physicians and their immediate family members. Effective January 1, 2022, these reporting obligations will extend to include transfers of value made in the previous year to certain non-physician providers such as physician assistants and nurse practitioners;
● federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; and
● analogous U.S. state, local and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers and may be broader in scope than their federal equivalents; state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and other relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures or drug pricing; state and local laws that require the registration of pharmaceutical sales representatives; and state and foreign laws governing the privacy and security of health information, some of which may be more stringent than those in the United States (such as the European Union, which adopted the General Data Protection Regulation, which became effective in May 2018) in certain circumstances, and may differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
The distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceutical products.
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Ensuring business arrangements comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming, costly, and can divert a company's attention from the business.
It is possible that governmental and enforcement authorities will conclude that our business practices, including our arrangements with physicians and other healthcare providers, may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of the laws described above or any other government regulations that apply to us, we may be subject to significant sanctions, including civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, reputational harm, exclusion from participation in federal and state funded healthcare programs, contractual damages and the curtailment or restricting of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws. Further, if any of the physicians or other healthcare providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to similar penalties. Any action for violation of these laws, even if successfully defended, could cause a pharmaceutical manufacturer to incur significant legal expenses and divert management's attention from the operation of the business. In addition, the approval and commercialization of any product candidate in other countries will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws. All of these could harm our ability to operate our business and our financial results.
Ongoing healthcare legislative and regulatory reform measures may have a material adverse effect on our business and results of operations.
Changes in U.S., Canadian, and foreign regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the recall or discontinuation of our products; or (iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.
In the United States and in some foreign jurisdictions, there have been, and likely will continue to be, a number of legislative initiatives and regulatory changes regarding the healthcare system directed at broadening the availability of healthcare, improving the quality of healthcare, and containing or lowering the cost of healthcare. For example, in March 2010, the ACA was enacted, which substantially changed the way health care is financed by both governmental and private insurers, and significantly impacted the U.S. pharmaceutical industry. The ACA, among other things, subjects biological products to potential competition by lower-cost biosimilars, expands the types of entities eligible for the 340B drug discount program; introduced a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations; established annual fees and taxes on manufacturers of certain branded prescription drugs; and created a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (increased to 70% pursuant to the Bipartisan Budget Act of 2018, or BBA, effective as of January 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer's outpatient drugs to be covered under Medicare Part D.
Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the ACA, and our expects there will be additional challenges and amendments to the ACA in the future. For example, various portions of the ACA are currently undergoing legal and constitutional challenges in the U.S. Supreme Court. Additionally, the Trump Administration has issued various Executive Orders which eliminated cost sharing subsidies and various provisions that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices and Congress has introduced several pieces of legislation aimed at significantly revising or repealing the ACA. We cannot predict what affect further changes to the ACA would have on our business.
In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. For example, on August 2, 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation's automatic reduction to several government programs, including aggregate reductions of Medicare payments to providers of up to 2% per fiscal year. These reductions went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, unless additional Congressional action is taken. However, pursuant to the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, and subsequent legislation, these Medicare sequester reductions are suspended from May 1, 2020 through March 31, 2021 due to the COVID-19 pandemic. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Additionally, the BBA, among other things, amended the ACA, effective January 1, 2019, by increasing the point-of-sale discount (from 50% under the ACA to 70%) that is owed by pharmaceutical manufacturers who participate in Medicare Part D and closing the coverage gap in most Medicare drug plans, commonly referred to as the "donut hole."
Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. For example, CMS may develop new payment and delivery models, such as bundled payment models. Recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their products. Such scrutiny has resulted in several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. For example, at the federal level, the Trump administration's budget proposal for fiscal year 2021 includes a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. On March 10, 2020, the Trump administration sent "principles" for drug pricing to Congress, calling for legislation that would, among other things, cap Medicare Part D beneficiary out of pocket pharmacy expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical price increases. HHS has solicited feedback on some of these measures and has implemented others under its existing authority. For example, in May 2019, CMS issued a final rule that would allow Medicare Advantage Plans the option of using step therapy, a type of prior authorization, for Part B drugs beginning January 1, 2020. This final rule codified CMS' policy change that was effective January 1, 2019.
Several regulations have also been proposed partly in response to several executive orders issued by President Trump related to prescription drug pricing that seek to implement several of the administration's proposals. For example, on November 20, 2020 CMS issued an Interim Final Rule implementing the Most Favored Nation, or MFN, Model under which Medicare Part B reimbursement rates will be calculated for certain drugs and biologicals based on the lowest price drug manufacturers receive in Organization for Economic Cooperation and Development countries with a similar gross domestic product per capita. The MFN Model regulations mandate participation by identified Part B providers and will apply in all U.S. states and territories for a seven-year period beginning January 1, 2021, and ending December 31, 2027. The Interim Final Rule has not been finalized and is subject to revision and challenge. Additionally, on November 20, 2020, HHS finalized a regulation removing the safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. While some of these and other measures may require additional authorization to become effective, and the Biden administration may reverse or otherwise change these measures, Congress has indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. Several bills have been introduced in both chambers, but due to increased focus on COVID-19 relief efforts, it is not clear when, and if any, proposed legislation regarding drug costs will advance.
At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biologic product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions on coverage or access could harm our business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for the Product or put pressure on product pricing.
Our expects that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the extent to which state and federal governments cover particular healthcare products and services and could limit the amounts that the federal and state governments will pay for healthcare products and services. This could result in reduced demand for the Product or could result in additional pricing pressures.
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action in the United States. If we or any third parties we may engage are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, the Product may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability.
Risks Relating to Securities
We may experience fluctuations in market value.
The market price of publicly-traded securities is affected by many variables not directly related to our corporate performance, including the markets in which we are traded, the strength of the economy generally, the global economic situation and outlook, the availability and attractiveness of alternative investments, and the breadth of the public market for the securities. The effect of these and other factors on the market price of our common shares and our warrants in the future cannot be predicted.
Our securities could be subject to large price and volume volatility.
Market prices for the securities of biotechnology companies have historically been highly volatile. Our common shares and our warrants may experience extreme price and volume volatility that may result in losses to shareholders. Accordingly, the trading price of our common shares and our warrants could be subject to wide fluctuations in response to a variety of factors including announcement of material events such as changes relating to new or improved technology, drug safety concerns and other general and industry-specific economic conditions.
Additionally, the securities markets in Canada and the United States have recently experienced a high level of price and volume volatility. It is expected that such fluctuations in volume and price will continue to occur which may make it difficult for a shareholder to sell our common shares and our warrants at a price equal to or above the price at which they were purchased.
We will need to raise additional financing in the future which may dilute our share capital.
Our articles permit the issuance of an unlimited number of common shares. Future issuance of our common shares will result in dilution to the existing shareholders. Additionally, future sales of our common shares into the public market may lower the market price for our common shares and warrants, which may result in losses to our shareholders. Sales of substantial amounts of our common shares into the public market, or even the perception by the market that such sales may occur, may lower the market price of our common shares and our warrants.
We have no history of dividends.
To date, we have not paid any dividends on our outstanding common shares. We currently intend to retain future earnings to finance the operation, development and expansion of our business. We do not anticipate paying cash dividends on our common shares in the foreseeable future. Any decision to pay dividends on our shares will be made at the discretion of our board of directors and will depend on our earnings, financial requirements and other conditions existing at such time. See "Dividend Policy."
Future sales of our common shares by our existing shareholders could cause our share price and our warrant price to decline.
Subject to compliance with applicable securities laws, our officers, directors and significant shareholders may sell some or all of their common shares in the future. No prediction can be made as to the effect, if any, such future sales of our common shares will have on the market price of our common shares and our warrants prevailing from time to time. However, the future sale of a substantial number of common shares by such persons or the perception that such sales could occur, could cause our share price and the price of our warrants to decline.
We may issue, without shareholder approval, preferred shares that have rights and preferences potentially superior to those of our common shares.
Our articles permit the issuance of an unlimited number of preferred shares (the "Medicus Preferred Shares") in one or more series. Medicus Preferred Shares are entitled to priority over our common shares with respect to the distribution of our assets in the event of any liquidation, dissolution or winding up of our affairs, whether voluntary or involuntary. Subject to any applicable regulatory approvals, our board of directors may set the rights and preferences of any series of Medicus Preferred Shares in its sole discretion without shareholder approval. The rights and preferences of those Medicus Preferred Shares may be superior to those of our common shares. Accordingly, the issuance of Medicus Preferred Shares may adversely affect the rights of holders of our common shares.
If equity research analysts do not publish research or reports about our business or if they issue unfavorable commentary or downgrade our common shares, the price of our common shares and our warrants could decline.
The trading market for our common shares and our warrants could be influenced by research and reports that industry and/or securities analysts may publish about us, our business, the market or our competitors. We do not have any control over these analysts and cannot assure that such analysts will cover us or provide favorable coverage. If any of the analysts who may cover our business change their recommendation regarding our common shares adversely, or provide more favorable relative recommendations about our competitors, the share price would likely decline. If any analysts who may cover our business were to cease coverage or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the share price or trading volume to decline.
An investment in this offering may result in uncertain or adverse U.S. federal income tax consequences.
An investment in this offering may result in uncertain or adverse U.S. federal income tax consequences. For instance, the allocation an investor makes with respect to the purchase price of a unit between the common share and the warrant included in each Unit could be challenged by the U.S. Internal Revenue Service (the “IRS”) or courts. Furthermore, the adjustment to the exercise price of the warrants could give rise to dividend income to investors without a corresponding payment of cash. See “United States Federal Income Tax Considerations” for a summary of the U.S. federal income tax considerations of an investment in our securities. Prospective investors are urged to consult their own tax advisors with respect to these and other tax consequences when purchasing, holding or disposing of our securities.
Risks Relating to New Securities
There is no liquid public market for our common shares in the United States and there is no existing public market for our warrants, and, in each case, we do not know whether one will develop to provide you with adequate liquidity. If our share price or the price of our warrants fluctuates after this offering, you could lose a significant part of your investment.
Prior to this offering, there has not been a liquid public market for our common shares in the United States and there has not been a public market for our warrants. If an active trading market does not develop, you may have difficulty selling any of the common shares or warrants that you buy. We cannot predict the extent to which investor interest in the Company will lead to the development of an active trading market on the U.S. Exchange or otherwise or how liquid that market might become. The initial public offering price for the Units will be determined by negotiations between us and the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell our common shares or warrants at prices equal to or greater than the price paid by you in this offering. In addition to the risks described above, the market price of our securities may be influenced by many factors, some of which are beyond our control, including actual or anticipated variations in our operating results; the failure of financial analysts to cover our common shares after this offering or changes in financial estimates by financial analysts, or any failure by us to meet or exceed any of these estimates or changes in the recommendations of any financial analysts that elect to follow our common shares or the shares of our competitors; announcements by us or our competitors of significant contracts or acquisitions; technological innovations by us or our competitors; future sales of our shares; and investor perceptions of us and the market in which we operate.
Risks Related to Being a Public Company
As a result of becoming a public company in the United States, we will become subject to additional regulatory compliance requirements, including Section 404 of the Sarbanes-Oxley Act, and if we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.
Our management team may not successfully or effectively manage our transition to a U.S. public company that will be subject to significant regulatory oversight and reporting obligations under U.S. and Canadian securities laws. Our limited experience in dealing with the increasingly complex laws pertaining to U.S. and Canadian public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management and growth of the post-combination company. We may not have adequate personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal control over financial reporting required of public companies in the United States and Canada.
As a public company listed on the U.S. Exchange, the Sarbanes-Oxley Act will require, among other things that we assess the effectiveness of our internal control over financial reporting at the end of each fiscal year. We anticipate being first required to issue management's assessment of internal control over financial reporting pursuant to Section 404(a) of the Sarbanes-Oxley Act in connection with issuing our consolidated financial statements as of and for the fiscal year ending December 31, 2025.
We have started the process of designing, implementing and testing our internal control over financial reporting required to comply with Section 404(a) of the Sarbanes-Oxley Act. This process is time-consuming, costly and complicated. Our management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that will be applicable to us as a public company listed on the U.S. Exchange. If we fail to maintain internal control over financial reporting adequate to meet the demands that will be placed upon us as a public company listed in the United States, our business and reputation may be harmed, the accuracy and timeliness of our financial reporting may be adversely affected, and the price of our shares may decline.
In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal controls over financial reporting beginning with our annual report following the date on which we are no longer an "emerging growth company," which may be up to five fiscal years following the date of this offering.
If we are unable for any reason to meet the continued listing requirements of the U.S. Exchange or the TSXV, such action or inaction could result in a delisting of our common shares and our warrants, as applicable.
If, after listing, we fail to satisfy the continued listing requirements of the U.S. Exchange or the TSXV (for example, the U.S. Exchange corporate governance requirements or the minimum closing bid price requirement), such exchanges may take steps to delist our common shares and our warrants, as applicable. Such a delisting would likely have a negative effect on the price of our common shares and our warrants and would impair your ability to sell or purchase our common shares and our warrants, as applicable, when you wish to do so. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our common shares and our warrants, as applicable, to become listed again, stabilize the market price or improve the liquidity of our common shares and our warrants, as applicable, prevent such securities from dropping below any minimum bid price requirement or prevent future non-compliance with the U.S. Exchange's or the TSXV's listing requirements.
If securities and industry analysts do not publish research or reports about our business or publish negative reports about our business, our share price and trading volume may suffer.
The trading market for our common shares and our warrants will depend on the research and reports that securities or industry analysts publish about Medicus or our business. Currently, we do not have any analyst coverage and may not obtain analyst coverage in the future. In the event we obtain analyst coverage, we will not have any control over such analysts. If one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our share price would likely decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.
There is a risk that we will fail to maintain an effective system of internal controls and our ability to produce timely and accurate financial statements or comply with applicable regulations could be adversely affected. We may identify material weaknesses in our internal controls over financing reporting which we may not be able to remedy in a timely manner.
As a U.S. public company, we will operate in an increasingly demanding regulatory environment, which requires us to comply with the Sarbanes-Oxley Act, the regulations of the U.S. Exchange and the TSXV, the rules and regulations of the SEC and Canadian securities regulators, expanded disclosure requirements, accelerated reporting requirements and more complex accounting rules. Company responsibilities required by the Sarbanes-Oxley Act include establishing corporate oversight and adequate internal control over financial reporting and disclosure controls and procedures. Effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent financial fraud. Prior to the closing of the offering, we have never been required to test our internal controls within a specified period and, as a result, we may experience difficulty in meeting these reporting requirements in a timely manner.
We anticipate that the process of building our accounting and financial functions and infrastructure may require significant additional professional fees, internal costs and management efforts. We may need to enhance and/or implement a new internal system to combine and streamline the management of our financial, accounting, human resources and other functions. However, the enhancement and/or implementation of a system may result in substantial costs. Any disruptions or difficulties in implementing or using such a system could adversely affect our controls and harm our business. Moreover, such disruption or difficulties could result in unanticipated costs and diversion of management's attention. In addition, we may discover additional weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our financial statements. Our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.
If we do not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements. If we cannot provide reliable financial reports or prevent fraud, our business and results of operations could be harmed, investors could lose confidence in our reported financial information and we could be subject to sanctions or investigations by the U.S. Exchange, the TSXV, the SEC, Canadian securities regulators or other regulatory authorities.
We will incur increased costs as a result of our operation as a dual U.S.-Canadian public company, and our management will be required to devote substantial time and resources to employing new compliance initiatives in order to comport with the regulatory requirements applicable to public companies.
If we complete the offering and become a public company in the US, we will incur significant legal, accounting and other expenses that we did not incur as a private company. As a dual U.S.-Canadian public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules adopted, and to be adopted, by the SEC, Canadian securities regulators, the U.S. Exchange and the TSXV. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, we expect these rules and regulations to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be forced to accept reduced policy limits or incur substantially higher costs to maintain the same or similar coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.
We will be a foreign private issuer and, as a result, we will not be subject to U.S. proxy rules and will be subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.
Following the offering, we will report under the Exchange Act as a non-U.S. company with foreign private issuer status. Until we will cease to qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (1) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (2) the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time and (3) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, although we will be subject to Canadian laws and regulations with regard to certain of these matters and intend to furnish comparable quarterly information on Form 6-K. In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year and U.S. domestic issuers that are large accelerated filers are required to file their annual report on Form 10-K within 60 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation FD, which is intended to prevent issuers from making selective disclosures of material information. As a result of all of the above, you may not have the same protections afforded to shareholders of a company that is not a foreign private issuer.
For so long as we are a "foreign private issuer," we intend to follow certain home country corporate governance practices, and our shareholders may not have the same protections afforded to shareholders of companies that are subject to all the U.S. Exchange corporate governance requirements.
As a foreign private issuer, we have the option to follow certain home country corporate governance practices rather than those of the U.S. Exchange, provided that we discloses the requirements we are not following and describe the home country practices we are following. We intend to rely on this "foreign private issuer exemption" with respect to the U.S. Exchange rules for shareholder meeting quorums and the U.S. Exchange rules requiring shareholder approval. We may in the future elect to follow home country practices with regard to other matters. As a result, our shareholders will not have the same protections afforded to shareholders of companies that are subject to all the U.S. Exchange corporate governance requirements.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
As discussed above, we are a foreign private issuer, and therefore we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act and may take advantage of certain exemptions to the U.S. Exchange's corporate governance rules. The determination of foreign private issuer status is made annually on the last business day of an issuer's most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on the U.S. Exchange. In the future, we would lose our foreign private issuer status if (1) more than 50% of our outstanding voting securities are owned by U.S. residents and (2) a majority of our directors or executive officers are U.S. citizens or residents, or if we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. If we lose our foreign private issuer status, we will be required to file with the SEC, periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We would also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we would lose our ability to rely upon exemptions from certain corporate governance requirements under the listing rules of the U.S. Exchange. As a U.S. listed public company that is not a foreign private issuer, we would incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer.
As we are organized under the laws of a Canadian province and certain of our directors and officers reside in Canada or the provinces thereof, it may be difficult for US shareholders to effect service on us to realize on judgments obtained in the United States. Similarly, it may be difficult for Canadian investors to enforce civil liabilities against our directors and officers residing outside of Canada.
We are governed by the Business Corporations Act (Ontario), as now enacted or as the same may from time to time be amended, re-enacted or replaced ("OBCA"), certain of our directors and officers reside or are organized outside of the United States and a portion of our assets or the assets of these persons may be located outside the United States. Consequently, it may be difficult for investors who reside in the United States to effect service of process in the United States upon us or upon such persons who are not residents of the United States, or to realize upon judgments of courts of the United States predicated upon the civil liability provisions of the U.S. federal securities laws. A judgment of a U.S. court predicated solely upon such civil liabilities may be enforceable in Canada by a Canadian court if the U.S. court in which the judgment was obtained had jurisdiction, as determined by the Canadian court, in the matter. Investors should not assume that Canadian courts: (i) would enforce judgments of U.S. courts obtained in actions against us or such persons predicated upon the civil liability provisions of the U.S. federal securities laws or the securities or blue sky laws of any state within the United States, or (ii) would enforce, in original actions, liabilities against us or such persons predicated upon the U.S. federal securities laws or any such state securities or blue sky laws. Similarly, some of our directors and officers are residents of countries other than Canada and all or a substantial portion of the assets of such persons are located outside Canada. As a result, it may be difficult for Canadian investors to initiate a lawsuit within Canada against these persons. In addition, it may not be possible for Canadian investors to collect from these persons judgments obtained in courts in Canada predicated on the civil liability provisions of securities legislation of certain of the provinces and territories of Canada. It may also be difficult for Canadian investors to succeed in a lawsuit in the United States based solely on violations of Canadian securities laws.
USE OF PROCEEDS
We estimate that the net proceeds to us from this offering will be approximately $ , or $ million if the underwriters' over-allotment option is exercised in full, after deducting underwriting discounts and commissions of approximately $ , or approximately $ if the underwriters' over-allotment option is exercised in full, and estimated offering expenses payable by .
We intend to use the net proceeds from this offering to fund our clinical trials for treatment of basal cell carcinoma using our doxorubicin tip loaded dissolvable microarray needle skinpatch. We may also use funds to support our portfolio expansion strategy which may include additional regulatory filings for marketing approval of the Product, both for geographical expansion and the extension of the potential indications for the Product. We will use the remainder of the net proceeds for general corporate purposes and working capital.
The amounts and timing of our actual expenditures will depend on numerous factors, the timing and success of any clinical trials and preclinical studies we may commence in the future, the timing of regulatory submissions, the status of our sales and marketing efforts, the amounts of proceeds actually raised in this offering and the amount of cash generated by our operations. Because we operate in a very dynamic and highly competitive industry, the actual use of proceeds may differ substantially from the ranges indicated above. Our management will have broad discretion to allocate the net proceeds from this offering.
DIVIDEND POLICY
We do not anticipate that we will declare or pay dividends in the foreseeable future on our common shares. Instead, we anticipate that all of our earnings will be used for the operation and growth of our business. Any future determination to declare cash dividends would be subject to the discretion of our board of directors and would depend upon various factors, including our results of operations, financial condition and liquidity requirements, restrictions that may be imposed by applicable law and our contracts and other factors deemed relevant by our board of directors.
TRADING MARKETS
Our shares are currently traded on the TSX Venture Exchange under the symbol "MDCX" and the Frankfurt Stock Exchange, trading under identification number "A3ES6P" and ticker symbol "N46".
Prior to the offering, there has been no public market in the United States for our securities. We intend to apply to list our common shares and our warrants on the U.S. Exchange under the symbol "MDCX" and "MDCXW," respectively.
The table below sets forth for the periods indicated the high and low closing prices in Canadian dollar of our common shares on the TSX Venture Exchange as reported:
| Price Range | |||||||||
| Monthly High ($) | Monthly Low ($) |
Volume |
|||||||
| 2023 | |||||||||
| October | 2.60 | 0.31 | 31,357 | ||||||
| November | 3.05 | 0.50 | 45,645 | ||||||
| December | 2.95 | 1.80 | 2,987 | ||||||
| 2024 | |||||||||
| January | 2.48 | 2.00 | 2,950 | ||||||
| February | 3.00 | 2.26 | 14,883 | ||||||
| March | 2.54 | 2.35 | 42,210 | ||||||
| April | 2.49 | 2.22 | 37,030 | ||||||
| May (until May 27) | 2.25 | 1.84 | 19,900 | ||||||
CAPITALIZATION
The following table sets forth our consolidated capitalization as of December 31, 2023:
|
|
- |
on an actual basis, as determined in accordance with IFRS; and |
|
|
|
|
|
|
- |
on an as-adjusted basis to reflect the net proceeds from our sale of Units in this offering at the public offering price of $ per Unit, after deducting the underwriting discounts and commissions and the estimated offering expenses, and the issuance of $5,172,500 aggregate principal amount of 10.00% Unsecured Convertible Notes due 2025 (the "2025 Convertible Notes"). For more information on the 2025 Convertible Notes, see "Description of Material Indebtedness." |
This table should be read in conjunction with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Use of Proceeds" sections, as well as our audited financial statements, included elsewhere in this prospectus. The following table assumes no exercise by the underwriters of the overallotment option to purchase additional common shares and/or warrants in this offering.
|
|
As of December 31, 2023 |
|
|
|
Actual |
Adjusted |
|
|
|
|
|
Cash |
1,719,338 |
$ (1) |
|
|
|
|
|
Liabilities |
781,609 |
|
|
|
|
|
|
Shareholders' equity: |
|
|
|
Share capital |
19,835,839 |
|
|
Contributed surplus |
146,671 |
|
|
Deficit |
(18,871,062) |
|
|
|
|
|
|
Total shareholders' equity (deficiency) |
1,111,448 |
|
|
|
|
|
|
Total capitalization |
$1,893,057 |
$ |
Note:
(1) Reflects assumed raise of $ and an assumed stock price of $ per share net of transaction related fees.
DILUTION
If you invest in our Units in this offering, your interest will be immediately diluted to the extent of the difference between the public offering price per common share that is part of a Unit in this offering and the adjusted net tangible book value per common share after this offering. Dilution results from the fact that the public offering price per common share is substantially in excess of the net tangible book value per common share. As of December 31, 2023, we had a historical net tangible book value of $0.06 per common share. Our net tangible book value per share represents total tangible assets less total liabilities, divided by the number of common shares outstanding on December 31, 2023.
After giving effect to the sale of Units in this offering at a public offering price of $ per Unit, after deducting the estimated underwriting discounts and commissions and estimated offering expenses, our as adjusted net tangible book value at December 31, 2023 would have been $ per share. This represents an immediate increase in as adjusted net tangible book value of $ per share to existing shareholders and immediate dilution of $ per share to new investors.
The following table illustrates this dilution per common share:
| Public offering price per common share (attributing no value to the warrants) | $ | |||||
| Historical net tangible book value per common share as of December 31, 2023 | $ | 0.06 | ||||
| Increase in as adjusted net tangible book value per common share attributable to the net proceeds from new investors | $ | |||||
| As adjusted net tangible book value per common share after this offering | $ | |||||
| Dilution per common share to new investors participating in this offering | $ |
If the underwriters exercise in full their option to purchase additional common shares and warrants, the as adjusted net tangible book value will increase to $ per common share, representing an immediate increase in as adjusted net tangible book value to existing shareholders of $ per common share and an immediate dilution of $ per common share to new investors participating in this offering.
We may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our equity holders.
The above discussion and tables are based on 16,153,465 common shares outstanding as of December 31, 2023 and excludes 1,650,000 common shares issuable upon the exercise of outstanding options, at exercise prices ranging from C$0.58 to C$2.42 and expiry dates ranging from October 24, 2028 to April 1, 2029.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this prospectus. This discussion and other parts of this prospectus contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under "Risk Factors" and elsewhere in this prospectus.
Overview
The Company is a biotech/life sciences company focused accelerating the clinical development programs of novel and disruptive therapeutic assets.
The Company's principal purpose is to advance the clinical development program of "SkinJect", while opportunistically identify, evaluate and acquire accretive assets, properties, businesses or licensing rights.
For additional information regarding the business of the Company and the regulatory environment in which it operates, please refer to the prospectus under the heading "Our Business."
Business Combination Agreement
On March 17, 2023, as amended on May 12, 2023 and August 29, 2023, the Company entered into a business combination agreement with RBx Capital, LP ("RBx") and SkinJect under which the Company entered into a reverse takeover transaction ("RTO") with SkinJect on September 29, 2023. The RTO transaction included a concurrent financing of $5,109,950. SkinJect converted all its shares of equity and securities convertible into equity into common shares to facilitate the RTO. Effective September 29, 2023, Interactive Capital Partners Corporation ("Interactive") changed its name to Medicus Pharma Ltd.
Interactive and SkinJect were combined via the purchase of SkinJect which constituted a reverse takeover of Interactive by the shareholders of SkinJect. Interactive acquired all of the issued and outstanding common shares of SkinJect and issued to each former shareholder of SkinJect (other than Interactive) the number of common shares in the capital of the Company as described below. In connection with and as a closing condition of the RTO, Interactive raised aggregate gross proceeds of $5,109,950 through the issuance of 2,554,975 common shares at a price of $2.00 per share.
Pursuant to the terms of the RTO, all outstanding financial instruments of SkinJect were converted into shares of SkinJect common shares (except that $1,000,000 of SkinJect's convertible notes were exchanged directly for 523,561 common shares of the Company). The SkinJect preferred shares, convertible promissory notes and note payable were converted into 14,900,000 shares of SkinJect common shares. Following the conversion of the financial instruments into common shares there were 21,334,000 shares of SkinJect common shares issued and outstanding which were then consolidated on a 1.706721-to-1 basis into 12,499,987 shares of SkinJect common shares. Interactive acquired all of the issued and outstanding SkinJect shares and issued Interactive common shares to the SkinJect shareholders.
Immediately prior to the completion of the RTO, the 7,249,999 Interactive common shares were consolidated into 574,941 common shares on a 12.609988-to-1 basis.
Upon closing of the transaction, the Company assumed $2,071,580 in transaction costs incurred by RBx that related to the RTO. The consideration paid to acquire Interactive consisted of net liabilities assumed of $50,000 and the value of the shares exchanged with Interactive, valued at $1,149,882, which was expensed on completion of the RTO.
Selected Financial Information
The following table sets forth selected financial information with respect to the Company. The selected financial information has been derived from the audited financial statements for the years ended December 31, 2022 and 2023.
| December 31, 2023 $ |
December 31, 2022 $ |
||||||
| Total assets | 1,893,057 | 282,652 | |||||
| Total liabilities | 781,609 | 12,480,684 | |||||
| Years ended December 31, | |||||||
| 2023 | 2022 | ||||||
|
Total operating expenses |
2,706,451 |
978,416 |
|||||
|
Net loss and comprehensive loss |
(6,478,492 |
) |
(1,692,382 |
) | |||
|
Net loss per common share (basic and diluted) |
(0.93 |
) |
(0.45 |
) | |||
As of the date of prospectus, we have not earned revenue and we do not expect to generate revenue in the near future.
Discussion of Operations
The following table outlines our statements of loss and comprehensive loss for the years ended December 31, 2023 and 2022:
| Years Ended December 31, | |||||||
| 2023 $ |
2022 $ |
||||||
| Operating expenses | |||||||
| General and administrative | 2,366,202 | 332,032 | |||||
| Research and development | 193,578 | 646,384 | |||||
| Share-based compensation | 146,671 | - | |||||
| Total operating expenses | 2,706,451 | 978,416 | |||||
| Loss from operations | (2,706,451 | ) | (978,416 | ) | |||
| Finance expense, net | 500,579 | 713,966 | |||||
| Listing expense | 3,271,462 | - | |||||
| Net loss and comprehensive loss for the year | (6,478,492 | ) | (1,692,382 | ) | |||
| Loss per share - basic and diluted | (0.93 | ) | (0.45 | ) | |||
| Weighted average number of common shares | |||||||
| outstanding - basic and diluted | 6,959,018 | 3,769,800 | |||||
General and administrative
G&A expenses increased by $1,549,603 and $2,034,170 for the three months and year ended December 31, 2023, compared to the equivalent periods in the prior year. The increase is primarily due to increased legal costs, professional fees and corporate activities related to preparation for the RTO transaction.
We expect an increase in G&A expenses associated with being a public company, including costs related to accounting, audit, legal, regulatory, and tax-related services associated with maintaining compliance with applicable securities law requirements; additional director and officer insurance costs; and investor and public relations costs.
Research and development
Research and development ("R&D") expenses comprise primarily of consulting fees and external contract costs. In terms of the clinical study costs, the '002 efficacy study that commenced in 2022 was limited to treatment of placebo subjects.
R&D expenses decreased by $55,130 and $452,806 for the three months and year ended December 31, 2023, compared to the equivalent periods in the prior year. This decrease is primarily the result of limited costs associated with the suspended '002 study and the evaluation of MNA fabrication methods to improve MNA application and dissolution for the year ended December 31, 2023.
R&D costs include costs incurred under agreements with third-party contract research organizations, contract manufacturing organizations and other third parties that conduct preclinical and clinical activities on our behalf and manufacture our product candidates, and other costs associated with our R&D programs, including laboratory materials and supplies. As of the date of this prospectus, management of the Company anticipates only one amendment to the '002 study, which relates to the preparation process for the microneedle array. Although the Company expects this amendment to be considered a "minor amendment" by the FDA, there can be no assurance of the FDA's approval of the amendment.
We expect our R&D expenses to increase substantially for the foreseeable future as we seek to initiate the SKNJCT-003 study to advance our product candidates into and through clinical trials, pursue regulatory approval of our product candidates and expand our pipeline of product candidates.
The principal risks related to the Company's future performance are that the MNA trials are unsuccessful, the Company does not receive FDA approval to proceed with the next stage of its research and development, or the Company unable to obtain future funding needed to continue its research and development. These are customary risks for a development stage pharmaceutical Company and are less acute than for a Company with a less advanced product. Nevertheless, there can be no assurance that the Company will be able to complete its trials of the MNA, that the trials will be successful, or that the product will ultimately reach commercialization.
Share-based compensation
Share-based compensation expense was $146,671 for the three months and year ended December 31, 2023, compared to $nil in the equivalent periods in the prior year. The Company granted 1,625,000 stock options during the three months ended December 31, 2023.
Finance expense, net
Finance expense decreased by $141,946 and $213,387 for the three months and year ended December 31, 2023, compared to the equivalent periods in the prior year. The decrease for the three months ended December 31, 2023 is due to the conversion of all outstanding financial instruments to common shares as part of the RTO, resulting in no financing expense in the period. The decrease for the year ended December 31, 2023 was primarily related to a fair value adjustment loss in 2023 versus a gain in 2022, and nine months of dividend expense in 2023 versus twelve months in 2022. This was partially offset by a $nil gain on modification in 2023 versus a gain in 2022, and an increase in accretion expense due to new convertible promissory notes.
Transaction expense
Transaction expense was $3,271,462 for the year ended December 31, 2023, compared to $nil in the prior year. This expense was related to the RTO transaction and includes the cost to acquire Interactive and the costs incurred by RBx related to the transaction.
Liquidity, Capital Resources and Financing
The general objectives of our capital management strategy are to preserve our capacity to continue operating, provide benefits to our stakeholders and provide an adequate return on investment to our shareholders by continuing to invest in our future in a manner that is commensurate with the level of operating risk we assume. We determine the total amount of capital required consistent with risk levels. This capital structure is adjusted on a timely basis depending on changes in the economic environment and risks of the underlying assets. We are not subject to any externally imposed capital requirements.
The financial statements and this prospectus have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. The financial statements and this prospectus do not include any adjustments to the amounts and classification of assets and liabilities that would be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.
We currently do not earn any revenues from our preclinical programs and are therefore considered to be in the R&D stage. As required, the Company will continue to finance its operations through the sale of equity or pursue non-dilutive funding sources available to the Company in the future. The continuation of our R&D activities is dependent on our ability to obtain financing.
As at December 31, 2023, the Company had cash of $1,719,338, representing an increase of $1,451,686 from December 31, 2022. This increase is due to $5,609,950 of cash provided by financing activities, offset by $4,158,264 of cash used in operating activities. As at December 31, 2023, the Company has an accumulated deficit of $18,871,062 (December 31, 2022 - $12,392,570) and net loss and comprehensive loss of $6,478,492 for the year ended December 31, 2023 (2022 - $1,692,382). The Company's working capital as at December 31, 2023 is $1,111,448 (December 31, 2022 - $12,198,032 deficit), comprised primarily of cash of $1,719,338, offset by liabilities of $781,609.
The Company does not expect to generate positive cash flow from operations for the foreseeable future due to additional R&D expenses, including expenses related to drug discovery, preclinical testing, clinical trials, chemistry, manufacturing and controls and operating expenses associated with supporting these activities. It is expected that negative cash flow from operations will continue until such time, if ever, that we receive regulatory approval to commercialize any of our products under development and/or we receive royalty or milestone revenue from any such products that exceeds our expenses.
Cash flows
| Years Ended December 31, | |||||||
| 2023 $ |
2022 $ |
||||||
| Cash used in operating activities | (4,158,264 | ) | (1,057,103 | ) | |||
| Cash provided by financing activities | 5,609,950 | 1,246,241 | |||||
| Net increase (decrease) in cash | 1,451,686 | 189,138 | |||||
| Cash, beginning of the year | 267,652 | 78,514 | |||||
| Cash, end of the year | 1,719,338 | 267,652 | |||||
Cash flows used in operating activities
Cash flows used in operating activities for the year ended December 31, 2023, were $4,158,264 compared to cash flows used in operating activities of $1,057,103 for the year ended December 31, 2022. The increase is primarily due to increased spending related to preparation for the RTO.
Cash flows provided by financing activities
Cash flows provided by financing activities for the year ended December 31, 2023 were $5,609,950 compared to $1,246,241 for the year ended December 31, 2022. The increase is due to proceeds from a private placement financing of $5,109,950, and the issuance of $500,000 of convertible promissory notes during the year ended December 31, 2023, compared to $1,096,241 of convertible promissory notes and $150,000 of the note payable issued in the year ended December 31, 2022.
Listing expenses for the year ended December 31, 2023 was $3,271,462. Listing expense is related to the reverse takeover transaction to become a publicly listed company in 2023.
Contractual Obligations
We have no significant contractual arrangements other than those noted in our financial statements.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Financial Instruments and Risk Management
The Company's financial instruments are exposed to certain risks as summarized below.
Market Risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk.
Currency risk
Currency risk is the risk to the Company's earnings that arises from fluctuations of foreign exchange rates. The Company's primary exposure with respect to foreign currencies is from Canadian dollar denominated trade and other payables. A 1% change in the foreign exchange rates would not result in any significant impact to the consolidated financial statements.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not exposed to interest rate risk as at December 31, 2023.
Other price risk
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices, other than those arising from interest rate risk or currency risk, whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Company is not exposed to other price risks as at December 31, 2023.
Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from deposits with banks and outstanding receivables. The Company does not hold any collateral as security but mitigates this risk by dealing only with what management believes to be financially sound counterparties and, accordingly, does not anticipate significant loss for non-performance.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company's exposure to liquidity risk is dependent on the Company's ability to raise additional capital to meet its commitments and sustain operations. The Company mitigates liquidity risk by management of working capital, cash flows, and the issuance of share capital.
The Company is obligated to the following contractual maturities of undiscounted cash flows as at December 31, 2023:
|
|
Carrying |
Contractual cash flows |
Year 1 |
|
|
$ |
$ |
$ |
|
Trade and other payables |
781,609 |
781,609 |
781,609 |
|
|
781,609 |
781,609 |
781,609 |
Fair values
The carrying values of cash and trade and other payables approximate the fair values due to the short-term nature of these items. The risk of material change in fair value is not considered to be significant due to a relatively short-term nature. The Company does not use derivative financial instruments to manage this risk.
Financial instruments recorded at fair value on the statements of financial position are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The Company categorizes its fair value measurements according to a three-level hierarchy. The hierarchy prioritizes the inputs used by the Company's valuation techniques. A level is assigned to each fair value measurement based on the lowest-level input significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are defined as follows:
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Level 1 - Unadjusted quoted prices as at the measurement date for identical assets or liabilities in active markets.
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Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
- Level 3 - Significant unobservable inputs that are supported by little or no market activity. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The fair value hierarchy requires the use of observable market inputs whenever such inputs exist. A financial instrument is classified to the lowest level of the hierarchy for which a significant input has been considered in measuring fair value.
Critical Accounting Policies and Estimates
Refer to Note 2 and Note 3 of the audited financial statements for the year ended December 31, 2023, for a full discussion of our critical accounting policies and estimates.
Outstanding Share Data
The Company has authorized unlimited common shares with no par value. Each holder of common shares is entitled to one vote for each share owned on all matters voted upon by shareholders.
The Company has 16,153,465 common shares issued and outstanding as at the date of this prospectus.
Subsequent Events
The Company signed a 42-month lease agreement for office space of approximately 3,500 square feet in West Conshohocken, Pennsylvania. The lease commenced on January 1, 2024. Future minimum rent payments under this lease are approximately $434,000.
On January 18, 2024, the Company announced the listing of its common shares on the Frankfurt Stock Exchange, trading under the symbol "N46".
On January 25, 2024, the Company filed a final short form base shelf prospectus, which allows the Company to offer up to $50,000,000 of common shares, preferred shares, warrants, subscription receipts, debt securities, or units comprised of more than one of the foregoing securities, or any combination thereof, in all of the provinces and territories of Canada over a 25-month period.
On May 3, 2024, the Company issued $5,172,500 aggregate principal amount of the 2025 Convertible Notes. For more information on the 2025 Convertible Notes, see "Description of Material Indebtedness."
OUR BUSINESS
Our company (formerly, Interactive Capital Partners Corporation) was incorporated pursuant to the Business Corporations Act (Ontario) on April 30, 2008 under the name Interactive Capital Partners Corporation. On September 29, 2023, we completed the Business Combination with SkinJect, Inc., a Pennsylvania corporation ("SkinJect"), pursuant to a business combination agreement dated May 12, 2023, as amended, among the Company, SkinJect and RBX Capital, LP. The Business Combination resulted in a reverse takeover of the Company by the former shareholders of SkinJect, with SkinJect becoming a wholly owned operating subsidiary of the Company, and the Company being renamed "Medicus Pharma Ltd."
We are a biotech/life sciences company focused on accelerating the clinical development programs of novel and disruptive therapeutic assets.
Our principal purpose is to advance the clinical development program of "SkinJect" (the "Product"), while opportunistically identifying, evaluating, and acquiring accretive assets, properties or businesses. Through the acquisition of SkinJect, our primary focus is on the development of a drug delivery system using novel dissolvable microneedle arrays for the treatment of certain skin cancers. The business conducted by the Company prior to the Business Combination was undertaken by SkinJect. References to the Company in this section as at a date prior to the completion of the Business Combination relate to the business undertakings of SkinJect.
In 2016, SkinJect licensed certain intellectual property from the University of Pittsburgh. During 2016 and 2017, SkinJect developed validated manufacturing methods for the manufacture of the microneedle arrays covered by the licensed patents. In 2017 and 2018, SkinJect completed pre-clinical animal studies and related verification analyses.
In 2018, SkinJect prepared an Investigational New Drug ("IND") application and submitted it to the FDA for the conduct of a dose escalation study in human subjects ("Phase 1 study"). The FDA issued a Study May Proceed letter in November 2018.The study was completed in March 2021 and met its primary objective of safety and tolerability. The investigational product, D-MNA was found to be safe and well-tolerated across all dose levels in all thirteen (13) participants enrolled in the study, with no dose-limiting toxicities (DLTs), serious adverse events (SAE), or study discontinuations. Furthermore, there were no systemic effects or clinically significant abnormal findings in laboratory parameters, vital signs, ECGs, and physical examinations. The clinical study report (CSR) also describes the efficacy of the investigational product, D-MNA, with 6 participants experiencing complete responses. The complete response is defined as the disappearance of basal cell carcinoma ("BCC") histologically in the final excision at the end of study visit. The participants profile, demonstrating complete responses, was diverse and all participants (6/6) had nodular subtype of BCC.
On January 3, 2024, we announced that we had submitted to the FDA a Phase 2 Investigational New Drug clinical protocol for the Product, which provides the Company with flexibility to potentially accelerate to a Phase 2 pivotal trial, subject to, among other things, sufficient capital resources to do so, or to decelerate its clinical trial to a Phase 2A trial.
Basal Cell Carcinoma Market Overview and Current Therapies
Basal cell carcinoma is a type of skin cancer that begins in the basal layer of the epidermis. It is the most common type of skin cancer.
Basal cell carcinoma often appears as a slightly transparent bump on the skin, though it can take other forms. Basal cell carcinoma occurs most often on areas of the skin that are exposed to the sun, such as your head and neck. Most basal cell carcinomas are thought to be caused by "long-term exposure to ultraviolet (UV) radiation from sunlight" (Mayo Clinic). Additional factors that increase your risk of developing basal cell cancer include radiation therapy, fair skin, increasing age, family history and immune suppressing drugs.
Basal cell carcinomas account for approximately 80 percent of all non-melanoma skin cancers worldwide. (The Johns Hopkins University). Based on studies of populations in the United States, 40-50% of Americans who live to age 65 will experience BCC or squamous cell carcinoma at least once.
More than 5 million cases of basal cell carcinoma are diagnosed in the United States each year. Untreated BCCs can become locally invasive, grow wide and deep into the skin and destroy skin, tissue and bone.
The most common treatment for basal cell carcinoma in the United States is surgical removal. Surgery is the standard treatment for most BCC patients, either standard excision or Mohs Micrographic surgery. The treatment of basal cell carcinoma by a surgical procedure can result in high costs and clearly visible scarring.
Basal cell carcinoma is the most common cancer in humans, with an estimated annual incidence in the United States of 5.4 million cases (American Cancer Society). BCC arises from the basal cells in the epidermis and is associated with both chronic and intermittent acute UV exposure. The development of basal cell carcinoma is thought to be attributable, in part, to a deregulation of the Hedgehog signaling pathway. The Hedgehog pathway is involved in stem cell maintenance, regulation of cell proliferation and differentiation, and carcinogenesis. Unregulated activation has been implicated in the development of multiple cancers, including BCC (Gupta et. al. 2010). Chemotherapeutic inhibition of Hedgehog signaling has been demonstrated to be effective against advanced BCC (Soura et. al. 2015).
The current standard of care for localized BCC is surgical, either via standard excision or Mohs micrographic surgery; but it carries risks, including bleeding, scarring, and infection. Surgical treatment may not be desirable or indicated for all patients, resulting in a demand for more non-surgical treatment options.
Commonly used topical treatments for BCC currently include: imiquimod; 5-fluorouracil; and tazarotene.
Imiquimod works primarily by acting as an agonist of toll-like receptors 7 and 8 (Schon and Schon, 2007) leading to activation of nuclear factor-kappa B. This activation results in the induction of pro-inflammatory cytokines and chemokines, ultimately resulting in a T-cell-mediated anti-tumor immune response (Schon and Schon, 2007). Imiquimod has demonstrated efficacy in the treatment of both superficial and nodular BCC; however, imiquimod's efficacy is significantly inferior to surgery, with 84% of imiquimod-treated patients remaining tumor-free after 3-years, compared to 98% of surgically treated patients (Bath-Hextall et. al. 2014).
5-Fluorouracil is an antimetabolite that blocks DNA replication by inhibiting thymidylate synthase (Nakamura et. al. 2014). Three-year tumor-free status following treatment with fluorouracil is poorer than with imiquimod, with 68% of patients remaining tumor-free after 3-years (Roozeboom et. al. 2016).
Tazarotene's mechanism-of-action as an anti-neoplastic agent is not fully understood, but it is believed to be related to its ability to cause caspase-dependent apoptosis (Wu et. al. 2014). Tazarotene is a less-promising non-surgical alternative, with only 30.5% of patients remaining tumor-free at 3 years (Bianchi et. al. 2004).
Regulatory Environment
The production and manufacture of the Product and its research and development activities are subject to regulation for safety, efficacy and ethics by various governmental authorities in the United States. Although the present plan is to focus research and development in the United States, we might in the future expand into Canada and the European Union, in which case our activities will also be governed by regulatory authorities in these jurisdictions. These authorities, in the United States, Canada and the rest of the world, regulate research, development, testing, manufacturing, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing and import/export of pharmaceutical products, among other things. In the United States drugs and biological products are subject to regulation by the FDA and in the European Union activities are regulated by the applicable competent authority within each individual country and by the European Medicines Agency. In Canada, these activities are primarily regulated by the Food and Drug Act and the rules and regulations thereunder, which are enforced by the Therapeutic Products Directorate of Health Canada.
Drug approval laws in the Unites States, Canada and Europe generally require licensing of manufacturing facilities, carefully controlled research and testing of products, government review and approval of results prior to marketing and sale of drugs and drug delivery products. In addition, they require adherence to best practices as defined by the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use, as well as national guidelines. The process for pharmaceutical development and approval are subject to inherent risks, described in "Risk Factors."
The principal steps generally required for approval of drug and drug delivery products in the United States, Canada and Europe are described below.
Non-clinical Toxicology Studies
Non-clinical studies are conducted in vitro and in animals to evaluate toxicokinetics and pharmacokinetics to provide evidence of the safety and bioavailability of the product prior to its administration to humans in clinical studies and throughout development. Such studies compliant with FDA guidelines have been completed.
Human Testing
The process of conducting clinical trials with a new drug product generally cannot begin until a company has submitted to the appropriate regulatory authorities an application to do so and the required number of days have lapsed without objection from the applicable regulatory authority. (In certain jurisdictions, a no objection letter or approval may be required before the clinical trial can proceed). In the United States, this application is called an investigational new drug study, or "IND", and in Canada and most European countries, a clinical trial application, or "CTA."
For the United States, the sponsor of the study must submit the results of the non-clinical tests, manufacturing information, analytical data and available clinical data or literature, within the IND, to the FDA. Some information may be omitted from the IND in instances where prior FDA findings of safety or efficacy of a drug product are being relied upon. Even once the IND is submitted, non-clinical testing may continue to occur. An IND becomes effective automatically 30 days after receipt of the document by the FDA, unless within that time the FDA raises concerns or questions, in which case a clinical hold may be put in place until the concerns are adequately addressed by the study sponsor with the FDA.
Two key factors influencing the rate of progression of clinical trials are the rate at which patients can be enrolled to participate in the research program and whether effective treatments are currently available for the disease that the drug is intended to treat. Patient enrollment is largely dependent upon the incidence and severity of the disease, the treatments available and the potential side effects of the drug to be tested and any restrictions for enrolment that may be imposed by regulatory agencies. For further information see "Risk Factors."
Phase 1 Clinical Trials
Phase 1 clinical trials are typically conducted, on a small number of individuals (healthy volunteers or patients), to determine safety, dose limiting toxicities, tolerability, pharmacokinetics and to determine dose ranging for Phase 2 clinical trials in humans.
Phase 2 Clinical Trials
Phase 2 clinical trials typically involve a larger patient population than is required for Phase 1 and are conducted to evaluate the safety and efficacy of a drug candidate in patients having the disease for which the drug is indicated. This phase also serves to identify possible common short-term side effects and risks.
Phase 3 Clinical Trials
Phase 3 clinical trials typically involve tests in a much larger population of patients suffering from the targeted condition or disease. These studies involve controlled and/or uncontrolled testing in an expanded patient population (several hundred to several thousand patients) at geographically dispersed test sites to establish clinical safety and effectiveness. These trials also generate information from which the overall risk-benefit relationship relating to the drug can be determined.
Marketing Application
Upon successful completion of Phase 3 clinical trials, the sponsor company assembles all the non-clinical, clinical and manufacturing data and submits a marketing application to the applicable regulatory authority for their review in order to obtain approval to sell the drug.
Before the applicable regulatory authority approves the marketing application, they will initiate an inspection of the facility or facilities where the product is manufactured. Products will not be approved unless there is compliance with Good Manufacturing Practices, or "GMP." Approval will occur if the inspection is satisfactory and the marketing application contains data that provides substantial evidence that the drug is safe and effective in the studied indication. In addition to manufacturing inspections, the regulatory authority will typically inspect one or more clinical sites to assure compliance with Good Clinical Practices.
The testing and approval process for a new drug candidate requires substantial time, effort and financial resources, and may take several years to complete. Data obtained from non-clinical and clinical testing are not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. Approval may not be granted on a timely basis, or at all.
Even if a regulatory authority approves a product candidate, the relevant authority may limit the approved indications for use, require specific contraindications, warnings or precautions be included in the product label, including a black box warning, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess a drug's safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms. For example, the FDA may require a Risk Evaluation and Mitigation Strategy ("REMS"), (also known as a Risk Management Plan ("RMP") in Europe) as a condition of, or following, approval to mitigate any identified or suspected serious risks and ensure safe use of the drug. The REMS or RMP could include medication guides, physician communication plans, assessment plans, and elements to assure safe use, such as restricted distribution methods, patient registries or other risk minimization tools. A REMS or RMP could materially affect the potential market and profitability of the product. A regulatory authority may prevent or limit further marketing of a product based on the results of post-marketing studies or surveillance programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes, and additional label claims, are subject to further testing requirements, notification, and regulatory authority review and approval. Further, should new safety information arise, additional testing, product labeling or regulatory notification may be required.
Healthcare Laws and Regulations
Coverage and Reimbursement
In the United States, Canada, and markets in other countries, patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Thus, even if a product candidate is approved, sales of the product will depend, in part, on the extent to which third-party payors, including government health programs in the United States such as Medicare and Medicaid, commercial health insurers and managed care organizations, provide coverage, and establish adequate reimbursement levels for, the product. In the United States, no uniform policy of coverage and reimbursement for drug products exists among third-party payors. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. The process for determining whether a third-party payor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the product once coverage is approved. Third-party payors are increasingly challenging the prices charged, examining the medical necessity, and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the approved products for a particular indication.
In the United States, Medicare tends to have a greater role than private insurers in determining reimbursement for the treatment of conditions, such as basal cell cancer, that disproportionately affect patients over the age of 65.
Applicable Laws in the United States
If we obtain FDA approval for the Product and begin commercializing the Product in the United States, our operations may be directly, or indirectly through our future potential customers and third-party payors, subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act ("FCA"), and data privacy and physician sunshine laws and regulations. These laws or their relevant foreign counterparts may impact, among other things, our proposed sales, marketing, and education programs and its relationships with healthcare providers, physicians and other parties through which we market, sell and distribute its products for which it obtains marketing approval. In addition, we may be subject to patient privacy regulation by the federal government and the states in the United States as well as other jurisdictions. The laws that may affect our ability to operate include:
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the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual, or the purchase, lease, order, arrangement, or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. A person or entity can be found guilty of violating the statute without actual knowledge of the statute or specific intent to violate it. The term remuneration has been interpreted broadly to include anything of value. Further, courts have found that if "one purpose" of remuneration is to induce referrals, the federal Anti-Kickback Statute is violated. Violations are subject to significant civil and criminal fines and penalties for each violation, plus up to three times the remuneration involved, imprisonment, and exclusion from government healthcare programs. In addition, a claim submitted for payment to any federal healthcare program that includes items or services that were made as a result of a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers, among others, on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution;
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the federal civil and criminal false claims laws, including the FCA, and civil monetary penalty laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, false, fictitious or fraudulent claims for payment to, or approval by Medicare, Medicaid , or other federal healthcare programs; knowingly making, using, or causing to be made or used, a false record or statement material to a false, fictitious or fraudulent claim or an obligation to pay or transmit money or property to the federal government; or knowingly concealing or knowingly and improperly avoiding, decreasing or concealing an obligation to pay money to the federal government. A claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim under the FCA. Manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to "cause" the submission of false or fraudulent claims. The FCA also permits a private individual acting as a "whistleblower" to bring qui tam actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery or settlement. When an entity is determined to have violated the FCA, the government may impose civil fines and penalties for each false claim, plus treble damages, and exclude the entity from participation in Medicare, Medicaid and other federal healthcare programs;
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the federal Health Insurance Portability and Accountability Act of 1996 ("HIPAA") which created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private), and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false fictitious or fraudulent statement or entry in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of violating HIPAA fraud provisions without actual knowledge of the statute or specific intent to violate it;
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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or "HITECH", and their respective implementing regulations, which impose, among other things, certain requirements relating to the privacy, security and transmission of individually identifiable health information on certain covered healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their respective "business associates," those independent contractors or agents of covered entities that create, receive, maintain, transmit or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys' fees and costs associated with pursuing federal civil actions. In addition, there may be additional federal, state and non-U.S. laws, including but not limited to: (i) General Data Protection Regulation (European Union); (ii) the Personal Information Protection and Electronic Documents Act (Canada); and (iii) Personal Information Protection Act (Canada), which govern the privacy and security of health and other personal information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts;
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the federal Physician Payments Sunshine Act, created under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, and its implementing regulations, which require manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program (with certain exceptions) to report annually to the Centers for Medicare & Medicaid Services ("CMS"), information related to direct or indirect payments and other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by the physicians and their immediate family members. Effective January 1, 2022, these reporting obligations will extend to include transfers of value made in the previous year to certain non-physician providers such as physician assistants and nurse practitioners;
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federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; and
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analogous U.S. state, local and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers and may be broader in scope than their federal equivalents; state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and other relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures or drug pricing; state and local laws that require the registration of pharmaceutical sales representatives; and state and foreign laws governing the privacy and security of health information, some of which may be more stringent than those in the United States (such as the European Union, which adopted the General Data Protection Regulation, which became effective in May 2018) in certain circumstances, and may differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Healthcare Reform
The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of products have been a focus in this effort. Governments have shown significant interest in implementing cost- containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit a company's revenue generated from the sale of any approved products. Coverage policies and third-party payor reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which a company or its collaborators receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
There have been a number of proposals during the last few years regarding the pricing of pharmaceutical products, limiting coverage and the amount of reimbursement for drugs and other medical products, government control and other changes to the healthcare system in the United States. For example, in March 2010, the U.S. Congress enacted the ACA, which, among other things, includes contains to the coverage and payment for products under government health care programs. Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the ACA, and there are likely to be additional challenges and amendments to the ACA in the future. For example, various portions of the ACA are currently undergoing legal and constitutional challenges in the U.S. Supreme Court. Additionally, the former Trump administration has issued various Executive Orders which eliminated cost sharing subsidies and various provisions that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices and Congress has introduced several pieces of legislation aimed at significantly revising or repealing the ACA.
Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. For example, CMS may develop new payment and delivery models, such as bundled payment models. Recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their products. Such scrutiny has resulted in several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. Several regulations have also been proposed partly in response to several executive orders issued by President Trump related to prescription drug pricing that seek to implement several of the administration's proposals. While some of these and other measures may require additional authorization to become effective, and the current Biden administration may reverse or otherwise change these measures, Congress has indicated that it will continue to seek new legislative and/or administrative measures to control drug costs.
The Microneedle Array Solution and Doxorubicin Hydrochloride
Why Doxorubicin Hydrochloride
The binding of doxorubicin to cellular membranes may affect a variety of cellular functions. Enzymatic electron reduction of doxorubicin by a variety of oxidases, reductases and dehydrogenases generates highly reactive species including the hydroxyl free radical (• OH). Cells treated with doxorubicin have been shown to manifest the characteristic morphologic changes associated with apoptosis or programmed cell death. Doxorubicin-induced apoptosis may be an integral component of the cellular mechanism of action relating to therapeutic effects, toxicities, or both. Doxorubicin is a particularly well-suited chemotherapeutic drug for the chemo-immunization strategy, because it creates an immunogenic "good death" for tumor cells (Galluzzi et. al. 2012) and (Storkus and Falo Jr 2007). As shown in the figure below, doxorubicin chemotherapy has been shown to result in innate immune activation, including the attraction and activation of antigen presenting cells, and a cell death process that facilitates the activation of antigen presenting cells and their internalization and processing of dying tumor cell derivatives through underlying mechanisms that include ATP and HMGB1 release, and calreticulin exposure (Zitvogel et al 2010 and Obeid et. al.) 2007). The doxorubicin-containing microneedle arrays ("D-MNA") in development by us utilizes this immunogenic apoptosis by applying very low doses of doxorubicin via the D-MNA to basal cell lesions.
Utility of Microneedle Arrays to Deliver Doxorubicin to Basal Cell Lesions
The D-MNA is a dissolvable, tip-loaded 15 x 15 mm microneedle array delivering doxorubicin to the tumor microenvironment for non-melanoma skin cancer therapy. The arrays are "pressed" into the skin where an appropriate-
size lesion is growing and left on the lesion site for up to 30 minutes, allowing the microneedles to penetrate the skin, dissolve, and deliver defined quantities of doxorubicin to the lesion. The micro-needle array's main excipient is buffered carboxymethyl cellulose. Doses of 25 µg, 50 µg, 100 µg, or 200 µg of doxorubicin hydrochloride can be contained in the array's 400 microneedles. A placebo array without doxorubicin hydrochloride but alike in every other respect ("P-MNA") has been fabricated for clinical testing and "blanks" for analytical testing.
The goal of our program is to demonstrate the D-MNA as a more robust alternative to the currently available non-surgical, and in many cases, surgical treatments for BCC.
Preclinical Proof of Efficacy Studies
The program's therapeutic strategy relies on highly localized delivery of doxorubicin to the topically accessible tumor microenvironment. Doxorubicin delivered by the MNAs described in University of Pittsburgh's IND #122448 had shown efficacy in causing local, acute tumor cell death in the mouse melanoma model at doses that would otherwise be considered safe (e.g., 25 µg), but sub-therapeutic if delivered via a systemic route of administration. MNAs delivering doxorubicin also demonstrated efficacy in a murine squamous cell carcinoma model, with 100% survival in MNA-Doxorubicin group versus 0% survival in MNA-Blank group (Friedman B, et al, 2017). Survival advantage persisted with 40% of MNA-Doxorubicin-treated mice alive at 40 days post-inoculation.
As a result, we believe BCC is a rational target for chemo-immunotherapy using D-MNAs.
Emerging clinical data also supports the use of D-MNA as a viable treatment for cutaneous malignancies. Researchers at the University of Pittsburgh, under IND #122448 are conducting a clinical study in cutaneous T-Cell lymphoma ("CTCL") (NCT02192021). The primary objective of the study is to evaluate the safety of escalating, low doses (25-200 µg) of doxorubicin delivered directly and specifically into CTCL lesions using D-MNA. Secondary objectives include evaluations of the pharmacokinetics and pharmacodynamics ("PK/PD") of doxorubicin when delivered D-MNA; and evaluations of local, locoregional, and distant responses, biologic responses, and effects of treatment on the tumor microenvironment.
Akilov et al. 2018 previously reported on the safety of D-MNA in the treatment of mycosis fungoides, a common subtype of cutaneous T-Cell lymphoma. An initial cohort of 3 patients was treated with 25 µg of doxorubicin via MNA. Patients were treated once/week for 4-weeks, followed by a one-week break. No toxicities were observed at the 25 µg dose, and the original cohort, plus a new 3-patient cohort was escalated to the 50 µg dose. Dose-limiting toxicity ("DLT") was observed in one patient at the 50 µg dose and the cohort was expanded to 2 additional patients, with no additional DLTs reported. One patient exhibited a complete resolution of mycosis fungoides in response to D-MNA.
Manufacturing Processes and Critical to Quality Parameters
Overview
For BCC, the principal mode of action of the D-MNA depends on doxorubicin being delivered to this basal layer space, disrupting the affected basal cells, and recruiting immune cells to eradicate the lesion. The 400 microneedles in the D-MNA must therefore be durable enough to penetrate the stratum corneum and upper layers of the epidermis, but also dissolve quickly enough to deliver sufficient doxorubicin to the site during the 30 minute application. Other more traditional parameters of biopharmaceutics also apply, such as consistency of dose between arrays, made more complex than oral or other dosage forms, by the molding and centrifugation process for the arrays. The important biopharmaceutic considerations for the efficacy of the array therefore include the following:
-
Fidelity of dose to label claim
-
Needle strength/hardness
-
Homogeneous distribution of drug throughout the array
-
Consistency of dose between arrays
-
Dissolution of the microneedles sufficient to deliver the drug payload
-
These factors can affect the ability of a dissolvable, tip-loaded microneedle array to perform as expected in human clinical studies. SkinJect has taken the following steps to ensure these factors are properly controlled during manufacturing.
These factors can affect the ability of a dissolvable, tip-loaded microneedle array to perform as expected in human clinical studies. We have taken the following steps to ensure these factors are properly controlled during manufacturing.
Factors Affecting Ability of MNA to Perform Clinically
|
Factor |
Measurement |
|
|
Fidelity of dose to label claim |
Quantitative testing of the array samples by a validated HPLC method |
|
|
Homogeneous distribution of drug throughout the array |
Visual inspection for "hot spots" |
|
|
Consistency of dose between arrays |
Quantitative testing for content uniformity of the array samples by a validated HPLC method |
|
|
Needle strength/hardness |
Desiccation measured by loss on drying to approximately 5%. |
|
|
Dissolution of the microneedles sufficient to deliver the drug payload |
Demonstrated in vitro, ex vivo, and in vivo. |
|
|
Doxorubicin stability |
pH measurement of the solution prior to carboxymethyl cellulose ("CMC") addition; follow-up analytical testing for impurities |
|
|
MNA = dissolvable microneedle array, HPLC = high power liquid chromatography, UV = ultra- violet, CMC = carboxymethyl cellulose. |
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Manufacturers of D-MNA Components
|
API/Excipient |
Manufacturer/Lot Number |
|
|
Doxorubicin HCl |
Gemini PharmChem, Mannheim, GmbH, batch no. 070520 |
|
|
Citric acid anhydrous |
Fischer Scientific/185791 |
|
|
Sodium phosphate dibasic anhydrous |
Fischer Scientific/175060 |
|
|
Trehalose dihydrate |
Pfanstiehl/37108A |
|
|
Carboxymethyl cellulose |
Dow distr. By aic, Inc./F294F88017 |
|
|
USP purified water |
Millipore/F7PA35615 |
Composition of the Drug Product
Each array contains 400 microneedles with a total tip volume of 9.6 µL which are evenly filled with 9.6 µL of doxorubicin gel of the following composition. The doses in the headline refer to the base of doxorubicin. The current formulation contains an overage of 5% of drug substance.
Controls of Critical Steps and Intermediates
The following are fundamental to the production of arrays according to GFE Protocol P171016-1-R3.
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Preparation: Assembly and gel formulation.
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Deposition 1 (Tip Loading): Deposition of the formulation containing active doxorubicin and excipients.
-
Deposition 2 (Backing Plate): Deposition of formulation containing only excipients to create the backing plate to the needle structure.
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Drying: Centrifugation of the array under controlled temperature and humidity conditions until moisture is removed from the formulation.
- Demolding, Cutting, Desiccation, and Storage: Removal of the arrays from the molds, trimming, and storage in a desiccator box in a controlled refrigerated environment for 72-96 hours.
Critical to quality parameters include:
-
Dissolution and homogeneity of all materials during mixing.
-
Centrifuge rpm and quality/degree of tip loading.
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Dilution and viscosity of gels relating to accurate, consistent deposition.
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Duration and speed of drying steps affecting water content and flatness of arrays.
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Temperature maintained (2-8 C) within centrifuge with impact on drying time and on doxorubicin stability.
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Refrigeration of arrays once fabricated.
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Post-fabrication, moisture content of arrays reduced to 5%, as measured by loss on drying.
In-Process Controls: D-MNA; P-MNA
|
In-Process Controls (Engineering) |
Limit |
|
|
Master mold fabrication via milling process |
CAD/CAM of all suitable material rendering required geometry for microneedles |
|
|
Production molds fabricated from polydimethyl siloxane |
Spun in the same centrifuge to fabricate the arrays such that forces and angles used to make production mold mirror those used to fabricate the arrays. Production molds inspected after every production cycle to ensure integrity of the needle forms- Protocol P171016-1 R3 governs this process. |
|
|
Fabrication of each fixture necessary for array production |
Protocol P171016-1 R3 provides these parameters |
|
In-Process Controls (Formulation) |
Limit |
|
|
Dissolution of all materials in gel formulation |
Visual inspection |
|
|
Viscosity of the gel |
Verified by cone plate viscometer torque reading; Brookefield Viscometer DVII+ calibrated at every run |
|
|
pH of the gel |
A pH of between 4.5 and 5.1 is sufficiently acidic. Follow procedure for dilution of gel, use of pH probe, and calculation (Determination of the pH of SkinJect Formulations) |
|
In-Process Controls (Array Fabrication) |
Limit |
|
|
Deposition and centrifugation. |
Deposit approximately 0.5 ml per 2 x 5 production mold. The centrifuge is run for 30 minutes at 5,500 rpm at 15C. |
|
|
Doxorubicin stability |
Temperature maintained within centrifuge at 15C that impacts drying. |
The flow chart, below, describes in more detail the critical steps and manufacturing parameters. A summary narrative of the process is provided on subsequent pages.
Figure 1. Manufacturing flow chart
Manufacturing Process Equipment
The equipment used to fabricate the arrays is listed in the table below:
Equipment Used to Fabricate Arrays
|
Description |
Supplier |
Model/Part Number/Print |
||
|
Centrifuge |
Thermofisher |
Sorvall Lynx 4000 |
||
|
Rotor |
Thermofisher |
BioFlex HC (PN 75003000Q502807) |
||
|
Rotor Bucket |
Thermofisher |
BioFlex HC (PN 75003000Q502807) |
||
|
Bucket Lid with Gasket |
Thermofisher |
BioFlex HC Lid (PN 75007309Q502807) |
||
|
|
||||
|
Bucket Insert |
GFE LLC |
GFE Print "Lynx Square Tool Holder Rev R1" |
||
|
Casting Mask |
GFE LLC |
GFE Print "Array Rev X6 Production Mold Frame" |
||
|
Casting Sleeve |
GFE LLC |
GFE Print "Array Rev X6 MNA Master Sleeve Rev E0" |
||
|
Production Mold |
GFE LLC |
GFE Print "Array Rev X6 Production Mold Rev E0" |
||
In an initial step, a master mold is fabricated by a milling process under CAD/CAM of a suitable material such as an acrylic or a metal alloy, rendering the required geometry for the microneedles. Once fabricated, the master mold is stored for future rendering of production molds as needed. The masters are wrapped in a clean-room towel for protection and stored in individually labeled rigid containers. The production molds are stored 4 per glass container labeled with revision codes. All materials are stored in a final secondary container labeled masters and production molds.
The master mold is then used to fabricate the production molds from polydimethyl siloxane (PDMS; (Slygard® 184, Dow Corning) (B)). This latter material is poured onto the master mold, positioned, and spun in the same centrifuge used to fabricate the arrays such that the forces and angles used to make the production mold mirror those used to fabricate, ultimately, the arrays. The production molds are inspected after every production cycle to ensure integrity of the needle forms. Protocol P171016-3 governs the process by which each production mold is cleaned of any material from a previous production run.
1. Preparation
The Lynx square tool holder assembly is disassembled into the components and all components are cleaned thoroughly with isopropyl alcohol. This includes the "square" bucket tool holder (black), the casting sleeves (white), and the leveling plates (green).
The square tool holder assembly is then reassembled. Each position in each holder is engraved with a number and letter. The number refers to the tool holder and the letter the position within the bucket. The cast leveling plates have similar markings and should align. Note the direction of arrow which identifies the spin direction of the centrifuge and orientation of the leveling plate.
The production molds and the mold masks, if used, should be sonicated in deionized water within an ultrasonic cleaner for 30 minutes at 35C and dried for 24 hours prior to use.
Pre-assemble the production molds by aligning the exterior step and pressing into the production mold.
The production mold is placed in the square tool holder assembly and pressed into the levelling plate. There is no orientation of the production mold.
The square tool holder is used for placement of completed assemblies into the buckets within the centrifuge and run at 2,000 rpm for 30 seconds. The purpose of this is to "seat" all components within the mold and levelling plate to a "home" position.
|
2. Deposition #1 (Tip Loading) The entire square tool holder assembly is removed from each bucket within the centrifuge. Using the appropriate placebo or active formulation, the operator deposits a small quantity of gel within each cavity as shown in Figure 2. The deposition should be approximately 0.05 ml per array cavity in each 5 x 2 production mold in an evenly distributed manner such as 5 small dots shown in Figure 2. All formulation syringes remain capped when not in use. The square tool holder assembly is placed into the bucket using the bucket holder and covered using the bio-safe bucket covers with gaskets. Note that the centrifuge must be balanced. Either two buckets may be used or four buckets. |
|
 |
The covered buckets are centrifuged for a short period of time to "set" the doxorubicin gel into the needle tips. Deposition #1 is complete: the doxorubicin gel has been molded into the microneedles. Upon completion of this step, the square tool holder assembly is removed from the centrifuge buckets. (Figure 3). | |
| A square edge spatula is then used to remove the excess formulation on the production mold. This removes most of the excess formulation (Figure 4). The square bucket tool holder assembly is placed in the centrifuge buckets, covered with biosafe HC caps and gaskets. These are centrifuged for 30 minutes at 5,500 rpm at 15°C. This step assures that the formulation is pushed as deeply into the tips as possible and to promote drying, allowing space for the backing plate material to be deposited, overlaying the microneedles |
|
|
3. Deposition #2 (Backing "Plate" to each D-MNA)
After the full drying cycle of 30 minutes finishes, the bucket tool holder assembly is removed from the centrifuge buckets. Next, the placebo formulation, 0.25 mL per array, is deposited in each array cavity (10 cavities per production mold). The material is deposited as evenly as possible.
The square tool holder assembly is placed back into the centrifuge buckets and covered with biosafe lids with gaskets. The centrifuge is run for 30 minutes at 5,500 rpms at 20°C. Upon completion of the centrifugation, the caps are removed from the buckets.
|
4. Drying Only the lids are removed from the buckets if not already completed, the tooling remains in the centrifuge. Drying is initiated at 4,000 rpms for 5.0 hours at 25°C. Flow valves for the desiccated air inlet are open. This ensures that the desiccation tube contains dry desiccant (dry is indicated by blue, purple indicates wet). The operator sets the flow for 20 psi at a minimum of 2 LPM. The operator ensures that the outlet of the centrifuge contains a new disposable HEPA filter with a 0.2 µm or smaller filter element to prevent room contamination of doxorubicin hydrochloride. Upon completion of the 5-hour drying cycle, the drying step is completed. 5. Demolding, Desiccation, and Storage All square tool holders are removed from the centrifuge buckets. Production molds are removed from the square tool holder (Figure 5). The operator places the freshly prepared arrays in a desiccator box in a controlled temperature refrigerator and allows the arrays to dry to a moisture content of approximately 5%. When fully dried, the arrays are then packaged and stored at 2-8°C. The fabrication cycle is complete. Subsequent cycles consisting of 80 microneedle arrays per run will follow the same process. |
 |
Packaging of Product
Starting from the innermost packaging, each array is contained in a foil-sealed PETG cube, which is contained in a 2" x 3" opaque, U- Line packet labeled with standard investigational drug text (Figure 6).
Figure 6. Left, the "cubes" holding each array (foil seal not shown);
center, 2" x 3" packets holding the cubes; right, ziplock bag holding 4 packets of arrays
Four 2" x 3" packets are then stored in a Ziplock Uline 4" x 6" bag, which contains D-MNA's of the same dosage (25 µg, 50 µg, 100 µg, or 200 µg, or placebo). The outer Uline bag is sealed with a serialized security tape and carries standard investigation drug labeling (Figure 7) including a supplemental label containing the subject number.
When the packaging of the entire production run (consisting typically of 200-240 arrays) has been completed, the product is then shipped on ice pack for the next phase, namely, sterilization, quality control testing, and release of the product.
Release Testing and Release of Product
The release of GMP-quality product to a clinical site is a highly regulated practice. Upon shipping of the arrays form GFE, LLC, the array manufacturer, which has already performed its own quality control, the entire shipment of arrays embarks on a multistage process, whose end goal is release of the investigational product to the clinical site (Figure 8).
Because the arrays are breaking the skin surface of human subjects, the FDA views the arrays as a type of parenteral product and therefore requires sterilization. On the day of completing the packaging of the arrays, GFE ships the fully packaged arrays by overnight courier to Ebeam Services who performs electron beam sterilization of the arrays. The arrays are then transported by a same-day courier service from Ebeam Services to Intertek Pharmaceutical Services ("Intertek"), who performs four functions:
1) places the majority of the arrays in stability storage;
2) ships a designated number of arrays to Nelson Laboratories for endotoxin and bioburden testing;
3) initiates analytical and other testing of the arrays within Intertek; and
4) ships a designated number of the arrays to Clinigen on quarantine for distribution to the clinical sites when the arrays have passed quality control/quality assurance.
Figure 9 indicates the types of tests performed for release of the product.
Figure 9. Certificate of Analysis qualifying the release of microneedle arrays
The essential settings for the phase appropriate, GMP-validated HPLC method for identity, assay/purity, related substances, and content uniformity testing performed by Intertek are provided below.
While Intertek is performing this testing, Nelson Laboratories is performing the following work to assess microbiological safety:
● Endotoxin testing: The Bacterial Endotoxin Test, or Lumulus Amebocyte Lysate ("LAL") Test, quantifies endotoxins that are part of the cell wall of gram-negative bacteria. LAL testing is performed on samples at T0 and subsequent stability timepoints.
● Sterility/bioburden: The arrays are also dissolved and the contents are cultured to determine if the sterilization eradicated all bacteria and yeasts from the samples. This test is performed on samples at T0 and subsequent stability timepoints.
All of the results of these tests and others such as moisture content and physical assessment are then collated and appended to a certificate of analysis ("COA"), which, when signed by qualified persons, allows the release of the product by Clinigen Clinical Services, who has stored the product under quarantine until they receive the signed COA authorizing release to the clinical site.
Non-clinical Development of D-MNA
Nonclinical Test Material
GMP-quality doxorubicin was used for all nonclinical studies (murine local lymph node assay, rabbit irritation and pyrogenicity study, and Yucatan minipig local tolerance study). The nonclinical arrays were produced under non-GMP conditions; GMP conditions were not required for these studies. The manufacturing methods used to make the arrays for the non-clinical studies are identical to the methods used to make the GMP-quality arrays.
Nonclinical PK and Safety Studies
The results of the nonclinical studies indicate a reliable lack of systemic exposure when doxorubicin is delivered via MNA. Furthermore, minipig studies using doses of up to 200 µg per MNA showed no detectable levels of doxorubicin, measured by LC-MS/MS. Given these data, no systemic effects are anticipated from D-MNA application.
Pharmacokinetics
Pharmacokinetics and Product Metabolism in Non-Human Animals
As shown by the data and Figure 10 below (courtesy of Louis Falo, M.D., Ph.D.), blood samples were collected from mice intravenously injected with 100 µg or 200 µg of doxorubicin or from mice receiving 200 µg D-MNA, after 5, 20, and 60 minutes. Doxorubicin content of the blood samples was measured by spectrofluorimetry and quantitated against a calibration curve. No detectable quantities of doxorubicin were observed in the mice receiving the 200 µg D-MNA; doxorubicin levels were detectable in the intravenously injected mice.
Figure 10
In addition, Medicus obtained pharmacokinetic data during the Yucatan minipig local tolerance study (Study No. S15055). A total of 30 minipigs (15 males and 15 females) were randomized into five treatment groups. Groups of 3 males and 3 females were treated with a blank control array (Group 1), and three dose levels of D-MNA at 25, 50 and 200 µg/dose of doxorubicin hydrochloride (Groups 2 - 4), respectively. An intravenous ("IV") doxorubicin group consisting of 3 males and 3 females served as a reference control (Group 5). Dosing occurred on Days 1, 7 and 14 with either control array or test article (Groups 1-4), and Group 5 was dosed IV on these same study days. Each topical treatment was 30 minutes. The experimental design is provided in the table below.
Study Design of Minipig Local Tolerance Study
Group |
Treatment |
Treatment/Dose | Number of Animals | Dose Route/ Frequency |
||||||||||
| Array | Dosage (µg/dose) | Male | Female | |||||||||||
| 1 | Blank Control | 1 | 0 | 3 | 3 | MNA/Days 1, 7, 14 | ||||||||
| 2 | D-MNA-low | 1 | 25 | 3 | 3 | |||||||||
| 3 | D-MNA-mid | 1 | 50 | 3 | 3 | |||||||||
| 4 | D-MNA-high | 1 | 200 | 3 | 3 | |||||||||
| 5 | Reference Control | NA | 2 mg/kg (Doxorubicin Hydrocholoride) | 3 | 3 | IV/Days, 1, 7, 14 |
||||||||
Note:
(1) Dosing volume for Group 5 was 1 ml/kg (doxorubicin hydrocholoride 2 mg/ml). NA = Not Applicable IV = Intravenous
Blood collections for toxicokinetic evaluation were conducted on Days 1 and 14 post dose administration (post-30 mins application for Groups 1-4) for all groups.
Excluding the group 5 control group, all array-treated groups showed doxorubicin plasma levels below the lower limit of quantitation ("LLOQ"), which for this LC-MS/MS method was 0.25 ng/ml. The study sponsor concluded that in the minipig model there was no measurable systemic exposure to doxorubicin when administered by the Sponsor's tip-loaded, dissolvable microneedle array.
Based on the mice and minipig pharmacokinetic data, we concluded that human systemic exposure to doxorubicin is unlikely through the application of the D-MNA.
Analytical Methods and Validation
A bioanalytical method was validated for the determination of doxorubicin in Yucatan minipig plasma ("K2EDTA") by liquid chromatography tandem mass spectrometry ("LC-MS/MS") at a dynamic range of 0.250 - 50.0 ng/ml. The analyte is light sensitive and exposure to direct light was minimized during extraction and analysis. Doxorubicin-13C,d3 was used as the internal standard.
A summary of the validation data for the analyte is presented in the table below.
Summary of Validation Data from LC-MS/MS Study
|
Analyte |
Doxorubicin |
|
|
Matrix |
Yucatan Mini Pig Plasma (K2EDTA) |
|
|
Analytical Procedure |
LC-MS/MS |
|
|
Sample Preparation |
Protein Precipitation |
|
|
Assay Aliquot Volume |
50 µl |
|
|
Assay Range |
0.250 - 50.0 ng/ml |
|
|
Regression |
Linear (1/x2) |
|
|
Selectivity |
6 of 6 lots within acceptance |
≤ 20% of mean LLOQ, ≥90% of individual lots free of interference |
|
Injector Carryover |
Not Significant |
≤20% of mean LLOQ |
|
Validation Batch Acceptance (Acceptable/Total Primary Runs) |
4/4 |
|
The toxicity of doxorubicin hydrochloride has previously been evaluated and reported in standard preclinical toxicology models. More important, the toxicity profile of parenteral doxorubicin in humans at doses cytotoxic to cancers has been well established and recounted in this investigator brochure.
We have not conducted any formal safety pharmacology studies. However, selected parameters that are typically collected in CNS and respiratory safety pharmacology were collected in the form of clinical observations in the below-listed toxicology studies. In addition, electrocardiograms were recorded in a pivotal toxicology study in minipigs and were evaluated by a board-certified veterinary cardiologist.
We have completed three GLP-compliant toxicology studies:
1. D-MNA toxicity, local tolerance and toxicokinetics study in Yucatan minipigs (Study No. S15055)
2. Local lymph node immunotoxicology assay ("LLNA") in CBA/J mice (Study No. BRT Study 20170724)
3. Pyrogenicity/skin irritation study in New Zealand white rabbits (Study No. Study No. S15054), each of which was preceded by a pilot study using the same species and strain of animal.
The D-MNA was designed to penetrate human skin and dissolve into a skin cancer. Given the inherent differences in skin types between mammalian species, the pilot studies were necessary to ensure that the GLP study would provide for a valid safety assessment.
In total, three pilot studies were performed. For the GLP minipig study (SRC Study No. S15055), a pilot study demonstrated that it was technically feasible to administer D-MNA to Yucatan minipigs (SRC Study No. S15200). For the LLNA (BRT Study No. 20170725), the site of dosing is always the mouse's ears. It was immediately obvious that a novel approach would be needed since the D-MNA measures approximately 1.5 x 1.5 cm, as large or larger than the ears themselves. The study sponsor developed a liquid test article containing all the ingredients of the D-MNA with added DMSO, an approved LLNA solvent which helps the test article to penetrate the skin of the mouse ear. The pilot study demonstrated that this test article was non-irritating, and therefore, should perform a valid assessment of D-MNA's sensitization potential (BRT Study No. 20170724).
For the GLP rabbit study (SRC Study No. S15054), the pilot study demonstrated that the rabbit was not a valid model for testing D-MNA due to the lack of underlying musculoskeletal support which allows for the technician to apply pressure to the D-MNA during administration (SRC Study No. S15198). In addition, the presence of tightly spaced hair follicles appeared to at least partially inhibit penetration of the needles on the D-MNA. Accordingly, the Sponsor determined that a subcutaneous injection of modified D-MNA gel, with extra buffer added to make the D-MNA formulation syringeable, would provide a valid assessment of pyrogenicity. This same formulation was also used to test for skin irritation on abraded skin.
The data in the table below describe the results of studies conducted by SkinJect to elucidate the effects of delivering the gel used to make the array or the array itself to the skin.
Summary of Toxicology Studies (Phase 1 Study)
| Study | Start Date |
Model | Dose | Frequency/ Duration |
Route of Admin |
Observations | Conclusions | |||||||
| Single Dose: Pilot study, SRC Study No. S15200 |
09-Aug-2017 | Yucatan Minipig 1 and 3- month old; 1M/1F n = 4 |
50 µg (3 mo. old) and 200 µg (1 month old) D-MNA | Day 1 | D-MNA | Trial 1: 30 min 1 male and 1 female 3 month old pig. Trial 2: 60 min 1 male and 1 female 1 month old pig. D-MNA was applied to 1- or 3-month old minipigs, removed after 60 or 30 min, respectively, and analyzed for concentrations of doxorubicin as well as visual inspection of D-MNAs post application. 3-month old minipigs were ultimately used due to ease of handling and blood draws. | D-MNA administration was acceptable. 3- month old minipigs chosen for technical reasons. And 60 minutes resulted in backing part of array being too soft. |
|||||||
| Repeat-Dose: SRC Study No. S15055 | 05-Feb-2018 | Yucatan Minipig 3-month old; 3M/3F per group n = 30 |
0, 25, 50 and 200 µg/dose D- MNA; 2 mg/kg IV doxorubicin (positive control group) | Days 1, 7, 14 | D-MNA, IV | 200 µg minipigs show red discoloration of epidermis at dosing site, which correlated with dermal inflammatory reactions seen microscopically with high frequency and severity in D-MNA treated groups. | D-MNA doses of up to 200 µg per week for three doses total were well tolerated. Tissue reactions were limited to inflammatory reactions of the dermis at the treated sites. |
| Study | Start Date |
Model | Dose | Frequency/ Duration |
Route of Admin |
Observations | Conclusions | |||||||
|
Local Tolerance: SRC Study No. S15055 (continued) |
—
|
|
|
|
|
Group 5 (reference control IV doxorubicin) males and females both had numerically or significantly decreased WBC, red blood cell counts, hemoglobin, hematocrit, platelets (females only), neutrophils, lymphocytes, monocytes (females only), eosinophils and reticulocytes. Group 5 (reference control) males had significantly (p<0.05) elevated APTTD and fibrinogen on study Day16. Blood samples (plasma) analyses after array administration on dosing phase Day 1 and 14 showed that there was no detectable doxorubicin systemic exposure after topical application at doses up to 200 μg via D-MNA (lower limit of detection was 0.250 ng/mL). For the reference control animals, all animals had detectable concentrations of doxorubicin for up to 8 hours post dose administration. |
D-MNA doses of up to 200 µg per week for three doses total were well tolerated. Tissue reactions were limited to inflammatory reactions of the dermis at the treated sites. |
|||||||
|
Immunotoxi-cology (LLNA Pilot): BRT Study 20170724 |
21-Feb-2018 |
CBA/J Mice 8- weeks old; 2F per group N =8 |
25, 50, 100, 200 µg/ear modified D- MNA gel + DMSO |
Days 1-3 |
Topical gel (both ears) |
Modified D-MNA gel + DMSO was applied for three days and ear thickness and irritation were determined. |
None had ≥ 25% increase of ear thickness or skin irritation. |
|||||||
|
Doxorubicin-Containing Microneedle Array (D-MNA) Constituents (Doxorubicin and Carboxymethyl Cellulose): Local Lymph Node Assay(LLNA) in Mice BRT Study 20170725 |
28-Feb-2018 |
CBA/J Mice 8-weeks old; 5-8F per group N = 45 |
25, 50, 100, 200 µg/ear modified D- MNA gel + DMSO |
Days 1-3 |
Topical gel (both ears) |
GLP. Standard test for sensitization potential of doxorubicin using modified D-MNA gel + DMSO. There were no clinical signs and no noteworthy body weight changes. Change in ear thickness was <25%. It was not possible to calculate an EC3 value. |
Modified D-MNA gel + DMSO was not considered a sensitizer. |
| Study | Start Date |
Model | Dose | Frequency/ Duration |
Route of Admin |
Observations | Conclusions | |||||||
|
Other (Pilot Pyrogenicity & Skin Irritation): SRC Study No. S15198 |
09-Aug-2017 |
New Zealand White rabbit 5-7 months old, 2M per group |
0, 50 µg D-MNA (Trial #1)
200 µg D-MNA (Trial #2) |
Day 1 |
D-MNA |
D-MNA was applied to shaved, depilated rabbits, removed after 30 minutes (Trial #1) or 60 min (Trial #2), and analyzed for concentrations of doxorubicin and well as visual inspection of D- MNAs post application. |
The size and fragility of the rabbits resulted in inconsistent delivery profiles from the D-MNA and the Sponsor deemed the D-MNA unsuitable for use in the rabbit model. |
|||||||
|
Other (Pyrogenicity & Skin Irritation): SRC Study No. S15054 |
21-Dec-2017 |
New Zealand White rabbit 6-7 months old, 3M per group n = 15 |
50, 100, 200 µg/dose modified D-MNA gel + buffer, vehicle, LPS positive control (pyrogenicity), SLS positive control (dermal irritation) |
Days 1 and 8 |
Day 1: SC injection of gel for pyro.; Day 8: gel for irritation |
GLP. Day 1 - core body temperatures were measured at baseline and at post modified D-MNA gel administration at 30 min intervals until 4 hours, and then at 8 and 24 hours. Day 8 - Modified Draize scoring at baseline and at 1, 4, 24 and 48 hour post modified D-MNA gel administration. For the reference control (Group 5), animal body temperatures were above normal (104.8-107.7F/40.4-42.1C) for all animals during the first 4 hours after intravenously administered. |
No noteworthy changes in body temperature or skin irritation for test article. Severe skin irritation was observed on all the test sites (SLS) in group 5. |
Murine Local Lymph Node Assay
The purpose of this study (BRT Study No. 20170725) was to evaluate the sensitization potential of doxorubicin, the active component of D-MNA, when applied at 4 concentrations (25, 50, 100, 200 µg) to both mouse ears, once daily for 3 consecutive days, in the LLNA.
There were no clinical observations or signs of erythema in the vehicle group or in test article-treated animals. No meaningful body weight loss was observed in any of the control or treatment groups.
Treatment-group mean ear thickness values did not increase by 25% or more at any tested concentration of the test or control articles. Thus, primary irritation would not be expected to have affected the LLNA stimulation indices.
It was not possible to calculate a threshold positive response (EC3 potency) in the current study since all test article stimulation index values were below 3, thus, the test article containing D-MNA constituents (doxorubicin in DMSO, CMC and excipients) was not considered a sensitizer under the conditions of this study.
Irritation and Pyrogenicity Study in the New Zealand Rabbit
Experience in a pilot trial (SRC Study No. S15198) using this rabbit species with the dissolvable, tip-loaded microneedle array of doxorubicin indicated that the microneedle array was not suitable for the New Zealand white rabbit.
Consequently, SkinJect decided to test the pre-molding array formulation, i.e., the gel consisting of doxorubicin, carboxy methylcellulose, trehalose, citric acid, dibasic sodium phosphate, and deionized water, on the New Zealand rabbit in this GLP study (SRC Study No. S15054). This approach provided a method for testing all gel components for their pyrogenic and irritation potential. The objective of this study was to evaluate the test article (doxorubicin and excipients) for pyrogenicity following subcutaneous (SQ) injection, and for local skin irritation potential after topical dose administration of various dose concentrations on New Zealand White ("NZW") rabbits.
A total of 15 male NZW rabbits were randomized into one of five treatment groups, including a vehicle control (Group 1), three dose levels of test article (Groups 2-4), and a reference control (Group 5). This study was conducted in two phases as follows:
Pyrogenicity Phase: Pyrogenicity of the test article was evaluated at dose levels of 50, 100 and 200 μg (0.3 ml/animal). On dosing phase Day 1, the vehicle or test article formulations were administered via SQ injection to the scapular area of each animal (Groups 1-4). Group 5 animals were intravenously administered lipopolysaccharide (LPS, 0.01μg/ml) at 0.04 ml/kg and 4 ml/kg within ~4 hours. Body temperatures were recorded at baseline, and at ~30-minute intervals for the first 4 hours post-dose, and at 8 and 24 hours post-dose administration.
All animals had a normal body temperature (99.2-103.4 ºF/37.3-39.7 ºC) at baseline. After dose administration, all vehicle control and test animals body temperature appeared normal (ranged from 99.1 ºF/37.3 ºC to 103.9 ºF/39.9 ºC) within the observation period up to 24 hours, except for two measurements at 8 hour respectively for one vehicle animal (104.1°F /40.1°C) and one high dose animal (104.9°F /40.5°C). These two measurements were slightly above the normal range and considered an incidental finding. For the reference control (Group 5), animal body temperatures were above normal (104.8-107.7°F/40.4-42.1°C) for all animals during the first 4 hours after intravenously administered lipopolysaccharide (LPS, 0.01μg/ml) at 0.04 μg/kg.
Dermal Irritation Phase: Groups 1-4, all animals were dosed topically via 2 filter paper patches (2.5 cm x 2.5 cm) on naïve dorsal skin sites with a saline control patch (saturated with ~0.2 ml saline) and a 0.3 ml of vehicle (Group 1) or test formulation (Groups 2-4, 50, 100 or 200 μg/site) instilled patch. Prior to dosing, skin of all dose sites was abraded using adhesive tape. The patches were removed after 30 minutes. For the reference control (Group 5) animals, 2 saline control and 2 reference control patches (~0.2 ml/patch) were applied to the dose sites for 4 hours. Dose site skin was assessed at approximately 1, 4, 24 and 48 hours following patch removal for all groups.
All animals in groups 1 - 4 exhibited minimal-to-no dose-related erythema or edema. If erythema and edema were present, they were generally mild, with only a few observations of well-defined erythema. Severe skin irritation was observed on all the test sites (SLS) in group 5. These results demonstrate that the test article did not cause any pyrogenicity after subcutaneous injection or topical application at doses up to 200 μg/site.
14-Day Toxicity Study in the Yucatan Minipig
The objective of this study (SRC Study No. S15055) was to evaluate the local tissue tolerability, potential toxicity, skin irritation and systemic exposure after various dose levels delivered by D-MNA following three (3) topical dose administrations within two weeks on young Yucatan minipigs. The minipig data needs to be considered in the context of an unexpectedly high degree of dose variability. The variability in the minipig study was most likely the result of inconsistent delivery of doxorubicin from the microneedle array, possibly due to animal movement as the arrays were being applied.
Following an acclimation period, a total of 30 minipigs (15 males and 15 females) were randomized into one of five treatment groups. Groups of 3 males and 3 females were treated with a blank control array (Group 1), and three dose levels of D-MNA at 25, 50 and 200 µg/dose of doxorubicin (Groups 2 - 4), respectively. An IV DXR group, consisting of 3 males and 3 females, served as a reference control (Group 5). Dosing occurred on Days 1, 7 and 14 with either control array or test article (Groups 1-4), and Group 5 was dosed intravenously on these same study days. Each topical treatment lasted 30 minutes. Each animal receiving topical treatment (Groups 1 - 4) was observed for clinical signs and dose site reactions. Blood collections for toxicokinetic evaluation were conducted on Days 1 and 14 post dose administration (post-30 mins application for Groups 1-4) for all groups. Clinical pathology was conducted on all animals on Day 3 to look for acute effects, and again on Day 16 prior to necropsy. The animals were euthanized on Day 16 with designated tissues collection for histopathology. Study Day 1 corresponded to the first day of dose administration.
The histopathology findings showed that the D-MNA-treated animals exhibited no systemic effects and no organ toxicity. These findings are consistent with systemic exposure to doxorubicin being below the lower limit of quantitation.
Application of the D-MNAs to the minipig's skin produced several findings all related to cutaneous reactions. Test article-related macroscopic findings were present in the dose site (skin). Red discoloration of the epidermis of the dose site was identified in four animals, limited to Groups 3 and 4 (D-MNA mid and high dose, respectively). In two of the Group 4 female animals, the red discoloration correlated microscopically with serocellular crust, and additionally with dermis congestion in one of those animals. The other two animals (males) did not have a microscopic correlation. Abnormal surface (scabbing) of the epidermis of the dose site was observed in a Group 4 male animal and correlated microscopically with serocellular crust.
Hemorrhage of the right axillary region was observed in a single animal in Group 5 (intravenous Doxorubicin) and correlated microscopically to hemorrhage. It was believed to be related to blood collection or injection procedures.
Other macroscopic findings represented incidental background findings typical for this species, or else did not have a correlate.
Local cutaneous reactions were expected with application of the D-MNA to the minipig and similar reactions are likely to occur in human subjects receiving D-MNAs.
Clinical Development
University of Pittsburgh Experience
The primary objective of the Pittsburgh study was to evaluate the safety of escalating, low doses (25-200 µg) of doxorubicin delivered directly and specifically into cutaneous T-cell lymphoma lesions using the D-MNA. Secondary objectives included evaluations of the PK/PD of doxorubicin when delivered using the D-MNA; and evaluations of local, locoregional, and distant responses, biologic responses, and effects of treatment on the CTCL tumor microenvironment. The initial Phase 1 clinical trial incorporated a single-arm, placebo-controlled (within patient), open-label, accelerated dose escalation study design to determine the maximum tolerated dose ("MTD") (or effective dose) of doxorubicin; followed by an extended evaluation of safety and effectiveness at the determined MTD (or effective dose). The first cohort of 3 patients was treated with 25 µg of doxorubicin via MNA. Patients were treated once/week for 4-weeks, followed by a one-week break. No toxicities were observed at the 25-µg dose, and the original cohort, plus a new 3-patient cohort was escalated to the 50-µg dose. DLT, a cutaneous reaction, was observed in one patient at the 50-µg dose and the cohort was expanded to 2 additional patients, with no additional DLT reported. One patient in the 50-µg cohort exhibited a complete resolution of mycosis fungoides in response to D-MNA.
Dr. Falo and his colleagues have also reported on the safety of D-MNA in the treatment of mycosis fungoides, a common subtype of cutaneous T-cell lymphoma, from the CTCL trial. An initial cohort of 3 patients was treated with 25 µg of doxorubicin via MNA. Patients were treated once/week for 4-weeks, followed by a one-week break. No toxicities were observed at the 25 µg dose, and the original cohort, plus a new 3-patient cohort was escalated to the 50 µg dose. DLT was observed in one patient at the 50 µg dose and the cohort was expanded to 2 additional patients, with no additional DLT reported. One patient exhibited a complete resolution of mycosis fungoides in response to D-MNA (Akilov et al. 2018).
SkinJect Experience
Protocol SKNJCT-001 (Phase 1 Study)
Study Design: This study was designed as an open-label dose escalation trial of D-MNA in participants with BCC (subtype: superficial or nodular). The study followed a traditional 3+3 dose escalation design with 4 dose groups plus placebo to define a MTD by evaluating DLTs. Treatments consisted of one application administered weekly, three times over a two-week period. The goal of the dose escalation was to determine the MTD and assess lesion responses in the different dose groups to inform a decision on the doses to be tested in a subsequent Phase 2 study.
The study was composed of a screening visit, three treatment visits at one-week intervals over a two-week period, an end of treatment visit, and three follow-up visits. The total duration for study recruitment was completed in approximately five to seven months. Individual participant participation was approximately up to 11 weeks (four weeks screening + seven weeks from the first treatment to the final follow up visit).
Escalation followed a traditional 3+3 design. Specifically, in each dose group n=3 participants were treated. If no DLTs were observed, the study was escalated to the next dose level. If DLTs had been observed in 2 or more participants, then the MTD would have been exceeded. If one DLT had been observed, an additional three participants would have been added at the same dose level. If no DLTs had been observed in the additional three participants, the study would have escalated to the next dose level. If DLTs had been observed in one or more of the three additional participants, the MTD would have been exceeded. The first two dose groups, Placebo and 25 µg, screened and enrolled subjects concurrently in the study.
SkinJect hypothesized that treatment with D-MNA would result in tumor destruction and the induction of potent, immunogenic anti-tumor responses. Because MNAs enable this agent to be delivered at very low doses to a confined tumor microenvironment, the study sponsor expected only minimal, if any, systemic drug toxicity; thus, facilitating optimal local dose levels and durable clinical responses.
The study design also included a placebo group (placebo-MNA). Inclusion of placebo-MNA allowed the evaluation of two questions:
-
Tolerability: to assess if there was a cutaneous response to microneedle penetration that was independent of microneedle delivery of doxorubicin to the target tissue.
-
Efficacy: to assess if a placebo-containing array could stimulate a non-specific immune response in reaction to microneedle penetration of the skin, and compare to the response with the active compound doxorubicin delivered by the D-MNA.
Subject populations included adult males and females, 18+ years in general good health as assessed by the study's principal investigator. BCC (subtype: superficial or nodular) had to confirmed histologically by diagnostic shave biopsy at the screening visit. If previously confirmed, participants could only have diagnosed BCC via shave biopsy within 6 months of first study treatment. The disease had to be primary BCC (i.e., no previous treatment), and the lesion size was required to = 64 mm2 or 8 x 8 mm and = 169 mm2 or 13 x 13 mm, i.e., the entire lesion must be covered by 13 x 13 mm area of the array containing the microneedles. Laboratory values had to be within normal ranges.
Subjects were excluded from participation in this study if they had evidence of clinically significant, unstable medical conditions as assessed by the principal investigator; if they had an excisional biopsy performed on the lesion to be treated in this study; if they had recent therapy(ies) to the BCC treatment area; if they had recurrent BCC (previously treated) at the site presented for treatment; and if they previously demonstrated sensitivity to doxorubicin or carboxymethyl cellulose. Other reasons for exclusion included current active malignancies, metastatic disease, in other regions; pregnancy; and any other reason that the investigator deemed as prejudicial to the outcome of the study.
The investigational product is chemotherapeutic agent, doxorubicin (25 µg, 50 µg, 100 µg, or 200 µg) delivered to the basal layer of skin by a novel delivery system, a MNA. The delivery system is a square array 15 x 15 mm in dimension edge to edge. The dissolvable array of 400 microneedles is in a 13 x 13 mm area. The microneedles are 750 microns in length. Each MNA patch delivers 9.6 µL of drug product into the peri- epidermal space.
Conclusions: The Phase 1 study was designed as an open-label dose escalation trial of D-MNA in participants with BCC (subtype: superficial or nodular). The study followed a traditional 3+3 dose escalation design with 4 dose groups plus placebo to define a MTD by evaluating DLTs. Treatments consisted of one application administered weekly, three times over a two-week period. The goal of the dose escalation was to determine the MTD and assess lesion responses in the different dose groups to inform a decision on the doses to be tested in a subsequent Phase 2 study. Of the 13 subjects enrolled, all 13 subjects completed the study and were included in all analysis populations; no subjects discontinued the study prematurely. Most subjects (8 of 13) were male, all subjects were White, and all but one subject were Non- Hispanic/Latino. Age range across the 13 subjects was 31 to 94 years.
The primary study endpoint was the assessment of DLT through Visit 4 (21 days) as defined using the LSR grading scale. No subjects reached DLT at any treatment assessment.
At screening, both the site and central reader were in agreement for 7 of 13 subjects (5 were considered nodular and 2 superficial at screening); however, for 6 subjects, the site and central reader assessments differed. For one subject (01-014), the Central Reader found no BCC present in the screening biopsy. Consultants reviewing the study results stated that multiple reasons could possibly be attributable, including human error misreading at the site, confusion of BCC with certain benign follicular tumors, and the presence of BCCs with both nodular and superficial components.
At the end of study, three subjects (01-001, Placebo; 01-008, D-MNA 25 µg and 01- 011, D-MNA 50 µg) had differing results when Local/Site evaluation were compared to the Central Reader evaluation. In all three subjects, the Local/Site evaluation noted the presence of residual BCC compared to the Central Reader results which noted no residual BCC for all three subjects. It should be noted that the central reader was blinded to study treatment. In addition, another contributing factor to the noted differences may have been related to different slices of the tumor being evaluated by each of the readers; the local/site reader had the tissue sample obtained at the time of the excision, whereas the Central Reader tissue samples were sliced from the same block for each subject and stained several months later; the slides used in the Local/Site evaluation were not available for reading by the Central Reader.
For the secondary endpoint of BCC clinical response, evaluations were performed both at the local/site level as well as independently by a central reader. For the local/site assessment, complete lesion response was observed in one subject each for Placebo, D- MNA 25 µg, D-MNA 100 µg, and D-MNA 200 µg. For D-MNA 50 µg, no subjects were observed to have CR. For the central reader assessment, histopathologic assessment showed six subjects (one Placebo, two D-MNA 25 µg, one D-MNA 50 µg, one D-MNA 100 µg, and one D-MNA 200 µg) with no residual BCC. A "complete response" was considered the absence of BCC in the final excision at 4 weeks. For the Placebo subject (001-003) although it was assessed as a clinical responder according to the local site assessment, the local PI noted a new squamous cell carcinoma in situ (but no residual basal cell carcinoma) that was also confirmed as squamous cell carcinoma by the Central Reader assessment of the end of study excision. Consultants stated that it could be difficult to tell by skin examination alone if there was residual BCC, and that a minority of subjects do not have any residual BCC after having had a biopsy (possibly due in part to local post-procedural inflammatory response).
For the exploratory endpoint of quantification of doxorubicin released by the MNAs, doxorubicin delivery was confirmed, but across all dose groups it was observed that there was inconsistent doxorubicin deposition by the MNAs.
For the secondary endpoint of local tolerance of the MNA, at post-MNA application, assessments indicated that subjects had mild to moderate erythema restricted to the treatment area, at each visit with each dose level, including placebo. Flaking/scaling was minimal and isolated to the lesions. Crusting was generally absent or isolated. Swelling, vesiculation/pustulation, and erosion/ulceration were absent. Based on the proposed mechanism of action, some erythema evidencing an inflammatory reaction at the site of D-MNA application was to be expected.
For the secondary endpoint of pain assessment, for most subjects, no pain was noted. Some subjects experienced mild or moderate pain, generally at Visit 2 or Visit 3. At the Visit 4 End of Treatment assessment, no pain was noted for any subject.
Only two subjects reported a total of three adverse events ("AEs") in this study. All three AEs were considered mild in severity, and only one was considered probably related to study treatment mild application site pain that resolved the same day; this AE was associated with a low pain assessment scale score (1) at Visit 3. No deaths, serious adverse events, or AEs leading to treatment discontinuation were reported. No clinically significant abnormal findings were observed with regard to laboratory parameters, vital signs, ECGs, and physical examinations.
Protocol SKNJCT-003 (Phase 2 Study)
Study Design: The clinical study, SKNJCT-003, is designed to be a randomized, double-blinded, placebo-controlled (P-MNA), multi-center study enrolling up to 60 subjects presenting with nodular type BCC of the skin. The study will evaluate the efficacy of two dose levels of D-MNA compared to placebo in patients with nodular BCC. The participants will be randomized 1:1:1 to one of three groups: a placebo-controlled group receiving P-MNA, a low-dose group receiving 100μg of D-MNA, and a high-dose group receiving 200μg of D-MNA. The clinical design was submitted to the FDA in January 2024 to seek comments to revise and amend the IND and finalize the protocol.
Patents and Proprietary Information
License Agreement with the University of Pittsburgh
SkinJect entered into an exclusive license agreement with the University on April 26, 2016 (as amended, the "License Agreement"). The License Agreement was amended on February 26, 2020 and on April 23, 2024. We have now replaced SkinJect as the Licensee and have assumed all of the rights and responsibilities associated with the License Agreement.
The License Agreement covers products designed to deliver drugs and bioactive agents, such as, but not limited to doxorubicin, for the treatment of cancers and pre-cancerous lesions, but specifically excluding the treatment of in-transit melanoma. Such treatments may include, but are not limited to, the use of agents that stimulate an immune response, which is different from vaccines, where an immune response is provoked by presentation of an antigen (the "Field").
The term of the License Agreement runs until the expiration of the last claim of the Patent Rights listed in the License Agreement, which is projected to be November 6, 2035 and could be extended, unless terminated earlier (the "Term"). The University has the right to terminate the License Agreement if breaches are not cured within 30 days of our receipt of written notice thereof from the University or in certain insolvency-related situations or if we cease to carry out its business.
The License Agreement covers any product or part thereof or service which is (a) covered in whole or in part by an issued, unexpired or pending claim contained in the Patent Rights in the country in which any such product or part thereof is made, used or sold or in which any such service is used or sold; (b) manufactured by using a process or is employed to practice a process which is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Patent Rights in the country in which any such process that is included in Licensed Technology is used or in which such product or part thereof or service is used or sold; or (c) manufactured by or otherwise makes use of Know How (as defined below) (the "Licensed Technology").
The License Agreement also covers Know How that includes: (a) the University's IND Application 122488 for Microneedle Array (carboxymethylcellulose matrix) containing the active drug, doxorubicin for the treatment of cutaneous T-cell lymphoma, (b) experimental protocols, data, and any supporting materials relating to B16 Melanoma murine experiments comparing tumor growth over time for Microneedle Array -delivered chemo-immunotherapy for B16 melanoma, including control mice that did not receive any treatment and mice that were treated with doxorubicin incorporated into Microneedle Arrays, and (c) Response from the University for SkinJect's Know How Request provided April 29, 2016 and accompanying Batch Analysis documentation (the "Know How").
We have been granted an exclusive, worldwide license to make, have made, use and sell the Licensed Technology in the Field and to practice under the patent rights listed in the table below for the Term of the License. We have also been granted a non-exclusive worldwide license to practice under the Know How in the Field for the Term of the License.
The University has also granted to us an option to enter into a non-exclusive license in the Field to Future Intellectual Property Rights upon such terms and conditions as the parties may agree and which contain similar standard terms and conditions as contained hereunder to the extent not prohibited by law, regulation, or third-party obligations within sixty (60) days after University informs us that the clinical trial under the University's IND 122488 is closed and the final report for such clinical trial is completed ("Option Exercise"). Upon University's timely receipt of such written notice from us , the parties shall negotiate in good faith, which negotiations shall commence no later than sixty (60) days following Option Exercise and shall endeavor to enter into a definitive royalty-bearing license agreement as soon thereafter as reasonably possible. In furtherance of the foregoing, University has agreed to disclose from time to time at University's sole discretion to SkinJect Future Intellectual Property Rights until expiration of the option. Future Intellectual Property Rights are defined as specific Know How encompassed within the University's IND 122488 and/or deriving from studies conducted under such IND which the University owns or controls before or after the April 26, 2016.
The University and Carnegie Mellon University have retained a royalty-free, nonexclusive right to practice under the Patent Rights and to use the Licensed Technology for Non-Commercial Education and Research Purposes. Non-Commercial Education and Research Purposes are defined as the use of Patent Rights (including distribution of biological materials covered by the Patent Rights) in the Field for academic research or other not-for-profit scholarly purposes which are undertaken at a nonprofit or governmental institution that does not use the Patent Rights in the production or manufacture of products for sale or the performance of services for a fee. The license granted is subject to the rights of the U.S. government, if any, as set forth in 35 U.S.C. §200, et seq. The U.S. government may have acquired a nonexclusive, nontransferable, paid-up license to practice or have practiced for or on behalf of the United States the inventions described in the Patent Rights throughout the world. Pursuant to 35 U.S.C. §200, et seq. Licensed Technology produced for sale in the United States shall be substantially manufactured in the United States (unless a waiver under 35 U.S.C. §204 is granted by the appropriate U.S. government agencies).
We have the right to enter into sublicensing arrangements for the rights, privileges and licenses granted hereunder upon prior written approval of each sublicensee by University, except that sublicensee shall not have rights to sublicense. Such sublicense agreements shall include a royalty rate upon sublicense Net Sales in an amount at least equal to the rate set forth in Article 5.1(c). Rights of any sublicensee shall terminate upon termination of this Agreement.
We are obligated to pay annual maintenance fees, which are non-refundable, non-creditable, and not to be prorated against any other payment or royalties due, in the amount of $5,000 until the first Net Sales occurs. we are further obligated to pay 15.0% of any execution fees, maintenance fees, milestone fees and all other non-royalty payments received by us from any of our sublicensees a share of Non-Royalty Sublicense Income.
Royalties are payable in an amount equal to 3.0% of Net Sales payable each calendar quarter with a minimum annual royalty of $50,000 per calendar year, but only to the extent such minimum royalty is greater than the aggregate annual royalty.
The License Agreement contains six milestones listed below:
1. Establish validated analytical methods related to licensed technology.
2. Submit IND application to FDA relating to licensed technology.
3. Raise $2.5 million of capital form investors or strategic partners (or combination thereof) in support of development or commercializing the licensed technology.
4. Submit a completed report to FDA of a Phase 2 trial of licensed technology or foreign equivalent.
5. Submit a new drug application ("NDA") or foreign equivalent for a covered product under Licensed Technology.
6. First commercial sale of Licensed Technology within five years of submission of a NDA or foreign equivalent for a product covered under Licensed Technology.
The first four milestones have been achieved and noted as completed by the University on January 6th, 2022.
Our failure to perform or to fulfill on a timely basis any one of the milestones set forth above shall be grounds for university to terminate this Agreement and upon termination all rights and interest to the Licensed Technology, Patent Rights, Know How, and Future Intellectual Property shall revert to university. Notwithstanding the foregoing, for a single time, if one of the milestones defined above has not been achieved within the required timeframe, through no fault of ours, and following best efforts of ours to meet the milestone, we shall be deemed to have fulfilled the milestone requirement if we make a payment of $50,000. In such case, in addition to the payment required, we shall negotiate with the University in good faith a new date for attainment of such missed milestone. If we fail to meet the revised milestone date, the University may terminate the License Agreement and upon termination all rights and interest to the Licensed Technology shall revert to the University.
We are in compliance with the License Agreement (after giving effect to such waivers and amendments as have been granted or entered into). The time taken to reach future milestones is dependent on several factors, not all of which are controlled by us. Although there can be no assurance that it will do so, we expect the University will grant any necessary future extensions to milestone requirements commensurate with our progress with its clinical development plan.
The table below summarizes the patents covered by the License Agreement, each of which is a utility patent.
|
Country |
Title |
Application |
Filed |
Patent |
Priority |
Issue |
Projected |
Status |
Assignee(s) |
|
UNITED STATES |
DISSOLVABLE MICRONEEDLE ARRAYS FOR TRANSDERMAL DELIVERY TO HUMAN SKIN |
12/910,516 |
10/22/2010 |
8,834,423 |
10/23/2009 |
9/16/2014 |
6/14/2031 |
Issued |
University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
|
UNITED STATES |
DISSOLVABLE MICRONEEDLE ARRAYS FOR TRANSDERMAL DELIVERY TO HUMAN SKIN |
16/861,112 |
4/28/2020 |
11,744,927 |
10/23/2009 |
9/5/2023
|
10/22/2030 |
Issued |
University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
|
UNITED STATES |
TIP-LOADED MICRONEEDLE ARRAYS FOR TRANSDERMAL INSERTION |
14/398,375 |
10/31/2014 |
9,944,019 |
5/1/2012 |
4/17/2018 |
7/5/2033 |
Issued |
University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
|
CANADA |
TIP-LOADED MICRONEEDLE ARRAYS FOR TRANSDERMAL INSERTION |
2871770 |
5/1/2013 |
2871770 |
5/1/2012 |
7/7/2020 |
5/1/2033 |
Issued |
University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
|
MEXICO |
TIP-LOADED MICRONEEDLE ARRAYS FOR TRANSDERMAL INSERTION |
MX/a/2014/013234 |
5/1/2013 |
370579
|
5/1/2012 |
12/17/2019 |
5/1/2033 |
Issued |
University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
|
AUSTRALIA |
TIP-LOADED MICRONEEDLE ARRAYS FOR TRANSDERMAL INSERTION |
2013256348 |
5/1/2013 |
2013256348 |
5/1/2012 |
9/28/2017 |
5/1/2033 |
Issued |
University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
|
INDIA |
TIP-LOADED MICRONEEDLE ARRAYS FOR TRANSDERMAL INSERTION |
10161/DELNP/2014 |
5/1/2013 |
|
5/1/2012 |
|
5/1/2033 |
Published |
University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
|
Country |
Title |
Application |
Filed |
Patent |
Priority |
Issue |
Projected |
Status |
Assignee(s) |
|
UNITED STATES |
TIP-LOADED MICRONEEDLE ARRAYS FOR TRANSDERMAL INSERTION |
15/936,228 |
3/26/2018 |
|
5/1/2020 |
|
5/1/2033 |
Published |
University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
|
EUROPEAN PATENT CONVENT |
TIP-LOADED MICRONEEDLE ARRAYS FOR TRANSDERMAL INSERTION |
22192026.7 |
5/1/2013 |
|
5/1/2012 |
|
5/1/2033 |
Pending |
University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
|
JAPAN |
TIP-LOADED MICRONEEDLE ARRAYS FOR TRANSDERMAL INSERTION |
2017-078229 |
5/1/2013 |
6712963 |
5/1/2012 |
6/4/2020 |
5/1/2033 |
Issued |
University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
|
CANADA |
TIP-LOADED MICRONEEDLE ARRAYS FOR TRANSDERMAL INSERTION |
3077452 |
5/1/2013 |
3077452
|
5/1/2012 |
8/9/2022 |
5/1/2033 |
Issued |
University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
|
MEXICO |
TIP-LOADED MICRONEEDLE ARRAYS FOR TRANSDERMAL INSERTION |
MX/a/2018/009573 |
5/1/2013 |
|
5/1/2012 |
|
5/1/2033 |
Pending |
University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
|
AUSTRALIA |
TIP-LOADED MICRONEEDLE ARRAYS FOR TRANSDERMAL INSERTION |
2017225155 |
5/1/2013 |
2017225155 |
5/1/2012 |
9/19/2019 |
5/1/2033 |
Issued |
University Of Pittsburgh of The Commonwealth System of Higher Education/ Carnegie Mellon University |
|
Country |
Title |
Application |
Filed |
Patent |
Priority |
Issue |
Projected |
Status |
Assignee(s) |
|
CHINA |
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MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information relating to our directors and executive officers as of the date of this prospectus. Directors of Medicus hold office for a one year term and, unless re-elected, will retire from office at the end of the next annual meeting of the shareholders of Medicus. Unless otherwise stated, the business address of our executive officers and directors is our office address at Suite 3400 - 100 King St W, Toronto, ON M5X 1A4, Canada.
|
Name and Province or State |
Position with |
Number of Common Shares |
||
|
Dr. Larry Kaiser(1) (5) |
Director |
--- |
||
|
Robert J. Ciaruffoli(1) (2) (3) |
Director |
25,000 |
||
|
Frank Lavelle(1) (2) (4) |
Director |
--- |
||
|
William L. Ashton(2) (3) (4) (5) |
Director |
2,500 |
||
|
Barry Fishman (4) (5) |
Director |
--- |
||
|
Dr. Raza Bokhari (3) |
Director & Executive Chairman and Chief Executive Officer |
1,432,612 |
||
|
Carolyn Bonner |
President |
25,000 |
||
|
James Quinlan |
Chief Financial Officer |
159,051 |
||
|
Erica Monaco |
Chief Operating Officer |
--- |
||
|
Dr. Edward Brennan |
Chief Medical Officer |
125,000 |
Notes:
(1) Member of the Compensation Committee. Mr. Lavelle is the Chair.
(2) Member of the Audit Committee. Mr. Ciaruffoli is the Chair.
(3) Member of the Corporate Disclosure Committee. Mr. Ciaruffoli is the Chair.
(4) Member of the Governance Committee. Mr. Fishman is the Chair.
(5) Member of the Nominating Committee. Dr. Kaiser is the Chair.
Set forth below is a description of the background of the directors and executive officers of Medicus.
Dr. Raza Bokhari, Executive Chairman and Chief Executive Officer and Director (Age 57)
A recipient of Philadelphia Business Journal's "40 under 40" award, Dr. Raza Bokhari, a physician turned serial entrepreneur, has a demonstrated successful track record in aggregating and accelerating life sciences, healthcare services and Pharmaceutical R&D companies.
He previously served as Executive Chairman and CEO of FSD Pharma (Nasdaq: HUGE), where his strategies successfully pivoted the company out of medicinal cannabis and into a clinical stage pharmaceutical R&D, a transition marked by a NASDAQ listing in January 2020, and raising nearly $100M institutional capital to fuel growth and expansion.
Dr. Bokhari currently also serves as the managing partner of RBx Capital, LP and as the Chairman of the Board of Parkway clinical Laboratories (PCL), a fifty-year-old College of American Pathologist (CAP) accredited, CLIA certified in-vitro diagnostic laboratory.
In addition to his corporate roles, Dr. Bokhari serves as the Vice Chairman of the World Affairs Council of Philadelphia. He formerly served on the Board of Temple University's Fox School of Business and Management as Chairman of the Executive Advisory Committee and was a Trustee of the esteemed Franklin Institute and Foreign Policy Research Institute.
Dr. Bokhari, through his family foundation, believes in giving back and investing in the community. In recognition of a $1 million gift, he made to his alma mater, Temple University, its Fox Business School named the Innovation & Entrepreneurship Institute Suite in his honor. The school acknowledged Dr. Bokhari in 2018 by naming him a Centennial Honoree, a special collection of entrepreneurs, visionaries, and disruptors who helped shape the Fox School and the business world since 1918. More information on Dr. Bokhari, is available at www.Razabokhari.com, which website does not form a part of and is not incorporated by reference into this prospectus.
Dr. Bokhari has a Doctor of Medicine degree from the University of Punjab, Rawalpindi Medical College, and an Executive MBA from Temple University, Fox School of Business & Management.
Dr. Larry Kaiser, Director (Age 71)
Dr. Kaiser is currently Managing Director with the Healthcare Industry Group at Alvarez and Marsal, a leading global professional services firm. Most recently, Dr. Kaiser was the President and CEO of the $2.2 billion Temple University Health System, Dean of Temple University's Lewis Katz School of Medicine, and Senior Executive Vice President for Health Sciences at Temple University. Among his many accomplishments at Temple was the acquisition of the Fox Chase NCI-designated Comprehensive Cancer Center, the development of a number of programs, including the number one lung transplant program in the country, a nationally recognized program in pulmonary hypertension, in addition to growing programs in cardiovascular surgery, thoracic surgery, neurosurgery, and orthopedic surgery. Before joining Temple University in 2011, Dr. Kaiser served as the President of the University of Texas Health Science Center at Houston, the largest of six health-related campuses at the University of Texas.
Dr. Kaiser graduated AOA (Alpha Omega Alpha Honor Medical Fraternity) from the Tulane University School of Medicine in 1977 and completed his residency in general surgery as well as a fellowship in surgical oncology at the University of California, Los Angeles. He then completed a residency in cardiovascular and thoracic surgery at the University of Toronto. Following that, he held positions as attending thoracic surgeon at Memorial Sloan-Kettering Cancer Center and Assistant Professor of Surgery at Cornell University Medical College (both New York City) and subsequently as Associate Professor (with tenure) at the Washington University School of Medicine (St. Louis). At the University of Pennsylvania, Dr. Kaiser held a variety of positions, including chief of general thoracic surgery, founder and director of the university's lung transplantation program, director of its Center for Lung Cancers and Related Disorders, and co-director of the Thoracic Oncology Laboratory. In 2001, following a national search, he was named the John Rhea Barton Professor and Chair of the Department of Surgery as well as Surgeon in Chief for the University of Pennsylvania Health System. In 1997, Dr. Kaiser was named as the first recipient of the Eldridge Eliason Professorship of Surgery endowment at the Perelman School of Medicine at the University of Pennsylvania.
Robert J. Ciaruffoli, Director (Age 72)
Robert J. Ciaruffoli is a Co-Founder and Chairman of Broad Street Angels, a 100-member Philadelphia-based angel investor network which invests in start-up entrepreneurial businesses with high growth potential. Broad Street Angels is the largest angel investor network in the Philadelphia region.
Mr. Ciaruffoli is a CPA and served as the Chairman and CEO of the Parente Beard/Baker Tilly accounting and advisory firm. During his tenure as chairman and CEO, he and his team transitioned the firm from a Pennsylvania practice to a multi-state super-regional firm. In 2014, he orchestrated a merger of the Parente Beard and Baker Tilly Virchow Krause firms to create the 12th largest U.S. accounting and advisory firm. Mr. Ciaruffoli also served on the board of directors and executive committee of Baker Tilly International, the 8th largest global accounting network. During his tenure on the board and the executive committee, Baker Tilly International grew from an unranked network to the eighth largest global accounting network.
Throughout his career, Mr. Ciaruffoli has served on numerous for-profit and not-for-profit boards. Presently, he is a board member of Ben Franklin Technology Partners. He was also the past chairman of the Pennsylvania State Board of Accountancy.
Mr. Ciaruffoli holds a Bachelor of Science in Accounting from Kings College, Wilkes-Barre, Pennsylvania and has proudly served in the U.S. Marine Corps (1970 - 1972).
Frank Lavelle, Director (Age 74)
For the past 40 years, Mr. Lavelle has been a President and Chief Executive Officer of global and multinational organizations focused on high-value data, analytics, technology solutions, and actionable insights for healthcare and life sciences manufacturers, payers, and providers. Mr. Lavelle has also brought technology solutions to public health, education, and the public sector over his career.
Mr. Lavelle currently owns and operates F W Lavelle Consulting LLC providing advisory services to healthcare and life sciences manufacturers with a primary focus on pharmaceutical development and public health.
During his career, Mr. Lavelle was President and Chief Executive Officer of Siemens Health Solutions, one of the world's largest suppliers to the healthcare industry; Chief Executive Officer and director of Symphony Health Solutions which gave deep insight into the pharmaceutical market tracking drug development and use on over 280 million patients and 65% of all specialty drug activity; board member and advisor to Symphony Performance Health working with accountable health organizations, direct contracting entities, and health systems to improve health systems costs with analytics into the performance of their provider network; President of MedQuist the world's largest provider of voice-to-coding solutions for healthcare, dictation, and speech recognition software. In addition, Mr. Lavelle was President and Chief Executive Officer of SunGard Public Sector and Education specializing in software solutions for cities and public schools which cover public safety, public administration, and public education (K-12) touching 150 million citizens and 17.5 million students.
Mr. Lavelle received his B.A. in Marketing from Pennsylvania State University.
William L. Ashton, Director (Age 73)
William Ashton is a former Fortune 100 senior executive with over 35 years' experience in the biotechnology and pharmaceutical business. Mr. Ashton retired from a successful career at Amgen Inc. where he served in various positions including Vice President of U.S. Sales, Vice President/General Manager of the Corporate Accounts, and Vice President of Government and Commercial Affairs where he was responsible for working with the FDA, and Centers for Medicare and Medicaid Services and Advocacy groups.
He previously worked for Boehringer-Ingelheim and Warner Lambert Pharmaceuticals.
Mr. Ashton is the President at Harrison Consulting Group, LLC, a privately held biopharmaceutical/ healthcare consulting firm with expertise in commercialization, payer strategy, and reimbursement.
He currently serves on the board of three publicly traded pharmaceutical companies, Spectrum Oncology, where he has been Chairman of the Board since June of 2019, Baudax Bio, and Societal CDMO. He previously served on the boards of Sucampo Pharmaceuticals and Galena Bio Pharma.
In addition, he has served on the boards of the National Osteoporosis Foundation, Friends of the National Library of Medicine, and is a Commissioner on the Medical Representatives National Certification Commission.
Following his extensive pharmaceutical career, Mr. Ashton was the Founding Dean and assistant professor at the Mayes College of Healthcare Business and Policy at the University of the Sciences of Philadelphia (now St. Joseph University).
Mr. Ashton holds a B.S. in Education from the University of California of Pennsylvania, (now Penn Western University) and a M.A. in Education from the University of Pittsburgh.
Barry Fishman, Director (Age 67)
Barry Fishman has almost 25 years of experience as an entrepreneurial business leader, most recently as CEO of VIVO Cannabis Inc. Prior to joining VIVO, Mr. Fishman served as CEO of international specialty pharmaceutical company Merus Labs, through its 2017 acquisition by Norgine M.V. He also previously served as CEO of Teva Canada, a major affiliate of the world's largest generic drug-maker and began his pharmaceutical career at Eli Lilly Canada, where he served as Vice President of Marketing. Mr. Fishman has also recently served as an independent director on a number of high-profile boards, including Aurora Cannabis Inc. and Canopy Growth Corporation. Mr. Fishman graduated from McGill University with a concentration in finance and went on to become a CPA while working for Deloitte in Southern California.
Carolyn Bonner, President (Age 40)
Carolyn Bonner until recently was the President & CEO of Parkway Clinical Laboratories, a College of American pathologist (CAP), accredited diagnostic company, serving healthcare providers across the United States.
Ms. Bonner was the Director of Corporate Development at Building Beyond BRIC Investment Fund where she was extensively involved in fundraising, marketing, and assisting with back office operations from May 2009 to Dec 2011.
Previously Ms. Bonner was the Director of Business Development at Parkway Clinical Laboratories ("PCL"), where she delivered client guided customization of PCL services and creative corporate partnerships. Carolyn also simultaneously served as Director of Corporate Development for Rosetta Genomics, a publicly traded Israeli biotech company, the parent company of PCL, from July 2008 to May 2009.
Ms. Bonner started her career in 2006 as a sales executive at Lakewood Pathology (now called PLUS Diagnostics), which is owned and operated by Water Street Healthcare Partners, a Chicago based private equity fund. Ms. Bonner has a B.A. focused in marketing from West Chester University.
James Quinlan, Chief Financial Officer (Age 60)
Jim Quinlan is a Certified Public Accountant, Certified Financial Planner, Chartered Financial Consultant and has spent his career in financial services. He has been President of Trinity Financial Advisors, Smart Financial Advisors and Beneficial Advisors as well as a Partner at both Smart Business Advisory and Consulting and Wipfli, LLP. While at Wipfli he was the U.S. Mid Atlantic regional leader for both Tax and Wealth management services.
Mr. Quinlan has been recognized in the Philadelphia region as a recipient of the 40 under 40 award and is very active in the community. His past board involvement includes acting as President of the Catholic Charities Appeal for the Archdiocese of Philadelphia, and Development Chair for the Archbishop John Carroll High School Board.
Mr. Quinlan has an MBA from Villanova University and a BS degree from Bucknell University.
Erica Monaco, Chief Operating Officer (Age 39)
Ms. Monaco is an accomplished C-suite professional with a successful track record as a leader in the pharmaceutical industry.
She has spent the last decade in the dermatology sector with an extensive track record of building start-up operations, accelerating change, and driving process improvement. Mostly recently, Ms. Monaco was the CEO of Biofrontera Inc. (NSDQ: BFRI). In her role as the CEO of Biofrontera, where she joined as "employee #2", Erica grew a pre-commercial organization from FDA approval through market introduction and commercial launch, posting a revenue growth at a CAGR over 80% and completing an accretive M&A transaction. Under her watch Biofrontera completed a successful initial public offering listing on NASDAQ in 2021 and follow on equity investment rounds in excess of $60M.
Ms. Monaco holds a Master of Accounting degree from the Isenberg School of Management at the University of Massachusetts, Amherst and holds an active CPA license.
Dr. Edward Brennan, Chief Medical Officer (Age 64)
Dr. Brennan has more than 25 years of experience in leadership roles at major pharmaceutical companies and clinical research organizations. He is an accomplished biopharmaceutical executive with a proven track record in FDA submissions and drug development.
Dr. Brennan has extensive experience in all phases of clinical development across multiple therapeutic areas. As a Medical Director with Wyeth-Ayerst Research and GlaxoSmithKline, he led teams through ten IND applications and advanced multiple compounds from pre-candidate selection (proof of concept) through clinical trial management and approval. At GSK, he was also responsible for coordinating all clinical activities for external partners within its Center of Excellence in External Drug Discovery. Dr. Brennan next founded IndiPharm, a full-service global CRO that was eventually acquired by private equity company, Velocity Fund Partners.
Dr. Brennan received his undergraduate Bachelor of Science Degree in Pharmacy from the Philadelphia College of Pharmacy and Science. He went on to study Medicine at the Royal College of Surgeons in Ireland before receiving his medical degree from the Temple University School of Medicine.
Penalties, Sanctions, Cease Trade Orders or Bankruptcies
Penalties or Sanctions
To our knowledge, no director or executive officer, or shareholder holding a sufficient number of our securities to materially affect the control of us, has been subject to: (i) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or (ii) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.
Individual Bankruptcies
To our knowledge, no director or executive officer, or shareholder holding a sufficient number of our securities to materially affect the control of us, has, within the ten years prior to the date of this prospectus, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold his or her assets.
Corporate Cease Trade Orders and Bankruptcies
To our knowledge, no director or executive officer, or shareholder holding a sufficient number of our securities to materially affect the control of us, is, as at the date of this prospectus, or has been within the ten years prior to the date of this prospectus: (a) a director, chief executive officer or chief financial officer of any company that was subject to an order that was issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer; (b) was subject to an order that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer; or (c) a director or executive officer of any company that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets. For the purposes of this paragraph, "order" means a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation, in each case, that was in effect for a period of more than 30 consecutive days.
Conflicts of Interest
To the best of our knowledge, except as disclosed elsewhere in this prospectus, we are not aware of any existing or potential material conflicts of interest between us and any of our directors or officers as of the date hereof. However, certain of our directors and officers are, or may become, directors or officers of other companies with businesses, which may conflict with its business. Accordingly, conflicts of interest may arise which could influence these individuals in evaluating possible acquisitions or in generally acting on our behalf. See also "Risk Factors."
Pursuant to the OBCA, our directors and officers are required to act honestly and in good faith with a view to act in our best interests. Generally, as a matter of practice, directors who have disclosed a material interest in any contract or transaction that the Board is considering will not take part in any board discussion respecting that contract or transaction. If on occasion such directors do participate in the discussions, they will refrain from voting on any matters relating to matters in which they have disclosed a material interest. In appropriate cases, we will establish a special committee of independent directors to review a matter in which directors or officers may have a conflict.
Corporate Governance
For as long as we are a foreign private issuer, we have the option to follow certain home country corporate governance practices rather than those of the U.S. Exchange, provided that we disclose the requirements we are not following and describe the home country practices we are following. We intend to rely on this "foreign private issuer exemption" with respect to the following for so long as we maintain our foreign private issuer status:
-
The U.S. Exchange requires that the quorum for any meeting of holders of common shares of a listed company should not be less than 33 1/3 of the outstanding common shares. Our bylaws provide the quorum for the transaction of business at a meeting of shareholders is at least two voting persons holding or representing, in the aggregate, not less than 5% of the issued and outstanding shares of the applicable class and we intend to follow our bylaws rather than the U.S. Exchange requirements in this regard.
-
The U.S. Exchange requires shareholder approval for equity compensation plans and material revisions thereto, private placements to related parties and issuances of common shares, or of securities convertible into or exercisable for common shares of 20% or more of the outstanding voting power. As a foreign private issuer, we may and will approve such actions in accordance with applicable rules and regulations in Canada.
-
The U.S. Exchange requires that a listed company that is not a limited partnership to solicit proxies and provide proxy statements for all meetings of shareholders, and also provide copies of such proxy solicitation materials to the U.S. Exchange. We are a "foreign private issuer" as defined in Rule 3b-4 under the Exchange Act, and our equity securities are accordingly exempt from the proxy rules set forth in Sections 14(a), 14(b), 14(c) and 14(f) of the Exchange Act. We solicit proxies in accordance with applicable rules and regulations in Canada.
Except as stated above, we intend to comply with the rules generally applicable to U.S. domestic companies listed on the U.S. Exchange. We may in the future decide to use other foreign private issuer exemptions with respect to some of the other listing requirements or, if we are no longer a foreign private issuer, be required to comply with all the requirements of the U.S. Exchange applicable to U.S. domestic issuers. Following our home country governance practices, as opposed to the requirements that would otherwise apply to a company listed on the U.S. Exchange, may provide less protection than is accorded to investors under listing requirements applicable to U.S. domestic issuers.
The Canadian securities authorities have issued corporate governance guidelines pursuant to National Policy 58-201 Corporate Governance Guidelines (the "Corporate Governance Guidelines"), together with certain related disclosure requirements pursuant to National Instrument 58-101- Disclosure of Corporate Governance Practices ("NI 58-101"). The Corporate Governance Guidelines are recommended as "best practices" for issuers to follow. We recognize that good corporate governance plays an important role in our overall success and in enhancing shareholder value and, accordingly, we have adopted, or will be adopting in connection with the consummation of this offering, certain corporate governance policies and practices which reflect our consideration of the recommended Corporate Governance Guidelines. The disclosure set out below includes disclosure required by NI 58-101 describing our approach to corporate governance in relation to the Corporate Governance Guidelines.
Composition of Board of Directors
Our board of directors (the "Board") is responsible for the general supervision of the management of our business and affairs with the objective of enhancing shareholder value. The Board discharges its responsibilities directly and through its committees.
Our board consists of six directors: Dr. Larry Kaiser, Robert J. Ciaruffoli, Frank Lavelle, William L. Ashton, Barry Fishman and Dr. Raza Bokhari. Dr. Bokhari is the Chairman of the Board. Robert J. Ciaruffoli acts as independent lead director and will assume the duties of the Chairman as and when required to address any actual or potential conflicts of interest.
Our articles provide that the number of directors may be between 1 and 15. The number of directors may be increased or decreased upon approval of the shareholders or, in certain circumstances and subject to our articles, by a majority of the directors. Our directors are elected at each annual general meeting of our shareholders and serve until the next annual meeting of shareholders or until their successors are elected or appointed unless their positions are earlier vacated.
Director Term Limits and Other Mechanisms of Board Renewal
Our Board has not adopted director term limits, a retirement policy for its directors or other automatic mechanisms of board renewal. Our Board will hold office for a one year term and, unless re-elected, will retire from office at the end of the next annual meeting of the shareholders of Medicus.
Director Independence
Our Board has determined that five members of our Board are "independent," as defined under the U.S. Exchange rules and for purposes of Canadian securities laws and therefore, a majority of the directors on our Board are independent. Dr. Bokhari is not considered independent by virtue of his management position.
For purposes of the U.S. Exchange rules, an independent director means a person other than an executive officer or employee of the company or any other individual having a relationship which, in the opinion of our Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, subject to certain additional limitations. A director is considered to be independent for the purposes of Canadian securities laws if the director has no direct or indirect material relationship to the company. A material relationship is a relationship that could, in the view of the Board, be reasonably expected to interfere with the exercise of a director's independent judgment. Certain individuals, such as our employees and executive officers, are deemed by Canadian securities laws to have material relationships with us.
We will take steps to ensure that adequate structures and processes will be in place following the consummation of this offering to permit our Board to function independently of management, including for purposes of encouraging an objective process for nominating directors and determining executive compensation.
Directorships
Some of our directors serve on the boards of directors of other reporting issuers (or the equivalent) in Canada or foreign jurisdictions. The following table lists our directors who serve on boards of directors of other reporting issuers (or the equivalent) and the identities of such reporting issuers (or the equivalent).
|
Name of Director |
Reporting Issuer (or the equivalent) |
|
Barry Fishman |
Gryphon Digital Mining, Inc. |
The Board has determined that these directorships will not adversely impact the effectiveness of these directors on the Board or create any potential for conflicts of interest. However, certain of our directors are, or may become, directors, officers, or shareholders of other companies with businesses which may conflict with our business. See also "Risk Factors."
Meetings of Directors
Our Board holds regularly scheduled meetings as well as ad hoc meetings from time to time. The independent members of our Board will also meet, as required, without the non-independent directors and members of management before or after each regularly scheduled board meeting.
Board of Directors' Charter
The Board has adopted a written mandate. The primary mandate of the Board is supervision of the senior management of the business, the going concern and general affairs of the Company. The Board discharges certain of its responsibilities through delegation to its committees as more particularly set out in committee mandates.
Position Descriptions
The Board has adopted a written position description for the lead independent director, which position is currently held by Robert J. Ciaruffoli, as well as a written position description for individual directors.
The Board does not intend on adopting written position descriptions for the Chief Executive Officer ("CEO"), other than as described in the CEO's employment contract, or the committee chairs on the basis that the roles are well understood by all of the directors. In general, the roles of the Board and committee chairs are to ensure that the Mandate of the Board or the mandate of a committee, as set out in their respective charters, are carried out in full.
With respect to the chairs of the committees, the Board has determined that their responsibilities include providing leadership to the applicable committee to carry out the committee's mandate as set out in a charter or through regulatory requirements and enhancing the committee's effectiveness through facilitating the committee's interaction with management, the Board and other committees of the Board and reporting as appropriate to the Board with respect to the committee's work.
With respect to the CEO, the CEO is responsible for our overall leadership and management in accordance with the strategies, policies and mandates established by the Board from time to time, and reports to the Board regarding our management and operations including the progress or deviations, if any, from the strategic plans set by the Board.
Orientation and Continuing Education
The Governance Committee, in conjunction with the Chair of the Board and the CEO, is responsible for ensuring that new directors are provided with an orientation program. It is not anticipated that we will adopt any formal policies with respect to the orientation of new directors, nor is it anticipated to provide continuing education for the directors. Formal policies with respect to director orientation and education will be implemented as and when warranted by growth of our operations.
Ethical Business Conduct
The Board has adopted a written code of conduct and ethics for its directors, officers, employees, contractors and consultants (the "Code"). The Board will be responsible for monitoring compliance with the Code. The Board has also adopted a whistleblower policy.
The Board will take appropriate measures to exercise independent judgment in considering transactions and agreements in respect of which a director or executive officer may have a material interest. Where appropriate, directors will abstain from portions of board or committee meetings to allow independent discussion of points in issue.
Conflicts of Interest
When faced with a conflict, it is required that business judgment of responsible persons, uninfluenced by considerations other than our best interests, will be exercised in compliance with the guidelines set out in the Code. Pursuant to the OBCA, any of our officers or directors with a conflict of interest must disclose the nature and extent of such conflict to the Board and recuse themselves from a matter that materially conflicts with that individual's duty as one of our directors or senior officers.
Protection and Proper Use of Corporate Assets, Information and Opportunities
Confidential information is not to be used for any purposes other than ours. This requirement of confidentiality extends beyond the duty not to discuss private information, whether about us and/or our management and also applies to any of our assets, including trade secrets, patient, supplier or customer lists, business plans, computer software, company records and other proprietary information. The Code provides for certain specific guidelines around the duty of confidentiality of our directors, officers, employees, contractors and consultants.
In the situation of contracts with third parties such as suppliers and service providers, management is to share only that information which is needed to satisfy the conditions of the contract and only to those individuals who need to know.
The duty of confidentiality applies to all directors, officers, employees, contractors and consultants even after leaving their position with us, regardless of the reason for departing.
Compliance with Laws, Rules, and Regulations
It is required that we are in compliance with all legislation applicable to our business operations, including but not restricted to the federal and provincial laws of Canada, and any other applicable laws in jurisdictions where the company operates.
All Board members and employees have a duty to know, understand and comply with any specific legislation pertaining to our business and any legislation applicable to their duties and responsibilities.
The Code provides guidelines surrounding, among other items, compliance with applicable laws, conflicts of interest, certain opportunities, confidentiality and disclosure, employment practices, and use of our property and resources.
Insider Trading Policy
The Board has adopted an insider trading policy to set forth basic guidelines for trading in our securities and to preserve our confidential information so as to avoid any situation that might have the potential to damage our reputation, or which could constitute a violation of applicable securities law by our officers, directors, or employees. Under this policy, "insiders" (i.e., officers, members of the Board and other individuals having access to material non-public information) are prohibited from trading in common shares and other securities on the basis of such material non-public information until after the information has been disclosed to the public. The obligation not to trade on inside information applies not only to our insiders, but also to persons who obtain such information from insiders and use it to their advantage. Thus, liability may be imposed upon us, our insiders and also outsiders who are the source of leaks of material information not yet disclosed to the public and the leaks coincide with purchases or sales of our securities (i) by such insiders or outsiders, (ii) by the us, or (iii) by "tippees" (including relatives, friends, investment analysts, etc.).
We have established scheduled "blackout periods" prohibiting sales or purchases by our directors and officers, and any other employee, independent contractor, or consultant of the Company who receives notice from our Chief Financial Officer that they are designated blacked-out employees in respect of a given period prior to the release of financial results which continue until two business days after the time such information has been released to the public and which begin, (i) in the case of interim period financial results, ten business days prior to the end of the fiscal quarter; and (ii) in the case of annual financial results, one calendar month after the end of the annual period. From time to time due to specific or anticipated events, we may feel it necessary to issue an unscheduled blackout period for a specific or indefinite period covering insiders or specific employees or groups.
Diversity Policy
The Board has adopted a written diversity policy relating to the identification and nomination of directors or members of senior management that are women, Indigenous peoples (First Nations, Inuit, and Metis), persons with disabilities or members of other racial, ethnic and/or visible minorities (collectively, "Designated Groups"). The Board and the Nominating Committee generally identifies, evaluates, and recommends candidates to become members of the Board or members of senior management with the goal of creating a Board and members of the senior management team that, as a whole, consists of individuals who possess extensive knowledge and competencies, diverse points of view, and relevant expertise, provide balance in terms of the knowledge and competencies of and represent all genders, various ages, and geographic and ethnic diversity, religious belief, cultural background, economic circumstance, human capacity, sexual orientation, as well as a broad range of business and educational experience, professional expertise, personal skills and perspectives The diversity policy identifies specific targets in respect of appointing persons from Designated Groups to the Board and in respect of executive officer appointments.
Committees of our Board of Directors
The Board may establish such other committees as it determines to be appropriate. Each permanent committee will have a mandate that is approved by the Board setting out the responsibilities of, and the extent of the powers delegated to, such committee by the Board.
Assessment of Directors, the Board and Board Committees
The Board is responsible for assessing its own mandate and the effectiveness in fulfilling its mandate and assesses the mandate and effectiveness of fulfilling each of the other committees (considering, among other things, the recommendation of the applicable committee) from time to time and at least annually.
Audit Committee
Composition of Audit Committee
Our audit committee is currently comprised of three members, including Robert J. Ciaruffoli, Frank Lavelle and Barry Fishman. Each member of our audit committee is a non-employee member of our Board. In addition, each member of our audit committee is financially literate, as required by the U.S. Exchange rules and Canadian securities laws. All of the members of our audit committee are "independent" members of our Board, as required by the U.S. Exchange rules, Rule 10A-3 of the Exchange Act and Canadian securities laws.
Relevant Education and Experience
The education and related experience of each of the members of the Audit Committee that is relevant to the performance of his responsibilities as a member of the Audit Committee is described below.
Robert J. Ciaruffoli
Robert J. Ciaruffoli has served as a member of our audit committee since 2023. Mr. Ciaruffoli holds a Bachelor of Science in Accounting from Kings College, Wilkes-Barre, Pennsylvania. Mr. Ciaruffoli is a CPA and served as the Chairman and CEO of the Parente Beard/Baker Tilly accounting and advisory firm. Mr. Ciaruffoli also served on the Board and executive committee of Baker Tilly International. Throughout his career, Mr. Ciaruffoli has served on numerous for-profit and not-for-profit boards. Presently, he is a board member of Ben Franklin Technology Partners and the Co-founder and Chairman of Broad Street Angels, an angel investor network. He was also the past chairman of the Pennsylvania State Board of Accountancy.
Frank Lavelle
Frank Lavelle has served as a member of our audit committee since 2023. Mr. Lavelle holds a Bachelor of Arts in Marketing from Pennsylvania State University. During his career, Mr. Lavelle served as the President and Chief Executive Officer of Siemens Health Solutions, the Chief Executive Officer and director of Symphony Health Solutions, board member and advisor to Symphony Performance Health and as President of MedQuist the world's largest provider of voice-to-coding solutions for healthcare, dictation, and speech recognition software. In addition, Mr. Lavelle was President and Chief Executive Officer of SunGard Public Sector and Education.
Barry Fishman
Barry Fishman has served as a member of our audit committee since 2023. Mr. Fishman holds a Bachelor of Commerce in Accounting and Finance from McGill University. Mr. Fishman is a CPA and has served as Chief Executive Officer of Merus Labs and Teva Canada, and Vice President of Marketing at Eli Lilly Canada. Mr. Fishman has also recently served as an independent director on a number of high-profile boards, including Aurora Cannabis Inc. and Canopy Growth Corporation.
Audit Committee Charter
Our audit committee has adopted an audit committee charter, which details the principal functions of the Audit Committee, including:
-
reviewing the financial statements to be included in our annual report and review with the Board and the auditors the results of the annual audit and reviews any financial statements;
-
reviewing and recommending to the Board for approval, where appropriate, financial information contained in any prospectuses, annual information forms, annual reports to shareholders, management proxy circulars, press releases, material change disclosures of a financial nature and similar disclosure documents;
-
reviewing with our management of the and with our auditor and assess significant accounting principles and disclosure issues and alternative treatments under IFRS all with a view to gaining reasonable assurance that financial statements present fairly, in all material respects, our financial position, cash flows and the results of our operations in accordance with IFRS;
-
reviewing and assessing the adequacy and effectiveness of our system of internal control and management information systems, risk management policies and procedures, and financial reporting of any transaction between us, and investigating any alleged fraud;
-
reviewing and discussing with our management our major financial risk exposures and the steps taken to monitor and control such exposures, including the use of any financial derivatives and hedging activities;
-
reviewing, discussing and investigating any alleged fraud involving our management or employees in relation to the internal controls, including our management's response to any allegations of fraud;
-
reviewing the financial reporting of any transaction between us and any officer, director or other "related party" or any entity in which any such person has a financial interest;
-
recommending an auditor for nomination and the auditors compensation to the Board, overseeing the work of the auditors, establishing communication with the auditors, reviewing the independence of the auditor, the audit plan, the performance of the auditors, and the results of the external audit and the report thereon;
-
monitoring and periodically reviewing our corporate policies and associated procedures, and hiring policies; and
-
providing broad oversight of our financial, risk and control related activities.
The Audit Committee has unrestricted access to all information regarding the Company and all our directors, officers and employees and will be directed to cooperate as requested by the Audit Committee. The Audit Committee has the authority to retain, at our expense, outside legal, financial and other advisors, consultants and experts, to assist the Audit Committee in fulfilling its duties and responsibilities. The Audit Committee also has the authority to communicate directly with the auditors and, if applicable, our internal auditors.
Pre-Approval Policies and Procedures
The Audit Committee will pre-approve all non-audit services to be provided to us by its external auditors. The Audit Committee may delegate to one or more of its members the authority to pre-approve non-audit services but preapproval by such member or members so delegated shall be presented to the full Audit Committee at its first scheduled meeting following such pre-approval.
External Auditor Service Fees
The aggregate fees billed by the Company's external auditors in the years ended December 31, 2023 and 2022 are set out below:
| Financial Year Ending |
Audit Fees(1) (US$) |
Audit-Related Fees(2) (US$) |
Tax Fees (US$) |
All Other Fees (US$) |
| December 31, 2023 | $167,921 | $4,277 | $3,850 | - |
| December 31, 2022 | $21,600 | - | $6,800 | - |
Notes:
(1) Audit Fees include fees for performance of the annual audit of the Company's financial statements, reviews of quarterly financial statements, reviews of periodic reports and reviews of other documents required by legislation or regulation.
(2) Audit-Related Fees include fees related to comfort letters, consents and reviews of securities filings.
(3) Tax Fees include fees billed for tax compliance, tax advice and tax planning professional services. These services included reviewing tax returns and assisting in responses to government tax authorities.
(4) All other fees include aggregate fees billed for professional services which included accounting advice
Compensation Committee
The purpose of the Compensation Committee is to assess and make recommendations to the Board regarding certain compensation matters, including, but not limited to, relating to the development of human resource strategy, policies and programs, the proper utilization of human resources within the Company, with special focus on senior management succession, development and compensation, the compensation of directors and senior executives and other employee benefits.
The Compensation Committee is required to review and assess the adequacy of its charter periodically as conditions dictate, but at least annually, to ensure compliance with any rules or regulations and recommend any modifications to its charter if and when appropriate to the Board for its approval.
Composition of the Compensation Committee
As of the date of this prospectus, the Compensation Committee is comprised of Dr. Larry Kaiser, Robert J. Ciaruffoli, and Frank Lavelle, all of whom are considered independent.
Compensation Committee Charter
The Board has adopted a written charter for the Compensation Committee, which sets out the Compensation Committee's responsibilities, including:
-
reviewing and recommending on an annual basis, the remuneration of our senior executives to the Board, including any incentive plans of directors and any remuneration policies;
-
reviewing the CEO's goals and objectives, including corporate goals and objectives relevant to the compensation of the CEO and the CEO's performance in light of those goals and objectives;
-
reviewing with the CEO the goals and objectives of other senior executives, including corporate goals and objectives relevant to the compensation of such senior executives, evaluate the performance of senior executives in light of those goals and objectives;
-
reviewing, in conjunction with the Nominating Committee, our corporate succession and development plans at the executive officer level;
-
reviewing executive compensation disclosure before we publicly disclose this information;
-
keeping abreast of current developments in executive compensation in companies engage in similar industries;
-
reviewing and making recommendations to the Board in relation to employment offers for a CEO or any senior executive employment offer, or any offer that contains special terms including, but not limited to, any retiring or other allowance agreements, equity-based compensation and any proposed change of control provisions;
-
proposing to the Board the engagement of, and manage and supervise, compensation consultants to assist in the evaluation of the compensation of the senior executives' and directors', including the fees and other terms of the retention;
-
periodically reviewing the structure and implementation of bonus plans and all share compensation plans;
-
reviewing on an annual basis our remuneration policies, including the total remuneration (including benefits) and the main components thereof for the directors and senior executives, and to compare such remuneration policies with the remuneration practices of peers in the same industry;
-
reviewing and recommending to the Board for its approval the disclosure required in any management information circular in respect of meetings of our shareholders relating to executive compensation and finalizing the report on executive compensation in any management information circular;
-
determining those directors, officers, employees and consultants of the Company who will participate in long term incentive plans, the number and type of shares of the Company allocated to each participant under such plan and the time or times when ownership of such shares will vest for each participant;
-
administering all matters relating to any long term incentive plan and any employee bonus plan to which the Committee has been delegated authority pursuant to the terms of such plans or any resolutions passed by the Board;
-
annually recommending to the Board the CEO's and senior executives' entitlement to be paid a bonus under any employee bonus plan;
-
reviewing on an annual basis, its mandate and recommending any proposed changes to the Board;
-
reporting regularly to the Board in relation to any matters arising from its review of compensation practices; and
-
evaluating the function of the Compensation Committee on an annual basis.
Nominating Committee
The primary function of the Nominating Committee, in accordance with its charter, is to assist the Board in fulfilling its responsibility to oversee our nominating procedures.
The Nominating Committee is required to review and assess the adequacy of its charter periodically as conditions dictate, but at least annually, to ensure compliance with any rules or regulations and recommend any modifications to its charter if and when appropriate to the Board for its approval.
Nominating Committee Composition
As of the date of this prospectus, the Nominating Committee is comprised of Dr. Larry Kaiser, Barry Fishman, and William L. Ashton, all of whom are considered independent.
Nominating Committee Charter
The Board has adopted a written charter for the Nominating Committee, which sets out the Compensation Committee's responsibilities, including;
-
making recommendations to the Board with respect to the size, composition and structure of the Board;
-
making recommendations to the Board with respect to the reorganization of responsibilities among committees, the creation of additional committees or subcommittees, or the elimination of committees;
-
making recommendations to the Board with respect to the preferred experience and qualifications of news directors to be elected by shareholders;
-
making recommendations to the Board with respect to qualified candidates for nomination for election to the Board at each annual general meeting of shareholders;
-
making recommendations to the Board with respect to the appointment of qualified directors to each committee;
-
making recommendations to the Board with respect to developing and overseeing an orientation program for new directors and a continuing education program for current directors;
-
making recommendations to the Board with respect to Board succession; and
-
conducting annual performance assessments of the Board.
Executive Compensation
Named Executive Officers
Compensation of our named executive officers generally consists of the following elements: base salaries and participation in our equity incentive plan. The following table sets forth all compensation awarded to, or earned by, our named executive officers for the year ended December 31, 2023.
|
Name and principal position |
Salary |
Share-based Awards |
Option-based Awards ($) |
Pension Value ($) |
All Other Compensation ($) |
Total |
|
Dr. Raza Bokhari, (1) CEO |
- |
- |
43,507.90 |
- |
- |
43,507.90 |
|
James Quinlan, |
93,969.00 |
- |
21,754.32 |
- |
100,000 |
215,723.32 |
|
Dr. Edward Brennan, |
79,424.00 |
- |
17,560.41 |
- |
75,000 |
171,984.41 |
(1) Dr. Raza Bokhari provided executive services to the Company through an agreement between Medicus and RBx, an entity controlled by Dr. Bokhari. RBx also made available to the Company certain other management services and administrative and executive support. The Company paid RBx a fee of US$100,000 per month for the services it provided to the Company.
Employment and Consulting Agreements with Executive Officers
We have entered into written employment agreements with James Quinlan, our Chief Financial Officer, Erica Monaco, our Chief Operating Officer and Edward Brennan, our Chief Medical Officer. Such agreements provide for a base salary, an annual discretionary bonus, notice and payment requirements upon termination without cause or as a result of a change in control, and payments following or in connection with any other termination or resignation. Mr. Quinlan, Ms. Monaco, and Mr. Brennan are also subject to non-solicitation and non-competition agreements prohibiting competing with us and soliciting our clients for a period of one year following termination and also prohibiting soliciting our employees, of officers, executives, or agents for a period of one year following termination.
Directors
Compensation of our directors generally consists of annual retainer fees and the Board and committee meeting fees, which are paid on a quarterly basis. There are no special arrangements between us and any director with respect to fees. Our directors are also entitled to participate in our equity incentive plan. Our executive officers who also act as directors do not receive any additional compensation for services rendered in their capacities as directors.
The following table sets forth all compensation awarded to, or earned by, our directors for the year ended December 31, 2023.
|
Director |
Fees earned |
Share-based |
Option- |
Pension |
All Other |
Total Compensation |
|
Dr. Raza Bokhari |
- |
- |
- |
- |
- |
- |
|
Dr. Larry Kaiser |
15,000.00 |
- |
5,161.46 |
- |
- |
20,161.46 |
|
Robert J. Ciaruffoli |
18,750.00 |
- |
5,161.46 |
- |
- |
23,911.46 |
|
Frank Lavelle |
15,000.00 |
- |
5,161.46 |
- |
- |
20,161.46 |
|
William L. Ashton |
12,500.00 |
- |
5,161.46 |
- |
- |
17,661.46 |
|
Barry Fishman |
15,000.00 |
- |
5,161.46 |
- |
- |
20,161.46 |
(1) Other than Dr. Raza Bokhari, who did not receive any extra compensation for serving as Executive Chairman, all directors were paid $50,000 annually, in quarterly installments, as compensation for Board membership in each of 2023 and 2022. In addition, committee Chairs received an annual compensation of $10,000, other than the Chair of the Audit Committee, who received $15,000, and Mr. Ciaruffoli, as the lead director, who received an additional $10,000 per annum.
Directors' Service Contracts
There are no arrangements or understandings between us, on the one hand, and any of our directors, on the other hand, providing for benefits upon termination of their service as directors of our company.
Employees
As of May 27, 2024, we have five full-time employees located in Pennsylvania, United States, of whom three were executive management.
Equity Incentive Plan
Background
The Board has adopted an Equity Incentive Plan (the "Plan"), which was approved by shareholders on July 28, 2023. The Plan allows for the issuance of restricted share units ("RSUs"), and stock options ("Options", and together with the RSUs, "Awards").
Purpose
The purpose of the Plan is to (i) assist in the reward, retention and motivation of directors, consultants, and key employees of the Company and its designated affiliates, (ii) link the reward of such persons to shareholder value creation, and (iii) align the interests of the directors, consultants, and key employees of the Company with its shareholders by providing an opportunity to receive an equity interest in the Company.
A summary of the key terms of the Plan is set out below, which is qualified in its entirety by the full text of the Plan.
Administration of the Equity Incentive Plan
The Plan is administered by the Compensation Committee, which has full authority to administer the Plan, subject to the rules of any stock exchange on which the common shares are listed, including the authority to: (i) interpret and construe any provision of the Plan; (ii) adopt, amend, and rescind such rules and regulations for administering the Plan as the Compensation Committee deems necessary or desirable in order to comply with the requirements of the Plan subject in all cases to compliance with regulatory requirements; (iii) permit an Option to be exercised by way of a "cashless exercise" or "net exercise" basis on terms established by the Compensation Committee in its sole discretion and in accordance with the policies of the TSXV, or such other principal market on which the common shares are then traded as designated by the Compensation Committee (the "Stock Exchange").
The Compensation Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan, in the manner and to the extent the Compensation Committee deems, in its discretion, necessary or desirable. All actions taken and all interpretations and determinations made by the Compensation Committee in good faith shall be final and conclusive and shall be binding on each of the Participants (as defined below) and the Company.
Eligibility
The Compensation Committee determines the employees, directors and consultants of the Company who are eligible to participate in the Plan (the "Participants"). The extent to which any Participant is entitled to receive a grant of an Award pursuant to the Plan will be determined in the sole and absolute discretion of the Compensation Committee. For Awards granted to eligible directors, eligible employees and consultants, the Company and the Participant are responsible for ensuring and confirming that the Participant is a bona fide eligible director, eligible employee or consultant, as the case may be.
Common Shares Subject to the Equity Incentive Plan
The Plan is a "rolling up to 10% and fixed up to 10%" security-based compensation plan, within the meaning of Policy 4.4 - Security Based Compensation of the TSXV. The Plan is: a "rolling" plan pursuant to which the number of common shares that are issuable pursuant to the exercise of Options granted under the Plan shall not exceed 10% of the issued and outstanding common shares as at the date of any Option grant; and a "fixed" plan under which the number of common shares that are issuable pursuant to all Awards other than Options granted under the Plan and under any other security based compensation plan, in the aggregate is a maximum of 10% of the issued and outstanding common shares as at the effective date of implementation of the Plan.
Insider Participation Limit, Individual Limits, Annual Grant Limits and Non-Employee Director Limits
The maximum number of common shares reserved for issue pursuant to Awards granted under the Plan to Participants who are "insiders" (as a group) in any 12-month period shall not exceed 10% of the number of common shares then outstanding, unless disinterested shareholder approval is received therefor in accordance with the policies of the Stock Exchange.
The maximum number of common shares reserved for issue pursuant to Awards granted under the Plan to Participants who are "insiders" (as a group) at any point in time shall not exceed 10% of the number of common shares then outstanding, unless disinterested shareholder approval is received therefor in accordance with the policies of Stock Exchange.
The maximum number of common shares reserved for issue under Awards granted to any one Participant in any 12-month period shall not exceed 5% of the number of common shares then outstanding, unless disinterested shareholder approval is received therefor in accordance with the policies of the Stock Exchange.
The maximum number of common shares reserved for issue under Awards granted to any one consultant in any 12-month period shall not exceed 2% of the number of common shares then outstanding.
The maximum number of common shares reserved for issue under Options granted to all Participants conducting investor relations activities in any 12-month period shall not exceed, in the aggregate, 2% of the number of common shares then outstanding. Options granted to Participants performing investor relations activities shall vest in stages over a 12-month period, with no more than one-quarter of the Options vesting in any three-month period. No acceleration of the vesting provisions of Options granted to persons retained to provide investor relations activities is allowed without the prior acceptance of the Stock Exchange.
Types of Awards
The Plan provides for the grant of Options and RSUs. All of the Awards described below are subject to the conditions, limitations, restrictions, exercise price, vesting, settlement and forfeiture provisions determined by the Board, in its sole discretion, subject to such limitations provided in the Plan. In addition, subject to the limitations provided in the Plan and in accordance with applicable law, the Board may accelerate or defer the vesting of Awards, modify outstanding Awards, and waive any condition imposed with respect to Awards or common shares issued pursuant to Awards.
Options
An Option is an option granted by the Company to a Participant entitling such Participant to acquire a designated number of common shares from treasury at the exercise price, subject to the provisions of the Plan. For greater certainty, the Company is obligated to issue and deliver the designated number of common shares on the exercise of an Option and shall have no independent discretion to settle an Option in cash or other property other than common shares issued from treasury. For the avoidance of doubt, no dividend equivalents shall be granted in connection with an Option.
Subject to the provisions set forth in the Plan and any shareholder or regulatory approval which may be required, the Compensation Committee shall, from time to time by resolution, in its sole discretion, (a) designate the eligible director, eligible employee or consultant who may receive Options under the Plan, (b) fix the number of Options, if any, to be granted to each eligible director, eligible employee or consultant and the date or dates on which such Options shall be granted, (c) determine the price per common share to be payable upon the exercise of each such Option, (d) determine the relevant vesting provisions (including performance criteria, if applicable) and (e) determine the period of time during which the particular Option may be exercised (the "Option Period").
Each Option granted to a Participant may be evidenced by a stock option notice or stock option agreement setting out terms and conditions consistent with the provisions of the Plan and may be subject to any other terms and conditions (including without limitation any recoupment, reimbursement or claw-back compensation policy as may be adopted by the Compensation Committee from time to time) which are not inconsistent with the Plan and which the Compensation Committee deems appropriate for inclusion in an Option, which terms and conditions need not be the same in each case and which terms and conditions may be changed from time to time.
The price per share (the "Exercise Price") at which any common share which is the subject of an Option may be purchased shall be determined by the Compensation Committee at the time the Option is granted, provided that the Exercise Price shall be not less than the closing price of the common shares on the Stock Exchange on the last trading day immediately preceding the date of the grant of such Option less the maximum discount, if any, permitted by the Stock Exchange or, if the common shares are not then listed on any Stock Exchange, the Exercise Price shall not be less than the fair market value of the common shares as may be determined by the Board on the day immediately preceding the date of the grant of such Option. Disinterested shareholder approval shall be required for any reduction in the Exercise Price of any Option if the optionee is an insider of the Company at the time of the proposed amendment to the Exercise Price.
Except as otherwise specifically provided in the Plan or in any employment contract, Options may be exercised by the optionee in whole at any time, or in part from time to time (in each case to the nearest full common share), during the Option Period only in accordance with the vesting schedule, if any, determined by the Compensation Committee, in its sole and absolute discretion, subject to the applicable requirements of the Stock Exchange, at the time of the grant of the Option, which vesting schedule may include performance vesting or acceleration of vesting in certain circumstances and which may be amended or changed by the Compensation Committee from time to time with respect to a particular Option. If the Compensation Committee does not determine a vesting schedule at the time of the grant of any particular Option, such Option shall be exercisable in whole at any time, or in part from time to time, during the Option Period, subject to the applicable requirements of the Stock Exchange. In the event that the common shares are listed on the TSXV, Options with an Exercise Price based on the discounted market price (as such term is defined in the policies of the TSXV), and the common shares issuable upon the exercise thereof, shall be subject to the restricted period and legending requirements imposed by the policies of the TSXV.
RSUs
An RSU is an Award that is a bonus for services rendered in the year of grant, that, upon settlement, entitles the recipient Participant to receive a cash payment equal to the market value of a common share or, at the sole discretion of the Compensation Committee, a common share, and subject to such restrictions and conditions on vesting as the Compensation Committee may determine at the time of grant, unless such RSU expires prior to being settled. Restrictions and conditions on vesting may, without limitation, be based on the passage of time during continued employment or other service relationship, the achievement of specified performance criteria or both.
Subject to the provisions of the Plan and any shareholder or regulatory approval which may be required, the Compensation Committee shall, from time to time by resolution, in its sole discretion, (a) designate the eligible director, eligible employee or consultant who may receive RSUs under the Plan, provided such person was not retained to provide investor relations activities, (b) fix the number of RSUs, if any, to be granted to each eligible director, eligible employee or consultant and the date or dates on which such RSUs shall be granted, (c) determine the relevant conditions, vesting provisions and the restriction period of such RSUs, and (d) determine any other terms and conditions applicable to the granted RSUs, which need not be identical and which, without limitation, may include non- competition provisions, subject to the terms and conditions prescribed in the Plan, in any RSU agreement, and any applicable rules of the Stock Exchange.
Subject to the vesting and other conditions and provisions in the Plan, all RSUs will vest in accordance with the terms of the RSU agreement entered into in respect of such RSUs, provided that no RSUs may vest for one year from the date of issuance.
Subject to the vesting and other conditions and provisions in the Plan and in the applicable RSU agreement, each RSU awarded to a Participant shall entitle the Participant to receive, on settlement, a cash payment equal to the market value of a common share, or, at the discretion of the Compensation Committee, one common share or any combination of cash and common shares as the Compensation Committee in its sole discretion may determine, in each case less any applicable withholding taxes. For greater certainty, no Participant shall have any right to demand to be paid in, or receive, common shares in respect of any RSU, and, notwithstanding any discretion exercised by the Compensation Committee to settle any RSU, or a portion thereof, in the form of common shares, the Compensation Committee reserves the right to change such form of payment at any time until payment is actually made.
Persons who provide investor relations activities shall not receive any Awards other than Options.
The Compensation Committee shall have sole discretion to (a) determine if any vesting conditions with respect to a RSU, including any performance criteria or other vesting conditions contained in the applicable RSU agreement, have been met, (b) waive the vesting conditions applicable to RSUs (or deem them to be satisfied), and (c) extend the restriction period with respect to any grant of RSUs, provided that any such extension shall not result in the restriction period for such RSUs extending beyond the RSU Outside Expiry Date (as defined below) and, provided, further, that any such determination, waiver or extension to an RSU granted to an eligible director, eligible employee or consultant who is a U.S. person shall be made in accordance with Section 409A of the U.S. Code. The Company shall communicate to a Participant, as soon as reasonably practicable, the date on which all such applicable vesting conditions in respect of a grant of RSUs to the Participant have been satisfied, waived or deemed satisfied and such RSUs have vested (the "Vesting Date").
Dividend Equivalents
Dividend equivalents may, as determined by the Compensation Committee in its sole discretion, be awarded as a bonus for services rendered in the year awarded in respect of unvested RSUs in a Participant's account on the same basis as cash dividends declared and paid on common shares as if the Participant was a shareholder of record of common shares on the relevant record date. Dividend equivalents, if any, will be credited to the Participant's account in additional RSUs, the number of which shall be equal to a fraction where the numerator is the product of (a) the number of RSUs in such Participant's account on the date that dividends are paid multiplied by (b) the dividend paid per common share and the denominator of which is the market value of a common share calculated as of the date that dividends are paid. Any additional RSUs credited to a Participant's account as a dividend equivalent shall be subject to the same terms and conditions (including vesting, restriction periods and expiry) as the RSUs in respect of which such additional RSUs are credited.
In the event that the Participant's applicable RSUs do not vest, all dividend equivalents, if any, associated with such RSUs will be forfeited by the Participant.
In the event that the limits set forth in the Plan prevent the Company from satisfying its obligations under any dividend equivalent, or the Company elects in its sole and absolute discretion, the Company shall be permitted to settle any dividend equivalent issued under the Plan in cash. Any such cash payments shall be calculated by multiplying the number of RSUs to be redeemed for cash by the market value per common share as at the settlement date.
Black-out Periods
If the expiry date of an Option fall falls within a blackout period or within ten business days after the expiry of a blackout period, then the expiry date of the Option will be the date which is ten business days after the expiry of the blackout period.
Expiry Date of Awards
Options
The Option Period for each Option shall be such period of time as shall be determined by the Compensation Committee, subject to amendment by an employment contract, provided that in no event shall an Option Period exceed ten years. Disinterested shareholder approval shall be required for the extension of any Option Period if the optionee is an insider of the Company at the time of the proposed amendment to the Option Period.
RSUs
No payment, whether in cash or in common shares, shall be made in respect of the settlement of any RSUs later than December 15th of the third (3rd) calendar year following the end of the calendar year in respect of which such RSU is ranted (the "RSU Outside Expiry Date").
Termination of Employment or Service
Options
If a Participant shall:
(a) cease to be a director or of a designated affiliate, as the case may be (and is not or does not continue to be an employee thereof), for any reason (other than death); or
(b) cease to be employed by, or provide services to, the Company or the designated affiliates (and is not or does not continue to be a director or officer thereof), or any corporation engaged to provide services to the Company or the designated affiliates, for any reason (other than death) or shall receive notice from the Company or any designated affiliate of the termination of their employment contract;
(the earliest to occur of any of the foregoing events being referred to herein as a "Termination"), except as otherwise provided in any employment contract, such Participant may, but only within the 90 days next succeeding such Termination (or, subject to the limitations set forth below, such other period of time as may be determined by the Board), exercise the Options to the extent that such Participant was entitled to exercise such Options at the date of such Termination. Notwithstanding the foregoing or any employment contract, in no event shall such right extend beyond the Option Period or one year from the date of Termination, whichever is earlier.
RSUs
If a Participant shall:
(a) cease to be a director or of a designated affiliate, as the case may be (and is not or does not continue to be an employee thereof), for any reason (other than death); or
(b) cease to be employed by, or provide services to, the Company (and is not or does not continue to be a director or officer thereof), or any corporation engaged to provide services to the Company, for any reason (other than death) or shall receive notice from the Company of the termination of their employment contract;
(the earliest to occur of any of the foregoing events being referred to as a Termination, the Participant's participation in the Plan shall be terminated immediately, all RSUs credited to such Participant's account that have not vested shall be forfeited and cancelled, and the Participant's rights that relate to such Participant's unvested RSUs shall be forfeited and cancelled on the date of such Termination. Notwithstanding the foregoing, if the Compensation Committee, in its sole discretion, instead accelerates the vesting or waives vesting conditions with respect to all or some portion of outstanding unvested RSUs, the date of such action is the Vesting Date.
If a Participant or, in the case of a consultant which is not an individual, the primary individual providing services to the Company on behalf of the consultant, shall die, any unvested RSUs in the Participant's account as at the date of such death relating to a restriction period in progress shall become immediately forfeited and cancelled. For greater certainty, where a Participant's employment or service relationship with the Company is terminated as a result of death following the satisfaction of all vesting conditions in respect of particular RSUs but before receipt of the corresponding distribution or payment in respect of such RSUs, the Participant shall remain entitled to such distribution or payment. Notwithstanding the foregoing, if the Compensation Committee, in its sole discretion, instead accelerates the vesting or waives vesting conditions with respect to all or some portion of outstanding unvested RSUs, the date of such action is the Vesting Date.
Change of Control
Under the Plan, in the event of a potential change in control, except as otherwise provided in the applicable resolution granting an Award, the Board shall provide for the treatment of each outstanding Award as it determines in its sole discretion, which treatment need not be uniform for all Participants and/or Awards and which may include, without limitation, one or more of the following:
(a) (i) continuation of such Awards or (ii) conversion of such Awards into, or substitution or replacement of such Awards with, an Award with respect to shares of the successor corporation (or a parent or subsidiary thereof) with substantially equivalent terms and value as such Awards (which value as at immediately following such change in control shall not exceed the intrinsic value of any such Option as at immediately prior to such change in control), effected in accordance with Sections 409A and 424 of the United States Internal Revenue Code of 1986 to the extent applicable; and/or
(b) acceleration of the vesting and the right to exercise such Option or settle such RSU as at immediately, or during a specified period, prior to such change in control, and the termination of such Option to the extent such Option is not timely exercised. If the change in control is not completed within the time specified therein (as the same may be extended), the Awards which vest pursuant to the Plan shall be returned by us to the Participant and, if exercised or settled, as applicable, the common shares issued on such exercise or settlement shall be reinstated as authorized but unissued common shares and the original terms applicable to such Awards shall be reinstated.
(c) for purposes of the application of the change in control provisions to any outstanding Award, if such Award is subject to performance criteria (including any performance vesting conditions), the level of attainment of such criteria shall be determined by the Board in its sole discretion, including, without limitation, by deeming such criteria attained at the applicable target or maximum level regardless of actual performance, or measuring the attainment of such criteria based on actual performance through such change in control or a specified date prior thereto.
Notwithstanding the foregoing, to the extent necessary to comply with Section 409A of the United States Internal Revenue Code of 1986 with respect to the payment of deferred compensation to any U.S. taxpayer, change in control shall be limited to a change in control event as defined in Treasury Regulations Section 1.409A-3(i)(5) prescribed pursuant to Section 409A of the United States Internal Revenue Code of 1986.
Non-Transferability of Awards
No rights under the Plan and no Award granted pursuant to the Plan are assignable or transferable by any Participant other than pursuant to a will or by the laws of descent and distribution.
Amendments to the Equity Incentive Plan
Subject to certain restrictions, the Compensation Committee shall have the right without the approval of the shareholders of the Company to make certain amendments to the Plan, including but not limited to the following amendments:
(a) any amendment of a "housekeeping" nature, including, without limitation, amending the wording of any provision of the Plan for the purpose of clarifying the meaning of existing provisions or to correct or supplement any provision of the Plan that is inconsistent with any other provision of the Plan, correcting grammatical or typographical errors and amending the definitions contained within the Plan;
(b) any amendment to comply with the rules, policies, instruments and notices of any regulatory authority to which the Company is subject, including the Stock Exchange, or to otherwise comply with any applicable law or regulation;
(c) other than changes to the expiration date and the exercise price of any Award, any amendment, with the consent of the Participant, to the terms of any Award previously granted to such Participant under the Plan;
(d) any amendment to the provisions concerning the effect of the termination of any Participant's position, employment or services on such Participant's status under the Plan;
(e) any amendment to the categories of persons who are Participants; and
(f) any amendment respecting the administration or implementation of the Plan.
Subject to the provisions of the Plan, the Compensation Committee also has the right, under the Plan with the approval of the shareholders of the Company by ordinary resolution including, if required by the applicable Stock Exchange, disinterested shareholder approval, to make amendments to the Plan not contemplated above, including, but not limited to:
(a) any change to the number of common shares issuable from treasury under the Plan, including an increase to the fixed maximum percentage or number of common shares or a change from a fixed maximum percentage of common shares to a fixed maximum number of common shares or vice versa;
(b) any amendment which reduces the exercise price of any Award, provided, however, that, for greater certainty, disinterested shareholder approval will be required for any amendment which reduces the exercise price of any Option if the Participant is an insider of the Company at the time of the proposed amendment;
(c) any amendment which extends the expiry date of an Award, or the restriction period of any RSU beyond the original expiry date or restriction period, except in the event of an extension due to a blackout period;
(d) any amendment which cancels any Award and replaces such Award with an Award which has a lower exercise price or other entitlement;
(e) any amendment which would permit Awards to be transferred or assigned by any Participant, and
(f) any amendments to the amendment provisions of the Plan.
Notwithstanding the foregoing: any amendment to the Plan shall be subject to the receipt of all required regulatory approvals including, without limitation, the approval of the Stock Exchange.
The following table sets forth the number of common shares to be issued, including upon exercise of outstanding convertible securities, pursuant to the Company's equity compensation plans, the weighted-average exercise price of such outstanding convertible securities and the number of common shares remaining available for future issuance under equity compensation plans as at December 31, 2023.
|
Plan Category |
Number of common |
Weighted-average |
Number of common |
|
Equity compensation plans approved by security holders |
1,625,000 |
C$0.58 |
1,605,692 |
|
Equity compensation plans not approved by security holders |
- |
- |
- |
|
Total |
1,625,000 |
C$0.58 |
1,605,692 |
PRINCIPAL SHAREHOLDERS
The following table lists those persons who beneficially own, directly or indirectly or exercise control or direction over 5% or more of our outstanding common shares as of the date of this prospectus. The percentage of common shares owned has been computed on the basis of 16,153,465 common shares outstanding as of May 24, 2024.
|
Name |
Number of Common Shares |
Percentage of Common Shares |
||
|
Dr. Kenneth Melani (1) |
6,647,483 |
41.15% |
||
|
John Hathaway(2) |
1,578,404 |
9.77% |
||
|
Dr. Raza Bokhari(3) |
1,432,612 |
8.87% |
||
|
Louis D. Falo |
893,526 |
5.53% |
Notes:
(1) Dr. Kenneth Melani is the beneficial owner of 6,647,483 common shares in Medicus, which include 5,828,661 common shares held by Velocity Fund Partners, LP, an entity controlled by Dr. Melani, and 818,822 common shares held by Dr. Melani in his personal capacity.
(2) John Hathaway is the beneficial owner of 1,578,404 common shares in Medicus held by SkinJect Partners LLC.
(3) Dr. Raza Bokhari is the beneficial owner of 1,432,612 common shares in Medicus held by RBx Capital LP.
Based upon a review of the information provided to us by our transfer agent, as of May 24, 2024, there were a total of 134 holders of record for our common shares, of which approximately 5% are located in Canada and the remainder, with the exception of 7 overseas holders, are located in the United States.
DESCRIPTION OF MATERIAL INDEBTEDNESS
The following is a summary of the material provisions relating to our material indebtedness. The following summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the corresponding agreement or instrument. You should refer to the relevant agreement or instrument for additional information, copies of which will be filed with this registration statement once available.
10.00% Unsecured Convertible Notes due 2025
On May 3, 2024, we issued $5,172,500 aggregate principal amount of our 10.00% Unsecured Convertible Notes due 2025 pursuant to an indenture, dated as of May 3, 2024 (the "Notes Indenture").
Interest accrues on the Notes at a rate of 10.00% payable in-kind semi-annually in arrears in the form of either cash or our common shares at the election of the holder.
Prior to January 1, 2025, the Notes will automatically convert into our common shares in the following circumstances:
-
upon our completion of an initial public offering in the United States, at a conversion price equal to the greater of (i) a 20% discount to the initial public offering price and (ii) $2.00 per common share; and
-
upon a change of control of Medicus under the Notes Indenture, equal to a conversion price equal to $2.00 per common share.
On or after January 1, 2025, the Notes will be convertible at the option of the holder at a conversion price of $2.00 per common share.
On or after January 1, 2025, we may redeem all or any portion of the Notes for a price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest up to but not including the date of redemption.
Upon the occurrence of a change of control of Medicus under the Notes Indenture, each holder of the Notes may require us to repurchase all or a portion of the Notes at a price equal to 101% of their principal amount plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the date of repurchase.
The Notes are subject to customary events of default.
RELATED PARTY TRANSACTIONS
SkinJect had an agreement with Velocity Fund Management, LLC ("VFM"), an affiliate of a shareholder of SkinJect, that provided for certain managerial positions to be filled from within VFM. These employees were not deemed employees of SkinJect, and VFM was responsible for the payment and provision of all wages, bonuses, commissions and benefits. Reimbursable salaries paid to VFM were approximately $180,000 during the years ended December 31, 2023 (2022 - $240,000). The total amount of accounts payable to VFM was $nil as of December 31, 2023 ($20,000). This agreement was terminated on September 29, 2023.
In December 2022, Velocity Fund Partners, LP, an affiliate of shareholders' of SkinJect invested $150,000 in the SAFE issued by SkinJect.
On September 29, 2023, RBx, an entity controlled by a related party of the Company, invested $1,600,000 in exchange for 800,000 common shares as part of the share issuance in connection with the RTO, and received 523,561 common shares upon conversion of promissory notes. RBx made an additional investment of $55,000 in Interactive in exchange for 1,375,000 common shares, which were consolidated into 109,051 common shares of the Company at the date of the RTO. An additional $405,000 was invested by directors and officers of the Company in exchange for 202,500 common shares as part of the share issuance in connection with the RTO, and another $55,000 was invested in Interactive by an officer of the Company in exchange for 1,375,000 common shares, which were consolidated into 109,051 common shares of the Company at the date of the RTO.
On October 18, 2023, the Company signed an agreement with RBx, that provides for certain managerial positions to be filled from within RBx. RBx is responsible for the payment and provision of all wages, bonuses, and benefits for these positions. Reimbursable salaries paid to RBx pursuant to this agreement are $100,000 per month. Reimbursable salaries paid to RBx were approximately $400,000 during the year ended December 31, 2023 (2022 - $nil). Additional expenses of $736,690 were incurred by RBx on behalf of the Company. The Company paid $970,740 to RBx during the year ended December 31, 2023 (2022 - $nil). The total amount of accounts payable to RBx was $165,950 as of December 31, 2023 (2022 - $nil).
Key management personnel compensation during the years ended December 31, 2023, and 2022 comprised:
| December 31, 2023 |
December 31, 2022 |
|||||
| $ | $ | |||||
| Salaries and benefits | 585,712 | - | ||||
| Share-based payments | 123,701 | - | ||||
| Total | 709,413 | - |
On May 3, 2024, directors and officers of the Company purchased $700,000 aggregate principal amount of 2025 Convertible Notes on the same terms as the investors who were not related to the Company.
Interests of Management and Others in Material Transactions
Other than as disclosed above, none of the directors or executive officers of Medicus, or persons or companies that beneficially own, or control or direct, directly or indirectly, more than 10% of our outstanding common shares, or any associate or affiliate of any of the foregoing, has any material interest, direct or indirect, in any transactions in which Medicus has participated within the three years before the date of this prospectus, which has materially affected or is reasonably expected to materially affect Medicus.
Indebtedness of Directors and Executive Officers
As of the date of this prospectus, no director or officer of Medicus, or any associate or affiliate of any of them is indebted to Medicus, nor is any indebtedness of any such person the subject of a guarantee, support agreement, letter of credit or other similar arrangement or understanding provided by Medicus.
DESCRIPTION OF SECURITIES
The following description of the material terms of the securities of the Company includes a summary of specified provisions of the articles of incorporation (the "Articles") and the by-laws (the "Bylaws") of the Company. This description is qualified by reference to the Articles and the Bylaws, copies of which have been filed with the SEC as exhibits to the registration statement of which this prospectus forms a part and incorporated in this prospectus by reference.
Authorized Capital
The Company's authorized capital consists of an unlimited number of common shares and an unlimited number of preferred shares. The following is a summary of the rights, privileges, restrictions and conditions attached to the common shares and the preferred shares as set forth in the Articles and the Bylaws and certain related sections of the OBCA but does not purport to be complete. Reference should be made to the constating documents of the Company and the full text of their provisions for a complete description thereof.
Common Shares
The Company is authorized to issue an unlimited number of common shares, of which 16,153,465 common shares are issued and outstanding as of the date of this prospectus.
The holders of the common shares are entitled to receive notice of and attend any meeting of the shareholders of the Company and are entitled to one vote for each common share held. Shareholders are entitled to receive dividends, if, as and when declared by the board of directors of the Company and to receive a proportionate share, on a per share basis, of the assets of the Company available for distribution in the event of a liquidation, dissolution or winding-up of the Company.
Provisions as to the modification, amendment or variation of the rights attached to the common shares are contained in the Bylaws.
Preferred Shares
The Company is authorized to issue an unlimited number of preferred shares, of which no preferred shares are issued and outstanding as of the date of this prospectus.
|
Dividends |
The holders of the preferred shares are entitled to receive dividends if, as and when declared by the board of directors of the Company out of the assets of the Company properly applicable to the payment of dividends in such amounts and payable in such manner as the board of directors may from time to time determine. Subject to the rights of the holders of any other class of shares of the Company entitled to receive dividends in priority to or ratably with the holders of the preferred shares, the board of directors may in their sole discretion declare dividends on the preferred shares to the exclusion of any other class of shares of the Company. |
|
Participation |
In the event of the liquidation, dissolution or winding-up of the Company or other distribution of assets of the Company among its shareholders for the purpose of winding-up its affairs, the holders of the preferred shares shall be entitled to receive from the assets of the Company a sum equivalent to the aggregate Redemption Amount (as defined below) of all preferred shares held by them respectively before any amount shall be paid or any assets of the Company distributed to the holders of common shares or shares of any other class ranking junior to the preferred shares. After payment to the holders of the preferred shares of the amount so payable to them as above provided they shall not be entitled to share in any further distribution of the assets of the Company. |
|
Redemption Holder |
A holder of preferred shares is entitled to require the Company to redeem, subject to the requirements of the OBCA, at any time or times all or any of the preferred shares held by such holder by tendering to the Company at its registered office a share certificate or certificates representing the preferred shares which the holder desires to have the Company redeem together with a request in writing specifying (i) that the holder desires to have the preferred shares represented by such certificate or certificates redeemed by the Company and, if part only of the shares represented by such certificate or certificates is to be redeemed, the number thereof so to be redeemed and (ii) the business day (the "Redemption Date") on which the holder desires to have the Company redeem such preferred shares. The Redemption Date shall be not less than 30 days after the day on which the request in writing is given to the Company. Upon receipt of a share certificate or certificates representing the preferred shares which the holder desires to have the Company redeem together with such a request the Company shall on the Redemption Date redeem such preferred shares by paying to such holder an amount for each such preferred share being redeemed equal to the Redemption Amount. Such payment shall be made by cheque payable at par at any branch of the Company's bankers for the time being in Canada. If a part only of the shares represented by any certificate by redeemed a new certificate for the balance shall be issued at the expense of the Company. The said preferred shares shall be redeemed on the Redemption Date and from and after the Redemption Date the holder of such shares shall cease to be entitled to dividends and shall not be entitled to exercise any of the rights of a holder of preferred shares in respect thereof unless payment of the Redemption Amount is not made on the Redemption Date, in which event the rights of the holder of the said preferred shares shall remain unaffected. |
|
Redemption Company |
The Company may, upon giving notice to holders of preferred shares, redeem at any time the whole or from time to time any part of the then outstanding preferred shares on payment of an amount for each share to be redeemed equal to the amount paid up thereon plus all declared and unpaid dividends thereon, the whole constituting and being herein referred to as the "Redemption Amount." |
|
Voting |
The holders of the preferred shares shall not be entitled to receive notice of or to attend any meeting of the shareholders of the Company and shall not be entitled to vote at any such meeting. The holders of the preferred shares shall, however, be entitled to notice of meetings of the shareholders called for the purpose of authorizing the dissolution of the Company or the sale, lease or exchange of all or substantially all the property of the Company other than in the ordinary course of business of the Company under subsection 184(3) of the OBCA, as now enacted or as the same may from time to time be amended, re-enacted or replaced. |
Stock Options
As of the date of this prospectus, the Company had options outstanding to purchase 1,650,000 common shares at exercise prices ranging from C$0.58 to C$2.42 and expiry dates ranging from October 24, 2023 to April 1, 2029.
Certain Important Provisions of the Articles and the Bylaws and the OBCA
The following is a summary of certain important provisions of the Articles and the Bylaws and certain related sections of the OBCA. Please note that this is only a summary and is not intended to be exhaustive. This summary is subject to, and is qualified in its entirety by reference to, the provisions of the Articles and the Bylaws and the OBCA.
Objects and Purposes of the Company
Our Articles do not contain and are not required to contain a description of our objects and purposes. There is no restriction contained in our Articles on the business that we may carry on.
Voting on Certain Proposal, Arrangement, Contract or Compensation by Directors
Other than as disclosed below, neither our Articles nor our Bylaws restrict our directors' power to: (a) vote on a proposal, arrangement or contract in which the directors are materially interested; or (b) to vote with regard to compensation payable to themselves or any other members of their body in the absence of an independent quorum.
Our Bylaws provide that a director who: (a) is a party to; or (b) is a director or an officer of, or has a material interest in, any person who is a party to; a material contract or transaction or proposed material contract or transaction with us shall disclose the nature and extent of such director's interest at the time and in the manner provided by the OBCA. Any such contract or transaction or proposed material contract or transaction shall be referred to our board of directors or shareholders for approval in accordance with the OBCA even if such contract or proposed material contract or transaction is one that in the ordinary course of our business would not require approval by our board of directors or shareholders, and a director interested in a contract or transaction so referred to our board of directors shall not attend any part of a meeting of our board of directors during which the contract or transaction is discussed and shall not vote on any resolution to approve such contract or transaction except as provided by the OBCA.
Subject to our Articles and any unanimous shareholder agreement, our directors shall be paid such remuneration for their services as our board of directors may from time to time determine. Our directors shall also be entitled to be reimbursed for travelling and other expenses properly incurred by them in attending meetings of our board of directors or any committee thereof. Nothing in our Bylaws shall preclude any director from serving the Company in any other capacity and receiving remuneration therefor in that capacity.
The OBCA provides that a director who: (a) is a party to a material contract or transaction or proposed material contract or transaction with the Company; or (b) is a director or an officer of, or has a material interest in, any person who is a party to a material contract or transaction or proposed material contract or transaction with the Company, shall not attend any part of a meeting of directors during which the contract or transaction is discussed and shall not vote on any resolution to approve the contract or transaction unless the contract or transaction is one: (i) relating primarily to such director's remuneration as a director of the Company or one of our affiliates; (ii) for indemnity or insurance for the benefit of such director in his or her capacity as a director; or (iii) with one of our affiliates.
Where a material contract is made or a material transaction is entered into between us and a director of the Company, or between us and another person of which a director of the Company is a director or officer or in which he or she has a material interest: (a) the director is not accountable to us or our shareholders for any profit or gain realized from the contract or transaction; and (b) the contract or transaction is neither void nor voidable, by reason only of that relationship or by reason only that the director is present at or is counted to determine the presence of a quorum at the meeting of directors that authorized the contract or transaction, if the director disclosed his or her interest in accordance with the OBCA and the contract or transaction was reasonable and fair to us at the time it was approved.
Borrowing Powers of Directors
Our Bylaws provide that, if authorized by our directors, we may, subject to our Articles: (i) borrow money upon our credit; (ii) issue, reissue, sell, pledge or hypothecate bonds, debentures, notes or other evidences of indebtedness of the Company, whether secured or unsecured; (iii) give a guarantee on behalf of the Company to secure performance of any present or future indebtedness, liability or obligation of any person; and (iv) mortgage, hypothecate, pledge or otherwise create a security interest in all or any currently owned or subsequently acquired real or personal, movable or immovable, property of the Company including book debts, rights, powers, franchises and undertakings, to secure any such bonds, debentures, notes or other evidences of indebtedness or guarantee or any other present or future indebtedness, liability or obligation of the Company.
Amendment to the borrowing powers described above requires an amendment to the Articles and the Bylaws. Our Bylaws do not contain any provisions in connection with amending the Bylaws. The OBCA provides that our board of directors may by resolution, make, amend or repeal any Bylaws that regulate our business or affairs and that our board of directors shall submit such Bylaws, amendment or repeal to our shareholders at the next meeting of shareholders and the shareholders may confirm, reject or amend the Bylaw, amendment or repeal.
Qualifications of Directors
Under our Bylaws and the OBCA, the following persons are disqualified from being a director of the Company: (i) a person who is less than 18 years of age; (ii) a person who has been found under the Substitute Decisions Act, 1992 or under the Mental Health Act to be incapable of managing property or who has been found to be incapable by a court in Canada or elsewhere; (iii) a person who is not an individual; and (iv) a person who has the status of a bankrupt. Subject to our Articles, a director is not required to be a shareholder of the Company. At least 25% of our directors must be resident Canadian and if we have less than four directors, at least one director must be a resident Canadian.
Procedures to Change the Rights of Shareholders
The rights, privileges, restrictions and conditions attaching to our shares are contained in our Articles and such rights, privileges, restrictions and conditions may be changed by amending our Articles. In order to amend our Articles, the OBCA requires a resolution to be passed by a majority of not less than two-thirds of the votes cast by the shareholders entitled to vote thereon. In addition, if we resolve to make particular types of amendments to our Articles, a holder of our shares may dissent with regard to such resolution and, if such shareholder so elects, we would have to pay such shareholder the fair value of the shares held by the shareholder in respect of which the shareholder dissents, determined as of the close of business on the day before the resolution was adopted. The types of amendments that would be subject to dissent rights include without limitation: (i) to add, remove or change restrictions on the issue, transfer or ownership of shares of a class or series of our shares; (ii) to add, remove or change any restriction upon the business that we may carry on or upon the powers that we may exercise; (iii) to amalgamate with another corporation in accordance with the OBCA; (iv) to continue under the laws of another jurisdiction in accordance with the OBCA; and (v) to sell, lease or exchange all or substantially all of our property other than in the ordinary course of our business in accordance with the OBCA.
Meetings
Each director holds office until our next annual meeting or until his office is earlier vacated in accordance with our Articles, Bylaws or with the provisions of the OBCA. A director appointed or elected to fill a vacancy on our board also holds office until our next annual meeting.
Annual meetings of our shareholders must be held at such time in each year not more than 15 months after the last annual meeting, as our board of directors may determine. Notice of the time and place of a meeting of shareholders must be sent not less than twenty-one days and not more than fifty days, before the meeting.
Meetings of our shareholders shall be held at our registered office or, if our board of directors shall so determine, at some other place in Ontario or, at some place outside Ontario if all the shareholders entitled to vote at the meeting so agree.
Our Board, the Chair of our Board or our CEO shall have the power to call a special meeting of our shareholders at any time.
The OBCA provides that our shareholders may requisition a special meeting in accordance with the OBCA. The OBCA provides that the holders of not less than five percent of our issued shares that carry the right to vote at a meeting sought to be held may requisition our directors to call a special meeting of shareholders for the purposes stated in the requisition.
Under our By-laws, the quorum for the transaction of business at any meeting of our shareholders is two person present in person or by proxy and holding or representing in the aggregate not less than 10% of our outstanding shares entitled to vote at such meeting.
Limitations on Ownership of Securities
Except as provided in the Investment Canada Act (Canada), there are no limitations specific to the rights of non-Canadians to hold or vote our shares under the laws of Canada or Ontario, or in our charter documents.
Change in Control
There are no provisions in our Articles or Bylaws that would have the effect of delaying, deferring or preventing a change in control of the Company, and that would operate only with respect to a merger, acquisition or corporate restructuring involving the Company or our subsidiaries.
Ownership Threshold
Neither the Articles nor the Bylaws contain any provisions governing the ownership threshold above which shareholder ownership must be disclosed. In addition, securities legislation in Canada requires that we disclose in our proxy information circular for our annual meeting and certain other disclosure documents filed by us under such legislation, holders who beneficially own more than 10% of our issued and outstanding shares.
U.S. federal securities laws require us to disclose, in our annual reports on Form 20-F, holders who own 5% or more of our issued and outstanding voting shares.
Transfer Agent and Registrar
Our registrar and transfer agent for the common shares is Odyssey Trust Company, 702 - 67 Yonge Street, Toronto, Ontario, M5E 1J8, Canada, telephone: 1-888-290-1175.
Public Warrants
Upon completion of this offering we expect to have warrants outstanding ( if the warrants reserved for the overallotment option are sold). Each warrant will be exercisable for one common share at an exercise price of 100% of the price of each unit sold in the offering and will be exercisable at any time up for a period of five years following the date of issuance.
The number of warrants outstanding, and the exercise price of those securities, will be adjusted proportionately in the event of a consolidation or share split of our common shares, a recapitalization or reclassification of our common shares, payment of dividends or distributions in common shares to our common share holders, or similar transactions. In the event that the Company effects a rights offering to its common share holders or a pro rata distribution of its assets among its common share holders, then the holders of warrants will have the right to participate in such distribution and rights offering to the extent of their pro rata share of the Company's outstanding common shares assuming they owned the number of common shares issuable upon the exercise of their warrants. In the event of a "Fundamental Transaction" by the Company, such as a merger or consolidation of it with another company, the sale or other disposition of all or substantially all of the Company's assets in one or a series of related transactions, a purchase offer, tender offer or exchange offer, or any reclassification, reorganization or recapitalization of the common shares, then the warrant holders will have the right to receive, for each common share issuable upon the exercise of a warrant, at the option of the holder, the number of common shares of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration payable as a result of the Fundamental Transaction, that would have been issued or conveyed to the warrant holder had the holder exercised the warrant immediately preceding the closing of the Fundamental Transaction.
The Company will promptly notify the warrant holders in writing of any adjustment to the exercise price or to the number of the outstanding warrants, declaration of a dividend or other distribution, a special non-recurring cash dividend on or a redemption of the common shares, the authorization of a rights offering, the approval of the share holders required for any proposed reclassification of the common shares, a consolidation or merger by the Company, sale of all or substantially all of the assets of the Company, any compulsory share exchange, or the authorization of any voluntary or involuntary dissolution, liquidation, or winding up of the Company.
The Warrants contain a contractual provision stating that all questions concerning the construction, validity, enforcement and interpretation of the Warrants are governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have common shares outstanding (assuming that the underwriters do not exercise their option to purchase additional common shares and no warrants are exercised). All of the common shares sold in this offering will be freely transferable by persons other than by our "affiliates" without restriction or further registration under the Securities Act. Sales of substantial amounts of our common share in the public market could adversely affect prevailing market prices of our common share. Prior to this offering, there has been a limited public market for our common shares and no public market in the United States for our warrants.
Additionally, as of the date of this prospectus, we have options outstanding to purchase 1,650,000 common shares, at exercise prices ranging from C$0.58 to C$2.42 and expiry dates ranging from October 24, 2028 to April 1, 2029. The exercise price of the majority of these options is significantly below our current market price.
Equity Incentive Plans
Following the completion of the offering, we may file one or more registration statements on Form S-8 under the Securities Act to register the offer and sale of any common shares reserved for issuance under our equity incentive plans that may be in effect from time to time. Such registration statements would become effective immediately upon filing. Shares covered by these registration statements will then be eligible for sale in the public markets, subject to vesting restrictions and any applicable holdings periods, any applicable lock-up agreements described below and Rule 144 limitations applicable to affiliates.
Rule 144
Certain of our common shares that will be outstanding upon the completion of this offering, other than those common shares sold in this offering, are "restricted securities" as that term is defined in Rule 144 under the Securities Act and may be sold publicly in the United States only if they are subject to an effective registration statement under the Securities Act or pursuant to an exemption from the registration requirement such as that provided by Rule 144 under the Securities Act. In general, beginning 90 days after the date of this prospectus, a person (or persons whose shares are aggregated) who at the time of a sale is not, and has not been during the three months preceding the sale, an affiliate of ours and has beneficially owned our restricted securities for at least six months will be entitled to sell the restricted securities without registration under the Securities Act, subject only to the availability of current public information about us, and will be entitled to sell restricted securities beneficially owned for at least one year without restriction. Persons who are our affiliates and have beneficially owned our restricted securities for at least six months may sell a number of restricted securities within any three-month period that does not exceed the greater of the following:
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1% of the then outstanding common shares of the same class, which immediately after this offering will equal approximately common shares assuming the over-allotment option is not exercised; or |
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If our common shares are listed on a national securities exchange, the average weekly trading volume of our common share, during the four calendar weeks preceding the date on which notice of the sale is filed with the SEC |
Sales by our affiliates under Rule 144 are also subject to certain requirements relating to manner of sale, notice and the availability of current public information about us.
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect, each of our employees, consultants or advisors who acquired our common share from us in connection with a compensatory stock plan or other written agreement executed prior to the completion of this offering is eligible to resell those common shares in reliance on Rule 144, but without compliance with some of the restrictions, including the holding period, contained in Rule 144. However, the Rule 701 shares would remain subject to lock-up arrangements and would only become eligible for sale when the lock-up period expires.
Regulation S
Regulation S provides generally that sales made in offshore transactions are not subject to the registration or prospectus-delivery requirements of the Securities Act.
Lock-Up Agreements
All of our directors and executive officers have agreed, subject to certain exceptions, not to sell or otherwise dispose of common shares or any securities convertible into or exchangeable for common shares for a period of 180 days after the date of this prospectus without the prior written consent of the Maxim Group LLC.
CERTAIN MATERIAL U.S. FEDERAL INCOME AND CANADIAN TAX CONSIDERATIONS
The following description is not intended to constitute a complete analysis of all tax considerations relating to the acquisition, ownership and disposition of Units, consisting of our common shares and warrants, pursuant to this offering, and (if applicable) Warrant Shares (as defined herein) upon the exercise of warrants. You are urged to consult your own tax advisor concerning the tax considerations relevant to you having regard to your own circumstances, including tax considerations that may arise under the laws of any state, local, foreign or other taxing jurisdiction.
Canadian Federal Income Tax Consequences for Non-Canadian Residents
The following summarizes the principal Canadian federal income tax considerations generally applicable to the holding and disposition of our common shares and warrants by a holder who acquires such common shares and warrants as beneficial owner pursuant to this offering, and who, for the purposes of the Income Tax Act (Canada) and the regulations thereunder (the “Tax Act”), and at all relevant times, (1) is not, and is not deemed to be, resident in Canada, (2) deals at arm’s length with us and the underwriters, and is not affiliated with us or the underwriters, and (3) holds such common shares and any Warrant Shares (for the purposes of this summary, sometimes collectively referred to as "Shares") acquired on the exercise of warrants and warrants as capital property and does not use or hold, and is not deemed to use or hold, such Shares or warrants in the course of carrying on, or otherwise in connection with, a business in Canada (hereinafter, a Non-Canadian Holder). Special rules, which are not discussed in this summary, apply to a Non-Canadian Holder that is an insurer carrying on an insurance business in Canada and elsewhere.
This summary is based on the current provisions of the Tax Act, the Canada-United States Tax Convention (1980), as amended (the "Treaty"), all proposed amendments to the Tax Act and the Treaty publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof, and our understanding of the current published administrative policies and assessing practices of the Canada Revenue Agency (the "CRA"). It has been assumed that all such proposed amendments will be enacted as proposed and that there will be no other relevant change in any governing law or administrative policy or assessing practice, whether by legislative, administrative or judicial action, although no assurances can be given in this respect. The summary does not take into account other federal or any Canadian provincial, territorial, U.S. federal (which follows further below), state or other foreign income tax law or practice.
Subject to certain exceptions that are not discussed in this summary, for the purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of Shares and warrants must be determined in Canadian dollars based on the rate of exchange quoted by the Bank of Canada on the date such amount first arose or such other rate of exchange as may be acceptable to CRA.
This summary is of a general nature only and is not, and is not intended to be, legal or tax advice to any particular holder. This summary is not exhaustive of all Canadian federal income tax considerations. Accordingly, prospective purchasers of common shares and warrants are urged to consult their own tax advisors having regard to their own particular circumstances.
Allocation of Purchase Price of Units
The offering price must be allocated on a reasonable basis between the common share and the warrant comprising a Unit to determine the cost of each to the Non-Canadian Holder for purposes of the Tax Act. The Company intends to allocate $ of the offering price as consideration for the issue of each common share and $ of the offering price as consideration for the issue of each warrant. Although the Company believes that this allocation is reasonable, it is not binding on the CRA or the Non-Canadian Holder, and counsel expresses no opinion with respect to such allocation. The Non-Canadian Holder's adjusted cost base of the common share comprising a part of each Unit will be determined by averaging the cost allocated to the common share with the adjusted cost base to the Non-Canadian Holder of all common shares (if any) owned by the Non-Canadian Holder as capital property immediately prior to such acquisition.
Exercise of Warrants
The exercise of a warrant to acquire one common share of the Company (each, a "Warrant Share") will be deemed not to constitute a disposition of property for purposes of the Tax Act. As a result, no gain or loss will be realized by a Non-Canadian Holder upon the exercise of a warrant to acquire a Warrant Share. When a warrant is exercised, the Non-Canadian Holder's cost of the Warrant Share acquired thereby will be equal to the aggregate of the Non-Canadian Holder's adjusted cost base of such warrant and the exercise price paid for the Warrant Share. The Non-Canadian Holder's adjusted cost base of the Warrant Share so acquired will be determined by averaging the cost of the Warrant Share with the adjusted cost base to the Non-Canadian Holder of all common shares (if any) owned by the Non-Canadian Holder as capital property immediately prior to such acquisition.
Expiry of Warrants
In the event of the expiry of an unexercised warrant, a Non-Canadian Holder generally will realize a capital loss equal to the Non-Canadian Holder's adjusted cost base of such warrant. The tax treatment of capital gains and capital losses is discussed above under the subheading "Canadian Federal Income Tax Consequences for Non-Canadian Residents – Disposition."
Dividends
Dividends paid or credited or deemed to be paid or credited to a Non-Canadian Holder by us will be subject to Canadian withholding tax. The Tax Act imposes withholding tax at a rate of 25%, although such rate may be reduced pursuant to an applicable tax treaty. Under the Treaty, dividends on the common shares paid to a Non-Canadian Holder that is the beneficial owner of the dividends and is a U.S. resident for the purposes of, and is entitled to all of the benefits of, the Treaty, or a qualifying person, the applicable rate of Canadian withholding tax is generally reduced to 15% (or to 5% if such Non-Canadian Holder is a qualifying person that is a company that for purposes of Article X(2)(a) of the Treaty owns at least 10% of our voting shares). We will be required to withhold the applicable withholding tax from any dividend and remit it to the Canadian government for the Non-Canadian Holder's account. A disposition of common shares to us may in certain circumstances result in a deemed dividend.
Disposition
A Non-Canadian Holder will not be subject to Canadian tax under the Tax Act on a capital gain realized on a disposition or deemed disposition of our common shares and warrants, nor will capital losses arising therefrom be recognized under the Tax Act, unless, at the time of disposition, such common shares or warrants constitute “taxable Canadian property” to the Non-Canadian Holder for the purposes of the Tax Act and the Non-Canadian Holder is not entitled to relief under an applicable income tax convention between Canada and the country in which the Non-Canadian Holder is resident.
If a common share is listed on a designated stock exchange (which includes the TSXV) at the time it is disposed of, such common share and warrant will generally not constitute “taxable Canadian property” to a Non-Canadian Holder unless, at that time or at any particular time within the preceding 60 months,
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25% or more of the issued shares of any class or series of our capital stock was owned by one or any combination of (1) the Non-Canadian Holder, (2) persons with whom the Non-Canadian Holder did not deal with at "arm's length" (within the meaning of the Tax Act), and (3) partnerships in which the Non-Canadian Holder or a person described in (2) holds a membership directly or indirectly through one or more partnerships, and
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more than 50% of the fair market value of the common share was derived directly or indirectly from one or any combination of real or immovable property situated in Canada, "Canadian resource properties" (as defined in the Tax Act), "timber resource properties" (as defined in the Tax Act), and options in respect of, or interests in, or for civil law rights in, any such foregoing properties, whether or not such properties exist.
A Non-Canadian Holder's capital gain (or capital loss) in respect of a disposition of common shares or warrants that constitute or are deemed to constitute taxable Canadian property to the Non-Canadian Holder (and are not "treaty-protected property" as defined in the Tax Act) will generally be computed in the manner described below under the subheading "Canadian Federal Income Tax Consequences for Non-Canadian Residents – Capital Gains and Capital Losses."
Capital Gains and Capital Losses
If a common share or warrant is “taxable Canadian property” to a Non-Canadian Holder and such Non-Canadian Holder is not exempt from tax under the Tax Act in respect of the disposition of such common share pursuant to an applicable income tax treaty or convention, the Non-Canadian Holder will generally realize a capital gain (or a capital loss) equal to the amount, if any, by which the proceeds of disposition of such share or warrant, as applicable, net of any reasonable costs of disposition, are greater (or are less) than the adjusted cost base of such share or warrant to the Non-Canadian Holder immediately before the disposition (or deemed disposition). The adjusted cost base to a Non-Canadian Holder of a common share will be determined by averaging the cost of the common share acquired pursuant to this offering with the adjusted cost base (determined immediately before such acquisition of the common share) of all other common shares of the Company held as capital property at that time by the Non-Canadian Holder.
Currently, a Non-Canadian Holder is required to include in computing its income for a taxation year one-half of the amount of any capital gain (a "taxable capital gain") realized in the year. Subject to and in accordance with the provisions of the Tax Act, a Non-Canadian Holder is required to deduct one-half of the amount of any capital loss (an "allowable capital loss") realized in a taxation year from taxable capital gains realized in the year by such Non-Canadian Holder. Allowable capital losses in excess of taxable capital gains for the taxation year of disposition may be carried back and deducted in any of the three preceding taxation years or carried forward and deducted in any following taxation year against net taxable capital gains realized in such years to the extent and under the circumstances described in the Tax Act.
Pursuant to tax proposals announced in the Federal Budget on April 16, 2024 (the "Budget 2024 Tax Proposals"), subject to certain transitional rules, the portion of a capital gain included in the taxable capital gain will be increased from one-half to two-thirds in respect of (i) dispositions realized by a Non-Canadian Holder that is an individual (excluding a trust) on or after June 25, 2024, for the portion of capital gains realized in the year (or, in the case of the 2024 taxation year, the portion of the year beginning on June 25, 2024) that exceed $250,000 (net of current-year capital losses, capital losses of other years applied to reduce current-year capital gains and capital gains subject to certain statutory exemptions and incentives), and (ii) dispositions realized by a Non-Canadian Holder that is a corporation or trust on or after June 25, 2024. Under the Budget 2024 Tax Proposals, two-thirds of capital losses (including capital losses realized prior to June 25, 2024) will be deductible against capital gains included in income at the two-thirds inclusion rate such that a capital loss will offset an equivalent capital gain regardless of the inclusion rate. The Budget 2024 Tax Proposals do not include comprehensive rules (including draft legislation) and state that additional details related to the change of the capital gains inclusion rate are forthcoming. Non-Canadian Holders are advised to consult their own tax advisors with regard to the Budget 2024 Tax Proposals.
The amount of any capital loss realized on the disposition or deemed disposition of a common share by a Non-Canadian Holder that is a corporation may be reduced by the amount of dividends received or deemed to have been received by it on such shares or shares substituted for such shares to the extent and in the circumstances specified by the Tax Act. Similar rules may apply where a common share is owned by a partnership or trust of which a corporation, trust or partnership is a member or beneficiary.
A Non-Canadian Holder whose shares or warrants may constitute taxable Canadian property is urged to consult with the Non-Canadian Holder's own tax advisors.
U.S. Federal Income Tax Considerations
The following discussion describes certain material U.S. federal income tax consequences relating to the acquisition, ownership and disposition of our common shares and warrants, which we refer to collectively as our securities. Because the components of a Unit are issued separately in this offering, a holder that acquires Units in this offering should be treated, for U.S. federal income tax purposes, as acquiring common shares and a warrant. This discussion applies to holders that purchase securities pursuant to this offering and hold such securities as capital assets within the meaning of Section 1221 of the Code (generally, assets held for investment purposes). This discussion is based on the Code, U.S. Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect.
This discussion does not address all of the U.S. federal income tax consequences that may be relevant to specific holders in light of their particular circumstances or to holders subject to special treatment under U.S. federal income tax law such as certain financial institutions, thrifts, insurance companies, broker-dealers and traders in securities or other persons that generally mark their securities to market for U.S. federal income tax purposes, tax-exempt entities, governmental organizations, retirement plans, regulated investment companies, real estate investment trusts, certain former citizens or residents of the United States, holders who hold securities as part of a “straddle”, “hedge”, “conversion transaction”, “synthetic security” or integrated investment, holders whose “functional currency” (as defined in the Code) is not the U.S. dollar, corporations that accumulate earnings to avoid U.S. federal income tax, persons who acquired our shares through the exercise or cancellation of employee stock options or otherwise as compensation for their services, partnerships and other pass-through entities (or arrangements treated as a partnership for U.S. federal income tax purposes), and investors in such pass-through entities. In addition, this discussion does not address the tax treatment of partnerships (or entities or arrangements that are treated as partnerships for U.S. federal income tax purposes) or persons that hold our securities through such partnerships. If a partnership, including any entity or arrangement treated as a partnership for U.S. federal income tax purposes, holds our securities, the U.S. federal income tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. Such partners and partnerships are urged to consult their tax advisors regarding the tax consequences of the ownership and disposition of our securities. This discussion does not address any U.S. state or local or non-U.S. tax consequences or any U.S. federal estate, gift or alternative minimum tax consequences or the requirements of Section 451 of the Code with respect to conforming the timing of income accruals to financial statements. We have not requested, and will not request, a ruling from the IRS with respect to any of the U.S. federal income tax consequences described below, and as a result there can be no assurance that the IRS will not disagree with or challenge any of the conclusions described herein.
As used in this discussion, the term “U.S. Holder” means a beneficial owner of securities that is, (1) an individual who is a citizen or resident alien of the United States for U.S. federal income tax purposes, (2) a corporation (or entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia, (3) an estate the income of which is subject to U.S. federal income tax regardless of its source or (4) a trust (x) with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions or (y) that has elected under applicable U.S. Treasury regulations to be treated as a domestic trust for U.S. federal income tax purposes, and the term “Non-U.S. Holder” means a beneficial owner of our securities that is neither a U.S. Holder nor a partnership or an entity or arrangement treated as a partnership for U.S. federal income tax purposes.
The following discussion is for general information only and is not intended to be, nor should it be construed to be, legal or tax advice to any holder or prospective holder of securities and no opinion or representation with respect to the U.S. federal income tax consequences to any such holder or prospective holder is made. Persons considering an investment in securities are urged to consult their own tax advisors as to the particular tax consequences applicable to them relating to the purchase, ownership and disposition of securities, including the applicability of U.S. federal, state and local tax laws and non-U.S. tax laws.
Treatment as a Domestic Corporation for U.S. Federal Income Tax Purposes
Even though we are organized as a corporation existing under the laws of Ontario, as a result of the Business Combination, we believe we are treated as a domestic corporation for U.S. federal income tax purposes pursuant to Section 7874 of the Code. As such, we will generally be subject to U.S. federal income tax as if we were organized under the laws of the United States or a state thereof. The remaining discussion contained in this "U.S. Federal Income Tax Considerations" assumes that we will be treated as a domestic corporation for all U.S. federal income tax purposes.
General Treatment of Units
The acquisition of a Unit should be treated for U.S. federal income tax purposes as the acquisition of one common share and one warrant. For U.S. federal income tax purposes, each holder that acquires a Unit must allocate the purchase price paid by such holder for such Unit between the common share and the warrant based on the relative fair market value of each at the time of issuance. A holder’s initial tax basis in the common share and the warrant included in each Unit should equal the portion of the purchase price of the Unit allocated thereto.
Tax Considerations Applicable to U.S. Holders
Distributions on Common Shares
If we pay distributions or make constructive distributions (other than certain distributions of our stock or rights to acquire our stock) to U.S. Holders, such distributions generally will constitute dividends for U.S. federal income tax purposes to the extent paid or deemed paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of our current and accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. Holder's adjusted tax basis in our common shares. Any remaining excess will be treated as gain realized on the sale or other disposition of the common shares and will be treated as described under "-Dispositions" below.
Dividends we pay to a U.S. Holder that is taxable as a corporation will generally qualify for the dividends received deduction if the required holding period is satisfied. Dividends we pay to a non-corporate U.S. Holder will generally constitute "qualified dividends" which are subject to tax at preferential long-term capital gains rates provided certain holding period and other requirements are met. If the holding period requirements are not satisfied, a corporation may not be able to qualify for the dividends received deduction and would have taxable income equal to the entire dividend amount, and non-corporate holders may be subject to tax on such dividend at ordinary income tax rates instead of the preferential rates that apply to qualified dividend income.
If a U.S. Holder is subject to Canadian withholding tax on dividends paid on common shares to the U.S. Holder, the dividends will be considered U.S. source income, which could limit the ability of a U.S. Holder to claim a foreign tax credit for the Canadian withholding taxes imposed in respect of such a dividend. See "-Foreign Tax Credit Limitations" below.
Dispositions of a Common Share
A U.S. Holder generally will recognize gain or loss on the sale, taxable exchange or other taxable disposition of our common shares. Any such gain or loss will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder’s holding period for the common shares so disposed of exceeds one year. The amount of gain or loss recognized will generally be equal to the difference between (1) the sum of the amount of cash and the fair market value of any property received in such disposition and (2) the U.S. Holder’s adjusted tax basis in its common shares so disposed of. A U.S. Holder’s adjusted tax basis in its common shares will generally equal the U.S. Holder’s acquisition cost for such common shares (or, in the case of common shares received upon exercise of a warrant, the U.S. Holder’s initial basis for such common shares, as discussed below), less any prior distributions treated as a return of capital. Long-term capital gains recognized by non-corporate U.S. Holders are generally eligible for reduced rates of tax. If the U.S. Holder’s holding period for the common shares so disposed of is one year or less, any gain on a sale or other taxable disposition of the shares would be subject to short-term capital gain treatment and would be taxed at ordinary income tax rates. The deductibility of capital losses is subject to limitations.
To the extent a U.S. Holder pays any Canadian tax on a sale, exchange or disposition of our common shares, a U.S. foreign tax credit may not be available. See "-Foreign Tax Credit Limitations" below.
Exercise of a Warrant
A U.S. Holder generally will not recognize taxable gain or loss upon exercise of a warrant for cash. The U.S. Holder’s initial tax basis in our common shares received upon the exercise of the warrant will generally be an amount equal to the sum of the U.S. Holder’s adjusted tax basis in the warrant and the exercise price of such warrant. A U.S. Holder’s adjusted tax basis in a warrant would generally equal the U.S. Holder’s acquisition cost of the warrant (i.e., the portion of the U.S. Holder’s purchase price for a Unit that is allocated to the warrant, as described under “—General Treatment of Units,”, increased by the amount of any constructive dividends included in income by such U.S. Holder, as described under “—Possible Constructive Distributions.” It is unclear whether a U.S. Holder’s holding period for the common shares received upon exercise of the warrant would commence on the date of exercise of the warrant or the day following the date of exercise of the warrant; however, in either case the holding period will not include the period during which the U.S. Holder held the warrants.
Dispositions of a Warrant
Upon a sale, exchange (other than by exercise), or expiration of a warrant, a U.S. Holder will recognize taxable gain or loss in an amount equal to the difference between (1) the amount realized upon such disposition or expiration and (2) the U.S. Holder’s adjusted tax basis in the warrant. Such gain or loss generally will be treated as long-term capital gain or loss if the warrant is held by the U.S. Holder for more than one year at the time of such disposition or expiration.
If a warrant is allowed to lapse unexercised, a U.S. Holder will generally recognize a capital loss equal to such holder’s adjusted tax basis in the warrant. Any such loss generally will be a capital loss and will be long-term capital loss if the warrant is held for more than one year. The deductibility of capital losses is subject to certain limitations.
Possible Constructive Distributions
The terms of the warrants provide for an adjustment to the number of common shares for which the warrant may be exercised or to the exercise price of the warrant in certain events. An adjustment which has the effect of preventing dilution generally should not be a taxable event. Nevertheless, a U.S. Holder of warrants would be treated as receiving a constructive distribution from us if, for example, the adjustment increases the holder’s proportionate interest in our assets or earnings and profits (e.g., through an increase in the number of common shares for which the warrant may be exercised or an adjustment to the exercise price of the warrant) as a result of a taxable dividend to the holders of our common shares. Such constructive distribution would be subject to tax as described above under “—Distributions” in the same manner as if such U.S. Holder received a cash distribution from us on common shares equal to the fair market value of such increased interest.
Receipt of Foreign Currency
The gross amount of any payment in a currency other than U.S. dollars will be included by each U.S. Holder in income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the day such U.S. Holder actually or constructively receives the payment in accordance with its regular method of accounting for U.S. federal income tax purposes regardless of whether the payment is in fact converted into U.S. dollars at that time. If the non-U.S. currency is converted into U.S. dollars on the date of the payment, the U.S. Holder should not be required to recognize any foreign currency gain or loss with respect to the receipt of non-U.S. currency. If, instead, the foreign currency is converted at a later date, any currency gains or losses resulting from the conversion of the foreign currency will be treated as U.S. source ordinary income or loss for U.S. foreign tax credit purposes. U.S. Holders are urged to consult their own U.S. tax advisors regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.
Foreign Tax Credit Limitations
Because the Company is subject to tax both as a U.S. domestic corporation and as a Canadian corporation, a U.S. Holder may pay, through withholding, Canadian tax, as well as U.S. federal income tax, with respect to dividends paid on its common shares. For U.S. federal income tax purposes, a U.S. Holder may elect for any taxable year to receive either a credit or a deduction for foreign income taxes paid by the holder during the year. Complex limitations apply to the foreign tax credit, including a general limitation that the credit cannot exceed the proportionate share of a taxpayer's U.S. federal income tax that the taxpayer's foreign source taxable income bears to the taxpayer's worldwide taxable income. In applying this limitation, items of income and deduction must be classified, under complex rules, as either foreign source or U.S. source.
The status of the Company as a U.S. domestic corporation for U.S. federal income tax purposes will cause dividends paid by the Company to be treated as U.S. source rather than foreign source income for this purpose. As a result, a foreign tax credit may be unavailable for any Canadian tax paid on dividends received from the Company. Similarly, to the extent a sale or disposition of common shares by a U.S. Holder results in Canadian tax payable by the U.S. Holder (for example, because the common shares constitute taxable Canadian property within the meaning of the Tax Act), a U.S. foreign tax credit may be unavailable to the U.S. Holder for such Canadian tax. In each case, however, the U.S. Holder may be able to take a deduction for the U.S. Holder's Canadian tax paid, provided that the U.S. Holder has not elected to credit other foreign taxes during the same taxable year. The foreign tax credit rules are complex, and each U.S. Holder should consult its own tax advisor regarding these rules.
Additional Tax on Net Investment Income
U.S. Holders that are individuals, estates or trusts are required to pay an additional 3.8% tax on the lesser of (1) the U.S. Holder's "net investment income" for the relevant taxable year and (2) the excess of the U.S. Holder's modified adjusted gross income for the taxable year over a certain threshold. A U.S. Holder's "net investment income" generally includes, among other things, dividends and net gains from disposition of property (other than property held in the ordinary course of the conduct of a trade or business).
Accordingly, dividends on and capital gain from the sale, exchange or other taxable disposition of common shares may be subject to this additional tax. U.S. Holders are urged to consult their own tax advisors regarding the additional tax on passive income.
Information Reporting and Backup Withholding.
In general, information reporting requirements may apply to distributions paid to a U.S. Holder and to the proceeds of the sale or other disposition of our common shares, unless the U.S. Holder is an exempt recipient. Backup withholding may apply to such payments if a U.S. Holder does not establish, in the manner provided by law, an exemption from backup withholding, or fails to provide a correct taxpayer identification number or make any other required certifications.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or credit against U.S. federal income tax liability, provided that the required information is timely furnished to the IRS. U.S. Holders are urged to consult their own tax advisors regarding their qualification for an exemption from backup withholding and the procedures for obtaining such an exemption.
Tax Considerations Applicable to Non-U.S. Holders
Distributions on Common Shares
Distributions of cash or property that we pay in respect of our common shares will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Subject to the discussions below under "-U.S. Trade or Business Income," "-Information Reporting and Backup Withholding" and "-FATCA," Non-U.S. Holders generally will be subject to U.S. federal withholding tax at a 30% rate, or at a reduced rate prescribed by an applicable income tax treaty, on any dividends received in respect of our common shares. If the amount of the distribution exceeds our current and accumulated earnings and profits, such excess first will be treated as a return of capital to the extent of the Non-U.S. Holder's tax basis in our common shares, and thereafter will be treated as capital gain and will be treated as described below under "-Dispositions." However, except to the extent that we elect (or the paying agent or other intermediary through which a Non-U.S. Holder holds its common shares elects) otherwise, we (or the intermediary) must generally withhold at the applicable rate on the entire distribution, in which case the Non-U.S. Holder would be entitled to a refund from the IRS for the withholding tax on the portion, if any, of the distribution that exceeded our current and accumulated earnings and profits.
In order to obtain a reduced rate of U.S. federal withholding tax under an applicable income tax treaty, Non-U.S. Holders will be required to provide a properly executed IRS Form W-8BEN or Form W-8BEN-E (or, in each case, a successor form) certifying the Non-U.S. Holder's entitlement to benefits under such treaty. If a Non-U.S. Holder is eligible for a reduced rate of U.S. federal withholding tax under an income tax treaty, it may obtain a refund or credit of any excess amounts withheld by filing an appropriate claim for a refund with the IRS. Non-U.S. Holders are urged to consult their own tax advisors regarding their possible entitlement to benefits under an applicable income tax treaty.
Dispositions of Common Shares or Warrants
Subject to the discussions below under “—U.S. Trade or Business Income,” “—Information Reporting and Backup Withholding” and “—FATCA,” Non-U.S. Holders generally will not be subject to U.S. federal income or withholding tax in respect of any gain on a sale, exchange or other taxable disposition of our common shares or warrants unless:
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|
• |
the gain is U.S. trade or business income (as defined below), in which case, such gain will be taxed as described in "-U.S. Trade or Business Income" below; |
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• |
the Non-U.S. Holder is an individual who is present in the United States for 183 or more days in the taxable year of the disposition and certain other conditions are met, in which case the Non-U.S. Holder will be subject to U.S. federal income tax at a rate of 30% (or a reduced rate under an applicable income tax treaty) on the amount by which certain capital gains allocable to U.S. sources exceed certain capital losses allocable to U.S. sources, provided the Non-U.S. Holder has timely filed its U.S. federal income tax return with respect to such losses; or |
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• |
we are or have been a "United States real property holding corporation" (a "USRPHC") under Section 897 of the Code at any time during the shorter of the five-year period ending on the date of the disposition and the Non-U.S. Holder's holding period for such common shares, in which case, subject to the exception set forth in the last sentence of the next paragraph, such gain will be subject to U.S. federal income tax as described in "-U.S. Trade or Business Income" below. |
In general, a corporation is a USRPHC if the fair market value of its “United States real property interests” equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business. We believe that we are not currently, and we do not anticipate becoming in the future, a USRPHC for U.S. federal income tax purposes. In the event that we are determined to be a USRPHC, gain arising from the sale, exchange or other taxable disposition of common shares or warrants by a Non-U.S. Holder will, nonetheless, not be subject to tax as U.S. trade or business income unless the Non-U.S. Holder’s holdings (direct and indirect, taking into account certain constructive ownership rules) at any time during the applicable period described in the third bullet point above constituted more than 5% of our common shares and our common shares were “regularly traded” (as defined by applicable Treasury regulations) on an established securities market during such period.
Exercise or Lapse of a Warrant
The U.S. federal income tax treatment of a Non-U.S. Holder’s exercise of a warrant or the lapse of a warrant held by a Non-U.S. Holder generally will correspond to the U.S. federal income tax treatment of the exercise, lapse, or redemption of a warrant by a U.S. Holder, as described under “—U.S. Holders—Exercise of a Warrant” or “—U.S. Holders—Dispositions of a Warrant.” A Non-U.S. Holder’s adjusted tax basis in a warrant would generally equal the Non-U.S. Holder’s acquisition cost of the warrant (i.e., the portion of the Non-U.S. Holder’s purchase price for a Unit that is allocated to the warrant, as described under “—General Treatment of Units,” increased by the amount of any constructive dividends included in income by such Non-U.S. Holder, as described under “—Possible Constructive Distributions.”
Possible Constructive Distributions
The terms of each warrant provide for an adjustment to the number of shares of common shares for which the warrant may be exercised or to the exercise price of the warrant in certain events. An adjustment which has the effect of preventing dilution is generally not a taxable event. Nevertheless, a Non-U.S. Holder of warrants would be treated as receiving a constructive distribution from us if, for example, the adjustment increases the holder’s proportionate interest in our assets or earnings and profits (e.g., through an increase in the number of shares of common shares that would be obtained upon exercise or through a decrease in the exercise price of the warrants), including as a result of a distribution of cash or other property, such as securities, to the holders of common shares, or as a result of the issuance of a stock dividend to holders of shares of our common shares, in each case which is taxable to such Non-U.S. Holders as described under “—Non-U.S. Holders—Distributions.” A Non-U.S. Holder would be subject to U.S. federal income tax withholding under that section in the same manner as if such Non-U.S. Holder received a cash distribution from us equal to the fair market value of such increased interest. Generally, a Non-U.S. Holder’s adjusted tax basis in its warrant would be increased to the extent any such constructive distribution is treated as a dividend.
U.S. Trade or Business Income
For purposes of this discussion, dividends paid in respect of common shares and gain on the sale, exchange or other taxable disposition of common shares or warrants will be considered to be “U.S. trade or business income” if (A)(i) such dividends or gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States and (ii) the Non-U.S. Holder is eligible for the benefits of an applicable income tax treaty and such treaty requires that such dividends or gain is attributable to a permanent establishment (or, if the Non-U.S. Holder is an individual, a fixed base) that the Non-U.S. Holder maintains in the United States or (B) with respect to gain, we are or have been a USRPHC at any time during the shorter of the five-year period ending on the date of the disposition of our common shares or warrants and the Non-U.S. Holder’s holding period for our common shares or warrants (subject to the exception set forth above in the last sentence of the second paragraph of “—Dispositions”). Generally, a Non-U.S. Holder’s U.S. trade or business income is not subject to U.S. federal withholding tax (provided that the Non-U.S. Holder complies with applicable certification and disclosure requirements, including providing a properly executed IRS Form W-8ECI (or successor form)); instead, the Non-U.S. Holder is subject to U.S. federal income tax on a net basis at regular U.S. federal income tax rates (generally in the same manner as a United States person) on the Non-U.S. Holder’s U.S. trade or business income. Any U.S. trade or business income received by a corporate Non-U.S. Holder may also be subject to a “branch profits tax” at a 30% rate, or at a lower rate prescribed by an applicable income tax treaty.
Information Reporting and Backup Withholding
We must annually report to the IRS and to each Non-U.S. Holder any dividends paid in respect of our common shares that is subject to U.S. federal withholding tax or that is exempt from such withholding tax pursuant to an income tax treaty. Copies of these information returns may also be made available under the provisions of a specific treaty or agreement to the tax authorities of the country in which a Non-U.S. Holder resides or is established. Under certain circumstances, the Code imposes a backup withholding obligation on certain reportable payments. Dividends paid to a Non-U.S. Holder will generally be exempt from backup withholding if the Non-U.S. Holder certifies its non-U.S. status by providing a properly executed IRS Form W-8BEN, Form W-8BEN-E or Form W-8ECI (or, in each case, a successor form) or otherwise establish an exemption, and the applicable withholding agent does not have actual knowledge or reason to know that the Non-U.S. Holder is a United States person or that the conditions of such other exemption are not, in fact, satisfied.
The payment of the proceeds from a Non-U.S. Holder's sale, exchange or other taxable disposition of our common shares to or through the U.S. office of any broker (U.S. or non-U.S.) will be subject to information reporting and, depending on the circumstances, backup withholding unless the Non-U.S. Holder certifies as to its non-U.S. status under penalties of perjury by providing the certification described above to the broker or otherwise establish an exemption, and the broker does not have actual knowledge or reason to know that the Non-U.S. Holder is a United States person or that the conditions of any other exemption are not, in fact, satisfied. The payment of proceeds from a Non-U.S. Holder's sale, exchange or other taxable disposition of our common shares to or through a non-U.S. office of a non-U.S. broker will not be subject to information reporting or backup withholding unless the non-U.S. broker has certain types of relationships with the United States (a "U.S. related financial intermediary"). In the case of the payment of proceeds from a Non-U.S. Holder's sale, exchange or other taxable disposition of our common shares to or through a non-U.S. office of a broker that is either a United States person or a U.S. related financial intermediary, information reporting and, depending on the circumstances, backup withholding will apply on the payment unless the broker has documentary evidence, such as the certifications described above, in its files certifying that the Non-U.S. Holder is not a United States person and the broker has no knowledge to the contrary. Non-U.S. Holders are urged to consult their own tax advisors regarding the application of information reporting and backup withholding in light of their particular circumstances.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a Non-U.S. Holder will be refunded or credited against the Non-U.S. Holder's U.S. federal income tax liability, if any, provided that the required information is timely furnished to the IRS.
FATCA
Pursuant to Sections 1471 through 1474 of the Code, commonly referred to as the Foreign Account Tax Compliance Act ("FATCA"), "foreign financial institutions" and "non-financial foreign entities" (each as defined in the Code) that do not otherwise qualify for an exemption must comply with information reporting rules with respect to their U.S. account holders and investors or be subject to a withholding tax on certain types of U.S.-source payments made to them (whether received as a beneficial owner or as an intermediary for another party).
More specifically, a foreign financial institution or non-financial foreign entity that does not comply with the FATCA reporting requirements or otherwise qualify for an exemption will generally be subject to a 30% withholding tax with respect to any "withholdable payments." For this purpose, withholdable payments generally include dividends on, or (subject to the proposed Treasury regulations discussed below) gross proceeds from the disposition of, our common shares paid to a foreign financial institution or non-financial foreign entity. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.
Withholding under FATCA currently applies to dividends paid in respect of our common shares. Proposed Treasury regulations, the preamble to which state that they can be relied upon until final Treasury regulations are issued, exempt from FATCA withholding gross proceeds from the dispositions of stock. To prevent withholding on dividends, Non-U.S. Holders may be required to provide the Company (or its withholding agents) with applicable tax forms or other information. Non-U.S. Holders are urged to consult with their own tax advisors regarding the effect, if any, of FATCA to them based on their particular circumstances
UNDERWRITING
Maxim Group LLC is acting as the sole book-running manager in this offering and Brookline Capital Markets, a division of Arcadia Securities, LLC, is acting as co-manager. We intend to enter into an underwriting agreement with respect to the securities being offered. In connection with this offering and subject to certain terms and conditions, the underwriters named below will agree to purchase, and we will agree to sell, all of the securities in this offering to the underwriters.
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Underwriter |
Number of |
Number of Warrants |
|
Maxim Group LLC |
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Brookline Capital Markets, a division of Arcadia Securities, LLC |
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Total |
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The underwriters intend to agree to purchase all such securities other than those covered by the over-allotment option to purchase additional securities described below, if it purchases any such securities. The obligations of the underwriters may be terminated upon the occurrence of certain events to be specified in the underwriting agreement. Furthermore, pursuant to the underwriting agreement, the underwriters' obligations will be subject to customary conditions and representations and warranties contained in the underwriting agreement, such as receipt by the underwriters of officers' certificates and legal opinions.
The underwriters will offer the securities, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by the underwriters' counsel and other conditions specified in the underwriting agreement. The underwriters will reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
Option to Purchase Additional Securities
We have granted the underwriters an option to purchase from us, at the public offering price, less the underwriting discounts and commissions, up to additional common shares and up to additional warrants within 45 days from the date of this prospectus.
Indemnification
We have agreed to indemnify the underwriters against certain liabilities, including certain liabilities under the Securities Act and certain liabilities arising from breaches of representations and warranties contained in the underwriting agreement, or to contribute to payments that the underwriters may be required to make in respect of those liabilities.
Determination of Offering Price
The public offering price of the Units is determined by negotiations between us and the underwriters; among the factors considered in determining such public offering price are our historical performance and capital structure, prevailing market conditions, and overall assessment of our business.
Underwriters Compensation
We have agreed to sell the Units to the underwriters at the public offering price of $ per Unit, which represents the public offering price of the Units set forth on the cover page of this prospectus, less a 7.5% underwriting discount.
We have also agreed to reimburse the underwriters for accountable legal expenses incurred by them connection with this transaction in the amount of up to an aggregate of $125,000. We estimate that the total expenses of the offering payable by us, excluding the total underwriting discount, will be approximately $ .
Discount, Commissions and Expenses
The underwriters have advised us that they propose to offer the Units at the public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $ per Unit. After this offering, the public offering prices and concession to dealers may be changed by Maxim Group LLC (the "representative"). No such change shall change the amount of proceeds to be received by us as set forth on the cover page of this prospectus. The Units are offered by the underwriters as stated herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. The underwriters have informed us that they do not intend to confirm sales to any accounts over which they exercise discretionary authority.
The following table summarizes the underwriting discount we will pay to the underwriters. These amounts are shown assuming both no exercise and full exercise of the over-allotment option.
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|
Per Unit |
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Total |
Total with Over- Allotment Option(1) |
||||
|
Public offering price |
$ |
|
|
$ |
|
$ |
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|
|
Total underwriting discount(2) |
$ |
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|
$ |
|
$ |
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Proceeds to us, before expenses |
$ |
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|
$ |
|
$ |
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|
(1) Assumes the over-allotment option is exercised in full for common shares.
(2) Represents an underwriting discount equal to 7.5% of the gross offering proceeds.
Right of First Refusal
We have also granted the underwriters a right of first refusal, subject to certain conditions, to act as sole book-running manager, sole underwriter or sole placement agent for any and all future public or private equity, equity-linked, convertible or debt offerings by us for the fifteen-month period following the closing of the offering.
Lock-Up Agreements and Trading Restrictions
We, our executive officers and directors have agreed to a 180-day "lock-up" from the pricing of this offering of Units that they beneficially own, including the issuance of common shares upon the exercise of currently outstanding convertible securities and options and options which may be issued. This means that, for a period of 180 days following such pricing date, subject to certain limited exceptions, such persons may not offer, sell, pledge or otherwise dispose of these securities without the prior written consent of the representative.
The representative has no present intention to waive or shorten the lock-up period; however, the terms of the lock-up agreements may be waived at its discretion. In determining whether to waive the terms of the lockup agreements, the representative may base its decision on its assessment of the relative strengths of the securities markets and companies similar to ours in general, and the trading pattern of, and demand for, our securities in general.
Stabilization
The rules of the SEC generally prohibit the underwriters from trading in our securities on the open market during this offering. However, the underwriters are allowed to engage in some open market transactions and other activities during this offering that may cause the market price of our securities to be above or below that which would otherwise prevail in the open market. These activities may include stabilization, short sales and over-allotments, syndicate covering transactions and penalty bids.
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● |
Stabilizing transactions consist of bids or purchases made by the representative for the purpose of preventing or slowing a decline in the market price of our securities while this offering is in progress. |
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● |
Short sales and over-allotments occur when the representative sells more of our common shares than it purchases from us in this offering. To cover the resulting short position, the representative may exercise the over-allotment option described above or may engage in syndicate covering transactions. There is no contractual limit on the size of any syndicate covering transaction. The representative will make available a prospectus in connection with any such short sales. Purchasers of shares sold short by the representative are entitled to the same remedies under the federal securities laws as any other purchaser of shares covered by the registration statement. |
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● |
Syndicate covering transactions are bids for or purchases of our securities on the open market by the representative in order to reduce a short position. |
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● |
Penalty bids permit the representative to reclaim a selling concession from a syndicate member when the Units originally sold by the syndicate member are purchased in a syndicate covering transaction to cover syndicate short positions. |
If the underwriters commence these activities, they may discontinue them at any time without notice. The underwriters will carry out any such transactions on the U.S. Exchange.
Listing
We intend to apply to list our common shares and the warrants on the U.S. Exchange under the symbol "MDCX" and "MDCXW," respectively.
Electronic Distribution
A prospectus in electronic format may be made available on websites or through other online services maintained by the underwriters of this offering, or by their affiliates. Other than the prospectus in electronic format, the information on any underwriters' website and any information contained in any other website maintained by an underwriter is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the representative in its capacity as an underwriter.
Other Relationships
The representative and its affiliates may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions. In the course of its businesses, the representative and its affiliates may actively trade our securities or loans for its own account or for the accounts of customers, and, accordingly, the representative and its affiliates may at any time hold long or short positions in such securities or loans.
Except for services provided in connection with this offering, and except as set forth in this section, the representative has not provided any investment banking or other financial services during the 180-day period preceding the date of this prospectus and we do not expect to retain the representative to perform any investment banking or other financial services for at least 90 days after the date of this prospectus.
Selling Restrictions
No action has been taken in any jurisdiction (except in the United States) that would permit a public offering of our Units, or the possession, circulation or distribution of this prospectus or any other material relating to us or our Units in any jurisdiction where action for that purpose is required. Accordingly, our Units (including their constituent common shares and warrants) may not be offered or sold, directly or indirectly, and this prospectus or any other offering material or advertisements in connection with our securities may be distributed or published, in or from any country or jurisdiction, except in compliance with any applicable rules and regulations of any such country or jurisdiction.
Notice to Investors in the United Kingdom
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State") an offer to the public of any securities which are the subject of the offering contemplated by this prospectus may not be made in that Relevant Member State except that an offer to the public in that Relevant Member State of any such securities may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:
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(a) |
to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; |
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(b) |
to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; |
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(c) |
by the underwriters to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive); or |
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(d) |
in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of these securities shall result in a requirement for the publication by the issuer or the underwriters of a prospectus pursuant to Article 3 of the Prospectus Directive. |
For the purposes of this provision, the expression an "offer to the public" in relation to any of the securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any such securities to be offered so as to enable an investor to decide to purchase any such securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression" Prospectus Directive" means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.
The representative has represented, warranted and agreed that:
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(a) |
it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (the FSMA)) received by it in connection with the issue or sale of any of the securities in circumstances in which section 21(1) of the FSMA does not apply to the issuer; and |
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(b) |
it has complied with and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the securities in, from or otherwise involving the United Kingdom. |
European Economic Area
In particular, this document does not constitute an approved prospectus in accordance with European Commission's Regulation on Prospectuses no. 809/2004 and no such prospectus is to be prepared and approved in connection with this offering. Accordingly, in relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (being the Directive of the European Parliament and of the Council 2003/71/EC and including any relevant implementing measure in each Relevant Member State) (each, a Relevant Member State), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date) an offer of securities to the public may not be made in that Relevant Member State prior to the publication of a prospectus in relation to such securities which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of securities to the public in that Relevant Member State at any time:
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to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; |
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to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000; and (3) an annual net turnover of more than €50,000,000, as shown in the last annual or consolidated accounts; or |
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● |
in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive. |
For the purposes of this provision, the expression an "offer of securities to the public" in relation to any of the securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State. For these purposes the shares offered hereby are "securities."
EXPENSES OF THIS OFFERING
Set forth below is an itemization of the total expenses, excluding underwriting discounts and commissions, which are expected to be incurred in connection with our sale of shares in this offering. With the exception of the registration fee payable to the SEC and the filing fee payable to FINRA, all amounts are estimates.
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Itemized expenses* |
Amount |
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SEC Registration Fee |
$ |
* |
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FINRA filing fee |
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* |
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listing fee |
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* |
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Printing expenses |
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* |
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Legal fees and expenses |
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* |
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Accounting fees and expenses |
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* |
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Miscellaneous fees and expenses |
* |
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Total |
$ |
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Notes:
* To be completed by amendment
EXPERTS AND LEGAL MATTERS
No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the securities was employed on a contingency basis or had, or is to receive, in connection with the offering, a substantial interest, directly or indirectly, in the Company or its subsidiaries. Nor was any such person connected with the Company or any of its subsidiaries as a promoter, managing or principal underwriters, voting trustee, director, officer or employee.
The financial statements included in this prospectus and elsewhere in the registration statement have been so included in reliance upon the report of MNP LLP, independent registered public accountants, upon the authority of said firm as experts in accounting and auditing.
The validity of the issuance of our common shares offered in this prospectus and certain other legal matters as to Canadian law will be passed upon for us by Bennett Jones LLP, Toronto, Canada. Certain legal matters governed by U.S. federal law will be passed upon for us by Paul, Weiss, Rifkind, Wharton and Garrison LLP, New York, New York. The underwriters are being represented by Pryor Cashman LLP, New York, New York.
SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES
We are incorporated under the laws of Ontario, Canada. Service of process upon us and upon certain of our directors and officers and the experts named in this prospectus, who reside outside the United States, may be difficult to obtain within the United States. Furthermore, because a substantial amount of our assets and certain of our directors and officers are located outside the United States, any judgment obtained in the United States against us or any of our directors and officers may not be collectible within the United States.
We have irrevocably appointed Medicus Pharma Inc. as our agent to receive service of process in any action against us in any U.S. federal or state court arising out of this offering or any purchase or sale of securities in connection with this offering. The address of our agent is 300 Conshohocken State Road, Suite 200, Conshohocken, PA 19428.
We have also been advised by Bennett Jones LLP, our Canadian legal advisor, that there is doubt as to the enforceability, in original actions in Canadian courts, of liabilities based on the U.S. federal securities laws or "blue sky" laws of any state within the United States and as to the enforceability in Canadian courts of judgments of U.S. courts obtained in actions based on the civil liability provisions of the U.S. federal securities laws or any such state securities or blue sky laws. There can be no assurance that U.S. investors will be able to enforce against us, members of our board of directors, officers or certain experts named herein who are residents of Canada or other countries outside the United States, any judgments in civil and commercial matters, including judgments under the federal securities laws.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement (including amendments and exhibits to the registration statement) on Form F-1 under the Securities Act. This prospectus, which is part of the registration statement, does not contain all of the information set forth in the registration statement. For further information, we refer you to the registration statement and the exhibits and schedules filed as part of the registration statement. If a document has been filed as an exhibit to the registration statement, we refer you to the copy of the document that has been filed. Each statement in this prospectus relating to a document filed as an exhibit is qualified in all respects by the filed exhibit. You should read this prospectus and the documents that we have filed as exhibits to the registration statement of which this prospectus is a part completely.
Upon completion of this offering, we will become subject to the informational requirements of the Exchange Act as applicable to foreign private issuers. Accordingly, we will be required to file reports and other information with the SEC, including annual reports on Form 20-F and reports on Form 6-K. The SEC maintains an internet site at www.sec.gov, from which you can electronically access the registration statement and its exhibits.
As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
We maintain a corporate website at www.medicuspharma.com. The reference to our website is an inactive textual reference only and information contained therein or connected thereto are not incorporated into this prospectus or the registration statement of which it forms a part.
INDEX TO FINANCIAL STATEMENTS
The following financial statements and related management's discussion and analysis are included in this prospectus:
Medicus Pharma Ltd.
Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(expressed in United States dollars, except number of shares)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Medicus Pharma Ltd. (formerly Interactive Capital Partners Corp.)
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Medicus Pharma Ltd. (formerly Interactive Capital Partners Corp.) (the "Company") as of December 31, 2023 and December 31, 2022, and the related consolidated statements of loss and comprehensive loss, changes in shareholders' equity (deficiency), and cash flows in each of the years in the two-year period ended December 31, 2023, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023 and December 31, 2022, and the results of its consolidated operations and its consolidated cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Chartered Professional Accountants
Licensed Public Accountants
We have served as the Company's auditor since 2014.
Mississauga, Canada
May 25, 2024
| MNP LLP | |
| Suite 900, 50 Burnhamthorpe Road W, Mississauga ON, L5B 3C2 | T: 416.626.6000 F: 416.626.8650 |
 |
MNP.ca |
Medicus Pharma Ltd.
Consolidated Statements of Financial Position
(expressed in United States dollars)
| As at | December 31, 2023 |
December 31, 2022 |
|||||
| Notes | $ | $ | |||||
| Assets | |||||||
| Current assets | |||||||
| Cash | 1,719,338 | 267,652 | |||||
| Prepaids | 173,719 | 15,000 | |||||
| Total current assets | 1,893,057 | 282,652 | |||||
| Total assets | 1,893,057 | 282,652 | |||||
| Liabilities | |||||||
| Current liabilities | |||||||
| Accounts payable and accrued liabilities | 781,609 | 99,794 | |||||
| Note payable | 5 | — | 150,000 | ||||
| Convertible promissory notes | 6 | — | 1,381,499 | ||||
| Derivative liability | 6 | — | 774,074 | ||||
| Preferred share liability | 7 | — | 10,075,317 | ||||
| Total current liabilities | 781,609 | 12,480,684 | |||||
| Total liabilities | 781,609 | 12,480,684 | |||||
| Shareholders’ equity (deficiency) | |||||||
| Share capital | 8 | 19,835,839 | 194,538 | ||||
| Contributed surplus | 9 | 146,671 | — | ||||
| Deficit | (18,871,062 | ) | (12,392,570 | ) | |||
| Total shareholders’ equity (deficiency) | 1,111,448 | (12,198,032 | ) | ||||
| Total liabilities and shareholders’ equity (deficiency) | 1,893,057 | 282,652 | |||||
| Commitments and contingencies | 12 | ||||||
| Subsequent events | 16 |
Approved on behalf of the Board:
| "Signed" | "Signed" |
| Director - Robert Ciaruffoli | Director - Frank Lavelle |
The accompanying notes are an integral part of these consolidated financial statements.
Medicus Pharma Ltd.
Consolidated Statements of Loss and Comprehensive Loss
(expressed in United States dollars, except number of shares)
| For the years ended December 31, | |||||||
| 2023 | 2022 | ||||||
| Notes | $ | $ | |||||
| Operating expenses | |||||||
| General and administrative | 2,366,202 | 332,032 | |||||
| Research and development | 193,578 | 646,384 | |||||
| Share-based compensation | 9 | 146,671 | - | ||||
| Total operating expenses | 2,706,451 | 978,416 | |||||
| Loss from operations | (2,706,451 | ) | (978,416 | ) | |||
| Finance expense, net | 6 | 500,579 | 713,966 | ||||
| Listing expense | 4 | 3,271,462 | - | ||||
| Net loss and comprehensive loss for the year | (6,478,492 | ) | (1,692,382 | ) | |||
| Loss per share - basic and diluted | 10 | (0.93 | ) | (0.45 | ) | ||
| Weighted average number of common shares outstanding | 10 | 6,959,018 | 3,769,800 | ||||
| - basic and diluted | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
Medicus Pharma Ltd.
Consolidated Statements of Changes in Shareholders' Equity (Deficiency)
(expressed in United States dollars, except number of shares)
| Common shares | Contributed | Deficit | Total | |||||||||||||
| surplus | ||||||||||||||||
| Notes | # | $ | $ | $ | $ | |||||||||||
| Balance as at December 31, 2022 | 4 | 3,769,800 | 194,538 | - | (12,392,570 | ) | (12,198,032 | ) | ||||||||
| Acquisition of Interactive Capital Partners Ltd. | 4 | 574,941 | 1,149,882 | - | - | 1,149,882 | ||||||||||
| Conversion of preferred shares | 7 | 7,904,731 | 10,506,903 | - | - | 10,506,903 | ||||||||||
| Conversion of promissory notes | 6 | 1,294,447 | 2,724,566 | - | - | 2,724,566 | ||||||||||
| Conversion of note payable | 5 | 54,571 | 150,000 | - | - | 150,000 | ||||||||||
| Common shares issued | 4 | 2,554,975 | 5,109,950 | - | - | 5,109,950 | ||||||||||
| Share-based compensation | 9 | - | - | 146,671 | - | 146,671 | ||||||||||
| Net loss and comprehensive loss for the year | - | - | - | (6,478,492 | ) | (6,478,492 | ) | |||||||||
| Balance as at December 31, 2023 | 16,153,465 | 19,835,839 | 146,671 | (18,871,062 | ) | 1,111,448 | ||||||||||
| Balance as at December 31, 2021 | 3,769,800 | 194,538 | - | (10,700,188 | ) | (10,505,650 | ) | |||||||||
| Net loss and comprehensive loss for the year | - | - | - | (1,692,382 | ) | (1,692,382 | ) | |||||||||
| Balance as at December 31, 2022 | 3,769,800 | 194,538 | - | (12,392,570 | ) | (12,198,032 | ) | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
Medicus Pharma Ltd.
Consolidated Statements of Cash Flows
(expressed in United States dollars)
| For the years ended December 31, | ||||||
| 2023 | 2022 | |||||
| $ | $ | |||||
| Operating activities | ||||||
| Net loss and comprehensive loss for the year | (6,478,492 | ) | (1,692,382 | ) | ||
| Adjustments for non-cash items: | ||||||
| Finance expense, net | 500,579 | 713,966 | ||||
| Share based compensation expense | 146,671 | - | ||||
| Transaction costs | 1,149,882 | - | ||||
| (4,681,360 | ) | (978,416 | ) | |||
| Changes in non-cash working capital balances: | ||||||
| Prepaids | (158,719 | ) | (15,000 | ) | ||
| Accounts payable and accrued liabilities | 681,815 | (63,687 | ) | |||
| Cash flows used in operating activities | (4,158,264 | ) | (1,057,103 | ) | ||
| Financing activities | ||||||
| Proceeds from issuance of convertible promissory notes | 500,000 | 1,096,241 | ||||
| Proceeds from issuance of note payable | - | 150,000 | ||||
| Proceeds from concurrent financing | 5,109,950 | - | ||||
| Cash flows provided by financing activities | 5,609,950 | 1,246,241 | ||||
| Net increase in cash during the year | 1,451,686 | 189,138 | ||||
| Cash, beginning of the year | 267,652 | 78,514 | ||||
| Cash, end of the year | 1,719,338 | 267,652 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(expressed in United States dollars, except number of shares)
1. Nature of business
Medicus Pharma Ltd. (the "Company" or "Medicus Pharma"), formerly Interactive Capital Partners Corporation ("Interactive"), up to the completion of the reverse takeover ("RTO") (Note 4) is a clinical stage, multi-strategy holding company focused on investing in and accelerating novel life sciences and bio-technology companies through FDA approved clinical trials. The Company was incorporated pursuant to the provisions of the Business Corporations Act (Ontario) on April 30, 2008.
The Company's registered office is located at 100 King Street West, Suite 3400, One First Canadian Place, Toronto, Ontario, Canada. The Company trades on the TSX Venture Exchange under the symbol "MDCX".
Business Combination Agreement
On March 17, 2023, as amended on May 12 and August 29, 2023, the Company entered into a Business Combination Agreement ("BCA") with RBx Capital, LP ("RBx") and SkinJect, Inc. ("SkinJect") under which the Company entered into an RTO with SkinJect on September 29, 2023. The RTO transaction included a concurrent financing of $5,109,950. SkinJect converted all its shares of equity and securities convertible into equity into common shares to facilitate the RTO.
Subsidiaries
These consolidated financial statements comprise the results of the Company and its subsidiaries, which are the entities over which the Company has control. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and can affect those returns through its power over the investee.
The Company has the following subsidiaries:
| Ownership percentage as at | |||
| Entity name | Country | December 31, 2023 | December 31, 2022 |
| SkinJect, Inc. | USA | 100% | - |
| Medicus Pharma Inc. | USA | 100% | - |
The Company's wholly owned subsidiaries are focused on the development of a drug delivery system using a dissolvable microneedle array for the treatment of certain skin cancers.
2. Basis of presentation
Statement of compliance
These consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). The policies set out below have been consistently applied to all periods presented, unless otherwise noted.
These consolidated financial statements were approved and authorized for issuance by the Board of Directors of the Company on May 25, 2024.
Basis of measurement
These consolidated financial statements have been prepared on a historical cost basis, except for financial instruments measured at fair value through profit and loss ("FVTPL"). Historical cost is generally based upon the fair value of the consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share- based payment transactions that are within the scope of IFRS 2, Share-based Payment ("IFRS 2").
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(expressed in United States dollars, except number of shares)
Basis of presentation
The accompanying consolidated financial statements include the accounts of Medicus Pharma and its subsidiaries, SkinJect and Medicus Pharma Inc. The consolidated financial statements incorporate the assets and liabilities of the Company and its subsidiaries as at December 31, 2023 and 2022 and the results of these subsidiaries for the years ended December 31, 2023 and 2022.
Subsidiaries are fully consolidated from the date on which control is obtained by the Company. All intercompany balances, transactions, unrealized gains and losses resulting from intercompany transactions and dividends are eliminated on consolidation.
Functional currency and presentation currency
The financial statements of each company within the consolidated group are measured using their functional currency, which is the currency of the primary economic environment in which an entity operates. The Company's functional currency is the United States dollar and the functional currencies of its subsidiaries are as follows:
| Entity name | Currency |
| SkinJect, Inc. | United States Dollar |
| Medicus Pharma Inc. | United States Dollar |
Use of estimates and judgments
The preparation of these consolidated financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities as at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.
Estimates are based on management's best knowledge of current events and actions that the Company may undertake in the future. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The following are the critical judgments, apart from those involving estimations, that management has made in the process of applying the Company's accounting policies and that have the most significant effect on the amounts recognized in the consolidated financial statements:
[i] Going concern
At each reporting period, management assesses the basis of preparation of the consolidated financial statements. These consolidated financial statements have been prepared on a going concern basis in accordance with IFRS. The going concern basis of presentation assumes that the Company will continue its operations for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business.
[ii] Valuation of conversion options
Management measures the value for conversion options related to the convertible promissory note using market- based option valuation techniques. Assumptions are made and estimates are used in applying the valuation techniques. These include estimating the future volatility of the share price, expected dividend yield, expected term and expected risk-free interest rate. Such estimates and assumptions are inherently uncertain. Changes in these assumptions affect the fair value estimates of conversion options.
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(expressed in United States dollars, except number of shares)
[iii] Valuation of share-based payments
Management measures the costs for share-based payments, using market-based option valuation techniques. Assumptions are made and estimates are used in applying the valuation techniques. These include estimating the future volatility of the share price, expected dividend yield, expected term, expected risk-free interest rate and the rate of forfeiture. Such estimates and assumptions are inherently uncertain. Changes in these assumptions affect the fair value estimates of share-based payments.
3. Material accounting policies
[a] Research and Development
The Company expenses research and development costs as incurred, with the exception of development costs for new products with proven technical feasibility and for which a defined future market exists. Such development costs are capitalized if all criteria are met. Research and development costs include outside consulting services and the costs associated with the filing and maintenance of the patent portfolio. The Company has not capitalized any expenditures incurred on research and development activities.
[b] Foreign Currency Translation
Foreign currency transactions are translated into functional currencies at exchange rates in effect on the date of the transactions. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated into functional currencies at the foreign exchange rate applicable at that period-end date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Expenses are translated at the exchange rates that approximate those in effect on the date of the transaction. Realized and unrealized exchange gains and losses are recognized in the consolidated statement of loss and comprehensive loss.
[c] Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) (a) as a result of a past event; (b) when it is more probable than not an outflow of resources embodying economic benefits will be required to settle the obligation; and (c) when a reliable estimate can be made of the amount of the obligation.
[d] Loss per share
The Company presents basic and diluted loss per share data for its common shares. Basic loss per share is calculated by dividing the loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the year.
Diluted loss per share is determined by adjusting the loss attributable to common shareholders and the weighted average number of common shares outstanding, adjusted for the effects of all dilutive potential common shares, which consists of additional shares from the assumed conversion of any dilutive instruments.
[e] Income taxes
Income tax expense comprises of current and deferred tax. Current tax and deferred tax are recognized in net profit or loss except to the extent that it relates to a business combination or items recognized directly in equity or in other comprehensive loss.
Current income taxes are recognized for the estimated income taxes payable or receivable on taxable income or loss for the current year and any adjustment to income taxes payable in respect of previous years. Current income taxes are determined using tax rates and tax laws that have been enacted or substantively enacted by the year- end date.
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(expressed in United States dollars, except number of shares)
Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability differs from its tax base, except for taxable temporary differences arising on the initial recognition of goodwill and temporary differences arising on the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit or loss.
Recognition of deferred tax assets for unused tax losses, tax credits and deductible temporary differences is restricted to those instances where it is probable that future taxable profit will be available against which the deferred tax asset can be utilized. At the end of each reporting period, the Company reassesses unrecognized deferred tax assets.
[f] Financial instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss.
[i] Financial assets
On initial recognition, a financial asset is classified as measured at amortized cost, fair value through other comprehensive income (''FVOCI''), or FVTPL. The classification of financial assets is based on the business model in which a financial asset is managed and its contractual cash flow characteristics. Derivatives embedded in contracts where the host is a financial asset in the scope of the standard are not separated. Instead, the hybrid financial asset as a whole is assessed for classification.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:
• It is held within a business model whose objective is to hold assets to collect contractual cash flows; and
• Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at
FVTPL:
• It is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
• Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment's fair value in other comprehensive income ("OCI"). This election is made on an investment-by-investment basis.
All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(expressed in United States dollars, except number of shares)
A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition.
The following accounting policies apply to the subsequent measurement of financial assets.
| Financial assets at FVTPL | Subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss. |
| Financial assets at amortized cost | Subsequently measured at amortized cost using the effective interest method, less any impairment losses. Interest income, foreign exchange gains and losses and impairment losses are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss. |
| Debt investments at FVOCI | Subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment losses are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss. |
| Equity investments at FVOCI | Subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in OCI and are not reclassified to profit or loss, even upon derecognition. |
[ii] Financial liabilities
The Company initially recognizes financial liabilities at fair value on the date at which the Company becomes a party to the contractual provisions of the instrument.
The Company classifies its financial liabilities as either financial liabilities at FVTPL or other liabilities.
Subsequent to initial recognition, other liabilities are measured at amortized cost using the effective interest method. Financial liabilities at fair value are stated at fair value with changes being recognized in profit or loss.
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire.
[iii] Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by a group entity are recognized at the proceeds received, net of direct issue costs.
Repurchase of the Company's own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company's own equity instruments.
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(expressed in United States dollars, except number of shares)
[iv] Classification of financial instruments
The Company classifies its financial assets and liabilities depending on the purpose for which the financial instruments were acquired, their characteristics and management intent as outlined below:
| Financial assets / liabilities | Classification |
| Cash | Amortized cost |
| Accounts payable and accrued liabilities | Amortized cost |
| Note payable | FVTPL |
| Convertible promissory notes | Amortized cost |
| Derivative liability | FVTPL |
| Preferred share liability | FVTPL |
[v] Impairment of financial assets
Financial assets, other than those classified as FVTPL, incorporate an allowance for expected credit losses.
[g] Share-based compensation
Equity settled awards issued to non-employees are accounted for using the fair value of the instrument awarded or service provided, whichever is considered more reliable. Share options awarded to employees are accounted for using the fair value method. The fair value of the share options granted are recognized as an expense on a proportionate basis consistent with the vesting features of each tranche of the grant. The fair value of share options are calculated using the Black-Scholes option pricing model with assumptions applicable at the date of grant.
New standards, amendments and interpretations recently adopted by the Company
IAS 1 - Presentation of financial statements ("IAS 1")
In January 2020, the IASB issued Classification of Liabilities as Current or Non-current (Amendments to IAS 1). The amendments aim to promote consistency in applying the requirements by helping companies determine whether, in the consolidated statements of financial position, debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current. The amendments include clarifying the classification requirements for debt a company might settle by converting it into equity.
The amendments effective for annual reporting periods beginning on or after January 1, 2024, with earlier application permitted. The Company early adopted these amendments effective January 1, 2023. The impact of adopting these amendments on the Company's consolidated financial statements was not significant.
IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors ("IAS 8")
In February 2021, the IASB issued Definition of Accounting Estimates, which amends IAS 8. The amendment will require the disclosure of material accounting policy information rather than disclosing significant accounting policies and clarifies how to distinguish changes in accounting policies from changes in accounting estimates. Under the new definition, accounting estimates are "monetary amounts in financial statements that are subject to measurement uncertainty". The amendment provides clarification to help entities to distinguish between accounting policies and accounting estimates.
The amendments are effective for annual periods beginning on or after January 1, 2023. The impact of adopting these amendments on the Company's consolidated financial statements was not significant.
IAS 12, Income Taxes ("IAS 12")
In May 2021, the IASB issued Deferred Tax related to Assets and Liabilities arising from a single transaction (Amendments to IAS 12). The amendment narrows the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal taxable and deductible temporary differences. As a result, companies will need to recognize a deferred tax asset and deferred tax liability for temporary differences arising on initial recognition of transactions such as leases and decommissioning obligations.
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(expressed in United States dollars, except number of shares)
The amendments are effective for annual reporting periods beginning on or after January 1, 2023 and are to be applied retrospectively. The impact of adopting these amendments on the Company's consolidated financial statements was not significant.
New standards, amendments and interpretations not yet adopted by the Company
IFRS 16 - Leases ("IFRS 16")
In September 2022, the IASB issued amendments to IFRS 16, Leases, which add to requirements explaining how a company accounts for a sale and leaseback after the date of the transaction.
The amendments are effective for annual reporting periods beginning on or after January 1, 2024. Earlier application is permitted.
All other IFRSs and amendments issued but not yet effective have been assessed by the Company and are not expected to have a material impact on the consolidated financial statements.
4. Reverse takeover transaction
On September 29, 2023, the Company executed the BCA with RBx and SkinJect, pursuant to which Interactive and SkinJect completed the RTO. Effective September 29, 2023, Interactive changed its name to Medicus Pharma Ltd.
On May 12, 2023, as amended on August 29, 2023, the Company entered into a BCA with RBX and SkinJect to combine Interactive and SkinJect via the purchase of SkinJect which constituted a reverse takeover of Interactive by the shareholders of SkinJect. Interactive acquired all of the issued and outstanding SkinJect shares from the SkinJect shareholders and issued to each SkinJect shareholder (other than Interactive) the number of common shares in the capital of the Company as described below. In connection with and as a closing condition of the RTO, Interactive raised aggregate gross proceeds of $5,109,950 through the issuance of 2,554,975 common shares at a price of $2.00 per share.
Pursuant to the terms of the RTO, all outstanding financial instruments of SkinJect were converted into common shares of SkinJect. The SkinJect preferred shares, convertible promissory notes and note payable were converted into 15,423,561 common shares which were then consolidated into 9,253,749 SkinJect common shares on a 1.706721-to-1 basis, with the exception of $1,000,000 of convertible promissory notes, which converted to 523,561 of the Company's common shares on a one-to-one basis. In addition, 6,434,000 original common shares were consolidated on a 1.706721-to-one basis, into 3,769,800 common shares.
Immediately prior to the completion of the RTO, the 7,249,999 Interactive common shares outstanding were consolidated into 574,941 common shares on a 12.609988-to-1 basis.
The substance of the acquisition is a reverse takeover as the shareholders of SkinJect held 80.62% of the resulting issuer shares and Interactive shareholders held 3.56% of the resulting issuer shares. The remaining 15.82% of the resulting issuer shares are held by former holders of Subscription Receipts. Accordingly, for accounting purposes, it was determined that SkinJect was the accounting acquirer and Interactive was the accounting acquiree. As SkinJect was deemed to be the acquirer for accounting purposes, its assets, liabilities and operations since incorporation are included in these consolidated financial statements at their historical carrying values. Interactive's results of operations have been included from September 29, 2023. As a result, the 2022 comparative information included herein is solely that of SkinJect. For simplicity, transactions undertaken by SkinJect are referred to as being undertaken by the Company in these consolidated financial statements. SkinJect incurred $270,419 of legal costs related to the RTO for the years ended December 31, 2023, included in general and administrative expense on the consolidated statements of loss and comprehensive loss.
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(expressed in United States dollars, except number of shares)
As the acquisition of Interactive did not constitute a business combination, the RTO transaction was accounted for in accordance with IFRS 2 - Share-based Payments, whereby equity instruments issued were recognized at fair value. Upon closing of the transaction, the Company assumed liabilities of $2,071,580 in costs incurred by RBx that related to the BCA and RTO. The consideration paid to acquire Interactive consisted of net liabilities assumed of $50,000 and the value of the shares exchanged with Interactive, valued at $1,149,882, which was expensed on completion of the RTO. Total listing expense is as follows:
| $ | |
| Common shares of Interactive - 574,941 at $2.00 per share | 1,149,882 |
| Plus: fair value of net liabilities assumed of Interactive | 50,000 |
| Plus: fair value of net liabilities assumed of RBx | 2,071,580 |
| Listing expense | 3,271,462 |
5. Note payable
On December 6, 2022, SkinJect issued a simple agreement for future equity ("SAFE") to a related party for proceeds of $150,000. In the event of an equity financing greater than $3 million, the SAFE is convertible to preferred shares at the lower of the SAFE valuation cap divided by the capitalization of the Company immediately prior to the equity financing and the lowest price per share sold in the equity financing. The Company has elected to account for the instrument at FVTPL. The fair value of the SAFE upon issuance, and as of December 31, 2022, was determined to be $150,000. The SAFE was redeemed immediately prior to the RTO transaction for 54,571 common shares of SkinJect.
6. Convertible promissory notes and derivative liability
On May 19, 2023, the Company issued a convertible promissory note in the principal amount of $500,000. The convertible promissory note accrued interest at the rate of 8% per annum and had a maturity date of December 31, 2023. At maturity the note was payable in full, including unpaid accrued interest, or the convertible note holder could elect to convert to preferred shares at a price determined by dividing $25,000,000 by the fully diluted outstanding shares at the time of conversion, excluding convertible debt securities, convertible promissory notes and any SAFEs outstanding. In the event of a financing prior to maturity, the outstanding principal and any unpaid accrued interest automatically converts to preferred shares at the lesser of 80% of the price per share paid by other purchasers or the base conversion rate determined by dividing $25,000,000 by fully diluted outstanding shares at the time of conversion, excluding convertible debt securities, convertible promissory notes and any SAFEs outstanding. This conversion results in a potential variable number of shares, and as such the conversion option was accounted for as an embedded derivative liability valued at $110,809 at initial recognition. The conversion option was accounted for at fair value and revalued at each reporting period end. The residual value of the convertible notes was accounted for at amortized cost using the effective interest rate after adjusting for transaction costs.
During prior periods, the Company also issued convertible promissory notes in the principal amount of $2,000,000. The convertible promissory notes accrued interest at the rate of 8% per annum and had a maturity date of December 31, 2023.
At maturity the notes were payable in full, including unpaid accrued interest. Convertible promissory notes in the principal amount of $1,500,000 could be converted into preferred shares at a price of $1.32061. Convertible promissory notes in the principal amount of $1,000,000 could be converted into preferred shares at a price determined by dividing $25,000,000 by the fully diluted outstanding shares at the time of conversion, excluding convertible debt securities, convertible promissory notes and any SAFEs outstanding.
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(expressed in United States dollars, except number of shares)
In the event of a financing greater than $3,000,000 prior to maturity, the outstanding principal of the convertible debentures of $2,500,000 and any unpaid accrued interest automatically converted into preferred shares at the lesser of 80% of the price per share paid by other purchasers or the base conversion rate. This conversion results in a potential variable number of shares being issued on conversion, and as such the conversion options were accounted for as an embedded derivative liability, since they did not meet the criteria for equity classification. The conversion options were accounted for at fair value and were revalued at each reporting period end. The residual value was accounted for at amortized cost using the effective interest rate after adjusting for transaction costs.
The promissory notes were converted immediately prior to the RTO transaction for 1,294,447 common shares of SkinJect.
The changes to the derivative and convertible note liabilities for the years ended December 31, 2023, are as follows:
| Derivative Liability | Convertible Note | Total | |||||||
| Liability | |||||||||
| $ | $ | $ | |||||||
| Balance at December 31, 2022 | 774,074 | 1,381,499 | 2,155,573 | ||||||
| Initial recognition | 110,809 | 389,191 | 500,000 | ||||||
| Accretion | - | 739,096 | 739,096 | ||||||
| Fair value adjustment | (670,103 | ) | - | (670,103 | ) | ||||
| Conversion | (214,780 | ) | (2,509,786 | ) | (2,724,566 | ) | |||
| Balance at December 31, 2023 | - | - | - |
During the years ended December 31, 2023 and 2022, the conversion option values were calculated using the Black-Scholes model with the following inputs:
| December 31, 2023 | December 31,2022 | |
| Grant date share price | $1.15 | $1.15 |
| Exercise price | $1.32 | $1.32 |
| Expected dividend yield | $nil | $nil |
| Risk-free interest rate | 4.01% - 4.83% | 4.07% |
| Expected option life | 0.25 - 0.75 years | 1 year |
| Expected volatility | 68.63 - 95.43% | 101.6% |
Finance expense, net consists of the following for the years ended December 31, 2023 and 2022:
| Years ended December 31, | ||||||
| 2023 | 2022 | |||||
| $ | $ | |||||
| Accretion | 739,096 | 526,825 | ||||
| Transaction fees allocated to embedded derivative liability | - | 3,182 | ||||
| Fair value adjustment | (670,103 | ) | (391,488 | ) | ||
| Dividend expense (Note 8) | 431,586 | 575,447 | ||||
| Finance expense, net | 500,579 | 713,966 | ||||
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(expressed in United States dollars, except number of shares)
7. Preferred share liability
[a] Authorized
The Company had authorized for issuance a combined total of 9,196,069 of Series A and Series A-1 preferred shares with no par value. The preferred shares were convertible at any time at the option of the holder into common shares at the series conversion rate unless there was a recapitalization event, in which case an anti-dilutive effect was triggered. Each share entitled the holder to the number of votes per share equal to the common shares into which the preferred shares converted. Preferred shares had several liquidity event triggers that required conversion to common shares and had liquidation preference over any other classes of shares.
In the event the Company liquidated, dissolved or wound-up the operations, the holders of the preferred shares were entitled to share equally and ratably in the Company's assets, if any, remaining after the payment of all the Company's debts and liabilities and in preference to any common shares that may have then been outstanding.
Holders of preferred shares were entitled to accrue dividends at a dividend rate of 8% of the original issue price per annum, and participated in any dividend declared on common shares, whether or not declared by the Board of Directors. Dividends were payable only when and if declared by the Board of Directors, out of funds, common shares or other property. Dividends were recorded as finance expense in the period in which they were accrued in the statement of loss and comprehensive loss.
The preferred shares were redeemable as of March 30, 2022, at the option of holders that together held at least 75% of the issued and outstanding preferred shares. The redemption price was equal to the original issue price plus any unpaid dividends accrued at the redemption request date. Preferred shares were a hybrid instrument measured at FVTPL. The fair value was classified as level 3 within the fair value hierarchy.
The preferred shares were redeemed immediately prior to the completion of the RTO transaction for 7,904,731 common shares of SkinJect.
[b] Issued and outstanding
Reconciliation of the Company's preferred shares is as follows:
| Series A | Series A-1 | Total | |||||||||||||
| # | $ | # | $ | $ | |||||||||||
| Balance - December 31, 2022 | 7,196,069 | 6,854,222 | 1,893,065 | 3,221,095 | 10,075,317 | ||||||||||
| Dividend accrual and conversion | - | 281,586 | - | 150,000 | 431,586 | ||||||||||
| Conversion of accrued dividends | 3,742,741 | - | 659,299 | - | - | ||||||||||
| Redemption | (10,938,810 | ) | (7,135,808 | ) | (2,552,364 | ) | (3,371,095 | ) | (10,506,903 | ) | |||||
| Balance - December 31, 2023 | - | - | - | - | - | ||||||||||
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(expressed in United States dollars, except number of shares)
8. Share capital
[a] Authorized
The Company has authorized unlimited common shares with no par value. Each holder of common shares is entitled to one vote for each share owned on all matters voted upon by shareholders.
[b] Issued and outstanding
| Common shares | ||||||
| # | $ | |||||
| Balance - December 31, 2022(i) | 3,769,800 | 194,538 | ||||
| Acquisition of Interactive Capital Partners Ltd. (note 4) | 574,941 | 1,149,882 | ||||
| Conversion of preferred shares(ii) | 7,904,731 | 10,506,903 | ||||
| Conversion of promissory notes(ii) | 1,294,447 | 2,724,566 | ||||
| Conversion of note payable(ii) | 54,571 | 150,000 | ||||
| Common shares issued(iii) | 2,554,975 | 5,109,950 | ||||
| Balance - December 31, 2023 | 16,153,465 | 19,835,839 | ||||
(i) Prior to the RTO, SkinJect completed a consolidation of its share capital on a 1.706721-to-1 basis.
(ii) Prior to the RTO, SkinJect redeemed the issued and outstanding preferred shares for 7,904,731 common shares, converted outstanding promissory notes for 1,294,447 common shares and converted the note payable for 54,571 common shares.
(iii) In connection with and as a closing condition of the RTO, the Company raised aggregate gross proceeds of $5,109,950 through the issuance of 2,554,975 common shares at a price of $2.00 per share.
9. Share-based compensation
The Company has established an Equity Incentive Plan (the "Plan") which is administered by the Board of Director's of the Company. Participants under the Plan include directors, officers, employees and consultants of the Company. The Company may issue share options or RSUs under the Plan. Each share option can be exercised into one common share of the Company upon vesting. The Board of Directors determines, among other things, the eligibility of individuals to participate in the Plan, the term and vesting periods, and the exercise price of options granted to individuals under the Plan. The options shall carry neither rights to dividends nor voting rights. Except as otherwise set forth, holders of RSUs may, as determined by the Board of Directors, have the right to receive dividends or other distributions if paid on such shares.
Each share option converts into one common share of the Company on exercise. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. Options typically vest quarterly in equal tranches over four years from the date of grant.
During the year ended December 31, 2023, the Company granted 1,625,000 share options to directors, officers, employees and consultants of the Company (2022 - nil).
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(expressed in United States dollars, except number of shares)
The change in the number of share options outstanding during the year ended December 31, 2023, were as follows:
| Weighted | ||||||
| Number of | average | |||||
| options | exercise price | |||||
| # | C$ | |||||
| Outstanding at December 31, 2022 | - | - | ||||
| Granted | 1,625,000 | 0.58 | ||||
| Outstanding at December 31, 2023 | 1,625,000 | 0.58 | ||||
| Exercisable at December 31, 2023 | 260,000 | 0.58 |
Measurement of fair values
The fair value of share options granted during the year ended December 31, 2023, was estimated at the date of grant using the Black-Scholes option pricing model with the following inputs:
| 2023 | |
| Grant date share price | $0.51 |
| Exercise price | $0.58 |
| Expected dividend yield | $nil |
| Risk-free interest rate | 4.24% |
| Expected option life | 5 years |
| Expected volatility | 93.10% |
The expected volatility is based on the share price volatility observed for comparable publicly traded companies over a period similar to the life of the options. The expected option life represents the period of time that options granted are expected to be outstanding. The risk-free interest rate is based on Canadian government bonds with a remaining term equal to the expected life of the options.
The following table is a summary of the Company's share options outstanding as at December 31, 2023:
| Options outstanding | Options exercisable | |||
| Weighted average | ||||
| Exercise | Number | remaining contractual life | Exercise | Number outstanding |
| price | outstanding | (years) | price | |
| C$ | # | # | C$ | # |
| 0.58 | 1,625,000 | 4.82 | 0.58 | 260,000 |
The Company recognized share-based compensation for the year ended December 31, 2023 of $146,671 (2022-$nil).
10. Loss per share
Net loss per common share represents net loss attributable to common shareholders divided by the weighted average number of common shares outstanding during the period.
Diluted loss per common share is calculated by dividing the applicable net loss by the sum of the weighted average number of common shares outstanding and all additional common shares that would have been outstanding if potentially dilutive common shares had been issued during the period.
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(expressed in United States dollars, except number of shares)
| December 31, 2023 | December 31, 2022 | |||||
| Net loss attributable to shareholders | $ | 6,478,492 | 1,692,382 | |||
| Weighted average number of common shares outstanding during the year | 6,959,018 | 3,769,800 | ||||
| Basic and diluted net loss per share attributable toshareholders | $ | $0.93 | $ | 0.45 |
For all the periods presented, diluted loss per share equals basic loss per share due to the anti-dilutive effect of the note payable, convertible promissory notes, preferred shares and share options. The outstanding number and type of securities that could potentially dilute basic net loss per share in the future but would have decreased the loss per share (anti-dilutive) presented for the years ended December 31, 2023 and 2022 are as follows:
| December 31, 2023 | December 31, 2022 | |||||
| # | # | |||||
| Note payable | 66,551 | |||||
| Convertible promissory notes | - | 915,870 | ||||
| Preferred shares | - | 5,325,493 | ||||
| Share options | 1,625,000 | - | ||||
| Total dilutive shares | 1,625,000 | 6,307,914 |
11. Income taxes
Medicus Parma Ltd intends to be treated as a United States corporation for United States federal income tax purposes under section 7874 of the U.S. Tax Code and is expected to be subject to United States federal income tax. However, for Canadian tax purposes, Medicus Parma Ltd is expected, regardless of any application of section 7874 of the U.S. Tax Code, to be treated as a Canadian resident company (as defined in the Income Tax Act (Canada) (the "ITA") for Canadian income tax purposes. As a result, Medicus Parma Ltd will be subject to taxation both in Canada and the United States.
The reconciliation of income tax expense for the years ended December 31, 2023 and 2022 consists of the following:
| 2023 | 2022 | |||||
| $ | $ | |||||
| Loss before income taxes | (6,478,492 | ) | (1,692,383 | ) | ||
| Statutory rate | 26.50% | 28.89% | ||||
| Income tax recovery at the statutory tax rate | (1,716,800 | ) | (488,965 | ) | ||
| Permanent differences | 1,127,418 | 181,041 | ||||
| Impact of tax rate changes | 437,388 | - | ||||
| Change in tax benefits not recognized | 151,994 | 307,924 | ||||
| - | - |
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(expressed in United States dollars, except number of shares)
Deferred tax assets have not been recognized in respect of the following temporary differences as at December 31, 2023 and 2022:
| 2023 | 2022 | |||||
| $ | $ | |||||
| Non-capital losses carry forward - Canada | 2,119,616 | - | ||||
| Non-capital losses carry forward - US | 9,192,237 | 2,380,000 | ||||
| Intangible assets | 44,564 | - | ||||
| Reserves | 645,854 | 121,000 | ||||
| Capital losses carried forward | 18,902 | - | ||||
| SR&ED credits | 242,190 | 257,000 | ||||
| Total | 12,263,363 | 2,758,000 |
The Company's non-capital income tax losses expire as follows:
| Canada | US | |||||
| $ | $ | |||||
| 2028 | 82 | - | ||||
| 2029 | 47,847 | - | ||||
| 2030 | 84,103 | - | ||||
| 2031 | 114,305 | - | ||||
| 2032 | 47,085 | - | ||||
| 2033 | 50,412 | - | ||||
| 2034 | 25,900 | - | ||||
| 2035 | 34,478 | 212,057 | ||||
| 2036 | 95,546 | 597,321 | ||||
| 2037 | 55,943 | 714,281 | ||||
| 2038 | 60,782 | - | ||||
| 2039 | 124,731 | - | ||||
| 2040 | 89,326 | - | ||||
| 2041 | 134,308 | - | ||||
| 2042 | 116,015 | - | ||||
| 2043 | 1,038,753 | - | ||||
| Indefinite | - | 7,668,578 | ||||
| Total | 2,119,616 | 9,192,237 |
12. Commitment and contingencies
Commitments
As at December 31, 2023, the Company had no long-term commitments.
Contingencies
In the ordinary course of business, from time to time, the Company may be involved in various claims related to operations, rights, commercial, employment or other claims. Although such matters cannot be predicted with certainty, management does not consider the Company's exposure to such claims to be material to these consolidated financial statements.
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(expressed in United States dollars, except number of shares)
13. Related party transactions
The Company had an agreement with Velocity Fund Management, LLC ("VFM"), an affiliate of a shareholder of the Company, that provided for certain managerial positions to be filled from within VFM. These employees were not deemed employees of the Company, and VFM was responsible for the payment and provision of all wages, bonuses, commissions and benefits. Reimbursable salaries paid to VFM were approximately $180,000 during the years ended December 31, 2023 (2022 - $240,000). The total amount of accounts payable to VFM was $nil as of December 31, 2023 (December 31, 2022 - $20,000). This agreement was terminated on September 29, 2023.
In December 2022, Velocity Fund Partners, LP, an affiliate of shareholders' of the Company invested $150,000 in the SAFE issued by the Company (Note 5).
On September 29, 2023, RBx, an entity controlled by the CEO of the Company, invested $1,600,000 in exchange for 800,000 common shares as part of the share issuance in connection with the RTO, and received 523,561 common shares upon conversion of promissory notes. An additional $405,000 was invested by directors and officers of the Company in exchange for 202,500 common shares as part of the share issuance in connection with the RTO (Note 8).
On October 18, 2023, the Company signed an agreement with RBx, that provides for certain managerial positions to be filled from within RBx. RBx is responsible for the payment and provision of all wages, bonuses, and benefits for these positions. Reimbursable salaries paid to RBx pursuant to this agreement are $100,000 per month. Reimbursable salaries paid to RBx were approximately $400,000 during the year ended December 31, 2023 (2022 - $nil). Additional expenses of $736,690 were incurred by RBx on behalf of the Company. The Company paid $970,740 to RBx during the year ended December 31, 2023 (2022 - $nil). The total amount of accounts payable to RBx was $165,950 as of December 31, 2023 (December 31, 2022 - $nil).
Key management personnel compensation during the years ended December 31, 2023 and 2022 comprised:
| December 31, | December 31, | |||||
| 2023 | 2022 | |||||
| $ | $ | |||||
| Salaries and benefits | 585,712 | - | ||||
| Share-based payments | 123,701 | - | ||||
| Total | 709,413 | - |
14. Capital management
The Company's capital management objectives are to maintain financial flexibility in order to pursue its strategy of organic growth and to provide returns to its shareholders. The Company defines capital as the aggregate of its share capital and borrowings. Borrowings consists of the issued and outstanding note payable, convertible promissory notes and preferred share liabilities.
Total managed capital is as follows:
| December 31, 2023 |
December 31, 2022 |
|||||
| $ | $ | |||||
| Borrowings | - | 12,380,890 | ||||
| Share capital | 19,835,839 | 194,538 | ||||
| 19,835,839 | 12,575,428 |
The Company manages its capital structure in accordance with changes in economic conditions. In order to maintain or adjust its capital structure, the Company may elect to issue or repay financial liabilities, issue shares, repurchase shares, pay dividends or undertake any other activities as deemed appropriate under the specific circumstances. The Company is not subject to any externally imposed capital requirements.
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(expressed in United States dollars, except number of shares)
15. Financial instruments and risk management
The Company's financial instruments are exposed to certain risks as summarized below.
Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from deposits with banks and outstanding receivables. The Company does not hold any collateral as security but mitigates this risk by dealing only with what management believes to be financially sound counterparties and, accordingly, does not anticipate significant loss for non- performance.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company's exposure to liquidity risk is dependent on the Company's ability to raise additional financing to meet its commitments and sustain operations. The Company mitigates liquidity risk by management of working capital, cash flows and the issuance of share capital. The Company's trade and other payables are all due within 12 months from the date of these consolidated financial statements.
The Company is obligated to the following contractual maturities of undiscounted cash flows as at December 31, 2023:
| Carrying | Contractual | Year 2 and | ||||||||||
| amount | cash flows | Year 1 | beyond | |||||||||
| $ | $ | $ | $ | |||||||||
| Accounts payable and accrued liabilities | 781,609 | 781,609 | 781,609 | - | ||||||||
| 781,609 | 781,609 | 781,609 | - |
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk.
Currency risk
Currency risk is the risk to the Company's earnings that arises from fluctuations of foreign exchange rates. The Company's primary exposure with respect to foreign currencies is from Canadian dollar denominated trade and other payables. A 1% change in the foreign exchange rates would not result in any significant impact to the consolidated financial statements.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not exposed to interest rate risk as at December 31, 2023.
Other price risk
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Company is not exposed to other price risks as at December 31, 2023.
Medicus Pharma Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
(expressed in United States dollars, except number of shares)
Fair values
The carrying values of cash, notes payable and trade and other payables approximate the fair values due to the short-term nature of these items. The risk of material change in fair value is not considered to be significant due to a relatively short-term nature. The Company does not use derivative financial instruments to manage this risk.
Financial instruments recorded at fair value on the statements of financial position are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The Company categorizes its fair value measurements according to a three-level hierarchy. The hierarchy prioritizes the inputs used by the Company's valuation techniques. A level is assigned to each fair value measurement based on the lowest-level input significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are defined as follows:
• Level 1 - Unadjusted quoted prices as at the measurement date for identical assets or liabilities in active markets.
• Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
• Level 3 - Significant unobservable inputs that are supported by little or no market activity. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The fair value hierarchy requires the use of observable market inputs whenever such inputs exist. A financial instrument is classified to the lowest level of the hierarchy for which a significant input has been considered in measuring fair value. During the year, there were no transfers of amounts between levels.
16. Subsequent events
The Company signed a 42-month lease agreement for office space of approximately 3,500 square feet in West Conshohocken, Pennsylvania. The lease commenced on January 1, 2024. Future minimum rent payments under this lease are approximately $434,000.
On January 18, 2024, the Company announced the listing of its common shares on the Frankfurt Stock Exchange, trading under the symbol "N46".
On January 25, 2024, the Company filed a final short form base shelf prospectus, which allows the Company to offer up to $50,000,000 of common shares, preferred shares, warrants, subscription receipts, debt securities, or units comprised of more than one of the foregoing securities, or any combination thereof, in all of the provinces and territories of Canada over a 25-month period.
The Company completed the first closing of a private placement (the "Private Placement") of its 10.00% Unsecured Convertible Notes due 2025 (the "Notes"). The Company issued $5,172,500 aggregate principal amount of Notes were issued at the first closing on May 3, 2024. The Company may issue additional Notes in one or more further closings, with up to $10,000,000 aggregate principal amount of Notes to be issued and outstanding following completion of the Private Placement.
Units
Each Unit Consisting of
One Common Share
and
One Warrant to Purchase One Common Share
MEDICUS PHARMA LTD.
Units
PRELIMINARY PROSPECTUS
|
Maxim Group LLC |
Brookline Capital Markets |
, 2024
Through and including , 2024 (25 days after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 6. Indemnification of Directors and Officers
Under the Business Corporations Act (Ontario), or the OBCA, the registrant may indemnify a present or former director or officer or a person who acts or acted at the registrant's request as a director or officer, or an individual acting in a similar capacity, of another entity, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by that individual in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of that association with the registrant or other entity; provided that the individual acted honestly and in good faith with a view to the best interests of the registrant or, as the case may be, to the best interests of such other entity and, in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, had reasonable grounds for believing that the individual's conduct was lawful. Such indemnification may be made in connection with a derivative action only with court approval. An individual is entitled to indemnification from the registrant as a matter of right if the individual was not judged by a court or other competent authority to have committed any fault or omitted to do anything that the individual ought to have done and the individual fulfilled the conditions set forth above. Under the OBCA, the registrant may advance money to a director, officer or other individual for the costs, charges and expenses of a proceeding referred to above, but the individual must repay the money if the individual does not fulfil the conditions set forth above.
In accordance with and subject to the OBCA, the by-laws of the registrant provide for indemnification of a director or officer of the registrant, a former director or officer of the registrant, or a person who acts or acted at the registrant's request as a director or officer, or an individual acting in a similar capacity, of another entity, and his heirs and legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of that association with the registrant or other entity, if he acted honestly and in good faith with a view to the best interests of the registrant or, as the case may be, to the best interests of the other entity for which he acted as a director or officer or in a similar capacity at the registrant's request.
The directors and officers of the registrant are covered by directors' and officers' insurance policies.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Securities Act"), may be permitted to directors, officers or persons controlling the Registrant pursuant to the foregoing provisions, the Registrant has been informed that in the opinion of the U.S. Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act, and is therefore unenforceable.
Item 7. Recent Sales of Unregistered Securities
In the prior three years, we have issued and sold the securities described below without registering the securities under the Securities Act. None of these transactions involved any underwriters' underwriting discounts or commissions, or any public offering. We believe that each of the following issuances was exempt from registration under the Securities Act in reliance on Regulation S promulgated under the Securities Act regarding sales by an issuer in offshore transactions, Regulation D under the Securities Act, Rule 701 under the Securities Act or pursuant to Section 4(a)(2) of the Securities Act regarding transactions not involving a public offering.
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The Registrant granted 1,425,000 stock options on October 24, 2023, each having an exercise price of C$0.58 and an expiry date of October 24, 2028.
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The Registrant granted 200,000 stock options on April 1, 2024, with exercise prices ranging from C$2.40 to C$2.42 and each having an expiry date of April 1, 2029.
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The Registrant issued $5,172,500 aggregate principal amount of 2025 Convertible Notes on May 3, 2024.
Item 8. Exhibits and Financial Statement Schedules
(a) The Exhibit Index is hereby incorporated herein by reference.
(b) Financial Statement Schedules.
All schedules have been omitted because they are not required, are not applicable or the information is otherwise set forth in the Financial Statements and related notes thereto.
Item 9. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the United States Securities and Exchange Commission ("SEC") such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(a) To provide the underwriters at the closing specified in the Underwriting Agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
(b) That for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(c) That for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Toronto, Ontario, Canada on this 28th day of May, 2024.
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MEDICUS PHARMA LTD. |
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By: |
/s/ Raza Bokhari |
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Name: Dr. Raza Bokhari Title: Executive Chairman and Chief Executive Officer |
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POWERS OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dr. Raza Bokhari or James Quinlan, or any of them, with full power to act alone, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments or supplements to this registration statement, whether pre-effective or post-effective, including any subsequent registration statement for the same offering which may be filed under Rule 462(b) under the Securities Act and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the SEC, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing necessary to be done, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his substitute, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney may be executed in multiple counterparts, each of which shall be deemed an original, but which taken together shall constitute one instrument.
Pursuant to the requirements of the Securities Act, this registration statement on Form F-1 has been signed by the following persons in the capacities and on the dates indicated below.
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Signature |
Title |
Date |
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/s/ Raza Bokhari |
Executive Chairman and Chief Executive Officer |
May 28, 2024 |
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Dr. Raza Bokhari |
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/s/ James Quinlan |
Chief Financial Officer |
May 28, 2024 |
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James Quinlan |
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/s/ Larry Kaiser |
Director |
May 28, 2024 |
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Dr. Larry Kaiser |
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/s/ Robert J. Ciaruffoli |
Director |
May 28, 2024 |
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Robert J. Ciaruffoli |
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/s/ Frank Lavelle |
Director |
May 28, 2024 |
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Frank Lavelle |
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/s/ William L. Ashton |
Director |
May 28, 2024 |
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William L. Ashton |
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/s/ Barry Fishman |
Director |
May 28, 2024 |
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Barry Fishman |
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AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of Section 6(a) of the Securities Act, the undersigned has signed this registration statement solely in the capacity of the duly authorized representative of Medicus Pharma Ltd. in the United States on
May 28, 2024.
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MEDICUS PHARMA, INC.
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By: |
/s/ Raza Bokhari |
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Name: Dr. Raza Bokhari Title: Chief Executive Officer |
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EXHIBIT INDEX
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Exhibit No. |
Description |
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1.1* |
Form of Underwriting Agreement |
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Articles of Amendment of Medicus Pharma Ltd., as in effect prior to this offering. |
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Bylaws of Medicus Pharma Ltd., as in effect prior to this offering. |
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| 4.2* | Form of Warrant Agreement |
| 4.3* | Form of Warrant |
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5.1* |
Opinion of Bennett Jones LLP |
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Employment Agreement, dated December 2, 2023, by and between Medicus Pharma Ltd. and James P Quinlan |
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Employment Agreement, dated March 5, 2024, by and between Medicus Pharma Ltd. and Erica Monaco |
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Employment Agreement, dated May 23, 2024, by and between Medicus Pharma Ltd. and Edward Brennan |
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23.2* |
Consent of Bennett Jones LLP (included in Exhibit 5.1) |
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Powers of Attorney (included in the signature page to this Registration Statement) |
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________________________
* To be filed by amendment.
+ Indicates a management contract or compensatory plan.
# Schedules and certain other private or confidential information (as indicated therein) have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish supplementally copies of any of the omitted schedules upon request by the SEC.
† Certain private or confidential information (as indicated therein) have been redacted pursuant to Item 601(a)(6) of Regulation S-K.
EXECUTION VERSION
AMENDED AND RESTATED BUSINESS COMBINATION AGREEMENT
RBX CAPITAL LP
AND
SKINJECT, INC.
AND
THE SHAREHOLDERS OF SKINJECT, INC.
AND
INTERACTIVE CAPITAL PARTNERS CORPORATION
MAY 12, 2023
TABLE OF CONTENTS
TABLE OF CONTENTS
(continued)
ii
TABLE OF CONTENTS
(continued)
iii
AMENDED AND RESTATED BUSINESS COMBINATION AGREEMENT
THIS AMENDED AND RESTATED BUSINESS COMBINATION AGREEMENT (this "Agreement") is made as of the 12th day of May, 2023.
AMONG:
RBX Capital LP, a limited partnership existing under the laws of Delaware ("RBX");
AND
SKINJECT INC., a corporation existing under the laws of Pennsylvania ("Skinject");
AND
THE SHAREHOLDERS OF SKINJECT
AND
INTERACTIVE CAPITAL PARTNERS CORPORATION, a corporation existing under the laws of Ontario ("Purchaser")
WHEREAS, subject to the terms and conditions hereof, the Purchaser wishes to acquire the businesses of Skinject pursuant to the Business Combination (as hereinafter defined) whereby, upon the completion of the Business Combination in the manner described herein, Skinject will become a wholly owned subsidiary of the Purchaser; and
WHEREAS the parties intend that, for U.S. federal income tax purposes, the Merger (as hereinafter defined) is intended to qualify as a "reorganization" pursuant to Section 368(a) of the Code (as hereinafter defined), the Amalgamation (as hereinafter defined) and the dissolution of Amalco (as hereinafter defined), taken together, are intended to qualify as a "reorganization" pursuant to Section 368(a) of the Code, that each of the Purchaser, Subco 1 (as hereinafter defined), Skinject and Finco are "parties to a reorganization" within the meaning of Section 368(b) of the Code, this Agreement shall constitute a "plan of reorganization" within the meaning of Treasury Regulation (as hereinafter defined) Section 1.368-2(g) and immediately following the Effective Time (as hereinafter defined) the Purchaser shall be treated as a U.S. domestic corporation under Section 7874(b) of the Code; and
WHEREAS the Parties wish to make certain representations, warranties, covenants and agreements in connection with the Business Combination; and
WHEREAS RBX, Skinject, and the Vendors entered into the Business Combination Agreement (as hereinafter defined) in respect of the Business Combination; and
WHEREAS the Parties wish to amend and restate the Business Combination Agreement as set forth herein.
NOW THEREFORE in consideration of the premises and the covenants, agreements, representations and warranties herein, the sufficiency of which is hereby acknowledged, the Parties covenant and agree as follows:
ARTICLE 1
INTERPRETATION
1.1 Defined Terms
As used in this Agreement, the following terms have the following meanings:
"Affiliate" has the meaning ascribed to such term in National Instrument 45-106 - Prospectus Exemptions of the Canadian Securities Administrators.
"Alternative Transaction" means, with respect to Skinject, other than the Business Combination, an agreement which constitutes, or may reasonably be expected to lead to (in either case whether in one transaction or a series of transactions): (i) a direct or indirect acquisition from Skinject or from its shareholders of 5% or more of the voting securities of Skinject; (ii) a direct or indirect acquisition of assets of Skinject representing 5% or more of the book value (on a consolidated basis) of Skinject; (iii) an amalgamation, arrangement, merger, or consolidation involving Skinject; (iv) any take-over bid, issuer bid, exchange offer, recapitalization, liquidation, dissolution, reorganization or similar transaction involving Skinject; or (v) any other transaction, the consummation of which would or could reasonably be expected to impede, interfere with, prevent or delay the transactions contemplated by this Agreement or which would or could reasonably be expected to materially reduce the benefits under this Agreement or the Business Combination.
"Amalco" has the meaning specified in Section 3.4.
"Amalco Shares" means the common shares in the capital of Amalco.
"Amalgamation" has the meaning specified in Section 3.4.
"Applicable Canadian Securities Laws" means, collectively, all applicable securities Laws of the provinces of Canada, and the respective rules and regulations under such Laws together with applicable published instruments, notices and Orders of the securities regulatory authorities in such provinces.
"Applicable Securities Laws" means, collectively, all applicable securities Laws and the respective rules and regulations under such Laws together with applicable published instruments, notices and Orders of the applicable securities regulatory authorities.
"Authorization" means, with respect to any Person, any Order, Permit, approval, waiver, licence or similar authorization of any Governmental Authority having jurisdiction over the Person, including the approval of the TSX-V.
"BCBCA" means the Business Corporations Act (British Columbia).
"Board and Management Changes" means the board and management appointments set forth in Section 3.8.
"Books and Records" means, in respect of a body corporate or similar entity, all of such entity's books of account, tax records, business reports, plans and projections and all other documents, files, correspondence and other similar information (whether in written, printed, electronic or computer printout form).
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"Business Combination" means the completion of the steps set out in Sections 3.1 - 3.4 (inclusive) on the basis set out in this Agreement.
"Business Combination Agreement" means the business combination agreement entered into by RBX, Skinject and the Vendors dated March 17, 2023;
"Business Day" means any day of the year, other than a Saturday or Sunday, on which banks are open for commercial banking business in the Commonwealth of Pennsylvania, the Province of Ontario and the Province of British Columbia.
"Capitalization Spreadsheet" means the capitalization table attached to this Agreement as Schedule "C", which capitalization table may thereafter be amended from time to time by Skinject at any time up to five (5) Business Days prior to the Effective Date, provided that the aggregate number of Resulting Issuer Shares to be issued to Skinject Shareholders in the Merger shall not be changed by any such amendments and that the proportion of Resulting Issuer Shares to be issued to RBX or any affiliate of RBX, relative to the aggregate number of Resulting Issuer Shares to be issued to Skinject Shareholders, shall not be reduced by any such amendments without the prior written consent of RBX.
"CDS" means CDS Clearing & Depository Services Inc.
"Claim" includes claims, demands, complaints, grievances, actions, applications, suits, causes of action, Orders, charges, indictments, prosecutions or other similar processes, assessments or reassessments, judgments, debts, liabilities, penalties, fines, expenses, costs, damages or losses, contingent or otherwise, whether liquidated or unliquidated, matured or unmatured, disputed or undisputed, contractual, legal or equitable, including punitive damages, loss of value, professional fees, including fees and disbursements of legal counsel on a full indemnity basis, and all costs incurred in investigating or pursuing any of the foregoing or any proceeding relating to any of the foregoing.
"Closing" means the completion of the Business Combination as contemplated in this Agreement.
"Closing Date" means on or about June 30, 2023 or such other date agreed upon by the Parties in writing on which the Closing will occur.
"Closing Time" means 10:00 a.m. (Toronto time) on the Closing Date, or such other time on the Closing Date as the Parties may agree in writing as the time at which the Closing shall take place.
"Code" means the U.S. Internal Revenue Code of 1986, as amended.
"Concurrent Financing" means the private placement of Subscription Receipts in connection with the Business Combination, for aggregate gross proceeds of $6,000,000 to $12,000,000 (inclusive of the Skinject 2022 Convertible Notes purchased by RBX and any financing provided to Purchaser by RBX or any of its affiliates).
"Contract" means any contract, agreement, license, franchise, lease, arrangement, commitment, understanding, joint venture, partnership or other right or obligation (written or oral) to which a Party or any of its subsidiaries is a party or by which it or any of its subsidiaries is bound or affected or to which any of their respective properties or assets is subject.
"Conversion Agreement" means an agreement to be entered into by Skinject, the holders of Skinject Convertible Notes and the holders of Skinject Preferred Shares, which will provide for the conversion of the Skinject Convertible Notes and the Skinject Preferred Shares into Skinject Common Shares immediately prior to the Merger.
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"Corporate Records" means, in respect of a body corporate or similar entity, all of the entity's corporate records and minute books, including: (i) all articles, by-laws, charter documents or similar constating documents; (ii) all minutes of meetings and resolutions of shareholders and directors (and any committees); (iii) the registers of directors and officers; and (iv) the central securities register.
"Data Room" means the documents and other materials made available by Skinject to the other Parties through a data room maintained by Skinject, in order to allow RBX and the Purchaser to conduct their due diligence with respect to the Business Combination.
"Declaration" means a declaration in the form of Schedule "B".
"Default" has the meaning specified in Section 9.1.
"Defaulting Party" has the meaning specified in Section 9.1.
"Discloser" has the meaning specified in Section 7.2(c).
"Disclosure Schedule" means the schedule attached as Schedule "A".
"Draft Skinject Financial Statements" means a draft of the audited consolidated financial statements of Skinject for the financial years ended December 31, 2021 and December 31, 2022, and any notes thereto prepared in accordance with IFRS.
"Effective Date" has the meaning specified in Section 3.2(c).
"Encumbrance" means any encumbrance of any kind whatever and includes any pledge, lien, charge, security interest, lease, title retention agreement, mortgage, hypothec, restriction, royalty, right of first refusal, pre-emptive right, development or similar agreement, option or adverse Claim or encumbrance of any kind or character whatsoever or howsoever arising, and any right or privilege capable of becoming any of the foregoing.
"Finco" has the meaning specified in Section 2.5.
"Finco Compensation Warrants" means warrants to acquire securities of Finco granted as compensation pursuant to the Concurrent Financing.
"Finco Share" has the meaning specified in Section 2.5.
"Finco Shareholders" means all of the registered and beneficial owners of Finco Shares.
"Governmental Authority" means: (i) any multinational, federal, provincial, territorial, state, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, board, ministry bureau, agency or entity, domestic or foreign; (ii) any stock exchange, including the TSX-V; (iii) any subdivision, agent, commission, board or authority of any of the foregoing; or (iv) any quasi-governmental or private body, including any tribunal, commission, regulatory agency or self-regulatory organization, exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing.
"IFRS" means International Financial Reporting Standards.
4
"Intellectual Property" means all (i) patents, applications for patents and reissues, divisions, continuations, renewals, extensions and continuations-in-part of patents or patent applications; (ii) proprietary and non-public business information, including inventions, invention disclosures, improvements, discoveries, trade secrets, know-how, methods, processes, designs, technology, technical data, schematics and documentation relating to any of the foregoing; (iii) trade names, business names, corporate names, domain names, website names and world wide web addresses, common law trade-marks, trade-mark registrations, trade-mark applications, trade dress and logos, and the goodwill associated with any of the foregoing; (iv) computer software and programs; and (v) all other intellectual property, whether registered or not.
"Interim Period" means the period between the close of business on the date of this Agreement and the Closing.
"Joinder Agreement" means either (a) the Joinder Agreement of a Non-U.S. Vendor, or (b) the Joinder Agreement of a U.S. Vendor, as applicable, delivered by each Vendor, each in form and substance reasonably satisfactory to RBX.
"Law" or "Laws" means all laws (including common law), by-laws, statutes, rules, regulations, principles of law and equity, Orders, rulings, ordinances, judgements, injunctions, determinations, awards, decrees or other requirements, whether domestic or foreign, and the terms and conditions of any Permit of or from any Governmental Authority or self-regulatory authority (including any stock exchange including the TSX-V), and the term "applicable" with respect to such Laws and in a context that refers to a Party, means such Laws as are applicable to such Party and/or its subsidiaries or their business, undertaking, property or securities and emanate from a Person having jurisdiction over the Party and/or its subsidiaries or its or their business, undertaking, property or securities.
"Legal Proceeding" means any litigation, hearing, Claim, grievance, arbitration or administrative proceeding or other proceeding or dispute resolution process and includes any appeal or review and any application for same.
"Listing Application" means the formal listing application of the Purchaser to be prepared in accordance with the requirements of the policies of the TSX-V and filed with the TSX-V in connection with the Business Combination, including a copy of the non-offering prospectus of the Purchaser prepared in accordance with the requirements of Applicable Canadian Securities Laws.
"Material Adverse Change" means, with respect to each of the Purchaser and Skinject, any event, change, circumstance or effect (any such item, an "Effect"), either individually or in the aggregate, that is or is reasonably likely to have a material and adverse effect on its business, operations, results of operations, properties, assets (tangible or intangible), liabilities (including any contingent liabilities), prospects, or condition (financial or otherwise), or its subsidiaries, if any, and on its ability to perform its obligations under this Agreement on a timely basis or to consummate the Business Combination on a timely basis; provided, however, that in no event shall any of the following be deemed, either alone or in combination, to constitute, nor shall any of the following be taken into account in determining whether there has been, a Material Adverse Change with respect to each of Skinject and the Purchaser: (i) any Effect related to the actions of or the public announcement or pendency of the Business Combination; (ii) any Effect that results from any action taken pursuant to or in accordance with this Agreement or any action taken, or any failure to take action, to which has been consented to in writing by the other Parties; (iii) any Effect that results from general currency exchange, securities or commodity market conditions; or (iv) any Effect that results from changes in general economic or financial conditions or general changes in the applicable industry including economic, legal or regulatory changes, except to the extent that such Effect adversely affects each of Skinject or the Purchaser, as applicable, to a materially greater extent than it affects other entities in the same industry operating under the same economic, legal and regulatory framework.
5
"Material Fact" means a fact that would reasonably be expected to have a significant effect on the value of the Skinject Shares, the Purchaser Shares or the Resulting Issuer Shares, as applicable.
"Merger" has the meaning specified in Section 3.2.
"Name Change" means the change of the Purchaser's name to "Medicus Pharma", or such other name designated by RBX and Skinject that is acceptable to the regulatory authorities.
"Non-Defaulting Party" has the meaning specified in Section 9.1.
"Non-U.S. Vendor" means a Vendor that is not a U.S. Person.
"Non-Vendor Parties" means, collectively, Skinject and Purchaser, and "Non-Vendor Party" means any one of them.
"Order" means any order (including any judicial or administrative order and the terms of any administrative consent), judgement, injunction, decree, ruling or award of any court, arbitrator or Governmental Authority.
"Ordinary Course" means, with respect to an action taken by a Person, that such action is consistent with the past practice of the Person and is taken in the ordinary course of the normal day-to-day business and operations of the Person.
"Parties" means RBX, Skinject, the Vendors and Purchaser, and each such Party's successors and permitted assigns and "Party" means any one of them.
"Permit" means any license, permit, certificate, consent, Order, grant, approval, agreement, classification, restriction, registration or other authorization of, from or required by any Governmental Authority.
"Person" shall be broadly interpreted and includes any individual, sole proprietorship, partnership, limited partnership, firm, unincorporated association, unincorporated organization, syndicate, trust, joint venture, body corporate, Governmental Authority, and any other entity or organization of any nature whatsoever, and includes any of the foregoing when they are acting as trustee, executor, administrator or other legal representative.
"Purchaser Approvals" means a resolution approving the Business Combination, the Purchaser Incentive Plan, the Board and Management Changes, the Name Change and such other ancillary matters as may be reasonably requested by RBX or Skinject.
"Purchaser Incentive Plan" means a 10% rolling equity incentive plan of the Purchaser which provides for the issuance of options and restricted stock units.
"Purchaser Securities Documents" has the meaning specified in Section 6.10(a).
"Purchaser Shares" means the common shares of the Purchaser.
"Purchaser Subsidiaries" has the meaning specified in Section 2.4(a)(ii).
6
"Purchaser Subsidiaries Shares" has the meaning specified in Section 6.6(c).
"Recipient" has the meaning specified in Section 7.2(c).
"Regulation S" means Regulation S under the U.S. Securities Act.
"Resulting Issuer" means the Purchaser following the Closing of the Business Combination.
"Resulting Issuer Registrar and Transfer Agent" means any Person which may be appointed as registrar and transfer agent of the Resulting Issuer from time to time.
"Resulting Issuer Shares" means the Resulting Issuer Shares following the Closing of the Business Combination.
"SEDAR" means the System for Electronic Document Analysis and Retrieval of the Canadian Securities Administrators.
"Skinject 2021 Convertible Notes" means the outstanding convertible promissory notes of Skinject in the aggregate principal amount of $1,500,000 issued pursuant to the Convertible Note Purchase Agreement between Skinject and certain purchasers dated July 15, 2021, as amended on January 1, 2022.
"Skinject 2022 Convertible Notes" means the convertible promissory notes of Skinject issued pursuant to the Convertible Note Purchase Agreement between Skinject and RBX dated December 6, 2022, of which an aggregate principal amount of $500,000 has been issued as of the date of this Agreement and $500,000 more may be issued pursuant to Section 2.1(c).
"Skinject 2022 SAFE" means the outstanding Amended and Restated simple agreement for future equity of Skinject in the aggregate principal amount of $150,000 issued to Velocity Fund Partners, LP originally issued on December 6, 2022, as amended, amended and restated, or otherwise modified from time to time.
"Skinject Articles" means the articles of incorporation, as amended, of Skinject.
"Skinject Common Shares" means shares of common stock of Skinject.
"Skinject Convertible Notes" means the Skinject 2021 Convertible Notes and the Skinject 2022 Convertible Notes.
"Skinject Financial Statements" means (i) the audited consolidated financial statements of Skinject for the financial years ended December 31, 2021 and December 31, 2022, and the notes thereto prepared in accordance with IFRS, and (ii) the reviewed interim consolidated financial statements of Skinject for the three months ended March 31, 2022 and March 31, 2023, and the notes thereto prepared in accordance with IFRS.
"Skinject Intellectual Property" means the Intellectual Property owned by or purported to be owned by, used by or held for use by, or licensed to Skinject.
"Skinject IP Schedule" has the meaning specified in Section 5.26(b).
"Skinject Material Contracts" has the meaning specified in Section 5.19.
7
"Skinject Merger Agreement" means the merger agreement to be executed by the Purchaser, Skinject and Subco 1 in connection with the execution of this Agreement in a form acceptable to the Parties.
"Skinject Preferred Shares" means shares of preferred stock of Skinject.
"Skinject Shareholders" means all of the registered and beneficial owners of Skinject Shares.
"Skinject Shares" means the Skinject Common Shares and the Skinject Preferred Shares.
"Subco 1" has the meaning specified in Section 2.4(a).
"Subco 2" has the meaning specified in Section 2.4(a).
"Subscription Receipts" has the meaning specified in Section 2.5(a).
"Tax Act" means the Income Tax Act (Canada), as may be amended from time to time.
"Tax Return(s)" includes all returns, reports, declarations, elections, notices, filings, forms, statements and other documents (whether in tangible, electronic or other form) and including any amendments, schedules, attachments, supplements, appendices and exhibits thereto, made, prepared, filed or required to be made, prepared or filed by law in respect of Taxes.
"Taxes" includes any taxes, duties, fees, premiums, assessments, imposts, levies and other charges of any kind whatsoever imposed by any Governmental Authority, including all interest, penalties, fines, additions to tax or other additional amounts imposed by any Governmental Authority in respect thereof, and including those levied on, or measured by, or referred to as, income, gross receipts, profits, capital, transfer, land transfer, sales, goods and services, harmonized sales, use, value-added, excise, stamp, withholding, business, franchising, property, development, occupancy, employer health, payroll, employment, health, social services, education and social security taxes, all surtaxes, all customs duties and import and export taxes, countervail and anti-dumping duties, all license, franchise and registration fees and all employment insurance, health insurance and government pension plan premiums or contributions.
"Termination Date" means July 15, 2023.
"Treasury Regulations" means the United States Treasury Regulations promulgated under the Code.
"TSX-V" means the TSX Venture Exchange.
"U.S. Person" means a "U.S. Person" as defined in Rule 902(k) of Regulation S.
"U.S. Securities Act" means the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated from time to time thereunder.
"U.S. Vendor" means a Vendor that is a U.S. Person.
"Vendors" means the Skinject Shareholders who deliver the applicable Joinder Agreement and "Vendor" means any one of them.
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1.2 References
The terms "Articles" and "Section" followed by a number and the terms "Schedule" and "Recital" followed by a letter refer to the specified Article, Section, Schedule or Recital in this Agreement unless otherwise expressly stated or the context otherwise requires.
1.3 Headings, etc.
The division of this Agreement into Articles, Sections and Schedules and the insertion of headings are for convenience and reference only and shall not affect in any way the meaning or interpretation of this Agreement.
1.4 Included Words
Words importing the singular number only will include the plural and vice versa where the context requires. Words importing a gender include all genders.
1.5 Currency
All statements or references to dollar amounts in this Agreement are references to U.S. Dollars.
1.6 Including
Where the word "including" or "includes" is used in this Agreement, it means "including (or includes), without limitation".
1.7 Statutory References
Unless otherwise specified, any reference in this Agreement to a statute includes all regulations, rules and policies made pursuant to such statute and, unless otherwise specified, the provisions of any statute or regulation which amends, supplements, supersedes or replaces any such statute, regulation, rule or policy.
1.8 Knowledge
Any reference to the knowledge of Skinject or the Purchaser, as applicable means the knowledge of its named officers.
1.9 Schedules
The schedule attached to and forming part of this Agreement is as follows:
Schedule "A" - Disclosure Schedule
Schedule "B" - Declaration
Schedule "C" - Capitalization Spreadsheet
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ARTICLE 2
ACTIVITIES PRIOR TO CLOSING
2.1 Corporate Governance Activities
The following shall occur prior to the Closing Date:
(a) RBX shall use commercially reasonable efforts to, by May 1, 2023: (i) provide Skinject with a term sheet that reflects the terms of the proposed Concurrent Financing, and (ii) provide Skinject with a capitalization table that reflects the expected capitalization of the Resulting Issuer.
(b) Provided that (i) the proposed capitalization table assigns a value not more than $1.2 million (on a cash free, debt free basis) to the Purchaser, (ii) the Concurrent Financing is priced at an enterprise valuation of at least $25,000,000, on a fully diluted, pre-money basis, or otherwise on pricing terms acceptable to the Parties, and (iii) the proposed capitalization table provided pursuant to Section 2.1(a) is consistent with the foregoing clauses of this Section 2.1(b), then RBX shall purchase an additional $500,000 Skinject 2022 Convertible Note within five (5) Business Days after the date hereof.
(c) Skinject shall within five (5) Business Days after the date hereof: (i) obtain a written consent and/or voting proxies of the Skinject Shareholders approving this Agreement and the Business Combination; (ii) execute a written resolution of the board of directors approving the Business Combination and all other matters, agreements and documents contemplated herein and the execution and delivery of this Agreement and the performance of its obligations hereunder; (iii) prepare and deliver the Skinject Financial Statements; (iv) take such steps as may be necessary to cause the Skinject Convertible Notes, the Skinject 2022 SAFE and the Skinject Preferred Shares to be converted into Skinject Common Shares pursuant to the Conversion Agreement prior to the consummation of the Merger.
(d) Purchaser shall obtain the Purchaser Approvals.
2.2 Concurrent Financing & TSX-V
Following the signing of this Agreement, the Purchaser, RBX and Skinject shall use commercially reasonable efforts to: (i) complete the Concurrent Financing; and (ii) make all necessary submissions to the TSX-V in connection with the Business Combination.
2.3 Conversion of the Skinject Convertible Notes, Skinject 2022 SAFE and Skinject Preferred Shares
Skinject shall take such actions as may be necessary to cause all Skinject Convertible Notes, the Skinject 2022 SAFE and all Skinject Preferred Shares to convert into Skinject Common Shares immediately prior to the Merger, in each case pursuant to the terms of the Conversion Agreement.
2.4 Purchaser Subsidiaries
(a) Following the signing of this Agreement, the Purchaser shall incorporate the following wholly owned subsidiaries:
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(i) a corporation incorporated under the laws of Delaware or Pennsylvania and having such name as may be determined by the Purchaser, acting reasonably ("Subco 1"); and
(ii) a corporation incorporated under the laws of British Columbia and having a numbered name or such other name as may be determined by the Purchaser, acting reasonably ("Subco 2", and together wih Subco 1, the "Purchaser Subsidiaries");
(b) The organization of Subco 1 shall be as follows:
(i) Registered Office. The registered office shall be in Pennsylvania or Delaware.
(ii) Authorized Capital. The authorized capital shall consist of 1,000 shares of common stock;
(iii) Restrictions on Share Transfer: The transfer of common shares of Subco 1 shall not be subject to any restrictions.
(iv) Number of Directors. The minimum number of directors shall be one and the maximum number of directors shall be ten.
(v) First Director and Officer. The initial number of directors shall be one. The first director and officer shall be Dr. Raza Bokhari.
(c) The organization of Subco 2 shall be as follows:
(i) Registered Office. The registered office shall be situated at 666 Burrard Street, Suite 2500, Vancouver, British Columbia, V6C 2X8.
(ii) Authorized Capital. The authorized capital shall consist of an unlimited number of common shares;
(iii) Restrictions on Share Transfer: The transfer of common shares of Subco 2 shall not be subject to any restrictions.
(iv) Number of Directors. The minimum number of directors shall be one and the maximum number of directors shall be ten.
(v) First Director and Officer. The initial number of directors shall be one. The first director and officer shall be Dr. Raza Bokhari.
2.5 Concurrent Financing
(a) It is contemplated that the Concurrent Financing will be conducted by way of a subscription receipt financing, whereby a special purpose entity will be incorporated ("Finco") and certain investors will invest cash for subscription receipts (the "Subscription Receipts") of Finco, with each Subscription Receipt representing the right of the holder thereof to receive, immediately prior to Closing, one (1) common share of Finco (a "Finco Share"), without any further act or formality, and for no additional consideration.
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(b) On Closing, as a result of the Amalgamation, the holders of Finco Shares will receive Resulting Issuer Shares on the basis of a one-for-one share exchange ratio, without any further act or formality, and for no additional consideration.
(c) The Parties agree and covenant to assist each other and any agents with respect to the Concurrent Financing and approve the entering into of a subscription receipt agreement or other similar agreement with respect to the Concurrent Financing on terms acceptable to RBX, Skinject and the Purchaser, each acting reasonably.
(d) Notwithstanding the foregoing, the Parties understand and agree that the Concurrent Financing may occur in a different manner and on different terms than as described in this Section 2.5, provided that such manner and terms are reasonably acceptable to the Parties.
2.6 Listing Application
(a) Promptly after the execution of this Agreement, the Purchaser and Skinject shall jointly prepare and complete the Listing Application together with any other documents required by applicable laws and the rules and policies of the TSX-V in connection with the Business Combination, and Purchaser shall, as promptly as reasonably practicable after obtaining the approval of the TSX-V as to the final Listing Application, file such final Listing Application on SEDAR, if required.
(b) Each Party shall furnish to the other Parties all such information as may be reasonably required by a party in the preparation of the Listing Application and other documents related thereto, and the Party supplying such information shall ensure that it does not contain any untrue statement of a Material Fact or omit to state a Material Fact required to be stated therein in order to make any information so furnished not misleading in light of the circumstances in which it is disclosed.
(c) Each Party shall promptly notify the other parties if, at any time before the Closing, a Party becomes aware that the Listing Application contains an untrue statement of a Material Fact or omits to state a Material Fact required to be stated therein or necessary to make the statements contained therein not misleading in light of the circumstances in which they are made, or that otherwise requires an amendment or supplement to the Listing Application and the Parties shall co-operate in the preparation of any amendment or supplement as required or as appropriate.
ARTICLE 3
BUSINESS COMBINATION
3.1 Purchaser Articles
The Parties agree that Purchaser shall take all necessary steps to complete and file articles of amendment under the BCBCA, in its prescribed form, giving effect to the Name Change and the Board and Management Changes, as applicable, and shall take all necessary steps to give effect thereto.
3.2 Merger of Skinject and Subco 1
(a) Skinject, the Purchaser and Subco 1 shall enter into the Skinject Merger Agreement and shall effect the reverse triangular merger set forth in the Skinject Merger Agreement in accordance with this Section 3.2 (the "Merger").
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(b) On the Effective Date, Skinject and Subco 1 shall jointly complete and file an executed Articles of Merger meeting the requirements of the Pennsylvania Business Corporation Law with the Department of State of the Commonwealth of Pennsylvania (the "Articles of Merger").
(c) Upon the filing of the Articles of Merger giving effect to the Merger, Subco 1 shall be merged with and into Skinject and Skinject shall continue as the surviving entity of such merger on the date of the Merger (the "Effective Date") under the terms and conditions prescribed in the Skinject Merger Agreement.
(d) At the Effective Time and in connection with the Merger:
(i) Subject to the rights of dissenting shareholders as provided the Skinject Merger Agreement, each Skinject Shareholder (other than the Purchaser) shall exchange its Skinject Shares with the Purchaser for the right to receive fully paid and non- assessable Resulting Issuer Shares in accordance with the Capitalization Spreadsheet.
(ii) Skinject Shareholders shall become the registered holders of the Resulting Issuer Shares to which they are entitled, calculated in accordance with the provisions and as specified in the Capitalization Spreadsheet.
(iii) Certificates or other evidence representing the Skinject Shares shall cease to represent any claim upon or interest in Skinject other than the right of the holder to receive, pursuant to the terms hereof, Resulting Issuer Shares, in accordance with this Agreement.
(iv) Any Skinject Shares held by the Purchaser immediately prior to the Effective Time shall not be converted in the Merger.
(v) Skinject shall become a wholly-owned subsidiary of the Purchaser.
3.3 Exchange of Subscription Receipts
Each Subscription Receipt will automatically be exchanged for one (1) Finco Share pursuant to the terms and conditions of the Subscription Receipts and the subscription receipt agreement to be entered into in connection with the Concurrent Financing.
3.4 Amalgamation of Finco and Subco 2
Finco, Subco 2 and the Purchaser agree to effect a "three-cornered amalgamation" (the "Amalgamation") whereby Finco and Subco 2 will amalgamate with the resulting entity ("Amalco") constituting a continuation of each of Finco and Subco 2 under applicable law and whereby:
(a) each Finco Share held by a Finco Shareholder shall be cancelled and in consideration therefor each Finco Shareholder shall receive one (1) fully paid and non-assessable Resulting Issuer Share for each such Finco Share.
(b) each Subco 2 share held by the Purchaser shall be cancelled and in consideration therefor the Purchaser shall receive one (1) fully-paid and non-assessable Amalco Share for each such Subco 2 share;
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(c) each holder of Finco Compensation Warrants shall receive Resulting Issuer Shares in lieu of Finco Shares upon the exercise thereof and payment of the applicable exercise price, all in accordance with the terms of the certificates evidencing the Finco Compensation Warrants;
(d) in consideration of the issuance of Resulting Issuer Shares pursuant to Section 3.4(a), Amalco shall issue to the Purchaser one Amalco Share for each Resulting Issuer Share issued; and
(e) Amalco will become a wholly owned subsidiary of the Purchaser.
(f) Upon the issuance of the certificate of amalgamation for Amalco: (i) the amalgamation of Finco and Subco 2 and their continuation as one corporation becomes effective; (ii) the property of each of Finco and Subco 2 shall continue to be the property of Amalco; (iii) Amalco shall continue to be liable for the obligations of Finco and Subco 2; (iv) any existing cause of action, claim, or liability to prosecution against Finco or Subco 2 shall be unaffected; (v) a civil, criminal or administrative action or proceeding pending by or against Finco or Subco 2 may be continued to be prosecuted by or against Amalco; (vi) a conviction against, or ruling, order or judgment in favour of or against, Finco or Subco 2 may be enforced by or against Amalco; (vii) the articles of amalgamation are deemed to be the articles of incorporation of Amalco and the certificate of amalgamation is deemed to be the certificate of incorporation of Amalco; and (viii) Amalco shall be a wholly owned subsidiary of the Purchaser.
3.5 Wind-up of Amalco
Immediately following the completion of the Business Combination, Amalco will be dissolved into the Purchaser and the assets of Amalco (which will consist of the funds invested by the investors in the Concurrent Financing net of expenses) will be transferred to the Purchaser.
3.6 Sequence
The Parties intend and agree that the transactions set forth in Sections 3.1 through 3.5 shall be completed as specified and that no single transaction of Sections 3.1 through 3.5 shall be completed without the intent of the Parties to complete the remaining transactions.
3.7 Organization of Amalco
(a) Name. Amalco shall have a numbered name or such other name as may be determined by the Resulting Issuer, acting reasonably.
(b) Registered Office. The registered office of Amalco shall be situated at 666 Burrard Street, Suite 2500, Vancouver, British Columbia, V6C 2X8.
(c) Authorized Capital. Amalco shall be authorized to issue an unlimited number of Amalco Shares.
(d) Restrictions on Share Transfer: The transfer of shares of Amalco shall not be subject to any restrictions.
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(e) Number of Directors. The minimum number of directors of Amalco shall be one and the maximum number of directors shall be ten.
(f) First Directors. The initial number of directors of Amalco shall be one. The first director of Amalco shall be Dr. Raza Bokhari.
(g) Officers. The officers of Amalco, until changed or added to by the board of directors of Amalco, shall be as follows:
|
Name |
Office |
|
Dr. Raza Bokhari |
Executive Chairman & CEO |
|
James Quinlan |
Chief Financial Officer |
|
Dr. Edward Brennan |
Chief Medical Officer |
|
Maryann Adesso |
Chief of Staff |
(h) Fiscal Year. The fiscal year end of Amalco shall be December 31.
(i) Restrictions on Business. There shall be no restrictions on the business that Amalco may carry on.
3.8 Resulting Issuer
(a) Name. The name of the Resulting Issuer shall be "Medicus Pharma" or such other name as might be approved by the shareholders of Purchaser and the TSX-V.
(b) Registered Office. The registered office of the Resulting Issuer shall be situated at Suite 3400, One First Canadian Place, 100 King Street West, Toronto, Ontario, Canada M5X 1A4.
(c) First Directors. The number of first directors of the Resulting Issuer shall be seven. Subject to the receipt of all necessary approvals, the first directors of the Resulting Issuer shall be Dr. Raza Bokhari, Dr. Larry Kaiser, Robert J. Ciaruffoli, Frank Lavelle and one additional independent director to be nominated by Skinject. The first directors shall hold office until the first annual meeting of the shareholders of the Resulting Issuer, or until their successors are duly appointed or elected.
(d) Officers. The officers of the Resulting Issuer, until changed or added to by the board of directors of the Resulting Issuer, shall be as follows:
|
Name |
Office |
|
Dr. Raza Bokhari |
Executive Chairman & CEO |
|
James Quinlan |
Chief Financial Officer |
|
Dr. Edward Brennan |
Chief Medical Officer |
| Maryann Adesso | Chief of Staff |
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(e) First Auditors. The auditors of the Resulting Issuer shall be MNP LLP. The auditors of the Resulting Issuer shall hold office until the first annual meeting of shareholders of the Resulting Issuer following the Business Combination or until their successor is appointed.
(f) Fiscal Year. The fiscal year end of the Resulting Issuer shall be December 31.
3.9 Withholding
Notwithstanding anything in this Agreement to the contrary, the Purchaser and any applicable withholding agent shall be entitled to deduct and withhold from any consideration (including shares or other property) otherwise payable, issuable or transferable pursuant to any of the transactions contemplated by this Agreement, such amounts as are required to be deducted and withheld with respect to such payment, issuance or transfer under the Tax Act, Code or any provision of provincial, state, local or non-Canadian tax law, in each case as amended. To the extent that amounts are so deducted or withheld, such deducted or withheld amounts shall be treated for all purposes hereof as having been paid, issued or transferred to the Person in respect of which such deduction and withholding was made, provided that such withheld amounts are actually remitted to the appropriate taxing authority.
3.10 Certificates
Upon Closing: (i) the registered holders of Finco Shares shall cease to be holders of Finco Shares, and shall be deemed to be registered holders of the Resulting Issuer Shares to which they are entitled in accordance with Sections 3.2 and 3.4 hereof, (ii) all certificates evidencing Finco Shares shall be null and void without further act or formality; and (iii) on or after Closing, subject to Section 3.12 hereof, the Resulting Issuer shall provide instructions to the Resulting Issuer Registrar and Transfer Agent to deliver such certificates or other evidence of ownership representing the number of Resulting Issuer Shares to which they are so entitled and/or register such Resulting Issuer Shares in book-entry only format in CDS's name, provided that any holder of Finco Shares immediately prior to the Amalgamation that is outside of Canada will not be entitled to receive delivery of any Resulting Issuer Shares unless and until such holder provides any and all such representations, warranties, covenants or agreements as may be required by the Resulting Issuer, in its sole discretion, in order to establish the availability of an exemption from any registration requirements of the U.S. Securities Act and any Applicable Securities Laws in connection with the distribution of the Resulting Issuer Shares to such holder.
3.11 Fractional Securities
No fractional securities of Skinject, the Purchaser or the Resulting Issuer will be issued. If a securityholder would otherwise be entitled to a fractional security upon the completion of any of the transactions contemplated in this Agreement, the number of securities to be issued to such securityholder shall be rounded down to the next lesser whole number of such security, and such securityholder shall not receive or be entitled to any compensation or payment in lieu of such fractional security.
3.12 U.S. Securities Law Restrictive Legend
(a) The Resulting Issuer Shares issuable to holders of Skinject Shares and Finco Shares and any other securities of the Resulting Issuer issued in connection with this Agreement ("Resulting Issuer Securities") to any Persons, who are in the United States or are U.S. Persons: (i) have not been and will not be registered under the U.S. Securities Act or any state securities laws, (ii) are being or will be issued to such holders in reliance on
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exemptions from the registration requirements of the U.S. Securities Act and in reliance upon similar exemptions from applicable state securities laws, and (iii) the Resulting Issuer Shares and the Resulting Issuer Securities are "restricted securities" and may not be offered or sold in the United States, unless such securities are registered under the U.S. Securities Act and any applicable state securities law or an exemption from such registration is available.
(b) The Parties acknowledge and agree that, in addition to any other legends that may be affixed to the securities issued in connection with the Merger or the Amalgamation, upon the original issuance of the Resulting Issuer Shares to Persons in the United States or U.S. Persons who are holders of Skinject Shares or Finco Shares, as applicable, in connection with the Merger or the Amalgamation, and until such time as the same is no longer required under applicable requirements of the U.S. Securities Act or applicable state securities laws, certificates representing such securities and all certificates issued in exchange therefor or in substitution thereof, shall bear or be deemed to bear the following legend:
"THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE OR CONVERSION HEREOF, AS APPLICABLE, HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY ACQUIRING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE ISSUER (THE "CORPORATION") THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE CORPORATION; (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS; (C) IN ACCORDANCE WITH THE EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED BY (i) RULE 144 OR (ii) RULE 144A THEREUNDER, IF AVAILABLE AND IN COMPLIANCE WITH STATE SECURITIES LAWS OR (D) WITHIN THE UNITED STATES PURSUANT TO ANY OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, PROVIDED, IN THE CASE OF AN OFFER, SALE, ASSIGNMENT, PLEDGE, ENCUMBRANCE OR OTHER TRANSFER PURSUANT TO (C)(i) or (D), THE HOLDER SHALL HAVE PROVIDED TO THE CORPORATION AN OPINION OF COUNSEL TO THE EFFECT THAT THE PROPOSED TRANSFER MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE U.S. SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, WHICH OPINION AND COUNSEL MUST BE REASONABLY SATISFACTORY TO THE CORPORATION. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN
SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA OR ELSEWHERE.
IF APPLICABLE, THESE SECURITIES MAY NOT BE EXERCISED OR CONVERTED IN THE UNITED STATES OR BY OR FOR THE ACCOUNT OR
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BENEFIT OF A U.S. PERSON OR A PERSON IN THE UNITED STATES UNLESS THESE SECURITIES AND THE UNDERLYING SECURITIES HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. "UNITED STATES" AND "U.S. PERSON" ARE AS DEFINED BY REGULATION S UNDER THE U.S. SECURITIES ACT."
(c) If the securities bearing the legend set forth above are being sold outside the United States in compliance with the requirements of Rule 904 of Regulation S, the Resulting Issuer shall promptly cause the registrar and transfer agent to remove any legend on a share certificate required by the U.S. Securities Act to permit sales made in reliance on Rule 904 of Regulation S, including the legend set forth above, upon receipt by the Resulting Issuer of an executed Declaration.
(d) If the securities bearing the legend set forth above are being sold otherwise than in accordance with Rule 904 of Regulation S, the legend set forth above shall be promptly removed upon receipt by the registrar and transfer agent of an opinion of counsel of recognized standing in form and substance reasonably satisfactory to the Resulting Issuer that such legend is no longer required under applicable requirements of the U.S. Securities Act or applicable securities laws of any state of the United States.
3.13 U.S. Tax Matters
(a) Subject to Section 6.8 hereof, each Party agrees that: (i) the Merger contemplated by Section 3.2 of this Agreement is intended to qualify as a reorganization under Section 368(a) of the Code, (ii) the Amalgamation and liquidation of Amalco contemplated by Sections 3.4 and 3.5 of this Agreement, taken together, are intended to qualify as a "reorganization" pursuant to Section 368(a) of the Code; (iii) the Parties shall retain such records and file such information as is required to be retained and filed pursuant Treasury Regulations Section 1.368-3 in connection with each of the transactions set forth in subsection (i) and (ii); and (iv) the Parties shall otherwise use their commercially reasonable efforts to cause the transactions set forth in subsection (i) to qualify as a reorganization under Section 368(a) of the Code and the transactions set forth in subjection (ii), taken together, to qualify as a "reorganization" pursuant to Section 368(a) of the Code. In connection with transactions described in subsections (i) and (ii), the Parties agree to treat the Purchaser as a United States domestic corporation for U.S. federal income tax purposes under Section 7874(b) of the Code. Except as otherwise required by this Agreement, no Party shall take any action, fail to take any action, cause any action to be taken or cause any action to fail to be taken that could reasonably be expected to prevent: (1) the transactions described in subsection (i) from qualifying as an exchange pursuant to Section 368(a) of the Code; (2) the transactions described in subsection (ii), taken together, from qualifying as a "reorganization" pursuant to Section 368(a) of the Code; or (3) the Purchaser from being treated as a United States domestic corporation for U.S. federal income tax purposes under Section 7874(b) of the Code. Subject to Section 6.8 hereof, each Party hereto agrees to act in good faith, consistent with the terms of this Agreement and the intent of the Parties and the intended treatment of such transactions as set forth in this Section 3.14(a).
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(b) Prior to the Effective Date, (i) Skinject shall deliver or cause to be delivered to Purchaser a certificate conforming to the requirements of Treasury Regulations Section 1.1445-2(c) and Section 1.897-2(h), and (ii) Finco shall deliver or cause to be delivered to Purchaser a certificate certifying that the assets of Finco are not U.S. real property interests within the meaning of Section 897(c) of the Code and Treasury Regulations Section 1.897-1(c), in each case, in such form as may be requested by Purchaser.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF RBX
RBX represents and warrants as of the date hereof and as of the Closing Date to the Purchaser and Skinject as follows, and acknowledges and confirms that the Purchaser and Skinject is each relying upon these representations and warranties in connection with the Business Combination.
4.1 Corporate Existence
RBX is duly incorporated and validly existing under the laws of its jurisdiction of incorporation.
4.2 Due Authorization
(a) RBX has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to complete the Business Combination.
(b) This Agreement has been duly executed and delivered by RBX and constitutes a legal, valid and binding obligation of RBX, enforceable against RBX in accordance with its terms, except: (i) as may be limited by bankruptcy, reorganization, insolvency and similar laws of general application relating to or affecting the enforcement of creditors' rights or the relief of debtors; and (ii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SKINJECT
Skinject represents and warrants as of the date hereof and as of the Closing Date to RBX and Purchaser as follows except as disclosed in the Disclosure Schedule, and acknowledges and confirms that RBX and the Purchaser are each relying upon these representations and warranties in connection with the Business Combination.
5.1 Corporate Existence
Skinject is duly incorporated and validly existing under the laws of its jurisdiction of incorporation and has the corporate power and authority to own, lease or operate its assets and conduct its business as now conducted. Skinject is duly qualified to carry on business and is in good standing in each jurisdiction in which the character of its properties or the nature of its activities makes such qualification necessary. Skinject is in good standing and not in default with respect to the filings required under the applicable Laws, including Applicable Securities Laws.
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5.2 Authorization and Binding Effect
(a) Skinject has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to complete the Business Combination.
(b) This Agreement has been duly executed and delivered by Skinject and constitutes a legal, valid and binding obligation of Skinject, enforceable against Skinject in accordance with its terms, except: (i) as may be limited by bankruptcy, reorganization, insolvency and similar laws of general application relating to or affecting the enforcement of creditors' rights or the relief of debtors; and (ii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
5.3 Conflicts
(a) The execution, delivery and performance by Skinject of this Agreement does not (or would not with the giving of notice, the lapse of time or the happening of any other event or condition):
(i) result in a violation of its articles, by-laws, constitution, or similar constating documents of Skinject or of any resolutions of the directors or shareholders of Skinject;
(ii) result in the violation of any Law applicable to Skinject or its business;
(iii) result in the creation of any Encumbrance on any of Skinject's assets or its shares or securities; or
(iv) conflict with, result in the breach of or constitute a default or give to others a right of termination, cancellation or revocation, the creation or acceleration of any obligation under or the loss of any material benefit under, or the creation of any benefit or right of any third party under any Authorization held by Skinject or any Contract to which Skinject is a party.
5.4 Consents
No consent, approval, order or authorization of, or registration, declaration or filing with, any third party or Governmental Authority is required by or with respect to Skinject in connection with the execution and delivery of this Agreement and the performance of its obligations hereunder and to complete the Business Combination other than: (i) the approval of the Skinject Shareholders; (ii) consents, approvals, authorizations and waivers which have been obtained (or will be obtained prior to the Closing Date) and are unconditional, and in full force and effect, and notices which have been given on a timely basis; and (iii) those which, if not obtained or made, would not prevent or delay the consummation of the Business Combination or otherwise prevent Skinject from performing its obligations under this Agreement.
5.5 Insolvency
Skinject is not insolvent nor has it committed an act of bankruptcy, proposed a compromise or arrangement to their creditors generally, had any petition for the granting of a receiving order in bankruptcy filed against it, made a voluntary assignment into bankruptcy or taken any proceeding to have itself dissolved, wound- up or declared bankrupt or to have a receiver appointed in respect of all or any portion of its assets or commenced proceedings for any amalgamation, continuation or other corporate reorganization, nor are any such proceedings pending.
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5.6 Authorized and Issued Capital
(a) The issued and outstanding capital of Skinject as at the date of this Agreement is 6,434,000 Skinject Common Shares, 7,196,069 shares of Skinject Series A Preferred Stock and 1,893,065 shares of Skinject Series A-1 Preferred Stock.
(b) The Skinject Shares, the Skinject Preferred Shares, the Skinject Convertible Notes and the Skinject 2022 SAFE are the only outstanding securities of Skinject, including any securities convertible, exchangeable or exercisable into shares or securities of Skinject. At the Closing Time, the Skinject Shares (including Skinject Shares issued pursuant to the Conversion Agreement described in Section 2.3), shall be the only outstanding securities of Skinject, including any securities convertible, exchangeable or exercisable into shares or securities of Skinject. Other than as contemplated in this Agreement, no person has any agreement, option, right or privilege (whether by law, pre-emptive or contractual) capable of becoming an agreement, including convertible securities, options, warrants or convertible obligations of any nature, for the purchase, subscription, allotment or issuance of any unissued Skinject Shares or other securities of Skinject.
(c) All of the Skinject Shares have been or shall be duly and validly issued in compliance with all applicable Laws and are or shall when issued be fully paid and non-assessable.
5.7 No Other Agreements to Purchase
No Person has any written or oral agreement, option, warrant, understanding or commitment or any right or privilege (whether by Law, contract or otherwise) capable of becoming such for the purchase or acquisition of any securities of Skinject, except for the Purchaser under this Agreement, the Skinject Convertible Notes, and the Skinject 2022 SAFE, and none of such shares and securities of Skinject are subject to any voting trust, shareholders agreement, voting agreement or other agreement with respect to the disposition or enjoyment of any rights of such securities of Skinject other than as contained in the Skinject Articles and the Shareholder Agreement among Skinject and its shareholders party thereto dated as of May 11, 2015 (as amended or modified from time to time).
5.8 Adverse Claims
There are no outstanding material adverse claims or challenges of any kind whatsoever, including without limitation claims or challenges by third parties, against or to the ownership of, or title to, the Skinject Shares, nor, to the knowledge of Skinject, is there any basis therefor.
5.9 Subsidiaries
As at the date of this Agreement, Skinject has no subsidiaries and holds no shares or other ownership, equity or proprietary interests in any other Person and Skinject does not have any agreements to acquire or lease any material assets or properties or any other business operations, other than as contemplated by this Agreement. As at the Closing, Skinject will have no subsidiaries and will hold no shares or other ownership, equity or proprietary interests in any other Person and Skinject will not have any agreements to acquire or lease any assets or properties or any other business operations.
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5.10 Non-Reporting Issuer
Skinject is not a reporting issuer under Applicable Canadian Securities Laws or equivalent foreign regulations, and there is no published market for any securities of Skinject.
5.11 Dividends and Distributions
Since incorporation, Skinject has not, directly or indirectly, declared or paid any dividends or declared or made any other distribution on any of its shares of any class and has not, directly or indirectly, redeemed, purchased or otherwise acquired any of its shares of any class or agreed to do so. Except as contemplated by the Conversion Agreement or the terms of the Skinject Convertible Notes, the Skinject 2022 SAFE or the Skinject Articles, Skinject has no obligation to pay any dividends.
5.12 Corporate Records
The Corporate Records of Skinject are complete and accurate and all corporate proceedings and actions reflected in their respective Corporate Records have been conducted or taken in compliance with all applicable Laws and its constating documents. Without limiting the generality of the foregoing, for Skinject: (i) the minute books contain complete and accurate (in all material respects) minutes of all meetings of the directors and shareholders held since incorporation and all such meetings were properly called and held; (ii) the minute books contain all resolutions passed by the directors and shareholders (and committees, if any) and all such resolutions were properly passed; (iii) the share certificate books, register of shareholders and register of transfers are complete and accurate (in all material respects), all transfers have been properly completed and approved and any tax payable in connection with the transfer of any securities has been paid; and (iv) the registers of directors and officers are complete and accurate (in all material respects) and all former and present directors and officers were properly elected or appointed, as the case may be.
5.13 Books and Records
All Books and Records of Skinject have been fully, properly and accurately kept and completed in all material respects.
5.14 Conduct of Business in Ordinary Course
Since December 31, 2022, Skinject has not, other than in connection with the Business Combination or as disclosed in the Data Room and identified in the Disclosure Schedule:
(a) sold, transferred or otherwise disposed of any material assets;
(b) acquired or agreed to acquire any Person or other business organization or division, or acquired or agreed to acquire any material assets;
(c) issued, sold, pledged, hypothecated, leased, disposed of, encumbered or agreed to issue, sell, pledge, hypothecate, lease, dispose of or encumber any shares or other securities or any right, option or warrant with respect thereto;
(d) made any material capital expenditure or commitment;
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(e) increased its indebtedness for borrowed money or made any loan or advance, or assumed, guaranteed or otherwise became liable with respect to the liabilities or obligation of any Person;
(f) removed any auditor or director or terminated any officer or other senior employee;
(g) granted any general increase in the rate of wages, salaries, bonuses or other remuneration of any employees;
(h) suffered any extraordinary loss or damages, whether or not covered by insurance;
(i) cancelled or waived any material Claims or rights;
(j) compromised or settled any litigation, proceeding or other governmental action relating to its assets or business;
(k) cancelled or reduced any of its insurance coverage;
(l) entered into any related party transaction; or
(m) authorized, agreed or otherwise committed, whether or not in writing, to do any of the foregoing.
5.15 Material Adverse Change
There has been no Material Adverse Change in the business, prospects, operations, results of operations, assets, capitalization or condition, financial or otherwise, of Skinject and Skinject has not experienced, nor is it aware of any occurrence or event which has, or might reasonably be expected to have, a Material Adverse Change on the business, prospects, operations, results of operations, assets, capitalization or condition (financial or otherwise) which would constitute a Material Adverse Change. This Section 5.15, does not extend to any of the other representations or warranties contained herein that are qualified by a Material Adverse Change.
5.16 Compliance with Laws
Skinject is conducting and has always conducted its business in compliance with all applicable Laws other than acts of non- compliance which, in the aggregate, are not material.
5.17 Anti-Corruption
Neither Skinject nor any of their respective directors or officers nor any representative acting on behalf of Skinject, has, directly or indirectly, (i) violated any anti-bribery or anti-corruption Laws, including the Corruption of Foreign Public Officials Act (Canada) and the U.S. Foreign Corrupt Practices Act, or (ii) offered, paid, promised to pay, or authorized the payment of any money, or offered, given, promised to give, or authorized the giving of anything of value, that goes beyond what is reasonable and customary: (A) to any government official, whether directly or through any other person, for the purpose of influencing any act or decision of a government official in his or her official capacity, inducing a government official to do or omit to do any act in violation of his or her lawful duties, securing any improper advantage, inducing a government official to influence or affect any act or decision of any governmental authority, or assisting any representative of Skinject in obtaining or retaining business for or with, or directing business to, any person; (B) to any person in a manner which would constitute or have the purpose or effect of public or commercial bribery, or the acceptance of or acquiescence in extortion, kickbacks, or other unlawful or improper means of obtaining business or any improper advantage; or (C) violated or is in violation of any provision of the Criminal Code (Canada) relating to foreign corrupt practices, including making any contribution to any candidate for public office, in either case, where either the payment or gift or the purpose of such contribution payment or gift was or is prohibited under the foregoing, and none of Skinject nor to the knowledge of any director, officer, employee, consultant, representative or agent of Skinject, has (i) conducted or initiated any review, audit, or internal investigation that concluded that Skinject, or any director, officer, employee, consultant, representative or agent of the foregoing violated such laws or committed any material wrongdoing, or (ii) made a voluntary, directed, or involuntary disclosure to any governmental authority responsible for enforcing anti-bribery or anti-corruption laws, in each case with respect to any alleged act or omission arising under or relating to non- compliance with any such laws, or received any notice, request, or citation from any person alleging noncompliance with any such laws. The operations of Skinject are and have been conducted at all times in compliance with the applicable financial recordkeeping and reporting requirements of the money laundering statutes and Laws of all applicable jurisdictions; and no action, Claim, notice of assessment, suit or proceeding by or before any commission, court, Governmental Authority, arbitrator or non-Governmental Authority involving Skinject with respect to such money laundering statutes and Laws is pending or, to the knowledge of Skinject, threatened.
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5.18 Authorizations
Skinject owns, holds, possesses or lawfully uses in the operation of its business, all Authorizations which are, in any manner, necessary for it to conduct its business as presently or previously conducted or as proposed to be conducted following completion of the Business Combination or for the ownership and use of its assets in compliance with all applicable Laws. Each Authorization is valid, subsisting and in good standing, Skinject is not in default or breach of any Authorization and no proceeding is pending or, to the knowledge of Skinject, threatened to revoke or limit any Authorization. All Authorizations are renewable by their terms or in the Ordinary Course without the need for the applicable Skinject Company to comply with any special rules or procedures, agree to any materially different terms or conditions or pay any amounts other than routine filing fees. Other than those required in the Ordinary Course, no registrations, filings, applications, notices, transfers, consents, approvals, audits, qualifications, waivers or other action of any kind is required by virtue of the execution and delivery of this Agreement, or of the consummation of the Business Combination: (a) to avoid the loss of any material Authorization or any material asset, property or right pursuant to the terms thereof, or the violation or breach of any Law applicable thereto, or (b) to enable Skinject to hold and enjoy the same immediately after the Closing Date in the conduct of their business as conducted prior to the Closing Date. Skinject has no reason to believe that Skinject will be unable to obtain any Authorization that might be required by Skinject to operate the business contemplated to be operated by Skinject following the completion of the Business Combination.
5.19 Material Contracts
Except for the Contracts provided by Skinject in the Data Room, (collectively, the "Skinject Material Contracts") or those Contracts which have been or shall be entered into in connection with the Business Combination, Skinject is not a party to or bound by:
(a) any continuing Contract for the purchase of materials, supplies, equipment or services;
(b) any Contract that expires or may be renewed at the option of any Person so as to expire more than one year after the date of this Agreement;
(c) any trust indenture, mortgage, promissory note, loan agreement or other Contract for the borrowing of money, including any Encumbrances related thereto, any currency exchange, commodities or other hedging arrangement or any leasing transaction of the type required to be capitalized in accordance with IFRS;
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(d) any Contract for capital expenditures;
(e) any Contract pursuant to which Skinject is a lessor of any machinery, equipment, motor vehicles, office furniture, fixtures or other personal property;
(f) any Contract with any Person with whom Skinject does not deal at arm's length or that was not entered into in the Ordinary Course;
(g) any agreement of guarantee, support, indemnification, assumption or endorsement of, or any similar commitment with respect to, the obligations, liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness of any other Person; or
(h) any Contract the termination of which would have a Material Adverse Change on Skinject.
5.20 No Breach of Material Contracts
Skinject has performed all of the obligations required to be performed by it and is entitled to all benefits under, and to the knowledge of Skinject is not alleged to be in default of any of the Skinject Material Contracts. Each of the Skinject Material Contracts is in full force and effect, unamended, and to the knowledge of Skinject there exists no default or event of default or event, occurrence, condition or act (including the completion of the Business Combination) which, with the giving of notice, the lapse of time or the happening of any other event or condition, would become a default or event of default under any of the Skinject Material Contracts.
5.21 No Breach of Other Contracts
Skinject has not violated or breached, in any material respect, any of the terms or conditions of any Contract (other than the Skinject Material Contracts), and to the knowledge of Skinject, all the covenants to be performed by any other party to such Contracts have been fully performed in all material respects.
5.22 Financial Statements
(a) The Draft Skinject Financial Statements and the Skinject Financial Statements have been, or will be, prepared in accordance with IFRS, applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto), are true and correct and present fairly the assets, liabilities, (whether accrued, absolute, contingent or otherwise) and financial position of Skinject as at the respective dates of the relevant statements and the results of operations and the changes in financial position of Skinject for the periods specified.
(b) Skinject maintains a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management's general or specific authorizations; (ii) access to assets is permitted only in accordance with management's general or specific authorization; and (iii) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
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(c) The Skinject Financial Statements will not vary materially from the Draft Skinject Financial Statements.
5.23 Undisclosed Liabilities
Other than as disclosed in the Draft Skinject Financial Statements, Skinject does not have any material liabilities or obligations of any nature that, either individually or in the aggregate, are material (whether absolute, accrued, contingent or otherwise) except for current liabilities as disclosed in the Draft Skinject Financial Statements or incurred in the Ordinary Course since December 31, 2022. Skinject has not granted any Encumbrance over its assets or in any particular asset or guaranteed or agreed to guarantee any debt, liability or other obligation of any kind whatsoever of any Person.
5.24 Litigation and Compliance
(a) There are no actions, suits or proceedings, at Law or in equity, by any Person nor any arbitration, administrative or other proceeding by or before (or to the knowledge of Skinject, any investigation by) any Governmental Authority pending, or, to the knowledge of Skinject, threatened against or adversely affecting Skinject or any of its assets or that question or challenge the validity of this Agreement or the Business Combination, and Skinject knows of no valid basis for any such action, suit, proceeding, arbitration or investigation by or against Skinject. Skinject is not subject to any judgment, Order or decree entered in any lawsuit or proceeding nor has Skinject settled any Claim prior to being prosecuted in respect of it. Skinject is not the plaintiff or complainant in any action, suit or proceeding.
(b) Skinject has conducted and is conducting its businesses in compliance with, and is not in default or violation under, and have not received notice asserting the existence of any default or violation under, any Law applicable to its business or operations, except for non- compliance, defaults and violations which would not, in the aggregate, have a Material Adverse Change.
(c) Neither Skinject, nor any asset of Skinject is subject to any judgment, order or decree entered in any lawsuit or proceeding which has had, or which is reasonably likely to have, a Material Adverse Change or which is reasonably likely to prevent Skinject from performing its obligations under this Agreement.
(d) Skinject has duly filed or made all reports and returns required to be filed by it with any Governmental Authority and has obtained all permits, licenses, consents, approvals, certificates, registrations and authorizations (whether governmental, regulatory or otherwise) which are required in connection with its business and operations, except where the failure to do so has not had and would not have a Material Adverse Change.
5.25 Title to Assets
Skinject owns (with good and marketable title) all of the properties and assets (whether real, personal or mixed and whether tangible or intangible) that it respectively purports to own including all the properties and assets reflected as being owned by its Books and Records and the Draft Skinject Financial Statements. Skinject has legal and beneficial ownership of its assets free and clear of all Encumbrances, including any agreements which would have a Material Adverse Change on such properties or assets. There are no written or oral agreements, options, understandings or commitments, or any right or privilege capable of becoming such for the purchase or other acquisition from Skinject of its assets. The tangible personal property of
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Skinject is in good operating condition and repair having regard to their use and age and are adequate and suitable for the uses to which they are being put. None of such tangible assets are in need of maintenance or repairs except for routine maintenance and repairs in the ordinary course that are not material in nature or cost.
5.26 Intellectual Property
(a) Skinject owns or has the legal right to use the Intellectual Property currently used, and as currently proposed to be used in the future, in the conduct of the business of Skinject, free and clear of any Encumbrance, and to the knowledge of Skinject, the ownership or use of such Intellectual Property and any other intellectual property rights owned or used by Skinject does not conflict with, violate or infringe upon the proprietary rights of any other Person.
(b) Prior to Closing, Skinject shall deliver a true and complete list, which accurately sets forth of all of the Intellectual Property owned or used by or licensed to, where applicable, Skinject in the conduct of its business (the "Skinject IP Schedule"), including: (a) the owner thereof, (b) the date of expiration and date of application, jurisdiction of application, designated nations for patent application and priority filing dates and deadlines, if any, (c) whether such ownership or licensing rights are exclusive, and (d) in respect of any license to Skinject, the term of, the applicable restrictions respecting use and sub-licensing and any royalties or fees owing or payable respecting, such rights.
(c) Except as otherwise set forth on the Skinject IP Schedule, no royalties or fees are payable by Skinject to any Person in respect of any Intellectual Property.
(d) Except as otherwise set forth on the Skinject IP Schedule, all licenses are valid and in good standing, and to the knowledge of Skinject, are adequate and sufficient to permit Skinject to conduct its business as currently conducted and as currently proposed to be conducted.
(e) Except as otherwise set forth on the Skinject IP Schedule, Skinject is the unencumbered owner of all right, title and interest in any and all of the Skinject Intellectual Property or has the sole and exclusive right to use the Skinject Intellectual Property and Skinject has not entered into any licenses, sublicenses or agreements relating to the use or any other rights thereto by any other Person of any Intellectual Property other than in the Ordinary Course and, to Skinject's knowledge, no infringement exists upon the Skinject Intellectual Property by any other Person.
(f) To the knowledge of Skinject, except as disclosed in the Skinject IP Schedule, no charge or claim is pending or threatened to the effect that the sale, license or use of any of Skinject's products or services infringes upon or conflicts in any way with any Intellectual Property owned or held by any other Person.
(g) The Intellectual Property set forth on the Skinject IP Schedule includes all Intellectual Property used in the ordinary day-to-day conduct of the business of Skinject, and there are no other items of Intellectual Property that are required for the ordinary day-to-day conduct of the business of Skinject.
(h) Except as otherwise set forth on the Skinject IP Schedule, the Skinject Intellectual Property is not and has not been adjudged invalid or unenforceable in whole or part and Skinject has
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not taken any action nor does Skinject have knowledge of any action that should have been taken, but was not taken, that would invalidate any of the Skinject Intellectual Property.
(i) To Skinject's knowledge, no Legal Proceedings have been asserted, are pending, or are threatened against Skinject: (i) based upon or challenging or seeking to deny or restrict the use, practice, license, sublicense, distribution, export or import, display, copying or creation of derivative works by Skinject of any of the Skinject Intellectual Property; (ii) alleging that any services provided by, processes used by, licensed by, sublicensed by, distributed by, displayed by, copied by or the creation of derivative works by or products manufactured or sold by Skinject of any of the Skinject Intellectual Property; (ii) alleging that any services provided infringe upon or misappropriate any Intellectual Property right of any third party; or (iii) alleging that any Intellectual Property licensed infringes upon any Intellectual Property right of any third party or is being licensed or sublicensed in conflict with the terms of any license or other agreement.
(j) To Skinject's knowledge, no Person is engaging in any activity that infringes upon any of the Skinject Intellectual Property.
(k) Other than in the Ordinary Course, Skinject has not granted any license or other right to any third party with respect to of the Skinject Intellectual Property.
(l) The consummation of the transactions contemplated by this Agreement shall not result in the termination, invalidity or impairment of any of the Skinject Intellectual Property.
(m) Skinject has the right to use all software development tools, and other third-party software that is material to the business of Skinject.
(n) Skinject has taken what they view as reasonable steps to maintain the confidentiality of its trade secrets and other confidential Intellectual Property.
(o) To the knowledge of Skinject: (a) there has been no misappropriation of any trade secrets or other confidential Intellectual Property by any Person; (b) no employee, independent contractor or agent of Skinject has misappropriated any trade secrets of any other Person in the course of such performance as an employee, independent contractor or agent; and (c) no employee, independent contractor or agent of Skinject is in default or breach of any term of any employment agreement, non-disclosure agreement, assignment of invention agreement or similar agreement or contract relating in any way to the protection, ownership, development, use or transfer of Intellectual Property.
5.27 Taxes
(a) Skinject has filed or caused to be filed, within the times and in the manner prescribed by applicable Law, all material federal, provincial, state, local and foreign Tax Returns which are required to be filed by or with respect to it. The information contained in such returns and reports is correct and complete in all material respects and no material fact has been omitted therefrom.
(b) All material federal, provincial, state, local and foreign income, profits, franchise, sales, use, occupancy, excise and other Taxes and assessments (including interest and penalties) that are or may become payable by or due from Skinject have been fully paid in a timely manner or fully disclosed and fully provided for in their respective Books and Records and Skinject Financial Statements.
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(c) There are no outstanding agreements or waivers extending the statutory period providing for an extension of time with respect to the assessment or re-assessment of Tax or the filing of any Tax Return by, or any payment of any Tax by Skinject. No written notice of assessment or reassessment for any Taxes has been received by or on behalf of Skinject, and to the knowledge of Skinject, no examination of any Tax Return of Skinject is currently in progress.
(d) There are no Claims, actions, suits or proceedings (or, to the knowledge of Skinject, any investigation) pending, or to the knowledge of Skinject, threatened against Skinject relating to Taxes and Skinject knows of no valid basis for any such Claim, action, suit, proceeding, investigation or discussion.
(e) Skinject has withheld from each payment made by it the amount of all material Taxes and other deductions required to be withheld therefrom and has paid the same to the proper taxing or other authority within the time prescribed under any applicable Law.
(f) No Encumbrance for Taxes has been filed or exists other than for taxes not yet due and payable.
(g) Skinject has never been a member of an affiliated group filing a consolidated, combined or unitary Tax Return and has no liability for a material amount of Taxes of any Person arising from the application of Treasury Regulation Section 1.1502-6 or any analogous provision of state, local or non-U.S. Law.
(h) Skinject is not and has never been a party to any "listed transaction," as defined in Section 6707A(c)(2) of the Code and Treasury Regulation Section 1.6011-4(b)(2).
(i) Skinject has not been a "distributing corporation" or a "controlled corporation" within the meaning of Section 355 of the Code in a distribution intended to qualify for Tax-free treatment under Section 355 of the Code in the last two years prior to the date of this Agreement.
(j) Skinject is not party to, and does not have any liability for Taxes of any Person under, any Tax sharing or Tax indemnity agreement or any other Contract (other than any commercial Contract entered into in the Ordinary Course that does not relate primarily to Taxes).
(k) No written claim has been made by any taxing authority in any jurisdiction where Skinject does not file Tax Returns that Skinject is or may be required to file Tax Returns or is or may be subject to Tax in such jurisdiction. Skinject does not have a permanent establishment (within the meaning of any applicable Tax treaty) or an office or fixed place of business in a country other than the jurisdiction in which it currently files Tax Returns.
(l) Skinject has properly collected and remitted all material sales and similar Taxes with respect to sales made to its customers or have properly received and retained any required tax exemption certificate and other documentation for all material sales made without charging or remitting sales or similar Taxes that qualify such sales as exempt from sales and similar Taxes.
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(m) Skinject will not be required to include any material item of income in, or exclude any material item of deduction from, taxable income for any taxable period (or portion thereof) beginning after the Closing Date as a result of any (a) change in method of accounting for a taxable period ending on or prior to the Closing Date, (b) "closing agreement" as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or non-U.S. Tax Law) executed on or prior to the Closing Date, (c) intercompany transaction or excess loss amount described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state, local or non-U.S. Tax Law), (d) installment sale or open transaction disposition made on or prior to the Closing Date, (e) deferred revenue or prepaid or deposit amount received on or prior to the Closing Date, or (f) Taxes due under Sections 951, 951A or 965 of the Code.
5.28 Real Property
Skinject is not a party to, or under any agreement to become a party to, any lease with respect to real property and does not own any real property.
5.29 Employment Matters
(a) There are no Contracts, written or oral, between Skinject on one side, and any other party on the other side, relating to payment, remuneration or compensation for work performed or services provided (other than Contracts with professional advisors engaged to provide services in connection with the Business Combination) or that would require any payment to be made as a result of the completion of the Business Combination.
(b) Skinject has operated and is currently operating in compliance with all Laws relating to employees, including employment standards, human rights, occupational health and safety, all pay equity and employment equity legislation and all statutory requirements to make withholdings or contributions with respect to any employees or workers, and any other relevant pension, retirement, death or disability benefit scheme or arrangements for the benefit of its employees and workers, other than such non-compliance which would not reasonably be expected to have a Material Adverse Change and there have been no employment related complaints against Skinject.
(c) To the knowledge of Skinject, there are no complaints or threatened complaints against Skinject before any employment standards branch or tribunal or human rights commission or tribunal, nor any occurrence which might lead to a complaint under any human rights legislation, employment standards legislation, health and safety legislation, workers' compensation legislation or pay equity legislation.
(d) There are no pension, profit sharing, group insurance, employee benefit or similar plans or other deferred compensation plans of any kind whatsoever with respect to the directors, officers or employees of Skinject.
5.30 Arm's Length Transactions
Except as shall be disclosed in the Draft Skinject Financial Statements:
(a) Skinject has not engaged in any transaction with, made any payment or loan to, or borrowed any monies from or is otherwise indebted to, any director, officer, employee or shareholder of Skinject or any other person with whom Skinject is not dealing at arm's length (within the meaning of the Tax Act) or any Affiliate of any of the foregoing, except for amounts due as normal compensation or reimbursement of ordinary business expenses; and
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(b) Skinject is not a party to any contract or agreement with any director, officer, employee, or shareholder or any other person with whom Skinject is not dealing at arm's length (within the meaning of the Tax Act) or any Affiliate of any of the foregoing, other than employment agreements entered into in the Ordinary Course.
5.31 Indebtedness
As at the date of this Agreement, no indebtedness for borrowed money was owing or guaranteed by Skinject except as set forth in the Draft Skinject Financial Statements.
5.32 Brokers
Except in relation to the Concurrent Financing, Skinject or, to the knowledge of Skinject, its associates, affiliates or advisers have retained any broker or finder in connection with the transactions contemplated hereby, nor have any of the foregoing incurred any liability to any broker or finder by reason of any such transaction.
5.33 Full Disclosure
Skinject has made available to the Purchaser all material information concerning Skinject and all such information is accurate, true and correct in all material respects.
5.34 U.S. Securities Law Matters
All holders of Skinject securities who are in the United States or are U.S. Persons, receiving or who will receive Resulting Issuer Securities, qualify as "accredited investors" within the meaning of Rule 501(a) of Regulation D under the U.S. Securities Act, except for one holder of Skinject securities that has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investment in the Resulting Issuer Shares.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants as of the date hereof and as of the Closing Date to RBX and Skinject as follows, and acknowledges and confirms that RBX and Skinject are each relying upon these representations and warranties in connection with the Business Combination.
6.1 Corporate Existence
The Purchaser is duly incorporated and validly existing under the laws of its jurisdiction of incorporation and has the corporate power and authority to own, lease or operate its assets and conduct its business as now conducted. The Purchaser is duly qualified to carry on business and is in good standing in each jurisdiction in which the character of its properties or the nature of its activities makes such qualification necessary. The Purchaser is in good standing and not in default with respect to the filings required under the applicable Laws, including Applicable Securities Laws.
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6.2 Due Authorization
(a) The Purchaser has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to complete the Business Combination.
(b) This Agreement has been duly executed and delivered by the Purchaser and constitutes a legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, except: (i) as may be limited by bankruptcy, reorganization, insolvency and similar laws of general application relating to or affecting the enforcement of creditors' rights or the relief of debtors; and (ii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
6.3 Conflicts
(a) The execution, delivery and performance by the Purchaser of this Agreement does not (or would not with the giving of notice, the lapse of time or the happening of any other event or condition):
(i) result in a violation of its articles, by-laws, constitution, or similar constating documents of the Purchaser or of any resolutions of the directors or shareholders of the Purchaser;
(ii) result in the violation of any Law applicable to the Purchaser or its business;
(iii) result in the creation of any Encumbrance on any of the Purchaser's assets or its shares or securities; or
(iv) conflict with, result in the breach of or constitute a default or give to others a right of termination, cancellation or revocation, the creation or acceleration of any obligation under or the loss of any material benefit under, or the creation of any benefit or right of any third party under any Authorization held by the Purchaser or any Contract to which the Purchaser is a party.
6.4 Consents
No consent, approval, order or authorization of, or registration, declaration or filing with, any third party or Governmental Authority is required by or with respect to the Purchaser in connection with the execution and delivery of this Agreement and the performance of its obligations hereunder and to complete the Business Combination other than: (i) the approval of the shareholders of the Purchaser for certain matters necessary to complete the Business Combination pursuant to the terms of this Agreement; (ii) the Purchaser Approvals; (iii) the approval of the TSX-V for the Business Combination and other transactions contemplated hereby; (iv) consents, approvals, authorizations and waivers which have been obtained (or will be obtained prior to the Closing Date) and are unconditional, and in full force and effect, and notices which have been given on a timely basis; and (v) those which, if not obtained or made, would not prevent or delay the consummation of the Business Combination or otherwise prevent Purchaser from performing its obligations under this Agreement.
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6.5 Insolvency
The Purchaser is not insolvent nor has it committed an act of bankruptcy, proposed a compromise or arrangement to their creditors generally, had any petition for the granting of a receiving order in bankruptcy filed against it, made a voluntary assignment into bankruptcy or taken any proceeding to have itself dissolved, wound-up or declared bankrupt or to have a receiver appointed in respect of all or any portion of its assets or commenced proceedings for any amalgamation, continuation or other corporate reorganization, nor are any such proceedings pending.
6.6 Authorized and Issued Capital
(a) The issued capital of the Purchaser as at the date of this Agreement is 7,249,999 Purchaser Shares, which have been duly authorized and are validly issued, fully paid and non- assessable, free of pre-emptive rights.
(b) There are no authorized, outstanding or existing securities issued by the Purchaser that are convertible into or exchangeable for any securities of the Purchaser or, other than this Agreement, agreements of any kind which may obligate the Purchaser to issue or purchase any of its securities.
(c) Immediately prior to Closing, the issued capital of: (i) Subco 1 will be 100 common shares; and (iii) Subco 2 will be 100 common shares (collectively, the "Purchaser Subsidiaries Shares").
(d) Immediately prior to Closing, the Purchaser Subsidiaries Shares will be the only outstanding securities of the Purchaser Subsidiaries including any securities convertible, exchangeable or exercisable into shares or securities of any Purchaser Subsidiary, and other than as contemplated in this Agreement, no person has any agreement, option, right or privilege (whether by law, pre-emptive or contractual) capable of becoming an agreement, including convertible securities, options, warrants or convertible obligations of any nature, for the purchase, subscription, allotment or issuance of any unissued shares or other securities of any Purchaser Subsidiary.
(e) All of the Purchaser Subsidiaries Shares have been or shall be duly and validly issued in compliance with all applicable Laws and are or shall when issued be fully paid and non- assessable.
6.7 Business
The Purchaser does not engage in any business in any jurisdiction, other than in connection with the Business Combination. The Purchaser is not a party to any Contract other than this Agreement and any Contract contemplated herein. The Purchaser does not and has never had any operations or provided any services other than in connection with the Business Combination.
6.8 Property
The Purchaser does not own any property, whether directly or indirectly, tangible or intangible, real or personal, including Intellectual Property.
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6.9 Litigation and Compliance
(a) There are no actions, suits or proceedings, at Law or in equity, by any Person nor any arbitration, administrative or other proceeding by or before (or to the knowledge of the Purchaser, any investigation by) any Governmental Authority pending, or, to the knowledge of the Purchaser, threatened against or adversely affecting the Purchaser or any of its assets or that question or challenge the validity of this Agreement or the Business Combination, and the Purchaser knows of no valid basis for any such action, suit, proceeding, arbitration or investigation by or against the Purchaser. The Purchaser is not subject to any judgment, Order or decree entered in any lawsuit or proceeding nor has the Purchaser settled any Claim prior to being prosecuted in respect of it. The Purchaser is not the plaintiff or complainant in any action, suit or proceeding.
(b) The Purchaser has conducted and is conducting its businesses in compliance with, and is not in default or violation under, and have not received notice asserting the existence of any default or violation under, any Law applicable to its business or operations, except for non-compliance, defaults and violations which would not, in the aggregate, have a Material Adverse Change.
(c) Neither the Purchaser, nor any asset of the Purchaser is subject to any judgment, order or decree entered in any lawsuit or proceeding which has had, or which is reasonably likely to have, a Material Adverse Change or which is reasonably likely to prevent the Purchaser from performing its obligations under this Agreement.
(d) The Purchaser has duly filed or made all reports and returns required to be filed by it with any Governmental Authority and has obtained all permits, licenses, consents, approvals, certificates, registrations and authorizations (whether governmental, regulatory or otherwise) which are required in connection with its business and operations, except where the failure to do so has not had and would not have a Material Adverse Change.
6.10 Public Filings; Financial Statements
(a) The Purchaser has filed all documents required pursuant to Applicable Canadian Securities Laws (the "Purchaser Securities Documents"). As of their respective dates, the Purchaser Securities Documents complied in all material respects with the Applicable Canadian Securities Laws (and all other applicable securities laws) and, at the respective times they were filed, none of the Purchaser Securities Documents contained any untrue statement of a Material Fact or omitted to state a Material Fact required to be stated therein or necessary to make any statement therein, in light of the circumstances under which it was made, not misleading. The Purchaser has not filed any confidential disclosure reports which have not at the date hereof become public knowledge. The Purchaser has not filed any confidential material change reports which remain confidential as at the date hereof and there are no circumstances presently existing under which liability is or would reasonably be expected to be incurred under Part XXIII.1 - Civil Liability for Secondary Market Disclosure of the Securities Act (Ontario) and analogous provisions under applicable Laws.
(b) Any financial statements (including, in each case, any notes thereto) included in the Purchaser Securities Documents were prepared in accordance with IFRS applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto) and fairly present in all material respects the consolidated assets, liabilities and financial condition of Purchaser.
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(c) The Purchaser is now, and on the Closing Date will be, a "reporting issuer" under Canadian Securities Laws of each of the Provinces of Alberta, British Columbia and Ontario. The Purchaser is not currently in default in any material respect of any requirement of Applicable Canadian Securities Laws and the Purchaser is not included on a list of defaulting reporting issuers maintained by any of the securities commissions or similar regulatory authorities in each of such Provinces.
(d) The Purchaser has not had any reportable event (within the meaning of National Instrument 51-102 - Continuous Disclosure Obligations of the Canadian Securities Administrators).
(e) To the knowledge of the Purchaser, no proceedings prohibiting the sale of its securities have been instituted, are pending, contemplated or threatened by any securities commission or self-regulatory organization.
6.11 Contracts
Other than in connection with the Business Combination, or disclosed in the Purchaser's public filings on SEDAR, the Purchaser has not approved, is not contemplating and has not entered into any agreement in respect of, nor has any knowledge of:
(a) the purchase of any material property or assets or any interest therein or the sale, transfer or disposition of any material property or assets or any interest therein currently owned, directly or indirectly, by the Purchaser, whether by asset sale, transfer of shares or otherwise;
(b) the change of control of the Purchaser by sale or transfer of shares or sale of all or substantially all of the property and assets or otherwise; or
(c) a proposed or planned disposition of shares by any shareholder who owns, directly or indirectly, 10% or more of the outstanding Purchaser Shares.
6.12 Anti-Corruption
Neither the Purchaser nor any of its directors or officers nor any representative acting on behalf of the Purchaser, has, directly or indirectly, (i) violated any anti-bribery or anti-corruption Laws, including the Corruption of Foreign Public Officials Act (Canada) and the U.S. Foreign Corrupt Practices Act, or (ii) offered, paid, promised to pay, or authorized the payment of any money, or offered, given, promised to give, or authorized the giving of anything of value, that goes beyond what is reasonable and customary: (A) to any government official, whether directly or through any other person, for the purpose of influencing any act or decision of a government official in his or her official capacity, inducing a government official to do or omit to do any act in violation of his or her lawful duties, securing any improper advantage, inducing a government official to influence or affect any act or decision of any governmental authority, or assisting any representative of the Purchaser in obtaining or retaining business for or with, or directing business to, any person; (B) to any person in a manner which would constitute or have the purpose or effect of public or commercial bribery, or the acceptance of or acquiescence in extortion, kickbacks, or other unlawful or improper means of obtaining business or any improper advantage; or (C) violated or is in violation of any provision of the Criminal Code (Canada) relating to foreign corrupt practices, including making any contribution to any candidate for public office, in either case, where either the payment or gift or the purpose of such contribution payment or gift was or is prohibited under the foregoing, and neither the Purchaser nor to the knowledge of any director, officer, employee, consultant, representative or agent of the Purchaser, has (i) conducted or initiated any review, audit, or internal investigation that concluded that the Purchaser, or any director, officer, employee, consultant, representative or agent of the Purchaser violated such laws or committed any material wrongdoing, or (ii) made a voluntary, directed, or involuntary disclosure to any governmental authority responsible for enforcing anti-bribery or anti-corruption laws, in each case with respect to any alleged act or omission arising under or relating to non- compliance with any such laws, or received any notice, request, or citation from any person alleging noncompliance with any such laws. The operations of the Purchaser are and have been conducted at all times in compliance with the applicable financial recordkeeping and reporting requirements of the money laundering statutes and Laws of all applicable jurisdictions; and no action, Claim, notice of assessment, suit or proceeding by or before any commission, court, Governmental Authority, arbitrator or non-Governmental Authority involving the Purchaser with respect to such money laundering statutes and Laws is pending or, to the knowledge of the Purchaser, threatened.
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6.13 Brokers
Except in relation to the Concurrent Financing, the Purchaser or, to the knowledge of the Purchaser, any of its associates, affiliates or advisers have retained any broker or finder in connection with the transactions contemplated hereby, nor have any of the foregoing incurred any liability to any broker or finder by reason of any such transaction.
6.14 Absence of Undisclosed Liabilities and Indebtedness
Other than as disclosed in the Purchaser's public filings on SEDAR, the Purchaser has no liabilities or indebtedness.
6.15 Arm's Length Transactions
Other than as disclosed in the Purchaser's public filings on SEDAR:
(a) the Purchaser has not engaged in any transaction with, made any payment or loan to, or borrowed any monies from or is otherwise indebted to, any director, officer, employee or shareholder of the Purchaser or any other person with whom the Purchaser is not dealing at arm's length (within the meaning of the Tax Act) or any Affiliate of any of the foregoing, except for amounts due as normal compensation or reimbursement of ordinary business expenses; and
(b) the Purchaser is not a party to any contract or agreement with any director, officer, employee, or shareholder or any other person with whom the Purchaser is not dealing at arm's length (within the meaning of the Tax Act) or any Affiliate of any of the foregoing, other than employment agreements entered into in the Ordinary Course.
6.16 Employment Matters
The Purchaser does not have any employees. There are no Contracts, written or oral, between the Purchaser on one side, and any other party on the other side, relating to payment, remuneration or compensation for work performed or services provided (other than Contracts with professional advisors engaged to provide services in connection with the Business Combination) or that would require any payment to be made as a result of the completion of the Business Combination.
6.17 Taxable Canadian Corporation
The Purchaser is a "taxable Canadian corporation" for purposes of the Tax Act.
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ARTICLE 7
COVENANTS
7.1 Conduct of Business Prior to Closing
Except as contemplated by this Agreement or the Conversion Agreement or as required or contemplated in connection with the Business Combination, during the Interim Period, Skinject shall not without the prior written consent of RBX and the other Non-Vendor Parties, enter into any Contract in respect of its business or assets, other than in the Ordinary Course, and each Non-Vendor Party shall carry on its business and maintain its assets in the Ordinary Course, comply with all Authorizations and all applicable Laws, and each Non-Vendor Party shall not:
(a) incur any debt other than debt incurred in the Ordinary Course or pursuant to the issuance Skinject 2022 Convertible Notes to RBX or mortgage, pledge or hypothecate any of their assets or subject any of its assets to any Encumbrance or to cease to maintain its good standing under applicable corporate and securities Laws;
(b) declare or pay or set aside any dividends or distribute any of its properties or assets or make any payment by way of return of capital to its shareholders;
(c) effect any subdivision, consolidation or reclassification of any of its share capital;
(d) redeem, purchase or offer to purchase any of its shares or other securities;
(e) make any loan or advance to any Person or guarantee the payment of any indebtedness of another Person;
(f) acquire or agree to acquire any Person or other business organization or division or acquire or agree to acquire any material assets;
(g) acquire, directly or indirectly, any assets, including but not limited to securities of other companies, other than in the Ordinary Course or pursuant to the transactions contemplated herein;
(h) make any reduction in or otherwise make any payment on account of its paid-up capital;
(i) reorganize, amalgamate or merge with any other entity or other business organization whatsoever;
(j) alter or amend its constating documents as they exist of the date hereof;
(k) issue any shares, rights, warrants or options to purchase shares or any securities convertible into shares, warrants or options in its capital or Skinject Convertible Notes;
(l) enter into any transaction with or make payments to a party or parties with which it does not deal at arm's length;
(m) enter into any agreement or arrangement granting any rights to purchase or lease any of its assets or rights or requiring the consent of any Person to the transfer, assignment or lease of any such assets or rights;
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(n) sell, pledge, lease, abandon, dispose of, grant any interest in, encumber or agree to sell, pledge, lease, abandon, dispose of, grant any interest in or encumber any of its assets, including in any Skinject Intellectual Property;
(o) grant any director, officer or employee who has a policy-making function any increase in compensation or in severance or termination pay or enter into any employment or consulting agreement with any such director, officer or employee, or hire or promote any such Person;
(p) enter into or modify any employment, severance, collective bargaining or similar agreements, policies or arrangements with, or grant any bonuses, salary increases, severance or termination pay to, any of its employees, officers or directors, other than pursuant to agreements in effect on the date hereof;
(q) remove its auditor or any director or terminate any officer or employee;
(r) engage in any business enterprise or other activity different from that carried on as of the date of this Agreement;
(s) make any expenditures out of the Ordinary Course, other than due diligence investigations with respect to the Business Combination, and the completion of the transactions as contemplated herein;
(t) take any action which would be outside the Ordinary Course or which may result in a Material Adverse Change;
(u) (A) make, change or rescind any Tax election, (B) change any accounting or Tax reporting periods or methods, (C) amend any income or other material Tax Return, (D) settle or compromise any material Tax liability or claim, (E) enter into any closing agreement relating to any material Tax, (F) agree to an extension of a statute of limitations in respect of any Tax (other than any automatic extensions granted in the Ordinary Course) or (G) surrender any right to claim a Tax refund; or
(v) perform any act or enter into any transaction or negotiation which might materially adversely interfere or be materially inconsistent with the consummation of the Business Combination.
For greater certainty, the Purchaser is not restricted under the terms of this Agreement from taking any actions or executing and delivering any agreements or other documents in connection with the Concurrent Financing, provided that all matters in relation to the Concurrent Financing shall be completed to the satisfaction of RBX and Skinject, acting reasonably.
7.2 Access for Due Diligence
(a) Subject to the terms of any applicable laws or confidentiality obligations by which any of the Non-Vendor Parties are bound, each of the Non-Vendor Parties shall:
(i) permit RBX and the other Non-Vendor Parties and their respective employees, counsel, accountants or other representatives, during the Interim Period, without undue interference to the ordinary conduct of business in the Ordinary Course, to have reasonable access during normal business hours and upon reasonable notice to:
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(A) such Non-Vendor Party's assets and, in particular to any information, including the Non-Vendor Party's Books and Records and Corporate Records;
(B) all Skinject Material Contracts;
(C) the senior personnel of the Non-Vendor Parties; and
(ii) furnish to RBX and the other the Non-Vendor Parties or their employees, counsel, accountants or other representatives such financial and operating data and other information with respect to such Non-Vendor Party as RBX or any other Non- Vendor Party shall from time to time reasonably request, which information shall be true and complete in all material respects and shall not contain an untrue statement of any Material Fact or omit to state any Material Fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances in which they are made, not misleading.
(b) No investigations made by or on behalf of a the Non-Vendor Party, whether under this Section 7.2 or any other provision of this Agreement, shall have the effect of waiving, diminishing the scope of, or otherwise affecting any representation or warranty made in this Agreement.
(c) Each of the Non-Vendor Parties acknowledges that all information provided by RBX or one Non-Vendor Party to another Non-Vendor Parties (a "Recipient") is confidential, agrees that such information shall not be used other than in furtherance of the purpose of this Agreement and the Business Combination and that until the Closing and in the event of termination of this Agreement without Closing, each of the Non-Vendor Parties shall keep such information confidential and shall not use such information for any improper purpose or disclose to any other Person any information obtained from RBX or another Non-Vendor Party (in each case, the "Discloser") or its agents and representatives, unless such information:
(i) is or becomes generally available to the public other than as a result of a disclosure in violation of this Agreement;
(ii) becomes available to the Recipient on a non-confidential basis from a source other than the Discloser or its agents or representatives, unless the Recipient knows that such source is prohibited from disclosing the information to the Recipient by a contractual, fiduciary or other legal obligation; or
(iii) was known to the Recipient on a non-confidential basis before its disclosure to the Recipient by the Discloser or its agents or representatives.
(d) In the event the Recipient is required by Law to disclose any confidential information, the Recipient shall, to the extent not prohibited by applicable Law, provide the Discloser with prompt notice of such requirements so that the Discloser may seek a protective Order or other appropriate remedy or waive compliance with the provisions of Section 7.2(c) and shall assist the Discloser however practicable in connection with same.
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(e) Subject to the next sentence, if this Agreement is terminated, promptly after such termination the Recipient shall return or cause to be returned or destroyed all documents, work papers and other material (whether in written, printed or electronic form and including all copies) obtained from the Discloser or its agents and representatives in connection with this Agreement and not previously made public together with all derivative materials prepared or created by the Recipient. The Recipient may retain one copy of all such documents, work papers and other materials in a sealed envelope left with its solicitors, which sealed envelope is not to be opened except in circumstances where this Agreement or the Business Combination are the subject of litigation or otherwise with the consent of the Discloser.
7.3 Public Announcements
RBX and the Non-Vendor Parties shall jointly plan and co-ordinate any public notices, press releases, and any other publicity concerning this Agreement and the Business Combination and none of RBX or the other Non-Vendor Parties shall act in this regard without the prior approval of RBX and the other Non-Vendor Parties, such approval not to be unreasonably withheld or delayed, unless such disclosure is required to meet timely disclosure obligations of RBX or any Non-Vendor Party under applicable Laws or stock exchange rules, in circumstances where prior consultation with RBX or the other Non-Vendor Parties is not practicable, and to the extent reasonably practicable, a copy of such disclosure is provided to RBX and the other Non-Vendor Parties at such time as it is made publicly available.
7.4 Business Combination
Subject to the terms of this Agreement, each of the Non-Vendor Parties shall perform all their respective obligations required to be performed by them under this Agreement and all other agreements and documents related to the Business Combination, co-operate with each other in connection therewith, and do all such other acts and things as may be necessary or desirable in order to consummate and make effective, as soon as reasonably practicable, the transactions contemplated in this Agreement and by the Business Combination, without limiting the generality of the foregoing, each of the Non-Vendor Parties shall:
(a) take all such actions as are within its power to control and use commercially reasonable efforts to cause other actions to be taken which are not within its power to control, so as to ensure compliance with all of the conditions applicable to such Non-Vendor Party set forth herein, including ensuring that during the Interim Period and at Closing, there is no breach of any of the representations and warranties given by such Non-Vendor Party herein;
(b) apply for and use commercially reasonable efforts to obtain all regulatory approvals required in connection with this Agreement, the ancillary documents relating to the Business Combination, or any of the other transactions contemplated herein, and, in doing so, keep each other fully informed as to the status of the proceedings related to obtaining the regulatory approvals, including providing each other promptly with copies of all related applications and notifications (other than with respect to confidential information contained in such applications and notifications), in a draft form prior to such applications and notifications being submitted, in order for the other party to provide its reasonable comments thereon;
(c) use commercially reasonable efforts to obtain all necessary waivers, consents and approvals required to be obtained from, and to deliver all notices required to be delivered to, other parties to any of a Non-Vendor Party's contracts in connection with this Agreement, the Business Combination, and the ancillary documents relating thereto or any of the other transactions contemplated herein;
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(d) use commercially reasonable efforts to comply promptly with all requirements imposed by applicable Law with respect to the Business Combination and any other transactions contemplated herein;
(e) not knowingly take any action, refrain from taking any commercially reasonable action, or permit any action to be taken or not taken, which is inconsistent with this Agreement or which is or could reasonably be expected to impede or delay the completion of the transactions contemplated under this Agreement except as specifically permitted by this Agreement;
(f) subject to the advice of counsel, use commercially reasonable efforts to defend all lawsuits or other legal, regulatory or other proceedings against it challenging or affecting this Agreement, the ancillary documents relating to the Business Combination or the consummation of the Business Combination or any of the other transactions contemplated hereby;
(g) use commercially reasonable efforts to oppose, lift or rescind any injunction or restraining or other order or decree seeking to stop, or otherwise adversely affecting its ability to consummate, the Business Combination or any of the other transactions contemplated hereby; and
(h) use commercially reasonable efforts to fulfil all conditions to closing contained in this Agreement that are within its power and satisfy all provisions of this Agreement and the Business Combination applicable to each of them.
7.5 Issuance of Resulting Issuer Shares
The Resulting Issuer shall take all commercially reasonable necessary corporate steps and corporate proceedings to permit the Resulting Issuer Shares, upon their issuance, to be validly issued and outstanding as fully paid and non-assessable common shares of the Resulting Issuer registered in the names of the Vendors, free and clear, under Applicable Canadian Securities Laws, of all voting restrictions, trade restrictions and Encumbrances, except as contemplated in this Agreement, as may be required under Applicable Canadian Securities Laws, any lock-up agreements reasonably requested in connection with the Concurrent Financing or any policies of the TSX-V, including any escrow required by the TSX-V.
7.6 Representation or Warranty and Material Information
(a) Each Non-Vendor Party shall promptly notify RBX and the other Non-Vendor Parties:
(i) upon any representation or warranty made by it contained in this Agreement becoming untrue or incorrect during the Interim Period;
(ii) of any material information, change or event in the business operations, financial condition or other affairs of such Non-Vendor Party;
(iii) of the occurrence of any material breach of any of its covenants in this Agreement or of the occurrence of any event that may make the satisfaction of such conditions impossible or unlikely or the occurrence of any condition or situation that has occurred or arisen which might reasonably be expected to have a Material Adverse Change on the business, the assets, liabilities, results, financial condition, affairs or prospects of a Non-Vendor Party; and
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(iv) if any document filed or to be filed with the TSX-V contains any misrepresentation or any untrue statement of a Material Fact or omits to state a Material Fact required to be stated therein or necessary to make the statements contained therein not misleading in light of the circumstances in which they are or were made, or that otherwise requires an amendment or a supplement to any document filed with the TSX-V; and in any such event, the Non-Vendor Parties shall cooperate in the preparation of an amendment or a supplement to such document.
(b) Any such notification shall set out particulars of the untrue or incorrect representation, warranty or material information, change or event and details of any actions being taken by the Non-Vendor Parties, as the case may be. No such notification shall relieve any Non- Vendor Party of any right or remedy provided for in this Agreement.
7.7 Exclusivity and Non-Solicitation
(a) From and after the date of this Agreement and until the earlier of the Termination Date and the Closing Date:
(i) Each of the Non-Vendor Parties shall, and shall direct and cause its officers, directors, employees, representatives, advisors, and agents and its subsidiaries and their officers, directors, employees, representatives, advisors, and agents to immediately cease and cause to be terminated any solicitation, encouragement, activity, discussion or negotiation with any parties that may be ongoing with respect to an Alternative Transaction;
(ii) Unless permitted pursuant to this Agreement, each Non-Vendor Party agrees that it shall not, and shall not authorize or permit any of its officers, directors, employees, representatives, advisors or agents or its subsidiaries, directly or indirectly, to: (i) make, solicit, initiate, entertain, encourage, promote or facilitate, including by way of permitting any visit to its facilities or properties or entering into any form of agreement, arrangement or understanding, any inquiries or the making of any proposals regarding an Alternative Transaction or that may be reasonably be expected to lead to an Alternative Transaction; (ii) participate in any discussions or negotiations regarding, or furnish to any person any information or otherwise cooperate with, respond to, assist or participate in any Alternative Transaction or potential Alternative Transaction; (iii) remain neutral with respect to, or agree to, approve or recommend any Alternative Transaction or potential Alternative Transaction; or (iv) enter into any agreement, arrangement or understanding related to any proposal with respect to an Alternative Transaction; and
(iii) Each Non-Vendor Party shall promptly (and in any event within 24 hours) notify RBX and the other Non-Vendor Party, at first orally and then in writing, of any proposals, offers or written inquiries relating to or which could result in an Alternative Transaction being consummated, or any request for non-public information relating to such Non-Vendor Party. Such notice shall include a description of the terms and conditions of any proposal, inquiry or offer, the identity of the person making such proposal, inquiry or offer. Each Non-Vendor Party shall keep RBX and the other Non-Vendor Party fully informed on a prompt basis of the status, including any change to the material terms, of any such inquiry, proposal or offer.
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7.8 Alternative Transaction Structure
At the reasonable request of RBX or Skinject, the Non-Vendor Parties shall use commercially reasonable efforts to assist each other to successfully implement and complete any alternative transaction structure that would result in the Purchaser acquiring, directly or indirectly, all of the Skinject Shares so long as such an alternative transaction: (a) would not prejudice the Vendors including with respect to the expected Tax treatment of the Merger described in subsection (i) of Section 3.14(a); and (b) is otherwise on terms and conditions no more onerous in any material respect than the Business Combination. In the event that the Business Combination structure is so modified, the relevant provisions of this Agreement shall be modified as necessary in order that they shall apply with full force and effect, mutatis mutandis, but with the adjustments necessary to reflect the revised Business Combination structure, and the Non-Vendor Parties shall execute and deliver an agreement in writing giving effect to and evidencing such amendments as may be reasonably required as a result of such modifications and adjustments.
7.9 Insurance
The Non-Vendor Parties covenant that they will, obtain, with effect on Closing, and maintain, following Closing, insurance, by insurers of recognized financial responsibility, against such losses, risks and damages to the Resulting Issuer and its business, including for greater certainty the business and assets of Skinject, and directors' and officers' insurance, in such amounts that are customary for the business in which the Resulting Issuer and its subsidiaries are engaged and on a basis consistent with reasonably prudent persons in comparable businesses.
7.10 Survival
The representations and warranties of the Parties contained in this Agreement shall expire and be terminated on the earlier of the Closing Date or the termination of this Agreement.
ARTICLE 8
CONDITIONS OF CLOSING
8.1 Mutual Conditions Precedent
The obligations of the Parties to complete the Business Combination are subject to the satisfaction of the following conditions on or prior to the Effective Date, each of which may be waived only with the consent in writing of RBX, Skinject and the Purchaser:
(a) Consents and Authorizations. All consents, waivers, permits, exemptions, orders, consents and approvals required to permit the completion of the Business Combination, the failure of which to obtain could reasonably be expected to have a Material Adverse Change on Skinject or the Purchaser or materially impede the completion of the Business Combination, shall have been obtained.
(b) Orders. No temporary restraining order, preliminary injunction, permanent injunction or other order preventing the consummation of the Business Combination shall have been issued by any federal, state, or provincial court (whether domestic or foreign) having jurisdiction and remain in effect.
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(c) Listing Application. The Parties having prepared and submitted the Listing Application to the applicable Governmental Authorities regarding the Business Combination.
(d) Conditional Approval. The Resulting Issuer Shares to be issued pursuant to the Business Combination shall have been conditionally approved for listing on the TSX-V, subject to standard conditions on the Closing Date or as soon as practicable thereafter, and shall, when issued, be issued as fully paid and non-assessable shares, free and clear, under Applicable Canadian Securities Laws, of any and all Encumbrances, except as contemplated in this Agreement, those imposed pursuant to statutory "control block hold periods", any lock-up agreements reasonably requested in connection with the Concurrent Financing or any policies of the TSX-V, including any escrow required by the TSX-V.
(e) Concurrent Financing. The Concurrent Financing shall have raised proceeds of at least $6,000,000 at a target enterprise valuation for Skinject of $25,000,000.
(f) Cease Trade Orders. On the Closing Date, no cease trade order or similar restraining order of any other provincial securities administrator relating to the Resulting Issuer Shares shall be in effect.
(g) No Legal Action. No injunction or restraining order of any court or administrative tribunal of competent jurisdiction shall be in effect and no action or proceeding is pending or threatened by any Person in any jurisdiction, to enjoin, restrict or prohibit the Business Combination or any of the other transactions contemplated by this Agreement.
(h) No Encumbrances. Except as contemplated in this Agreement or as may be required under Applicable Canadian Securities Laws; (i) any outstanding Encumbrances in respect of the Skinject Shares shall have been discharged; and (ii) there shall exist no Encumbrances on the Resulting Issuer Shares or the Resulting Issuer Shares.
(i) Shareholder Approval. The Skinject Shareholders shall have approved the Business Combination and, further, the Skinject Shareholders and the Purchaser's shareholders shall have approved all other matters contemplated herein and ancillary to the Business Combination.
(j) Prospectus Exemption. The distribution of Resulting Issuer Shares, Amalco Shares and Resulting Issuer Shares pursuant to the Business Combination shall be exempt from the prospectus and registration requirements of Applicable Canadian Securities Law.
(k) Resale Restrictions. The distribution of Resulting Issuer Shares pursuant to the Business Combination shall not be subject to resale restrictions under Applicable Canadian Securities Laws (other than as applicable to control persons) or pursuant to section 2.6 of National Instrument 45-102 - Resale of Securities of the Canadian Securities Administrators.
(l) Registration Exemption. The distribution of all applicable Resulting Issuer Shares to persons in the United States or to, or for the account or benefit of, U.S. Persons pursuant to the Business Combination shall be exempt from the registration requirements of the U.S. Securities Act and any applicable United States state securities Laws.
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(m) Pre-Closing Activities. All of the activities, transactions, documents or agreements contemplated in Article 2 shall have been completed.
(n) Termination. This Agreement shall not have been terminated in accordance with its terms.
8.2 Conditions for the Benefit of the Purchaser
The completion of the Business Combination is subject to the following conditions to be fulfilled or performed at or prior to Closing, which conditions are for the exclusive benefit of the Purchaser and may be waived, in whole or in part, by the Purchaser in its sole discretion:
(a) Truth of Representations and Warranties. The representations and warranties of Skinject and RBX contained in this Agreement shall be true and correct in all respects as of the Closing Time (disregarding for this purpose all materiality or Material Adverse Change qualifications contained therein) with the same force and effect as if such representations and warranties had been made on and as of such time (except such representations and warranties as may be affected by the occurrence of events or transactions expressly contemplated and permitted by this Agreement and those that are date and time specific) except where the failure of such representations and warranties to be so true and correct, individually or in the aggregate, has not had, and would not reasonably be expected to result in, a Material Adverse Change, and Skinject and RBX shall have executed and delivered a certificate of a senior officer to that effect.
(b) Performance of Covenants. Skinject and RBX shall have fulfilled or complied in all material respects with all covenants contained in this Agreement to be fulfilled or complied with by it at or prior to the Closing, and Skinject and RBX shall have executed and delivered a certificate of a senior officer to that effect. The receipt of such certificate and the Closing shall not constitute a waiver by the Purchaser of any of the covenants of Skinject or RBX contained in this Agreement.
(c) Deliveries. Skinject shall deliver or cause to be delivered to the Purchaser the following in form and substance satisfactory to the Purchaser, acting reasonably:
(i) certified copies of:
(A) the constating documents of Skinject;
(B) the register of shareholders of Skinject;
(C) all resolutions of the board of directors and shareholders of Skinject, as applicable, approving the entering into and completion of the Business Combination and to effect the transactions contemplated in this Agreement including authorizing the cancellation of the share certificates in respect of the Skinject Shares held in the name of the Vendors; and
(D) a certificate of incumbency signed by a duly authorized officer thereof and giving the name and bearing a specimen signature of each individual who shall be authorized to sign, in the name and on behalf of Skinject, as the case may be, this Agreement and any other ancillary documents; and
(ii) the Skinject Financial Statements;
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(iii) the aggregate short term assets of Skinject shall exceed the aggregate short term liabilities of Skinject by at least $1.00; and
(iv) all other necessary consents, waivers, including waivers of rights of first refusal and pre-emptive rights, authorizations and instruments of transfer required to enable the transfer of Skinject Shares, in accordance with the terms hereof, free and clear of any Encumbrances.
8.3 Conditions for the Benefit of RBX
The completion of the Business Combination is subject to the following conditions to be fulfilled or performed at or prior to the Closing, which conditions are for the exclusive benefit of RBX and may be waived, in whole or in part, by RBX in its sole discretion:
(a) Truth of Representations and Warranties. The representations and warranties of Skinject and the Purchaser contained in this Agreement shall be true and correct in all material respects as of the Closing Time (disregarding for this purpose all materiality or Material Adverse Change qualifications contained therein) with the same force and effect as if such representations and warranties had been made on and as of such time (except such representations and warranties as may be affected by the occurrence of events or transactions expressly contemplated and permitted by this Agreement and those that are date and time specific) and Skinject and the Purchaser shall have executed and delivered a certificate of a senior officer to that effect.
(b) Performance of Covenants. Skinject and the Purchaser shall have fulfilled or complied with all covenants contained in this Agreement to be fulfilled or complied with by them at or prior to the Closing, and each of Skinject and the Purchaser, on behalf of itself, shall have executed and delivered a certificate of a senior officer to that effect. The receipt of such certificate and the Closing shall not constitute a waiver by RBX of any of the covenants of Skinject or the Purchaser contained in this Agreement.
(c) Board Appointment.
(i) The Purchaser shall have obtained a duly executed resignation and mutual release of each director and officer of the Purchaser not remaining as a director or officer of the Purchaser following Closing in form and substance acceptable to RBX acting reasonably; and
(ii) the shareholders of the Purchaser shall have approved the appointment of the nominees to the Purchaser's board of directors effective immediately following
Closing.
(d) Resignation of Skinject Management. Each existing director and officer of Skinject shall have executed and delivered a resignation and non-competition agreement in form and substance acceptable to RBX acting reasonably.
(e) Acquisition of Purchaser Shares. Certain designated investors will have acquired 50% of the common shares of the Purchaser currently held by Jason Smart (representing approximately 37% of the outstanding common shares of the Purchaser) at par value for an aggregate purchase price of approximately US$110,000 in cash, in such manner as is acceptable to RBX acting reasonably.
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(f) No Outstanding Purchaser Liabilities. The Purchaser shall have no liabilities other than transaction expenses of up to US$50,000, and all outstanding management fees and other related party expenses payable by the Purchaser shall have been waived, cancelled or otherwise extinguished in writing for no payment or other consideration.
(g) Material Adverse Change. There shall not have been any Material Adverse Change with respect to the Purchaser or Skinject.
(h) Deliveries. Purchaser and Skinject, as applicable, shall deliver or cause to be delivered to RBX the following in form and substance satisfactory to RBX, acting reasonably:
(i) certified copies of:
(A) the constating documents of each of Skinject and the Purchaser;
(B) the register of shareholders of each of Skinject and the Purchaser;
(C) all resolutions of the board of directors and shareholders of Skinject and the Purchaser, as applicable, approving the entering into and completion of the Business Combination and to effect the transactions contemplated in this Agreement including the transfer of the Skinject Shares to the Purchaser and the issuance of the Resulting Issuer Shares to the Vendors with effect on Closing; and
(D) a certificate of incumbency signed by a duly authorized officer thereof and giving the name and bearing a specimen signature of each individual who shall be authorized to sign, in the name and on behalf of Skinject and the Purchaser, as the case may be, this Agreement and any other ancillary documents.
(ii) all other necessary consents, waivers, including waivers of rights of first refusal and pre-emptive rights, authorizations and instruments of transfer required to enable the transfer of Skinject Shares, in accordance with the terms hereof, free and clear of any Encumbrances and the issuance of the Resulting Issuer Shares to the Vendors.
8.4 Conditions for the Benefit of Skinject
The completion of the Business Combination is subject to the following conditions to be fulfilled or performed at or prior to the Closing, which conditions are for the exclusive benefit of the Skinject and may be waived, in whole or in part, by Skinject in its sole discretion:
(a) Truth of Representations and Warranties. The representations and warranties of RBX and the Purchaser contained in this Agreement shall be true and correct in all material respects as of the Closing Time (disregarding for this purpose all materiality or Material Adverse Change qualifications contained therein) with the same force and effect as if such representations and warranties had been made on and as of such time (except such representations and warranties as may be affected by the occurrence of events or transactions expressly contemplated and permitted by this Agreement and those that are date and time specific) and RBX and the Purchaser shall have executed and delivered a certificate of a senior officer to that effect.
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(b) Performance of Covenants. RBX and the Purchaser shall have fulfilled or complied with all covenants contained in this Agreement to be fulfilled or complied with by them at or prior to the Closing.
(c) Board Appointment.
(i) The Purchaser shall have obtained a duly executed resignation and mutual release of each director and officer of the Purchaser not remaining as a director or officer of the Purchaser following Closing in form and substance acceptable to RBX and Skinject, each acting reasonably; and
(ii) the shareholders of the Purchaser shall have approved the appointment of the nominees to the Purchaser's board of directors effective immediately following
Closing.
(d) Deliveries. The Purchaser shall deliver or cause to be delivered to Skinject the following in form and substance satisfactory to Skinject, acting reasonably:
(i) certified copies of:
(A) the constating documents of the Purchaser;
(B) the register of shareholders of the Purchaser;
(C) all resolutions of the board of directors and shareholders of the Purchaser approving the entering into and completion of the Business Combination and to effect the transactions contemplated in this Agreement including the transfer of the Skinject Shares to the Purchaser and the issuance of the Resulting Issuer Shares to the Vendors with effect on Closing; and
(D) a certificate of incumbency signed by a duly authorized officer thereof and giving the name and bearing a specimen signature of each individual who shall be authorized to sign, in the name and on behalf of the Purchaser, this Agreement and any other ancillary documents; and
(ii) all other necessary consents, waivers, including waivers of rights of first refusal and pre-emptive rights, authorizations and instruments of transfer required to enable the issuance of the Resulting Issuer Shares to the Vendors.
ARTICLE 9
TERMINATION
9.1 Default
The Parties agree that if any Party herein is in material misrepresentation, breach or non- performance (each a "Default") with respect to any of its representations, warranties or covenants in this Agreement which could reasonably be expected to have a Material Adverse Change on such other Party (the "Defaulting Party"), a non- defaulting Party (the "Non-Defaulting Party") shall give notice, such notice to be delivered to the Defaulting Party and the other Parties, designating such Default and confirming whether, in the sole opinion of Non-Defaulting Party, the Default is capable of remedy. Within ten calendar days after its receipt of such notice, the Defaulting Party shall, if the Non-Defaulting Party accepts that it is curable, cure such Default or commence proceedings to cure such Default and prosecute the same to completion without undue delay.
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9.2 Curing the Default
If:
(a) the Default is not so cured or the Defaulting Party does not commence or diligently proceed to cure the default within the requisite ten calendar day period; or
(b) the Default is incurable;
the Non-Defaulting Party may, by written notice given to the Defaulting Party and to the other Party at any time while the default continues, terminate this Agreement, provided that such right to terminate this Agreement shall not be available to any Party where failure to fulfill any of its obligations under this Agreement has been the cause of or resulted in the failure of such condition precedent being satisfied.
9.3 Termination
Subject to any necessary compliance with this Article 9, it is hereby acknowledged and agreed by the Parties that this Agreement and the obligation to effect the Business Combination may be terminated by a Party without liability to the terminating Party in the event that:
(i) another Party has (i) neither satisfied nor has the terminating Party waived each of the respective conditions precedent or (ii) failed to deliver or cause to be delivered any of its respective documents required to be delivered, in each case prior to the Closing in accordance with the provisions of Sections 8.1 to Section 8.4 (inclusive), as applicable, provided that such right to terminate this Agreement shall not be available to any Party where failure to fulfill any of its obligations under this Agreement has been the cause of or resulted in the failure of such condition precedent or delivery of documents being satisfied;
(ii) the conditions specified in Sections 8.1 to Section 8.4 (inclusive), as applicable, cannot be satisfied through no fault of the terminating Party prior to the Termination Date;
(iii) if RBX shall have failed to fund $500,000 to purchase another Skinject 2022 Convertible Note as specified in Section 2.1(b); or
(iv) each of the Parties agrees to the termination of this Agreement, in writing;
and in such event this Agreement shall be terminated and be of no further force and effect other than the obligations under Section 7.2(c), Section 7.3 and Section 11.6 and provided, however, that any such termination shall not prejudice the rights of a Party as a result of a breach by any other Party of its obligations hereunder or a liability resulting from the fraud or willful misconduct of such Party in connection with the termination of this Agreement.
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ARTICLE 10
CLOSING
10.1 Date, Time and Place of Closing
The completion of the transaction of purchase and sale contemplated by this Agreement shall take place by electronic means or at the offices of Bennett Jones LLP, 100 King Street West, Suite 3400, Toronto, Ontario, on the Closing Date at the Closing Time.
ARTICLE 11
MISCELLANEOUS
11.1 Notices
Any notice or communication to be given under this Agreement may be effectively given by delivering the same at the following addresses or by sending the same by electronic communication to the following e- mail addresses. Any notice so delivered shall be deemed to have been received on the date delivered and any electronic communication shall be deemed to have been received on the date of transmission, if in either case, the date thereof is a Business Day and, if not, on the next Business Day following delivery or transmission. The addresses for delivery and e-mail addresses for electronic communication of the Parties for the purposes hereof shall be as follows:
If to RBX:
RBX Capital LP
1717 Arch Street, Floor 39
Philadelphia, PA 19103
Attention: Dr. Raza Bokhari
E-mail: [Redacted]
with a copy to:
Bennett Jones LLP
100 King Street West, Suite 3400
Toronto, Ontario
M5X 1A4
Attention: Aaron Sonshine
E-mail: [Redacted]
and
Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas
New York, NY 10019-6064
Attention: Christopher J. Cummings
E-mail: [Redacted]
If to Skinject:
Skinject Inc.
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4981 McKnight Road, # 101371
Pittsburgh, PA 15237
Attention: Ken Melani
E-mail: [Redacted]
with a copy to:
Dentons Cohen & Grigsby P.C.
625 Liberty Avenue, 5th Floor
Pittsburgh, PA 15222
|
Attention: |
David J. Kalson, Esq. |
|
E-mail: |
[Redacted] |
|
If to Purchaser: |
|
Interactive Capital Partners Corporation
217 Queen Street West, Suite 401
Toronto, Ontario
M5V 0R2
Attention: Jen Thor
E-mail: [Redacted]
with a copy to:
Interactive Capital Partners Corporation
217 Queen Street West, Suite 401
Toronto, Ontario
M5V 0R2
Attention: Chris Irwin
E-mail: [Redacted]
If to a Vendor, to the addresses specified on the signature page for such Vendor on their Joinder Agreement.
Any Party may from time to time notify the other Parties, in accordance with the provisions of this Agreement, of any change of its address or e-mail address which thereafter, until changed by like notice, shall be the address or e-mail address of such Party for all purposes of this Agreement.
11.2 Responsibility for Own Costs
Except as agreed in writing by the Parties, each of the Parties shall be responsible to bear its own costs (including fees, disbursements and taxes) related to this Agreement and the Business Combination. Counsel to RBX shall be responsible for preparing the initial draft of the Listing Application and the other transaction documentation related to the Business Combination.
11.3 Enurement
This Agreement shall be binding upon and enure to the benefit of the Parties and their respective successors and permitted assigns. None of the Parties may assign any of its rights or obligations hereunder without the prior written consent of the other Parties. The Skinject Shareholders shall be entitled to enforce the provisions of Section 3.12(b) and Section 3.12(c).
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11.4 Further Assurances
The Parties shall from time to time do, make and execute all such documents, additional conveyances, transfers and other acts, matters and things as may be reasonably required to transfer the Skinject Shares to the Purchaser and for the Purchaser to deliver the Resulting Issuer Shares to the Vendors, as applicable, and to otherwise give effect to this Agreement and the Business Combination.
11.5 Severability
Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions hereof and any such prohibitions or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
11.6 Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal Laws of Canada applicable therein. Each Party hereby irrevocably attorns to the non- exclusive jurisdiction of the courts of the Province of Ontario in respect of all matters arising under or in relation to this Agreement.
11.7 Entire Agreement
This Agreement (including the Schedules hereto) constitutes the entire agreement between the Parties and replaces and supersedes all prior agreements, memorandum, correspondence, communications, negotiations and representations, whether oral or written, expressed or implied, statutory or otherwise with respect to the subject matter herein and, except as expressly provided herein, this Agreement is not intended to and shall not confer upon any Person other than the Parties any rights or remedies hereunder.
11.8 Amendments
No supplement, modification, amendment, waiver or termination of this Agreement shall be binding unless executed in writing by all Parties.
11.9 Time
Time shall be of the essence of this Agreement.
11.10 Waiver
No consent or waiver, express or implied, by any Party to or of any breach or default by any other Party of any or all of its obligations under this Agreement shall:
(a) be valid unless it is in writing and stated to be a consent or waiver hereunder;
(b) be relied upon as a consent or waiver to or of any other breach or default of the same or any other obligation;
(c) constitute a general waiver under this Agreement; or
(d) eliminate or modify the need for a specific consent or waiver in any other or subsequent instance.
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11.11 Counterparts
This Agreement may be executed in any number of counterparts, each of which shall be considered to be an original and together shall constitute one and the same document. The Parties shall be entitled to rely upon delivery of an executed facsimile or similar executed electronic copy of this Agreement, and such facsimile or similar executed electronic copy shall be legally effective to create a valid and binding agreement between the Parties.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
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IN WITNESS WHEREOF the Parties have executed this Agreement on the date first set forth above.
RBX CAPITAL LP
|
Per: |
/s/ Raza Bokhari |
|
|
Name: Raza Bokhari |
|
|
Title: Managing Partner |
SKINJECT INC.
|
Per: |
/s/ Kenneth Melani |
|
|
Name: Kenneth Melani |
|
|
Title: Chairman |
INTERACTIVE CAPITAL PARTNERS
CORPORATION
|
Per: |
/s/ Chris Irwin |
|
|
Name: Chris Irwin |
|
|
Title: Director |
Signature Page - Business Combination Agreement
SCHEDULES TO THE AGREEMENT ARE REDACTED FOR CONFIDENTIALITY
AMENDMENT NO. 1 TO THE AMENDED AND RESTATED BUSINESS COMBINATION AGREEMENT
THIS AMENDMENT AGREEMENT dated for reference May 18, 2023, is made
AMONG
RBX Capital LP, a limited partnership existing under the laws of Delaware ("RBX");
AND
SKINJECT INC., a corporation existing under the laws of Pennsylvania ("Skinject");
AND
THE SHAREHOLDERS OF SKINJECT
AND
INTERACTIVE CAPITAL PARTNERS CORPORATION, a corporation existing under the laws of Ontario ("Purchaser")
WHEREAS:
A. RBX, Skinject, the shareholders of Skinject and the Purchaser have entered into an amended and restated business combination agreement dated May 12, 2023 (the "BCA");
B. The Parties mutually wish to amend the BCA in the manner set out herein; and
C. Except as otherwise specified herein, all capitalized terms defined in the BCA will have the same meaning when used in this Amendment Agreement.
NOW THEREFORE, in consideration of the mutual premises and the respective covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties agree as follows:
1. The definition of "Termination Date" set out in Section 1.1 of the BCA is hereby deleted in its entirety and replaced with the following:
"Termination Date" means August 31, 2023.
2. Except as amended by this Amendment Agreement, the BCA remains unamended and continues in full force and effect and this Amendment Agreement will have effect so far as practicable as if all the provisions of the BCA and this Amendment Agreement were contained in one instrument.
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3. This Amendment Agreement may be executed in any number of counterparts, each of which shall be considered to be an original and together shall constitute one and the same document. The Parties shall be entitled to rely upon delivery of an executed facsimile or similar executed electronic copy of this Amendment Agreement, and such facsimile or similar executed electronic copy shall be legally effective to create a valid and binding agreement between the Parties.
4. This Amendment Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal Laws of Canada applicable therein.
[Remainder of page intentionally left blank. Signature page follows.]
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IN WITNESS WHEREOF the Parties have executed this Agreement on the date first set forth above.
| RBX CAPITAL LP | ||
| Per: | ||
| /s/ Raza Bokhari | ||
| Name: Raza Bokhari | ||
| Title: Managing Partner | ||
| SKINJECT INC. | ||
| Per: | ||
| /s/ Kenneth Melani | ||
| Name: Kenneth Melani | ||
| Title: Chairman | ||
| INTERACTIVE CAPITAL PARTNERS CORPORATION | ||
| Per: | ||
| /s/ Chris Irwin | ||
| Name: Chris Irwin | ||
| Title: Director | ||
Signature Page - Amendment No. 1 to Business Combination Agreement
DocuSign Envelope ID: 4CE3302B-9764-43A3-B8CB-1FA4B242EAF8
AMENDMENT NO. 2 TO THE AMENDED AND RESTATED BUSINESS COMBINATION AGREEMENT
THIS AMENDMENT AGREEMENT dated for reference August 29, 2023, is made AMONG
RBX Capital LP, a limited partnership existing under the laws of Delaware ("RBX");
AND
SKINJECT INC., a corporation existing under the laws of Pennsylvania ("Skinject");
AND
THE SHAREHOLDERS OF SKINJECT
AND
INTERACTIVE CAPITAL PARTNERS CORPORATION, a corporation existing under the laws of Ontario ("Purchaser")
.
WHEREAS:
A. RBX, Skinject, the shareholders of Skinject and the Purchaser have entered into an amended and restated business combination agreement (the "BCA") dated May 12, 2023 and amended on May 18, 2023;
B. The Parties mutually wish to amend the BCA in the manner set out herein; and
C. Except as otherwise specified herein, all capitalized terms defined in the BCA will have the same meaning when used in this Amendment Agreement.
NOW THEREFORE, in consideration of the mutual premises and the respective covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties agree as follows:
1. The definition of "Termination Date" set out in Section 1.1 of the BCA is hereby deleted in its entirety and replaced with the following:
"Termination Date" means September 30, 2023.
2. Except as amended by this Amendment Agreement, the BCA remains unamended and continues in full force and effect and this Amendment Agreement will have effect so far as practicable as if all the provisions of the BCA and this Amendment Agreement were contained in one instrument.
DocuSign Envelope ID: 57ED4581-5ADA-46D3-BBF9-537A3F7D4EE2
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3. This Amendment Agreement may be executed in any number of counterparts, each of which shall be considered to be an original and together shall constitute one and the same document. The Parties shall be entitled to rely upon delivery of an executed facsimile or similar executed electronic copy of this Amendment Agreement, and such facsimile or similar executed electronic copy shall be legally effective to create a valid and binding agreement between the Parties.
4. This Amendment Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal Laws of Canada applicable therein.
[Remainder of page intentionally left blank. Signature page follows.]
DocuSign Envelope ID: 57ED4581-5ADA-46D3-BBF9-537A3F7D4EE2
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IN WITNESS WHEREOF the Parties have executed this Agreement on the date first set forth above.
| RBX CAPITAL LP | ||
| Per: | /s/ Raza Bokhari | |
| Name: Raza Bokhari | ||
| Title: Managing Partner | ||
| SKINJECT INC. | ||
| Per: | /s/ Kenneth Melani | |
| Name: Kenneth Melani | ||
| Title: Chairman | ||
| INTERACTIVE CAPITAL PARTNERS CORPORATION | ||
| Per: | /s/ Chris Irwin | |
| Name: Chris Irwin | ||
| Title: Director | ||
Signature Page - Amendment No. 2 to Business Combination Agreement
BY-LAW NO. 1 - GENERAL REGULATION OF
THE BUSINESS AND AFFAIRS OF MEDICUS PHARMA LTD.
TABLE OF CONTENTS
-i-
TABLE OF CONTENTS
(continued)
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ARTICLE 1
INTERPRETATION
1.1 Definitions
In this by-law:
"Act" means the Business Corporations Act (Ontario) and the regulations enacted pursuant to it and any statute and regulations that may be substituted for them, as amended or re-enacted from time to time;
"articles" means the articles, as that term is defined in the Act, of the Company;
"auditor" means the auditor of the Company;
"board" means the board of directors of the Company;
"by-law" means a by-law of the Company;
"Company" means Medicus Pharma Ltd.;
"director" means a director of the Company;
"Indemnified Person" means
(a) each director and former director of the Company;
(b) each officer and former officer of the Company;
(c) each individual who acts or acted at the Company's request as a director or officer of a body corporate or an individual acting in a similar capacity of another entity; and
(d) the respective heirs and legal representatives of each of the persons designated in the preceding paragraphs (a) through (b).
"number of directors" means the number of directors provided for in the articles or, where a minimum and maximum number of directors is provided for in the articles, the number of directors determined by a special resolution or resolution of the board where it is empowered by special resolution to determine the number of directors.
"officer" means an officer of the Company, and reference to any specific officer is to the individual holding that office of the Company;
"person" means an individual, body corporate, partnership, joint venture, trust, unincorporated organization, association, the Crown or any agency or instrumentality thereof, or any entity recognized by law;
"proxyholder" means an individual holding a valid proxy for a shareholder;
"resident Canadian" has the meaning ascribed to that phrase in the Act;
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"shareholder" means a shareholder of the Company;
"telephonic or electronic means" means telephone calls or messages, facsimile messages, electronic mail, transmission of data or information through automated touch-tone telephone systems, transmission of data or information through computer networks, any other similar means or any other means prescribed by the Act; and
"voting person" means, in respect of a meeting of shareholders, an individual who is either a shareholder entitled to vote at that meeting, a duly authorized representative of a shareholder entitled to vote at the meeting or a proxyholder entitled to vote at that meeting.
1.2 Number, Gender and Headings
In this by-law, words in the singular include the plural and vice-versa and words in one gender include all genders. The insertion of headings in this by-law and its division into articles, sections and other subdivisions are for convenience of reference only, and shall not affect the interpretation of this by-law.
1.3 By-Law Subordinate to Other Documents
This by-law is subordinate to, and should be read in conjunction with, the Act, the articles and any unanimous shareholder agreement of the Company.
1.4 Computation of Time
The computation of time and any period of days shall be determined in accordance with the Act.
ARTICLE 2
DIRECTORS
2.1 Notice of Meeting
Any director may call a meeting of the board by petitioning and providing the chairman and secretary with written notice stating the business proposed to be conducted and the proposed timing of such meeting. The chairman shall thereupon direct the secretary to issue notice to the directors establishing a place, date and time for such meeting, having regard to the directors' availability and ability to achieve quorum, the urgency of the business proposed to be conducted, and any regularly scheduled board meeting already called pursuant to Section 2.6 at which such business could alternatively be conducted in a timely manner. The secretary shall at the direction of the chairman or other director petitioning the meeting deliver any additional materials corresponding to the agenda items set out in the notice of meeting that may be necessary or advisable to allow the directors to make an informed decision with respect to the business put before the meeting.
The board also may appoint, by resolution, dates, time and places for meetings of the board. A copy of any such resolution shall be sent to each director forthwith after being passed, but no other notice is required for any such meeting.
These powers are in addition to the powers of a majority of those representing a quorum of the board to call a meeting in accordance with Section 126(8) of the Act.
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2.2 Waiver of Notice
A director may in any manner and at any time waive notice of or otherwise consent to a meeting of the board, including by sending an electronic document to that effect. Attendance of a director at a meeting of the board shall constitute a waiver of notice of that meeting, except where a director attends for the express purpose of objecting to the transaction of any business on the grounds that the meeting has not been properly called.
2.3 No Notice to Newly Appointed Director
An individual need not be given notice of the meeting at which that individual is appointed by the other directors to fill a vacancy on the board, if that individual is present at that meeting.
2.4 Meetings Without Notice
A meeting of the board may be held without notice immediately following any annual meeting of shareholders.
2.5 Adjourned Meeting
Notice of an adjourned meeting of the board is not required if the time and place of the adjourned meeting is announced at the original meeting.
2.6 Regular Meetings
The board may appoint a day or days in any month or months for regular meetings of the board at a place and hour to be named. A copy of any resolution of the board fixing the place and time of such regular meetings shall be sent to each director forthwith after being passed, but no other notice shall be required for any such regular meeting except where the Act requires the purpose thereof or the nature of the business to be transacted to be specified.
2.7 Place of Meeting
A meeting of the board may be held at any place within or outside Ontario, and no such meeting need be held at a place within Canada.
2.8 Quorum for Board Meetings
The quorum for the transaction of business at any meeting of the board shall consist of a majority of the directors. If, however, the Company has fewer than three directors, all directors must be present at any meeting of the board to constitute a quorum.
2.9 Chairman of Board Meetings
The chairman of any meeting of the board shall be a director and the Chairman of the Board, and if a Chairman of the Board has not been appointed, the directors present at the meeting shall choose a director to preside as chairman of the meeting.
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2.10 Votes at Board Meetings
Each director present at a meeting of the board shall have 1 vote on each motion arising. Motions arising at meetings of the board shall be decided by a majority vote. The chairman of the meeting shall have a second or casting vote in the event of a tied vote on a matter before the board of directors.
2.11 Meeting by Telephonic or Electronic Means
A meeting of the board or of a committee of the board may be held by telephonic or electronic means or other communication facility that permits all persons participating in the meeting to communicate with each other simultaneously and instantaneously. A director who, through those means, votes at such a meeting or establishes a communications link to such a meeting shall be deemed for the purposes of the Act to be present at the meeting.
ARTICLE 3
MEETINGS OF SHAREHOLDERS
3.1 Notice of Shareholders' Meetings
The board may call a meeting of shareholders by causing notice of the date, time and place of the meeting to be sent to each shareholder entitled to vote at the meeting, each director and the auditor. Such notice shall be sent no less than 21 days and no more than 50 days before the meeting, if the Company is an offering Company (as defined in the Act), or no less than 10 days and no more than 50 days before the meeting if the Company is not an offering Company.
3.2 Quorum at Meetings of Shareholders
A quorum for the transaction of business at any meeting of shareholders shall be 2 voting persons holding or representing in the aggregate not less than 10% of the issued and outstanding shares of the Company, or of the class or classes respectively (if there is more than one class of shares outstanding for the time being). Notwithstanding the foregoing, if the Company has only one shareholder, or only one shareholder of any class or series of shares, the shareholder present in person or by proxy constitutes a meeting and a quorum for such meeting.
3.3 Chairman's Vote
The chairman of any meeting of shareholders shall not have a second or casting vote.
3.4 Voting
Unless the chairman of a meeting of shareholders directs a ballot, or a voting person demands one, each motion shall be voted upon by a show of hands. Each voting person has 1 vote in a vote by show of hands. Whenever a vote by show of hands shall have been taken upon a question, unless a ballot thereon is so required or demanded, a declaration by the chairman of the meeting as to the result of the vote upon the question and an entry to that effect in the minutes of the meeting shall be prima facie evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against any resolution or other proceeding in respect of such question, and the result of the vote so taken shall be the decision of the shareholders upon such question. A ballot may be directed or demanded either before or after a vote by show of hands. A demand for a ballot may be withdrawn at any time prior to the taking of the ballot. If a ballot is taken, a prior vote by show of hands has no effect.
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3.5 Chairman, Secretary and Scrutineers
The chairman of any meeting of shareholders shall be the first mentioned of such of the following officers as have been appointed and who is present at the meeting and willing to serve: chairman of the board, managing director, or chief executive officer, president or a vice-president who is a shareholder. If no such officer is present within 15 minutes from the time fixed for holding the meeting, the persons present and entitled to vote shall choose one of their number to be chairman. If the secretary of the Company is absent, the chairman shall appoint some person, who need not be a shareholder, to act as secretary of the meeting. If desired, one or more scrutineers, who need not be shareholders, may be appointed by a resolution or by the chairman with the consent of the meeting.
3.6 Who May Attend Shareholders' Meeting
The only persons entitled to attend a meeting of shareholders are voting persons, the directors, the auditor and, if any, the chairman, the managing director and the chief executive officer, as well as others permitted by the chairman of the meeting.
3.7 Meeting by Telephonic or Electronic Means
A meeting of the shareholders may be held by telephonic or electronic means and a shareholder who, through those means, votes at the meeting or establishes a communications link to the meeting shall be deemed for the purposes of the Act to be present at the meeting.
ARTICLE 4
SECURITY CERTIFICATES, PAYMENTS
4.1 Certificates
(a) Subject to Section 4.1(b), security certificates shall be in such form as the board may approve or the Company adopt. The president or the board may order the cancellation of any security certificate that has become defaced and the issuance of a replacement certificate for it when the defaced certificate is delivered to the Company or to a transfer agent or branch transfer agent of the Company.
(b) Unless otherwise provided in the articles, the board may provide by resolution that any or all classes and series of shares or other securities shall be uncertificated securities, provided that such resolution shall not apply to securities represented by a certificate until such certificate is surrendered to the Company.
4.2 Cheques
Any amount payable in cash to shareholders (including dividends payable in cash) may be paid by cheque drawn on any of the Company's bankers to the order of each registered holder of shares of the class or series in respect of which such amount is to be paid or, paid by electronic funds transfer to the bank account designated by the registered holder, unless such holder otherwise directs. Cheques may be sent by delivery or first class mail to such registered holder at that holder's address appearing on the register of shareholders, unless that holder otherwise directs in writing. By sending a cheque, as provided in this by-law, or the electronic funds transfer as aforesaid, in the amount of the dividend less any tax that the Company is required to withhold, the Company discharges its liability to pay the amount of that dividend, unless the cheque is not paid on due presentation.
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4.3 Cheques to Joint Shareholders
Cheques payable to joint shareholders shall be made payable to the order of all such joint shareholders unless such joint shareholders direct otherwise. Such cheques may be sent to the joint shareholders at the address appearing on the register of shareholders in respect of that joint holding, to the first address so appearing if there is more than one, or to such other address as those joint shareholders direct in writing.
4.4 Non-Receipt of Cheques
The Company shall issue a replacement cheque in the same amount to any person who does not receive a cheque sent as provided in this by-law, if that person has satisfied the conditions regarding indemnity, evidence of non-receipt and title set by the board from time to time, either generally or for that particular case.
4.5 Currency of Dividends
Dividends or other distributions payable in cash may be paid to some shareholders in Canadian currency and to other shareholders in equivalent amounts of a currency or currencies other than Canadian currency. The board may declare dividends or other distributions in any currency or in alternative currencies and make such provisions as it deems advisable for the payment of such dividends or other distributions.
ARTICLE 5
SIGNATORIES, INFORMATION
5.1 Signatories
Except for documents executed in the usual and ordinary course of the Company's business, which may be signed by any officer or employee of the Company acting within the scope of his or her authority, the following are the only persons authorized to sign any document on behalf of the Company:
(a) any individual appointed by resolution of the board to sign the specific document, that type of document or documents generally on behalf of the Company; or
(b) any director or any officer appointed to office by the board.
Any document so signed may, but need not, have the corporate seal of the Company applied, if there is one.
5.2 Facsimile or Electronic Signatures
The signature of any individual authorized to sign on behalf of the Company may, if specifically authorized by resolution of the board, be written, printed, stamped, engraved, lithographed or otherwise mechanically reproduced or may be an electronic signature. Anything so signed shall be as valid as if it had been signed manually, even if that individual has ceased to hold office when anything so signed is issued or delivered, until revoked by resolution of the board.
5.3 Voting Rights in other Companies
All securities carrying voting rights of any other Company held from time to time by the Company may be voted at any and all meetings of shareholders, bond holders, debenture holders or holders of other securities (as the case may be) of such other Company and in such manner as the board may from time to time determine. Any person or persons authorized to sign on behalf of the Company may also from time to time execute and deliver for and on behalf of the Company proxies and/or arrange for the issuance of voting certificates and/or other evidence of the right to vote in such names as they may determine.
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5.4 Restriction on Information Disclosed
Except as required by the Act or authorized by the board, no shareholder is entitled by virtue of being a shareholder to disclosure of any information, document or records respecting the Company or its business.
ARTICLE 6
PROTECTION AND INDEMNITY
6.1 Transactions with the Company
A director or officer of the Company who is:
(a) a party to a material contract or transaction or proposed material contract or proposed transaction with the Company; or
(b) a director or an officer of, or has a material interest in, any person who is a party to a material contract or transaction or proposed material contract or proposed transaction with the Company.
shall, at the time and in the manner provided in the Act, disclose in writing to the Company or request to have entered in the minutes of meetings of directors, the nature and extent of his or her interest. Except as provided in the Act, no such director of the Company shall attend any part of a meeting of directors during which the contract or transaction is discussed, and no such director shall vote on any resolution to approve such contract or transaction.
If a material contract is made or a material transaction is entered into between the Company and one or more of its directors or officers, or between the Company and another person of which a director or officer of the Company is a director or officer or in which he or she has a material interest, the director or officer shall not be accountable to the Company or its shareholders for any profit or gain realized from the contract or transaction, and the contract shall not be void or voidable, by reason only of that relationship or by reason only that such director is present at or is counted to determine the presence of a quorum at the meeting of directors that authorized the contract or transaction, if (a) the director or officer disclosed his or her interest in accordance with the Act, and (b) the contract or transaction was reasonable and fair to the Company at the time it was approved.
Even if the foregoing conditions are not met, a director or officer, acting honestly and in good faith, shall not be accountable to the Company or to its shareholders for any profit or gain realized from any such contract or transaction, by reason only of his or her holding the office of director or officer, and the contract or transaction, if it was reasonable and fair to the Company at the time it was approved, shall not be by reason only of the director's or officer's interest therein void or voidable, where (a) the contract or transaction is confirmed or approved by special resolution at a meeting of the shareholders duly called for that purpose, and (b) the nature and extent of the director's or officer's interest in the contract or transaction are disclosed in reasonable detail in the notice calling the meeting or in the information circular.
6.2 Limitation of Liability
Subject to the Act, no director or officer of the Company shall be liable for the acts or omissions of any other director, officer, employee or agent of the Company, or for any costs, charges or expenses of the Company resulting from any deficiency of title to any property acquired for or on behalf of the Company, or for the insufficiency of any security in or upon which any of the moneys of the Company shall be invested, or for any loss or damage arising from bankruptcy or insolvency, or in respect of any tortious acts of or relating to the Company or any other director, officer, employee or agent of the Company, or for any loss occasioned by an error of judgment or oversight on the part of any other director, officer, employee or agent of the Company, or for any other costs, charges or expenses of the Company occurring in connection with the execution of the duties of the director or officer, unless such costs, charges or expenses are incurred as a result of such person's own wilful neglect, default or negligence. Nothing in this by-law, however, shall relieve any director or officer from the duty to act in accordance with the Act or from liability for any breach of the Act.
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6.3 Indemnity of Directors and Officers
As required or permitted by the Act, the Company shall indemnify each Indemnified Person against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, which that Indemnified Person reasonably incurs in respect of any civil, criminal or administrative, investigative or other proceeding to which that Indemnified Person is made a party by reason of being or having been at the relevant time a director or officer of the Company or of a body corporate of which the Company is or was a shareholder or creditor, or by reason of having acted in a similar capacity for any other entity that is or was at the relevant time directly or indirectly owned or controlled by the Company, if:
(a) the Indemnified Person acted honestly and in good faith with a view to the best interests of the Company; and
(b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the Indemnified Person had reasonable grounds for believing that the conduct was lawful.
6.4 Advances by the Company
The Company shall advance monies to an Indemnified Person for the costs, charges and expenses of a proceeding referred to in Section 6.3 provided the Indemnified person shall repay such monies if the Indemnified person does not fulfil the conditions set out in Subsections 6.3(a) and (b).
6.5 Indemnities Not Limiting
The provisions of this Article 6 shall be in addition to and not in substitution for any rights, immunities and protections to which an Indemnified Person is otherwise entitled under the Act or as the law may permit or require.
6.6 Insurance
Subject to the Act, the Company may purchase and maintain such insurance for the benefit of any individual referred to in Section 6.3 as the board may determine.
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ARTICLE 7
NOTICES
7.1 Procedure for Sending Notices
Notice shall be deemed to have been sufficiently sent if sent in writing to the address of the addressee on the books of the Company and delivered in person, sent by prepaid first class mail or sent by any telephonic or electronic means of sending messages. Notice shall not be sent by mail if there is any general interruption of postal services in the municipality in which or to which it is mailed. Each notice so sent shall be deemed to have been received on the day it was delivered or sent by electronic means or on the fifth day after it was mailed.
7.2 Notices to Successors in Title
Notice to a shareholder is sufficient notice to each successor in title to that shareholder until the name and address of that successor have been entered on the Company's share register.
7.3 Notice to Joint Shareholders
Notice to one joint shareholder is sufficient notice to all of them. Such notice shall be addressed to all such joint shareholders and sent to the address for them on the Company's register of shareholders, or to the first such address if there is more than one.
7.4 Signatures on Notices
The signature on any notice or other communication or document to be sent by the Company may be written, printed, stamped, engraved, lithographed or otherwise mechanically reproduced or may be an electronic signature.
7.5 Omission of Notice Does Not Invalidate Actions
All actions taken at a meeting in respect of which a notice has been sent shall be valid even if:
(a) by accident, notice was not sent to any person;
(b) notice was not received by any person; or
(c) there was an error in a notice that did not affect the substance of that notice.
7.6 Waiver of Notice
Any person entitled to notice under the Act, the articles or the by-laws may waive that notice. Waiver, either before or after the event referred to in the notice, shall cure any default in sending that notice.
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ARTICLE 8
REPEAL OF FORMER BY-LAWS
8.1 Former By-Laws Repealed
Upon this by-law coming into force, By-Law No. 1 of the Company that is in effect at the time this by-law becomes effective is repealed provided that such repeal shall not affect the previous operation of such by-law so repealed or affect the validity of any act or right, privilege, obligation or liability acquired or incurred under the validity of any contract or agreement made pursuant to any such by-law prior to its repeal. All officers and provisions of this by-law and all resolutions of the shareholders or of the directors with continuing effect passed under such repealed by-law shall continue good and valid except to the extent inconsistent with this by-law and until amended or repealed.
BY-LAW NO. 2 - ADVANCE NOTICE BY-LAW
A by-law relating generally to the advance notice requirements for the nomination of directors of MEDICUS PHARMA LTD. (the "Company") is hereby made as follows:
1. INTRODUCTION
The purpose of this advance notice by-law (the "Advance Notice By-law") is to establish the conditions and framework under which holders of voting securities of the Company may exercise their right to submit director nominations by fixing a deadline by which such nominations must be submitted by a shareholder to the Company prior to any annual or special meeting of shareholders, and sets forth the information that a shareholder must include in the notice to the Company for the notice to be in proper form.
It is the position of the Company that this Advance Notice By-law is beneficial to shareholders and other stakeholders of the Company in that it helps to: (i) facilitate an orderly and efficient annual general meeting or, where the need arises, special meeting, process; (ii) ensure that all shareholders receive adequate notice of the director nominations and sufficient information regarding all director nominees; and (iii) allow shareholders to register an informed vote after having been afforded reasonable time for appropriate deliberation. This Advance Notice By-law is intended to further these objectives.
2. NOMINATION OF DIRECTORS
Subject only to the Business Corporations Act (Ontario) (the "Act") and the articles of the Company, only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Company. For greater certainty, this Advance Notice By-law does not apply to (i) the appointment, by the board, of a director to fill a vacancy on the board or (ii) the appointment, by the board, of a director between annual meetings of the shareholders of the Company in accordance with the articles of the Company. Nominations of persons for election to the board may be made at any annual meeting of shareholders, or at any special meeting of shareholders if one of the purposes for which the special meeting was called was the election of directors. Such nominations may be accepted only if made in the following manner:
(a) by or at the direction of the board or an authorized officer of the Company, including pursuant to a notice of meeting;
(b) by or at the direction or request of one or more shareholders of the Company pursuant to a proposal made in accordance with the provisions of the Act, or a requisition of meeting of the shareholders of the Company made in accordance with the provisions of the Act; or
(c) by any person (a "Nominating Shareholder"): (i) who, at the close of business on the date of the giving of the notice provided below in this Advance Notice By-law and on the record date for notice of such meeting, is entered in the securities register of the Company as a holder of one or more shares carrying the right to vote at such meeting, or who beneficially owns shares that are entitled to be voted at such meeting and who establishes to the satisfaction of the chair of the meeting such beneficial ownership; and (ii) who complies with the notice and other procedures set out below in this Advance Notice By-law.
In addition to any other applicable requirements, for a nomination made by a Nominating Shareholder to be accepted, such Nominating Shareholder must have given timely notice thereof in proper written form to the Secretary of the Company at the head office of the Company in accordance with this Advance Notice By-law.
To be timely, a Nominating Shareholder's notice to the Secretary of the Company must be given:
(a) in the case of an annual meeting of shareholders, not less than 30, nor more than 60, days prior to the date of the annual meeting of shareholders; provided, however, that in the event the annual meeting of shareholders is to be held on a date that is less than 50 days after the date (the "Notice Date") on which the first public announcement of the date of the annual meeting was made, notice by the Nominating Shareholder must be given not later than the close of business on the 10th day following the Notice Date; and
(b) in the case of a special meeting (which is not also an annual meeting) of shareholders called for the purpose of electing directors (whether or not called for other purposes), not later than the close of business on the 15th day following the day on which the first public announcement of the date of the special meeting of shareholders was made. In no event shall any adjournment or postponement of a meeting of shareholders or the announcement thereof commence a new time period for the giving of a Nominating Shareholder's notice as described above.
To be in proper written form, a Nominating Shareholder's notice to the Secretary of the Company must set out:
(a) as to each person whom the Nominating Shareholder proposes to nominate for election as a director (i) the name, age, business address and residential address of the person, (ii) the principal occupation, business or employment of the person for the most recent five years including, without limitation, the name and principal business of any company in which any such employment is carried on, (iii) the number of securities of each class of voting securities of the Company or any of its subsidiaries beneficially owned, or controlled or directed, directly or indirectly, by the person as of the record date for the meeting of shareholders (if such date shall then have been made publicly available and shall have occurred) and as of the date of such notice, (iv) any other information relating to the person that would be required to be disclosed in a dissident's proxy circular in connection with solicitations of proxies for the election of directors pursuant to the Act and Applicable Securities Laws, and (v) a duly completed personal information form in the form prescribed by the principal stock exchange on which the securities of the Company are listed for trading, if any; and
(b) as to the Nominating Shareholder giving the notice, any proxy, contract, arrangement, understanding or relationship pursuant to which such Nominating Shareholder has a right to vote any securities of the Company and any other information relating to such Nominating Shareholder that would be required to be made in a dissident's proxy circular in connection with solicitations of proxies for election of directors pursuant to the Act and Applicable Securities Laws.
Such notice must be accompanied by the written consent of each nominee to being named as a nominee and to serve as a director, if elected. The Company may require any proposed nominee to furnish such other information as the Company may request to determine the eligibility of such proposed nominee to serve as an independent director of the Company or that could be material to a reasonable shareholder's understanding of the independence, or lack thereof, of such proposed nominee.
No person shall be eligible for election as a director of the Company unless nominated in accordance with the provisions of this Advance Notice By-law; provided, however that nothing in this Advance Notice By- law shall be deemed to preclude discussions by a shareholder (as distinct from the nomination of directors) at a meeting of shareholders of any matter in respect of which such shareholder would have been entitled to submit a proposal pursuant to the provisions of the Act. The chair of the meeting shall have the power and duty to determine whether a nomination was made in accordance with the procedures set out in the foregoing provisions and, if any proposed nomination is not in compliance with such foregoing provisions, to declare that such nomination is defective and cannot be accepted.
For purposes of this Advance Notice By-law:
"public announcement" shall mean disclosure in a news release disseminated through a national news service in Canada, or in a communication otherwise provided (through electronic means or otherwise) to all shareholders; and
"Applicable Securities Laws" means the applicable securities legislation of each relevant province and territory of Canada, as amended from time to time, the rules, regulations and forms made or promulgated under any such statute and the published national instruments, multilateral instruments, policies, bulletins and notices of the securities commissions and similar regulatory authorities of each relevant province and territory of Canada.
Notwithstanding anything to the contrary in the by-laws, notice given to the Secretary of the Company pursuant to this Advance Notice By-law may only be given by personal delivery, facsimile transmission or by email (at such email address as stipulated from time to time by the Secretary of the Company for the purposes of this notice), and shall be deemed to have been given and made only at the time it is served by personal delivery, email (at the address as aforesaid) or sent by facsimile transmission (provided that receipt of confirmation of such transmission has been received) to the Secretary of the Company at the address of the head office of the Company; provided that if such delivery or electronic communication is made on a day that is not a business day or later than 5:00 p.m. (local time at the head office of the Company) on a day that is a business day, then such delivery or electronic communication shall be deemed to have been made on the first subsequent day that is a business day.
Notwithstanding the foregoing, the board may, in its sole discretion, waive any requirement in this Advance Notice By-law.
MEDICUS PHARMA LTD.
10.00% Unsecured Convertible Notes due 2025
____________________________________
INDENTURE
Dated as of May 3, 2024
____________________________________
Odyssey Trust Company,
as Trustee
TABLE OF CONTENTS
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2
Appendix
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THIS INDENTURE, dated as of May 3, 2024, is between Medicus Pharma Ltd. (including any successors in accordance with this Indenture, the "Company"), a corporation subsisting under the Business Corporations Act (Ontario) and Odyssey Trust Company, as trustee (the "Trustee").
WHEREAS the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of a series of notes designated as 10.00% Unsecured Convertible Notes due 2025 in an aggregate principal amount of up to U.S.$10,000,000 (the "Notes"), which may be issued on one or more dates;
NOW THEREFORE each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the holders of Notes issued under this Indenture:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
1.01 Definitions
"62-104" means National Instrument 62-104 - Take-Over Bids and Issuer Bids.
"90% Redemption Right" has the meaning given to it in Section 3.07(7).
"90% Redemption Right Notice" has the meaning given to it in Section 3.07(7).
"Affiliate" means, at any time, with respect to any Person, any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person. As used in this definition "Control" and "Controlled" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
"Applicable Securities Laws" means applicable securities laws (including rules, regulations, policies and instruments) in Canada, the United States and any other applicable jurisdiction.
"Authentication Order" has the meaning assigned to it in Section 2.03.
"Bankruptcy Law" means the Bankruptcy and Insolvency Act (Canada), the Companies' Creditors Arrangement Act (Canada), and the Winding Up and Restructuring Act (Canada), each as now and hereafter in effect, any successors to such statutes, any other applicable insolvency, winding-up, dissolution, restructuring, reorganization, liquidation, or other similar law of any jurisdiction, and any law of any jurisdiction (including any corporate law relating to arrangements, reorganizations, or restructurings) permitting a debtor to obtain a stay or a compromise of the claims of its creditors against it.
"Beneficial Owner" means any person who holds a beneficial interest in a Note that is represented by a Note certificate registered in the name of the Depository or its nominee, for the purposes of being held by or on behalf of the Depository as custodian for Participants.
"Board of Directors" means the board of directors of the Company.
"Business Combination Notice" has the meaning given to it in Section 4.02(1).
"Business Combination" has the meaning given to it in Section 4.02(1).
"Business Day" means each day that is not a Saturday, Sunday or, solely in relation to a payment to be made by the Company, any other day on which banking institutions in Philadelphia, Pennsylvania or Toronto, Ontario are authorized or required by law to close.
"Canadian dollars" or "CDN$" means such currency of Canada which, as at the time of payment or determination, is legal tender in Canada for the payment of public or private debts.
"Cash Interest" has the meaning given to it in Section 2.12(6).
"Cash Interest Payment Election Notice" means a written irrevocable notice delivered by a Holder to the Company and the Trustee specifying the interest obligation to which the election relates in the form of Schedule 1 attached hereto.
"CDS" means CDS Clearing and Depository Services Inc. and its nominees, successors and assigns.
"Change of Control" means any circumstance arising after the date hereof in which the Company becomes aware that a Person or a combination of Persons, acting jointly or in concert (within the meaning of National Instrument 62-104 - Take-Over Bids and Issuer Bids), other than any Permitted Holders, acquires Voting Securities of the Company which, together with all other Voting Securities of the Company held by such Persons, constitute in the aggregate more than 50% of all outstanding Voting Securities of the Company; provided that, the foregoing shall be deemed not to be a Change of Control if such acquisition of Voting Securities does not entitle such Person(s) to more than 50% of the votes attached to all outstanding Voting Securities of the Company whether as a result of the voting restrictions under a securityholders agreement or otherwise; provided further that a transaction will be deemed not to involve a Change of Control if (i) the Company becomes a direct or indirect wholly owned Subsidiary of a holding company and (ii)(A) the direct or indirect holders of the voting stock of such holding company immediately following the transaction are the same as the holders of the Company's voting shares immediately prior to the transaction or (B) immediately following the transaction, the holders of the Company's voting stock immediately prior to the transaction (or another holding company satisfying the requirements of this sentence) are the beneficial owners, directly or indirectly, or more than fifty percent of the voting shares of such holding company.
"Change of Control Purchase Date" has the meaning given to it in Section 3.07(5).
"Common Shares" means common shares in the capital of the Company, as such common shares are constituted on the date of execution and delivery of this Indenture; provided that in the event of a change or a subdivision, revision, reduction, combination or consolidation thereof, any reclassification, capital reorganization, consolidation, amalgamation, arrangement, merger, sale or conveyance or liquidation, dissolution or winding-up, or such successive changes, subdivisions, redivisions, reductions, combinations or consolidations, reclassifications, capital reorganizations, consolidations, amalgamations, arrangements, mergers, sales or conveyances or liquidations, dissolutions or windings-up, then, subject to adjustments, if any, having been made in accordance with the provisions of Section 4.04, "Common Shares" shall mean the shares or other securities or property resulting from such change, subdivision, redivision, reduction, combination or consolidation, reclassification, capital reorganization, consolidation, amalgamation, arrangement, merger, sale or conveyance or liquidation, dissolution or winding-up.
"Company Order" means an order or direction in writing signed by any one officer or director of the Company.
"continuing" means, with respect to any Default or Event of Default, that such Default or Event of Default has not been cured or waived.
"Control" means the possession, directly or indirectly, of the power to direct, or cause the direction of, the management or policies of a Person, or make investment decisions on behalf of such Person, whether through the ability to exercise voting powers, by contract, or otherwise and "Controlled by" has the corresponding meaning.
"Corporate Trust Office" means the office of the Trustee at which at any time its corporate trust business shall be administered, which office at the date hereof is located at 1230 - 300 5th Avenue S.W., Calgary, Alberta, Canada T2P 3C4, Attention: Corporate Trust, or such other address as the Trustee may designate from time to time by notice to the Holders and the Company, or the principal corporate trust office of any successor Trustee (or such other address as such successor Trustee may designate from time to time by notice to the Holders and the Company).
"Current Market Price" means the VWAP of the Common Shares on the Principal Exchange for the 20 consecutive trading days ending on the date immediately preceding the applicable date; provided that if the Common Shares are quoted on the Principal Exchange in Canadian dollars, then the exchange rate used to convert from Canadian dollars to U.S. dollars shall be the applicable Bank of Canada daily average exchange rate on the applicable date; provided, further, that if no such VWAP or exchange rate, as applicable, is available, "Current Market Price" shall be the fair value of a Common Share as determined by the Board of Directors.
"Date of Conversion" has the meaning given to it in Section 4.03(9).
"Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.
"Definitive Notes" means certificated Notes and uncertificated notes (Direct Registration System).
"Depository" means CDS, and such other Persons (and their nominees, successors and assigns) as are designated from time to time in writing by the Company and acceptable to the Trustee to act as depository in respect of the Notes.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended.
"Expiration Date" has the meaning given to it in Section 4.04(5).
"Expiration Time" has the meaning given to it in Section 4.04(5).
"Expiry Date" has the meaning given to it in Section 3.07(2).
"Expiry Time" has the meaning given to it in Section 3.07(2).
"Fair Market Value" means, (i) with respect to a Common Shares, the Current Market Price and (ii) otherwise, fair market value as determined by the Board of Directors.
"First Optional Conversion Date" means January 1, 2025 or, subject to applicable regulatory approval, such earlier date as the Company may specify by notice to the Holders.
"Global Note" means a Note that is issued to and registered in the name of the Depository, or its nominee, pursuant to Section 2.02 for purposes of being held by or on behalf of the Depository as custodian for participants in the Depository's book-entry only registration system.
"Government Securities" means securities that are:
(1) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged, or
(2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America,
which, in each case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such Government Securities or a specific payment of principal of or interest on any such Government Securities held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the Government Securities evidenced by such depository receipt.
"Holder" or "Noteholder" means a Person in whose name a Note is registered on the Registrar's books.
"Holders' Request" means an instrument signed in one or more counterparts by the registered holder or holders of not less than 25% in aggregate principal amount of the outstanding Notes requesting the Trustee to take an action or proceeding permitted by this Indenture.
"IFRS" means International Financial Reporting Standards, as adopted by the International Accounting Standards Board, as in effect in Canada from time to time.
"Indenture" means this Indenture as modified, amended, supplemented or amended and restated from time to time.
"Ineligible Persons" means any Person whose address is in, or whom the Company or its transfer agent has reason to believe is a resident of, any jurisdiction outside of Canada or the United States to the extent that: (i) the issuance or delivery by the Company to such Person, upon an IPO Conversion or Change of Control Conversion, of Common Shares, would require the Company to take any action to comply with securities or analogous laws of such jurisdiction; or (ii) the Company or its transfer agent would be obligated to make or remit any tax withholdings or deductions to a governmental authority in connection with the delivery to such Person of Common Shares upon an IPO Conversion or Change of Control Conversion.
"Interest Payment Date" has the meaning given to it in Section 2.12(2).
"Interest Share Market Price" means, with respect to any Interest Payment Date, the last closing price of the Common Shares on the Principal Exchange prior to the Interest Payment Date.
"IPO Conversion Price" means the greater of (1) a 20% discount to the price per Common Share offered to the public in a U.S. Initial Public Offering and (2) the Non-IPO Conversion Price.
"Issue Date" means the first date on which some or all of the Notes are issued under this Indenture.
"Material Subsidiary" means any Subsidiary of the Company which has consolidated assets equal to or greater than 10% of the consolidated assets of the Company and its Subsidiaries.
"Maturity Date" means December 31, 2025.
"Maturity Date Interest" has the meaning given to it in Section 2.12(6).
"Non-IPO Conversion Price" is equal to U.S.$2.00 such that 500 Common Shares shall be issued for each U.S.$1,000 principal amount of Notes converted, subject to adjustment in accordance with Section 4.04.
"Non-IPO Conversion Rate" means, at any time of determination, U.S.$1,000 divided by the Non-IPO Conversion Price then in effect.
"Note Offer" has the meaning given to it in Section 3.07(1).
"Notes" has the meaning given to it in the recitals of this Indenture.
"Notes Custodian" means the custodian with respect to the Global Notes, if and when issued (as appointed by the Depository), or any successor Person thereto and shall initially be the Trustee.
"Offer Price" has the meaning given to it in Section 3.07(1).
"Officer" means the President, Chairman, the Chief Executive Officer, the Chief Financial Officer, the Chief Operating Officer, any Executive Vice President or Vice President, any Treasurer or any Secretary of the Company.
"Officer's Certificate" means a certificate signed by an Officer and provided to the Trustee.
"Opinion of Counsel" means a written opinion reasonably acceptable to the Trustee from legal counsel and which opinion may be subject to customary assumptions, qualifications and exclusions. The counsel may be an employee of or counsel to the Company.
"Optional Conversion" has the meaning given to it in Section 4.03(1).
"Optional Conversion Time" has the meaning given to it in Section 4.03(3).
"Par Call Date" means January 1, 2025.
"Participant" means a Person recognized by the Depository as a participant in the non-certificated inventory system administered by the Depository.
"Paying Agent" has the meaning given to it in Section 2.04.
"Permitted Holder" means Dr. Raza Bokhari or any entity directly or indirectly controlled by Dr. Raza Bokhari.
"Person" means any individual, corporation, partnership, joint venture (other than an unincorporated joint venture), association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.
"Principal Exchange" means, at any time of determination, (i) if the Common Shares are then listed on a U.S. national securities exchange and have been so listed for twenty consecutive trading days, such U.S. national securities exchange and (ii) otherwise, the principal Canadian securities exchange, if any, on which the Common Shares are then listed. As of the date of this Indenture, the Principal Exchange is the TSX Venture Exchange.
"Purchased Common Shares" has the meaning given to it in Section 4.04(5).
"Record Date" means (i) with respect to the Maturity Date, December 15, 2025 and (ii) with respect to an Interest Payment Date, the date determined as the record date for the determination of the Holders to which interest on the Notes is payable on such Interest Payment Date, which shall be April 15 in the case of a May 1 interest payment date and October 15 in the case of a November 1 Interest Payment Date.
"Registrar" has the meaning given to it in Section 2.04.
"Required Holders" means, at any time, the Holders of more than 50% in principal amount of the Notes at such time outstanding (exclusive of Notes then owned or held by the Company or any of its controlled Affiliates).
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the U.S. Securities Act of 1933, as amended.
"Successor Person" has the meaning given to it in Section 9.01(1)(i).
"Subsidiary" has the meaning given to it in the Securities Act (Ontario).
"Transaction Instruction" means a written order signed by the holder or the Depository entitled to request that one or more actions be taken, or such other form as may be reasonably acceptable to the Trustee, requesting one or more such actions to be taken in respect of a Note held by a Beneficial Owner.
"Trustee" has the meaning given to it in the recitals.
"Unclaimed Funds Return Date" has the meaning given to it in Section 3.07(12).
"U.S. Dollars" or "U.S.$" means such currency of the United States of America which, as at the time of payment or determination, is legal tender therein for the payment of public or private debts.
"U.S. Initial Public Offering" means the closing of the Company's first firm commitment underwritten initial public offering of Common Shares in the United States pursuant to a registration statement filed under the Securities Act, accompanied by a listing of the Common Shares on a U.S. national securities exchange.
"Voting Securities" means shares of capital stock of any Person that is entitled to vote in the election of the board of directors of such Person.
"VWAP" means the per share volume weighted average trading price of the Common Shares for the applicable period (which must be calculated utilizing days in which the Common Shares actually trade) on the Principal Exchange.
1.02 Rules of Construction
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it in accordance with IFRS;
(3) "or" is not exclusive;
(4) "including" means including without limitation (and "includes" and other similar derivations shall have the same import);
(5) words in the singular include the plural and words in the plural include the singular;
(6) references to sections of, or rules under, legislation shall be deemed to include substitute, replacement or successor sections or rules adopted in respect of such legislation from time to time;
(7) unless the context otherwise requires, any reference to an "Article", "Section" or "clause" refers to an Article, Section or clause, as the case may be, of this Indenture; and
(8) all references to the date the Notes were originally issued shall refer to the Issue Date.
ARTICLE 2
THE NOTES
2.01 Form and Dating
(1) The Notes shall be dated as of the date they are issued and shall mature on the Maturity Date. Provisions relating to the Notes are set forth in the Appendix attached hereto (the "Appendix"), which is hereby incorporated in, and expressly made part of, this Indenture. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit 1 to the Appendix, which is hereby incorporated in, and expressly made a part of, this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage; provided that any such notation, legend or endorsement is in a form acceptable to the Company. Each Note shall be dated the date of its authentication. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture, and the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. The Notes shall be in minimum denominations of U.S.$1,000 and integral multiple of U.S.$1,000 in excess thereof.
(2) The maximum aggregate principal amount of Notes authorized to be issued and certified under this Indenture is U.S.$10,000,000.
2.02 Issue of Global Notes
(1) The Company may specify that the Notes are to be issued in whole or in part as one or more Global Notes registered in the name of a Depository, or its nominee, designated by the Company in a written direction of the Company delivered to the Trustee at the time of issue of such Notes, and in such event the Company shall execute and the Note shall certify and deliver one or more Global Notes that shall:
(A) represent an aggregate amount equal to the principal amount of the outstanding Notes to be represented by one or more Global Notes;
(B) be delivered by the Trustee to such Depository or pursuant to such Depository's instructions; and
(C) bear a legend substantially to the following effect:
"THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREIN REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE THEREOF. THIS NOTE MAY NOT BE TRANSFERRED TO OR EXCHANGED FOR NOTES REGISTERED IN THE NAME OF ANY PERSON OTHER THAN THE DEPOSITORY OR A NOMINEE THEREOF AND NO SUCH TRANSFER MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. EVERY NOTE AUTHENTICATED AND DELIVERED UPON REGISTRATION OF, TRANSFER OF, OR IN EXCHANGE FOR, OR IN LIEU OF, THIS NOTE SHALL BE A GLOBAL NOTE SUBJECT TO THE FOREGOING, EXCEPT IN SUCH LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE."
(2) Each Depository designated for a Global Note must, at the time of its designation and at all times while it serves as such Depository, be a clearing agency registered or designated under the securities legislation of the jurisdiction where the Depository has its principal offices.
2.03 Execution and Authentication
(1) An Officer shall sign the Notes for the Company by manual or electronic signature.
(2) If an Officer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless.
(3) A Note shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture.
(4) If the Notes are issued as certificated Notes or Global Notes, the Trustee shall, upon receipt of a written order of the Company signed by an Officer of the Company (an "Authentication Order"), authenticate and deliver certificated Notes or Global Notes, as the case may be, in such names and amounts as the Company shall direct in an Authentication Order.
(5) If the Notes are issued as via the Direct Registration System, the Trustee shall, upon receipt of a treasury direction of the Company signed by an Officer of the Company (a "Treasury Direction"), deliver Notes via the Direct Registration System in such names and amounts as the Company Shall Direct in a Treasury Direction.
(6) The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Notes. Unless limited by the terms of such appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands.
2.04 Registrar and Paying Agent
(1) The Company shall maintain an office or agency (which may be the office of the Trustee or an Affiliate of the Trustee, Registrar or co-registrar) where Notes may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency (which may be the office of the Trustee or an Affiliate of the Trustee, Registrar or co-registrar) where Notes may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may change any Paying Agent or Registrar without prior notice to any Noteholder. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent.
(2) The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture. The agency agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee in writing of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.08. The Company may act as Paying Agent, Registrar, co-registrar or transfer agent.
(3) The Company initially appoints the Trustee as Registrar and Paying Agent in connection with the Notes.
2.05 Paying Agent to Hold Money in Trust
The Company shall deposit with the Paying Agent, by wire a sum sufficient to pay the principal amount of Notes that become due and payable. The wire must be sent prior to 11:00 a.m. (Calgary time) on the Business Day prior to the date principal becomes due. If payment is made by a certified cheque, such cheque shall be forwarded at least three Business Days prior to the date principal becomes due. Principal will be considered paid on the date due if the Paying Agent holds (as of 11:00 a.m., Calgary time, on the Business Day prior to the due date) money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal then due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Noteholders or the Trustee all money held by the Paying Agent for the payment of principal of the Notes and shall notify the Trustee of any default by the Company in making any such payment. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, a Paying Agent shall have no further liability for the money. If the Company or a Subsidiary of the Company acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee.
2.06 Noteholder Lists
The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Noteholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee, in writing at least two Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Noteholders.
2.07 Transfer and Exchange
(1) The Notes shall be issued in fully registered form without coupons and shall be transferable only upon the surrender of a Note for registration of transfer and in compliance with the Appendix. A Holder may transfer or exchange Notes in accordance with the provisions of this Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents in connection with a transfer of Notes. Holders shall be required to pay all taxes due on transfer. The Company shall not be required to transfer or exchange any Note selected for redemption. Also, the Company shall not be required to transfer or exchange any Note for a period of 15 days before the redemption date or between a Record Date and the next succeeding Interest Payment Date, except the unredeemed portion of any Note being redeemed in part. Neither the Trustee nor any agent shall have any responsibility or liability for any actions taken or not taken by CDS.
(2) All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange.
(3) At the option of the Holder, Notes may be exchanged for other Notes of any authorized denomination or denominations of a like aggregate principal amount upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the replacement Notes which the Holder making the exchange is entitled to in accordance with the provisions of the Appendix.
2.08 Replacement Notes
If a mutilated Note is surrendered to the Registrar or if the Holder of a Note claims that the Note has been lost, destroyed, wrongfully taken or is inaccessible, the Company shall issue, at its expense, and the Trustee shall authenticate, a replacement Note, subject to, in the case of a lost, destroyed or wrongfully taken Note, furnishing to the Company such evidence of the loss, theft or destruction of the Note as shall be satisfactory to it in its discretion and the satisfaction of any reasonable requirements of the Trustee. Such Holder shall furnish an indemnity or surety bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Note is replaced.
2.09 Outstanding Notes
(1) Notes outstanding at any time are all Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note.
(2) If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Notes (or portions thereof) to be redeemed or maturing, as the case may be, then on and after that date such Notes (or portions thereof) cease to be outstanding and interest on them ceases to accrue.
2.10 Temporary Notes
Until Definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of Definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Notes and deliver them in exchange for temporary Notes.
2.11 Cancellation
The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and dispose of all Notes surrendered for registration of transfer, exchange, payment or cancellation in accordance with its customary procedures. The Company may not issue new Notes to replace Notes they have redeemed, paid or delivered to the Trustee for cancellation.
2.12 Concerning Interest
(1) Every Note, whether issued originally or in exchange or in substitution for previously issued Notes, shall bear interest from and including the later of: (i) its date of issue; and (ii) the last Interest Payment Date to which interest shall have been paid or made available for payment on the outstanding Notes, to but excluding the next Interest Payment Date.
(2) The Company will pay interest on the principal amount of the Notes semi-annually in arrears on May 1 and November 1 of each year (each an "Interest Payment Date"), commencing November 1, 2024, at the rate of 10.00% per annum. Interest will be computed on the basis of a 360-day year of twelve 30-day months. For purposes only of providing the disclosure required by the Interest Act (Canada), the yearly rate of interest for purposes thereof that is equivalent to the rate payable under the Notes is the rate payable under the Notes multiplied by the actual number of days in the year divided by 360.
(3) Subject to accrual of any interest on unpaid interest from time to time, interest on each Note will cease to accrue from the earlier of the Maturity Date of such Note and, if such Note is called for redemption, the applicable redemption date, unless, in each case, upon due presentation and surrender of such Note for payment on or after such Maturity Date or redemption date, as the case may be, such payment is improperly withheld or refused by the Company.
(4) Wherever in this Indenture or the Notes there is mention, in any context, of the payment of interest, such mention is deemed to include the payment of interest on amounts in default to the extent that, in such context, such interest is, was or would be payable in cash pursuant to this Indenture, any Notes or any supplemental indenture, and express mention of interest on amounts in default in any of the provisions of this Indenture or the Notes will not be construed as excluding such interest in those provisions of this Indenture or the Notes in which such express mention is not made.
(5) Except as otherwise provided herein, if the date for payment of any amount of principal or interest in respect of any Note is not a Business Day, then payment will be made on the next Business Day and the Holder of such Note will not be entitled to any further interest or other payment in respect of the delay.
(6) Provided that all necessary regulatory approvals have been obtained (including any required approval of the Principal Exchange and any stock exchange on which the Common Shares are then listed), (i) the interest payable on each Interest Payment Date (excluding the Maturity Date) and (ii) the accrued and unpaid interest payable pursuant to Section 4.05 upon a conversion, shall be payable in Common Shares, unless, subject to the provisions and conditions of Section 2.13, a Holder has elected to receive cash in lieu of Common Shares in respect of interest payable on any Interest Payment Date or upon a conversion (as applicable) by delivering a Cash Interest Payment Election Notice to the Company and the Trustee in accordance with Section 2.13. Notwithstanding anything to the contrary in the Notes or in this Indenture, (i) interest for the final interest period ending on the Maturity Date will be paid entirely in cash ("Maturity Date Interest") in the same manner as the repayment of the aggregate principal amount of the notes then outstanding and (ii) the payment of accrued and unpaid interest in connection with any redemption or repurchase of Notes under this Indenture will be made solely in cash (any such interest, Maturity Date Interest and other interest payable in cash in accordance with this Indenture, "Cash Interest"). To the extent necessary regulatory approvals have not been obtained to issue Common Shares in respect of the interest payable on any Interest Payment Date or upon a conversion, as the case may be (including any required approval of the Principal Exchange and any stock exchange on which the Common Shares are then listed), the Company will pay such interest in cash as Cash Interest.
(7) The number of Common Shares to be issued in respect of interest on any Interest Payment Date or upon a conversion pursuant to Section 4.05 shall be determined based on the Interest Share Market Price by dividing the interest payable to each Noteholder on such Interest Payment Date or upon such conversion by the Interest Share Market Price; provided that the Interest Share Market Price shall not be lower than the "market price" determined in accordance with Section 2.2(a) of Policy 4.1 of the TSX Venture Exchange Company Manual, if then applicable, and shall be subject to the applicable requirements of any exchange on which the Common Shares are then listed. No fractional Common Shares shall be issued and the number of Common Shares to be issued will be rounded down to the nearest whole number of Common Shares. The Company will not make in payment in respect of fractional Common Shares that would have been issued if not for this clause (7).
(8) If all necessary regulatory approvals have been obtained for the Company to pay interest in Common Shares (including any required approval of the Principal Exchange and any stock exchange on which the Common Shares are then listed), the Company shall deliver a certificate or certificates representing such Common Shares or deposit such Common Shares through the Depository's non-certificated system or through the Direct Registration System (in each case, including any restrictions or legends that may be required under Applicable Securities Laws) to the Holder on the applicable Interest Payment Date and not later than ten (10) Business Days following a conversion.
(9) The Company shall, if applicable, pay the Cash Interest due upon the principal amount of each interest-bearing Definitive Note (except interest payable on maturity or redemption of a certificated Note which, at the option of the Company, may be paid only upon presentation of such certificated Note for payment) by forwarding or causing to be forwarded by prepaid ordinary mail (or in the event of mail service interruption, by such other means as the Trustee and the Company determine to be appropriate) a cheque for such interest (less any tax required by law to be deducted or withheld) payable to the Holder of such Definitive Note on the applicable Record Date for each applicable Interest Payment Date at the address appearing on the applicable register unless otherwise directed in writing by the Holder or, in the case of registered joint Holders, payable to all such joint Holders and addressed to one of them at the last address appearing in the applicable register and negotiable at par at each of the places at which interest upon such Definitive Note is payable. The forwarding of such cheque shall satisfy and discharge the liability for the interest on such Definitive Note to the extent of the sum represented thereby (plus the amount of any tax deducted or withheld) unless such cheque is not paid on presentation at any of the places at which such interest is payable. In the event of the non- receipt of such cheque by the applicable Noteholder or the loss, theft or destruction thereof, the Company, upon being furnished with evidence of such non-receipt, loss, theft or destruction and indemnity reasonably satisfactory to it, shall issue or cause to be issued to such Noteholder a replacement cheque for the amount of such cheque. Notwithstanding the foregoing, the Company, at its option, may cause the amount payable in respect of interest to be paid to a Noteholder by wire or other electronic transfer to an account maintained by such Noteholder or in any other manner acceptable to the Trustee. If payment of interest is made by cheque, such cheque shall be forwarded at least three Business Days prior to the applicable Interest Payment Date, and if payment is made in any other manner, such payment shall be made in a manner whereby the recipient receives credit for such payment on the applicable Interest Payment Date.
(10) The Company shall, if applicable, pay the Cash Interest due upon the principal amount of each interest-bearing Global Note by wire to the Trustee (and then by the Trustee to the Depository or its nominee) for subsequent payment to beneficial holders of interests in that Global Note, unless the Company, the Trustee and/or the Depository, as applicable, otherwise agree. Such funds as are required for the payments of interest on Global Notes shall be deposited by the Company with the Trustee or the Depository (or its nominee), as applicable, by wire on or before 11:00 a.m. (Calgary time) on the Business Day prior to the Interest Payment Date, or on the Business Day prior to the mailing date, if payment is to be made by cheque. If the funds are deposited with the Trustee, the Trustee shall pay such funds to the Depository or its nominee on or prior to the applicable Interest Payment Date. The deposit of funds by the Company with the Trustee or with the Depository (or its nominee), as applicable, with respect to the payment of interest will satisfy and discharge the liability of the Company in respect of the interest then due on such Global Note to the extent of the amount deposited (plus the amount of any tax deducted and withheld).
(11) In no event shall any interest or fee to be paid hereunder or under a Note exceed the maximum rate permitted by applicable laws. In the event any such interest rate or fee exceeds such maximum rate, such rate shall be adjusted downward to the highest rate (expressed as a percentage per annum) or fee that the parties could validly have agreed to by contract on the date hereof under Applicable Securities Laws. It is further agreed that any excess actually received by a holder of a Note shall be credited against the principal of the Notes (or, if the principal shall have been or would thereby be paid in all, the remaining amount shall be credited or paid to the Company).
2.13 Cash Interest Payment Election
(1) Each Holder shall have the option to have interest paid by the Company in cash in lieu of Common Shares.
(2) In order to exercise its right to receive interest in cash, the Holder shall deliver to the Company and the Trustee a Cash Interest Payment Election Notice electing to receive such interest on such Interest Payment Date or conversion date (as applicable) in cash. Such Cash Interest Payment Election Notice shall be delivered at least ten (10) Business Days prior to the applicable Interest Payment Date or conversion date but no more than thirty (30) Business Days prior to such Interest Payment Date or conversion date.
2.14 CUSIP Numbers, ISINs, etc.
The Company in issuing the Notes may use "CUSIP" numbers, ISINs and "Common Code" numbers (in each case if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers, ISINs and "Common Code" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall promptly advise the Trustee in writing of any change in any "CUSIP" numbers, ISINs or "Common Code" numbers applicable to the Notes.
2.15 Currency of Payment
The principal of, interest and any other amounts payable under this Indenture shall, unless otherwise provided for in this Indenture, be payable in U.S. Dollars.
ARTICLE 3
REDEMPTION
3.01 Notices to Trustee
(1) If the Company elects to redeem Notes pursuant to paragraph 5 of the Notes, it shall notify the Trustee in writing of the redemption date and the principal amount of Notes to be redeemed. Such notice shall be accompanied by an Officer's Certificate from the Company to the effect that such redemption will comply with the conditions herein. The Trustee shall have no liability with respect to or obligation to calculate the redemption price of any Notes to be redeemed pursuant to this Indenture.
(2) Notice of any redemption upon any corporate transaction or other event may be given prior to the completion thereof. In addition, any redemption or notice thereof may, at the discretion of the Company, be subject to one or more conditions precedent, including, but not limited to, completion of a corporate transaction or other event.
3.02 Selection of Notes to Be Redeemed
If less than all of the Notes are to be redeemed at any time, the Trustee will cause the Notes to be redeemed on a pro rata basis and shall identify and/or select the physical Note of each Holder necessary to effect such partial redemption on such basis (or, in the case of a Note issued in global form, based on a method as CDS may require, or by such other method as the Trustee in its sole discretion deems to be fair and appropriate) unless otherwise required by law or applicable stock exchange or depository requirements.
3.03 Notice of Redemption
Notices of redemption shall be given by the Company in the manner provided for in Section 12.01 not less than 10 but not more than 60 days before the redemption date to each Noteholders to be redeemed, except that redemption notices may be sent more than 60 days prior to a redemption date if the notice is issued in connection with a satisfaction and discharge of this Indenture. The notice shall identify the Notes to be redeemed and shall state:
(1) the redemption price including the calculation of interest;
(2) the redemption date;
(3) the name and address of the Paying Agent;
(4) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;
(5) if less than all the outstanding Notes are to be redeemed, the identification and principal amounts of the particular Notes to be redeemed;
(6) that, unless the Company defaults in making such redemption payment, interest on Notes (or portion thereof) called for redemption ceases to accrue on and after the redemption date;
(7) the "CUSIP" number, ISIN or "Common Code" number, if any, printed on the Notes being redeemed;
(8) that no representation is made as to the correctness or accuracy of the "CUSIP" number, ISIN, or "Common Code" number, if any, listed in such notice or printed on the Notes; and
(9) if the redemption is subject to the satisfaction of one or more conditions precedent, a description of each such condition and, if applicable, a statement that, in the discretion of the Company, the redemption date may be delayed until such time as any or all such conditions shall be satisfied, or such redemption may not occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied by the redemption date, or the redemption date as so delayed.
At the Company's request, upon written notice provided at least two Business Days prior to the giving of notice of redemption (or such later time as the Trustee may agree), the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. In such event, the Company shall provide the Trustee with the information required by this Section and a copy of the notice of redemption to be delivered to the Holders.
3.04 Effect of Notice of Redemption
Once the notice of redemption is delivered, Notes called for redemption become due and payable on the redemption date and at the redemption price stated in the notice (subject to any conditions precedent to such redemption yet to be satisfied or waived by the Company). Upon surrender to the Paying Agent, such Notes shall be paid at the redemption price stated in the notice, plus accrued and unpaid interest to but not including the redemption date (subject to the right of Holders of record on the relevant Record Date to receive interest due on the related Interest Payment Date), and such Notes shall be canceled by the Trustee. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. If a redemption date is on or after a regular Record Date and on or prior to the next Interest Payment Date, the accrued interest shall be payable to the holder of the redeemed Notes on the relevant Record Date and not to any other holder.
3.05 Deposit of Redemption Price
Prior to 11:00 a.m. (Calgary time) on the Business Day prior to the redemption date, the Company shall deposit with the Paying Agent (or, if the Company or a Subsidiary of the Company is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued and unpaid interest on all Notes to be redeemed on that date other than Notes or portions of Notes called for redemption which have been delivered by the Company to the Trustee for cancellation. If the Company complies with the foregoing provision of this Section 3.05, on and after the redemption or purchase date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption or purchase.
3.06 Notes Redeemed in Part
Upon surrender of a Note identified and/or selected as aforesaid and that is redeemed in part only, a new Note in principal amount equal to the unredeemed portion of the original Note, based on the applicable notice of partial redemption, shall be issued in the name of the Noteholder upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption, and no interest shall accrue on any Notes so redeemed on or after the redemption date.
3.07 Redemption upon a Change of Control
Prior to the consummation of a Change of Control resulting from a Business Combination and within 30 days following the occurrence of any other Change of Control, the Company shall be obligated to offer to purchase all Notes then outstanding. The terms and conditions of such obligation (in addition to complying with Applicable Securities Laws) are set forth below:
(1) At least 10 days prior to the consummation of a Change of Control resulting from a Business Combination and within 30 days following the occurrence of any other Change of Control, the Company shall deliver to the Trustee a notice in writing stating that there is expected to be or has been a Change of Control and specifying the date on which such Change of Control is expected to occur or has occurred and the circumstances or events giving rise to such Change of Control together with a cash offer in writing (the "Note Offer") to purchase all (or any portion actually tendered to such offer) of the Notes then outstanding from the Holders at a price per Note equal to 101% of the principal amount of Notes being repurchased together with accrued and unpaid interest thereon up to but not including the Change of Control Purchase Date (as defined below) (the "Offer Price"). The Trustee will promptly thereafter deliver, electronically or by prepaid courier or mail, at the Company's election, the Note Offer to the holders of all Notes then outstanding, at their electronic or physical addresses, as applicable, appearing in the registers of holders of Notes maintained by the Trustee.
(2) The Note Offer shall specify the date (the "Expiry Date") and time (the "Expiry Time") on which the Note Offer shall expire which date and time shall not, unless otherwise required by Applicable Securities Laws, be earlier than the close of business on the 10th day and not later than the close of business on the 60th day following the date on which such Note Offer is made.
(3) The Note Offer shall specify that the Note Offer may be accepted by the Holders by tendering the Notes so held by them to the Trustee at its offices in Calgary, Alberta at or before the Expiry Time together with an acceptance notice in form and substance acceptable to the Trustee.
(4) The Note Offer shall specify that acceptance thereof is irrevocable except with the consent of the Company.
(5) The Note Offer shall state that holders of Notes may accept the Note Offer in respect of all or a portion (in a minimum amount of $1,000 principal amount and multiples thereof) of their Notes.
(6) The Note Offer shall specify a date (the "Change of Control Purchase Date") no later than the third Business Day following the Expiry Date on which the Company shall take up and pay for all Notes duly tendered in acceptance of the Note Offer.
(7) The Company shall, on or before 11:00 a.m. (Calgary time), on the Business Day immediately prior to the Change of Control Purchase Date pay to the Trustee by wire transfer or such other means as may be acceptable to the Trustee, an amount of money sufficient to pay the aggregate Offer Price in respect of all Notes duly tendered to the Note Offer (less any tax required by law to be deducted). The Trustee, on behalf of the Company, will pay the Offer Price to the holders of Notes in the respective amounts to which they are entitled in accordance with the Note Offer as aforesaid.
(8) If holders of 90% or more of the aggregate principal amount of Notes outstanding on the date the Company delivers the Note Offer to the Trustee (other than Notes held at such date by or on behalf of the Company, associates or Affiliates of the Company or anyone acting jointly or in concert with the Company) accept the Note Offer, the Company shall have the right (the "90% Redemption Right"), upon written notice (the "90% Redemption Right Notice") provided to the Trustee within ten Business Days following the Expiry Date, to redeem on the purchase date specified in the 90% Redemption Right Notice all the Notes remaining outstanding at the Offer Price and on the other terms and conditions provided herein. Upon receipt of such notice by the Trustee, the Trustee shall promptly provide written notice to each Holder of outstanding Notes (other than those that have accepted the Note Offer) that:
(i) the Company has exercised the 90% Redemption Right and is purchasing all outstanding Notes effective as at the Change of Control Purchase Date at the Offer Price;
(ii) such Holder must surrender its Notes to the Trustee on the same terms as those holders that accepted the Note Offer within ten days after the sending of such notice; and
(iii) the rights of such holder under the terms of the Notes and this Indenture shall cease to be effective as of the Change of Control Purchase Date provided the Company has, on or before the date on which the Company delivers the 90% Redemption Right Notice to the Trustee, paid the aggregate Offer Price to, or to the order of, the Trustee and thereafter such Holder's Notes shall not be considered to be outstanding and such holder shall not have any rights hereunder except to receive such Offer Price to which such holder is entitled upon surrender and delivery of such Holder's Notes in accordance with the Indenture.
(9) The Company shall on or before 11:00 a.m. (Calgary time) on the Business Day immediately prior to the date on which the Company delivers the 90% Redemption Right Notice pay to the Trustee by wire transfer or such other means as may be acceptable to the Trustee an amount of money sufficient to pay the aggregate Offer Price in respect of all Notes to be redeemed pursuant to the 90% Redemption Right (less any tax required by law to be deducted). The Trustee, on behalf of the Company, will pay the Offer Price to the holders of Notes in the respective amounts to which they are entitled in accordance with the exercise of the 90% Redemption Right as aforesaid upon surrender and delivery of such Holders' Notes.
(10) The Notes in respect of which the Company has made payment to the Trustee in accordance with the terms of this Section 3.07 (or the portion thereof tendered in acceptance of the Note Offer) shall thereafter no longer be considered to be outstanding under this Indenture. The Company shall also deposit with the Trustee a sum of money sufficient to pay any charges or expenses which may be incurred by the Trustee in connection with the Note Offer and the exercise of the 90% Redemption Right, if applicable. All Notes in respect of which payment of the Offer Price has been so made shall be cancelled by the Trustee.
(11) In the event only a portion of the principal amount of an Note is tendered by a Holder thereof in acceptance of the Note Offer, the Company shall execute and deliver to the Trustee and the Trustee shall certify and deliver to the holder, without charge to such holder, a certificate (if applicable) or such other evidence of ownership representing the principal amount of the Note not so tendered in acceptance of the Note Offer.
(12) Notes for which Holders have accepted the Note Offer in accordance with this Section 3.07 shall become due and payable at the Offer Price on the Change of Control Purchase Date, in the same manner and with the same effect as if it were the date of maturity specified in such Notes, anything therein or herein to the contrary notwithstanding, and from and after the Change of Control Purchase Date, if the money necessary to purchase the Notes shall have been deposited as provided in this Section 3.07 and affidavits or other proofs satisfactory to the Trustee as to the publication and/or mailing of such notices shall have been lodged with it, interest on the Notes shall cease. If any question shall arise as to whether any notice has been given as above provided and such deposit made, such question shall be decided by the Trustee whose decision shall be final and binding upon all parties in interest.
(13) In case the holder of any Note to be purchased in accordance with this Section 3.07 shall fail on or before the Change of Control Purchase Date to so surrender such Holder's Note or shall not within such time accept payment of the monies payable, or give such receipt therefor, if any, as the Trustee may require, such monies may be set aside in trust, without interest, either in the deposit department of the Trustee or in a chartered bank, and such setting aside shall for all purposes be deemed a payment to the Noteholder shall have no other right except to receive payment of the monies so paid and deposited, or both, upon surrender and delivery of such Holder's Note. In the event that any money required to be deposited hereunder with the Trustee or any depository or paying agent on account of principal or interest, if any, on Notes issued hereunder shall remain so deposited for a period of three years less a day from the Change of Control Purchase Date (the "Unclaimed Funds Return Date"), then such monies together with any accumulated interest thereon, shall at the end of such period be paid over or delivered over by the Trustee or such depository or paying agent to the Company and the Trustee shall not be responsible to Noteholders for any amounts owing to them. Notwithstanding the foregoing, the Trustee will pay to the Company any remaining funds deposited hereunder prior to the Business Day immediately preceding the Unclaimed Funds Return Date upon receipt from the Company or one of its Subsidiaries of an unconditional letter of credit from a Canadian chartered bank in an amount equal to or in excess of the amount of the remaining funds. If the remaining funds are paid to the Company prior to the Unclaimed Funds Return Date, the Company shall reimburse the Trustee for any amounts required to be paid by the Trustee to a Holder of a Note pursuant to the Note Offer after the date of such payment of the remaining funds to the Company but prior to the Unclaimed Funds Return Date.
(14) Subject to the provisions above related to Notes purchased in part, all Notes paid under this Section 3.07 shall forthwith be delivered to the Trustee and cancelled and no Notes shall be issued in substitution therefor.
(15) If the Change of Control Purchase Date is on or after an interest Record Date and on or before the related Interest Payment Date, the accrued and unpaid interest on the Notes, if any, will be paid only to the Person in whose name the Note is registered at the close of business on such Record Date.
(16) A Note Offer made prior to the occurrence of a Change of Control resulting from a Business Combination may be contingent on the completion of the Business Combination.
ARTICLE 4
CONVERSION OF NOTES
4.01 U.S. Initial Public Offering Conversion
Following the completion of a U.S. Initial Public Offering on or prior to December 31, 2024, all Notes then outstanding shall be automatically converted into Common Shares at the IPO Conversion Price (an "IPO Conversion"). The terms and conditions of such IPO Conversion (in addition to complying with Applicable Securities Laws) are set forth below:
(1) Within 3 Business Days following the public issuance of a preliminary prospectus for a U.S. Initial Public Offering, the Company shall deliver to the Trustee a notice in writing stating that the Company has launched the marketing of a U.S. Initial Public Offering and specifying the approximate date on which such U.S. Initial Public Offering is scheduled to close (the "Initial IPO Notice"). The Trustee will promptly thereafter deliver, electronically or by prepaid courier or mail, at the option of the Company, the Initial IPO Notice to the holders of all Notes then outstanding, at their electronic or physical addresses, as applicable, appearing in the register of holders of Notes maintained by the Trustee.
(2) Promptly (and in any event at least one Business Day prior to the closing of the applicable U.S. Initial Public Offering) following the date of a fully executed underwriting agreement or equivalent document for a U.S. Initial Public Offering, the Company shall deliver to the Trustee a notice in writing stating the IPO Conversion Price and the date on which such U.S. Initial Public Offering is scheduled to close.
(3) Promptly (and in any event no more than three Business Days) after the closing time of such U.S. Initial Public Offering (the "IPO Conversion Time"), the outstanding Notes of each Noteholder shall be automatically converted into Common Shares at the IPO Conversion Price.
(4) Notwithstanding any other provision of this Indenture, if the IPO Conversion Time occurs after a Record Date for the payment of interest and before the corresponding Interest Payment Date then no interest shall be paid to Noteholders on such Interest Payment Date.
(5) Upon an IPO Conversion, the Company reserves the right not to issue some or all, as applicable, of the Common Shares to Ineligible Persons. In such circumstances, the Company will hold all Common Shares that would otherwise be delivered to Ineligible Persons, as agent for such Ineligible Persons, and will attempt to facilitate the sale of such Common Shares through a registered dealer retained by the Company for the purpose of effecting the sale (to parties other than the Company, its affiliates or other Ineligible Persons) on behalf of such Ineligible Persons. Such sales, if any, may be made at any time and any price. The Company will not be subject to any liability for failing to sell Common Shares on behalf of any such Ineligible Persons or at any particular price on any particular day. The net proceeds received by the Company from the sale of any such Common Shares will be divided among the Ineligible Persons in proportion to the number of Common Shares that would otherwise have been delivered to them, after deducting the costs of sale and applicable taxes, if any. The Company will make payment of the aggregate net proceeds to Depository (if the Notes are then held in the book-entry only system) or to the registrar and transfer agent (in all other cases) for distribution to such Ineligible Persons in accordance with Depository procedures or otherwise.
4.02 Change of Control Conversion
Upon a Change of Control occurring on or prior to December 31, 2024, all Notes then outstanding that are not tendered to a Note Offer ("Non-Tendered Notes") shall be automatically converted into Common Shares at the Non-IPO Conversion Price then in effect (a "Change of Control Conversion"). The terms and conditions of such Change of Control Conversion (in addition to complying with Applicable Securities Laws) are set forth below:
(1) Within 5 Business Days following the execution by the Company of a definitive agreement for a business combination that would result in a Change of Control (a "Business Combination"), the Company shall deliver to the Trustee a notice in writing stating that the Company has executed a definitive agreement for a Business Combination and specifying the date on which such Business Combination is scheduled to occur and the circumstances or events giving rise to such Business Combination ("Business Combination Notice"). The Trustee will promptly thereafter deliver, electronically or by prepaid courier or mail, at the option of the Company, the Business Combination Notice to the holders of all Notes then outstanding, at their email or physical addresses, as applicable, appearing in the registers of holders of Notes maintained by the Trustee.
(2) Immediately prior to the effective time of a Business Combination (the "Business Combination Conversion Time"), the outstanding Non-Tendered Notes of each Noteholder shall be automatically converted into Common Shares ("Business Combination Conversion Shares") at the Non-IPO Conversion Price in effect immediately prior to the Business Combination Conversion Time. The holders of such Business Combination Conversion Shares shall be entitled to receive the same consideration as holders of Common Shares receive generally pursuant to the applicable Business Combination.
(3) Within 30 days following the Company becoming aware of a Change of Control that did not occur pursuant to an agreement entered into by the Company (an "Involuntary Change of Control"), the Company shall deliver to the Trustee a notice in writing stating that an Involuntary Change of Control has occurred and the reason it constitutes a Change of Control ("Involuntary Change of Control Notice"). The Trustee will promptly thereafter deliver, electronically or by prepaid courier or mail, at the option of the Company, the Involuntary Change of Control Notice to the holders of all Notes then outstanding, at their email or physical addresses, as applicable, appearing in the registers of holders of Notes maintained by the Trustee.
(4) Upon the Expiry Time for the Note Offer related to an Involuntary Change of Control (the "Involuntary Change of Control Conversion Time"), the outstanding Notes not tendered to such Note Offer shall be automatically converted into Common Shares ("Involuntary Change of Control Conversion Shares") at the Non-IPO Conversion Price in effect immediately prior to the Involuntary Change of Control Conversion Time.
(5) Notwithstanding any other provision of this Indenture, if the Business Combination Conversion Time or the Involuntary Change of Control Conversion Time, as applicable, occurs after a Record Date for the payment of interest and before the corresponding Interest Payment Date then no interest shall be paid to Noteholders on such Interest Payment Date.
(6) Upon a Change of Control Conversion, the Company reserves the right not to issue some or all, as applicable, of the Common Shares to Ineligible Persons. In such circumstances, the Company will hold all Common Shares that would otherwise be delivered to Ineligible Persons, as agent for such Ineligible Persons, and will attempt to facilitate the sale of such Common Shares through a registered dealer retained by the Company for the purpose of effecting the sale (to parties other than the Company, its affiliates or other Ineligible Persons) on behalf of such Ineligible Persons. Such sales, if any, may be made at any time and any price. The Company will not be subject to any liability for failing to sell Common Shares on behalf of any such Ineligible Persons or at any particular price on any particular day. The net proceeds received by the Company from the sale of any such Common Shares will be divided among the Ineligible Persons in proportion to the number of Common Shares that would otherwise have been delivered to them, after deducting the costs of sale and applicable taxes, if any. The Company will make payment of the aggregate net proceeds to Depository (if the Notes are then held in the book-entry only system) or to the registrar and transfer agent (in all other cases) for distribution to such Ineligible Persons in accordance with Depository procedures or otherwise.
4.03 Optional Conversion
(1) On or after the First Optional Conversion Date, upon election by a holder, and in accordance with this Section 4.03, any Notes issued hereunder will be convertible into Common Shares at the Non-IPO Conversion Price (an "Optional Conversion").
(2) Such right of conversion shall extend only to the maximum number of whole Common Shares into which the aggregate principal amount of the Note or Notes surrendered for conversion at any one time by the holder thereof may be converted. Fractional interests in Common Shares shall not be issued.
(3) The holder of a Note desiring to convert such Note in whole or in part into Common Shares shall surrender such Note to the Trustee at its principal offices in the City of Calgary, Alberta together with the conversion notice attached hereto as Schedule 2 or any other written notice in a form satisfactory to the Trustee, in either case duly executed by the Noteholder or his executors or administrators or other legal representatives or his or their attorney duly appointed by an instrument in writing in form and executed in a manner satisfactory to the Trustee, exercising his right to convert such Note in accordance with the provisions of this Article 4 (each such time of exercise, an "Optional Conversion Time"). Thereupon such Noteholder or, subject to payment of all applicable stamp or security transfer taxes or other governmental charges and compliance with all reasonable requirements of the Trustee, his nominee(s) or assignee(s) shall be entitled to be entered in the books of the Company as at the Date of Conversion (or such later date as is specified in Section 4.03(9)) as the holder of the number of Common Shares into which such Note is convertible in accordance with the provisions of this Article 4 and, within ten (10) Business Days after the Optional Conversion Time, the Company shall deliver to such Noteholder or, subject as aforesaid, his nominee(s) or assignee(s), a certificate or certificates for such Common Shares or deposit such Common Shares through the Depository's non-certificated system or through the Direct Registration System and make or cause to be made any payment of interest to which such holder is entitled in accordance with Section 4.04(12) hereof.
(4) A Beneficial Owner may exercise the right evidenced by a Note to receive Common Shares by causing a Participant to deliver to the Depository on behalf of the Beneficial Owner, a notice of such Beneficial Owner's intention to convert the Notes in a manner acceptable to the Depository. Forthwith upon receipt by the Depository of such notice, the Depository shall deliver to the Trustee a Transaction Instruction confirming its intention to convert Notes in a manner acceptable to the Trustee, including by electronic means.
(5) A notice in form acceptable to the Participant from such Beneficial Owner should be provided to the Participant sufficiently in advance so as to permit the Participant to deliver notice to the Depository and for the Depository in turn to deliver notice to the Trustee prior to the Maturity Date. The Depository will initiate the exercise by way of the Transaction Instruction and the Trustee will execute the exercise by issuing to the Depository through the non-certificated inventory system the Common Shares to which the exercising Noteholder is entitled pursuant to the conversion.
(6) By causing a Participant to deliver notice to the Depository, a Noteholder shall be deemed to have irrevocably surrendered his or her Notes so exercised and appointed such Participant to act as his or her exclusive settlement agent with respect to the conversion and the receipt of Common Shares in connection with the obligations arising from such conversion.
(7) Any notice which the Depository determines to be incomplete, not in proper form, or not duly executed shall for all purposes be void and of no effect and the exercise to which it relates shall be considered for all purposes not to have been exercised thereby. A failure by a Participant to exercise or to give effect to the settlement thereof in accordance with the Noteholder's instructions will not give rise to any obligations or liability on the part of the Company or Trustee to the Participant or the Noteholder.
(8) Any Transaction Instruction referred to in this Section 4.03 shall be signed by the registered Noteholder, or its executors or administrators or other legal representatives or an attorney of the registered Noteholder, duly appointed by an instrument in writing satisfactory to the Trustee but such exercise form need not be executed by the Depository.
(9) For the purposes of this Article 4, a Note shall be deemed to be surrendered for conversion on the date on which it is so surrendered when the register of the Trustee is open and in accordance with the provisions of this Article 4 or, in the case of Note held through the Depository which the Trustee received notice of and all necessary documentation in respect of the exercise of the conversion rights and, in the case of a Note so surrendered by post or other means of transmission, on the date on which it is received by the Trustee at its offices specified in Section 4.03(3); provided that if a Note is surrendered for conversion on a day on which the register of Common Shares is closed, the person or persons entitled to receive Common Shares shall become the holder or holders of record of such Common Shares as at the date on which such registers are next reopened (in each case, called the "Date of Conversion").
(10) Any part, being U.S.$1,000 or an integral multiple thereof, of a Note in a denomination in excess of U.S.$1,000 may be converted as provided in this Article 4 and all references in this Indenture to conversion of Notes shall be deemed to include conversion of such parts.
(11) The holder of any Note of which only a part is converted shall, upon the exercise of his right of conversion, surrender such Note to the Trustee in accordance with Section 4.03(3), and the Trustee shall cancel the same and shall without charge forthwith authenticate and deliver to the holder a new Note or Notes in an aggregate principal amount equal to the unconverted part of the principal amount of the Note so surrendered or, with respect to a Note held through the Depository, registration and surrender of interests in the Notes will be made only through the Depository's non-certificated system.
(12) Notwithstanding any other provision of this Indenture, if an Optional Conversion Time occurs after a Record Date for the payment of interest and before the corresponding Interest Payment Date then no interest shall be paid to the converting Holder on such Interest Payment Date.
4.04 Adjustments
The Non-IPO Conversion Price in effect at any date shall be subject to adjustment, without duplication, from time to time as set forth below.
(1) If and whenever at any time prior to the Maturity Date, the Company shall: (i) subdivide or redivide the outstanding Common Shares into a greater number of shares; (ii) reduce, combine or consolidate the outstanding Common Shares into a smaller number of shares; or (iii) issue Common Shares or securities convertible into Common Shares to the holders of all or substantially all of the outstanding Common Shares by way of a dividend or distribution (other than the issue of Common Shares to holders of Common Shares who have elected to receive dividends or distributions in the form of Common Shares in lieu of cash dividends or cash distributions paid in the ordinary course on the Common Shares, which shall be subject to Section 4.04(5)), the Non-IPO Conversion Price in effect on the effective date of such subdivision, redivision, reduction, combination or consolidation, or on the record date for such issue of Common Shares by way of a dividend or distribution, as the case may be, shall in the case of any of the events referred to in (i) and (iii) above be decreased in proportion to the ratio of the number of outstanding Common Shares outstanding immediately prior to such subdivision, redivision, dividend or distribution over the number of Common Shares outstanding immediately after such subdivision, redivision, dividend or distribution, or shall, in the case of any of the events referred to in (ii) above, be increased in proportion to ratio of the number of outstanding Common Shares outstanding immediately prior to such reduction combination or consolidation over the number of Common Shares outstanding immediately after such reduction combination or consolidation. Such adjustment shall be made successively whenever any event referred to in this Section 4.04(1) shall occur. Any such issue of Common Shares by way of a dividend or distribution shall be deemed to have been made on the record date for the dividend or distribution for the purpose of calculating the number of outstanding Common Shares under subsections (ii) and (iii) of this Section 4.04(1). To the extent that such dividend or distribution is not so made, the Non-IPO Conversion Price shall be re-adjusted to the Non-IPO Conversion Price which would then be in effect if such record date had not been fixed.
(2) If and whenever at any time prior to the Maturity Date the Company shall fix a record date for the issuance of options, rights or warrants to all or substantially all the holders of its outstanding Common Shares (other than the issue of Common Shares to holders of Common Shares who have elected to receive dividends or distributions in the form of Common Shares in lieu of cash dividends or cash distributions paid in the ordinary course on the Common Shares, which shall be subject to Section 4.04(5)) entitling them, for a period expiring not more than 45 days after such record date, to subscribe for or purchase Common Shares (or securities convertible into Common Shares) at a price per share (or having a conversion or exchange price per share) less than 95% of the Fair Market Value of a Common Share on such record date (other than pursuant to a distribution reinvestment plan of the Company), the Non-IPO Conversion Price shall be adjusted immediately after such record date so that it shall equal the price determined by multiplying the Non-IPO Conversion Price in effect on such record date by a fraction, of which (i) the numerator shall be the total number of Common Shares outstanding on such record date plus a number of Common Shares equal to the quotient obtained by dividing the aggregate price of the total number of additional Common Shares offered for subscription or purchase (or the aggregate conversion or exchange price of the convertible securities so offered) by such Fair Market Value per share; and (ii) the denominator shall be the total number of Common Shares outstanding on such record date plus the total number of additional Common Shares offered for subscription or purchase (or into which the convertible securities so offered are convertible). Such adjustment shall be made successively whenever such a record date is fixed. To the extent that any such options, rights or warrants are not so issued or any such options, rights or warrants are not exercised prior to the expiration thereof, the Non-IPO Conversion Price shall be readjusted to the Non-IPO Conversion Price which would then be in effect if such record date had not been fixed or to the Non-IPO Conversion Price which would then be in effect if only the number of Common Shares (or securities convertible into Common Shares) actually issued upon the exercise of such options, rights or warrants were included in such fraction, as the case may be.
(3) If and whenever at any time prior to the Maturity Date the Company shall fix a record date for the making of a distribution to all or substantially all the holders of its outstanding Common Shares of: (i) shares of any class other than Common Shares and other than shares distributed to holders of Common Shares who have elected to receive dividends or distributions in the form of such shares in lieu of dividends or distributions paid in the ordinary course on the Common Shares (which shall be subject to Section 4.04(4)), (ii) rights, options or warrants (excluding rights, options or warrants subject to Section 4.04(2)); (iii) evidences of its indebtedness; or (iv) other assets (including, for clarification, any dividends or distributions paid, but excluding any cash dividend or distribution, which shall be subject to Section 4.04(4), and excluding any dividend or distribution that is subject to Section 4.04(1) then, in each such case, the Non-IPO Conversion Price shall be adjusted immediately after such record date so that it shall equal the price determined by multiplying the Non-IPO Conversion Price in effect on such record date by a fraction, of which (i) the numerator shall be the total number of Common Shares outstanding on such record date multiplied by the Fair Market Value per Share on such record date, less the fair market value (as determined by the Board of Directors in good faith, which determination shall be conclusive) of such shares or rights, options or warrants or evidences of indebtedness or other assets so distributed; and (ii) the denominator shall be the total number of Common Shares outstanding on such record date multiplied by such Fair Market Value per Share. Such adjustment shall be made successively whenever such a record date is fixed. To the extent that such distribution is not so made, the Non-IPO Conversion Price shall be re- adjusted to the Non-IPO Conversion Price which would then be in effect if such record date had not been fixed or to the Non-IPO Conversion Price which would then be in effect based upon such shares or rights, options or warrants or evidences of indebtedness or other assets actually distributed, as the case may be. In clause (iv) of this subsection (3) the term "dividends or distributions paid" shall include the value of any securities or other property or assets distributed in lieu of cash dividends or distributions paid in the ordinary course at the option of Shareholders.
(4) If and whenever at any time prior to the Maturity Date the Company shall fix a record date for the payment of a cash dividend or distribution to the holders of all or substantially all of the outstanding Common Shares in respect of any applicable period, the Non-IPO Conversion Price shall be adjusted immediately after such record date so that it shall be equal to the price determined by multiplying the Non-IPO Conversion Price in effect on such record date by a fraction, of which (i) the numerator shall be the Fair Market Value per Share on such record date minus the amount in cash per Share distributed to holders of Common Shares; and (ii) the denominator shall be the Fair Market Value per Share on such record date. Such adjustment shall be made successively whenever such a record date is fixed. To the extent that any such cash dividend or distribution is not paid, the Non- IPO Conversion Price shall be re-adjusted to the Non-IPO Conversion Price which would then be in effect if such record date had not been fixed. For the avoidance of doubt, if and to the extent any adjustment pursuant to Sections 4.04(1), 4.04(2) and 4.04(3) is made, no adjustment to the Non-IPO Conversion Price pursuant to this Section 4.04(4) shall also be made. In this subsection (4) the term "dividends" or "distributions" shall include the value of any securities or other property or assets distributed in lieu of cash dividends or distributions paid in the ordinary course at the option of Shareholders.
(5) If any issuer bid made by the Company or any of its Subsidiaries for all or any portion of the Common Shares shall expire, then, if the issuer bid shall require the payment to Shareholders who accept such bid of consideration per Common Share having a fair market value (determined as provided below) that exceeds the Fair Market Value per Common Share on the last date (the "Expiration Date") tenders could have been made pursuant to such issuer bid (as it may be amended) (the last time at which such tenders could have been made on the Expiration Date is hereinafter sometimes called the "Expiration Time"), the Non-IPO Conversion Price in respect of the Notes shall be adjusted so that the same shall equal the price determined by multiplying the Non-IPO Conversion Price in effect immediately preceding the close of business on the Expiration Date by a fraction of which (i) the numerator of which shall be the product of the number of Common Shares outstanding (including Purchased Common Shares (as defined below) but excluding any Common Shares held in the treasury of the Company) at the Expiration Time multiplied by the Fair Market Value per Common Share on the Expiration Date; and (ii) the denominator shall be the sum of (A) the fair market value of the aggregate consideration (the fair market value being as determined by the Board of Directors in good faith, which determination shall be conclusive) payable to Shareholders based on the acceptance (up to any maximum specified in the terms of the issuer bid) of all Common Shares validly tendered to the issuer bid and not withdrawn as of the Expiration Time (the Common Shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Common Shares"), and (B) the product of the number of Common Shares outstanding (less any Purchased Common Shares and excluding any Common Shares held in the treasury of the Company) at the Expiration Time and the Fair Market Value per Common Share on the Expiration Date, such adjustment to be effective immediately preceding the opening of business on the day following the Expiration Date. In the event that the Company is obligated to purchase Common Shares pursuant to any such issuer bid, but the Company is permanently prevented by applicable law from effecting any or all such purchases or any or all such purchases are rescinded, the Non-IPO Conversion Price shall again be adjusted to be the Non-IPO Conversion Price which would have been in effect based upon the number of Common Shares actually purchased, if any. If the application of this Section 4.04(5) to any issuer bid would result in an increase in the Non- IPO Conversion Price, no adjustment shall be made for such issuer bid pursuant hereto.
For purposes of this Section 4.04(5), the term "issuer bid" shall mean an issuer bid (other than an issuer bid which is exempt from the requirements of Part 2 of 62-104) under applicable Canadian securities laws or a take-over bid (other than a take-over bid which is exempt from the requirements of Part 2 of 62-104) under applicable Canadian securities laws by a Subsidiary of the Company for the Common Shares and all references to "purchases" of Common Shares in issuer bids (and all similar references) shall mean and include the purchase of Common Shares in issuer bids and all references to "tendered Common Shares" (and all similar references) shall mean and include Common Shares tendered in issuer bids.
(6) In any case in which this Section 4.04 shall require that an adjustment shall become effective immediately after a record date for an event referred to herein (each a "Conversion Event"), the Company may defer, until the occurrence of such Conversion Event, issuing to the holder of any Note converted after such record date and before the occurrence of such event the additional Common Shares issuable upon such conversion by reason of the adjustment required by such event before giving effect to such adjustment; provided, however, that the Company shall deliver to such holder an appropriate instrument evidencing such holder's right to receive such additional Common Shares upon the occurrence of the applicable Conversion Event requiring such adjustment and the right to receive any distributions made on such additional Common Shares declared in favour of holders of record of Common Shares on and after the Date of Conversion or such later date as such holder would, but for the provisions of this Section 4.04(6), have become the holder of record of such additional Common Shares pursuant to this Section 4.04.
(7) The adjustments provided for in this Section 4.04 are cumulative and shall apply to successive subdivisions, redivisions, reductions, combinations, consolidations, distributions, issues or other events resulting in any adjustment under the provisions of this Section.
(8) For the purpose of calculating the number of Common Shares outstanding, Common Shares owned by or for the benefit of the Company shall not be counted.
(9) In the event of any question arising with respect to the adjustments provided in this Section 4.04, such question shall be conclusively determined by a firm of nationally recognized chartered professional accountants appointed by the Company and acceptable to the Trustee (who may be the auditors of the Company); such accountants shall have access to all necessary records of the Company and such determination shall be binding upon the Company, the Trustee, and the Notes.
(10) In case the Company shall take any action affecting the Common Shares other than action described in this Section 5.04, which in the opinion of the Board of Directors acting in good faith would materially affect the rights of Noteholders, the Non-IPO Conversion Price shall be adjusted in such manner and at such time, by action of the Directors, as the Directors may in their sole discretion determine to be equitable in the circumstances. Failure of the Directors to make such an adjustment shall be conclusive evidence that they have determined that it is equitable to make no adjustment in the circumstances.
(11) No adjustment in the Non-IPO Conversion Price shall be made in respect of any event described in Sections 4.04(1), 4.04(2), 4.04(3) or 4.04(4) other than the events described in Sections 4.04(1)(i) or 4.04(1)(ii) if the holders of the Notes are entitled to participate in such event on the same terms mutatis mutandis as if they had converted their Notes prior to the effective date or record date, as the case may be, of such event.
(12) No adjustment to the Non-IPO Conversion Price shall be required unless the adjustment would require an increase or decrease of at least U.S.$0.01; provided, however, that the Company will carry forward any adjustments that result in an increase or decrease of less than U.S.$0.01 that the Company elects not to make and take such carried-forward adjustments into account upon (i) each conversion of Notes and (ii) such time as all adjustments that have not been made prior thereto would have the effect of adjusting the Non-IPO Conversion Price by at least U.S.$0.01.
(13) Except as stated above in this Section 4.04, no adjustment will be made in the Non-IPO Conversion Price for any Notes as a result of the issuance of Common Shares at less than the Fair Market Value for such Common Shares on the date of issuance or the then applicable Non-IPO Conversion Price.
4.05 Accrued and Unpaid Interest on Conversion
Provided that all necessary regulatory approvals have been obtained (including any required approval of the Principal Exchange and any stock exchange on which the Common Shares are then listed), upon an IPO Conversion, Change of Control Conversion or Optional Conversion, all accrued but unpaid interest up to but not including the applicable conversion date on the Notes surrendered for conversion, shall be payable to the converting Holder by the Company in Common Shares unless subject to the provisions and conditions of Section 2.13, a Holder has elected to receive cash in lieu of Common Shares in respect of accrued but unpaid interest payable on conversion by delivering a Cash Interest Payment Election Notice to the Company and the Trustee in accordance with Section 2.13. To the extent necessary regulatory approvals have not been obtained to issue Common Shares in respect of accrued but unpaid interest payable on upon a conversion (including any required approval of the Principal Exchange and any stock exchange on which the Common Shares are then listed), the Company will pay such interest in cash as Cash Interest.
4.06 No Requirement to Issue Fractional Common Shares
The Company shall not be required to issue fractional Common Shares upon the conversion of Notes pursuant to this Article. If more than one Note shall be surrendered for conversion at one time by the same holder, the number of whole Common Shares issuable upon conversion thereof shall be computed on the basis of the aggregate principal amount of such Notes to be converted. The Company will not make any payment in respect of a fractional Common Share that would have been issuable upon conversion of Notes if not for this Section 4.06.
4.07 Cancellation of Converted Notes
Notes converted in part and all Notes converted in whole or in part under the provisions of this Article shall be forthwith delivered to and cancelled by the Trustee and no Note shall be issued in substitution for those converted.
4.08 Certificate as to Adjustment
The Company shall from time to time promptly after the occurrence of any event which requires an adjustment or readjustment as provided in Section 4.04 deliver an Officer's Certificate to the Trustee specifying the nature of the event requiring the same and the amount of the adjustment necessitated thereby and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based, which certificate and the amount of the adjustment specified therein shall be verified and confirmed by the Company's auditors. The Company shall, except in respect of any subdivision, redivision, reduction, combination or consolidation of the Common Shares, forthwith give notice to the Noteholders specifying the event requiring such adjustment or readjustment and the results thereof, including the resulting Non-IPO Conversion Price. The certificate shall be conclusive evidence of the correctness of such adjustment.
4.09 Notice of Special Matters
The Company covenants with the Trustee that so long as any Note remains outstanding, it will give notice to the Trustee, and to the Noteholders of its intention to fix a record date for any event referred to in Section 4.04(1), 4.04(2), 4.04(3) or 4.04(4) (other than the subdivision, redivision, reduction, combination or consolidation of its Common Shares) which may give rise to an adjustment in the Non-IPO Conversion Price, and, in each case, such notice shall specify the particulars of such event and the record date and the effective date for such event; provided that the Company shall only be required to specify in such notice such particulars of such event as shall have been fixed and determined on the date on which such notice is given. Such notice shall be given not less than 5 days in each case prior to such applicable record date.
4.10 Protection of Trustee
Subject to Article 6, the Trustee:
(1) shall not at any time be under any duty or responsibility to any Noteholder to determine whether any facts exist which may require any adjustment in the Non-IPO Conversion Price, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed in making the same;
(2) shall not be accountable with respect to the validity or value (or the kind or amount) of any Common Shares or of any shares or other securities or property which may at any time be issued or delivered upon the conversion of any Note; and
(3) shall not be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver Common Shares or share certificates upon the surrender of any Note for the purpose of conversion, or to comply with any of the covenants contained in this Article 4.
4.11 Payment of Cash in Lieu of Common Shares
Upon conversion, the Company may offer and the converting Noteholder may agree to the delivery of cash for all or a portion of the Notes surrendered in lieu of Common Shares, the cash equivalent thereto to be determined on the basis of the Fair Market Value of the Common Shares to be received upon conversion on the Date of Conversion (less applicable withholding taxes, if any).
4.12 Representations of Converting Noteholders
Notwithstanding anything to the contrary in this Indenture, Common Shares of the Company will only be issued to a converting Noteholder pursuant to this Article 4 if such converting Noteholder has executed, prior to or concurrently with such conversion, a letter substantially in the form of Exhibit B (a "Conversion Representation Letter"). If such converting Noteholder fails to execute a Conversion Representation Letter in respect of a conversion, such conversion may, at the Company's option, be settled in cash.
ARTICLE 5
AFFIRMATIVE COVENANTS
5.01 Payment of Notes
The Company shall promptly pay the principal of, and interest on, the Notes on the dates and in the manner provided in the Notes and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due.
5.02 To Pay Trustee's Remuneration
The Company will pay the Trustee reasonable remuneration for its services as Trustee hereunder and will repay to the Trustee on demand all monies which shall have been paid by the Trustee in connection with the execution of the trusts hereby created and such monies including the Trustee's remuneration, shall be payable out of any funds coming into the possession of the Trustee in priority to payment of any principal of the Notes or interest thereon. Such remuneration shall continue to be payable until the trusts hereof be finally wound up and whether or not the trusts of this Indenture shall be in the course of administration by or under the direction of a court of competent jurisdiction.
5.03 To Give Notice of Default
The Company shall notify the Trustee promptly upon obtaining knowledge of any Event of Default hereunder.
ARTICLE 6
DEFAULTS AND REMEDIES
6.01 Events of Default
Each of the following is an "Event of Default":
(1) any default in the payment of the principal of, accrued interest on or other charges in respect of the Notes as and when the same shall become due and payable and the failure to cure (or obtain a waiver for) such default for a period of 15 days after notice in writing has been given by the Trustee or from holders of not less than 25% in aggregate principal amount of the Notes to the Company specifying such default and requiring the Company to rectify such default or obtain a waiver for same;
(2) default in the delivery, when due, of any Common Shares, payable on conversion with respect to the Notes, which default continues for 15 days;
(3) default in the observance or performance of any covenant or condition of this Indenture or in a Note purchase agreement by the Company and the failure to cure (or obtain a waiver for) such default for a period of 30 days after notice in writing has been given by the Trustee or from holders of not less than 25% in aggregate principal amount of the Notes to the Company specifying such default and requiring the Company to rectify such default or obtain a waiver for same;
(4) if a decree or order of a Court having jurisdiction is entered adjudging the Company or any Material Subsidiary a bankrupt or insolvent under the Bankruptcy and Insolvency Act (Canada) or any other bankruptcy, insolvency or analogous laws, or issuing sequestration or process of execution against, or against any substantial part of, the property of the Company or any Material Subsidiary, or appointing a receiver of, or of any substantial part of, the property of the Company or any Material Subsidiary or ordering the winding-up or liquidation of its affairs, and any such decree or order continues unstayed and in effect for a period of 60 days; or
(5) if the Company or any Material Subsidiary institutes proceedings to be adjudicated a bankrupt or insolvent, or consents to the institution of bankruptcy or insolvency proceedings against it under the Bankruptcy and Insolvency Act (Canada) or any other bankruptcy, insolvency or analogous laws, or consents to the filing of any such petition or to the appointment of a receiver of, or of any substantial part of, the property of the Company or any Material Subsidiary or makes a general assignment for the benefit of creditors, or admits in writing its inability to pay its debts generally as they become due.
The foregoing shall constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.
6.02 Notice of Defaults
If a Default occurs, is continuing and is actually known to the Trustee, the Trustee shall send to each Noteholder notice of the Default within 30 days after it occurs unless such Default shall have been cured or waived. Except in the case of a Default in the payment of principal of, or interest on, any Note, the Trustee may withhold the notice if and so long as it in good faith determines that withholding the notice is not opposed to the interests of the Noteholders.
6.03 Acceleration
(1) In the case of an Event of Default specified in Sections 6.01(4) or 6.01(5) with respect to the Company, all outstanding Notes, plus all accrued and unpaid interest thereon will become due and payable immediately without further action or notice.
(2) If any other Event of Default occurs and is continuing, and is known to the Trustee, the Trustee or the Required Holders may declare all the Notes, plus all accrued and unpaid interest thereon to be due and payable immediately by notice in writing to the Company specifying the Event of Default.
(3) The Required Holders by written notice to the Trustee may rescind any such acceleration with respect to the Notes and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto.
6.04 Other Remedies
(1) If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of, or interest on, the Notes or to enforce the performance of any provision of the Notes or this Indenture.
(2) The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Noteholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative, to the extent permitted by applicable law.
6.05 Waiver of Past Defaults
The Required Holders may, by written notice to the Trustee, on behalf of the Holders of all of the Notes, rescind an acceleration or waive any existing Default or Event of Default and its consequences under this Indenture, if the rescission would not conflict with any judgment or decree, except a continuing Default or Event of Default in the payment of principal of, or interest, if any, on, the Notes. When a Default or Event of Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right.
6.06 Control by Majority
The Required Holders may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee upon the Trustee being funded and indemnified for the costs thereof to the reasonable satisfaction of the Trustee by the Company or the Required Holders. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Noteholders or would involve the Trustee in personal liability; provided, however, that the Trustee may withhold from Holders of Notes notice of any continuing Default or Event of Default if it determines that withholding notice is in their interest, except a Default or Event of Default relating to the payment of principal of, and interest on, if any, Notes. The Company agrees to indemnify and reimburse any such Holder or Holders who advance funds for the purposes of enforcing rights of the Holders hereunder.
6.07 Limitation on Suits
Subject to Article 7, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under this Indenture at the request or direction of any Holders of Notes unless such Holders have offered to the Trustee indemnity or security satisfactory to it against any loss, liability or expense. Except to enforce the right to receive payment of principal, or interest, when due, no Holder of a Note may pursue any remedy with respect to this Indenture or the Notes unless:
(1) such Holder has previously given the Trustee written notice that an Event of Default is continuing;
(2) the Required Holders make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer and, if requested, provide to the Trustee security or indemnity reasonably satisfactory to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with such request within 60 days after receipt of the request and the offer of security or indemnity; and
(5) during such 60-day period, the Required Holders do not give the Trustee a direction inconsistent with such request.
A Noteholder may not use this Indenture to prejudice the rights of another Noteholder or to obtain a preference or priority over another Noteholder. In the event that the Definitive Notes are not issued to any beneficial owner promptly after the Registrar has received a request from the Holder of a Global Note to issue such Definitive Notes to such beneficial owner or its nominee, the Company expressly agrees and acknowledges, with respect to the right of any Holder to pursue a remedy pursuant to this Indenture, the right of such beneficial Noteholders to pursue such remedy with respect to the portion of the Global Note that represents such beneficial Holder's Notes as if such Definitive Notes had been issued.
6.08 Rights of Holders to Receive Payment
Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of, and interest on, the Notes held by such Holder, on or after the respective due dates expressed in the Notes, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.
6.09 Collection Suit by Trustee
If an Event of Default specified in Section 6.01(1) occurs and is continuing, the Trustee may recover judgment in its own name and as Trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07.
6.10 Trustee May File Proofs of Claim
The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Noteholders allowed in any judicial proceedings relative to the Company, its creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a Trustee in bankruptcy or other Person performing similar functions, and any Notes Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due to the Trustee under Section 7.07.
6.11 Priorities
If the Trustee collects any money or property pursuant to this Article 6, it shall pay out the money or property in the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Noteholders for amounts due and unpaid on the Notes for principal and interest, rateably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, and interest, respectively; and
THIRD: to the Company or to such party as a court of competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to Noteholders pursuant to this Section 6.11. At least 15 days before such record date, the Company shall send to each Noteholder and the Trustee a notice that states the record date, the payment date and amount to be paid.
6.12 Undertaking for Costs
In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court of competent jurisdiction in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable out-of-pocket attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.08 or a suit by Holders of more than 10% in aggregate principal amount of the Notes.
6.13 Waiver of Stay or Extension Laws
The Company (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted.
ARTICLE 7
TRUSTEE
7.01 Duties of Trustee
In the exercise of the rights, duties and obligations prescribed or conferred by the terms of this Indenture, the Trustee shall act honestly and in good faith and exercise that degree of care, diligence and skill that a reasonably prudent Trustee would exercise in comparable circumstances. Subject to the foregoing, the Trustee will be liable for its own fraud, wilful misconduct, bad faith and gross negligence. The Trustee will not be liable for any act or default on the part of any agent employed by it or a co-Trustee, or for having permitted any agent or co-Trustee to receive and retain any money payable to the Trustee, except as aforesaid.
7.02 Conditions Precedent to Trustee's Obligations to Act Hereunder
(1) The obligation of the Trustee to commence or continue any act, action or proceeding for the purpose of enforcing the rights of the Trustee and of the Holders hereunder shall be conditional upon any one or more Holders furnishing when required by notice in writing by the Trustee, sufficient funds to commence or continue such act, action or proceeding and indemnity reasonably satisfactory to the Trustee to protect and hold harmless the Trustee against the costs, charges and expenses and liabilities to be incurred thereby and any loss and damage it may suffer by reason thereof. The Company agrees to indemnify and reimburse any such Holder or Holders who advance funds for the purposes of enforcing rights of the Holders hereunder.
(2) None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties or in the exercise of any of its rights or powers unless indemnified as aforesaid.
(3) The Trustee may, before commencing or at any time during the continuance of any such act, action or proceeding require the Holders of Notes at whose instance it is acting to deposit with the Trustee such Notes held by them for which Notes the Trustee shall issue receipts.
7.03 Investment of Money Held by Trustee
(1) Unless herein otherwise expressly provided, any of the funds held by the Trustee may be deposited in a trust account in the name of the Trustee (which may be held with the Trustee or an Affiliate of the Trustee), which account may be non-interest bearing. Upon the written direction of the Company, the Trustee shall invest in its name such funds in Authorized Investments in accordance with such direction. Any direction by the Company to the Trustee as to the investment of the funds shall be in writing and shall be provided to the Trustee no later than 11:00 a.m. (Calgary time) on the day on which the investment is to be made. Any such direction received by the Trustee after 11:00 a.m. (Calgary time), or received on a non-Business Day, shall be deemed to have been given prior to 11:00 a.m. on the next Business Day. In the event that the Trustee does not receive a direction or only a partial direction, the Trustee may hold cash balances constituting part or all of the funds and may, but need not, invest same in its deposit department or the deposit department of one of its Affiliates; but the Trustee and its Affiliates shall not be liable to account for any profit to the Company, or to the Holder of any Note, or to any person or entity other than at a rate, if any, established from time to time by the Trustee or one of its Affiliates.
(2) Unless and until the Trustee shall have declared the principal amount of the Notes to be due and payable, the Trustee shall pay over to the Company all interest received by the Trustee with respect to any investments or deposits made pursuant to the provisions of this Section.
(3) For the purposes of this section, "Authorized Investments" means short term interest bearing or discount debt obligations issued or guaranteed by the government of Canada or a Province or a Canadian chartered bank (which may include an affiliate (as defined in this section) or related party of the Trustee) provided that such obligation is rated at least R1 (middle) by DBRS or an equivalent rating service. For certainty, the Company and the holders acknowledge and agree that the Trustee has no obligation or liability to confirm or verify that investment instructions delivered pursuant to this Section 7.03 comply with the definition of Authorized Investments.
7.04 Rights of Trustee
(1) The Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document.
(2) The Trustee may act through agents or attorneys and shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care.
(3) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute willful misconduct or gross negligence.
(4) The Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.
(5) In no event shall the Trustee be responsible or liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.
(6) The Trustee shall not be deemed to have notice of any Default or Event of Default unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture.
(7) The rights, privileges, protections, immunities and benefits given to the Trustee, including its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.
(8) The Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Holders of Notes pursuant to the provisions of this Indenture, unless such Holders of Notes shall have offered to the Trustee, security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred therein or thereby.
(9) The Trustee may at any time request, and the Company shall deliver an Officer's Certificate setting forth the specimen signatures and the names of individuals and/or titles of Officers authorized at such time to take specified actions pursuant to this Indenture, which Officer's Certificate may be signed by any Person authorized to sign an Officer's Certificate, including any Person specified as so authorized in any such certificate previously delivered and not superseded.
(10) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.
(11) The Trustee may, in the course of providing services hereunder, collect or receive financial and other personal information about such parties and/or their representatives, as individuals, or about other individuals related to the subject matter hereof, and use such information for the following purposes:
(A) to provide the services required under this Indenture and other services that may be requested from time to time;
(B) to help the Trustee manage its servicing relationships with such individuals;
(C) to meet the Trustee's legal and regulatory requirements; and
(D) if social insurance numbers are collected by the Trustee, to perform tax reporting and to assist in verification of an individual's identity for security purposes.
Each party acknowledges and agrees that the Trustee may receive, collect, use and disclose personal information provided to it or acquired by it in the course of its acting as agent hereunder this Indenture for the purposes described above and, generally, in the manner and on the terms described in its Privacy Code, which the Trustee shall make available on its website, www.odysseytrust.com, or upon request, including revisions thereto. The Trustee may transfer personal information to other companies in or outside of Canada that provide data processing and storage or other support in order to facilitate the services it provides.
7.05 Individual Rights of Trustee
The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11.
7.06 Disclaimer
The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes; it shall not be accountable for the Company's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Trustee's certificate of authentication.
7.07 Reports by Trustee to Holders
As promptly as practicable, upon the Company's request, the Trustee shall deliver to each Noteholder any report received by the Trustee from the Company pursuant to Section 5.02.
7.08 Compensation and Indemnity
(1) The Company shall pay to the Trustee from time to time such compensation for its services as agreed by the Company and the Trustee. The Trustee's compensation shall not be limited by any law on compensation of a Trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable, documented and out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable, documented and out-of-pocket compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company shall indemnify the Trustee and its officers, directors, employees and agents against any and all loss, liability, damage, claim or expense (including reasonable out-of-pocket attorneys' fees and expenses) including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.08) and defending itself against any claim (whether asserted by the Company, any Holder or any other Person) incurred by it in connection with the administration of this Indenture and the performance of its duties hereunder. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee may have separate counsel and the Company shall pay the reasonable, documented and out-of- pocket fees and expenses of such counsel. Notwithstanding anything to the contrary, the Company need not reimburse any cost or expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own bad faith, willful misconduct, gross negligence or breach of its duties hereunder.
(2) The Company's payment obligations pursuant to this Section shall survive the discharge of this Indenture and the resignation or removal of the Trustee. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(4) or 6.01(5) with respect to the Company, the expenses are intended to constitute expenses of administration under the Bankruptcy Law.
7.09 Replacement of Trustee
(1) The Trustee may resign at any time by so notifying the Company. The Required Holders may remove the Trustee by so notifying the Trustee and the Company not less than 30 days prior the effective date of such removal and may appoint a successor Trustee. The Company may remove the Trustee if:
(A) the Trustee fails to comply with Section 7.11;
(B) the Trustee is adjudged bankrupt or insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;
(C) a receiver or other public officer takes charge of the Trustee or its property; or
(D) the Trustee otherwise becomes incapable of acting.
(2) If the Trustee resigns or is removed by the Company or by the Required Holders and the Required Holders do not reasonably and promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee.
(3) A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall send a notice of its succession to Noteholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.08.
(4) If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, at the expense of the Company, or the Holders of 10% in principal amount of the Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.
(5) If the Trustee fails to comply with Section 7.11, any Noteholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.
(6) Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.08 shall continue for the benefit of the retiring Trustee.
(7) The Trustee shall retain the right not to act and shall not be liable for refusing to act if, due to a lack of information or for any other reason whatsoever, the Trustee, in its sole judgment determines that such act might cause it to be in non-compliance with any applicable anti- money laundering, anti-terrorist financing or economic sanctions legislation, regulation or guideline. Further, should the Trustee, in its sole judgment determine at any time that its acting under this Indenture has resulted in its being in non-compliance with any applicable anti-money laundering, anti-terrorist financing or economic sanctions legislation, regulation or guideline, then it shall have the right to resign on 10 days written notice to the Company and the Noteholders; provided that (A) the Trustee's written notice shall describe the circumstances of such non-compliance; (B) if such circumstances are rectified to Trustee's satisfaction, within such 10 day period, then such resignation shall not be effective; and (C) the Trustee's resignation is only effective upon a successor trustee's acceptance of the appointment.
7.10 Successor Trustee by Merger
(1) If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee.
(2) In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have.
7.11 Eligibility; Disqualification
The Trustee represents to the Company that at the date of execution and delivery by it of this Indenture it is authorized to carry on the business of a trust company in all provinces of Canada but if, notwithstanding the provisions of this Section 7.11, it ceases to be so authorized to carry on business, the validity and enforceability of this Indenture and the securities issued hereunder shall not be affected in any manner whatsoever by reason only of such event but the Trustee shall, within 90 days after ceasing to be authorized to carry on the business of a trust company in any province of Canada, either become so authorized or resign in the manner and with the effect specified in Section 7.09.
7.12 No Conflict of Interest
The Trustee represents to the Company that at the date of execution and delivery by it of this Indenture there exists no material conflict of interest in the role of the Trustee as a fiduciary hereunder but if, notwithstanding the provisions of this Section 7.12, such a material conflict of interest exists, or hereafter arises, the validity and enforceability of this Indenture and the Notes shall not be affected in any manner whatsoever by reason only that such material conflict of interest exists or arises.
ARTICLE 8
MEETINGS OF HOLDERS
8.01 Purpose, Effect and Convention of Meetings
(1) Wherever in this Indenture a consent, waiver, notice, authorization or resolution of the Holders (or any of them) is required, a meeting may be convened in accordance with this Article 8 to consider and resolve whether such consent, waiver, notice, authorization or resolution should be approved by such Holders. A resolution passed by the affirmative votes of the Holders of at least a majority of the outstanding principal amount of the Notes represented and voting on a poll at a meeting of Holders duly convened for the purpose and held in accordance with the provisions of this Indenture shall constitute conclusively such consent, waiver, notice, authorization or resolution; provided that with respect to any of the matters described in clauses (1) through (7) of Section 10.02, such resolution may not be passed without the affirmative votes of each Holder affected.
(2) At any time and from time to time, the Trustee on behalf of the Company may and, on receipt of a Company Order or a Holders' Request and upon being indemnified and funded for the costs thereof to the reasonable satisfaction of the Trustee by the Company or the Holders signing such Holders' Request, will, convene a meeting of all Holders.
(3) If the Trustee fails to convene a meeting after being duly requested as aforesaid (and indemnified and funded as aforesaid), the Company or such Holders may themselves convene such meeting and the notice calling such meeting may be signed by such Person as the Company or those Holders designate, as applicable. Every such meeting will be held in Toronto, Ontario or such other place as the Trustee may in any case determine or approve. Any meeting held pursuant to this Article 8 may be done through a virtual or electronic meeting platform, subject to the Trustee's capabilities at the time.
8.02 Notice of Meetings
Not more than 60 days' nor less than 21 days' notice of any meeting of the Holders shall be given to the Holders, in the manner provided in Section 12.01 and a copy of such notice shall be sent by post or electronic delivery to the Trustee, unless the meeting has been called by it, and to the Company, unless such meeting has been called by it. Such notice shall state the time when and the place where the meeting is to be held and shall state briefly the general nature of the business to be transacted thereat and it shall not be necessary for any such notice to set out the terms of any resolution to be proposed or any of the provisions of this Article 8. The accidental omission to give notice of a meeting to any Holder shall not invalidate any resolution passed at any such meeting. A Holder may waive notice of a meeting either before or after the meeting.
8.03 Chair
Some individual, who need not be a Holder, nominated in writing by the Trustee shall be chair of the meeting and if no individual is so nominated, or if the individual so nominated is not present within 15 minutes from the time fixed for the holding of the meeting, a majority of the Holders present in person or by proxy shall choose some individual present to be chair.
8.04 Quorum
Subject to this Indenture, at any meeting of the Holders, a quorum shall consist of Holders present in person or by proxy and representing at least 25% of the principal amount of the outstanding Notes. If a quorum of the Holders shall not be present within 30 minutes from the time fixed for holding any meeting, the meeting, if convened by the Holders or pursuant to a Holders' Request, shall be dissolved, but in any other case the meeting shall be adjourned to the same day in the next week (unless such day is not a Business Day in which case it shall be adjourned to the next following Business Day thereafter) at the same time and place and no notice shall be required to be given in respect of such adjourned meeting. At the adjourned meeting, the Holders present in person or by proxy shall constitute a quorum and may transact the business for which the meeting was originally convened notwithstanding that they may not represent 25% of the principal amount of the outstanding Notes. Any business may be brought before or dealt with at an adjourned meeting which might have been brought before or dealt with at the original meeting in accordance with the notice calling the same. No business shall be transacted at any meeting unless the required quorum shall be present at the commencement of business.
8.05 Power to Adjourn
The chair of any meeting at which the requisite quorum of the Holders is present may, with the consent of the Holders of a majority in principal amount of the Notes represented thereat, adjourn any such meeting and no notice of such adjournment need be given except such notice, if any, as the meeting may prescribe.
8.06 Voting
On a poll each Holder present in person or represented by a duly appointed proxy shall be entitled to one vote in respect of each U.S.$1,000 principal amount of the Notes of which it is the Holder. A proxyholder need not be a Noteholder. In the case of joint registered Holders of a Note, any one of them present in person or by proxy at the meeting may vote in the absence of the other or others; but in case more than one of them be present in person or by proxy, they shall vote together in respect of the Notes of which they are joint Holders.
8.07 Poll
A poll will be taken on every resolution submitted for approval at a meeting of Holders of Notes, in such manner as the chair directs, and the results of such polls shall be binding on all Holders. Every resolution will be decided by a majority of the votes cast on the poll for that resolution.
8.08 Proxies
A Noteholders may be present and vote at any meeting of Holders by an authorized representative. The Company (in case they convene the meeting) or the Trustee (in any other case) for the purpose of enabling the Holders of Notes to be present and vote at any meeting without producing their Notes, and of enabling them to be present and vote at any such meeting by proxy and of depositing instruments appointing such proxies at some place other than the place where the meeting is to be held, may from time to time make and vary such regulations as it shall think fit providing for and governing any or all of the following matters:
(1) the form of the instrument appointing a proxy, which shall be in writing, and the manner in which the same shall be executed and the production of the authority of any individual signing on behalf of a Holder;
(2) the deposit of instruments appointing proxies at such place as the Trustee, the Company or the Holder convening the meeting, as the case may be, may, in the notice convening the meeting, direct and the time, if any, before the holding of the meeting or any adjournment thereof by which the same must be deposited; and
(3) the deposit of instruments appointing proxies at some approved place or places other than the place at which the meeting is to be held and enabling particulars of such instruments appointing proxies to be mailed, faxed, cabled, telegraphed or sent by other electronic means before the meeting to the Company or to the Trustee at the place where the same is to be held and for the voting of proxies so deposited as though the instruments themselves were produced at the meeting.
Any regulations so made shall be binding and effective and the votes given in accordance therewith shall be valid and shall be counted. Save as such regulations may provide, the only Persons who shall be recognized at any meeting as the Holders of any Notes, or as entitled to vote or be present at the meeting in respect thereof, shall be Holders and Persons whom Holders have by instrument in writing duly appointed as their proxies.
8.09 Persons Entitled to Attend Meetings
The Company and the Trustee, by their respective directors, officers and employees and the respective legal advisors of the Company, the Trustee or any Holder may attend any meeting of the Holders, but shall have no vote as such.
8.10 Powers Cumulative
Any one or more of the powers in this Indenture stated to be exercisable by the Holders by resolution or otherwise may be exercised from time to time and the exercise of any one or more of such powers from time to time shall not be deemed to exhaust the rights of the Holders to exercise the same or any other such power or powers thereafter from time to time. No powers exercisable by resolution will derogate in any way from the rights of the Company pursuant to this Indenture.
8.11 Minutes
Minutes of all resolutions and proceedings at every meeting as aforesaid shall be made and duly entered in books to be from time to time provided for that purpose by the Trustee at the expense of the Company, and any such minutes as aforesaid, if signed by the chair of the meeting at which such resolutions were passed or proceedings had, or by the chair of the next succeeding meeting of the Holders, shall be prima facie evidence of the matters therein stated and, until the contrary is proved, every such meeting, in respect of the proceedings of which minutes shall have been made, shall be deemed to have been duly held and convened, and all resolutions passed thereat or proceedings taken thereat to have been duly passed and taken.
8.12 Instruments in Writing
Any consent, waiver, notice, authorization or resolution of the Holders which may be given by resolution at a meeting of the Holders pursuant to this Article 8 may also be given by the Required Holders by a signed instrument in one or more counterparts; provided that with respect to any of the matters described in clauses
(1) through (7) of Section 10.02, such signed instrument must be given by each Holder affected.
8.13 Binding Effect of Resolutions
Every resolution passed in accordance with the provisions of this Article at a meeting of Holders shall be binding upon all the Holders, whether present at or absent from such meeting, and every instrument in writing signed by Holders in accordance with Section 8.12 shall be binding upon all the Holders, whether signatories thereto or not, and each and every Holder and the Trustee (subject to the provisions for its indemnity herein contained) shall, subject to applicable law, be bound to give effect accordingly to every such resolution and instrument in writing.
8.14 Evidence of Rights of Holders
(1) Any request, direction, notice, consent or other instrument which this Indenture may require or permit to be signed or executed by the Holders may be in any number of concurrent instruments of similar tenor signed or executed by such Holders. Proof of the execution of any such request, direction, notice, consent or other instrument or of a writing appointing any such attorney will be sufficient for any purpose of this Indenture if the fact and date of the execution by any Person of such request, direction, notice, consent or other instrument or writing may be proved by the certificate of any notary public, or other officer authorized to take acknowledgements of deeds to be recorded at the place where such certificate is made, that the Person signing such request, direction, notice, consent or other instrument or writing acknowledged to such notary public or other officer the execution thereof, or by an affidavit of a witness of such execution or in any other manner which the Trustee may consider adequate.
(2) Notwithstanding Section 8.14(1), the Trustee may, in its discretion, require proof of execution in cases where it deems proof desirable and may accept such proof as it shall consider proper.
ARTICLE 9
SUCCESSORS TO THE COMPANY
9.01 Amalgamation, Consolidation, Merger and Sale of Certain Assets
(1) The Company may not, without the consent of the Required Holders, directly or indirectly: (x) amalgamate, consolidate or merge with or into another Person; or (y) sell, assign, transfer, convey, lease or otherwise dispose of all or substantially all of the property of the Company to another Person; unless:
(i) either (A) the Company is the surviving entity; or (B) the Person formed by or surviving any such amalgamation, consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance, lease or other disposition has been made (if other than the Company) (in each case, the "Successor Person") assumes all the obligations of the Company in this Indenture either by operation of law or pursuant to a supplemental indenture reasonably satisfactory to the Trustee;
(ii) immediately after such transaction no Default or Event of Default exists; and
(iii) if the Company is not the surviving entity, the Company has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that such amalgamation, consolidation, merger, conveyance, lease or transfer complies with this Section 9.01(1) and that all conditions precedent contained in this Indenture relating to such transaction have been complied with;
provided that, notwithstanding the foregoing, no consent of the Required Holders shall be required pursuant to this Section 9.01 if such transaction would result in the automatic conversion of the Notes pursuant to Section 4.02.
(2) If the Company is not the Surviving Person of a transaction referred to in Section 9.01(1) and such transaction would not result in the automatic conversion of the Notes pursuant to Section 4.02, the right of a Holder to convert a Note will be changed into a right to convert each U.S.$1,000 of Notes into the kind and amount of shares, other securities or other property or assets (including cash or any combination thereof) that a holder of the number of Common Shares equal to the Non-IPO Conversion Rate immediately prior to such transaction would have been entitled to receive in such transaction (or, if such transaction resulted in the Common Shares being converted into more than one type of consideration, the weighted average of the types and amounts of consideration received by holders of Common Shares in such transaction).
9.02 Vesting of Powers in Successor
Whenever the conditions of Section 9.01 have been duly observed and performed, the Trustee will execute and deliver a supplemental indenture as provided for in Section 10.05 then:
(1) the Successor Person will possess and from time to time may exercise each and every right and power of the Company under this Indenture in the name of the Company, as applicable, or otherwise, and any act or proceeding by any provision of this Indenture required to be done or performed by any directors or officers of the Company may be done and performed with like force and effect by the like directors or officers of such successor; and
(2) the Company will be released and discharged from liability under this Indenture and the Trustee will execute any documents which it may be advised are necessary or advisable for effecting or evidencing such release and discharge.
ARTICLE 10
AMENDMENTS
10.01 Without Consent of Holders
Without the consent of any Noteholders, the Company and the Trustee may amend or supplement this Indenture or the Notes to:
(1) cure any ambiguity, defect or inconsistency;
(2) provide for the assumption of the Company's obligations to Holders of Notes in the case of a merger or consolidation or sale of all or substantially all of the Company's assets, as applicable;
(3) make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under the Indenture of any Noteholders;
(4) decrease the Non-IPO Conversion Price and/or the IPO Conversion Price;
(5) provide for the issuance of additional Notes in accordance with the limitations set forth in this Indenture as of the date of this Indenture;
(6) secure the Notes;
(7) add guarantees with respect to the Notes;
(8) evidence or provide for the acceptance of appointment under this Indenture of a successor Trustee;
(9) make any amendment to the provisions of this Indenture relating to the transfer and legending of Notes as permitted by this Indenture and in compliance with Applicable Securities Laws, including to facilitate the issuance and administration of the Notes; provided, however, that such amendment does not adversely affect the rights of Holders of Notes to transfer Notes in any material respect (except to the extent required by Applicable Securities Laws); or
(10) comply with the rules of any applicable depository.
After an amendment under this Section becomes effective, the Company shall send to Holders of Notes a notice briefly describing such amendment. The failure to give such notice to all Holders of Notes, or any defect therein, shall not impair or affect the validity of an amendment under this Section.
10.02 With Consent of Holders
This Indenture or the Notes may be amended or supplemented with the consent of the Required Holders, and any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, or interest, if any, on, the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Required Holders. However, without the consent of each Noteholders affected, an amendment, supplement or waiver may not (with respect to any Notes held by a non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes in a manner adverse to Holders (other than solely with respect to the minimum notice periods required for redemption of Notes described in Section 3.03 or in paragraph 5 of the Notes);
(3) reduce the rate of or change the time for payment of interest on any Note;
(4) waive a Default or Event of Default in the payment of principal of, or interest, if any, on, the Notes (except a rescission of acceleration of the Notes and a waiver of the payment default that resulted from such acceleration), or make any changes to any Event of Default relating the payment of principal of, or interest, if any, on, the Notes or make any changes to any remedies available upon an Event of Default;
(5) make any Note payable in money other than that stated in the Notes or make any changes to Section 2.14;
(6) make any change adverse to Holders in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or interest, if any, on, the Notes; or
(7) make any change in the preceding amendment, supplement and waiver provisions.
It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the Company shall send to Noteholders a notice briefly describing such amendment. The failure to give such notice to all Noteholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section.
10.03 Revocation and Effect of Consents and Waivers
(1) A consent to an amendment or a waiver by a Holder of a Note shall bind the Holder and every subsequent Holder of that Note or portion of the Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent or waiver is not made on the Note. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Note or portion of the Note if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Noteholder. An amendment or waiver becomes effective in accordance with its terms.
(2) The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Noteholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Noteholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 180 days after such record date.
10.04 Notation on or Exchange of Notes
If an amendment changes the terms of a Note, the Company may require the Holder of the Note to deliver it to the Trustee. The Trustee shall, in that case, place an appropriate notation on the Note regarding the changed terms and return it to the Holder. Alternatively, if the Company so determines, the Company in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation or to issue a new Note shall not affect the validity of such amendment.
10.05 Trustee to Sign Amendments
In executing, or accepting the additional trusts created by, any amendment or supplemental indenture permitted by this Article 10 or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Opinion of Counsel and an Officer's Certificate stating that the execution of such amendment or supplemental indenture is authorized or permitted by this Indenture and that all conditions precedent to the execution have been complied with. The Trustee may, but shall not be obligated to, enter into any amendment or supplemental indentures which affect the Trustee's own rights, duties, immunities, or indemnities under this Indenture, the Notes or otherwise. The Trustee will sign any amendment or supplemental indenture authorized pursuant to this Article 10 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee.
ARTICLE 11
SATISFACTION AND DISCHARGE
11.01 Satisfaction and Discharge
(1) This Indenture will be discharged and will cease to be of further effect as to all Notes issued thereunder (except as to surviving rights of registration of transfer or exchange of the Notes and as otherwise specified in this Indenture), when:
(A) either:
(a) all Notes that have been authenticated, except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment cash has been deposited in trust and thereafter repaid to the Company, have been delivered to the Trustee for cancellation; or
(b) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the sending of a notice of redemption or otherwise or will become due and payable within one year and the Company has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. Dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal of, or interest, if any, on the Notes to the date of stated maturity or redemption;
(B) no Default or Event of Default has occurred and is continuing on the date of the deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit and any similar deposit relating to other indebtedness and, in each case, the granting of security interests to secure such borrowings);
(C) the Company has paid or caused to be paid all other sums payable by the Company under this Indenture; and
(D) the Company has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at stated maturity or on the redemption date, as the case may be.
(2) In connection with any discharge under this Article 11, the Company must deliver an Officer's Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.
ARTICLE 12
MISCELLANEOUS
12.01 Notices
(1) Any notice, request or communication required or permitted to be sent or delivered to the Company or the Trustee shall be in writing (including facsimile and electronic transmission in PDF format) and delivered in person, mailed by first-class or registered mail or sent by overnight courier or electronic mail addressed as follows:
(A) if to the Company:
Medicus Pharma Ltd.
3400 One First Canadian Place
Toronto, ON M5X 1A4
Email: [Redacted: Personal Information]
Attention: Chief Financial Officer
(B) if to the Trustee:
Odyssey Trust Company
1230-300 5th Ave SW
Calgary, Alberta T2P 3C4
Email [Redacted: Personal Information]
Attention: Corporate Trust
(2) The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.
(3) Any notice or communication required or permitted hereunder to be sent or delivered to a Noteholder shall be mailed, first class or registered mail, or sent by overnight courier, or delivered by electronic mail, to the Noteholder at the Noteholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so sent within the time prescribed.
(4) Any notice or communication required or permitted hereunder to be sent to a Holder of a Global Note, if and when issued, shall be delivered in accordance with the applicable procedures of the Depository and shall be sufficiently sent if so delivered within the time prescribed.
(5) Failure to send a notice or communication to a Noteholder or any defect in it shall not affect its sufficiency with respect to other Noteholders. If a notice or communication is sent in the manner provided above, it is duly given, whether or not the addressee receives it.
(6) The Trustee agrees to accept and act upon instructions or directions pursuant to this Indenture sent by unsecured e-mail, pdf, facsimile transmission or other similar unsecured electronic methods; provided, however, that the Trustee shall have received an incumbency certificate listing persons designated to give such instructions or directions and containing specimen signatures of such designated persons, which such incumbency certificate shall be amended and replaced whenever a person is to be added or deleted from the listing. If the Company elects to give the Trustee e-mail or facsimile instructions (or instructions by a similar electronic method) and the Trustee in its discretion elects to act upon such instructions, the Trustee's understanding of such instructions shall be deemed controlling. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee's reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The party providing electronic instructions shall assume and be liable for all risks arising out of the use of such electronic methods to submit instructions and directions to the Trustee, including the risk of the Trustee acting on unauthorized instructions, and the risk or interception and misuse by third parties.
(7) All certifications, certificates and Opinions of Counsel required to be submitted to the Trustee under this Indenture may be submitted by mail or by facsimile or transmission in a portable document format (such as "PDF" or "tiff").
12.02 Certificate and Opinion as to Conditions Precedent
Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Trustee may require by written notice to the Company:
(1) an Officer's Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and/or
(2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with.
12.03 Statements Required in Certificate or Opinion
Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with (which, in the case of an Opinion of Counsel, may be limited to reliance on an Officer's Certificate as to matters of fact); and
(4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with.
12.04 Rules by Trustee, Paying Agent and Registrar
The Trustee may make reasonable rules for action by or a meeting of Noteholders. The Registrar and the Paying Agent may make reasonable rules and set reasonable requirements for their functions.
12.05 Legal Holidays
If a payment date is not a Business Day, payment shall be made on the next succeeding day that is a Business Day, and no interest, cost or other charge shall accrue for the intervening period. If a regular record date is a Business Day, the record date shall not be affected.
12.06 Governing Law
This Indenture, any supplemental indenture and the Notes shall be governed by and interpreted in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein and shall be treated in all respects as Ontario contracts, with respect to any suit, action or proceedings relating to this Indenture, any supplemental indenture or any Note, the Company, the Trustee and each holder irrevocably submit and attorn to the non-exclusive jurisdiction of the courts of the Province of Ontario.
12.07 Successors
All agreements of the Company in this Indenture and the Notes shall bind their successors. All agreements of the Trustee in this Indenture shall bind its successors.
12.08 Severability
In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
12.09 Multiple Originals
The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. The parties agree to electronic contracting and signatures with respect to this Indenture. One signed copy is enough to prove this Indenture. The exchange of copies of this Indenture and of signature pages by facsimile, PDF, email, photographic or other electronic transmission shall constitute effective execution and delivery of this Indenture as to the parties hereto and may be used in lieu of the original Indenture for all purposes. Signatures of the parties hereto transmitted by such electronic signature as described above shall be deemed to be their original signatures for all purposes. Notwithstanding the foregoing, if any Holder shall request a manually signed counterpart signature to this Indenture, the Company hereby agrees to use its reasonable endeavors to provide such manually signed signature pages within 30 days of such request or such longer period as the requesting Holder and the Company may agree.
12.10 Table of Contents; Headings
The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.
12.11 Waiver of Jury Trial
THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAWS, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE SECURITIES OR THE TRANSACTIONS CONTEMPLATED HEREBY.
12.12 Force Majeure
Neither party shall be liable to the other, or held in breach of this Indenture, if prevented, hindered, or delayed in the performance or observance of any provision contained herein by reason of act of God, riots, terrorism, acts of war, epidemics, governmental action or judicial order, earthquakes, or any other similar causes (including, but not limited to, mechanical, electronic or communication interruptions, disruptions or failures). Performance times under this Indenture shall be extended for a period of time equivalent to the time lost because of any delay that is excusable under this Section 12.12.
12.13 Anti Money Laundering
The Trustee shall retain the right not to act and shall not be liable for refusing to act if, due to a lack of information or for any other reason whatsoever, the Trustee, in its sole judgment, determines that such act might cause it to be in non-compliance with any applicable Anti-Money Laundering Laws, anti-terrorist financing or economic sanctions legislation, regulation or guideline. Further, should the Trustee, in its sole judgment, determine at any time that its acting under this Agreement has resulted in its being in non- compliance with any applicable Anti-Money Laundering Laws, anti-terrorist financing or economic sanctions legislation, regulation or guideline, then it shall have the right to resign on ten (10) days written notice to the other parties to this Agreement; provided (i) that the Trustee's written notice shall describe the circumstances of such non-compliance; and (ii) that if such circumstances are rectified to the Trustee's satisfaction within such ten (10) day period, then such resignation shall not be effective.
12.14 No Registered Securities
The Company confirms to the Trustee that as at the date of execution of this Indenture it does not have a class of securities registered pursuant to Section 12 of the Exchange Act or have a reporting obligation pursuant to Section 15(d) of the Exchange Act. The Company covenants to the Trustee that in the event that (i) any class of its securities shall become registered pursuant to Section 12 of the Exchange Act or the Company shall incur a reporting obligation pursuant to Section 15(d) of the Exchange Act, or (ii) any such registration or reporting obligation shall be terminated by the Company in accordance with the Exchange Act, the Company shall promptly notify the Trustee of such registration or termination and such other information as the Trustee may require at the time. The Company acknowledges that the Trustee is relying upon the foregoing representation and covenants in order to meet certain SEC obligations with respect to those clients who are filing with the SEC.
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above.
| THE COMPANY: | ||
| MEDICUS PHARMA LTD. | ||
| Per: | /s/ Dr. Raza Bokhari | |
| Name: Dr. Raza Bokhari | ||
| Title: Chairman & CEO | ||
| THE TRUSTEE: | ||
| ODYSSEY TRUST COMPANY | ||
| Per: | /s/ Dan Sander | |
| Name: Dan Sander | ||
| Title: President, Corporate Trust | ||
| Per: | /s/ Amy Douglas | |
| Name: Amy Douglas | ||
| Title: Senior Director, Corporate Trust | ||
APPENDIX
PROVISIONS RELATING TO SECURITIES
1. Interpretation
1.1 Definitions
For the purposes of this Appendix the following terms have the meanings indicated below:
"Agent Members" means the Depository or its nominee, members of, or participants in the Depository.
"Definitive Note" means a certificated Note or an uncertificated Note (Direct Registration System) bearing, if required, the appropriate restricted securities legend(s) set forth in Section 2.3(d).
"Depository" means CDS Clearing and Depository Services Inc., its nominees and their respective successors, or such other Person designated by the Company as Depository from time to time.
"Notes Custodian" means the custodian with respect to the Global Note (as appointed by the Depository), or any successor Person thereto and shall initially be the Trustee.
"Qualified Institutional Buyer" means a "qualified institutional buyer" as defined in Rule 144A. "Regulation D" means Regulation D under the Securities Act.
"Regulation S" means Regulation S under the U.S. Securities Act.
"Regulation S Global Note" has the meaning given to it in Section 2.3(b)(ii) of this Appendix. "Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the U.S. Securities Act of 1933, as amended.
"Transfer Restricted Notes" means Notes that bear or are required to bear the legend relating to restrictions on transfer relating to the Securities Act set forth in Section 2.3(d)(ii) hereto.
"U.S. Accredited Investor" means an "accredited investor" meeting one or more of the criteria of Rule 501(a) of Regulation D.
"U.S. Global Note" has the meaning given to it in Section 2.3(b)(ii) of this Appendix. "U.S. Person" means a "U.S. person" as defined in Rule 902(k) of Regulation S.
"U.S. Subscriber" means a Person who is: (a) at the time of purchase, (i) a U.S. Person, or (ii) a Person purchasing such Notes on behalf of, or for the account or benefit of, any U.S. Person or any Person in the United States, (b) a Person who receives or received an offer to acquire such Notes while in the United States, and (c) any Person who was in the United States at the time such Person's buy order was made or the subscription agreement pursuant to which such Notes were acquired was executed or delivered, in each case other than where such Person is a Qualified Institutional Buyer.
2. The Notes
2.1 Form and Dating. The Notes shall be issued initially in definitive note form, either certificated or uncertificated (Direct Registration System) (the "Definitive Notes"), in each case without interest coupons and with the appropriate restricted securities legend set forth in Section 2.3(d).
2.2 Authentication and Delivery. If the Notes are issued as certificated Notes or Global Notes, the Trustee shall, upon receipt of an Authentication Order, authenticate and deliver on the date of issuance of such Notes, certificated Notes in such names and amounts as the Company shall direct in the Authentication Order. If the Notes are issued as via the Direct Registration System, the Trustee shall, upon receipt of a Treasury Direction, deliver Notes via the Direct Registration System in such names and amounts as the Company Shall Direct in the Treasury Direction.
2.3 Transfer and Exchange
(a) Transfer and Exchange of Definitive Notes. When Definitive Notes are presented to the Registrar with a request:
(x) to register the transfer of such Definitive Notes; or
(y) to exchange such Definitive Notes for an equal principal amount of Definitive Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Notes surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar, duly executed by the holder thereof or its attorney duly authorized in writing; and
(ii) if such Definitive Notes are Transfer Restricted Notes, they are being transferred or exchanged pursuant to an effective registration statement under the Securities Act, pursuant to Section 2.3(b) or pursuant to clause (A), (B) or (C) below, and are accompanied by the following additional information and documents, as applicable:
(A) if such Definitive Notes are being delivered to the Registrar by a holder for registration in the name of such holder, without transfer, a certification from such holder to that effect; or
(B) if such Definitive Notes are being transferred to the Company, a certification to that effect; or
(C) if such Definitive Notes are being transferred (x) to a U.S. Accredited Investor or pursuant to an exemption from registration in accordance with Rule 144A, Regulation S or Rule 144 (if available) under the Securities Act; or (y) in reliance upon another exemption from the registration requirements of the Securities Act: (i) a certification to that effect (in the form set forth on the reverse of the Note) and (ii) if the Company or Trustee so requests, an Opinion of Counsel or other evidence reasonably satisfactory to them as to the compliance with the restrictions set forth in the legend on such Note and as set forth in Section 2.3(d)(ii) of this Appendix.
(b) Restrictions on Transfer of a Definitive Note for a Beneficial Interest in a Global Note. A Definitive Note may not be exchanged for a beneficial interest in a Global Note except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Definitive Note, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Trustee, together with:
(i) certification, in the form set forth on the reverse of the Note, that such Definitive Note is either (A) being transferred to a Qualified Institutional Buyer in accordance with Rule 144A or (B) being transferred in accordance with Rule 903 or 904 of Regulation S or Rule 144 (if available); and
(ii) written instructions directing the Trustee to make, or to direct the Notes Custodian to make, an adjustment on its books and records with respect to a Global Note issued in respect of Notes issued to a U.S. Person ("U.S. Global Note") (in the case of a transfer pursuant to clause (b)(i)(A)) or a Global Note issued in respect of Notes issued in reliance on Regulation S ("Regulation S Global Note") (in the case of a transfer pursuant to clause (b)(i)(B)) to reflect an increase in the aggregate principal amount of the Notes represented by the U.S. Global Note or Regulation S Global Note, as applicable, such instructions to contain information regarding the Depository account to be credited with such increase,
then the Trustee shall cancel such Definitive Note and cause, or direct the Notes Custodian to cause, in accordance with the standing instructions and procedures existing between the Depository and the Notes Custodian, the aggregate principal amount of Notes represented by the U.S. Global Note or Regulation S Global Note, as applicable, to be increased by the aggregate principal amount of the Definitive Note to be exchanged and shall credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the U.S. Global Note or Regulation S Global Note, as applicable, equal to the principal amount of the Definitive Note so canceled. If no U.S. Global Notes or Regulation S Global Notes, as applicable, are then outstanding, the Company shall issue and the Trustee shall authenticate, upon written order of the Company in the form of an Officers' Certificate of the Company, a new U.S. Global Note or Regulation S Global Note, as applicable, in the appropriate principal amount.
(c) Transfer and Exchange of Global Notes
(i) If and when a Global Note is issued hereunder, the transfer and exchange of Global Notes or beneficial interests therein shall be effected through the Depository, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depository therefor. A transferor of a beneficial interest in a Global Note shall deliver to the Registrar a written order given in accordance with the Depository's procedures containing information regarding the participant account of the Depository to be credited with a beneficial interest in the Global Note. The Registrar shall, in accordance with such instructions, instruct the Depository to credit to the account of the Person specified in such instructions a beneficial interest in the Global Note and to debit the account of the Person making the transfer of the beneficial interest in the Global Note being transferred.
(ii) If the proposed transfer is a transfer of a beneficial interest in one Global Note to a beneficial interest in another Global Note, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Note to which such interest is being transferred in an amount equal to the principal amount of the interest to be so transferred, and the Registrar shall reflect on its books and records the date and a corresponding decrease in the principal amount of the Global Note from which such interest is being transferred.
(iii) Notwithstanding any other provisions of this Appendix (other than the provisions set forth in Section 2.4), a Global Note may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository.
(iv) In the event that a beneficial interest in a Global Note is exchanged for Definitive Notes pursuant to Section 2.4, such Notes may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Notes intended to ensure that such transfers comply with Rule 144A, Regulation S or another applicable exemption under the Securities Act, as the case may be) and such other procedures as may from time to time be adopted by the Company.
(d) Legends
(i) Each Note certificate or Direct Registration System statement evidencing the Definitive Notes (and all Notes issued in exchange therefor or in substitution thereof and all Common Shares issued in respect of interest on any Interest Payment Date and upon conversion of the Notes) other than those issued to a U.S. Subscriber shall bear the following legend in substantially the following form:
"UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) [DATE OF DISTRIBUTION OF THE SECURITIES] AND (II) THE DATE MEDICUS PHARMA LTD. (THE "COMPANY") BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY."
(ii) Except as permitted by following paragraphs (iii) and (iv), each Note certificate or Direct Registration System statement issued to a U.S. Subscriber evidencing the Definitive Notes (and all Notes issued in exchange therefor or in substitution thereof all Common Shares issued in respect of interest on any Interest Payment Date and upon conversion of the Notes) shall bear the following legend in substantially the following form:
"THE OFFER AND SALE OF SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE AS A RESULT OF INTEREST PAYABLE AND UPON CONVERSION THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING OR OTHERWISE HOLDING SUCH SECURITIES, AGREES FOR THE BENEFIT OF MEDICUS PHARMA LTD. (THE "COMPANY") THAT THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY: (A) TO THE COMPANY; (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT; (C) IN ACCORDANCE WITH THE EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS; OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, AND, IN THE CASE OF CLAUSE (C) OR (D), THE SELLER FURNISHES TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY TO SUCH EFFECT. THE PRESENCE OF THIS LEGEND MAY IMPAIR THE ABILITY OF THE HOLDER HEREOF TO EFFECT "GOOD DELIVERY" OF THE SECURITIES REPRESENTED HEREBY ON A CANADIAN STOCK EXCHANGE."
[EACH GLOBAL NOTE SHALL ALSO BEAR THE FOLLOWING ADDITIONAL LEGEND]:
"THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREIN REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE THEREOF. THIS NOTE MAY NOT BE TRANSFERRED TO OR EXCHANGED FOR NOTES REGISTERED IN THE NAME OF ANY PERSON OTHER THAN THE DEPOSITORY OR A NOMINEE THEREOF AND NO SUCH TRANSFER MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. EVERY NOTE AUTHENTICATED AND DELIVERED UPON REGISTRATION OF, TRANSFER OF, OR IN EXCHANGE FOR, OR IN LIEU OF, THIS NOTE SHALL BE A GLOBAL NOTE SUBJECT TO THE FOREGOING, EXCEPT IN SUCH LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE."
(iii) Upon any sale or transfer of a Transfer Restricted Note in the United States pursuant to Rule 144 under the Securities Act, the Registrar shall permit the transferee thereof to exchange such Transfer Restricted Note for a Definitive Note that does not bear the legend set forth in the paragraph (ii) above (other than the last paragraph thereof unless such legend can be removed pursuant to its terms) and rescind any restriction on the transfer of such Transfer Restricted Note, if the transferor thereof certifies in writing to the Registrar that such sale or transfer was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Note) and provides such legal opinions, certifications and other information as the Company or the Trustee may require.
(iv) Upon any sale or transfer of a Transfer Restricted Note outside the United States in compliance with the requirements of Regulation S, and such securities were acquired when the Company qualified as a "foreign issuer" (as defined in Rule 902 of Regulation S), the foregoing legend set forth in the paragraph (ii) above may be removed by providing a declaration to the Registrar and the Company in the form set forth on the reverse of the Note or in such other form as the Company may prescribe from time to time.
(e) Cancellation or Adjustment of Global Note. At such time as all beneficial interests in a Global Note have either been exchanged for Definitive Notes, redeemed, purchased or canceled, such Global Note shall be returned to the Depository for cancellation or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for Definitive Notes, redeemed, purchased or canceled, the principal amount of Notes represented by such Global Note shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Notes Custodian for such Global Note) with respect to such Global Note, by the Trustee or the Notes Custodian, to reflect such reduction.
(f) No Obligation of the Trustee
(i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Note, a member of, or a participant in the Depository or other Person with respect to the accuracy of the records of the Depository or its nominee or of any participant or member thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository) of any notice (including any notice of redemption) or the payment of any amount, under or with respect to such Notes. All notices and communications to be given to the Holders and all payments to be made to Holders under the Notes shall be given or made only to or upon the order of the registered Holders (which shall be the Depository or its nominee in the case of a Global Note). The rights of beneficial owners in any Global Note shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Trustee may conclusively rely and shall be fully protected in conclusively relying upon information furnished by the Depository with respect to its members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depository participants, members or beneficial owners in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.
2.4 Definitive Notes
(a) A Global Note deposited with the Depository or with the Trustee as Notes Custodian for the Depository pursuant to Section 2.3 shall be transferred to the beneficial owners thereof in the form of Definitive Notes in an aggregate principal amount equal to the principal amount of such Global Note, in exchange for such Global Note, only if such transfer complies with Section 2.3 hereof and (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for such Global Note and the Depository fails to appoint a successor depository or if at any time such Depository ceases to be a "clearing agency" registered under the Exchange Act and, in either case, a successor depository is not appointed by the Company within 90 days of such notice, or (ii) an Event of Default has occurred and is continuing.
(b) Any Global Note that is transferable to the beneficial owners thereof pursuant to this Section 2.4 shall be surrendered by the Depository to the Trustee at its designated corporate trust office, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall, upon receipt of an Authentication Order or a Treasury Direction, as applicable, authenticate and deliver, as applicable, upon such transfer of each portion of such Global Note, an equal aggregate principal amount of Definitive Notes of authorized denominations. Any portion of a Global Note transferred pursuant to this Section 2.4 shall be executed, authenticated and delivered only in denominations of U.S.$1,000 principal amount and integral multiples of U.S.$1,000 in excess thereof and registered in such names as the Depository shall direct. Any Definitive Note delivered in exchange for an interest in a Global Note shall, except as otherwise provided by Section 2.3(d) hereof, bear the applicable restricted securities legend and definitive securities legend set forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b) hereof, the registered Holder of a Global Note shall be entitled to grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes.
(d) In the event of the occurrence of one of the events specified in Section 2.4(a) hereof, the Company shall promptly make available to the Trustee a reasonable supply of Definitive Notes in definitive, fully registered form without interest coupons. In the event that such Definitive Notes are not issued, the Company expressly acknowledges, with respect to the right of any Holder to pursue a remedy pursuant to Article 10 of the Indenture, the right of any beneficial owner of Notes to pursue such remedy with respect to the portion of the Global Note that represents such beneficial owner's Notes as if such Definitive Notes had been issued.
EXHIBIT 1
to
APPENDIX
[FORM OF FACE OF SECURITY]
[Each Note certificate or Direct Registration System statement evidencing the Definitive Notes (and all Notes issued in exchange therefor or in substitution thereof and all Common Shares issued in respect of interest on any Interest Payment Date and upon conversion of the Notes) other than those issued to a U.S. Subscriber shall bear the following legend:]
"UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) [DATE OF DISTRIBUTION OF THE SECURITIES] AND (II) THE DATE MEDICUS PHARMA LTD. (THE "COMPANY") BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY."
[Except as permitted by Section 2.3(d)(iii) or Section 2.3(d)(iv) of the Appendix of the Indenture, each Note certificate or Direct Registration System statement issued to a U.S. Subscriber evidencing the Definitive Notes (and all Notes issued in exchange therefor or in substitution thereof all Common Shares issued in respect of interest on any Interest Payment Date and upon conversion of the Notes) shall bear the following legend:]
"THE OFFER AND SALE OF SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE AS A RESULT OF INTEREST PAYABLE AND UPON CONVERSION THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING OR OTHERWISE HOLDING SUCH SECURITIES, AGREES FOR THE BENEFIT OF MEDICUS PHARMA LTD. (THE "COMPANY") THAT THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY: (A) TO THE COMPANY; (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT; (C) IN ACCORDANCE WITH THE EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS; OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, AND, IN THE CASE OF CLAUSE (C) OR (D), THE SELLER FURNISHES TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY TO SUCH EFFECT. THE PRESENCE OF THIS LEGEND MAY IMPAIR THE ABILITY OF THE HOLDER HEREOF TO EFFECT "GOOD DELIVERY" OF THE SECURITIES REPRESENTED HEREBY ON A CANADIAN STOCK EXCHANGE."
[Global Notes Legend to be added to a Global Note if and when issued pursuant to this Indenture]
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREIN REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE THEREOF. THIS NOTE MAY NOT BE TRANSFERRED TO OR EXCHANGED FOR NOTES REGISTERED IN THE NAME OF ANY PERSON OTHER THAN THE DEPOSITORY OR A NOMINEE THEREOF AND NO SUCH TRANSFER MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. EVERY NOTE AUTHENTICATED AND DELIVERED UPON REGISTRATION OF, TRANSFER OF, OR IN EXCHANGE FOR, OR IN LIEU OF, THIS NOTE SHALL BE A GLOBAL NOTE SUBJECT TO THE FOREGOING, EXCEPT IN SUCH LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF CDS CLEARING AND DEPOSITORY SERVICES INC. ("CDS") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN RESPECT THEREOF IS REGISTERED IN THE NAME OF CDS & CO., OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CDS (AND ANY PAYMENT IS MADE TO CDS & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CDS), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED HOLDER HEREOF, CDS & CO., HAS A PROPERTY INTEREST IN THE SECURITIES REPRESENTED BY THIS NOTE HEREIN AND IT IS A VIOLATION OF ITS RIGHTS FOR ANOTHER PERSON TO HOLD, TRANSFER OR DEAL WITH THIS NOTE.
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[CUSIP [] ISIN []] |
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No. ____________ |
U.S.$________ |
10.00% Unsecured Convertible Notes due 2025
Medicus Pharma Ltd., a corporation subsisting under the Business Corporations Act (Ontario), promises to pay to [_________________] or its registered assigns, [the principal sum of U.S.$_____________ (as such sum may be increased or decreased as reflected on the Schedule of Increases or Decreases in the Global Note attached hereto)]* on December 31, 2025.
Interest Payment Dates: May 1 and November 1 of each year; commencing November 1, 2024.
Record Dates: April 15 and October 15 of each year.
Additional provisions of this Note are set forth on the other side of this Note.
*Include if Global Note
IN WITNESS WHEREOF, Medicus Pharma Ltd. has caused this instrument to be duly executed.
| MEDICUS PHARMA LTD. | ||
| By: _______________________________________ | By: _______________________________________ | |
| Name: | Name: | |
| Title: | Title: |
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
ODYSSEY TRUST COMPANY, as Trustee,
certifies that this is one of the Notes referred to
in the Indenture.
By: _______________________________________
Authorized Signatory
Dated:
[FORM OF REVERSE SIDE OF SECURITY]
10.00% Unsecured Convertible Notes due 2025
1. Interest
Medicus Pharma Ltd., a corporation subsisting under the Business Corporations Act (Ontario) (the "Company"), and its successors and permitted assigns under the Indenture hereinafter referred to, promises to pay interest on the principal amount of this Note semi-annually in arrears on May 1 and November 1 of each year (each an "Interest Payment Date"), commencing November 1, 2024. Interest shall accrue at the rate of 10.00% per annum and, except for Cash Interest (as defined below), shall, subject to all necessary regulatory approval (including any required approval of the Principal Exchange and any stock exchange on which the Common Shares are then listed), be payable in Common Shares, unless, subject to the provisions and conditions of Section 2.13 of the Indenture, a Holder has elected to receive cash in lieu of Common Shares by delivering a Cash Interest Payment Election Notice to the Company and the Trustee. Notwithstanding anything to the contrary herein, (i) interest for the final interest period ending on the Maturity Date will be paid entirely in cash ("Maturity Date Interest") in the same manner as the repayment of the aggregate principal amount of the Notes then outstanding and (ii) the payment of accrued and unpaid interest in connection with any redemption or repurchase of the Notes under this Indenture will be made solely in cash (any such interest, Maturity Date Interest and other interest payable in cash in accordance with the Indenture, being "Cash Interest"). To the extent necessary regulatory approvals have not been obtained to issue Common Shares in respect of the interest payable on any Interest Payment Date or upon a conversion, as applicable (including any required approval of the Principal Exchange and any stock exchange on which the Common Shares are then listed), the Company will pay such interest in cash as Cash Interest.
2. Method of Payment
(a) The Company shall pay interest on the Notes to the Persons who are registered holders of Notes at the close of business on April 15 and October 15 immediately preceding the relevant Interest Payment Date to the extent required under the Indenture. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company shall pay principal, and Cash Interest, if any, in U.S. Dollars. Payments in respect of the Notes represented by a Global Note (including principal and Cash Interest, if any) will be made by wire transfer of immediately available funds to the accounts specified by the Depository. The Company shall make all payments in respect of a certificated Note (including principal and Cash Interest, if any) by mailing a cheque to the registered address of each Holder thereof; provided, however, that payments on a certificated Note will be made by wire transfer if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 5 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
(b) If all necessary regulatory approvals have been obtained for the Company to pay interest in Common Shares (including any required approval of the Principal Exchange and any stock exchange on which the Common Shares are then listed), the Company shall deliver a certificate or certificates representing such Common Shares or deposit such Common Shares through the Depository's non-certificated system or via the Direct Registration System (in each case, including any restrictions or legends that may be required under Applicable Securities Laws) to the Holder on the applicable Interest Payment Date or conversion date (as applicable) and not later than ten (10) Business Days following a conversion.
3. Paying Agent and Registrar
Initially, Odyssey Trust Company (the "Trustee") will act as Paying Agent and Registrar and transfer agent. The Company may appoint and change any Paying Agent, Registrar, co-registrar or transfer agent without notice. The Company may act as Paying Agent, Registrar or co-registrar.
4. Indenture
(a) The Company issued the Notes under an Indenture dated as of May 3, 2024 (the "Indenture"), between the Company and the Trustee. Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Notes are subject to all such terms, and Noteholders are referred to the Indenture for a statement of those terms.
(b) The Notes are unsecured obligations of the Company and will be treated as a single class for all purposes under the Indenture.
5. Optional Redemption
(a) At any time on or after the Par Call Date but prior to the Maturity Date, the Company may on any one or more occasions redeem all of the Notes outstanding at such time, or a part of the Notes having an aggregate principal amount equal to not less than U.S.$1,000 (or the aggregate principal amount of Notes then outstanding, whichever is less), upon not less than 10 nor more than 60 days' notice, at a redemption price equal to 100% of the principal amount of the Notes redeemed, plus accrued and unpaid interest, if any, to but excluding the date of redemption, subject to the rights of Holders of Notes on the relevant Record Date to receive interest due on the relevant Interest Payment Date.
(b) Unless the Company defaults in the payment of the redemption price, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date.
(c) If the optional redemption date is on or after an interest Record Date and on or before the related Interest Payment Date, the accrued and unpaid interest on the Notes, if any, will be paid only to the Person in whose name the Note is registered at the close of business on such Record Date.
(d) The Company shall cause notice of such redemption to be sent to the Noteholders not less than 10 nor more than 60 days prior to the redemption date, except that redemption notices issued in connection with a satisfaction or discharge of the Indenture may be sent more than 60 days prior to the redemption date.
(e) An optional redemption may be subject to one or more conditions, including completion of a corporate transaction or other event, and the Company may postpone the optional redemption date or cancel the optional redemption until such conditions have been satisfied.
6. Notice of Redemption
Notice of redemption will be sent at least 10 days but not more than 60 days before the redemption date to the Holders of the Notes at their respective registered addresses. If money sufficient to pay the redemption price of and accrued interest on all Notes (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Notes (or such portions thereof) called for redemption.
Notice of any redemption upon any corporate transaction or other event may be given prior to the completion thereof. In addition, any redemption or notice thereof may, at the discretion of the Company, be subject to one or more conditions precedent, including, but not limited to, completion of a corporate transaction or other event.
7. Mandatory Redemption
The Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes.
8. Denominations; Transfer; Exchange
The Notes are in registered form without coupons in denominations of U.S.$1,000 principal amount and integral multiples of U.S.$1,000 in excess thereof. A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Notes for a period of 15 days before the redemption date.
9. Persons Deemed Owners
The registered Holder of this Note may be treated as the owner of it for all purposes.
10. Unclaimed Money
If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment.
11. Amendment; Waiver
Subject to certain exceptions set forth in the Indenture, (a) the Indenture and the Notes may be amended with the written consent of the Required Holders and (b) any default or noncompliance with any provision may be waived with the written consent of the Required Holders. Subject to certain exceptions set forth in the Indenture, without the consent of any Noteholders, the Company and the Trustee shall be entitled to amend the Indenture and the Notes to, among other things, cure any ambiguity, defect or inconsistency, or to make a change that would provide additional rights or benefits to Holders or that does not adversely affect the legal rights under the Indenture of any Holder, or to provide for the issuance of additional Notes in accordance with the limitations set forth in the Indenture as of the date of the Indenture, or to evidence or provide for the acceptance of appointment under the Indenture of a successor trustee.
12. Trustee Dealings with the Company
Subject to certain limitations imposed by the Indenture, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.
13. No Recourse Against Others
A director, officer, employee, incorporator or member, partner, trustee, beneficiary or shareholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. By accepting a Note, each Noteholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Notes.
14. Authentication
This Note shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Note.
15. Abbreviations
Customary abbreviations may be used in the name of a Noteholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act).
16. CUSIP Numbers, ISINs, etc.
The Company in issuing the Notes may use "CUSIP" numbers, ISINs and "Common Code" numbers (in each case if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers, ISINs and "Common Code" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall promptly advise the Trustee in writing of any change in any "CUSIP" numbers, ISINs or "Common Code" numbers applicable to the Notes.
17. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE PROVINCE OF ONTARIO AND THE LAWS OF CANADA APPLICABLE THEREIN.
The Company shall furnish to any Noteholder upon written request and without charge to the Noteholder a copy of the Indenture which has in it the text of this Note in larger type. Requests may be made to: Medicus Pharma Ltd., 3400 One First Canadian Place, P.O. Box 130, Toronto, Ontario, Canada M5X 1A4, Attention: Chief Financial Officer.
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint _________ as agent to transfer this Note on the books of the Company. The agent may substitute another to act for him.
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Date: |
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Your Signature: |
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Sign exactly as your name appears on the other side of this Note.
In connection with any transfer of any of the Notes evidenced by this certificate occurring prior to the expiration of one year after the later of the date of original issuance of such Notes and the last date, if any, on which such Notes were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Notes are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
☐ to the Company; or
| (1) | ☐ | inside the United States to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or | |
| (2) | ☐ | to an "accredited investor" (as defined in Rule 501(a) under the Securities Act of 1933), and there has been furnished to the Trustee a signed letter containing certain representations and agreements and, if requested by the Company, such transferee shall have furnished to the Company and the Trustee an opinion of counsel to the effect that such transfer is in compliance with the Securities Act; or | |
| (3) | ☐ | outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act of 1933 in compliance with Rule 904 under the Securities Act of 1933; or | |
| (4) | ☐ | pursuant to the exemption from registration provided by Rule 144 under the Securities Act of 1933, and there has been furnished to the Trustee a signed letter containing certain representations and agreements and, if required, an Opinion of Counsel in respect of such transfer; or | |
| (5) | ☐ | pursuant to an effective registration statement under the Securities Act of 1933. |
Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered Holder thereof; provided, however, that if box (2) or (4) is checked, the Trustee shall be entitled to require, prior to registering any such transfer of the Notes, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933.
_________________________________________________
Signature
Signature
Guarantee*: ___________________________________________
*Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Note Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
TO BE COMPLETED BY PURCHASER IF (1) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A.
Dated: ____________________
To be executed by an executive officer _________________________________________________
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Note have been made:
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Exhibit A
Form of
Transferee Letter of Representation
ODYSSEY TRUST COMPANY
1230 - 300 5TH AVENUE S.W.
CALGARY, ALBERTA
CANADA T2P 3C4
RE: INDENTURE, DATED MAY 3, 2024, IN RESPECT OF 10.00% UNSECURED CONVERTIBLE NOTES DUE 2025 OF MEDICUS PHARMA LTD.
Ladies and Gentlemen:
This certificate is delivered to request a transfer of U.S.$_________________ principal amount of the 10.00% Unsecured Convertible Notes due 2025 (the "Notes") of Medicus Pharma Ltd. (the "Company").
Upon transfer, the Notes would be registered in the name of the new beneficial owner as follows:
Name: __________________________________________________________
Address: _____________________________________________________________________________________________________
_____________________________________________________________________________________________________________
Taxpayer ID Number: ________________________
The undersigned represents and warrants to you that:
1. We are an "accredited investor" (as defined in Rule 501(a) under the U.S. Securities Act of 1933, as amended (the "Securities Act")), purchasing for our own account or for the account of such an "accredited investor" and, if requested by the Company, we are furnishing herewith an Opinion of Counsel that such purchase is in compliance with the Securities Act, and we are acquiring the Notes not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we invest in or purchase securities similar to the Notes in the normal course of our business. We, and any accounts for which we are acting, are each able to bear the economic risk of our or its investment.
2. We understand that the Notes have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Notes to offer, sell or otherwise transfer such Notes prior to the date that is one year after the later of the date of original issue and the last date on which the Company was or any affiliate of the Company was the owner of such Notes (or any predecessor thereto) (the "Resale Restriction Termination Date") only (i) to the Company, (ii) in the United States to a person whom the seller reasonably believes is a (a) "qualified institutional buyer" in a transaction meeting the requirements of Rule 144A (b) or to an "accredited investor" as defined in Rule 501(a) under the Securities Act, (iii) outside the United States in a transaction complying with the provisions of Rule 904 under the Securities Act, (iv) pursuant to an exemption from registration under the Securities Act provided by Rule 144 (if available) or (v) pursuant to an effective registration statement under the Securities Act, in each of cases (i) through (v) subject to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. Each purchaser acknowledges that the Company and the Trustee reserve the right prior to the offer, sale or other transfer prior to the Resale Restriction Termination Date of the Notes pursuant to clause, (ii)(b), (iii) or (iv) above to require the delivery of an opinion of counsel, certifications or other information satisfactory to the Company and the Trustee.
TRANSFEREE ___________________________________________
By: _______________________________________________
Exhibit B
Form of
Converting Noteholder Letter of Representation
TO: MEDICUS PHARMA LTD. (THE "COMPANY")
AND TO: ODYSSEY TRUST COMPANY (THE "TRUSTEE")
RE: INDENTURE, DATED MAY 3, 2024, IN RESPECT OF 10.00% UNSECURED CONVERTIBLE NOTES DUE 2025 OF MEDICUS PHARMA LTD.
Ladies and Gentlemen:
This certificate is delivered in connection with a conversion (the "Conversion") of U.S.$[•] principal amount of the 10.00% Unsecured Convertible Notes due 2025 (the "Notes") of the Company, into [●] Common Shares (the "Shares") pursuant to Article 5 of the Indenture.
The undersigned represents and warrants to you that:
1. We are an "accredited investor" (as defined in Rule 501(a) under the U.S. Securities Act of 1933, as amended (the "Securities Act")), acquiring the Shares for our own account or for the account of such an "accredited investor" and we are acquiring the Shares not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Shares, and we invest in or purchase securities similar to the Shares in the normal course of our business. We, and any accounts for which we are acting, are each able to bear the economic risk of our or its investment.
2. We understand that the Shares have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are acquiring Shares to offer, sell or otherwise transfer such Shares prior to the date that is one year after the later of the date of original issue and the last date on which the Company was or any affiliate of the Company was the owner of such Shares (or any predecessor thereto) (the "Resale Restriction Termination Date") only (i) to the Company, (ii) in the United States to a person whom the seller reasonably believes is (a) a "qualified institutional buyer" in a transaction meeting the requirements of Rule 144A, or (b) to an "accredited investor" as defined in Rule 501(a) under the Securities Act, (iii) outside the United States in a transaction complying with the provisions of Rule 904 under the Securities Act, (iv) pursuant to an exemption from registration under the Securities Act provided by Rule 144 (if available) or (v) pursuant to an effective registration statement under the Securities Act, in each of cases (i) through (v) subject to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. Each purchaser acknowledges that the Company and the Trustee reserve the right prior to the offer, sale or other transfer prior to the Resale Restriction Termination Date of the Shares pursuant to clause (ii)(b), (iii) or (iv) above to require the delivery of an opinion of counsel, certifications or other information satisfactory to the Company and the Trustee.
3. We understand that any Shares issued upon conversion of Notes bearing a U.S. restrictive legend will also bear such U.S. restrictive legend which may impact the transferability of the Shares.
CONVERTING
NOTEHOLDER ________________________________________
By: _____________________________________________
Exhibit C
Form of Declaration for Removal of Legend
TO: MEDICUS PHARMA LTD. (THE "COMPANY")
AND TO: ODYSSEY TRUST COMPANY (THE "TRUSTEE")
AND TO: [REGISTRAR OF THE COMPANY]
The undersigned (A) acknowledges that the sale of the ___________________ (the "Securities") of the Company represented by certificate number _______________, to which this declaration relates, is being made in reliance on Rule 904 of Regulation S under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), and (B) certifies that (1) the undersigned is not an "affiliate" (as defined in Rule 405 under the U.S. Securities Act) of the Company (except solely by virtue of being an officer or director of the Company) or a "distributor", as defined in Regulation S, or an affiliate of a "distributor"; (2) the offer of such Securities was not made to a person in the United States and either (a) at the time the buy order was originated, the buyer was outside the United States, or the seller and any person acting on its behalf reasonably believe that the buyer was outside the United States, or (b) the transaction was executed on or through the facilities of the Toronto Stock Exchange, the TSX Venture Exchange, the Canadian Securities Exchange or another designated offshore securities market within the meaning of Rule 902(b) of Regulation S under the U.S. Securities Act, and neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States; (3) neither the seller nor any affiliate of the seller nor any person acting on their behalf has engaged in any directed selling efforts in connection with the offer and sale of such Securities; (4) the sale is bona fide and not for the purpose of "washing off" the resale restrictions imposed because the Securities are "restricted securities" (as such term is defined in Rule 144(a)(3) under the U.S. Securities Act); (5) the seller does not intend to replace the Securities sold in reliance on Rule 904 of Regulation S under the U.S. Securities Act with fungible unrestricted securities; and (6) the contemplated sale is not a transaction, or part of a series of transactions which, although in technical compliance with Regulation S, is part of a plan or a scheme to evade the registration provisions of the U.S. Securities Act. Unless otherwise specified, terms used herein have the meanings given to them by Regulation S under the U.S. Securities Act.
Dated ________________________________.
X
Signature of individual (if Holder is an individual)
X
Authorized signatory (if Holder is not an individual)
________________________________________________
Name of Holder (please print)
________________________________________________
Name of authorized signatory (please print)
________________________________________________
Official capacity of authorized signatory (please print)
Schedule 1
Cash Interest Payment Election Notice
TO: MEDICUS PHARMA LTD. (THE "COMPANY")
AND TO: ODYSSEY TRUST COMPANY (THE "TRUSTEE")
RE: INDENTURE, DATED MAY 3, 2024, IN RESPECT OF 10.00% UNSECURED CONVERTIBLE
NOTES DUE 2025 OF MEDICUS PHARMA LTD (THE "INDENTURE")
Note: All capitalized terms used herein have the meaning ascribed thereto in the Indenture, unless otherwise indicated.
Pursuant to Section 2.13 of the Indenture, the undersigned registered holder of 10.00% Unsecured Convertible Notes due 2025 hereby notifies you that the undersigned is irrevocably electing to receive [the accrued interest due on the Interest Payment Date which occurs on____________, 20_____] [the accrued and unpaid interest due upon the conversion of the Notes on or about ____________, 20_____] in cash.
| Dated: __________________________________ | |
| (Signature of Registered Holder) |
Schedule 2
Conversion Notice
TO: MEDICUS PHARMA LTD. (THE "COMPANY")
AND TO: ODYSSEY TRUST COMPANY (THE "TRUSTEE")
RE: INDENTURE, DATED MAY 3, 2024, IN RESPECT OF 10.00% UNSECURED CONVERTIBLE
NOTES DUE 2025 OF MEDICUS PHARMA LTD. (THE "INDENTURE")
Note: All capitalized terms used herein have the meaning ascribed thereto in the Indenture, unless otherwise indicated.
The undersigned registered holder of 10.00% Unsecured Convertible Notes due 2025 irrevocably elects to convert such Notes (or U.S.$[●] principal amount thereof) in accordance with the terms of the Indenture referred to in such Notes and tenders herewith the Notes, and, if applicable, directs that the Common Shares of the Company issuable upon a conversion be issued and delivered to the person indicated below. (If Common Shares are to be issued in the name of a person other than the holder, all requisite transfer taxes must be tendered by the undersigned).
| Dated: __________________________________ | |
| (Signature of Registered Holder) |
* If less than the full principal amount of the Notes, indicate in the space provided the principal amount (which must be U.S.$1,000 or integral multiples thereof).
NOTE: If Common Shares are to be issued in the name of a person other than the holder, the signature must be guaranteed by a chartered bank, a trust company or by a member of an acceptable Medallion Guarantee Program. The Guarantor must affix a stamp bearing the actual words:
"SIGNATURE GUARANTEED".
(Print name in which Common Shares are to be issued, delivered and registered) Name:
Name: ______________________________________________
_____________________________________________________
(Address)
_____________________________________________________
(City, Province and Postal Code)
Name of guarantor: _____________________________________________________
Authorized signature:____________________________________________________
EXCLUSIVE LICENSE AGREEMENT
This Agreement is made and entered into as of the 29th day of April, 2016 ("Effective Date"), by and between the University of Pittsburgh - Of the Commonwealth System of Higher Education, a non-profit corporation organized and existing under the laws of the Commonwealth of Pennsylvania, with an office at 200 Gardner Steel Conference Center, Thackeray and O'Hara Streets, Pittsburgh, Pennsylvania 15260 ("University"), and Skinject Inc., with its principal business at 4981 McKnight Road, Suite 101371, Pittsburgh, PA 15237 ("Licensee").
WHEREAS, University is the owner is the joint owner with Carnegie Mellon University ("CMU") by assignment from the inventors of certain Patent Rights, entitled "Dissolvable Microneedle Arrays for Effective Transdermal Delivery to Human Skin", "Tip-Loaded Microneedle Arrays For Transdermal Insertion", and "Microneedle Arrays For Cancer Treatment" (University Reference Numbers 02006 and 02688)," developed by Louis D. Falo, Jr. and Geza Erdos of University faculty and O. Burak Ozdoganlar of CMU of University faculty, and University has the right to grant licenses under such Patent Rights;
WHEREAS, University has the sole right to grant licenses under such Patent Rights pursuant to Inter-Institutional Agreements with CMU;
WHEREAS, University desires to have the Patent Rights utilized in the public interest;
WHEREAS, Licensee has represented to University, to induce University to enter into this Agreement, that Licensee is experienced in the development, production, manufacture, marketing and sale of products and/or the use of similar products to the Licensed Technology and that Licensee shall commit itself to a thorough, vigorous and diligent program of exploiting the Patent Rights so that public utilization results therefrom; and
WHEREAS, Licensee desires to obtain a license under the Patent Rights upon the terms and conditions hereinafter set forth,
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto, intending to be legally bound, agree as follows:
ARTICLE 1 - DEFINITIONS
For purposes of this Agreement, the following words and phrases shall have the following meanings:
1.1 "Affiliate" shall mean, with respect to University, any clinical or research entity that is operated or managed as a facility under the UPMC Health System, whether or not owned by University, and with respect to Licensee, shall mean all entities at least fifty percent (50%) owned or controlled by Licensee.
1.2 "Field" shall mean delivery of drugs and bioactive agents, such as, but not limited to doxorubicin, for the treatment of cancers and pre-cancerous lesions, but specifically excluding the treatment of in-transit melanoma. Such treatments may include, but are not limited to, the use of agents that stimulate an immune response, which is different from vaccines, where an immune response is provoked by presentation of an antigen.
1.3 "Future Intellectual Property Rights" shall mean the specific Know-How encompassed within the IND listed in Exhibit B and/or deriving from studies conducted under such IND which the University owns or controls before or after the Effective Date.
1.4 "Licensee" shall mean Skinject, Inc. and all entities at least fifty percent (50%) owned or controlled by Skinject, Inc.
1.5 "Licensed Technology" shall mean any product or part thereof or service which is:
(a) Covered in whole or in part by an issued, unexpired or pending claim contained in the Patent Rights in the country in which any such product or part thereof is made, used or sold or in which any such service is used or sold;
(b) Manufactured by using a process or is employed to practice a process which is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Patent Rights in the country in which any such process that is included in Licensed Technology is used or in which such product or part thereof or service is used or sold; or
(c) Manufactured by or otherwise makes use of Know-How.
1.6 "Know-How" shall mean University owned or controlled technical information, experimental results, data, know-how, processes, procedures, compositions, devices, methods, formulas, protocols, techniques, designs, drawings or other information as described in Exhibit B to this Agreement: (a) existing as of the Effective Date, (b) useful or necessary to make, have made, use or sell the Licensed Technology in the Field; and ( c) information made available by University after the Effective Date to support a regulatory filing or submission relating to the Patent Rights, as set forth in 2.2, below.
1.7 "Net Sales" shall mean Licensee's and any sublicensee's invoice price for products or services included in Licensed Technology and produced hereunder less the sum of the following:
(a) Actual cost of freight charges or freight absorption, separately stated in such invoice;
(b) Actual trade, quantity or cash discounts allowed, if any; and
(c) Sales taxes, tariff duties and/or use taxes separately stated on each invoice.
1.8 "Non-Commercial Education and Research Purposes" shall mean use of Patent Rights (including distribution of biological materials covered by the Patent Rights) in the Field for academic research or other not-for-profit scholarly purposes which are undertaken at a nonprofit or governmental institution that does not use the Patent Rights in the production or manufacture of products for sale or the performance of services for a fee.
1.9 "Non-Royalty Sublicense Income" shall mean execution fees, maintenance fees, milestone fees and all other non-royalty payments received by Licensee from its sublicensees pursuant to any sublicense granted pursuant to Section 2.4 hereunder.
1.10 "Patent Rights" shall mean University and CMU intellectual property described below and assigned to University and CMU:
(a) The United States and foreign patents and/or patent applications listed in Exhibit A;
(b) United States and foreign patents issued from the applications listed in Exhibit A and from divisionals and continuations of these applications; and
(c) Claims of U.S. and foreign continuation and divisional applications, and of the resulting patents, which are directed to subject matter specifically described in the U.S. and foreign applications listed in Exhibit A.
1.11 "Territory" shall mean worldwide.
1.12 "University Intellectual Property" shall mean the Patent Rights, Know-How, Future Intellectual Property, and Licensed Technology, collectively.
ARTICLE 2 - GRANT
2.1 Subject to the terms and conditions of this Agreement, University hereby grants to Licensee, to the extent it may lawfully do so, the right and exclusive license in the Territory to make, have made, use and sell the Licensed Technology in the Field and to practice under the Patent Rights in the Field for the Term set forth in Article 11 below. University and CMU reserve the royalty-free, nonexclusive right to practice under the Patent Rights and to use the Licensed Technology for Non-Commercial Education and Research Purposes.
2.2 Subject to the terms and conditions of this Agreement, University hereby grants to Licensee, to the extent it may lawfully do so, the right and non-exclusive license in the Territory to practice under the Know-How in the Field for the Term set forth in Article 11 below. Additionally, if at any time following the Effective Date, Licensee, FDA, or similar governmental authority requests that the University provide or make available any additional data or information directly relating to Licensed Technology which was in existence as of the Effective Date and was owned or controlled by University as of the Effective Date and continues to be owned or controlled by the University at the time of the request in order to supplement or support a regulatory filing or submission containing Licensed Technology, then University shall exercise its reasonable best efforts to do so to the extent permitted by law or any conflicting obligations.
2.3 The license granted hereby is subject to the rights of the United States government, if any, as set forth in 35 U.S.C. §200, et seq. Pursuant to this law, the United States government may have acquired a nonexclusive, nontransferable, paid up license to practice or have practiced for or on behalf of the United States the inventions described in the Patent Rights throughout the world. Pursuant to 35 U.S.C. §200, et seq. Licensed Technology produced for sale in the United States shall be substantially manufactured in the United States (unless a waiver under 35 U.S.C. §204 is granted by the appropriate United States government agencies).
2.4 Licensee shall have the right to enter into sublicensing arrangements for the rights, privileges and licenses granted hereunder upon prior written approval of each sublicensee by University, except that sublicensees shall not have rights to sublicense. Such sublicense agreements shall include a royalty rate upon sublicense Net Sales in an amount at least equal to the rate set forth in Section 5.l(c). Rights of any sublicensee shall terminate upon termination of this Agreement.
2.5 Licensee agrees that any sublicense granted by it shall provide that the obligations to University of Articles 2, 8, 9, 10, 11, and 15 of this Agreement shall be binding upon the sublicensee as if it were party to this Agreement. Each sublicense granted by Licensee pursuant to this Agreement shall include an audit right by University of sub licensee of the same scope as provided in Section 6.2 with respect to Licensee.
2.6 Licensee agrees to forward to University a copy of any and all sublicense agreements promptly upon execution thereof, but in no event later than thirty (30) days after each such sublicense agreement has been executed by both parties thereto.
2.7 To the extent not prohibited by law, regulation, or third party obligations, University hereby grants to Licensee an option to enter into a non-exclusive license in the Field to Future Intellectual Property Rights upon such terms and conditions as the parties may agree and which contain similar standard terms and conditions as contained hereunder. Such option may be exercised by Licensee by providing a written notice to University after the Effective Date until sixty (60) days after University informs Licensee that the clinical trial under the IND listed in Exhibit B is closed and the final report for such clinical trial is completed ("Option Exercise"). Upon University's timely receipt of such written notice from Licensee, the parties shall negotiate in good faith, which negotiations shall commence no later than sixty (60) days following Option Exercise and shall endeavor to enter into a definitive royalty-bearing license agreement as soon thereafter as reasonably possible. In furtherance of the foregoing, University agrees to disclose from time to time at University's sole discretion to Licensee Future Intellectual Property Rights until expiration of the option.
2.8 The license granted hereunder shall not be construed to confer any rights upon Licensee by implication, estoppel or otherwise as to any intellectual property not specifically set forth in Exhibit A hereof.
ARTICLE 3 - LETTER OF CROSS REFERENCE
3.1 The parties understand and agree that Louis D. Falo, Jr. is the holder of the Investigational New Drug ("IND") application set forth and described in Exhibit B, attached. The University shall endeavor to obtain a letter of cross-reference to the IND described in Exhibit B to be executed by Louis D. Falo, Jr. for Licensee's use for clinical evaluation of Licensed Technology and for use with any regulatory agency Licensee deems appropriate. University shall endeavor to transfer a letter of cross reference signed by Louis D. Falo Jr. to Licensee by sending the original letter to Licensee within thirty (30) days after receipt of written request from Licensee for such a letter.
ARTICLE 4 - DUE DILIGENCE
4.1 Licensee shall use its best efforts to bring the Licensed Technology to market as soon as practicable, consistent with sound and reasonable business practice and judgment, and to continue active, diligent marketing efforts for the Licensed Technology throughout the Term of this Agreement.
4.2 In addition, Licensee shall adhere to each of the following milestones:
(a) Establish validated analytical methods relating to Licensed Technology by December 31, 2016;
(b) Submit IND application to FDA relating to Licensed Technology by March 31, 2017;
(c) Raise$ 2.5 million of capital from investors or strategic partners (or combination thereof) in support of development or commercializing the Licensed Technology by June 30, 2017;
(d) Submit a completed report to Food & Drug Administration of a Phase II trial of Licensed Technology or foreign equivalent by June 30, 2019;
(e) Submit a New Drug Application or foreign equivalent for a product covered under Licensed Technology by June 30, 2022; and
(f) First commercial sale of Licensed Technology within five (5) years of submission of a New Drug Application or foreign equivalent for a product covered under Licensed Technology.
4.3 Licensee shall notify University in writing of the achievement of each milestone within thirty (30) days upon the achievement of the respective milestone.
4.4 Licensee's failure to perform in accordance with Section 4.1 or to fulfill on a timely basis any one of the milestones set forth in Section 4.2 hereof shall be grounds for University to terminate this Agreement and upon termination all rights and interest to the Licensed Technology, Patent Rights, Know-how, and Future Intellectual Property shall revert to University. Notwithstanding the foregoing, for a single time, if the milestone defined in paragraph 4.2 (f) above has not been achieved within the required timeframe, through no fault of Licensee, and following best efforts of Licensee to meet the milestone, Licensee shall be deemed to have fulfilled the milestone requirement if Licensee makes a payment of Fifty Thousand Dollars ($50,000). In such case, in addition to the payment required, Licensee and University shall negotiate in good faith a new date for attainment of such missed milestone, If Licensee fails to meet the revised milestone date, University may terminate the license agreement and upon termination all rights and interest to the Licensed Technology shall revert to University.
ARTICLE 5 - LICENSE CONSIDERATION
5.1 In consideration of the rights, privileges and license granted by University hereunder, Licensee shall pay royalties and other monetary consideration as follows:
(a) Initial license fee, nonrefundable and noncreditable against royalties, of Twenty Five Thousand Dollars ($25,000) due immediately and payable within ten (10) business days from the Effective Date of this Agreement;
(b) Annual maintenance fees, non-refundable, non-creditable, and not to be prorated against any other payment or royalties due, in the amount of Five Thousand Dollars ($5,000) until the first Net Sales occurs;
(c) Royalties in an amount equal to three percent (3.0%) of Net Sales due immediately and payable each calendar quarter;
(d) Beginning with the first Net Sales, a minimum annual royalty in the amount of Fifty Thousand Dollars ($50,000) per calendar year, but only to the extent such minimum royalty is greater than the aggregate annual royalty computed in accordance with Section 5.1(c) above;
(e) A share of Non-Royalty Sublicense Income of fifteen percent (15.0%); and
(f) One Hundred and Twenty Five Thousand (125,000) Shares of Licensee's Capital Stock as further described in the Stock Issuance Agreement attached and incorporated hereto as Exhibit E, which is equal to Two Percent (2.0%) of the issued and outstanding Capital Stock of Licensee ("Common Equity") on a fully diluted basis as of the Effective Date, which assumes the exercise, conversion and exchange of all outstanding securities of Licensee for or into Shares of Common Equity.
5.2 All payments pursuant to this Agreement shall be made by check or by wire transfer in United States Dollars without deduction or exchange, collection or other charges and directed to the address, or in the case of wire transfer, to the bank set forth in Article 11. Annual maintenance fees pursuant to Section 5.1(b) hereof shall be paid on the anniversary of the Effective Date of the calendar year in which they are due. Royalty payments pursuant to Section 5.1(c) hereof shall be paid within thirty (30) days after each March 31, June 30, September 30 and December 31. Minimum annual royalties pursuant to Section 5.1(d) shall be paid by January 30 following the calendar year in which they are due. Non-Royalty Sublicense Income payments pursuant to Section 5.1(e) hereof shall by paid within thirty (30) days after receipt of payment by Licensee from sublicense.
5.3 Taxes imposed by any foreign governmental agency on any payment to be made to University by Licensee shall be paid by Licensee without deduction from any payment due to University hereunder.
5.4 The balance of any payments pursuant to this Agreement, including those specified in Section 7.2, which are overdue shall bear interest, compounded monthly, calculated from the due date until payment is received at the rate of eight percent (8%) per annum. Payment of such interest by Licensee shall not negate or waive the right of University to seek any other remedy, legal or equitable, to which it may be entitled because of the delinquency of any payment, including, but not limited to, termination of this Agreement as set forth in Article 11. Licensee shall reimburse University for any costs and expenses incurred in connection with collecting any overdue balance of payments with respect to Licensee's payment and reimbursement obligations under this Agreement, including the costs of engaging counsel or a collection agency for such purpose.
5.5 Licensee shall sell products and/or services resulting from Licensed Technology to University and its Affiliates upon request at such price(s) and on such terms and conditions as such products and/or processes are made available to Licensee's most favored customer.
ARTICLE 6 - REPORTS AND AUDIT
6.1 Within thirty (30) days after each March 31, June 30, September 30 and December 31 of each year during the term of this Agreement beginning in the year of the first commercial sale of Licensed Technology, Licensee shall deliver to University true, accurate and detailed reports of the following information in a form as illustrated in Exhibit C:
(a) Number of Licensed Technology products manufactured and sold by Licensee and all sublicensees;
(b) Total billings for all such products;
(c) Accounting for all Licensed Technology services used or sold by Licensee and all sub licensees;
(d) Deductions set forth in Section 1.7;
(e) Total royalties due;
(f) Name and addresses of sub licensees; and
(g) Total Non-Royalty Sublicense Income received during such calendar quarter and total amount of payment due pursuant to Section 5.1(e).
6.2 Licensee shall keep full, true and accurate books of account, in accordance with generally accepted accounting principles, containing all information that may be necessary for the purpose of showing the amounts payable to University hereunder. Such books of account shall be kept at Licensee's principal place of business. Such books of account shall be open at all reasonable times for three (3) years following the end of the calendar year to which they pertain, and for three (3) years after the expiration or termination of this Agreement, for inspection by University or its agents for the purpose of verifying Licensee's royalty statement or compliance in other respects with this Agreement. The fees and expenses of University's representatives shall be borne by University; however, if an error of more than five percent (5%) of the total payments due or owing for any year is discovered, then Licensee shall bear University's fees and expenses.
6.3 No later than sixty ( 60) days after December 31 of each calendar year during the term of this Agreement, Licensee shall provide to University a written annual progress report, as illustrated in Exhibit D, describing Licensee's progress on research and development, regulatory approvals, manufacturing, sublicensing, marketing and sales during the preceding twelve-month period ending December 31,
6.4 Notwithstanding the above, University shall have the right, on an annual basis during the term of this Agreement and for three (3) years after the expiration or termination of this Agreement, to inspect technical and other information from Licensee sufficient to evidence whether and to what extent Licensee is: (a) practicing the Patent Rights and/or other University property licensed hereunder; and (b) meeting its diligence obligations under Article 3, above.
6.5 Licensee shall report to the University the date of the first commercial sale of a Licensed Technology within sixty (60) days of occurrence in each country.
ARTICLE 7 - PATENT PROSECUTION
7.1 University has or shall apply for, seek prompt issuance of and maintain during the term of this Agreement the Patent Rights in the United States and in such foreign countries as may be designated by Licensee in a written notice to University within a reasonable time in advance of the required foreign filing dates. Licensee shall have the opportunity to advise and cooperate with University in the prosecution, filing and maintenance of such patents using its own patent counsel. Licensee shall notify University immediately if, at any time during the term of this Agreement, Licensee or any of its sub licensees does not qualify as a "small entity" as provided by the United States Patent and Trademark Office.
7.2 All fees and costs, including attorneys' fees, relating to the filing, prosecution, maintenance, and post grant proceedings relating to the Patent Rights shall be the responsibility of Licensee, whether incurred prior to or after the Effective Date. Such fees and costs incurred by University prior to the Effective Date in the amount of Ninety Thousand Three Hundred Five Dollars and Eighty Six Cents ($90,305.86) ("Pre-agreement Expenses") shall be due immediately and payable quarterly by Licensee to University in twelve (12) equal quarterly installments in the amount of Seven Thousand Five Hundred Twenty Five Dollars and Forty Eight Cents ($7,525.48), with the first installment due and payable three months from the Effective Date. Fees and costs incurred after the Effective Date, or fees and costs incurred before the Effective Date which are not included in the Pre-Agreement Expenses stated above, shall be paid by Licensee within thirty (30) days after receipt of University's invoice therefor. Additionally, Licensee shall be liable to University for all of University's out-of-pocket filing, prosecution, and maintenance costs (including all attorneys' fees and costs), for any and all patent prosecution and maintenance actions that will be taken by patent counsel after the term of this Agreement but in response to any instructions that were sent during the term of this Agreement from University to patent counsel relating to the Patent Rights. Payments pursuant to this Section 7.2 are not creditable against royalties or any other payment due to University under this Agreement.
ARTICLE 8 - INFRINGEMENT ACTIONS
8.1 Licensee shall inform University promptly in writing of any alleged infringement of the Patent Rights by a third party and of any available evidence thereof.
8.2 During the term of this Agreement, Licensee shall have the right, but shall not be obligated, to prosecute at its own expense and using its own patent counsel all infringements of the Patent Rights in the Field and in the Territory if Licensee has notified University in writing of its intent to prosecute; provided, however, that such right to bring such an infringement action shall remain in effect only for so long as the license granted herein remains exclusive. In furtherance of such right, University hereby agrees that Licensee may include University as a party plaintiff in any such suit, without expense to University. The total cost of any such infringement action commenced or defended solely by Licensee shall be borne by Licensee and University shall receive a percentage of any recovery or damages for past infringement derived therefrom which is equal to the percentage royalty due University under Article 5. Licensee shall indemnify University against any order for costs that may be made against University in such proceedings.
8.3 If within six (6) months after having been notified of any alleged infringement, Licensee shall have been unsuccessful in persuading the alleged infringer to desist and shall not have brought and shall not be diligently prosecuting an infringement action, or if Licensee shall notify University at any time prior thereto of its intention not to bring suit against any alleged infringer, then, and in those events only, University shall have the right, but shall not be obligated, to prosecute at its own expense any infringement of the Patent Rights, and University may, for such purposes, use the name of Licensee as party plaintiff. University shall bear all costs and expenses of any such suit. In any settlement or other conclusion, by litigation or otherwise, University shall keep any recovery or damages for past infringement derived therefrom.
8.4 In the event that a declaratory judgment action alleging invalidity or infringement of any of the Patent Rights shall be brought against University, Licensee, at its option, shall have the right, within thirty (30) days after commencement of such action, to intervene and take over the sole defense of the action at its own expense.
8.5 In any infringement suit either party may institute to enforce the Patent Rights pursuant to this Agreement, the other party shall, at the request and expense of the party initiating such suit, cooperate in all respects and, to the extent possible, have its employees testify when requested and make available relevant records, information, samples, specimens, and other evidence upon request.
ARTICLE 9 - INDEMNIFICATION/INSURANCE/LIMITATION OF LIABILITY
9.1 Licensee shall at all times during the term of this Agreement and thereafter indemnify, defend and hold University and CMU and their trustees, officers, faculty members, employees and affiliates ("Indemnified Parties") harmless against all claims anti expenses, including legal expenses and reasonable attorneys' fees, arising out of the death of or injury to any person or persons or out of any damage to property or the environment, and against any other claim, proceeding, demand, expense and liability of any kind whatsoever resulting from: (i) the production, manufacture, sale, use, lease, consumption or advertisement of the Licensed Technology, (ii) the practice by Licensee or sublicensee of the Patent Rights; or (iii) arising from or relating to this License Agreement. Licensee shall provide this defense and indemnity whether or not any Indemnified Party, either jointly or severally, is named as a party defendant and whether or not any Indemnified Party is alleged to be negligent or otherwise responsible for any injuries to person or property. The obligation of Licensee to defend and indemnify as set forth herein shall survive termination of this Agreement and shall not be limited by any other limitation of liability elsewhere in this Agreement.
9.2 Licensee shall obtain and carry in full force and effect liability insurance which shall protect Licensee, University, and CMU in regard to events covered by Section 8.1 above, as provided below:
| COVERAGE | LIMITS | ||
| (a) | Commercial General Liability, including, but not limited to, Products, Contractual, Fire, Legal and Personal Injury | $1,000,000 Combined Single Limits for Bodily Injury and Property Damage | |
| (b) | Products Liability | $5,000,000* |
*Required prior to Licensee's or sublicensee's first use of Licensed Technology on a human patient.
University and CMU are to be named as additional insured with respect to insurance policies identified in Sections 9.2(a) and 9.2(b) above. Certificates of Commercial General Liability insurance evidencing the coverage required above shall be filed with University's Office of Technology Management, 200 Gardner Steel Conference Center, Thackeray & O'Hara Streets, Pittsburgh, PA 15260 ("OTM"), no later than fifteen (15) days after execution of this Agreement and on or before July 1 of each subsequent year during the Term of this Agreement. Certificates evidencing Products Liability coverage of $5,000,000 shall be filed with OTM within thirty (30) days in advance of such use of Licensed Technology in a human. Such certificates shall provide that the insurer will give University not less than thirty (30) days advance written notice of any material changes in or cancellation of coverage.
9.3 UNIVERSITY AND CMU, AND THEIR AGENTS AND/OR EMPLOYEES, MAKE NO REPRESENTATION AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR PENDING. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION OR WARRANTY THAT THE PRACTICE BY LICENSEE OF THE LICENSE GRANTED HEREUNDER SHALL NOT INFRINGE THE PATENT RIGHTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY. UNIVERSITY ADDITIONALLY DISCLAIMS ALL OBLIGATIONS AND LIABILITIES ON THE PART OF UNIVERSITY, ITS AGENTS AND/OR EMPLOYEES FOR DAMAGES, INCLUDING, BUT NOT LIMITED TO, DIRECT, INDIRECT, SPECIAL AND CONSEQUENTIAL DAMAGES, ATTORNEYS' AND EXPERTS' FEES, AND COURT COSTS (EVEN IF UNIVERSITY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, FEES OR COSTS), ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, INCLUDING THE MANUFACTURE, USE OR SALE OF THE PRODUCT(S) AND SERVICE(S) LICENSED UNDER THIS AGREEMENT. LICENSEE ASSUMES ALL RESPONSIBILITY AND LIABILITY FOR LOSS OR DAMAGE CAUSED BY A PRODUCT THAT IS MANUFACTURED, USED OR SOLD BY LICENSEE (INCLUDING SUBLICENSEE SALES) WHICH IS LICENSED TECHNOLOGY HEREUNDER.
ARTICLE 10 - ASSIGNMENT
10.1 This Agreement is not assignable without the prior written consent of University and any attempt to do so shall be null and void. Notwithstanding the foregoing, Licensee may assign this Agreement and the license granted hereby to the transferee of Licensee's business or of that part of Licensee's business to which the License grantee under this Agreement relates, whether by merger, consolidation, asset sale, or the sale of a controlling interest in the Licensee's outstanding capital stock; provided, however, that such transferee agrees in writing in advance of such assignment to be bound by all terms and conditions of this Agreement and University is promptly provided with a copy of the assumption agreement. For the avoidance of doubt, an assignment made under this Section 10 shall not be considered a sub license under Section 2.4.
ARTICLE 11 - TERM AND TERMINATION
11.1 Term. The term of this Agreement shall be the expiration of the last claim of the Patent Rights unless terminated earlier pursuant to Section 11.2 and 11.3 below.
11.2 University shall have the right to terminate this Agreement, upon written notice, if:
(a) Licensee defaults in the performance of any of the obligations herein contained and such default has not been cured within thirty (30) days after receiving written notice thereof from University; or
(b) Licensee ceases to carry out its business, becomes bankrupt or insolvent, applies for or consents to the appointment of a trustee, receiver or liquidator of its assets or seeks relief under any law for the aid of debtors.
11.3 Licensee may terminate this Agreement upon six (6) months prior written notice to University and upon payment of all amounts accrued or due to the University through the effective date of termination, including patent cost reimbursement pursuant to Section 7 .2 hereof.
11.4 Upon termination of this Agreement, neither party shall be released from any obligation that accrued prior to the effective date of such termination. Licensee and any sublicensee may, however, after the effective date of such termination, sell all Licensed Technology which Licensee produced prior to the effective date of such termination, provided that Licensee shall pay to University the royalties thereon as required by Article 5 hereof and submit the reports required by Article 6 hereof.
ARTICLE 12 - NOTICES
12.1 Any notice or communication pursuant to this Agreement shall be sufficiently made or given if sent by certified or registered mail, postage prepaid, or by overnight courier, with proof of delivery by receipt, addressed to the address below or as either party shall designate by written notice to the other party.
In the case of University:
Associate Vice Chancellor for Technology Management and
Commercialization
Office of Technology Management
University of Pittsburgh
200 Gardner Steel Conference Center
Thackerny & O'Hara Streets
Pittsburgh, PA 15260
In the case of Licensee:
Chief Executive Officer
Skinject, Inc.
4981 McKnight Road
Suite 101371
Pittsburgh, PA 15237
12.2 Any payments to University hereunder by wire transfer shall be directed as follows:
The Licensee shall be responsible for all applicable fees and costs relating to any wire transfer, to include translation fees, without any deduction of such fees from amounts due to the University pursuant to this Agreement.
12.3 All invoices to Licensee generated by University under this Agreement will be sent electronically, via e-mail, in PDF format, unless instructed otherwise by Licensee in writing.
ARTICLE 13 - AMENDMENT, MODIFICATION
13.1 This Agreement may not be amended or modified except by the execution of a written instrument signed by the University's Executive Vice Chancellor, or its successor and/or designated University employee having signatory authority, and Licensee's Chief Executive Officer. In connection with any agreed upon amendment or modification of this Agreement pursuant to this Article 13, Licensee shall be required to pay an Amendment Fee.
ARTICLE 14 - MISCELLANEOUS
14.1 This Agreement shall be construed and interpreted in accordance with the laws of the Commonwealth of Pennsylvania. The forum for any action relating to this Agreement, including those brought against individuals such as University employees or agents, shall be the Courts of Allegheny County, Pennsylvania, or, if in a federal proceeding, the United States District Court for the Western District of Pennsylvania.
14.2 The parties acknowledge that this Agreement sets forth the entire understanding and intentions of the parties hereto as to the subject matter hereof and supersedes all previous representations, negotiations, or understandings between the parties and/or its employees or agents, whether written or oral, regarding the subject matter of this Agreement.
14.3 The parties acknowledge that they consulted, or had the opportunity to investigate and/or consult, with their legal counsel and/or other advisors with respect to the University Intellectual Property and the terms of this Agreement.
14.4 The parties agree that this Agreement constitutes an arm's length business transaction and does not create a fiduciary relationship.
14.5 Nothing contained in this Agreement shall be construed as conferring upon either party any right to use in advertising, publicity or other promotional activities any name, trade name, trademark, or other designation of the other party, including any contraction, abbreviation, or simulation of any of the foregoing. Without the express written approval of the other party, neither party shall use any designation of the other party in any promotional activity associated with this Agreement or the Licensed Technology. Neither party shall issue any press release or make any public statement in regard to this Agreement without the prior written approval of the other party.
14.6 Licensee agrees that with respect to the performance of this Agreement or the practice of the rights granted by the University hereunder, it shall comply with any and all applicable United States export control laws and regulations, as well as any and all embargoes and/or other restrictions imposed by the Treasury Department's Office of Foreign Asset Controls.
14.7 If Licensee challenges the validity or enforceability of University's Intellectual Property anywhere in the world, the Licensee shall continue to pay to University all royalties and other financial obligations required under this Agreement, to include patent costs and fees. If any such challenge is unsuccessful by Licensee, the royalty rates and any non-royalty sublicense income rate set forth in Article 5.1 above shall automatically double in value, to include all royalty minimums and floors; and Licensee shall reimburse the University for all fees and costs associated with defending such action, including but not limited to attorneys fees and expert fees. The effective date of such increase in royalty rates shall be the date of the first court order or date of issuance of a re-examination certificate ( or foreign equivalents thereof) declaring any claim of the Patent Rights or other University Intellectual Property as valid or enforceable. Within thirty (30) days prior to filing any such challenge, Licensee shall provide the University with written notice of its intent to make such challenge detailing its allegation(s) along with specific and detailed facts supporting those allegations of invalidity or unenforceability of University's Intellectual Property.
14.8 If one or more of the provisions of this Agreement shall be held invalid, illegal or unenforceable, the remaining provisions shall not in any way be affected or impaired thereby. In the event any provision is held illegal or unenforceable, the parties shall use reasonable efforts to substitute a valid, legal and enforceable provision which, insofar as is practical, implements purposes of the provision held invalid, illegal or unenforceable.
14.9 Failure at any time to require performance of any of the provisions herein shall not waive or diminish a party's right thereafter to demand compliance therewith or with any other provision. Waiver of any default shall not waive any other default. A party shall not be deemed to have waived any rights hereunder unless such waiver is in writing and signed by a duly authorized officer of the party making such waiver.
14.10 Licensee acknowledges that University is free to publish the results of the research activities of its faculty, staff and students, even though such publication may involve the Patent Rights or Licensed Technology. University agrees to submit to Licensee any proposed publication or presentation regarding the subject matter specifically described in the Patent Rights for prior review by Licensee at least thirty (30) days before its submittal for publication or its presentation. Licensee may, within thirty (30) days after receipt of such proposed publication, request that such proposed publication be delayed not more than sixty (60) days in order to allow for protection of intellectual property rights.
14.11 Licensee shall mark all Licensed Technology with applicable U.S. and foreign patent numbers in accordance with the applicable laws of the countries in which Licensed Technology is used or sold.
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IN WITNESS WHEREOF, the parties represent and warrant that each has the authority to bind the party to this Agreement and have set their hands and seals as of the date set forth on the first page hereof.
UNIVERSITY OF PITTSBURGH - OF THE COMMONWEALTH SYSTEM OF HIGHER EDUCATION
By: /s/ Marc S. Malandro
Marc S. Malandro, Ph.D., CLP, RTTP
Associate Vice Chancellor for
Technology Management and
Commercialization
SKINJECT, INC.
By: /s/ James M. Nolan
Name: James M. Nolan
Title: Chief Executive Officer
Reviewed and approved by OGC University of Pittsburgh
By: /s/
Date: ______________________________________
EXHIBIT A
Redacted (confidential information)
FIRST AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT
This FIRST AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT (this "First Amendment") is made as of February 26, 2020 , by and between the University of Pittsburgh - Of the Commonwealth System of Higher Education, a non-profit corporation organized and existing under the laws of the Commonwealth of Pennsylvania ("University") and SkinJect Inc. ("Licensee").
WHEREAS, University and Licensee have previously entered into an Exclusive License Agreement with effective date of April 29, 2016 (the "Agreement"); and
WHEREAS, the parties wish to amend the Agreement as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and for good and valuable consideration, the receipt and sufficiency which are hereby acknowledged, the parties hereby agree as follows:
1. Amendment Fee. The Licensee shall pay University an Amendment Fee in the amount of $5,000.00, which shall be due immediately upon Licensee's execution of this Amendment.
2. Amendments to Exclusive License Agreement.
(a) Section 4.2 of the Agreement is hereby deleted and replaced in its entirety as follows:
"4.2 In addition, Licensee shall adhere to each of the following milestones:
(a) Submit a completed report to Food & Drug Administration of a Phase II trial of Licensed Technology or foreign equivalent by September 30, 2021;
(b) Submit a New Drug Application or foreign equivalent for a product covered under Licensed Technology by September 30, 2024; and
(c) First commercial sale of Licensed Technology within five (5) years of submission of a New Drug Application or foreign equivalent for a product covered under Licensed Technology."
(b) Section 4.4 of the Agreement is hereby deleted and replaced in its entirety as follows:
"4.4 Licensee's failure to perform in accordance with Section 4.1 or to fulfill on a timely basis any one of the milestones set forth in Section 4.2 hereof shall be grounds for University to terminate this Agreement and upon termination all rights and interest to the Licensed Technology, Patent Rights, Know- how, and Future Intellectual Property shall revert to University. Notwithstanding the foregoing, for a single time, if the milestone defined in paragraph 4.2 (c) above has not been achieved within the required timeframe, through no fault of Licensee, and following best efforts of Licensee to meet the milestone, Licensee shall be deemed to have fulfilled the milestone requirement if Licensee makes a payment of Fifty Thousand Dollars ($50,000). In such case, in addition to the payment required, Licensee and University shall negotiate in good faith a new date for attainment of such missed milestone. If Licensee fails to meet the revised milestone date, University may terminate the license agreement and upon termination all rights and interest to the Licensed Technology shall revert to University."
3. Miscellaneous.
(a) Except as specifically amended above, all terms of the Agreement shall remain in full force and effect. To the extent that there are any inconsistencies between the terms of the Agreement and the terms of this First Amendment, the terms of this First Amendment shall prevail in effect.
(b) The parties acknowledge that this First Amendment and the Agreement set forth the entire understanding and intentions of the parties hereto as to the subject matter hereof and supersedes all previous understandings between the parties, written or oral, regarding such subject matter.
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IN WITNESS WHEREOF, the parties represent and warrant that each has the authority to bind the party to this Agreement and hereto have executed this First Amendment as of the date first written above.
| UNIVERSITY OF PITTSBURGH - OF THE COMMONWEALTH SYSTEM OF HIGHER EDUCATION |
||
| By | /s/ Evan Facher | |
| Evan Facher, Ph.D., MBA Director, Innovation Institute Vice Chancellor for Innovation and Entrepreneurship | ||
| LICENSEE | ||
| By | /s/ Michael J. Fare | |
| Name: | Michael J. Fare | |
| Title: | Chief Operating Officer | |
DocuSign Envelope ID: 3C715F3B-4E71-42B3-A040-FF55DA7C45B2
SECOND AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT
This SECOND AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT (this "First Amendment") is made as of April 23, 2024, by and between the University of Pittsburgh - Of the Commonwealth System of Higher Education, a non-profit corporation organized and existing under the laws of the Commonwealth of Pennsylvania ("University") and Medicus Pharma, Ltd. ("Licensee").
WHEREAS, University and Licensee have previously entered into an Exclusive License Agreement with effective date of April 29, 2016 (the "Agreement");
WHEREAS, University and Licensee have previously entered into a First Amendment to the Exclusive License Agreement with effective date of February 26, 2020 (the "First Amendment"); AND
WHEREAS the parties wish to further amend the Agreement as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and for good and valuable consideration, the receipt and sufficiency which are hereby acknowledged, the parties hereby agree as follows:
1. Amendment Fee. The Licensee shall pay the University an Amendment Fee in the amount of Five Thousand Dollars ($5,000), which shall be due immediately upon Licensee's execution of this Amendment.
2. Amendments to Exclusive License Agreement.
Section 4.2 of the Agreement is hereby deleted and replaced in its entirety as follows:
"4.2 In addition, Licensee shall adhere to each of the following milestones:
(a) Submit a completed report to Food & Drug Administration of a Phase II trial of Licensed Technology or foreign equivalent by September 30, 2021.
(b) Submit a New Drug Application or foreign equivalent for a product covered under Licensed Technology by September 30, 2026; and
(c) First commercial sale of Licensed Technology within four (4) years of submission of a New Drug Application or foreign equivalent for a product covered under Licensed Technology."
3. Miscellaneous.
(a) Except as specifically amended above, all terms of the Agreement shall remain in full force and effect. To the extent that there are any inconsistencies between the terms of the Agreement and the terms of this Second Amendment, the terms of this First Amendment shall prevail in effect.
DocuSign Envelope ID: 3C715F3B-4E71-42B3-A040-FF55DA7C45B2
(b) The parties acknowledge that this Second Amendment and the Agreement set forth the entire understanding and intentions of the parties hereto as to the subject matter hereof and supersedes all previous understandings between the parties, written or oral, regarding such subject matter.
[Remainder of this page is left intentionally blank.]
DocuSign Envelope ID: 3C715F3B-4E71-42B3-A040-FF55DA7C45B2
IN WITNESS WHEREOF, the parties represent and warrant that each has the authority to bind the party to this Agreement and hereto have executed this Second Amendment as of the date first written above.
| UNIVERSITY OF PITTSBURGH – OF THE COMMONWEALTH SYSTEM OF HIGHER EDUCATION |
||
| By | /s/ Evan Facher | |
| Evan Facher, Ph.D., MBA Director, Innovation Institute Vice Chancellor for Innovation and Entrepreneurship |
||
| MEDICUS PHARMA | ||
| By | /s/ James P. Quinlan | |
| Name: | James P. Quinlan, CPA | |
| Title: | Chief Financial Officer | |
A CLINICAL TRIAL AGREEMENT (the "Agreement") is EFFECTIVE the 3rd day of
December 2021 (the "Effective Date")
BETWEEN:
SkinJect, Inc.
4981 McKnight Rd.
#101371
Pittsburgh, PA 15237
(the "SPONSOR")
and
THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK, a New York State nonprofit corporation ("University"), and THE NEW YORK AND PRESBYTERIAN HOSPITAL, a New York State non-profit corporation ("Hospital") (University and Hospital collectively referred to as the "Institution") located at 154 Haven Avenue, Third Floor, New York, NY 10032
(the "INSTITUTION")
- and -
Faramarz Samie, M.D.
(the "Principal Investigator")
WHEREAS, SPONSOR desires to engage INSTITUTION to perform a clinical trial according to a protocol entitled "A Trial to Evaluate the Performance of Placebo Microneedle Arrays in Healthy Human Volunteers (Part I), Followed by Proof of Concept Testing of Efficacy and Safety of Doxorubicin Microneedle Arrays in Subjects with Basal Cell Cancer (Part II)" (the "Clinical Trial") to study the D-MNA in accordance with the Sponsor Protocol Number: SKNJCT-002, which is incorporated herein in its entirety by reference thereto as may be amended from time to time in accordance with this Agreement (the "Protocol") to be conducted at the INSTITUTION under the direction and supervision of INSTITUTION's employee, Faramarz Samie, M.D., as Principal Investigator;
WHEREAS, SPONSOR has retained consultants, acting as independent contractors, to act on behalf of SPONSOR, including, but not limited to, negotiations of this Agreement and payment administration amounts described hereunder (the "Consultants"); and
WHEREAS, INSTITUTION and PRINCIPAL INVESTIGATOR desire to undertake the performance of the Clinical Trial under the terms and conditions of this Agreement;
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NOW THEREFORE, in consideration of the mutual premises and covenants herein, the parties agree as follows:
1. SCOPE OF CLINICAL TRIAL
1.1 Study Protocol. INSTITUTION and Principal Investigator agree to perform the Clinical Trial in accordance with the Protocol, which may be amended from time-to-time by SPONSOR with prior Institutional Review Board ("IRB") approval; provided, however, that the INSTITUTION and Principal Investigator may deviate from the Protocol only when necessary (and with prompt notice to SPONSOR) to protect the safety, rights or welfare of Trial Subjects (as hereinafter defined). The parties agree that in the event of a conflict between the Protocol and this Agreement, the terms of this Agreement shall govern, except in the case of matters relating directly to the scientific conduct of the Clinical Trial, with respect to which the terms of the Protocol shall prevail.
1.2 INSTITUTION Obligations.
A. INSTITUTION represents and certifies that it has and shall be responsible for providing at its sole cost and expense adequate personnel (including employees, agents, representatives, independent contractors or third-party entities as required) with the requisite training and experience and adequate facilities, equipment or other resources necessary to undertake this Clinical Trial (collectively, the "Clinical Trial Personnel"). The Clinical Trial shall be conducted under the direction and control of the Principal Investigator. INSTITUTION will require Clinical Trial Personnel to comply with the applicable terms and conditions of this Agreement.
B. In the event Principal Investigator becomes either unwilling or unable to perform the duties required by this Agreement, INSTITUTION will cooperate, in good faith and expeditiously, to identify a replacement investigator acceptable to the designated Consultants and SPONSOR. In the event an acceptable substitute is not found, and Sponsor shall not unreasonably withhold their approval, SPONSOR may terminate this Agreement in accordance with Article 27. INSTITUTION's cooperation in finding an acceptable replacement does not negate its obligation to perform this Agreement up to the effective date of termination.
1.3 INVESTIGATOR OBLIGATIONS. Prior to the initiation of the Clinical Trial, the INSTITUTION agrees that Principal Investigator (and any sub-Investigators participating in the Clinical Trial) shall provide to SPONSOR or its designated Consultants a current Curriculum Vitae that is dated and signed on each page by the Principal Investigator (or sub-Investigator as may be applicable). The INSTITUTION agrees on behalf of the Principal Investigator and sub-Investigators that the information included on such Curriculum Vitae shall be true and accurate and agrees to promptly notify SPONSOR of any material changes or updates or any censures or limitations on the practice of medicine by the Principal Investigator or sub-investigators. The Principal Investigator shall: (a) make all reasonable efforts to enter all data related to the Clinical Trial onto the appropriate electronic case report forms/logs ("e-CRFs") pages using the Electronic Data Capture ("EDC") system within fifteen (15) business days of a subject's last completed Clinical Trial visit and all other labs or other relevant information has been received, and for a data lock or data transfer within fifteen (15) business days or as soon as possible following collection of complete Data from a Clinical Trial subject's last completed Clinical Trial visit; SPONSOR and INSTITUTION shall use all reasonable efforts to coordinate the visit and data collection to enable data entry prior to such lock or transfer; (b) promptly assist SPONSOR from time-to-time to obtain data collected on a worksheet/ questionnaire or other medium prior to entry onto the e-CRF page(s) in the EDC system or transmission to a vendor, as appropriate; and (c) review all e-CRF pages for accuracy and completeness and (d) adhere to reporting timelines as specified for serious adverse events as required by regulations and noted in the protocol.
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1.4 Supply and Rights to D-MNA. SPONSOR shall supply to the Principal Investigator, at SPONSOR's expense, the D-MNA. The INSTITUTION and the Principal Investigator shall handle the D-MNA in accordance with the Protocol and FDA regulations. The D-MNA is and remains the sole and exclusive property of SPONSOR. SPONSOR does not grant INSTITUTION and Principal Investigator any express or implied intellectual property rights in the D-MNA or in any methods of making or using the D-MNA. INSTITUTION on behalf of itself, personnel and Principal Investigator agree that the D-MNA shall only be used in connection with the Clinical Trial in accordance with the Protocol and any other use is a material breach of this Agreement. Any invention conceived related to the D-MNA in the course of activities that are in breach of this Agreement, and all intellectual property rights therein, shall be solely and exclusively owned by SPONSOR, and INSTITUTION shall reasonably execute and deliver any documents of assignment or conveyance to effectuate the ownership rights of SPONSOR in such invention and related intellectual property rights at Sponsor's expense.
The Sponsor acknowledges that the Institution has a human research protection program ("HRPP") established in accordance with the principles and standards of the Association for the Accreditation of Human Research Protection Programs ("AAHRPP") that is applicable to clinical research studies and clinical trials, including the Research.
In furtherance of the Institution's HRPP, the Sponsor affirms that the manufacture and formulation of the Product meets all applicable laws, regulations and rules, including manufacture in accordance with "Good Manufacturing Practices". Before the Research begins, the Sponsor will provide the Principal Investigator with an investigator brochure describing all known contraindications, warnings, precautions and adverse reactions associated with the administration of Product. If such information is revised while the Research is in progress, Sponsor will timely provide the latest revision to the Principal Investigator. Sponsor will report to the Institution promptly (no more than thirty (30) days) any urgent data safety and monitoring reports, e.g., any finding, event, or information, including any information generated from a monitoring visit, that could affect the safety of subjects or their willingness to continue participating in the Research, influence the conduct of the Research, or affect the IRB's approval to continue the Research. When the Sponsor has the responsibility to conduct data and safety monitoring, the Sponsor shall develop a plan for data and safety monitoring for the Research to ensure the safety of Research Subjects and for the provision of such reports to the Institution. The parties agree that, during the term of the Research, the Sponsor shall report the aforementioned findings, events or information directly to the Institution's IRB, in accordance with a data safety monitoring plan approved by the Institution's IRB, on a quarterly basis or as otherwise reasonably necessary to protect Research subjects, but in no event less than on a yearly basis, if applicable. Such reporting obligation shall survive for a reasonable period, but no less than two years, following the conclusion of the Research. The Sponsor acknowledges and agrees that the Institution may undertake efforts to notify Research subjects of any information or findings, including the information described in this section, which may reasonably affect the Research subject's health and safety. This Section shall survive the termination or conclusion of this Agreement.
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1.5 Subject Enrollment. For purposes of this Agreement, all individuals enrolled in the Clinical Trial shall be referred to as "Trial Subjects." INSTITUTION and Principal Investigator will use reasonable efforts to enroll the requisite number of Trial Subjects for the Clinical Trial in accordance with the patient eligibility criteria specified in the Protocol. The Principal Investigator shall at all times exercise independent medical judgment as to the suitability of each prospective individual for enrollment as a Trial Subject. The INSTITUTION acknowledges and agrees that the Clinical Trial may be conducted concurrently by SPONSOR at more than one (1) trial center under the same Protocol with concurrent patient enrollment. SPONSOR shall have the right to terminate INSTITUTION's recruitment and enrollment of Trial Subjects at any time that SPONSOR determines that sufficient enrollment has been achieved in any combination of trial centers performing the Clinical Trial. SPONSOR, in its sole discretion, may extend the enrollment period upon written notice to INSTITUTION.
2. TERM
This term of this Agreement shall be in effect from the Effective Date through the date that all data and reports are delivered to and accepted by SPONSOR and the Clinical Trial is completed at INSTITUTION, unless otherwise extended, renewed, or amended by mutual written consent, or terminated as provided in Article 27 (the "Term").
3. PUBLICATION
3.1 Sponsor acknowledges that the Institution is dedicated to a free scholarly exchange and to public dissemination of the results of their scholarly activities. Nothing in this Agreement shall restrict the right of the Institution or their faculty, physicians (including the Principal Investigator), and other employees and students, to publish, disseminate, or otherwise disclose information about work conducted pursuant to this Agreement. Following completion of the Clinical Trial, INSTITUTION and Principal Investigator shall have the right to publish or present any information or data derived from the Clinical Trial.
i. INSTITUTION and Principal Investigator recognize the integrity of a multicenter study and agree not to publish any Data (defined below in Section 11) derived from the
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Clinical Trial until the Clinical Trial has been completed and all data from all Clinical Trial sites has been reported and analyzed, and INSTITUTION and Principal Investigator agree that the first publication of the results of the Clinical Trial shall be made by SPONSOR or its designated Consultants. The Institution may, however, publish its results independently of the multi-site publication after the earliest of: (i) the results at multiple sites have been published or otherwise made publicly available; (ii) six months have elapsed since the conclusion of the Trial by the Institution under this Agreement; or (iii) Sponsor acknowledges in writing that there will be no multi-center publication.
ii. SPONSOR shall be provided with a copy of all proposed publication and/or presentation materials, including abstracts, posters, presentations and manuscripts of the results of the Clinical Trial at least thirty (30) days prior to submission for publication or presentation; and
iii. Except for the results of the Clinical Trial, SPONSOR shall have the right to identify and require removal of any Confidential Information from any such abstract, poster, presentation or manuscript and, in such case, INSTITUTION and Principal Investigator shall remove all such Confidential Information. If during the thirty (30) day review period, SPONSOR notifies INSTITUTION that it desires patent applications to be filed on any Inventions (as defined in Section 4.1) disclosed or suggested in the manuscripts, INSTITUTION agrees that Principal Investigator will defer publication or other disclosure for a period, not to exceed sixty (60) days, to permit SPONSOR to file any desired patent applications. In no event shall the submission of such publication of results be delayed for more than ninety(90)) days for manuscripts and for more than ninety (90) days for abstracts from the date such proposed publication was provided to SPONSOR; at the end of ninety (90) days, the Principal Investigator shall be free to publish such results as proposed.
iv. INSTITUTION and Principal Investigator hereby acknowledge and agree that SPONSOR may elect to use the results of the Clinical Trial for the purposes of national and international registration, publication, and information for medical professionals. If legally necessary, the relevant regulatory and health authorities will be notified of the Principal
Investigator's name, address, qualifications, and extent of involvement in the Clinical Trial. SPONSOR reserves its right to use, reproduce, publish, re-publish and compile any abstract related to the Clinical Trial and the Data, or part thereof, as SPONSOR, in its sole discretion, decides.
v. For all publications relating to the Clinical Trial, authorship or acknowledgement of Principal Investigators will be determined based primarily on scientific contribution to protocol development and data interpretation and secondarily on patient enrollment. INSTITUTION and Principal Investigator will comply with recognized ethical standards concerning publications and authorship, including Section II - "Ethical Considerations in the Conduct and Reporting of Research" of the Uniform Requirements for Manuscripts Submitted to Biomedical Journals (http://www.icmje.org/index.html#authorship) established by the International Committee of Medical Journal Editors.
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3.2 The participation of SPONSOR and scientific contributions made by SPONSOR personnel shall be acknowledged in any publication or presentation.
3.3 SPONSOR agrees that it or its designated Consultants shall register and report results of the Clinical Trial on http://clinicaltrials.gov, as required by Title VIII of the FDA Amendments Act of 2007 within twenty-four (24) months of trial completion unless posting the Clinical Trial results would compromise publication in a peer-reviewed medical journal in which case, results will be posted on a Sponsor-determined publicly accessible website at the time of publication. The Clinical Trial results will be disclosed as soon as reasonably possible if there are any significant safety findings. The Clinical Trial results will be disclosed regardless of whether they support the hypothesis being tested or are contrary to the predicted outcome.
4. INTELLECTUAL PROPERTY
(a) 4.1 Inventions. It is recognized and understood that certain inventions and technologies existing as of the Effective Date are the separate property of SPONSOR and the INSTITUTION and are not affected by this Agreement, and neither party shall have any claims to or rights in such separate inventions and technologies of the other party.
(b) Any new inventions, developments, or discoveries made in the course of the Research ("Inventions") shall be disclosed in writing to Sponsor. Sponsor will own any Inventions representing a reduction to practice of Sponsor's documented prior conception (a "Sponsor Invention"). Title to Inventions made in the course of the Research other than a Sponsor Invention (an "Other Invention") will reside with Sponsor if Sponsor personnel are the sole developers. If the Institution' faculty or personnel are the sole inventors, then the Institution will own title to the Other Inventions; and if both Sponsor and the Institution are joint inventors, then title will be held jointly. Inventorship will be determined in accordance with U.S. patent law. Notwithstanding the foregoing, the Institution acknowledges that Section 1 of this Agreement precludes the use of the D-MNA for any other purpose other than that expressly described in Section 1.
(c) To the extent that the Institution own the rights of sole or joint inventorship to an Other Invention, Sponsor is hereby granted, without fee other than consideration of the payments specified herein, the exclusive option to negotiate an exclusive, worldwide license to Institution' rights to the Other Invention, which option shall extend for 90 days after Sponsor's receipt of the Other Invention disclosure. If Sponsor and the Institution fail to reach a mutually agreeable license agreement within 90 days from the date on which an Other Invention is disclosed to Sponsor, the Institution shall have no further obligation to Sponsor, In all events, the Institution shall retain the rights to use Inventions (including any
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Sponsor Inventions and Other Invention) for its own non-commercial purposes of research, education, publication, and patient care.
4.2 SPONSOR shall have the sole right to file patent applications on Inventions at its expense. INSTITUTION and Principal Investigator shall provide to SPONSOR, at SPONSOR'S expense, the assistance necessary to obtain and secure patent protection, including execution of legal documents including, but not limited to, assignment documents.
4.3 Disclosure of Inventions. INSTITUTION and Principal Investigator shall promptly disclose to SPONSOR all Inventions. Such disclosure shall be made fully and promptly in writing to an authorized representative of SPONSOR.
4.4 No Conflict. The INSTITUTION represents on behalf of itself and the Principal Investigator that it and they are not bound by any agreement, commitment, arrangement or court order, or any other existing or previous business relationship that violates, conflicts with or prevents the full performance of the INSTITUTION's and the Principal Investigator's duties and obligations to SPONSOR under this Agreement. The INSTITUTION represents and warrants that INSTITUTION, Principal Investigator and Clinical Trial Personnel have no present obligations to assign or exclusively license to any person or entity other than INSTITUTION or SPONSOR any Inventions or other intellectual property covered by this Article 4. The INSTITUTION further represents and warrants that the Principal Investigator and any Clinical Trial Personnel shall be, prior to undertaking such work and for the entire duration of such work, contractually obligated to assign their rights in any Inventions to the INSTITUTION.
5. CONFIDENTIALITY OF INFORMATION
5.1 During the course of the Clinical Trial, INSTITUTION and Principal Investigator may develop, become aware of or have access to Confidential Information. INSTITUTION and Principal Investigator acknowledge and agree that, as between the parties, SPONSOR is and shall at all times remain the sole and exclusive owner of Confidential Information. For purposes of this Agreement, "Confidential Information" shall mean any and all information
(including, without limitation, information contained in and/or arising from the Protocol, the D- MNA, the Clinical Trial Data, reports, preclinical data and formulation information, basic scientific data, Inventions, patent applications, formulas, manufacturing processes and SPONSOR's operations), data, know how or other information (i) disclosed or submitted in writing or in other tangible form by SPONSOR, its affiliates or any of their representatives to the INSTITUTION and/or Principal Investigator, whether before or after the Effective Date; or (ii) collected, created, generated or observed in connection with the Clinical Trial or the D- MNA In addition, INSTITUTION and Clinical Trial Personnel shall protect the Confidential Information with the same degree of care as it normally uses to preserve and safeguard its own proprietary information, but not less than a reasonable degree of care.
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5.2 INSTITUTION and Principal Investigator agree:
i. to use the Confidential Information only for the purposes of this Agreement except as provided for herein; and
ii. not to disclose the Confidential Information to any third party, or publish or otherwise disseminate such Confidential Information during the conduct of the Clinical Trial and for five (5) years after the conclusion thereof;
iii. Institution, Principal Investigator and Clinical Trial Personnel shall protect the Confidential Information with the same degree of care as each normally uses to preserve and safeguard its own proprietary information, but not less than a reasonable degree of care; and
iv. not to make copies of the Confidential Information without the written consent of SPONSOR (or its designated Consultants) and to deliver all documents and copies of such documents to SPONSOR or designated Consultants upon termination or expiration of this Agreement or request by SPONSOR. However, INSTITUTION and Principal Investigator may retain (one copy of Confidential Information for the purpose of identifying/ascertaining and fulfilling INSTITUTION's and Principal
Investigator's obligations of confidentiality under this Agreement.
5.3 The INSTITUTION may disclose Confidential information to the Clinical Trial Personnel who require access thereto for the purposes of this Agreement, provided that prior to making any such disclosures, each such Clinical Trial Personnel shall be bound by the same obligations to maintain Confidential Information in confidence and not to use such information for any purpose other than in accordance with the terms of this Agreement.
5.4 Nothing contained herein will in any way restrict or impair any party's right to use, disclose, or otherwise deal with any Confidential Information which at the time of its receipt:
i. can be shown to have been known to the INSTITUTION or Principal Investigator prior to the Effective Date hereof; or
ii. is already, or becomes, part of the public domain without breach of this Agreement;
iii. can be shown to have been obtained from third parties having no obligation of confidentiality with respect to the Confidential Information, whether to SPONSOR or another party, and having the legal right to disclose such Confidential Information;
iv. is required to be disclosed by law or legal process, provided, that INSTITUTION gives prompt notice of such order or requirement to SPONSOR to enable SPONSOR to seek a protective order or otherwise prevent or restrict such disclosure, and INSTITUTION shall cooperate with SPONSOR in connection therewith;
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v. must be disclosed to potential Trial Subjects during the recruitment process or to patients who are or were enrolled in the Clinical Trial, or their lawful representatives, in order to obtain and maintain informed consent or as the information relates to their health, safety or diagnosis;
vi. must be disclosed to Clinical Trial staff with a need to know or to INSTITUTION's Institutional Review Board (IRB)/Research Ethics Board (REB) and, in the case of a multi-center study, is deemed necessary by INSTITUTION or Principal Investigator in the interest of patient safety to be disclosed to IRBs/REBs of participating sites reviewing the Protocol in order to coordinate the review; or
vii. is deemed necessary by INSTITUTION or Principal Investigator to be disclosed to the Clinical Trial steering committee and/or the data safety monitoring board, if any, in the interest of patient safety.
Notwithstanding the foregoing, the obligation of confidentiality set forth in this Section shall be waived to the extent required for medical treatment of the subject participants. In addition, the Protocol may be posted by the University and Hospital at its databases to be used by non- Study medical providers and personnel at the University and Hospital for diagnostic and treatment purposes for Study Subjects. Such non-Study medical providers and personnel will keep the Protocol confidential in accordance with the terms of this Agreement. The results of the Study (and information reasonably required to publish the results of the Study in accordance with routine scholarly standards) shall not be considered Confidential Information, for the purposes of publication.
6. USE OF NAME/TRADEMARK
6.1 Except as otherwise required by applicable law, regulation or court order, no party to this Agreement will use the name or other identifying marks of the other party or its employees in any advertisement, press release or other publicity without prior written consent of such other party; provided, however, that, subject to Article 4, INSTITUTION and the Principal Investigator shall acknowledge SPONSOR's support of the Clinical Trial in scientific publications and other scientific communications and SPONSOR may identify the Principal Investigator and INSTITUTION in association with a listing of the Protocol and participating Clinical Trial sites and principal investigators in a publicly available listings of ongoing clinical trials.
6.2 For the purposes of this Clinical Trial, no party to this Agreement will use or permit others to use the name and/or trademark of the other party, or refer to their participation in the Clinical Trial, for any sales or promotional purposes without the prior written consent of such other party.
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7. PAYMENT
7.1 In consideration for performance of the Clinical Trial by INSTITUTION, SPONSOR agrees to support the Clinical Trial for all site visits, procedures, data management, and tests set out in the Protocol; provided; however, that SPONSOR shall have no obligation to pay INSTITUTION for procedures, visits or other charges other than payments that are specifically set forth in the Protocol and attached Budget. SPONSOR will not pay INSTITUTION for any Trial Subject whose enrollment in a Clinical Trial materially deviates from the Protocol's eligibility criteria or from whom data cannot be analyzed because of material Protocol deviations, lack of proper records or incomplete, uncorrected or unverifiable CRFs. Reimbursements for any procedures, visits or other charges performed apart from those set out in the Protocol are subject to prior approval by SPONSOR or designated Consultants. INSTITUTION agrees that it will be responsible for making payments to any and all personnel (including without limitation the Principal Investigator) and third parties who provide services hereunder for the conduct of the Clinical Trial at INSTITUTION. No other benefits or compensation, beyond those expressly provided in the Budget will be provided by SPONSOR through the designated Consultants or otherwise to INSTITUTION.
7.2 SPONSOR shall pay INSTITUTION as Sponsor verifies that all data for each subject have been fully and properly entered in the EDC system, as outlined in the Budget attached as Exhibit "A" within the timelines defined in Section 1.3. For clarity, INSTITUTION acknowledges and agrees that, except for the specific costs designated to be paid prior to enrollment (e.g., start-up costs identified in the Budget), SPONSOR will only be responsible for payments to the INSTITUTION for Trial Subject visits as described in Exhibit A. The Budget may be modified only upon the prior written consent of the parties. Tests, services or reimbursable costs and expenses that are not required by the Protocol shall not be compensable under this Agreement without the prior written consent of SPONSOR. The last payment required by the Budget shall be made after SPONSOR has received all deliverables defined in the Protocol and all other data to which SPONSOR is entitled under this Agreement, including, but not limited to, completed CRFs with all query resolutions having been resolved and verified by SPONSOR. INSTITUTION represents and warrants that it will not seek payment or accept reimbursement from any third party for costs and/or expenses paid for by SPONSOR, including, but not limited to, treatment/evaluation, procedures and/or drug/supplies.
7.3 The undisputed amounts due pursuant to this Article 7 shall be payable by SPONSOR to INSTITUTION within forty-five (45) days following receipt by SPONSOR of detailed invoices. Invoices shall be submitted electronically to:
or such other address as specified by SPONSOR. All invoices must include the Protocol number and, if requested, the Purchase Order number. INSTITUTION shall be responsible for all expenses it incurs that are related directly or indirectly to the performance of the Services. All payments to INSTITUTION hereunder shall be made by check payable to INSTITUTION's payee identified in Exhibit A.
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7.4 The INSTITUTION acknowledges and agrees that the amounts payable by SPONSOR under this Agreement represent the fair market value of the covered costs associated with the Clinical Trial at INSTITUTION and no part of any consideration paid hereunder is a prohibited payment for the recommending or arranging for the referral of business or the ordering of items or services; nor are the payments intended to induce illegal referrals of business.
7.5 Pursuant to applicable laws, the INSTITUTION acknowledges and agrees that SPONSOR may be required to disclose publicly and/or to relevant governmental authorities the payments made by or on behalf of SPONSOR to INSTITUTION under this Agreement referencing the Principal Investigator, as well as the purpose and nature of such payments.
8. RECORD KEEPING
8.1 INSTITUTION and Principal Investigator agree to maintain complete and accurate Clinical Trial records during the Clinical Trial, as expressly required by 21 C.F.R. Part 312.62(c) (the "Clinical Trial Records").
8.2 INSTITUTION and Principal Investigator shall retain Clinical Trial Records for the period required by applicable laws, including without limitation 21 C.F.R. Part 312. Thereafter, prior to the disposal of the Clinical Trial Records, INSTITUTION and Principal Investigator (as applicable) shall give SPONSOR not less than sixty (60) days prior express written notice thereof, and if SPONSOR or designated Consultants request in writing, INSTITUTION and Principal Investigator shall transfer the study records to SPONSOR or designated Consultants at SPONSOR's expense.
9. CERTIFICATIONS
INSTITUTION and Principal Investigator certify that they are fully able to perform and will perform the Clinical Trial in a competent and professional manner and with strict adherence to the Protocol. Principal Investigator agrees to carry out the Clinical Trial in accordance with the Protocol and written instructions provided by SPONSOR, using high scientific and professional standards, but does not promise success in achieving any particular result. Neither the INSTITUTION nor Principal Investigator give any warranty, express or implied, on the results of the Clinical Trial and shall not be liable for any direct, consequential, or any other damage suffered by SPONSOR or others resulting from the use of the study results.
10. INSTITUTIONAL REVIEW BOARDS/RESEARCH ETHICS BOARDS (IRB/REB) INFORMED CONSENT:
10.1 IRB/REB. Institution and Principal Investigator shall be responsible for obtaining approval of the Protocol, Informed Consent, Clinical Trial advertisements (if any) and any alteration to or waiver of any patient authorization permitting the disclosure of confidential patient information in connection with the Clinical Trial, from the appropriate IRB/REB prior to commencement of the Clinical Trial. In the event the IRB requires changes in the Protocol or Informed Consent, such changes shall not be implemented until Sponsor is notified and gives its approval. The Protocol and the Informed Consent shall not be revised without the prior written agreement of Sponsor or designated Consultants and the IRB/REB. INSTITUTION will promptly forward to SPONSOR copies of all correspondence to and from the IRB that concerns the Clinical Trial.
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10.2 Informed Consent. Institution and Principal Investigator shall also be responsible for obtaining from each prospective Trial Subject: (i) a completed informed consent document signed by or on behalf of each Trial Subject, which informed consent document shall be the document approved by Sponsor or designated Consultants and the IRB/REB prior to the Trial Subject's participation in the Clinical Trial (the "Informed Consent") and (ii) a form that is compliant with HIPAA that meets the requirements of 45 C.F.R. § 164.508(c), in form and substance acceptable to SPONSOR and the IRB, authorizing SPONSOR and its designated Consultants to receive such Trial Subject's protected health information ("PHI"), as such term is defined by HIPAA and, as this Clinical Trial is a multi-site Clinical Trial, with researchers at other Clinical Trial sites, to the extent necessary for them to comply with this Agreement, applicable laws and regulations, and for purposes related to the Clinical Trial (including, without limitation, Clinical Trial monitoring, analysis of Clinical Trial Data, and preparing applications and other reports to be submitted to regulatory authorities. Principal Investigator shall also maintain the originals and, upon request, provide designated Consultants and SPONSOR with access to and/or copies of the signed authorization; and provide designated Consultants and SPONSOR and regulatory authorities with access to all original source documentation, which has not been de-identified, in compliance with study instruction manuals and applicable guidelines.
11. OWNERSHIP OF CLINICAL TRIAL DATA
All i) results, conclusions, documents, data, know-how and formulas provided to the INSTITUTION and/or Principal Investigator for purposes of the Clinical Trial; (ii) all data, information, results and conclusions case report forms and other data (including without limitation, written, printed, graphic, video and audio material, and information contained in any computer data base or computer readable form) generated by INSTITUTION in the course of conducting the Clinical Trial, without limitation, the completed case report forms and any reports prepared by INSTITUTION or Principal Investigator (the "Clinical Trial Data") and (iii) the D-MNA provided to the INSTITUTION and/or Principal Investigator for purposes of the Clinical Trial shall be, and are and will, in each case, remain the property of SPONSOR. SPONSOR, shall have the right to use the Clinical Trial Data, including the results of the Clinical Trial, in any way it deems appropriate, including, but not limited to, incorporating the Clinical Trial Data in any regulatory or patent filing concerning the Clinical Trial. For the avoidance of doubt, the Clinical Trial Data shall be deemed Confidential Information. Any copyrightable work created in connection with performance of the Clinical Trial and contained in the Data (except any publication by Principal Investigator as provided for in Article 3 above) shall be property of SPONSOR as author and owner of copyright in such work.
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INSTITUTION will have the non-exclusive right to use Clinical Trial Data generated by INSTITUTION only for its internal Clinical Trial patient care purposes. Original medical records and source documents of Trial Subjects are the property of INSTITUTION.
12. REPORTING OF DATA; ACCESS TO DATA
Principal Investigator and Institution agree to provide SPONSOR or Sponsor's designated Consultants, with the data called for in the Protocol on properly completed case report forms within 5-7 days of each patient visit. Institution shall promptly notify Sponsor in writing of any special or particular Institution policies that may limit SPONSOR's or Sponsor's designated Consultants' access to the data. Principal Investigator and Institution also agree to notify SPONSOR or designated Consultants within twenty-four (24) hours after learning of any serious and/or unexpected adverse events and device defects (as defined in the Protocol) affecting any patient in the Clinical Trial. Principal Investigator and Institution further agree to follow up such notification with appropriate reports in compliance with all applicable legal and regulatory requirements and provide SPONSOR with a copy of any such report for review and comment prior to submission, where practicable.
13. MONITORING OF CLINICAL TRIAL
13.1 Inspections/Audits. Upon reasonable advance notice and in keeping with the Institution's policies and procedures relating to security, safety, infection control, and patient privacy that are generally applicable to all persons at Institution' facilities, the Institution agree to give Sponsor and its authorized representatives reasonable access to the Research site's facilities at mutually agreeable times and during normal business hours to help enable Sponsor to monitor the Research. Sponsor acknowledges that its authorized representatives shall be required to undergo vendor credentialing through Institution' service provider or submit a medical attestation form in order to gain physical access to Institution' facilities. Sponsor also acknowledges that Institution maintain reasonable electronic access practices (if electronic access is granted by Institution) for those seeking to view medical records or information for monitoring purposes. If Sponsor, including its authorized representatives, is exposed to a subject participant's or patient's medical records or information, whether through electronic means or on site, Sponsor will, and shall cause its authorized representatives to, hold all medical records or information in confidence and comply with all applicable laws and Institution' policies regarding the confidentiality and privacy of such records and information, including but not limited to those rules and requirements established under the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"). Sponsor's authorized representatives on site at any Institution premises shall comply with all applicable policies and procedures of Institution, including but not limited to security, safety, infection control, and patient privacy. The Parties agree that this article shall survive the termination or expiration of this Agreement.
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13.2 Corrective Action. Institution and Principal Investigator agree to take any reasonable steps requested by Sponsor or designated Consultants to cure deficiencies noted during an audit or inspection. In addition, INSTITUTION shall provide Sponsor with a copy of any correspondence to FDA generated as a result of an FDA inspection prior to submission by Institution and/or Principal Investigator, if allowable by law.
14. COMPLIANCE WITH APPLICABLE LAWS
14.1 FDA Laws. Principal Investigator and INSTITUTION agree to conduct the Clinical Trial and maintain records and data during and after the term of this Agreement in compliance with all applicable legal and regulatory requirements, including without limitation, any applicable requirements of the FDA.
14.2 Privacy Laws. The parties agree that INSTITUTION's use and disclosure of patient health and medical information is subject to compliance with applicable state and federal privacy laws. The parties, therefore, agree to take all reasonable steps to protect the confidentiality of any patient health and medical information that it has access to and comply with applicable state and federal privacy laws.
INSTITUTION and Principal Investigator each agrees to conduct or cause the Clinical Trial to be conducted under the Protocol in accordance with the current state of Good Clinical Practices, the Health Insurance Portability and Accountability Act ("HIPAA") and all other applicable federal, state and local laws and regulations, as amended from time to time, as appropriate to the work.
INSTITUTION agrees to obtain or cause Principal Investigator to obtain, from each study subject participating in the Clinical Trial, an appropriately signed Informed Consent form in the form required by FDA as approved by the IRB/REB in accordance with 21 C.F.R. Part 50 and the Protocol, and a HIPAA Authorization as required by 45 C.F.R. Part 164. SPONSOR or designated Consultants shall have an opportunity to review and comment on the Informed Consent form prior to its submission to the IRB/REB for approval.
INSTITUTION and Principal Investigator each agrees to include in the informed consent form the Clinical Trial statement permitting the SPONSOR to use Trial Subjects' data collected under the Protocol for the following future research purposes: to study the safety and effectiveness of the D-MNA and other products, to conduct performance reviews of the product or retrospective reviews of the Clinical Trial or the Clinical Trial Data, to develop a better understanding of periodontal disease, and/or to improve the design and efficiency of future clinical trials (collectively referred to as "further research uses").
14.3 Healthcare Compliance. The parties to this Agreement specifically intend to comply with all applicable laws, rules and regulations, including the federal anti-kickback statute (42 U.S.C. 1320a-7b) and the related safe harbor regulations. Nothing contained in this Agreement shall be construed in any manner as an obligation or inducement for INSTITUTION or Principal Investigator to recommend that any person or entity purchase SPONSOR's products or those of any entity affiliated with SPONSOR.
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14.4 Noncompliance. In the event that any part of this Agreement is determined to violate federal, state, or local laws, rules, or regulations, the parties agree to negotiate in good faith revisions to the provision or provisions that are in violation. In the event the parties are unable to agree to new or modified terms as required to bring the entire Agreement into compliance, either party may terminate this Agreement on sixty (60) days written notice to the other party.
15. INSURANCE
Sponsor will maintain, during the term of this Agreement, Commercial General Liability insurance (including products liability, contractual liability and clinical testing liability) with reputable and financially secure insurance carriers licensed to do business in New York to cover the activities arising out of this Agreement, with minimum limits of $2,000,000 per occurrence. Such insurance will include the Institution, and their respective trustees, directors, officers, faculty, medical staff, students, agents and employees as additional insureds. Sponsor will maintain, during the term of the Agreement, Cyber (Privacy/Network Security) Liability insurance with coverage for privacy and system breaches, including both first party expenses for forensic services, notification and credit monitoring, and third party liability arising from the loss or disclosure of confidential information with minimum limits of $2,000,000 per claim. All of Sponsor's insurance will be primary coverage and will be written to cover claims incurred, discovered, manifested, or made during or after the expiration of this Agreement. Any insurance the Institution may purchase will be excess and noncontributory and shall not constitute nor be construed as an indemnification by the Institution of Sponsor. As soon as practicable upon execution of this Agreement, the Sponsor will deposit with the University certificates of insurance evidencing this coverage. Such coverage may not be changed or terminated except upon at least thirty days prior written notice to the Institution. The limits of any insurance coverage will not limit Sponsor's obligations under the indemnification provisions of the Agreement.
16. DEBARMENT/FINANCIAL DISCLOSURE
INSTITUTION, TO THE BEST OF ITS KNOWLEDGE shall not employ, contract with or retain any person directly or indirectly to perform services under this Agreement if such a person is currently debarred under any applicable law, rule or regulation, including but not limited to, by FDA under 21 U.S.C. 335a (Section 306, Federal Food, Drug and Cosmetic Act) or any equivalent local law, rule or regulation. Upon written request from SPONSOR or designated Consultants, INSTITUTION shall, promptly, provide written confirmation that it has complied with the foregoing obligation. INSTITUTION shall also provide all information to SPONSOR necessary to comply with any disclosure requirements mandated by FDA, including any information required to be disclosed in connection with any financial relationship between SPONSOR and Principal Investigator and any other Investigator involved in the Clinical Trial and any other agent or employee of INSTITUTION or SPONSOR. This disclosure requirement may require disclosure of information involving immediate family members of those involved in the Clinical Trial.
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If any of the foregoing events occur during the term of this Agreement or for three (3) years thereafter, the INSTITUTION and/or Principal Investigator shall provide SPONSOR with a full written explanation of the circumstances of such event within two (2) days of its occurrence. If the INSTITUTION or INSTITUTION's employees or agents who will perform Clinical Trial services hereunder (including without limitation the Principal Investigator and all other Clinical Trial investigators and Clinical Trial Personnel) becomes debarred, this Agreement may be terminated by SPONSOR immediately (or such other period of time specified by SPONSOR in its written notice).
17. INDEMNIFICATION
17.1 SPONSOR shall indemnify, defend and hold harmless INSTITUTION, its trustees, officers, medical and professional staff, Principal Investigator, employees, associates, and agents and their respective successors, heirs and assigns ("INSTITUTION Indemnitees") from and against any and all actions, suits, claims, proceedings, investigations, demands, costs and expenses (including reasonable attorney fees), judgments, liabilities, losses, personal injuries (including death), or other damages (collectively "Losses"), of all types whatsoever, that are asserted to have arisen from or are related to the performance of the Study and any other activities to be performed under this Agreement. The Sponsor's obligation to indemnify, defend and hold harmless an Indemnitee will be reduced to the extent that any Losses are finally adjudicated to have been directly caused by: (i) a failure by such Indemnitee to comply with the Protocol or (ii) a failure by such Indemnitee to comply with state or federal statutes or regulations, including Food and Drug Administration regulations. Without limitation, Sponsor will bear all liabilities arising from or related to its use or commercialization of the Study results, whether or not the exceptions referenced in the preceding sentence apply.
17.2 The University or Hospital will promptly notify Sponsor of any indemnifiable action, suit, or claim ("Claim") of which it becomes aware, and each Indemnitee will cooperate with Sponsor and its insurance carrier in the defense of any such Claim. Sponsor agrees, at its sole expense, to provide attorneys to diligently defend against any such Claim against any Indemnitee whether or not such Claim is rightfully brought or filed. With respect to any Claim as to which Sponsor has irrevocably acknowledged a duty to indemnify the Indemnitees, Sponsor will be entitled to conduct and direct defense of the Indemnitees against such Claim using qualified attorneys of Sponsor's own selection, but Sponsor will consult with the Indemnitees on litigation strategy and any proposed settlements. Sponsor will not enter into a settlement agreement of any such Claim without the Institution' prior written approval unless the settlement agreement: (i) includes a full and unconditional release of each Indemnitee and (ii) has no finding or admission of any violation or wrongdoing by any Indemnitee. At the individual option of an Indemnitee, such Indemnitee may defend itself at its own expense.
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17.3 Without reducing Sponsor's obligations and the Indemnitees' rights to enforce the indemnity and defense obligations, with respect to any Claim as to which Sponsor has not irrevocably acknowledged a duty to indemnify Indemnitees, the Institution and the other Indemnitees will be entitled to conduct and direct their own defense and that of other Indemnitees using attorneys of their own selection. Sponsor's duty to defend the Indemnitees in such instance shall consist of reimbursing the Indemnitees on a current basis for all reasonable legal, expert and other defense fees and costs incurred by the Indemnitees in conducting their defense. In addition, Sponsor will reimburse the Institution for their costs and expenses enforcing this Section 17. The indemnity obligations under this Section 9 will not be construed to negate, abridge, or otherwise reduce any other obligation of indemnity or liability that would apply to Sponsor under applicable law.
18. SUBJECT INJURY
SPONSOR shall reimburse the INSTITUTION for the actual and reasonable medical expenses incurred in diagnosing and treating any injury, illness, or adverse event of a Trial Subject that results directly and solely from the conduct of the Clinical Trial, including the administration of the D-MNA in accordance with the Protocol or the proper performance of any Protocol procedure, except that SPONSOR shall not be responsible to the extent such expenses are paid by the Study Subject's private insurance or by government programs providing such coverage. SPONSOR shall not reimburse INSTITUTION for any treatment costs associated with an illness or injury that is attributable to the: (i) INSTITUTION Indemnitees' negligent activities, reckless misconduct, intentional misconduct or omissions; (ii) failure of the INSTITUTION Indemnitees to comply with all applicable laws; (iii) failure of the INSTITUTION Indemnitees to adhere to the terms of the Protocol or this Agreement; or (iv) the natural progression of Trial Subject's disease or underlying conditions.
19. ASSIGNMENT AND SUBCONTRACTING
Neither INSTITUTION nor Principal Investigator may assign, subcontract or transfer any of its or his/her rights or obligations under this Agreement without the written consent of SPONSOR. SPONSOR may assign this Agreement in whole or in part to any third party without the consent of INSTITUTION or Principal Investigator. This Agreement shall inure to the benefit of and be binding upon each party hereto, its successors and permitted assigns. No assignment shall relieve any party of the performance of any obligation that such party may then have under this Agreement.
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20. AMENDMENT AND WAIVER
20.1 No Amendment or variation to this Agreement shall operate to change or vary the terms, obligations, or conditions hereof except upon mutual agreement by both parties signed by an authorized representative of each party.
20.2 The failure of either party to enforce or insist upon compliance with any of the terms and conditions of this Agreement, or to exercise any rights hereunder, shall not constitute a waiver or relinquishment of any such terms, conditions or rights. The mere passage of time or the giving of notices or the execution of revisions, modifications or extensions to this Agreement shall not affect other terms, conditions or rights in and under this Agreement unless expressly stated.
20.3 If, in the course of performing this Agreement, generally accepted standards of clinical research and medical practice relating to the safety of research subjects require a change in the Protocol, such standards will be followed and changes made. If any change in the Protocol appears necessary, the party aware of such need for a change shall immediately inform the other party of the reason for such change as soon as reasonably possible after such reasons are known to such party. All laws and regulations relating to such protocols and changes shall be followed.
21. NOTICES
21.1 Any written notice required under this Agreement shall be in writing and shall be delivered to the parties hereto respectively as follows:
SPONSOR:
SkinJect, Inc.
4981 McKnight Rd. #101371 Pittsburgh, PA 15237
Attention: Sponsor Representative:
Michael Fare, COO
If to the Institution to:
Associate Vice President for Clinical Trials
Clinical Trials Office
Vagelos College of Physicians and Surgeons
Columbia University
154 Haven Ave, Floor 3
New York, NY 10032
Phone: 212-305-5064
Fax: 212-305-5065
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Copy to:
General Counsel
Columbia University
535 West 116th Street
412 Low Memorial Library
New York, New York 10027
Phone: 212-854-5795
Fax: 212-222-8505
Copy to:
Office of Legal Affairs and Risk Management
New York and Presbyterian Hospital
466 Lexington Avenue, 13th Floor, Box 36
New York, NY 10017
Phone: (212) 746-1752
Fax: 212-746-8606
21.2 In order for such notices to be effective, they shall be delivered in person, or sent by United States registered or certified mail, overnight courier or facsimile addressed to the party for whom it is intended at the above-mentioned address and shall be deemed to have been received, if sent by certified mail, when the postal receipt is acknowledged by the other party; if sent by overnight courier, when transmitted by the carrier; and, if sent by facsimile, when transmitted. The address of either party may be changed by notice in the manner set out in this provision.
22. SPONSOR'S REPRESENTATIVE
SPONSOR hereby designates Sponsor representative, as its representative with authority to act on SPONSOR's behalf in any matter related to this Agreement. Additionally, SPONSOR hereby designates the Consultant representatives, as its representative with authority to act on SPONSOR's behalf in Clinical Trial matters related to this Agreement.
23. INSTITUTION'S REPRESENTATIVE
INSTITUTION hereby designates Contact Name as its representative to act on INSTITUTION's behalf in any matter related to this Agreement.
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24. RELATIONSHIP OF PARTIES
The relationship of INSTITUTION to SPONSOR is and shall remain at all times that of an independent contractor and nothing in this Agreement shall be construed as establishing an agency, partnership, or employment relationship between the parties. INSTITUTION and Principal Investigator and its respective employees and agents, shall not participate in any SPONSOR employee benefit plans nor receive any other compensation beyond that stated herein. Neither party shall have the power or authority to bind the other party or to assume or create any obligation or responsibility, expressed or implied, on the other party's behalf.
25. GOVERNING LAW
This Agreement shall be construed and interpreted and its performance governed by the laws of State of New York, without giving effect to the doctrine of conflict of laws.
26. ENTIRE AGREEMENT
This Agreement and all attachments hereto, including any amendments, represent the entire agreement among the parties with respect to the subject matter hereof and supersede all previous negotiations, commitments and writings. Should there be any conflict between any attachment and the terms and conditions of this Agreement, the terms and conditions of this Agreement shall prevail, except as otherwise specified in Article 1.1 hereof.
27. TERMINATION
27.1 Termination of Clinical Trial. Either party may immediately terminate this Agreement by giving written notice to the other party only if such immediate termination is necessary to protect the safety, health or welfare of Trial Subjects.
27.2 Termination for Breach. This Agreement may be terminated by either SPONSOR or INSTITUTION for material breach of this Agreement by the other party that is not cured within thirty (30) days after written notice is received by the breaching party.
27.3 Immediate Termination. SPONSOR may terminate this Agreement, in whole or in part, effective immediately, upon written notice to the INSTITUTION for any of the following reasons: (i) authorization and approval to conduct the Clinical Trial is withdrawn by FDA; (ii) material unauthorized deviations from the Protocol or reporting requirements; (iii) upon the Principal Investigator's withdrawal or unavailability to complete his/her responsibilities hereunder (iv) prior to the shipment of the D-MNA to the INSTITUTION or (v) as a result of debarment as set forth in Article 16.
27.4 Termination At Will. This Agreement may be terminated by SPONSOR with or without cause upon thirty (30) days' written notice to the INSTITUTION.
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27.5 Effect of Termination.
(i) In the event of early termination of this Agreement by either party, the parties may agree to complete the Services in connection with the Clinical Trial that have not been completed as of the date of termination of this Agreement. INSTITUTION hereby agrees to fulfill its obligations in connection with same. Termination of this Agreement by either party for any reason shall not affect the rights and obligations of the parties accrued prior to the effective date of termination. The rights and obligations of SPONSOR and INSTITUTION which by intent or meaning have validity beyond termination of this Agreement, including, but not limited to, rights with respect to ownership of Inventions and developments, confidentiality, indemnification and liability, shall survive the termination or expiration of this Agreement.
(ii) Immediately upon receipt or delivery of a notice of termination, the Principal Investigator and the INSTITUTION shall: (a) unless otherwise directed by SPONSOR, stop enrolling Trial Subjects into the Clinical Trial and cease conducting Clinical Trial procedures on Trial Subjects enrolled in the Clinical Trial, except as necessary to ensure the safety of such enrolled Trial Subjects; and (b) immediately return to SPONSOR all Clinical Trial Data and Confidential Information described herein, whether the same are in INSTITUTION's actual possession or under its control. Clinical Trial Personnel shall comply with post-termination procedures included in the Protocol, if any.
(iii) In the event of early termination of this Agreement by either party pursuant to this Article 27, SPONSOR shall pay, following receipt by SPONSOR of detailed invoices, only reasonable, actual, direct costs incurred by INSTITUTION up to the point of termination of the Clinical Trial and agreed to be paid by SPONSOR pursuant to the Budget. Upon receipt or delivery by either party of notice of termination of the Clinical Trial, INSTITUTION agrees to promptly take all reasonable steps to reduce costs to SPONSOR and take reasonable steps to wind down the Clinical Trial.
27.6 Final Report. Upon completion of the Clinical Trial or earlier termination thereof, INSTITUTION and/or Principal Investigator shall prepare and forward a final report containing all relevant information for the Clinical Trial as described in the Protocol, including all data and Clinical Trial results to SPONSOR. For the avoidance of doubt, the final report shall be deemed Confidential Information.
27.7 Return of D-MNA and all Clinical Trial Materials. Upon completion of the Clinical Trial or early termination thereof, INSTITUTION shall cooperate with the SPONSOR and assist SPONSOR's designated personnel in arranging for the return or the destruction of any device and/or related Clinical Trial materials furnished to INSTITUTION and/or Principal Investigator by or on behalf of SPONSOR
27.8 The rights and obligations of the parties, which by intent or meaning have validity beyond termination or expiration (including, but not limited to, rights with respect to, audits, confidentiality, indemnification and responsibility, representations and warranties and effects of termination) and all other provisions that, by their terms, are intended to endure beyond the term of this Agreement, shall survive termination of this Agreement.
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28. SEVERABILITY
The invalidity or unenforceability of any term or provision of this Agreement shall not affect the validity or enforceability of any other term or provision hereof.
29. COUNTERPARTS
This Agreement and documents delivered pursuant hereto may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement or document. Signatures to this Agreement transmitted by facsimile transmission, by electronic mail in "portable document format" (".pdf") form, or by any other electronic means intended to preserve the originals graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing the original signatures, and shall be deemed original signatures by both parties.
Signature page to follow
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IN WITNESS WHEREOF, the duly authorized officers of the parties have executed this Agreement on the date first written above.
SPONSOR: SKINJECT, INC.
| /s/ Michael Fare | ||
| Name: Michael Fare | Date | |
| Title: Chief Operating Officer |
INSTITUTION:
| /s/ Helen Kim | 3/8/2022 | 9:19:04 AM EST | |
| Name: Helen Kim, PharmD | Date | |
| Title: AVP, Clinical Trials Office, The Trustees of Columbia University in the City of New York | ||
| /s/ Peter Fleischut | 3/8/2022 | 9:21:51 AM PST | |
| Name: Peter Fleischut, MD | Date | |
| Title, SVP,Chief Transformation Officer, New York and Presbyterian Hospital | ||
I have read this Agreement and agree to be bound by its terms and conditions.
| /s/ Faramarz Sarnie | 3/8/2022 | 7:47:40 AM EST | |
| Name: Faramarz Sarnie, M.D. | Date | |
| Title: Principal Investigator | ||
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Exhibit "A"
Redacted (confidential information)
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MEDICUS PHARMA LTD.
EQUITY INCENTIVE PLAN
ARTICLE ONE
ARTICLE ONE DEFINITIONS AND INTERPRETATION
1.01 Definitions.
For purposes of this Plan, unless such capitalized word or term is otherwise defined herein or the context in which such capitalized word or term is used herein otherwise requires, the following words and terms with the initial letter or letters thereof capitalized shall have the following meanings.
(a) "Acceleration Event" has the meaning given to such term in Section 3.10 hereof;
(b) "Account" means a notional account maintained for each Participant on the books of the Company which will be credited with RSUs in accordance with the terms of this Plan;
(c) "Award" means any of an Option or RSU granted pursuant to, or otherwise governed by, the Plan;
(d) "Award Agreement" means an agreement evidencing the grant to a Participant of an Award, including an Option Agreement or a RSU Agreement;
(e) "Blackout Period" means a period of time during which:
(i) the trading guidelines of the Company, as amended or replaced from time to time, restrict one or more Participants from trading in securities of the Company; or
(ii) the Company has determined that one or more Participants may not trade any securities of the Company;
(f) "Blackout Period Expiry Date" means the date on which a Blackout Period expires;
(g) "Business Day" means a day on which the Stock Exchange is open for trading;
(h) "Committee" means the Directors or, if the Directors so determine in accordance with Section 2.04 hereof, the committee of the Directors authorized to administer this Plan;
(i) "Common Shares" means the common shares of the Company, as adjusted in accordance with the provisions of Article Six hereof from time to time;
(j) "Company" means Medicus Pharma Ltd., a corporation existing under the Business Corporations Act (Ontario), and any successor corporation thereof;
(k) "Consultant" has the meaning given to such term in Policy 4.4 - Security Based Compensation of the TSX Venture Exchange;
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(l) "Designated Affiliates" means the affiliates of the Company designated by the Committee for purposes of this Plan from time to time;
(m) "Designated Broker" means a broker who is independent of, and deals at arm's length with, the Company and its Designated Affiliates and is designated by the Company;
(n) "Directors" means the directors of the Company from time to time;
(o) "Dividend Equivalent" means additional RSUs credited to a Participant's Account as a dividend equivalent pursuant to Section 4.07;
(p) "Eligible Directors" means, other than, in the case of a grant of RSUs, a person retained to provide Investor Relations Activities, the Directors or the directors of any Designated Affiliate from time to time;
(q) "Eligible Employees" means, other than, in the case of a grant of RSUs, a person retained to provide Investor Relations Activities, any employees and officers, whether Directors or not, of the Company or any Designated Affiliate, provided that such employees and officers are individuals who are considered employees under the ITA;
(r) "Employment Contract" means any contract between the Company or any Designated Affiliate and any Participant relating to, or entered into in connection with, the employment or departure of the Eligible Employee, the appointment, election or departure of the Eligible Director or the engagement of the Consultant or any other agreement to which the Company or a Designated Affiliate is a party with respect to the rights of such Participant in respect of a change in control of the Company or the termination of employment, appointment, election or engagement of such Participant;
(s) "Exercise Price" has the meaning given to such term in Section 3.04 hereof;
(t) "Insider" has the meaning given to such term in the policies of the TSX Venture Exchange;
(u) "Investor Relations Activities" has the meaning given to such term in the policies of the TSX Venture Exchange;
(v) "ITA" means the Income Tax Act (Canada), together with the regulations thereto, each as amended from time to time;
(w) "Market Value of a Common Share" means, with respect to any particular date as of which the Market Value of a Common Share is required to be determined, (a) if the Common Shares are then listed on the Stock Exchange, the closing price of the Shares on the Stock Exchange on the last Trading Day prior to such particular date; or (b) if the Common Shares are not then listed on any stock exchange, the value as is determined solely by the Committee, acting reasonably and in good faith, and such determination shall be conclusive and binding on all persons;
(x) "Option" means an option to purchase Common Shares granted pursuant to, or governed by, this Plan, provided that no Option is intended to be an "incentive stock option" within the meaning of the U.S. Code;
(y) "Optionee" means a Participant to whom an Option has been granted pursuant to this Plan;
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(z) "Option Period" means the period of time during which the particular Option may be exercised, including as extended in accordance with Section 3.05 hereof;
(aa) "Participant" means each Eligible Director, Eligible Employee and Consultant that is granted one or more Awards under this Plan;
(bb) "Plan" means this amended and restated equity incentive plan as amended from time to time;
(cc) "Redemption Date" has the meaning ascribed thereto in Section 4.05(a) hereof;
(dd) "Reserved Amount" has the meaning ascribed thereto in Section 2.07(a) hereof;
(ee) "Restriction Period" means, with respect to a particular grant of RSUs, the period between the date of grant of such RSUs and the latest Vesting Date in respect of any portion of such RSUs;
(ff) "RSU" means a restricted share unit, which is a right awarded to a Participant to receive cash, Common Shares or any combination of cash and Common Shares, as determined by the Company in its sole discretion, pursuant to, and governed by, this Plan;
(gg) "RSU Agreement" means a written agreement between the Company and a Participant evidencing the grant of RSUs and the terms and conditions thereof;
(hh) "RSU Outside Expiry Date" has the meaning ascribed thereto in Section 4.05(d) hereof;
(ii) "Stock Exchange" means the TSX Venture Exchange or, if the Common Shares are not then listed on the TSX Venture Exchange, such other principal market on which the Common Shares are then traded as designated by the Committee from time to time;
(jj) "Termination" has the meaning given to such term in Section 3.12 or Section 4.09 hereof, as applicable;
(kk) "Trading Day" means any day on which the Stock Exchange is open for trading;
(ll) "U.S. Code" means the United States Internal Revenue Code of 1986, as amended from time to time, and any reference to a particular section of the U.S. Code shall include references to guidance, regulations and rulings thereunder and to successor provisions;
(mm) "U.S. Person" means any individual who is a U.S. citizen or U.S. permanent resident for purposes of the U.S. Code;
(nn) "U.S. Securities Act" has the meaning given to such term in Section 5.02 hereof; and
(oo) "Vesting Date" has the meaning ascribed thereto in Section 4.04 hereof.
1.02 Headings.
The headings of all articles, sections, paragraphs and subparagraphs in this Plan are inserted for convenience of reference only and shall not affect the construction or interpretation of this Plan.
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1.03 Context, Construction.
Whenever the singular or masculine are used in this Plan the same shall be construed as being the plural or feminine or neuter or vice versa where the context so requires. The word "person" shall be given the widest meaning possible and shall include, without limitation, an individual, a corporation, a partnership, a limited partnership or any other unincorporated entity.
1.04 References to this Plan.
The words "hereto", "herein", "hereby", "hereunder", "hereof" and similar expressions mean or refer to this Plan as a whole and not to any particular article, section, paragraph, subparagraph or other part hereof.
1.05 Canadian Funds.
Unless otherwise specifically provided, all references to dollar amounts in this Plan are references to lawful money of Canada.
ARTICLE TWO
PURPOSE AND ADMINISTRATION OF THIS PLAN
2.01 Purpose of this Plan.
This Plan provides for the potential acquisition of Common Shares by Participants for the purpose of advancing the interests of the Company through the motivation, attraction and retention of key employees, directors and consultants of the Company and the Designated Affiliates and to secure for the Company and the shareholders of the Company the benefits inherent in the ownership of Common Shares by key employees, directors and consultants of the Company and the Designated Affiliates, it being generally recognized that share incentive plans can aid in attracting, retaining and encouraging employees, directors and consultants due to the opportunity offered to them to acquire a proprietary interest in the Company.
2.02 Participants.
This Plan is hereby established for Eligible Directors, Eligible Employees and Consultants.
2.03 Administration of this Plan.
This Plan shall be administered by the Committee and the Committee shall have full authority to administer this Plan, including the authority to interpret and construe any provision of this Plan and to adopt, amend and rescind such rules and regulations for administering this Plan as the Committee may deem necessary or desirable in order to comply with the requirements of this Plan, subject in all cases to compliance with regulatory requirements. For certainty, and without limiting the scope of the foregoing, the Committee may, on terms established by it in its sole discretion and in accordance with the policies of the Stock Exchange, permit an Option to be exercised by way of a "cashless exercise" or "net exercise" basis. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and conclusive and shall be binding on the Participants and the Company. No member of the Committee shall be personally liable for any action taken or determination or interpretation made in good faith in connection with this Plan and all members of the Committee shall, in addition to their rights as Directors, be fully protected, indemnified and held harmless by the Company with respect to any such action taken or determination or interpretation made. The appropriate officers of the Company are hereby authorized and empowered to do all things and execute and deliver all instruments, undertakings and applications and writings as they, in their absolute discretion, consider necessary or desirable for the implementation of this Plan and of the rules and regulations established for administering this Plan. All costs incurred in connection with this Plan shall be for the account of the Company and its Designated Affiliates. This Plan shall be administered in accordance with the rules and policies of the TSX Venture Exchange by the Committee so long as the Common Shares are listed on the TSX Venture Exchange.
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2.04 Delegation to Committee.
All of the powers exercisable hereunder by the Directors may, to the extent permitted by applicable law and as determined by resolution of the Directors, be exercised by a committee of the Directors comprised of not less than three Directors.
2.05 Record Keeping.
The Company shall maintain a register in which shall be recorded:
(a) the name and address of each Participant;
(b) the number of Common Shares subject to Awards granted to each Participant; and
(c) the aggregate number of Common Shares subject to Awards.
2.06 Determination of Participants.
The Committee shall from time to time determine the Participants who may participate in this Plan. The Committee shall from time to time determine the Participants to whom Awards shall be granted, the number of Common Shares to be made subject to, and the expiry date of, each Award granted to each Participant and the other terms, including any vesting provisions, of each Award granted to each Participant, all such determinations to be made in accordance with the terms and conditions of this Plan, and the Committee may take into consideration the present and potential contributions of, and the services rendered by, the particular Participant to the success of the Company and any other factors which the Committee deems appropriate and relevant. For Awards granted to Eligible Directors, Eligible Employees and Consultants, the Company and the Participant are responsible for ensuring and confirming that the Participant is a bona fide Eligible Director, Eligible Employee or Consultant, as the case may be.
2.07 Maximum Number of Shares.
(a) Subject to any adjustment pursuant to Section 6.07, the Plan is a "rolling up to 10% and fixed up to 10%" Security Based Compensation Plan, as defined in Policy 4.4 - Security Based Compensation of the TSX Venture Exchange. The Plan is: (i) a "rolling" plan pursuant to which the number of Common Shares that are issuable pursuant to the exercise of Options granted hereunder shall not exceed 10% of the issued and outstanding Common Shares as at the date of any Option grant; and (hh) a "fixed" plan under which the number of Common Shares that are issuable pursuant to all Awards other than Options granted hereunder and under any other Security Based Compensation Plan, in the aggregate is a maximum of 10% of the issued and outstanding Common Shares as at the effective date of implementation of the Plan, which is expected to be up to approximately 1,557,500 (the "Reserved Amount").
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(b) The maximum number of Common Shares reserved for issue pursuant to Awards granted under this Plan to Participants who are Insiders (as a group) in any 12 month period shall not exceed 10% of the number of Common Shares then outstanding, unless disinterested shareholder approval is received therefor in accordance with the policies of the Stock Exchange.
(c) The maximum number of Common Shares reserved for issue pursuant to Awards granted under this Plan to Participants who are Insiders (as a group) at any point in time shall not exceed 10% of the number of Common Shares then outstanding, unless disinterested shareholder approval is received therefor in accordance with the policies of the Stock Exchange.
(d) The maximum number of Common Shares reserved for issue under Awards granted to any one Participant in any 12 month period shall not exceed 5% of the number of Common Shares then outstanding, unless disinterested shareholder approval is received therefor in accordance with the policies of the Stock Exchange.
(e) The maximum number of Common Shares reserved for issue under Awards granted to any one Consultant in any 12 month period shall not exceed 2% of the number of Common Shares then outstanding.
(f) The maximum number of Common Shares reserved for issue under Options granted to all Participants conducting Investor Relations Activities in any 12 month period shall not exceed, in the aggregate, 2% of the number of Common Shares then outstanding. Options granted to Participants performing Investor Relations Activities shall vest in stages over a 12 month period, with no more than ¼ of the Options vesting in any three month period. The Directors shall, through the establishment of appropriate procedures, monitor the trading in the securities of the Company by all Participants performing Investor Relations Activities. No acceleration of the vesting provisions of Options granted to persons retained to provide Investor Relations Activities is allowed without the prior acceptance of the Stock Exchange.
ARTICLE THREE
OPTION AWARDS
3.01 Nature of Options.
An Option is an option granted by the Company to a Participant entitling such Participant to acquire a designated number of Common Shares from treasury at the Exercise Price, but subject to the provisions hereof. For greater certainty, the Company is obligated to issue and deliver the designated number of Common Shares on the exercise of an Option and shall have no independent discretion to settle an Option in cash or other property other than Common Shares issued from treasury. For the avoidance of doubt, no Dividend Equivalents shall be granted in connection with an Option.
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3.02 Option Awards.
Subject to the provisions set forth in this Plan and any shareholder or regulatory approval which may be required, the Committee shall, from time to time by resolution, in its sole discretion, (a) designate the Eligible Director, Eligible Employee or Consultant who may receive Options under the Plan, (b) fix the number of Options, if any, to be granted to each Eligible Director, Eligible Employee or Consultant and the date or dates on which such Options shall be granted, (c) subject to Section 3.04, determine the price per Common Share to be payable upon the exercise of each such Option, (d) determine the relevant vesting provisions (including performance criteria, if applicable) and (e) determine the term of the Options, the whole subject to the terms and conditions prescribed in this Plan or in any stock option agreement, and any applicable rules of the Stock Exchange.
3.03 Option Notice or Agreement.
Each Option granted to a Participant may be evidenced by a stock option notice or stock option agreement setting out terms and conditions consistent with the provisions of this Plan and may be subject to any other terms and conditions (including without limitation any recoupment, reimbursement or claw-back compensation policy as may be adopted by the Committee from time to time) which are not inconsistent with this Plan and which the Committee deems appropriate for inclusion in an Option, which terms and conditions need not be the same in each case and which terms and conditions may be changed from time to time.
3.04 Exercise Price.
The price per share (the "Exercise Price") at which any Common Share which is the subject of an Option may be purchased shall be determined by the Committee at the time the Option is granted, provided that the Exercise Price shall be not less than the closing price of the Common Shares on the Stock Exchange on the last trading day immediately preceding the date of the grant of such Option less the maximum discount, if any, permitted by the Stock Exchange or, if the Common Shares are not then listed on any stock exchange, the Exercise Price shall not be less than the fair market value of the Common Shares as may be determined by the Directors on the day immediately preceding the date of the grant of such Option. Disinterested shareholder approval shall be required for any reduction in the Exercise Price of any Option if the Optionee is an Insider of the Company at the time of the proposed amendment to the Exercise Price.
3.05 Term of Option.
The Option Period for each Option shall be such period of time as shall be determined by the Committee, subject to amendment by an Employment Contract, provided that in no event shall an Option Period exceed ten years. Notwithstanding the definition of Option Period contained herein or the foregoing, the expiration date of an Option will be the date fixed by the Directors with respect to such Option unless such expiration date falls within a Blackout Period or, except with respect to an Option held by a U.S. Person, within ten days after a Blackout Period Expiry Date, in which case the expiration date of the Option will be the date which is ten Business Days after the Blackout Period Expiry Date. Disinterested shareholder approval shall be required for the extension of any Option Period if the Optionee is an Insider of the Company at the time of the proposed amendment to the Option Period.
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3.06 Lapsed Options.
If Options granted under this Plan are surrendered, terminate or expire without being exercised in whole or in part, new Options may be granted covering the Common Shares not purchased under such lapsed Options (or such lapsed stock options).
3.07 Limit on Options to be Exercised.
Except as otherwise specifically provided herein or in any Employment Contract, Options may be exercised by the Optionee in whole at any time, or in part from time to time (in each case to the nearest full Common Share), during the Option Period only in accordance with the vesting schedule, if any, determined by the Committee, in its sole and absolute discretion, subject to the applicable requirements of the Stock Exchange, at the time of the grant of the Option, which vesting schedule may include performance vesting or acceleration of vesting in certain circumstances and which may be amended or changed by the Committee from time to time with respect to a particular Option. If the Committee does not determine a vesting schedule at the time of the grant of any particular Option, such Option shall be exercisable in whole at any time, or in part from time to time, during the Option Period, subject to the applicable requirements of the Stock Exchange. In the event that the Common Shares are listed on the TSX Venture Exchange, Options with an Exercise Price based on the Discounted Market Price (as such term is defined in the policies of the TSX Venture Exchange), and the Common Shares issuable upon the exercise thereof, shall be subject to the restricted period and legending requirements imposed by the policies of the TSX Venture Exchange.
3.08 Eligible Participants on Exercise.
An Option may be exercised by the Optionee in whole at any time, or in part from time to time, during the Option Period, provided however that, except as otherwise specifically provided in Section 3.11 or Section 3.12 hereof or in any Employment Contract, no Option may be exercised unless the Optionee at the time of exercise thereof is:
(a) in the case of an Eligible Employee, an officer of the Company or a Designated Affiliate or in the employment of the Company or a Designated Affiliate and has been continuously an officer or so employed since the date of the grant of such Option, provided however that a leave of absence with the approval of the Company or such Designated Affiliate shall not be considered an interruption of employment for purposes of this Plan;
(b) in the case of an Eligible Director who is not also an Eligible Employee, a director of the Company or a Designated Affiliate and has been such a director continuously since the date of the grant of such Option; and
(c) in the case of a Consultant, engaged, directly or indirectly, in providing ongoing management, advisory, consulting, technical or other services for the Company or a Designated Affiliate and has been so engaged since the date of the grant of such Option.
3.09 Payment of Exercise Price.
The issue of Common Shares on the exercise of any Option shall be contingent upon receipt by the Company of payment of the aggregate purchase price for the Common Shares in respect of which the Option has been exercised by cash or certified cheque delivered to the registered office of the Company together with a completed notice of exercise, together with any tax amounts required under Section 5.01. No Optionee or legal representative, legatee or distributee of any Optionee will be, or will be deemed to be, a holder of any Common Shares with respect to which such Optionee was granted an Option, unless and until certificates for such Common Shares are issued to such Optionee, or them, under the terms of this Plan. Subject to Section 6.11 hereof, upon an Optionee exercising an Option and paying the Company the aggregate purchase price for the Common Shares in respect of which the Option has been exercised, the Company shall as soon as practicable thereafter issue and deliver a certificate representing the Common Shares so purchased.
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3.10 Acceleration on Take-over Bid, Consolidation, Merger, etc. In the event that:
(a) the Company seeks or intends to seek approval from the shareholders of the Company for a transaction which, if completed, would constitute an Acceleration Event (as defined below); or
(b) a person makes a bona fide offer or proposal to the Company or the shareholders of the Company which, if accepted or completed, would constitute an Acceleration Event,
the Company shall send notice to all Optionees of such transaction, offer or proposal as soon as practicable and, provided that the Committee has determined that no adjustment will be made pursuant to Section 6.06 hereof, (i) the Committee may, by resolution and notwithstanding any vesting schedule applicable to any Option or Section 3.07 hereof, permit all Options outstanding which have restrictions on their exercise to become immediately exercisable during the period specified in the notice (but in no event later than the applicable expiry date of an Option) and prior to such transaction, offer or proposal, so that the Optionee may participate in such transaction, offer or proposal, and (ii) the Committee may accelerate the expiry date of such Options and the time for the fulfillment of any conditions or restrictions on such exercise.
In this Section 3.10, an "Acceleration Event" means:
(a) the acquisition by any person of beneficial ownership of more than 50% of the votes attached to the outstanding voting securities of the Company, by means of a take-over bid or otherwise;
(b) any consolidation, merger, statutory amalgamation or arrangement involving the Company and pursuant to which the Company will not be the continuing or surviving corporation or pursuant to which the Common Shares will be converted into cash or securities or property of another entity, other than a transaction involving the Company and in which the shareholders of the Company immediately prior to the completion of the transaction will have the same proportionate ownership of the surviving corporation immediately after the completion of the transaction;
(c) a separation of the business of the Company into two or more entities;
(d) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company to another entity; or
(e) the approval by the shareholders of the Company of any plan of liquidation or dissolution of the Company.
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3.11 Effect of Death.
If a Participant or, in the case of a Consultant which is not an individual, the primary individual providing services to the Company or Designated Affiliate on behalf of the Consultant, shall die, any outstanding Option held by such Participant or Consultant at the date of such death shall become immediately exercisable notwithstanding Section 3.07 hereof, and shall be exercisable in whole or in part only by the person or persons to whom the rights of the Optionee under the Option shall pass by the will of the Optionee or the laws of descent and distribution for a period of 12 months after the date of death of the Optionee or prior to the expiration of the Option Period in respect of the Option, whichever is earlier, and then only to the extent that such Optionee was entitled to exercise the Option at the date of the death of such Optionee in accordance with Sections 3.07, 3.08 and 3.12 hereof.
3.12 Effect of Termination of Engagement. If a Participant shall:
(a) cease to be a Director or of a Designated Affiliate, as the case may be (and is not or does not continue to be an employee thereof), for any reason (other than death); or
(b) cease to be employed by, or provide services to, the Company or the Designated Affiliates (and is not or does not continue to be a director or officer thereof), or any corporation engaged to provide services to the Company or the Designated Affiliates, for any reason (other than death) or shall receive notice from the Company or any Designated Affiliate of the termination of their Employment Contract;
(the earliest to occur of any of the foregoing events being referred to herein as a "Termination"), except as otherwise provided in any Employment Contract, such Participant may, but only within the 90 days next succeeding such Termination (or, subject to the limitations set forth below, such other period of time as may be determined by the Board of Directors of the Company), exercise the Options to the extent that such Participant was entitled to exercise such Options at the date of such Termination. Notwithstanding the foregoing or any Employment Contract, in no event shall such right extend beyond the Option Period or one year from the date of Termination, whichever is earlier.
ARTICLE FOUR
RESTRICTED SHARE UNIT AWARDS
4.01 Nature of RSUs.
An RSU is an Award that is a bonus for services rendered in the year of grant, that, upon settlement, entitles the recipient Participant to receive a cash payment equal to the Market Value of a Common Share or, at the sole discretion of the Committee, a Common Share, and subject to such restrictions and conditions on vesting as the Committee may determine at the time of grant, unless such RSU expires prior to being settled. Restrictions and conditions on vesting may, without limitation, be based on the passage of time during continued employment or other service relationship, the achievement of specified performance criteria or both.
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4.02 RSU Awards
(a) Subject to the provisions herein and any shareholder or regulatory approval which may be required, the Committee shall, from time to time by resolution, in its sole discretion, (a) designate the Eligible Director, Eligible Employee or Consultant who may receive RSUs under the Plan, provided such person was not retained to provide Investor Relations Activities, (b) fix the number of RSUs, if any, to be granted to each Eligible Director, Eligible Employee or Consultant and the date or dates on which such RSUs shall be granted, (c) determine the relevant conditions, vesting provisions and the Restriction Period of such RSUs, and (d) determine any other terms and conditions applicable to the granted RSUs, which need not be identical and which, without limitation, may include non- competition provisions, subject to the terms and conditions prescribed in this Plan, in any RSU Agreement, and any applicable rules of the Stock Exchange.
(b) Subject to the vesting and other conditions and provisions in this Plan, including Section 2.07, all RSUs granted herein shall vest in accordance with the terms of the RSU Agreement entered into in respect of such RSUs, provided that no RSUs may vest for one year from the date of issuance.
(c) Subject to the vesting and other conditions and provisions in this Plan and in the applicable RSU Agreement, each RSU awarded to a Participant shall entitle the Participant to receive, on settlement, a cash payment equal to the Market Value of a Common Share, or, at the discretion of the Committee, one Common Share or any combination of cash and Common Shares as the Committee in its sole discretion may determine, in each case less any applicable withholding taxes. For greater certainty, no Participant shall have any right to demand to be paid in, or receive, Common Shares in respect of any RSU, and, notwithstanding any discretion exercised by the Committee to settle any RSU, or a portion thereof, in the form of Common Shares, the Committee reserves the right to change such form of payment at any time until payment is actually made.
(d) Persons who provide Investor Relations Activities shall not receive any Awards other than Options.
4.03 RSU Agreements
(a) The grant of a RSU by the Committee shall be evidenced by a RSU Agreement in such form not inconsistent with the Plan as the Committee may from time to time determine. Such RSU Agreement shall be subject to all applicable terms and conditions of this Plan and may be subject to any other terms and conditions (including without limitation any recoupment, reimbursement or claw-back compensation policy as may be adopted by the Committee from time to time) which are not inconsistent with this Plan and which the Committee deems appropriate for inclusion in a RSU Agreement. The provisions of the various RSU Agreements issued under this Plan need not be identical.
(b) The RSU Agreement shall contain such terms that the Company considers necessary in order that the RSUs granted to Participants, shall not constitute a "salary deferral arrangement" as defined in subsection 248(1) of the ITA, by reason of the exemption in paragraph (k) thereof or other laws in force in any country or jurisdiction of which the Participant may from time to time be a resident or citizen or provide services in or the rules of any regulatory body having jurisdiction over the Company.
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4.04 Vesting of RSUs.
The Committee shall have sole discretion to (a) determine if any vesting conditions with respect to a RSU, including any performance criteria or other vesting conditions contained in the applicable RSU Agreement, have been met, (b) waive the vesting conditions applicable to RSUs (or deem them to be satisfied), and (c) extend the Restriction Period with respect to any grant of RSUs, provided that any such extension shall not result in the Restriction Period for such RSUs extending beyond the RSU Outside Expiry Date and, provided, further, that any such determination, waiver or extension to an RSU granted to an Eligible Director, Eligible Employee or Consultant who is a U.S. Person shall be made in accordance with Section 409A of the U.S. Code. The Company shall communicate to a Participant, as soon as reasonably practicable, the date on which all such applicable vesting conditions in respect of a grant of RSUs to the Participant have been satisfied, waived or deemed satisfied and such RSUs have vested (the "Vesting Date").
4.05 Redemption / Settlement of RSUs
(a) Subject to the provisions of this Section 4.05 and Section 4.06, a Participant's vested RSUs shall be redeemed in consideration for a cash payment on the date (the "Redemption Date") that is the earlier of (a) the 15th day following the applicable Vesting Date for such vested RSUs (or, if such day is not a Business Day, on the immediately following Business Day), and (b) the RSU Outside Expiry Date.
(b) Subject to the provisions of this Section 4.05 and Section 4.06, during the period between the Vesting Date and the Redemption Date in respect of a Participant's vested RSUs, the Company (or any Designated Affiliate that is party to an Employment Contract with the Participant whose vested RSUs are to be redeemed) shall, at its sole discretion, be entitled to elect to settle all or any portion of the cash payment obligation otherwise arising in respect of the Participant's vested RSUs either (a) by the issuance of Common Shares to the Participant (or the legal representative of the Participant, if applicable) on the Redemption Date, or (b) by paying all or a portion of such cash payment obligation to the Designated Broker, who shall use the funds received to purchase Common Shares in the open market, which Common Shares shall be registered in the name of the Designated Broker in a separate account for the Participant's benefit.
(c) Settlement of a Participant's vested RSUs shall take place on the Redemption Date as follows:
(i) where the Company (or applicable Designated Affiliate) has elected to settle all or a portion of the Participant's vested RSUs in Common Shares issued from treasury:
(A) in the case of Common Shares issued in certificated form, by delivery to the Participant (or to the legal representative of the Participant, if applicable) of a certificate in the name of the Participant (or the legal representative of the Participant, if applicable) representing the aggregate number of Common Shares that the Participant is entitled to receive, subject to satisfaction of any applicable withholding tax and other applicable source deductions in accordance with Section 5.01; or
(B) in the case of Common Shares issued in uncertificated form, by the issuance to the Participant (or to the legal representative of the Participant, if applicable) of the aggregate number of Common Shares that the Participant is entitled to receive, subject to satisfaction of any applicable withholding tax and other applicable source deductions under Section 5.01, which Common Shares shall be evidenced by a book position on the register of the shareholders of the Company to be maintained by the transfer agent and registrar of the Common Shares;
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(ii) where the Company or a Designated Affiliate has elected to settle all or a portion of the Participant's vested RSUs in Common Shares purchased in the open market, by delivery by the Company or a Designated Affiliate of which the Participant is a director, executive officer, employee or consultant to the Designated Broker of readily available funds in an amount equal to the Market Value of a Common Share as of the Redemption Date multiplied by the number of vested RSUs to be settled in Common Shares purchased in the open market, less the amount of any applicable withholding tax and other applicable source deductions under Section 5.01, along with directions instructing the Designated Broker to use such funds to purchase Common Shares in the open market for the benefit of the Participant and to be evidenced by a confirmation from the Designated Broker of such purchase;
(iii) any cash payment to which the Participant is entitled (excluding, for the avoidance of doubt, any amount payable in respect of the Participant's RSUs that the Company or a Designated Affiliate has elected to settle in Common Shares) shall, subject to satisfaction of any applicable withholding tax and other applicable source deductions under Section 5.01, be paid to the Participant (or to the legal representative of the Participant, if applicable) by the Company or a Designated Affiliate of which the Participant is a director, executive officer, employee or consultant, in cash, by cheque or by such other payment method as the Company and Participant may agree; and
(iv) where the Company or a Designated Affiliate has elected to settle a portion, but not all, of the Participant's vested RSUs in Common Shares, the Participant shall be deemed to have instructed the Company or Designated Affiliate, as applicable, to withhold from the cash portion of the payment to which the Participant is otherwise entitled such amount as may be required in accordance with Section 5.01 and to remit such withheld amount to the applicable taxation authorities on account of any withholding tax obligations, and the Company or Designated Affiliate, as applicable, shall deliver any remaining cash payable, after making any such remittance, to the Participant (or to the legal representative of the Participant, if applicable) as soon as reasonably practicable. In the event that the cash portion payable to settle a Participant's RSUs in the foregoing circumstances is not sufficient to satisfy the withholding obligations of the Company or a Designated Affiliate pursuant to Section 5.01, the Company or Designated Affiliate, as applicable, shall be entitled to satisfy any remaining withholding obligation by any other mechanism as may be required or determined by the Company or Designated Affiliate as appropriate.
(d) Notwithstanding any other provision in this Article Four, no payment, whether in cash or in Common Shares, shall be made in respect of the settlement of any RSUs later than December 15th of the third (3rd) calendar year following the end of the calendar year in respect of which such RSU is granted (the "RSU Outside Expiry Date").
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4.06 Determination of Amounts
(a) The cash payment obligation arising in respect of the redemption and settlement of a vested RSU pursuant to Section 4.05 shall be equal to the Market Value of a Common Share as of the applicable Redemption Date. For the avoidance of doubt, the aggregate cash amount to be paid to a Participant (or the legal representative of the Participant, if applicable) in respect of a particular redemption of the Participant's vested RSUs shall, subject to any adjustments in accordance with Section 6.07 and any withholding required pursuant to Section 5.01, be equal to the Market Value of a Common Share as of the Redemption Date for such vested RSUs multiplied by the number of vested RSUs in the Participant's Account at the commencement of the Redemption Date (after deducting any such vested RSUs in the Participant's Account in respect of which the Company (or applicable Designated Affiliate) makes an election under Section 4.05(b) to settle such vested RSUs in Common Shares).
(b) If the Company (or applicable Designated Affiliate) elects in accordance with Section 4.05(b) to settle all or a portion of the cash payment obligation arising in respect of the redemption of a Participant's vested RSUs by the issuance of Common Shares, the Company shall, subject to any adjustments in accordance with Section 6.07 and any withholding required pursuant to Section 5.01, issue to the Participant (or the legal representative of the Participant, if applicable), for each vested RSU which the Company (or applicable Designated Affiliate) elects to settle in Common Shares, one Common Share. Where, as a result of any adjustment in accordance with Section 6.07 and/or any withholding required pursuant to Section 5.01, the aggregate number of Common Shares to be received by a Participant upon an election by the Company (or applicable Designated Affiliate) to settle all or a portion of the Participant's vested RSUs in Common Shares includes a fractional Common Share, the aggregate number of Common Shares to be received by the Participant shall be rounded down to the nearest whole number of Common Shares.
4.07 Award of Dividend Equivalents
(a) Dividend Equivalents may, as determined by the Committee in its sole discretion, be awarded as a bonus for services rendered in the year awarded in respect of unvested RSUs in a Participant's Account on the same basis as cash dividends declared and paid on Common Shares as if the Participant was a shareholder of record of Common Shares on the relevant record date. Dividend Equivalents, if any, will be credited to the Participant's Account in additional RSUs, the number of which shall be equal to a fraction where the numerator is the product of (a) the number of RSUs in such Participant's Account on the date that dividends are paid multiplied by (b) the dividend paid per Common Share and the denominator of which is the Market Value of a Common Share calculated as of the date that dividends are paid. Any additional RSUs credited to a Participant's Account as a Dividend Equivalent shall be subject to the same terms and conditions (including vesting, Restriction Periods and expiry) as the RSUs in respect of which such additional RSUs are credited.
(b) In the event that the Participant's applicable RSUs do not vest, all Dividend Equivalents, if any, associated with such RSUs will be forfeited by the Participant.
(c) In the event that the limits set forth in Section 2.07 prevent the Company from satisfying its obligations under any Dividend Equivalent, or the Company elects in its sole and absolute discretion, the Company shall be permitted to settle any Dividend Equivalent issued under this Plan in cash. Any cash payments made under this Section 4.07(c) to a Participant shall be calculated by multiplying the number of RSUs to be redeemed for cash by the Market Value per Common Share as at the settlement date.
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4.08 Effect of Death.
If a Participant or, in the case of a Consultant which is not an individual, the primary individual providing services to the Company or Designated Affiliate on behalf of the Consultant, shall die, any unvested RSUs in the Participant's Account as at the date of such death relating to a Restriction Period in progress shall become immediately forfeited and cancelled. For greater certainty, where a Participant's employment or service relationship with the Company or a Designated Affiliate is terminated as a result of death following the satisfaction of all vesting conditions in respect of particular RSUs but before receipt of the corresponding distribution or payment in respect of such RSUs, the Participant shall remain entitled to such distribution or payment. Notwithstanding the foregoing, if the Committee, in its sole discretion, instead accelerates the vesting or waives vesting conditions with respect to all or some portion of outstanding unvested RSUs, the date of such action is the Vesting Date.
4.09 Effect of Termination of Engagement. If a Participant shall:
(a) cease to be a Director or of a Designated Affiliate, as the case may be (and is not or does not continue to be an employee thereof), for any reason (other than death); or
(b) cease to be employed by, or provide services to, the Company or the Designated Affiliates (and is not or does not continue to be a director or officer thereof), or any corporation engaged to provide services to the Company or the Designated Affiliates, for any reason (other than death) or shall receive notice from the Company or any Designated Affiliate of the termination of their Employment Contract;
(the earliest to occur of any of the foregoing events being referred to in this Section 4.09 as a "Termination"), the Participant's participation in the Plan shall be terminated immediately, all RSUs credited to such Participant's Account that have not vested shall be forfeited and cancelled, and the Participant's rights that relate to such Participant's unvested RSUs shall be forfeited and cancelled on the date of such Termination. Notwithstanding the foregoing, if the Committee, in its sole discretion, instead accelerates the vesting or waives vesting conditions with respect to all or some portion of outstanding unvested RSUs, the date of such action is the Vesting Date.
ARTICLE FIVE
TAXES AND SECURITIES LAWS
OF THE UNITED STATES OF AMERICA
5.01 Taxes.
The Company or any Designated Affiliate may take such steps as are considered necessary or appropriate for the withholding of any taxes which the Company or any Designated Affiliate is required by any law or regulation of any governmental authority whatsoever to withhold in connection with any Award or Common Share including, without limiting the generality of the foregoing, the withholding of all or any portion of any payment or the withholding of the issue of Common Shares to be issued upon the exercise or settlement, as applicable, of any Award, until such time as the Participant has paid the Company or any Designated Affiliate for any amount which the Company or the Designated Affiliate is required to withhold with respect to such taxes.
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It is the intention, but not the obligation, that the Committee design payments and benefits provided under this Plan and design any Award so that it shall either be exempt from the application of, or comply with, the requirements of the Nonqualified Deferred Compensation Rules. The Plan and all Grant Agreements shall be construed in a manner that effects such intent. Nevertheless, the tax treatment of the benefits provided under the Plan or any Award is not warranted or guaranteed. Neither the Corporation, its Subsidiaries nor their respective directors, officers, employees or advisers (other than in his or her capacity as a Participant) shall be held liable for any taxes, interest, penalties or other monetary amounts owed by any Participant or other taxpayer as a result of the Plan or any Award. With respect to any RSU that is granted to a Participant who is a U.S. Person and that is considered "deferred compensation" under the Section 409A of the U.S. Code and that settles or pays out upon termination of a Participant's employment or engagement, the following will apply; (i) with respect to "specified employees" (as defined in Section 409A of the U.S. Code), the amount that would otherwise be payable during the six-month period immediately following the Participant's separation from service will be accumulated through and paid, without interest, on the first day of the seventh month following the Participant's separation from service (or, if the Participant dies during such period, within 30 days after the Participant's death); (ii) references in the Plan to Termination (and substantially similar phrases) shall mean "separation from service" within the meaning of Section 409A of the U.S. Code, and (iii) in the event such Participant is entitled to a series of installment payments (as defined in Section 409A of the U.S. Code) such Participant's right to the series of installment payments shall be treated as a right to a series of separate payments and not to a single payment.
5.02 Securities Laws of the United States of America.
Neither the Awards which may be granted pursuant to this Plan nor the Common Shares which may be issued pursuant to the exercise or settlement, as applicable, of any Awards have been registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or under any securities law of any state of the United States of America. Accordingly, any Participant who is issued Common Shares or granted an Award in a transaction which is subject to the U.S. Securities Act or the securities laws of any state of the United States of America may be required to represent, warrant, acknowledge and agree that:
(a) the Participant is acquiring the Award and/or any Common Shares as principal and for the account of the Participant;
(b) in granting the Award and/or issuing the Common Shares to the Participant, the Company is relying on the representations and warranties of the Participant to support the conclusion of the Company that the granting of the Award and/or the issue of Common Shares do not require registration under the U.S. Securities Act or to be qualified under the securities laws of any state of the United States of America;
(c) each certificate representing Common Shares so issued may be required to have the following legend:
"THE SECURITIES REPRESENTED HEREBY [for Awards add: AND ANY SECURITIES ISSUABLE UPON EXERCISE HEREOF] HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") OR UNDER ANY STATE SECURITIES LAWS, AND THE SECURITIES REPRESENTED HEREBY MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT, (C) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED BY RULE 144 OR 144A UNDER THE U.S. SECURITIES ACT, IF APPLICABLE, AND IN COMPLIANCE WITH APPLICABLE U.S. STATE SECURITIES LAWS, OR (D) WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY (WHICH WILL BE DELIVERED PROMPTLY AND WILL NOT BE UNREASONABLY WITHHELD, BUT WHICH MAY BE CONDITIONAL ON DELIVERY OF A LEGAL OPINION IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY), PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
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THE PRESENCE OF THIS LEGEND MAY IMPAIR THE ABILITY OF THE HOLDER HEREOF TO EFFECT "GOOD DELIVERY" OF THE SECURITIES REPRESENTED HEREBY ON A CANADIAN STOCK EXCHANGE. A CERTIFICATE WITHOUT A LEGEND MAY BE OBTAINED FROM THE REGISTRAR AND TRANSFER AGENT OF THE COMPANY IN CONNECTION WITH A SALE OF THE SECURITIES REPRESENTED HEREBY AT A TIME WHEN THE COMPANY IS A "FOREIGN ISSUER" AS DEFINED IN REGULATION S UNDER THE U.S. SECURITIES ACT, UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO THE REGISTRAR AND TRANSFER AGENT AND THE COMPANY, TO THE EFFECT THAT SUCH SALE OF THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT.";
provided that if such Common Shares are being sold outside the United States of America in compliance with the requirements of Rule 904 of Regulation S under the U.S. Securities Act and provided that the Company is a "foreign issuer" within the meaning of Regulation S under the U.S. Securities Act at the time of such sale, such legend may be removed by providing a written declaration signed by the holder to the registrar and transfer agent for the Common Shares to the following effect:
"The undersigned (A) represents and warrants that the sale of the securities of Medicus Pharma Ltd. (the "Company") to which this declaration relates is being made in compliance with Rule 904 of Regulation S under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), and (B) certifies that (1) the undersigned is not an affiliate of the Company as that term is defined in the U.S. Securities Act, (2) the offer of such securities was not made to a person in the United States and either (A) at the time the buy order was originated, the buyer was outside the United States, or the undersigned and any person acting on its behalf reasonably believe that the buyer was outside the United States or (B) the transaction was executed on or through the facilities of a Designated Offshore Securities Market and neither the undersigned nor any person acting on behalf thereof knows or has any reason to believe that the transaction has been prearranged with a buyer in the United States, (3) neither the seller nor any affiliate of the seller nor any person acting on any of their behalf has engaged or will engage in any directed selling efforts in the United States in connection with the offer and sale of such securities, (4) the sale is bona fide and not for the purpose of "washing off" the resale restrictions imposed because the securities are "restricted securities" (as such term is defined in Rule 144(a)(3) under the U.S. Securities Act), (5) the seller does not intend to replace the securities sold in reliance on Rule 904 of the U.S. Securities Act with fungible unrestricted securities and (6) the contemplated sale is not a transaction, or part of a series of transactions which, although in technical compliance with Regulation S under the U.S. Securities Act, is part of a plan or scheme to evade the registration provisions of the U.S. Securities Act. Terms used herein have the meanings given to them by Regulation S under the U.S. Securities Act.";
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(d) other than as contemplated by Section 5.02(c) hereof, prior to making any disposition of any Common Shares acquired pursuant to this Plan which might be subject to the requirements of the U.S. Securities Act, the Participant shall give written notice to the Company describing the manner of the proposed disposition and containing such other information as is necessary to enable counsel for the Company to determine whether registration under the U.S. Securities Act or qualification under any securities laws of any state of the United States of America is required in connection with the proposed disposition and whether the proposed disposition is otherwise in compliance with such legislation and the regulations thereto;
(e) other than as contemplated by Section 5.02(c) hereof, the Participant will not attempt to effect any disposition of the Common Shares owned by the Participant and acquired pursuant to this Plan or of any interest therein which might be subject to the requirements of the U.S. Securities Act in the absence of an effective registration statement relating thereto under the U.S. Securities Act or an opinion of counsel satisfactory in form and substance to counsel for the Company that such disposition would not constitute a violation of the U.S. Securities Act and then will only dispose of such Common Shares in the manner so proposed;
(f) the Company may place a notation on the records of the Company to the effect that none of the Common Shares acquired by the Participant pursuant to this Plan shall be transferred unless the provisions of the Plan have been complied with; and
(g) the effect of these restrictions on the disposition of the Common Shares acquired by the Participant pursuant to this Plan is such that the Participant may not be able to sell or otherwise dispose of such Common Shares for a considerable length of time in a transaction which is subject to the provisions of the U.S. Securities Act other than as contemplated by Section 5.02(c) hereof.
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ARTICLE SIX
GENERAL
6.01 Effective Time of this Plan.
This Plan shall become effective upon a date to be determined by the Directors; provided, however, that the RSU components of the Plan shall be subject to disinterested shareholder approval.
6.02 Amendment of Plan.
The Committee shall have the right:
(a) without the approval of the shareholders of the Company, subject to Section 6.02(b) of the Plan, to make any amendments to the Plan, including but not limited to the following amendments:
(i) any amendment of a "housekeeping" nature, including, without limitation, amending the wording of any provision of the Plan for the purpose of clarifying the meaning of existing provisions or to correct or supplement any provision of the Plan that is inconsistent with any other provision of the Plan, correcting grammatical or typographical errors and amending the definitions contained within the Plan;
(ii) any amendment to comply with the rules, policies, instruments and notices of any regulatory authority to which the Company is subject, including the Stock Exchange, or to otherwise comply with any applicable law or regulation;
(iii) other than changes to the expiration date and the exercise price of any Award as described in Section 6.02(b)(iii) and Section 6.02(b)(iv) of this Plan, any amendment, with the consent of the Participant, to the terms of any Award previously granted to such Participant under the Plan;
(iv) any amendment to the provisions concerning the effect of the termination of any Participant's position, employment or services on such Participant's status under the Plan;
(v) any amendment to the categories of persons who are Participants; and
(vi) any amendment respecting the administration or implementation of the Plan;
(b) with the approval of the shareholders of the Company by ordinary resolution, including if required by the applicable Stock Exchange, disinterested shareholder approval, to make any amendment to the Plan not contemplated by Section 6.02(a) of the Plan, including, but not limited to:
(i) any change to the number of Common Shares issuable from treasury under the Plan, including an increase to the fixed maximum percentage or number of Common Shares or a change from a fixed maximum percentage of Common Shares to a fixed maximum number of Common Shares or vice versa, other than an adjustment pursuant to Section 6.07 of the Plan;
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(ii) any amendment which reduces the exercise price of any Award, other than an adjustment pursuant to Section 6.07 of the Plan; provided, however, that, for greater certainty, disinterested shareholder approval will be required for any amendment which reduces the exercise price of any Option if the Participant is an Insider of the Corporation at the time of the proposed amendment;
(iii) any amendment which extends the expiry date of an Award, or the Restriction Period of any RSU beyond the original expiry date or Restriction Period, except in the event of an extension due to a Blackout Period;
(iv) any amendment which cancels any Award and replaces such Award with an Award which has a lower exercise price or other entitlement, other than an adjustment pursuant to Section 6.07 of the Plan,
(v) any amendment which would permit Awards to be transferred or assigned by any Participant other than as allowed by Section 6.03 of the Plan, and
(vi) any amendments to this Section 6.02 of the Plan.
Notwithstanding the foregoing: any amendment to the Plan shall be subject to the receipt of all required regulatory approvals including, without limitation, the approval of the Stock Exchange.
6.03 Non-Assignable.
No rights under this Plan and no Award awarded pursuant to this Plan are assignable or transferable by any Participant other than pursuant to a will or by the laws of descent and distribution.
6.04 Rights as a Shareholder.
No Participant shall have any rights as a shareholder of the Company with respect to any Common Shares which are the subject of an Award. Except as otherwise provided in this Plan, no Participant shall be entitled to receive any dividends, distributions or other rights declared for shareholders of the Company for which the record date is prior to the date of issue of certificates representing Common Shares acquired upon the exercise or settlement, as applicable, of any Awards.
6.05 No Contract of Employment.
Nothing contained in this Plan shall confer or be deemed to confer upon any Participant the right to continue in the employment of, or to provide services to, the Company or any Designated Affiliate nor interfere or be deemed to interfere in any way with any right of the Company or any Designated Affiliate to discharge any Participant at any time for any reason whatsoever, with or without cause. Participation in any of this Plan by a Participant shall be voluntary.
6.06 Consolidation, Merger, etc.
If there is a consolidation, merger or statutory amalgamation or arrangement of the Company with or into another corporation, a separation of the business of the Company into two or more entities or a sale, lease exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company to another entity, upon the exercise or settlement, as applicable, of an Award under this Plan the holder thereof shall be entitled to receive the securities, property or cash which the holder would have received upon such consolidation, merger, amalgamation, arrangement, separation or transfer if the holder had been the holder of Common Shares immediately prior to the effective time of such event, unless the Committee otherwise determines appropriate adjustments or substitutions to be made in such circumstances in order to maintain the economic rights of the Participant in respect of such Award in connection with such event.
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6.07 Adjustment in Number of Common Shares Subject to the Plan.
In the event there is any change in the Common Shares, whether by reason of a stock dividend, consolidation, subdivision, reclassification or otherwise, an appropriate adjustment shall be made by the Committee in:
(a) the number of Common Shares available under this Plan;
(b) the number of Common Shares subject to any Award;
(c) the exercise price of the Common Shares subject to Awards; and
(d) the number of Common Shares or cash payment to which the Participant is entitled upon exercise or settlement of such Award.
If the foregoing adjustment shall result in a fractional Common Share, the fraction shall be disregarded. All such adjustments shall be conclusive, final and binding for all purposes of this Plan.
6.08 Securities Exchange Take-over Bid.
In the event that the Company becomes the subject of a take-over bid (within the meaning of the Securities Act (Ontario)) as a result of which all of the outstanding Common Shares are acquired by the offeror through compulsory acquisition provisions of the incorporating statute or otherwise, and where consideration is paid in whole or in part in equity securities of the offeror, the Committee may send notice to all Participants requiring them to surrender their Awards within 10 days of the mailing of such notice, and the Optionees shall be deemed to have surrendered such Awards on the tenth day after the mailing of such notice without further formality, provided that:
(a) the Committee delivers with such notice an irrevocable and unconditional offer by the offeror to grant replacement awards to the Participants on the equity securities offered as consideration;
(b) the Committee has determined, in good faith, that such replacement awards have substantially the same economic value as the Awards being surrendered; and
(c) the surrender of Awards and the granting of replacement awards can be effected on a tax free rollover basis or otherwise without adverse tax consequences under the ITA.
6.09 No Representation or Warranty.
The Company makes no representation or warranty as to the future market value of any Common Shares issued in accordance with the provisions of this Plan.
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6.10 Compliance with Applicable Law.
If any provision of this Plan or any Award contravenes any law or any order, policy, by-law or regulation of any regulatory body having jurisdiction over the securities of the Company, then such provision shall be deemed to be amended to the extent necessary to bring such provision into compliance therewith.
6.11 Necessary Approvals.
The obligation of the Company to issue and deliver any Common Shares in accordance with this Plan shall be subject to any necessary approval of any stock exchange or regulatory authority having jurisdiction over the securities of the Company. If any Common Shares cannot be issued to any Participant upon the exercise or settlement, as applicable, of an Award for whatever reason, the obligation of the Company to issue such Common Shares shall terminate and any exercise price paid to the Company in respect of the exercise or settlement, as applicable, of such Award shall be returned to the Participant.
6.12 Conflict.
To the extent there is any inconsistency or ambiguity between this Plan and any Employment Contract, the terms of such Employment Contract shall govern to the extent of such inconsistency or ambiguity, subject only to compliance with applicable law and Stock Exchange policy.
6.13 Interpretation.
This Plan shall be governed by, and be construed in accordance with, the laws of the Province of Ontario.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (hereinafter this "Agreement") is made effective the 2nd day of December 2023 (the "Effective Date")
B E T W E E N:
Medicus Pharma Ltd. (the "Company")
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James P Quinlan (the "Executive")
RECITALS
WHEREAS the Company wishes to employ the Executive and the Executive wishes to be employed by the Company pursuant to the terms and conditions of this Agreement.
NOW THEREFORE for good and valuable consideration set forth in this Agreement, the parties agree as follows:
SECTION 1. EFFECTIVE DATE AND TERM
1.1 Effective Date and Term. The terms and conditions of this Agreement shall become effective on September 1, 2023 (the "Start Date"), and shall continue for five (5) years, subject to the terms of this Agreement.
SECTION 2. POSITION
2.1 Capacity and Services. The Company shall employ the Executive in the position of the Chief Financial Officer (CFO), reporting directly to the Chief Executive Officer of the Company (the "CEO"), or his or her designee. In his position, the Executive shall perform such duties and have such authority as are normally associated with the position and as may be assigned, delegated or limited from time to time, in the reasonable discretion of the Company.
Executive shall render such services as are necessary and desirable to protect and advance the best interests of the Company, acting, in all instances, under the supervision of and in accordance with the policies set by the Company. At all times, the Executive's employment is conditioned upon him exercising his duties with due regard to the Company's Business (as defined below) and any related statutory acts. The Executive shall perform all duties and responsibilities in a manner consistent with all applicable laws as well as with the written policies of the Company in effect from time to time. The terms of this Agreement are subject to company policies that are in effect from time to time, with the exception of terms and conditions of employment addressed in more particularity herein. The Executive shall, if so, requested by the Company, serve without additional compensation, as an officer, director or manager of any subsidiary or affiliate of the Company. The Executive acknowledges that by virtue of his position, he is a fiduciary and has fiduciary obligations to the Company that continue even after his employment ends.
2.2 Insurance. If the Executive is a director or officer at any time, the Company agrees to provide the executive with comprehensive directors' and officers' liability insurance, which shall be established and maintained by the Company at its own expense. This obligation of Company shall continue for the three calendar years after Executive's separation from employment of for any reason.
2.3 Other Duties. Substantially all of Executive's working time, energy, skill and efforts shall be devoted to the performance of Executive's duties hereunder in a manner that will faithfully and diligently further the business and interests of the Company; provided, however, that Employee may (i) serve on corporate boards or committees as pre-approved by the Board; (ii) civic or charitable boards or committees; (iii) manage personal passive investments (including, without limitation, in start-up and early-stage companies), (iv) serve in non-operational or advisory positions for other companies, so long as any of the activities in (i) through (iv) hereof do not violate any other provision of this Agreement or, in the aggregate, materially interfere with the performance of Executive's duties to the Company in accordance with this Agreement. The Executive agrees that he shall obtain written permission from the Company regarding any external roles, including board roles or advisory roles, that he holds or wishes to hold outside of his employment with the Company, and the Company agrees that it shall not exercise its discretion unreasonably in this regard.
Company acknowledges and approves Executive's affiliation with Private Advisor group (PAG) a Registered Investment Advisor, and that Executive's exercise of duties for Company are separate and apart from such work or services Executive may perform as an Investment Advisory representative of PAG.
SECTION 3. COMPENSATION AND BENEFITS
3.1 Initial Options. The Company shall award the Executive 50,000 stock options (the "Initial Options") on the effective date of this agreement. The initial options are granted and vested immediately. The Options are granted at a strike price calculated based on 10 days of volume weighted average price from the date of commencement of trading of the securities on Toronto Stock Exchange (TSXV). This grant is also subject to the approval of the Compensation Committee or the Board of Directors of the company. These Initial Options shall expire five years after the Initial Grant Date, subject to earlier forfeiture in accordance with the terms hereof or the terms of the Company's Share Option Plan (the "Plan").
3.2 Base Salary. The annual base salary of the Executive shall be USD $300,000 (the "Base Salary"), (without regard to authorized or legally required deductions and withholdings) to be paid in the normal payroll cycle of Company for similarly situated employees.
3.3 One-Time sign-up Bonus. The company shall disburse one-time sign-up bonus of USD $100,000 to the executive at the time of commencement of employment.
3.4 Discretionary Bonus Plan. The Executive shall be eligible to participate in the Company's Discretionary Bonus Plan (the "Bonus Plan"), as may be amended from time to time. The bonus will be based on prescribed written performance milestones to be discussed between the Executive and the CEO, and established by the CEO, the final amount to be determined in the discretion of the CEO, subject to certain other factors, including the Company's performance, financial stability, and availability of cash. The amount Executive will be eligible to earn are:
(a) in the first year of this Agreement, (i.e., ending August 31, 2024) the Executive shall be eligible to receive a bonus of up to 60% of his Base Salary.
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(b) thereafter, the Executive shall be eligible to receive an annual discretionary bonus as follows:
(i) after the completion of the second year of employment under this Agreement, the Executive shall be eligible to receive up to 70% Base Salary.
(ii) after the completion of the third year of employment under this Agreement, the Executive shall be eligible to receive up to 80% Base Salary.
(iii) after the completion of the fourth year of employment under this Agreement, the Executive shall be eligible to receive up to 90% Base Salary; and
(iv) after the completion of the fifth year of employment under this Agreement, the Executive shall be eligible to receive up to 100% of Base Salary.
(c) subject to the terms and conditions below, any cash bonus payable under the Bonus Plan is generally payable within 60 days of completion of the applicable anniversary year.
(d) the Executive must be in the active employment of the Company in order to receive any payment under the Bonus Plan. No period of notice whether occasioned by the Executive or the Company shall be considered active service.
(e) the Executive shall be entitled to a pro-rated Bonus for any partial year only if this Agreement is terminated in accordance with Section 3.4;
(f) any discretionary bonus under this Section 3.4 does not accrue after the Executive gives or receives notice of termination and is only earned and payable as noted above in this Section 3.4, regardless of whether such termination is with or without notice, adequate notice or legal notice or is with or without legal or just cause. The Executive's rights to an annual bonus shall be strictly limited to those provided in this Section 3.4. Unless otherwise specifically provided in writing, the Executive shall have no claim to, or in respect of, any discretionary bonus payments in the event that due notice of termination of employment had been given and is pending at the time the Bonus is earned, or to be paid, nor shall the Executive have any entitlement to damages or other compensation or any claim for wrongful termination or dismissal in respect of any discretionary bonus payments, which may have or would have been payable to the Executive if such wrongful termination or dismissal had not occurred or if due notice of termination had been given; and
(g) by delivery of written notice to the Company at any time prior to the date of payment of a bonus that has been earned by the Executive under this Section 3.4 the Executive may elect to convert 50% of any cash payments under this Section 3.4 to common shares of the Company at a price per share equal to the market price of common shares of the Company at the close of business on the Canadian Securities Exchange on the date of notice. Any tax or other withholdings required as a result of to Executive's election to convert the cash bonus into common shares of the Company will be withheld from the cash payment to Executive.
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(h) The Company reserves the right to convert any cash payments under Section 3.4 to equity-based incentives. In the event the Company elects to convert a bonus cash payment to equity-based incentives, it shall convert no more of the cash payment than is necessary to pay the withholding on the issuance of the equity-based incentives so that the payment of bonus is a cash neutral transaction for Executive.
3.5 Share Incentive Plan. The Executive shall receive 200,000 stock options (the "Options"), which shall vest as described herein. The Options are granted at a strike price calculated based on 10 days of volume weighted average price from the date of commencement of trading of the securities on Toronto Stock Exchange (TSXV). This grant is also subject to the approval of the Compensation Committee or the Board of Directors of the company.
(a) The Options shall vest at the ratee of 50,000 per year for each completed year of service under this Agreement, commencing one year after the Effective Date. The Options shall expire five years from the Effective Date, subject to earlier forfeiture in accordance with the terms of this Agreement, or the terms of the Plan or applicable grant agreement. The Executive's entitlements to Options hereunder shall be subject to adjustment for stock splits, reverse splits and other like events.
(b) The Executive must be in active employment in order to receive the Options. No period of notice, whether occasioned by the Executive or the Company, shall be considered active service.
(c) Options do not vest after the Executive's gives or receives notice of termination, or after the effective date of termination occurs, whether such termination is with or without notice, adequate notice or legal notice or is with or without legal or just cause, the Executive's rights shall be strictly limited to those provided for in the Plan, or as otherwise provided in the applicable grant agreement. Unless otherwise specifically provided in writing, the Executive shall have no claim to or in respect of any Options which may have or would have become vested Options had due notice of termination of employment been given nor shall the Executive have any entitlement to damages or other compensation or any claim for wrongful termination or dismissal in respect of any Options or loss of profit or opportunity which may have or would have vested or accrued to the Executive if such wrongful termination or dismissal had not occurred or if due notice of termination had been given.
3.6 Benefits. The Executive shall be eligible to participate in all benefit plans that the Company maintains from time to time for the benefit of similar senior executives, in accordance with the terms and conditions of the plans. The Company may, at any time and from time to time, modify, suspend, or discontinue any or all such benefits plans with or without prior notice.
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3.7 Paid Time Off. The Executive shall be entitled to take 28 days of paid time off ("PTO") per calendar year, pro-rated for any partial calendar year of employment. The Company will allow no more than five (5) days of PTO to be carried over from one calendar year to the next. Any PTO that is carried over from one calendar year to the next and not used before December 31st of the following calendar year shall be forfeit and forever lost without any compensation. For example, if two days of PTO are carried over from 2023 to 2024, such two days of PTO must be used by December 31, 2024, or they will be forfeited and lost forever without compensation.
3.8 Expenses. The Company shall reimburse the Executive for the Executive's travel and other expenses or disbursements reasonably and necessarily incurred or made in connection with the Company's business. Expenses will be reimbursed in accordance with policies and practices approved by the Company. The Executive shall furnish statements and receipts for all such expenses prior to reimbursement.
SECTION 4. TERMINATION AND RESIGNATION
4.1 Termination for Cause. The Employment may be terminated by the Company for Cause (as defined below) without further liability on the part of the Company, except for payment of amounts which may be due and remaining unpaid at the time of termination of employment such as Base Salary, vacation pay and expenses properly accrued to the termination date ("Accrued Entitlements") or as may be provided under law, effective immediately upon written notice to Executive. Only the following shall constitute "Cause" for such termination:
(a) Executive's conviction of or plea of nolo contendere to, or a judgment against Executive in any quasi-criminal judicial or administrative proceeding (including without limitation, any proceeding by a federal, state or local regulatory agency or body) with respect to, any crime constituting a felony, or a misdemeanor: which involves the Executive's fraud, theft or embezzlement; or, in the sole discretion of the Board, materially harms the Company's reputation or standing in the community, or renders Executive incapable of performing his duties and responsibilities in an effective manner.
(b) Executive willfully breaches any material duty or obligation to the Company which breach continues, or renews, after written notice of such conduct and failure to cure within ten (10) days;
(c) Executive willfully engages in misconduct that causes material harm to the Company after written notice of such conduct and failure to cure within ten (10) days;
(d) Executive willfully fails to follow lawful direction from the Board, after written notice of such conduct and failure to cure within ten (10) days;
(e) any conduct of the Executive that constitutes a material violation of legal requirements, or any policy of the Company applicable to Executive that relates to discrimination, harassment or retaliation that are substantiated by the Company;
(f) habitual use of alcohol or any controlled substance without prescription, in each case, that hinders Executive's ability to discharge his or her duties under this Agreement after written notice of such conduct and failure to cure within thirty (30) days, which cure shall include, at a minimum an evaluation by a medical professional specializing in substance abuse and addiction, and strict adherence to any course of treatment recommended by the medical professional as documented by the medical professional and shared with the Chair of the Board;
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(g) Executive engages in a conflict of interest or usurps a business opportunity of the Company after written notice of such conduct and failure to cure within ten (10) days; and
(h) Executive's material breach of any other provision of this Agreement provided, that the Executive is given written notice of breach and a thirty (30) day opportunity to cure.
In the event that, in the sole determination, reasonably exercised, of the Board, a breach of any of the grounds for termination for "Cause" is not capable of cure, the requirement that an opportunity for cure be provided to Executive can be waived.
Any written notice to cure under the Section shall (a) state that it is provided pursuant to the Agreement and identify the Section(s) believed to have been breached; and (b) specify the relevant acts of misconduct underlying the notice.
Each of the events or circumstances described in this Section 4.1(a) shall constitute a violation of this Agreement.
4.2 Resignation by Executive. The Executive shall give the Company 90 days' notice of the resignation (the "Resignation Period") of the Executive's employment hereunder; however, it is understood and agreed that the Company shall be entitled to:
(a) waive all or part of that notice and accept the Executive's resignation effective at an earlier date, subject to providing the Executive with his Accrued Entitlements up to the end of the Resignation Period. The Executive agrees that any waiver of the Resignation Period by the Company hereunder shall not amount to a termination of the Executive's employment by the Company; or
(b) assign the Executive transitional or temporary duties through such Resignation Period or have the Executive work at another location (within reason), and the Executive agrees that these actions by the Company shall not amount to a termination of the Executive's employment by the Company.
4.3 Termination by Company without Cause. The Employment may be terminated without Cause by the Company upon three months written notice to Executive (the "Notice Period") at any time during the Employment Term; absent the Company's determination otherwise as set forth in the notice, termination shall be effective immediately upon CEO's receipt thereof. Upon any such termination the Executive shall be entitled to the payment of Termination Benefits (as defined below in Section 4.5). It is expressly agreed and understood that if this Agreement is terminated by the Company without Cause as provided in this Section 4.3 it shall not impair or otherwise affect Executive's Additional Obligations (as defined below in Section 4.5) as and to the
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extent provided herein. Termination of employment upon expiration of the Executive's Employment Term as such term may have been extended or renewed hereunder shall not be considered a Termination without Cause.
4.4 Termination by Executive For Good Reason. Executive may terminate his employment and this Agreement for Good Reason as defined herein upon 30 days written notice delivered to the Company. "Good Reason" for purposes of this Agreement shall mean the occurrence of any of the following events without the written consent of the Executive: (a) a material reduction by the Company in the Executive's Base Salary which is not authorized by this Agreement (other than an inadvertent reduction in Base Salary not occurring in bad faith and that is remedied by the Company within 30 days after receipt of notice thereof given by the Executive); (b) relocation of Executive's primary Company employment location more than thirty five (35) miles from the office that currently serves as the Executive's primary employment location; (c) a material reduction in the Executive's duties or responsibilities in a manner that is inconsistent with executive employment with respect to the Company business; or (d) the material breach by the Company of any provision of this Agreement that is not cured within 30 days after receipt of notice thereof given by the Executive stating in reasonable detail the actions or omissions purported to constitute such a material reduction or a breach of the Company's obligations hereunder. In the event of the Executive's resignation for Good Reason, pursuant to this Section 4.4, the Company shall pay to the Executive the Termination Benefits as provided and conditioned in Section 4.5 below.
4.5 Termination Benefits In The Event Of A Termination By Company Without Cause Or By Executive With Good Reason Pursuant To Section 4.3 or 4.4 Respectively.
(a) In the event of a termination of the Employment by the Company without Cause, or by Executive with Good Reason pursuant to Section 4.3 or 4.4 respectively, the Company shall provide to Executive (i) a severance payment at a rate equal to 100% of Executive's Base Salary as in effect on the date of termination for a period of twelve (12) months from the date of termination; (b) pro rata target discretionary bonus payment for the partial year worked by the Executive up to the date notice is provided under Sections 4.3 or 4.4; (c) payment by the Company of any COBRA premiums, based on Executive's health insurance election at time of termination, on Executive's behalf for the period of twelve months; (d) the Executive's Accrued Entitlements as of the termination date. All payments made hereunder shall be subject to withholding under applicable law and shall be made in accordance with the Company's usual practice as in effect from time to time); (collectively, "Termination Benefits").
(b) Notwithstanding anything to the contrary herein, in no event shall the Company be obligated to pay any Termination Benefits in the event that before or after termination Executive is in breach of Executive's obligations under Section 6 ("Additional Obligations") under this Agreement , and the Company shall have the right to withhold any Termination Benefits due to Executive to the extent necessary to offset any monies then owing by Executive to the Company, including any damages suffered by the Company as a result of Executive's acts or omissions or breach of his or her Additional Obligations, to the extent permitted by applicable law. Notwithstanding the foregoing, nothing in this Section 4.5 shall be construed to affect Executive's right to receive COBRA continuation entirely at Executive's own cost to the extent that Executive may be entitled to additional COBRA continuation.
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(c) The Company and Executive agree that the Termination Benefits paid by the Company to Executive under this Section 4.5 shall be in full satisfaction, compromise and release of any claims arising out of any termination of the Employment by the Company without Cause or by Executive with Good Reason pursuant to Section 4.3 or 4.4 respectively. The payment of the Termination Benefits set forth in this Section 4.5 shall be contingent upon, and the Company shall have no obligation to initiate payment of any Termination Benefits until Executive's timely delivery of a Separation Agreement containing among other things, a general release by Executive, for Executive and Executive's successors, assigns, related parties, affiliates, and all those entitled to assert Executive's rights, of any and all claims that such Persons ever had or then have against the Company, and its respective officers, managers, members, employees, agents, subsidiaries, affiliates, successors and assigns, arising out of Executive's employment with the Company or termination thereof, in a customary form reasonably satisfactory to the Company (a "Conforming Release"), it being understood that no Termination Benefits set forth in this Section 4.5 shall be provided unless and until Executive executes, delivers and does not revoke a Conforming Release; provided, that the Conforming Release shall not require a waiver of any Accrued Entitlements or the Company's obligations with respect to the Termination Benefits. The Conforming Release must be executed by Executive and delivered to the Company, and all revocation periods must have expired, within sixty (60) days after the date of termination of the Employment; provided, that, if the Conforming Release is not executed and delivered by Executive prior to the expiration of such sixty (60) day period, then Executive shall forfeit, and the Company shall cease to have any duties or obligations with respect to, the Termination Benefits; the foregoing sixty-day period shall commence on the date that the Company delivers a copy of the Conforming Release to the CFO In addition, to the extent that the payments described in Section 4.4 are delayed pending the effectiveness of the Conforming Release, the initial installment thereof shall include a catch-up payment to cover amounts retroactive to the day immediately following the date of termination.
4.6 Disability. If, due to a physical or mental impairment, Executive shall be unable to perform the essential functions of Executive's then existing position or positions under this Agreement with or without reasonable accommodation for a period of ninety (90) consecutive days, or one hundred and twenty (120) days in a one hundred and eighty (180) day period, as determined by a physician retained by the Company and reasonably acceptable to Executive (and the Executive hereby authorizes the disclosure and release to the Company of such determination and all supporting medical records) ("Disability"), the Company's Board of Directors may remove Executive from any responsibilities and/or reassign Executive to another position with the Company for a period of two months or during the maximum period of such Disability as described above (referred to as "Disability Period""). Notwithstanding any such removal or reassignment as a result of the Executive's Disability, Executive shall continue to receive Executive's full Base Salary (less any disability pay or sick pay benefits to which Executive may be entitled under the Benefit Plans or otherwise under the Company's policies) and to participate in Benefit Plans in accordance with Section 3 of this Agreement (except to the extent that Executive may be ineligible for one or more such benefits under applicable plan terms) for such Disability Period. In the event Executive is not able to return to work in the office and perform all essential functions of his position at the end of the Disability Period referenced above, Company has the right to terminate Executive's employment hereunder with no further obligations to Executive except to pay any (a) Accrued Entitlements with respect to Executive, the payment of each of which shall be subject to withholding under applicable law and shall be made at the time when, and to the extent that, the Company would have otherwise had to make such payment pursuant to Section 3 had the termination of Employment not occurred; and (b) Executive's rights under the Benefit Plans shall be determined under the provisions of such Benefit Plans. Any determination of Disability under this Section 4.6 is not intended to alter any benefits Executive may be entitled to receive under any long-term disability insurance policy (if any) carried by either the Company or Executive with respect to Executive, which benefits shall be governed solely by the terms of any such insurance policy.
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4.7 Death. The Employment and all obligations of the Company and Executive hereunder shall terminate in the event of the death of Executive; provided, that the Company shall pay to Executive's estate any Accrued Entitlements, the payment of each of which shall be subject to withholding under applicable law and shall be made at the time when, and to the extent that, the Company would have otherwise had to make such payment pursuant to Section 3 had the termination of Employment not occurred.
4.8 Effect of Termination. The Executive agrees that upon cessation of his employment for any reason whatsoever, the Executive shall be deemed to have immediately resigned any position that the Executive may have as an officer, director or Executive of the Company together with any other office, position or directorship that the Executive may hold in any of the Company's related entities and its affiliates. In such event, the Executive shall, at the request of the Company, forthwith execute any and all documents appropriate to evidence such resignations. The Executive shall not be entitled to any payments in respect of such resignations in addition to those provided for herein.
SECTION 5. CHANGE OF CONTROL
5.1 For the purposes of this Section 5:
(a) "Target" means the Company; and
(b) "Change of Control Transaction" means:
(i) the acquisition of a sufficient number of voting securities in the capital of the Target so that the acquirer, together with persons acting jointly or in concert with the acquirer, becomes entitled, directly or indirectly, to exercise more than 50% of the voting rights attaching to the outstanding voting securities in the capital of the Target (provided that, prior to the acquisition, the acquirer was not entitled to exercise more than 50% of the voting rights attaching to the outstanding voting securities in the capital of the Target);
(ii) the completion of a consolidation, merger, arrangement or amalgamation of the Target with or into any other entity whereby the voting security holders of the Target immediately prior to the consolidation, merger, arrangement or amalgamation receive less than 50% of the voting rights attaching to the outstanding voting securities of the consolidated, merged, arranged or amalgamated entity; or
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(iii) the completion of a sale whereby all or substantially all of the Target's undertakings and assets become the property of any other entity and the voting security holders of the Target immediately prior to the sale hold less than 50% of the voting rights attaching to the outstanding voting securities of that other entity immediately following that sale.
5.2 In the event of a Change of Control Transaction, any unvested Options granted to the Executive pursuant to Section 5.2 shall immediately vest.
SECTION 6. NON-COMPETITION, CONFIDENTIALITY AND PROPRIETARY RIGHTS
6.1 Definitions. For the purposes of this Section 6:
(a) "Business" means the business of Pharmaceutical Research and Development of compounds marketed by the Company or any of its subsidiaries or affiliates or are in the Company's or any such subsidiaries or affiliate's developmental pipeline, as of the date of termination of this Agreement.
(b) "Customer" means any commercial or institutional Entity who has: (i) purchased or licensed from the Company or its affiliates (with the Executive's knowledge) any product produced or service supplied, sold, licensed or distributed by the Company; or (ii) supplied to the Company or its affiliates (with the Executive's knowledge) any product to be produced, sold, licensed or distributed by the Company; provided that Customers shall only include any Entity who was a Customer during the six (6) months preceding the last date of the Executive's active employment.
(c) "Entity" means a partnership, limited partnership, limited liability partnership, company, joint stock company, trust, unincorporated association, joint venture or other entity or governmental entity, and pronouns have a similarly extended meaning.
(d) "Prospective Customer" means any commercial or institutional Entity that the Company or its affiliates was in active discussions about selling products or services related to the Business during the six (6) months preceding the last date of the Executive's active employment.
(e) "Restricted Period" means a period of twelve (12) months following the last day of active employment of the Executive.
(f) "Territory" means United States and Canada.
6.2 Non-Competition. During the Restricted Period, the Executive shall not, whether individually or in partnership or jointly or in conjunction with any other person, as principal, agent, consultant, contractor, employer, executive or in any other manner, directly or indirectly, perform services for in a role similar to what he held in the twelve (12) months prior to termination with the Company, or establish, control, own a beneficial interest in, or be otherwise commercially involved in any endeavour, activity or business in the Territory that is substantially similar to or competitive with the Business of the Company.
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6.3 Prohibited Investments. The Executive shall not be an investor, shareholder, or partner in any enterprise, association, company, joint venture or partnership (each, an "Investment") if the Investment conflicts with the interests of the Company or any of its or their affiliated or related entities. The Executive shall identify and inform the Company of any potential conflicts that may arise as a result of an Investment by the Executive and the Executive shall, to the best of the Executive's efforts, reduce or eliminate any such conflict. The Company reserves the right, acting reasonably, to determine whether any Investment conflicts with or is otherwise inconsistent with the Company's interests in which case the Executive shall be required to immediately eliminate any such conflict.
6.4 Non-Solicitation. During the Restricted Period, the Executive shall not, either individually or in partnership or jointly or in conjunction with any other person, as principal, agent, consultant, contractor, employer, executive or in any other manner, directly or indirectly:
(a) canvass or solicit the business of (or procure or assist the canvassing or soliciting of the business of) any Customer for any purpose which is competitive with the Business; or
(b) canvass or solicit the business of (or procure or assist the canvassing or soliciting of the business of) any Prospective Customer for any purpose which is competitive with the Business.
6.5 Non-Solicitation of Employees. During the Restricted Period, the Executive shall not, either individually or in partnership or jointly or in conjunction with any other person or entity, as principal, agent, consultant, contractor, employer, executive or in any other manner, directly or indirectly, solicit, induce or entice away or in any other manner persuade or attempt to persuade any officer, executive, employee, consultant or agent of the Company or its affiliated or related entities whom the Executive supervised or had business contact with on behalf of the Company or its affiliated or related entities during the twelve (12) month period immediately prior to the end of the Executive's active employment, to discontinue or alter any one or more of their relationships with the Company or its subsidiaries or related entities. For greater certainty, this Section 6.5 shall not prohibit general advertisements in electronic or print media through which the Executive has not intentionally targeted any officer, executive, employee, consultant or agent of the Company or its affiliated or related entities and where the first contact with respect thereto is initiated by such officer, executive, employee, consultant, or agent.
6.6 Confidentiality. Except in the normal and proper course of the Executive's duties, the Executive shall not use for the Executive's own account or disclose to anyone else, during or after the Executive's last day of active employment, any confidential or proprietary information or material relating to the Company's operations or business that the Executive obtains from the Company or the Company's subsidiaries and affiliates, and their officers, executives, agents, suppliers or customers or otherwise by virtue of the Executive's employment by the Company. Confidential or proprietary information or material includes, without limitation, the following types of information or material, in whatever form, both existing and contemplated, regarding the Company or any subsidiary or other affiliate of the Company: corporate information, including contractual licensing arrangements, plans, strategies, tactics, policies, resolutions, patent, trade-mark and trade name applications, and any litigation or negotiations; information concerning suppliers; marketing information, including sales, investment and product plans, customer lists, strategies, methods, customers, prospects and market research data; financial information, including cost and performance data, debt arrangements, equity structure, investors and holdings; operational and scientific information, including trade secrets; software; technical information, including technical drawings and designs; and personnel information, including personnel lists, resumes, personnel data, organizational structure and performance evaluations (the "Confidential Information"). Confidential Information does not include: (a) information that is in the public domain, unless such information falls into the public domain through unauthorized disclosure or other acts by the Executive; (b) information that was in the Executive's lawful possession prior to the disclosure and has not been obtained by the Executive either directly or indirectly from the Company or its affiliated or related entities; or (c) information that the Executive is required by law to disclose, provided that the Executive provides the Company with prior written notice of such disclosure.
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6.7 Intellectual Property. All right, title and interest in all inventions, methodologies, concepts, documentation, specifications and any other works developed by the Executive in the scope of and during the course of the Executive's employment (the "Works for Hire") including all patent, copyright, trade-mark, trade secret and any other intellectual property and proprietary rights therein (the "Intellectual Property Rights") shall be the sole and exclusive property of the Company and the Executive hereby assigns and shall assign to the Company all such Intellectual Property Rights and waives all moral rights that the Executive may have in such Works for Hire for the benefit of the Company and its successors, assigns and licensees. The Executive represents and warrants that the Works for Hire will not infringe the intellectual property and proprietary rights of any third parties. The Executive shall not disclose the Works for Hire to any third parties without the prior written consent of Company.
6.8 Privacy. The Executive acknowledges and agrees that the Executive will take all necessary steps to protect and maintain the confidentiality of personal information of the executives, consultants, customers and suppliers of the Company and its affiliated and related entities obtained during the Executive's employment with the Company. The Company shall always comply, and shall assist the Executive to comply, with all applicable privacy laws. The Executive acknowledges and agrees that the disclosure of the Executive's personal information may be required as part of the ongoing operations of the Company's business, as required by law, as part of the Company's audit process, as part of a potential business or commercial transaction or as part of the Company's management of the employment relationship, and the Executive hereby grants consent as may be required by applicable privacy laws to the use and disclosure of personal information for those purposes, to only the limited extent necessary.
6.9 Return of Property. The Executive agrees that all property and documents (including software and information in machine-readable form) of any nature pertaining to activities of the Company or any affiliate or related entity of the Company, including Confidential Information, in the Executive's possession now or at any time during employment, are and shall be the property of the Company or such subsidiary or other related entity, and that all such documents and all copies of them shall be surrendered to the Company whenever requested by the Company. Subject to applicable laws, in the event the Executive does not return such property upon termination of employment or sooner (including at any time during the Resignation Period) if requested by the Company, the Company has the right to (a) deduct from any monies owing to the Executive the cost of such property from any amounts due or owing to the Executive, and (b) reduce the Executive's Base Salary during the Resignation Period to an amount equal to the then-applicable minimum hourly wage, until such time, if any, during the Resignation Period as the Executive has returned such property.
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6.10 Acknowledgement. The Executive acknowledges that the Executive's services are unique and extraordinary. The Executive also acknowledges that the Executive's position will give or has given the Executive access to Confidential Information of substantial importance to the Company and its business. The Executive acknowledges that, in connection with the Executive's employment by the Company, the Executive will receive, or will become eligible to receive, substantial benefits and compensation. The Executive acknowledges that the Executive's continued employment by the Company and all compensation and benefits and potential compensation and benefits to the Executive from such employment will be conferred by the Company upon the Executive only because and on condition of the Executive's willingness to commit the Executive's best efforts and loyalty to the Company, including protecting the Company's right to have its Confidential Information protected from non-disclosure by the Executive and abiding by the confidentiality, non-competition, non-solicitation and other provisions herein. The Executive understands the Executive's duties and obligations as set forth in this Section 6 and agrees that such duties and obligations would not unduly restrict or curtail the Executive's legitimate efforts to earn a livelihood following any termination of the Executive's employment with the Company.
6.11 Breach of a Restrictive Covenant. In the event of any breach by the Executive of any of his obligations under Section 6 of this Agreement, the Executive will be obligated to repay, and the Company will be entitled to collect from the Executive, all amounts paid prior to or after the date of such breach by the Company to the Executive under Section 4.5 of this Agreement, and the Company shall have no further obligations under Section 4.5. In such a case, the Executive shall make a cash payment to the Company of all amounts owing within three (3) days of written demand therefor by the Company. The rights of the Company under this Section 6.11 shall be in addition to any rights of the Company (a) under this Agreement, and (b) to seek injunctive relief or other equitable or legal remedies in the case of any such breach by the Executive.
SECTION 7. MISCELLANEOUS COVENANTS
7.1 Entire Agreement. This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written. The Executive hereby waives any right to assert a claim based on pre-contractual representations, negligent or otherwise, made by the Company or its representatives.
7.2 Currency. Unless otherwise stated herein, all amounts referred to in this Agreement shall be in USD.
7.3 Affiliated Corporations. By signing below the Executive agrees that the covenants and obligations to the Company, as well as the rights of the Company under this Agreement, shall run in favour of and shall be enforceable by the parent and subsidiary companies of the Company. This Agreement is between the Executive and the Company. The Executive shall have no right to enforce this Agreement against any party other than the Company.
7.4 Assignment. The Executive may not assign all or any part of this Agreement without the prior written consent of the Company (which consent may be withheld for any reason), and any assignment or delegation made without such consent shall be void. Nothing shall prevent the Company from assigning any of its rights or obligations under the Agreement. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of each party hereto and his or its respective successors and assigns.
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7.5 Amendment. No amendment of this Agreement shall be effective unless made in writing and signed by the parties.
7.6 Waiver. Any purported waiver of any default, breach or non-compliance under this Agreement shall not be effective unless in writing and signed by the party to be bound by the waiver. No waiver shall be inferred from or implied by any failure to act or delay in acting by a party in respect of any default, breach or non-observance or by anything done or omitted to be done by the other party. The waiver by a party of any default, breach or non-compliance under this Agreement shall not operate as a waiver of that party's rights under this Agreement in respect of any continuing or subsequent default, breach or non-observance (whether of the same or any other nature).
7.7 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of the prohibition or unenforceability and shall be severed from the balance of this Agreement, all without affecting the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.
7.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania and the laws of the United States applicable in the Commonwealth of Pennsylvania and shall be treated, in all respects, as a Commonwealth of Pennsylvania contract.
7.9 Attornment. For all purposes, the parties agree to attorn to the exclusive jurisdiction of the federal courts for the Eastern District of Pennsylvania, and the State courts located therein.
7.10 Successors and Assigns. This Agreement shall endure to the benefit of, and be binding on, the parties and their respective heirs, administrators, executors, successors and permitted assigns. The Company shall have the right to assign this Agreement to any successor (whether direct or indirect, by purchase, amalgamation, arrangement, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company provided only that the Company must first require the successor to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The Executive by the Executive's signature hereto expressly consents to such assignment. The Executive shall not assign or transfer, whether absolutely, by way of security or otherwise, all or any part of the Executive's rights or obligations under this Agreement without the prior consent of the Company, which may be arbitrarily withheld.
7.11 Statutory Deductions and Withholdings. The Company may withhold from any amounts payable under this Agreement such federal or provincial taxes and other statutory deductions that are required by applicable law to be so withheld or deducted.
7.12 Change in Terms and Conditions. The parties agree that the terms and conditions of this Agreement, and specifically Section 2 and Section 3, as may be amended in writing from time to time, shall govern the Executive's employment with the Company, regardless of the length of the Executive's employment or any changes to the Executive's terms of employment, including changes to position or compensation, and regardless of whether any such change is material or otherwise, subject to Executive's rights as set forth in Section 4.4 hereof.
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SECTION 8. DISPUTE RESOLUTION
8.1 Dispute Resolution Procedure. Any dispute, controversy or claim arising out of or relating to this Agreement ("Dispute") shall be subject to the dispute resolution procedure set forth in this Section 8 (the "Dispute Resolution Procedure"); provided, however, that the Company shall be entitled to seek injunctive relief from any court of appropriate jurisdiction in the case of any breach by the Executive of any of the terms of Section 6 of this Agreement; and provided further that such Dispute Resolution Procedure shall be non-binding, as described herein.
8.2 Commencement of the Dispute Resolution Procedure. If a Dispute arises, either party may initiate the Dispute Resolution Procedure by giving written notice of the Dispute to the other party (the "Notice of Dispute"). The Notice of Dispute shall contain a brief statement of the nature of the Dispute and set out the relief requested.
Upon the submission of a Notice of Dispute, the parties shall, during the following fifteen (15) days, attempt to amicably resolve the Dispute through negotiations. (the "Consultation Period").
8.3 Arbitration. If the Dispute is not resolved by the parties within the Consultation Period, the Dispute shall, at the request of either party by delivery of written notice (a "Notice of Arbitration") during the thirty (30) day period following the expiration of the Consultation Period (the "Arbitration Election Period"), be subject to non-binding arbitration under the rules of the American Arbitration Association, except to the extent that such rules conflict with the terms of this Section 8.3. The following provisions shall apply to an arbitration commenced pursuant to this Section 8.3:
(a) The arbitration shall be heard by a sole arbitrator (the "Arbitrator"), who the parties shall jointly select within thirty (30) days of the receipt of the Notice of Arbitration. The Arbitrator shall be trained in the laws of the Commonwealth of Pennsylvania. If the parties are unable to agree on the Arbitrator, either party may apply to have the Arbitrator appointed in accordance with the provisions of the American Arbitration Association.
(b) The place of the arbitration shall be Philadelphia, Pennsylvania.
(c) Each party shall bear its own costs (including legal fees) of preparing for and participating in the Dispute Resolution Procedure, including legal fees; provided, however that the party against whom a decision is rendered by the Arbitrator shall bear all fees and disbursements of the Arbitrator. Notwithstanding the non-binding nature of the arbitration, the terms of this Section 8.3(c) shall be binding on the parties.
8.4 Proceedings Confidential. The parties agree that any arbitration carried out hereunder shall be kept private and confidential, and that the existence of the proceedings and any element of it shall be kept confidential, except (a) where disclosure is lawfully required by a legal duty, and (b) where such information is already in the public domain other than as a result of a breach of this clause.
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8.5 Non-Binding Nature of Dispute Resolution Procedure. The Dispute Resolution Procedure shall be deemed concluded on the earlier of (a) the expiration of the Arbitration Election Period, if neither party has delivered a Notice of Arbitration, and (b) immediately upon the issuance of a non-binding decision by the Arbitrator, if either party has delivered a Notice of Arbitration during the Arbitration Election Period. Following the conclusion of the Dispute Resolution Procedure, the parties shall be free to mutually accept the results of such Dispute Resolution Procedure, or either party may reject such results and pursue all available legal and equitable remedies.
SECTION 9. EXECUTIVE'S ACKNOWLEDGEMENT
9.1 Acknowledgement. The Executive acknowledges that:
(a) the Executive has had sufficient time to review the Agreement thoroughly.
(b) the Executive has read and understands the terms of the Agreement and his obligations hereunder.
(c) the Executive is receiving good and valuable consideration in exchange for being bound by the terms and conditions of this Agreement and shall not attach enforceability of any such covenants or effectiveness of this Agreement.
(d) the Executive has been given a reasonable opportunity to obtain independent legal advice concerning the interpretation and effect of the Agreement.
(e) the Executive has received a fully executed original copy of the Agreement; and
(f) Part of the Executive's duties shall include entertaining and socializing from time to time in various settings and locations and during weekends. The Executive agrees that if the Executive is not comfortable participating in any such entertainment or social event, the Executive will promptly notify the CEO of the Company. In the absence of any such notification, it is understood that the Executive is voluntarily and/or willingly participating in such entertainment and social events and does not find them objectionable.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.
| SIGNED, SEALED AND DELIVERED in | ) | ||
| the presence of: | ) | ||
| ) | |||
| ) | |||
| ) | |||
| /s/ James H. Clark | ) | /s/ James P. Quinlan | |
| Witness | James P. Quinlan | ||
| Medicus Pharma Ltd. | |||
| By: | /s/ Raza Bokhari | ||
| Raza Bokhari, MD |
|||
| Exec. Chairman & CEO | |||
| I have authority to bind the Company. | |||
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (hereinafter this "Agreement") is made effective the 5th day of March, 2024 (the "Effective Date")
B E T W E E N:
Medicus Pharma Ltd. (the "Company") - and -
Erica Monaco (the "Executive")
RECITALS
WHEREAS the Company wishes to employ the Executive and the Executive wishes to be employed by the Company pursuant to the terms and conditions of this Agreement.
NOW THEREFORE for good and valuable consideration set forth in this Agreement, the parties agree as follows:
SECTION 1 - EFFECTIVE DATE AND TERM
1.1 Effective Date and Term. The terms and conditions of this Agreement shall become effective on April 1st 2024 (the "Start Date"), unless mutually agreed otherwise and shall continue for five (5) years, subject to the terms of this Agreement.
SECTION 2- POSITION
2.1 Capacity and Services. The Company shall employ the Executive in the position of Chief Operating Officer (COO) and reporting directly to the Chief Executive Officer (the "CEO") of the company, or his or her designee. In her position, the Executive shall perform such duties and have such authority as are normally associated with the position and as may be assigned or delegated from time to time, and which include, but are not limited to:
(a) Actively participating planning organizing, directing, and coordinating the business activities of the company.
(b) actively participating in strategic planning, human resource management, capital and operating budgets, forecast and projections of the company.
(c) actively participating in evaluating merger and acquisition opportunities to expand the business of the company.
The Executive shall perform all duties and responsibilities in a manner consistent with all applicable laws as well as with the written policies of the Company that have been made available to Company executives. The Executive shall, if so, requested by the Company, serve without additional compensation, as an officer, director or manager of any subsidiary or affiliate of the Company.
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2.2 Other Duties. The Executive agrees that she shall seek written permission from the Company regarding any external roles, including board roles or advisory roles, that she holds or wishes to hold outside of her employment with the Company, and the Company agrees that it shall not exercise its discretion unreasonably in this regard.
SECTION 3- COMPENSATION AND BENEFITS
3.1 Base Salary. The annual gross base salary of the Executive shall be USD $295,000 (the "Base Salary"), to be pro-rated for any partial year of employment.
3.2 Discretionary Bonus Plan. The Executive shall be eligible to participate in the Company's Discretionary Bonus Plan (the "Bonus Plan"), as may be amended from time to time on the following terms:
(a) in the first year of this Agreement, the Executive shall be eligible to receive up to 60% of her Base Salary as cash bonus, based on prescribed written performance milestones agreed between the Executive and the CEO of the Company or his/her designee within 60 days of the Effective Date of this Agreement;
(b) thereafter, the Executive and the Company shall agree in advance of the start of the next year of employment on the prescribed written performance objectives with the following targets under the Bonus Plan:
(i) after the completion of the second year of employment under this Agreement, the Executive shall be eligible to receive up to 70% of her Base Salary as a cash bonus;
(ii) after the completion of the third year of employment under this Agreement, the Executive shall be eligible to receive up to 80% of her Base Salary as a cash bonus;
(iii) after the completion of the fourth year of employment under this Agreement, the Executive shall be eligible to receive up to 90% of her Base Salary as a cash bonus; and
(iv) after the completion of the fifth year of employment under this Agreement, the Executive shall be eligible to receive up to 100% of her base Salary as a cash bonus.
(c) subject to the terms and conditions below, any cash bonus payable under the Bonus Plan is generally payable within 60 days of completion of the applicable anniversary year;
(d) the Executive must be in active employment in order to receive any payment under the Bonus Plan. No period of notice whether occasioned by the Executive or the Company shall be considered active service;
(e) the Executive shall be entitled to a pro-rated Bonus for any partial year only if this Agreement is terminated in accordance with Section 4.3;
(f) any discretionary bonus under this Section 3.2 does not accrue after the Executive gives or receives notice of termination, and is only earned and payable as noted above in this Section 3.2 regardless of whether such termination is with or without notice, adequate notice or legal notice or is with or without legal or just cause, and the Executive's rights shall be strictly limited to those provided for in this Section 3.2. Unless otherwise specifically provided in writing, the Executive shall have no claim to, or in respect of, any discretionary bonus payments had due notice of termination of employment been given, nor shall the Executive have any entitlement to damages or other compensation or any claim for wrongful termination or dismissal in respect of any discretionary bonus payments, which may have or would have been payable to the Executive if such wrongful termination or dismissal had not occurred or if due notice of termination had been given; and
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(g) by delivery of written notice to the Company at any time prior to the date of payment of a bonus that has been earned by the Executive under this Section 3.2, the Executive may elect to convert 50% of any cash payments under this Section 3.2 to common shares of the Company at a price per share equal to the market price of common shares of the Company at the close of business on the Canadian Securities Exchange on the date of notice.
(h) The Company reserves the right to convert any cash payments under Section 3.3 to equity-based incentives.
3.3 Share Incentive Plan. The Executive shall receive 125,000 stock options (the "Options"), which shall vest as described herein. The Options are granted at a strike price calculated based on the closing price of trading of the securities on Toronto Stock Exchange (TSXV) on the date this agreement is signed. This grant is also subject to the approval of the Compensation Committee or the Board of Directors of the company.
(a) The Options shall vest at the ratee of 25,000 per year for each completed year of service under this Agreement, commencing one year after the Effective Date. The Options shall expire five years from the Effective Date, subject to earlier forfeiture in accordance with the terms of this Agreement, or the terms of the Plan or applicable grant agreement. The Executive's entitlements to Options hereunder shall be subject to adjustment for stock splits, reverse splits and other like events.
(b) The Executive must be in active employment in order to receive the Options. No period of notice, whether occasioned by the Executive or the Company, shall be considered active service.
(c) Options do not vest after the Executive's gives or receives notice of termination, or after the effective date of termination occurs, whether or not such termination is with or without notice, adequate notice or legal notice or is with or without legal or just cause, the Executive's rights shall be strictly limited to those provided for in the Plan, or as otherwise provided in the applicable grant agreement. Unless otherwise specifically provided in writing, the Executive shall have no claim to or in respect of any Options which may have or would have become vested Options had due notice of termination of employment been given nor shall the Executive have any entitlement to damages or other compensation or any claim for wrongful termination or dismissal in respect of any Options or loss of profit or opportunity which may have or would have vested or accrued to the Executive if such wrongful termination or dismissal had not occurred or if due notice of termination had been given.
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3.4 Benefits. The Executive shall be eligible to participate in all benefit plans that the Company maintains from time to time for the benefit of similar senior executives, in accordance with the terms and conditions of the plans. The Company may, at any time and from time to time, modify, suspend, or discontinue any or all such benefits plans with or without prior notice.
3.5 Paid Time Off. The Executive shall be entitled to take 28 days of paid time off ("PTO") per calendar year, pro-rated for any partial calendar year of employment. The Company will allow no more than five (5) days of PTO to be carried over from one calendar year to the next. Any PTO that is carried over from one calendar year to the next and not used before December 31st of the following calendar year shall be forfeit and forever lost without any compensation. For example, if two days of PTO are carried over from 2024 to 2025, such two days of PTO must be used by December 31, 2025, or they will be forfeited and lost forever without compensation.
3.6 Expenses. The Company shall reimburse the Executive for the Executive's travel and other expenses or disbursements reasonably and necessarily incurred or made in connection with the Company's business. Expenses will be reimbursed in accordance with policies and practices approved by the Company. The Executive shall furnish statements and receipts for all such expenses prior to reimbursement.
SECTION 4 - TERMINATION AND RESIGNATION
4.1 Termination for Cause. The Company may terminate the employment of the Executive at any time for cause by written notice to the Executive. For the purposes of this Agreement, "cause" means wilful neglect of duty and/or wilful misconduct and/or just cause at common law. If the Company terminates the employment of the Executive for cause under this Section 4.1, the Company shall not be obligated to make any further payments or provide any further entitlements under this Agreement or otherwise, subject only to any amounts which may be due and remaining unpaid at the time of the termination of employment such as Base Salary, vacation pay and expenses properly accrued to the termination date ("Accrued Entitlements").
4.2 Resignation by Executive. The Executive shall give the Company 60 days' notice of the resignation (the "Resignation Period") of the Executive's employment hereunder; however, it is understood and agreed that the Company shall be entitled to:
(a) waive all or part of that notice and accept the Executive's resignation effective at an earlier date, subject to providing the Executive with his Accrued Entitlements up to the end of the Resignation Period. The Executive agrees that any waiver of the Resignation Period by the Company hereunder shall not amount to a termination of the Executive's employment by the Company; or
(b) assign the Executive transitional or temporary duties through such Resignation Period, or have the Executive work at another location (within reason), and the Executive agrees that these actions by the Company shall not amount to a termination of the Executive's employment by the Company.
4.3 Termination without Cause.
(a) two (2) months of advance notice of termination (the "Notice Period");
(b) following completion of such Notice Period, and subject to the terms below, a payment equivalent to six (6) months' of Base Pay and which shall be paid on regularly scheduled pay dates over such six (6) month period;
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(c) pro rata target discretionary bonus payment for the partial year worked by the Executive up to the date notice is provided under Section 4.3(a);
(d) the benefit plan contributions necessary to maintain the Executive's participation during the Notice Period in all benefit plans provided to the Executive by the Company immediately before the termination of the Executive's employment; and
(e) the Executive's Accrued Entitlements as of the effective termination date.
4.4 No Further Claims. In the event of the Executive's dismissal without cause in accordance with Section 4.3, and upon provision of the payments and other benefits set forth in Section 4.3, the Executive will not be entitled to any additional notice, pay in lieu of notice, severance payments or other compensation or entitlements of any kind, pursuant to the common law or otherwise.
4.5 Release of Claims. In order to receive any entitlement hereunder, the Executive shall first execute a release of claims relating to his employment in favour of the Company and its affiliates and in a form provided by the Company.
4.6 Effect of Termination. The Executive agrees that upon cessation of her employment for any reason whatsoever, the Executive shall be deemed to have immediately resigned any position that the Executive may have as an officer, director or Executive of the Company together with any other office, position or directorship that the Executive may hold in any of the Company's related entities and its affiliates. In such event, the Executive shall, at the request of the Company, forthwith execute any and all documents appropriate to evidence such resignations. The Executive shall not be entitled to any payments in respect of such resignations in addition to those provided for herein.
SECTION 5 - CHANGE OF CONTROL
5.1 For the purposes of this Section 5:
"Target" means the Company; and
"Change of Control Transaction" means:
(a) the acquisition of a sufficient number of voting securities in the capital of the Target so that the acquirer, together with persons acting jointly or in concert with the acquirer, becomes entitled, directly or indirectly, to exercise more than 50% of the voting rights attaching to the outstanding voting securities in the capital of the Target (provided that, prior to the acquisition, the acquirer was not entitled to exercise more than 50% of the voting rights attaching to the outstanding voting securities in the capital of the Target);
(b) the completion of a consolidation, merger, arrangement or amalgamation of the Target with or into any other entity whereby the voting security holders of the Target immediately prior to the consolidation, merger, arrangement or amalgamation receive less than 50% of the voting rights attaching to the outstanding voting securities of the consolidated, merged, arranged or amalgamated entity; or
(c) the completion of a sale whereby all or substantially all of the Target's undertakings and assets become the property of any other entity and the voting security holders of the Target immediately prior to the sale hold less than 50% of the voting rights attaching to the outstanding voting securities of that other entity immediately following that sale.
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5.2 In the event of a Change of Control Transaction, any unvested Options granted to the Executive pursuant to Section 3.3 shall immediately vest.
SECTION 6 - NON-COMPETITION, CONFIDENTIALITY AND PROPRIETARY RIGHTS
6.1 Definitions. For the purposes of this Section 6:
(a) "Business" means the business of Pharmaceutical Research and Development of compounds marketed by the Company or any of its subsidiaries or affiliates, or in the Company's or any such subsidiary's or affiliate's developmental pipeline, as of the date of termination of this Agreement.
(b) "Customer" means any commercial or institutional Entity who has: (i) purchased or licensed from the Company or its affiliates (with the Executive's knowledge) any product produced or service supplied, sold, licensed or distributed by the Company; or (ii) supplied to the Company or its affiliates (with the Executive's knowledge) any product to be produced, sold, licensed or distributed by the Company; provided that Customers shall only include any Entity who was a Customer during the six (6) months preceding the last date of the Executive's active employment.
(c) "Entity" means a partnership, limited partnership, limited liability partnership, company, joint stock company, trust, unincorporated association, joint venture or other entity or governmental entity, and pronouns have a similarly extended meaning.
(d) "Prospective Customer" means any commercial or institutional Entity that the Company or its affiliates was in active discussions about selling products or services related to the Business during the six (6) months preceding the last date of the Executive's active employment.
(e) "Restricted Period" means a period of twelve (12) months following the last day of active employment of the Executive.
(f) "Territory" means United States and Canada.
6.2 Non-Competition. During the Restricted Period, the Executive shall not, whether individually or in partnership or jointly or in conjunction with any other person, as principal, agent, consultant, contractor, employer, executive or in any other manner, directly or indirectly, perform services for in a role similar to what She held in the twelve (12) months prior to termination with the Company, or establish, control, own a beneficial interest in, or be otherwise commercially involved in any endeavour, activity or business in the Territory that is substantially similar to or competitive with the Business of the Company.
6.3 Prohibited Investments. The Executive shall not be an investor, shareholder, or partner in any enterprise, association, company, joint venture or partnership (each, an "Investment") if the Investment conflicts with the interests of the Company or any of its or their affiliated or related entities. The Executive shall identify and inform the Company of any potential conflicts that may arise as a result of an Investment by the Executive and the Executive shall, to the best of the Executive's efforts, reduce or eliminate any such conflict. The Company reserves the right, acting reasonably, to determine whether any Investment conflicts with or is otherwise inconsistent with the Company's interests in which case the Executive shall be required to immediately eliminate any such conflict.
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6.4 Non-Solicitation. During the Restricted Period, the Executive shall not, either individually or in partnership or jointly or in conjunction with any other person, as principal, agent, consultant, contractor, employer, executive or in any other manner, directly or indirectly:
(a) canvass or solicit the business of (or procure or assist the canvassing or soliciting of the business of) any Customer for any purpose which is competitive with the Business; or
(b) canvass or solicit the business of (or procure or assist the canvassing or soliciting of the business of) any Prospective Customer for any purpose which is competitive with the Business.
6.5 Non-Solicitation of Executives. During the Restricted Period, the Executive shall not, either individually or in partnership or jointly or in conjunction with any other person or entity, as principal, agent, consultant, contractor, employer, executive or in any other manner, directly or indirectly, solicit, induce or entice away or in any other manner persuade or attempt to persuade any officer, executive, consultant or agent of the Company or its affiliated or related entities whom the Executive supervised or had business contact with on behalf of the Company or its affiliated or related entities during the twelve (12) month period immediately prior to the end of the Executive's active employment, to discontinue or alter any one or more of their relationships with the Company or its subsidiaries or related entities. For greater certainty, this Section 6.5 shall not prohibit general advertisements in electronic or print media through which the Executive has not intentionally targeted any officer, executive, consultant or agent of the Company or its affiliated or related entities and where the first contact with respect thereto is initiated by such officer, executive, consultant, or agent.
6.6 Confidentiality. Except in the normal and proper course of the Executive's duties, the Executive shall not use for the Executive's own account or disclose to anyone else, during or after the Executive's last day of active employment, any confidential or proprietary information or material relating to the Company's operations or business that the Executive obtains from the Company or the Company's subsidiaries and affiliates, and their officers, executives, agents, suppliers or customers or otherwise by virtue of the Executive's employment by the Company. Confidential or proprietary information or material includes, without limitation, the following types of information or material, in whatever form, both existing and contemplated, regarding the Company or any subsidiary or other affiliate of the Company: corporate information, including contractual licensing arrangements, plans, strategies, tactics, policies, resolutions, patent, trade-mark and trade name applications, and any litigation or negotiations; information concerning suppliers; marketing information, including sales, investment and product plans, customer lists, strategies, methods, customers, prospects and market research data; financial information, including cost and performance data, debt arrangements, equity structure, investors and holdings; operational and scientific information, including trade secrets; software; technical information, including technical drawings and designs; and personnel information, including personnel lists, resumes, personnel data, organizational structure and performance evaluations (the "Confidential Information"). Confidential Information does not include: (a) information that is in the public domain, unless such information falls into the public domain through unauthorized disclosure or other acts by the Executive; (b) information that was in the Executive's lawful possession prior to the disclosure and has not been obtained by the Executive either directly or indirectly from the Company or its affiliated or related entities; or (c) information that the Executive is required by law to disclose, provided that the Executive provides the Company with prior written notice of such disclosure.
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6.7 Intellectual Property. All right, title and interest in all inventions, methodologies, concepts, documentation, specifications and any other works developed by the Executive in the scope of and during the course of the Executive's employment (the "Works") including all patent, copyright, trade-mark, trade secret and any other intellectual property and proprietary rights therein (the "Intellectual Property Rights") shall be the sole and exclusive property of the Company and the Executive hereby assigns and shall assign to the Company all such Intellectual Property Rights and waives all moral rights that the Executive may have in such Works for the benefit of the Company and its successors, assigns and licensees. The Executive represents and warrants that the Works will not infringe the intellectual property and proprietary rights of any third parties. The Executive shall not disclose the Works to any third parties without the prior written consent of Company.
6.8 Privacy. The Executive acknowledges and agrees that the Executive will take all necessary steps to protect and maintain the confidentiality of personal information of the executives, consultants, customers and suppliers of the Company and its affiliated and related entities obtained in the course of the Executive's employment with the Company. The Company shall at all times comply, and shall assist the Executive to comply, with all applicable privacy laws. The Executive acknowledges and agrees that the disclosure of the Executive's personal information may be required as part of the ongoing operations of the Company's business, as required by law, as part of the Company's audit process, as part of a potential business or commercial transaction or as part of the Company's management of the employment relationship, and the Executive hereby grants consent as may be required by applicable privacy laws to the use and disclosure of personal information for those purposes, to only the limited extent necessary.
6.9 Return of Property. The Executive agrees that all property and documents (including software and information in machine-readable form) of any nature pertaining to activities of the Company or any affiliate or related entity of the Company, including Confidential Information, in the Executive's possession now or at any time during employment, are and shall be the property of the Company or such subsidiary or other related entity, and that all such documents and all copies of them shall be surrendered to the Company whenever requested by the Company. Subject to applicable laws, in the event the Executive does not return such property upon termination of employment or sooner (including at any time during the Resignation Period) if requested by the Company, the Company has the right to (a) deduct from any monies owing to the Executive the cost of such property from any amounts due or owing to the Executive, and (b) reduce the Executive's Base Salary during the Resignation Period to an amount equal to the then-applicable minimum hourly wage, until such time, if any, during the Resignation Period as the Executive has returned such property.
6.10 Acknowledgement. The Executive acknowledges that the Executive's services are unique and extraordinary. The Executive also acknowledges that the Executive's position will give or has given the Executive access to Confidential Information of substantial importance to the Company and its business. The Executive acknowledges that, in connection with the Executive's employment by the Company, the Executive will receive, or will become eligible to receive, substantial benefits and compensation. The Executive acknowledges that the Executive's continued employment by the Company and all compensation and benefits and potential compensation and benefits to the Executive from such employment will be conferred by the Company upon the Executive only because and on condition of the Executive's willingness to commit the Executive's best efforts and loyalty to the Company, including protecting the Company's right to have its Confidential Information protected from non-disclosure by the Executive and abiding by the confidentiality, non-competition, non-solicitation and other provisions herein. The Executive understands the Executive's duties and obligations as set forth in this Section 6 and agrees that such duties and obligations would not unduly restrict or curtail the Executive's legitimate efforts to earn a livelihood following any termination of the Executive's employment with the Company.
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6.11 Breach of a Restrictive Covenant. In the event of any breach by the Executive of any of his/her obligations under Section 6 of this Agreement, the Executive will be obligated to repay, and the Company will be entitled to collect from the Executive, all amounts paid prior to or after the date of such breach by the Company to the Executive under Section 4.3 of this Agreement, and the Company shall have no further obligations under Section 4.3. In such a case, the Executive shall make a cash payment to the Company of all amounts owing within three (3) days of written demand therefor by the Company. The rights of the Company under this Section 6.11 shall be in addition to any rights of the Company (a) under this Agreement, and (b) to seek injunctive relief or other equitable or legal remedies in the case of any such breach by the Executive.
SECTION 7 - MISCELLANEOUS COVENANTS
7.1 Entire Agreement. This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written. The Executive hereby waives any right to assert a claim based on pre-contractual representations, negligent or otherwise, made by the Company or its representatives.
7.2 Currency. Unless otherwise stated herein, all amounts referred to in this Agreement shall be in USD.
7.3 Affiliated Corporations. By signing below the Executive agrees that the covenants and obligations to the Company, as well as the rights of the Company under this Agreement, shall run in favour of and shall be enforceable by the parent and subsidiary companies of the Company. This Agreement is between the Executive and the Company. The Executive shall have no right to enforce this Agreement against any party other than the Company.
7.4 Assignment. The Executive may not assign all or any part of this Agreement without the prior written consent of the Company (which consent may be withheld for any reason) and any assignment or delegation made without such consent shall be void. Nothing shall prevent the Company from assigning any of its rights or obligations under the Agreement. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of each party hereto and his/her or its respective successors and assigns.
7.5 Amendment. No amendment of this Agreement shall be effective unless made in writing and signed by the parties.
7.6 Waiver. Any purported waiver of any default, breach or non-compliance under this Agreement shall not be effective unless in writing and signed by the party to be bound by the waiver. No waiver shall be inferred from or implied by any failure to act or delay in acting by a party in respect of any default, breach or non-observance or by anything done or omitted to be done by the other party. The waiver by a party of any default, breach or non-compliance under this Agreement shall not operate as a waiver of that party's rights under this Agreement in respect of any continuing or subsequent default, breach or non-observance (whether of the same or any other nature).
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7.7 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of the prohibition or unenforceability and shall be severed from the balance of this Agreement, all without affecting the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.
7.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania and the laws of the United States applicable in the Commonwealth of Pennsylvania and shall be treated, in all respects, as a Commonwealth of Pennsylvania contract.
7.9 Attornment. For all purposes, the parties agree to attorn to the exclusive jurisdiction of the federal courts for the Eastern District of Pennsylvania, and the State courts located therein.
7.10 Successors and Assigns. This Agreement shall endure to the benefit of, and be binding on, the parties and their respective heirs, administrators, executors, successors and permitted assigns. The Company shall have the right to assign this Agreement to any successor (whether direct or indirect, by purchase, amalgamation, arrangement, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company provided only that the Company must first require the successor to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The Executive by the Executive's signature hereto expressly consents to such assignment. The Executive shall not assign or transfer, whether absolutely, by way of security or otherwise, all or any part of the Executive's rights or obligations under this Agreement without the prior consent of the Company, which may be arbitrarily withheld.
7.11 Statutory Deductions and Withholdings. The Company may withhold from any amounts payable under this Agreement such federal or provincial taxes and other statutory deductions that are required by applicable law to be so withheld or deducted.
7.12 Change in Terms and Conditions. The parties agree that the terms and conditions of this Agreement, and specifically Section 4 and Section 5, as may be amended in writing from time to time, shall govern the Executive's employment with the Company, regardless of the length of the Executive's employment or any changes to the Executive's terms of employment, including changes to position or compensation, and regardless of whether any such change is material or otherwise.
SECTION 8- DISPUTE RESOLUTION
8.1 Dispute Resolution Procedure. Any dispute, controversy or claim arising out of or relating to this Agreement ("Dispute") shall be subject to the dispute resolution procedure set forth in this Section 8 (the "Dispute Resolution Procedure"); provided, however, that the Company shall be entitled to seek injunctive relief from any court of appropriate jurisdiction in the case of any breach by the Executive of any of the terms of Section 6 of this Agreement; and provided further that such Dispute Resolution Procedure shall be non-binding, as described herein.
8.2 Commencement of the Dispute Resolution Procedure. If a Dispute arises, either party may initiate the Dispute Resolution Procedure by giving written notice of the Dispute to the other party (the "Notice of Dispute"). The Notice of Dispute shall contain a brief statement of the nature of the Dispute and set out the relief requested.
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Upon the submission of a Notice of Dispute, the parties shall, during the following fifteen (15) days, attempt to amicably resolve the Dispute through negotiations. (the "Consultation Period").
8.3 Arbitration. If the Dispute is not resolved by the parties within the Consultation Period, the Dispute shall, at the request of either party by delivery of written notice (a "Notice of Arbitration") during the thirty (30) day period following the expiration of the Consultation Period (the "Arbitration Election Period"), be subject to non-binding arbitration under the rules of the American Arbitration Association, except to the extent that such rules conflict with the terms of this Section 8.3. The following provisions shall apply to an arbitration commenced pursuant to this Section 8.3:
(a) The arbitration shall be heard by a sole arbitrator (the "Arbitrator"), who the parties shall jointly select within thirty (30) days of the receipt of the Notice of Arbitration. The Arbitrator shall be trained in the laws of the Commonwealth of Pennsylvania. If the parties are unable to agree on the Arbitrator, either party may apply to have the Arbitrator appointed in accordance with the provisions of the American Arbitration Association.
(b) The place of the arbitration shall be Philadelphia, Pennsylvania.
(c) Each party shall bear its own costs (including legal fees) of preparing for and participating in the Dispute Resolution Procedure, including legal fees;
Notwithstanding the non-binding nature of the arbitration, the terms of this Section 8.3(c) shall be binding on the parties.
8.4 Proceedings Confidential. The parties agree that any arbitration carried out hereunder shall be kept private and confidential, and that the existence of the proceedings and any element of it shall be kept confidential, except (a) where disclosure is lawfully required by a legal duty, and (b) where such information is already in the public domain other than as a result of a breach of this clause.
8.5 Non-Binding Nature of Dispute Resolution Procedure. The Dispute Resolution Procedure shall be deemed concluded on the earlier of (a) the expiration of the Arbitration Election Period, if neither party has delivered a Notice of Arbitration, and (b) immediately upon the issuance of a non-binding decision by the Arbitrator, if either party has delivered a Notice of Arbitration during the Arbitration Election Period. Following the conclusion of the Dispute Resolution Procedure, the parties shall be free to mutually accept the results of such Dispute Resolution Procedure, or either party may reject such results and pursue all available legal and equitable remedies.
SECTION 9- EXECUTIVE'S ACKNOWLEDGEMENT
9.1 Acknowledgement. The Executive acknowledges that:
(a) the Executive has had sufficient time to review the Agreement thoroughly;
(b) the Executive has read and understands the terms of the Agreement and his obligations hereunder;
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(c) the Executive is receiving good and valuable consideration in exchange for being bound by the terms and conditions of this Agreement and shall not attach enforceability of any such covenants or effectiveness of this Agreement.
(d) the Executive has been given a reasonable opportunity to obtain independent legal advice concerning the interpretation and effect of the Agreement.
(e) the Executive has received a fully executed original copy of the Agreement; and
(f) Part of the Executive's duties shall include entertaining and socializing from time to time in various settings and locations and during weekends. The Executive agrees that if the Executive is not comfortable participating in any such entertainment or social event, the Executive will promptly notify the CEO of the Company or his/her designee. In the absence of any such notification, it is understood that the Executive is voluntarily and/or willingly participating in such entertainment and social events and does not find them objectionable.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.
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SIGNED, SEALED AND DELIVERED in the presence of:
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) ) ) ) ) ) |
/s/ Erica Monaco Erica Monaco |
Medicus Pharma Ltd. By: /s/ Raza Bokhari Name: Raza Bokhari, MD Title: Exec Chairman & CEO I have authority to bind the Company. |
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (hereinafter this "Agreement") is made effective the 23rd day of May, 2024 (the "Effective Date")
B E T W E E N:
Medicus Pharma Ltd. (the "Company") - and -
Edward Brennan (the "Executive")
RECITALS
WHEREAS the Company wishes to employ the Executive and the Executive wishes to be employed by the Company pursuant to the terms and conditions of this Agreement.
NOW THEREFORE for good and valuable consideration set forth in this Agreement, the parties agree as follows:
SECTION 1 - EFFECTIVE DATE AND TERM
1.1 Effective Date and Term. The terms and conditions of this Agreement shall become effective on September 1st 2023 (the "Start Date"), unless mutually agreed otherwise and shall continue for five (5) years, subject to the terms of this Agreement.
SECTION 2- POSITION
2.1 Capacity and Services. The Company shall employ the Executive in the position of Chief Medical Officer (CMO) and reporting directly to the Chief Executive Officer (the "CEO") of the company, or his or her designee. In her position, the Executive shall perform such duties and have such authority as are normally associated with the position and as may be assigned or delegated from time to time, and which include, but are not limited to:
(a) Provide strategic leadership and vision for our clinical development, regulatory, and medical affairs functions.
(b) Develop and oversee the implementation of comprehensive clinical development plans for our pipeline of therapies. Build and maintain strong relationships with key stakeholders, including clinical investigators, regulatory agencies, and healthcare professionals. Secure regulatory approvals for our therapies and ensure their successful commercialization.
(c) Champion evidence-based medicine and represent the company at scientific conferences and industry events.
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(d) Stay abreast of the latest relevant field advancements and their potential impact on our pipeline.
(e) Foster a culture of scientific excellence, ethical conduct, and patient- centricity within the organization.
(f) actively participating in evaluating merger and acquisition opportunities to expand the business of the company.
The Executive shall perform all duties and responsibilities in a manner consistent with all applicable laws as well as with the written policies of the Company that have been made available to Company executives. The Executive shall, if so, requested by the Company, serve without additional compensation, as an officer, director or manager of any subsidiary or affiliate of the Company.
2.2 Other Duties. The Executive agrees that she shall seek written permission from the Company regarding any external roles, including board roles or advisory roles, that she holds or wishes to hold outside of her employment with the Company, and the Company agrees that it shall not exercise its discretion unreasonably in this regard.
SECTION 3- COMPENSATION AND BENEFITS
3.1 Initial Options. The Company shall award the Executive 50,000 stock options (the "Initial Options") on the effective date of this agreement. The initial options are granted and vested immediately. The Options are granted at a strike price calculated based on 10 days of volume weighted average price from the date of commencement of trading of the securities on Toronto Stock Exchange (TSXV). This grant is also subject to the approval of the Compensation Committee or the Board of Directors of the company. These Initial Options shall expire five years after the Initial Grant Date, subject to earlier forfeiture in accordance with the terms hereof or the terms of the Company's Share Option Plan (the "Plan").
3.2 One-Time sign-up Bonus. The company shall disburse one-time sign-up bonus of USD $75,000 to the executive at the time of commencement of employment.
3.3 Base Salary. The annual gross base salary of the Executive shall be USD $295,000 (the "Base Salary"), to be pro-rated for any partial year of employment.
3.4 Discretionary Bonus Plan. The Executive shall be eligible to participate in the Company's Discretionary Bonus Plan (the "Bonus Plan"), as may be amended from time to time on the following terms:
(a) in the first year of this Agreement, the Executive shall be eligible to receive up to 60% of her Base Salary as cash bonus, based on prescribed written performance milestones agreed between the Executive and the CEO of the Company or his/her designee within 60 days of the Effective Date of this Agreement;
(b) thereafter, the Executive and the Company shall agree in advance of the start of the next year of employment on the prescribed written performance objectives with the following targets under the Bonus Plan:
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(i) after the completion of the second year of employment under this Agreement, the Executive shall be eligible to receive up to 70% of her Base Salary as a cash bonus;
(ii) after the completion of the third year of employment under this Agreement, the Executive shall be eligible to receive up to 80% of her Base Salary as a cash bonus;
(iii) after the completion of the fourth year of employment under this Agreement, the Executive shall be eligible to receive up to 90% of her Base Salary as a cash bonus; and
(iv) after the completion of the fifth year of employment under this Agreement, the Executive shall be eligible to receive up to 100% of her base Salary as a cash bonus.
(c) subject to the terms and conditions below, any cash bonus payable under the Bonus Plan is generally payable within 60 days of completion of the applicable anniversary year;
(d) the Executive must be in active employment in order to receive any payment under the Bonus Plan. No period of notice whether occasioned by the Executive or the Company shall be considered active service;
(e) the Executive shall be entitled to a pro-rated Bonus for any partial year only if this Agreement is terminated in accordance with Section 4.3;
(f) any discretionary bonus under this Section 3.2 does not accrue after the Executive gives or receives notice of termination, and is only earned and payable as noted above in this Section 3.2 regardless of whether such termination is with or without notice, adequate notice or legal notice or is with or without legal or just cause, and the Executive's rights shall be strictly limited to those provided for in this Section 3.2. Unless otherwise specifically provided in writing, the Executive shall have no claim to, or in respect of, any discretionary bonus payments had due notice of termination of employment been given, nor shall the Executive have any entitlement to damages or other compensation or any claim for wrongful termination or dismissal in respect of any discretionary bonus payments, which may have or would have been payable to the Executive if such wrongful termination or dismissal had not occurred or if due notice of termination had been given; and
(g) by delivery of written notice to the Company at any time prior to the date of payment of a bonus that has been earned by the Executive under this Section 3.2, the Executive may elect to convert 50% of any cash payments under this Section 3.2 to common shares of the Company at a price per share equal to the market price of common shares of the Company at the close of business on the Canadian Securities Exchange on the date of notice.
(h) The Company reserves the right to convert any cash payments under Section 3.3 to equity-based incentives.
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3.5 Share Incentive Plan. The Executive shall receive 100,000 stock options (the "Options"), which shall vest as described herein. The Options are granted at a strike price calculated based on the closing price of trading of the securities on Toronto Stock Exchange (TSXV) on the date this agreement is signed. This grant is also subject to the approval of the Compensation Committee or the Board of Directors of the company.
(a) The Options shall vest at the ratee of 25,000 per year for each completed year of service under this Agreement, commencing one year after the Effective Date. The Options shall expire five years from the Effective Date, subject to earlier forfeiture in accordance with the terms of this Agreement, or the terms of the Plan or applicable grant agreement. The Executive's entitlements to Options hereunder shall be subject to adjustment for stock splits, reverse splits and other like events.
(b) The Executive must be in active employment in order to receive the Options. No period of notice, whether occasioned by the Executive or the Company, shall be considered active service.
(c) Options do not vest after the Executive's gives or receives notice of termination, or after the effective date of termination occurs, whether or not such termination is with or without notice, adequate notice or legal notice or is with or without legal or just cause, the Executive's rights shall be strictly limited to those provided for in the Plan, or as otherwise provided in the applicable grant agreement. Unless otherwise specifically provided in writing, the Executive shall have no claim to or in respect of any Options which may have or would have become vested Options had due notice of termination of employment been given nor shall the Executive have any entitlement to damages or other compensation or any claim for wrongful termination or dismissal in respect of any Options or loss of profit or opportunity which may have or would have vested or accrued to the Executive if such wrongful termination or dismissal had not occurred or if due notice of termination had been given.
3.6 Benefits. The Executive shall be eligible to participate in all benefit plans that the Company maintains from time to time for the benefit of similar senior executives, in accordance with the terms and conditions of the plans. The Company may, at any time and from time to time, modify, suspend, or discontinue any or all such benefits plans with or without prior notice.
3.7 Paid Time Off. The Executive shall be entitled to take 28 days of paid time off ("PTO") per calendar year, pro-rated for any partial calendar year of employment. The Company will allow no more than five (5) days of PTO to be carried over from one calendar year to the next. Any PTO that is carried over from one calendar year to the next and not used before December 31st of the following calendar year shall be forfeit and forever lost without any compensation. For example, if two days of PTO are carried over from 2024 to 2025, such two days of PTO must be used by December 31, 2025, or they will be forfeited and lost forever without compensation.
3.8 Expenses. The Company shall reimburse the Executive for the Executive's travel and other expenses or disbursements reasonably and necessarily incurred or made in connection with the Company's business. Expenses will be reimbursed in accordance with policies and practices approved by the Company. The Executive shall furnish statements and receipts for all such expenses prior to reimbursement.
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SECTION 4 - TERMINATION AND RESIGNATION
4.1 Termination for Cause. The Company may terminate the employment of the Executive at any time for cause by written notice to the Executive. For the purposes of this Agreement, "cause" means wilful neglect of duty and/or wilful misconduct and/or just cause at common law. If the Company terminates the employment of the Executive for cause under this Section 4.1, the Company shall not be obligated to make any further payments or provide any further entitlements under this Agreement or otherwise, subject only to any amounts which may be due and remaining unpaid at the time of the termination of employment such as Base Salary, vacation pay and expenses properly accrued to the termination date ("Accrued Entitlements").
4.2 Resignation by Executive. The Executive shall give the Company 60 days' notice of the resignation (the "Resignation Period") of the Executive's employment hereunder; however, it is understood and agreed that the Company shall be entitled to:
(a) waive all or part of that notice and accept the Executive's resignation effective at an earlier date, subject to providing the Executive with his Accrued Entitlements up to the end of the Resignation Period. The Executive agrees that any waiver of the Resignation Period by the Company hereunder shall not amount to a termination of the Executive's employment by the Company; or
(b) assign the Executive transitional or temporary duties through such Resignation Period, or have the Executive work at another location (within reason), and the Executive agrees that these actions by the Company shall not amount to a termination of the Executive's employment by the Company.
4.3 Termination without Cause.
(a) two (2) months of advance notice of termination (the "Notice Period");
(b) following completion of such Notice Period, and subject to the terms below, a payment equivalent to six (6) months' of Base Pay and which shall be paid on regularly scheduled pay dates over such six (6) month period;
(c) pro rata target discretionary bonus payment for the partial year worked by the Executive up to the date notice is provided under Section 4.3(a);
(d) the benefit plan contributions necessary to maintain the Executive's participation during the Notice Period in all benefit plans provided to the Executive by the Company immediately before the termination of the Executive's employment; and
(e) the Executive's Accrued Entitlements as of the effective termination date.
4.4 No Further Claims. In the event of the Executive's dismissal without cause in accordance with Section 4.3, and upon provision of the payments and other benefits set forth in Section 4.3, the Executive will not be entitled to any additional notice, pay in lieu of notice, severance payments or other compensation or entitlements of any kind, pursuant to the common law or otherwise.
4.5 Release of Claims. In order to receive any entitlement hereunder, the Executive shall first execute a release of claims relating to his employment in favour of the Company and its affiliates and in a form provided by the Company.
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4.6 Effect of Termination. The Executive agrees that upon cessation of her employment for any reason whatsoever, the Executive shall be deemed to have immediately resigned any position that the Executive may have as an officer, director or Executive of the Company together with any other office, position or directorship that the Executive may hold in any of the Company's related entities and its affiliates. In such event, the Executive shall, at the request of the Company, forthwith execute any and all documents appropriate to evidence such resignations. The Executive shall not be entitled to any payments in respect of such resignations in addition to those provided for herein.
SECTION 5 - CHANGE OF CONTROL
5.1 For the purposes of this Section 5:
"Target" means the Company; and
"Change of Control Transaction" means:
(a) the acquisition of a sufficient number of voting securities in the capital of the Target so that the acquirer, together with persons acting jointly or in concert with the acquirer, becomes entitled, directly or indirectly, to exercise more than 50% of the voting rights attaching to the outstanding voting securities in the capital of the Target (provided that, prior to the acquisition, the acquirer was not entitled to exercise more than 50% of the voting rights attaching to the outstanding voting securities in the capital of the Target);
(b) the completion of a consolidation, merger, arrangement or amalgamation of the Target with or into any other entity whereby the voting security holders of the Target immediately prior to the consolidation, merger, arrangement or amalgamation receive less than 50% of the voting rights attaching to the outstanding voting securities of the consolidated, merged, arranged or amalgamated entity; or
(c) the completion of a sale whereby all or substantially all of the Target's undertakings and assets become the property of any other entity and the voting security holders of the Target immediately prior to the sale hold less than 50% of the voting rights attaching to the outstanding voting securities of that other entity immediately following that sale.
5.2 In the event of a Change of Control Transaction, any unvested Options granted to the Executive pursuant to Section 3.3 shall immediately vest.
SECTION 6 - NON-COMPETITION, CONFIDENTIALITY AND PROPRIETARY RIGHTS
6.1 Definitions. For the purposes of this Section 6:
(a) "Business" means the business of Pharmaceutical Research and Development of compounds marketed by the Company or any of its subsidiaries or affiliates, or in the Company's or any such subsidiary's or affiliate's developmental pipeline, as of the date of termination of this Agreement.
(b) "Customer" means any commercial or institutional Entity who has: (i) purchased or licensed from the Company or its affiliates (with the Executive's knowledge) any product produced or service supplied, sold, licensed or distributed by the Company; or (ii) supplied to the Company or its affiliates (with the Executive's knowledge) any product to be produced, sold, licensed or distributed by the Company; provided that Customers shall only include any Entity who was a Customer during the six (6) months preceding the last date of the Executive's active employment.
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(c) "Entity" means a partnership, limited partnership, limited liability partnership, company, joint stock company, trust, unincorporated association, joint venture or other entity or governmental entity, and pronouns have a similarly extended meaning.
(d) "Prospective Customer" means any commercial or institutional Entity that the Company or its affiliates was in active discussions about selling products or services related to the Business during the six (6) months preceding the last date of the Executive's active employment.
(e) "Restricted Period" means a period of twelve (12) months following the last day of active employment of the Executive.
(f) "Territory" means United States and Canada.
6.2 Non-Competition. During the Restricted Period, the Executive shall not, whether individually or in partnership or jointly or in conjunction with any other person, as principal, agent, consultant, contractor, employer, executive or in any other manner, directly or indirectly, perform services for in a role similar to what She held in the twelve (12) months prior to termination with the Company, or establish, control, own a beneficial interest in, or be otherwise commercially involved in any endeavour, activity or business in the Territory that is substantially similar to or competitive with the Business of the Company.
6.3 Prohibited Investments. The Executive shall not be an investor, shareholder, or partner in any enterprise, association, company, joint venture or partnership (each, an "Investment") if the Investment conflicts with the interests of the Company or any of its or their affiliated or related entities. The Executive shall identify and inform the Company of any potential conflicts that may arise as a result of an Investment by the Executive and the Executive shall, to the best of the Executive's efforts, reduce or eliminate any such conflict. The Company reserves the right, acting reasonably, to determine whether any Investment conflicts with or is otherwise inconsistent with the Company's interests in which case the Executive shall be required to immediately eliminate any such conflict.
6.4 Non-Solicitation. During the Restricted Period, the Executive shall not, either individually or in partnership or jointly or in conjunction with any other person, as principal, agent, consultant, contractor, employer, executive or in any other manner, directly or indirectly:
(a) canvass or solicit the business of (or procure or assist the canvassing or soliciting of the business of) any Customer for any purpose which is competitive with the Business; or
(b) canvass or solicit the business of (or procure or assist the canvassing or soliciting of the business of) any Prospective Customer for any purpose which is competitive with the Business.
6.5 Non-Solicitation of Executives. During the Restricted Period, the Executive shall not, either individually or in partnership or jointly or in conjunction with any other person or entity, as principal, agent, consultant, contractor, employer, executive or in any other manner, directly or indirectly, solicit, induce or entice away or in any other manner persuade or attempt to persuade any officer, executive, consultant or agent of the Company or its affiliated or related entities whom the Executive supervised or had business contact with on behalf of the Company or its affiliated or related entities during the twelve (12) month period immediately prior to the end of the Executive's active employment, to discontinue or alter any one or more of their relationships with the Company or its subsidiaries or related entities. For greater certainty, this Section 6.5 shall not prohibit general advertisements in electronic or print media through which the Executive has not intentionally targeted any officer, executive, consultant or agent of the Company or its affiliated or related entities and where the first contact with respect thereto is initiated by such officer, executive, consultant, or agent.
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6.6 Confidentiality. Except in the normal and proper course of the Executive's duties, the Executive shall not use for the Executive's own account or disclose to anyone else, during or after the Executive's last day of active employment, any confidential or proprietary information or material relating to the Company's operations or business that the Executive obtains from the Company or the Company's subsidiaries and affiliates, and their officers, executives, agents, suppliers or customers or otherwise by virtue of the Executive's employment by the Company. Confidential or proprietary information or material includes, without limitation, the following types of information or material, in whatever form, both existing and contemplated, regarding the Company or any subsidiary or other affiliate of the Company: corporate information, including contractual licensing arrangements, plans, strategies, tactics, policies, resolutions, patent, trade- mark and trade name applications, and any litigation or negotiations; information concerning suppliers; marketing information, including sales, investment and product plans, customer lists, strategies, methods, customers, prospects and market research data; financial information, including cost and performance data, debt arrangements, equity structure, investors and holdings; operational and scientific information, including trade secrets; software; technical information, including technical drawings and designs; and personnel information, including personnel lists, resumes, personnel data, organizational structure and performance evaluations (the "Confidential Information"). Confidential Information does not include: (a) information that is in the public domain, unless such information falls into the public domain through unauthorized disclosure or other acts by the Executive; (b) information that was in the Executive's lawful possession prior to the disclosure and has not been obtained by the Executive either directly or indirectly from the Company or its affiliated or related entities; or (c) information that the Executive is required by law to disclose, provided that the Executive provides the Company with prior written notice of such disclosure.
6.7 Intellectual Property. All right, title and interest in all inventions, methodologies, concepts, documentation, specifications and any other works developed by the Executive in the scope of and during the course of the Executive's employment (the "Works") including all patent, copyright, trade-mark, trade secret and any other intellectual property and proprietary rights therein (the "Intellectual Property Rights") shall be the sole and exclusive property of the Company and the Executive hereby assigns and shall assign to the Company all such Intellectual Property Rights and waives all moral rights that the Executive may have in such Works for the benefit of the Company and its successors, assigns and licensees. The Executive represents and warrants that the Works will not infringe the intellectual property and proprietary rights of any third parties. The Executive shall not disclose the Works to any third parties without the prior written consent of Company.
6.8 Privacy. The Executive acknowledges and agrees that the Executive will take all necessary steps to protect and maintain the confidentiality of personal information of the executives, consultants, customers and suppliers of the Company and its affiliated and related entities obtained in the course of the Executive's employment with the Company. The Company shall at all times comply, and shall assist the Executive to comply, with all applicable privacy laws. The Executive acknowledges and agrees that the disclosure of the Executive's personal information may be required as part of the ongoing operations of the Company's business, as required by law, as part of the Company's audit process, as part of a potential business or commercial transaction or as part of the Company's management of the employment relationship, and the Executive hereby grants consent as may be required by applicable privacy laws to the use and disclosure of personal information for those purposes, to only the limited extent necessary.
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6.9 Return of Property. The Executive agrees that all property and documents (including software and information in machine-readable form) of any nature pertaining to activities of the Company or any affiliate or related entity of the Company, including Confidential Information, in the Executive's possession now or at any time during employment, are and shall be the property of the Company or such subsidiary or other related entity, and that all such documents and all copies of them shall be surrendered to the Company whenever requested by the Company. Subject to applicable laws, in the event the Executive does not return such property upon termination of employment or sooner (including at any time during the Resignation Period) if requested by the Company, the Company has the right to (a) deduct from any monies owing to the Executive the cost of such property from any amounts due or owing to the Executive, and (b) reduce the Executive's Base Salary during the Resignation Period to an amount equal to the then- applicable minimum hourly wage, until such time, if any, during the Resignation Period as the Executive has returned such property.
6.10 Acknowledgement. The Executive acknowledges that the Executive's services are unique and extraordinary. The Executive also acknowledges that the Executive's position will give or has given the Executive access to Confidential Information of substantial importance to the Company and its business. The Executive acknowledges that, in connection with the Executive's employment by the Company, the Executive will receive, or will become eligible to receive, substantial benefits and compensation. The Executive acknowledges that the Executive's continued employment by the Company and all compensation and benefits and potential compensation and benefits to the Executive from such employment will be conferred by the Company upon the Executive only because and on condition of the Executive's willingness to commit the Executive's best efforts and loyalty to the Company, including protecting the Company's right to have its Confidential Information protected from non-disclosure by the Executive and abiding by the confidentiality, non-competition, non-solicitation and other provisions herein. The Executive understands the Executive's duties and obligations as set forth in this Section 6 and agrees that such duties and obligations would not unduly restrict or curtail the Executive's legitimate efforts to earn a livelihood following any termination of the Executive's employment with the Company.
6.11 Breach of a Restrictive Covenant. In the event of any breach by the Executive of any of his/her obligations under Section 6 of this Agreement, the Executive will be obligated to repay, and the Company will be entitled to collect from the Executive, all amounts paid prior to or after the date of such breach by the Company to the Executive under Section 4.3 of this Agreement, and the Company shall have no further obligations under Section 4.3. In such a case, the Executive shall make a cash payment to the Company of all amounts owing within three (3) days of written demand therefor by the Company. The rights of the Company under this Section 6.11 shall be in addition to any rights of the Company (a) under this Agreement, and (b) to seek injunctive relief or other equitable or legal remedies in the case of any such breach by the Executive.
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SECTION 7 - MISCELLANEOUS COVENANTS
7.1 Entire Agreement. This Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written. The Executive hereby waives any right to assert a claim based on pre-contractual representations, negligent or otherwise, made by the Company or its representatives.
7.2 Currency. Unless otherwise stated herein, all amounts referred to in this Agreement shall be in USD.
7.3 Affiliated Corporations. By signing below the Executive agrees that the covenants and obligations to the Company, as well as the rights of the Company under this Agreement, shall run in favour of and shall be enforceable by the parent and subsidiary companies of the Company. This Agreement is between the Executive and the Company. The Executive shall have no right to enforce this Agreement against any party other than the Company.
7.4 Assignment. The Executive may not assign all or any part of this Agreement without the prior written consent of the Company (which consent may be withheld for any reason) and any assignment or delegation made without such consent shall be void. Nothing shall prevent the Company from assigning any of its rights or obligations under the Agreement. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of each party hereto and his/her or its respective successors and assigns.
7.5 Amendment. No amendment of this Agreement shall be effective unless made in writing and signed by the parties.
7.6 Waiver. Any purported waiver of any default, breach or non-compliance under this Agreement shall not be effective unless in writing and signed by the party to be bound by the waiver. No waiver shall be inferred from or implied by any failure to act or delay in acting by a party in respect of any default, breach or non-observance or by anything done or omitted to be done by the other party. The waiver by a party of any default, breach or non-compliance under this Agreement shall not operate as a waiver of that party's rights under this Agreement in respect of any continuing or subsequent default, breach or non-observance (whether of the same or any other nature).
7.7 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of the prohibition or unenforceability and shall be severed from the balance of this Agreement, all without affecting the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.
7.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania and the laws of the United States applicable in the Commonwealth of Pennsylvania and shall be treated, in all respects, as a Commonwealth of Pennsylvania contract.
7.9 Attornment. For all purposes, the parties agree to attorn to the exclusive jurisdiction of the federal courts for the Eastern District of Pennsylvania, and the State courts located therein.
7.10 Successors and Assigns. This Agreement shall endure to the benefit of, and be binding on, the parties and their respective heirs, administrators, executors, successors and permitted assigns. The Company shall have the right to assign this Agreement to any successor (whether direct or indirect, by purchase, amalgamation, arrangement, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company provided only that the Company must first require the successor to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The Executive by the Executive's signature hereto expressly consents to such assignment. The Executive shall not assign or transfer, whether absolutely, by way of security or otherwise, all or any part of the Executive's rights or obligations under this Agreement without the prior consent of the Company, which may be arbitrarily withheld.
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7.11 Statutory Deductions and Withholdings. The Company may withhold from any amounts payable under this Agreement such federal or provincial taxes and other statutory deductions that are required by applicable law to be so withheld or deducted.
7.12 Change in Terms and Conditions. The parties agree that the terms and conditions of this Agreement, and specifically Section 4 and Section 5, as may be amended in writing from time to time, shall govern the Executive's employment with the Company, regardless of the length of the Executive's employment or any changes to the Executive's terms of employment, including changes to position or compensation, and regardless of whether any such change is material or otherwise.
SECTION 8- DISPUTE RESOLUTION
8.1 Dispute Resolution Procedure. Any dispute, controversy or claim arising out of or relating to this Agreement ("Dispute") shall be subject to the dispute resolution procedure set forth in this Section 8 (the "Dispute Resolution Procedure"); provided, however, that the Company shall be entitled to seek injunctive relief from any court of appropriate jurisdiction in the case of any breach by the Executive of any of the terms of Section 6 of this Agreement; and provided further that such Dispute Resolution Procedure shall be non-binding, as described herein.
8.2 Commencement of the Dispute Resolution Procedure. If a Dispute arises, either party may initiate the Dispute Resolution Procedure by giving written notice of the Dispute to the other party (the "Notice of Dispute"). The Notice of Dispute shall contain a brief statement of the nature of the Dispute and set out the relief requested.
Upon the submission of a Notice of Dispute, the parties shall, during the following fifteen (15) days, attempt to amicably resolve the Dispute through negotiations. (the "Consultation Period").
8.3 Arbitration. If the Dispute is not resolved by the parties within the Consultation Period, the Dispute shall, at the request of either party by delivery of written notice (a "Notice of Arbitration") during the thirty (30) day period following the expiration of the Consultation Period (the "Arbitration Election Period"), be subject to non-binding arbitration under the rules of the American Arbitration Association, except to the extent that such rules conflict with the terms of this Section 8.3. The following provisions shall apply to an arbitration commenced pursuant to this Section 8.3:
(a) The arbitration shall be heard by a sole arbitrator (the "Arbitrator"), who the parties shall jointly select within thirty (30) days of the receipt of the Notice of Arbitration. The Arbitrator shall be trained in the laws of the Commonwealth of Pennsylvania. If the parties are unable to agree on the Arbitrator, either party may apply to have the Arbitrator appointed in accordance with the provisions of the American Arbitration Association.
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(b) The place of the arbitration shall be Philadelphia, Pennsylvania.
(c) Each party shall bear its own costs (including legal fees) of preparing for and participating in the Dispute Resolution Procedure, including legal fees;
Notwithstanding the non-binding nature of the arbitration, the terms of this Section 8.3(c) shall be binding on the parties.
8.4 Proceedings Confidential. The parties agree that any arbitration carried out hereunder shall be kept private and confidential, and that the existence of the proceedings and any element of it shall be kept confidential, except (a) where disclosure is lawfully required by a legal duty, and
(b) where such information is already in the public domain other than as a result of a breach of this clause.
8.5 Non-Binding Nature of Dispute Resolution Procedure. The Dispute Resolution Procedure shall be deemed concluded on the earlier of (a) the expiration of the Arbitration Election Period, if neither party has delivered a Notice of Arbitration, and (b) immediately upon the issuance of a non-binding decision by the Arbitrator, if either party has delivered a Notice of Arbitration during the Arbitration Election Period. Following the conclusion of the Dispute Resolution Procedure, the parties shall be free to mutually accept the results of such Dispute Resolution Procedure, or either party may reject such results and pursue all available legal and equitable remedies.
SECTION 9- EXECUTIVE'S ACKNOWLEDGEMENT
9.1 Acknowledgement. The Executive acknowledges that:
(a) the Executive has had sufficient time to review the Agreement thoroughly;
(b) the Executive has read and understands the terms of the Agreement and his obligations hereunder;
(c) the Executive is receiving good and valuable consideration in exchange for being bound by the terms and conditions of this Agreement and shall not attach enforceability of any such covenants or effectiveness of this Agreement.
(d) the Executive has been given a reasonable opportunity to obtain independent legal advice concerning the interpretation and effect of the Agreement.
(e) the Executive has received a fully executed original copy of the Agreement; and
(f) Part of the Executive's duties shall include entertaining and socializing from time to time in various settings and locations and during weekends. The Executive agrees that if the Executive is not comfortable participating in any such entertainment or social event, the Executive will promptly notify the CEO of the Company or his/her designee. In the absence of any such notification, it is understood that the Executive is voluntarily and/or willingly participating in such entertainment and social events and does not find them objectionable.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.
| SIGNED, SEALED AND DELIVERED | ) | ||
| in the presence of: | ) | ||
| ) | |||
| ) | |||
| ) | |||
| ) | /s/ Edward Brennan | ||
| Witness | ) | Edward Brennan | |
| Medicus Pharma Ltd. | |||
| By: | /s/ Carolyn Bonner | ||
| Name: Carolyn Bonner | |||
| Title: President | |||
| I have authority to bind the Company. | |||
Exhibit 21.1
Subsidiaries of Medicus Pharma Ltd. (the "Company")
The full corporation name, jurisdiction of incorporation and registered and beneficial ownership of the issued and outstanding shares of each direct and indirect Subsidiary is as follows:
| Name of Subsidiary | Jurisdiction of Incorporation | Ownership of Securities | ||
| SkinJect, Inc. | Pennsylvania | Wholly owned by the Company | ||
| Medicus Pharma, Inc. | Delaware | Wholly owned by the Company |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the reference to our firm under the caption "Experts and Legal Matters" and to the use of our report dated May 25, 2024 relating to the consolidated financial statements of Medicus Pharma Ltd. in the Registration Statement on Form F-1 and the related Prospectus of Medicus Pharma Ltd. dated May 28, 2024.
| May 28, 2024 | /s/ MNP LLP |
| Chartered Professional Accountants | |
| Mississauga, Canada | Licensed Public Accountants |