Psyence Biomedical Ltd 20-F, filed Jan 31, 2024
Psyence Biomedical Ltd. (PBM)
About this 20-F
Psyence Biomedical Ltd filed this 20-F on January 31, 2024, covering the fiscal year ended January 25, 2024.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
| ¨ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| ☐ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended __________
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| x | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report: January 25, 2024
Commission File Number: 001-41937
Psyence Biomedical Ltd.
(Exact name of Registrant as specified in its charter)
| Not applicable | Canada | |
(Translation of Registrant’s name into English)
|
(Jurisdiction of incorporation or organization)
|
121 Richmond Street West
Penthouse Suite 1300
Toronto, Ontario M5H 2K1
+1 (416) 346-7764
(Address of principal executive offices)
Copy to:
Neil Maresky
121 Richmond Street West
Penthouse Suite 1300
Toronto, Ontario M5H 2K1
+1 (416) 346-7764
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) |
Name of each exchange on which registered | ||
| Common shares, without par value | PBM | The Nasdaq Stock Market LLC | ||
| Warrants, each exercisable to purchase one Common Share at an exercise price of $11.50 per share | PBMWW | The Nasdaq Stock Market LLC |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the shell company report: 13,390,659 common shares and 13,070,000 warrants to purchase common shares.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨ No x
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or an emerging growth company. See definition of “accelerated filer,” “large accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | ¨ | Accelerated filer | ¨ | Non-accelerated filer | x | |||||
| Emerging growth company | x | |||||||||
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 13(a) of the Exchange Act. ¨
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ¨
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
| U.S. GAAP ¨ | International Financial Reporting Standards as issue by the International Accounting Standards Board | x | Other ¨ |
If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ¨ Item 18 ¨
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ¨
TABLE OF CONTENTS
On January 25, 2024 (the “Closing Date”), Psyence Biomedical Ltd., a corporation organized under the laws of Ontario, Canada (“Psyence Biomedical” or the “Company”), consummated the previously announced business combination pursuant to the Amended and Restated Business Combination Agreement (as amended, the “BCA”), dated as of July 31, 2023, by and among the Company, Newcourt Acquisition Corp, a Cayman Islands exempted company (“NCAC”), Newcourt SPAC Sponsor LLC, a Delaware limited liability company (“Sponsor”), Psyence Group Inc., a corporation organized under the laws of Ontario, Canada (“Parent”), Psyence (Cayman) Merger Sub, a Cayman Islands exempted company and a direct and wholly owned subsidiary of Pubco (“Merger Sub”), Psyence Biomed Corp., a corporation organized under the laws of British Columbia, Canada (“Original Target”), and Psyence Biomed II Corp., a corporation organized under the laws of Ontario, Canada (“Psyence II”).
The following transactions occurred pursuant to the terms of the BCA (collectively, the “Business Combination”) at the effective time of the Merger (the “Effective Time”):
| · | Parent contributed Psyence II to the Company in a share for share exchange (the “Company Exchange”). |
| · | Following the Company Exchange, Merger Sub merged with and into NCAC, with NCAC being the surviving company in the merger (the “Merger”) and each outstanding ordinary share of NCAC was converted into the right to receive one common share of the Company (“Company Common Share”). |
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| · | Each outstanding warrant to purchase NCAC Class A ordinary shares was converted into a warrant to acquire one Company Common Share (the “Company Warrants”) on substantially the same terms as were in effect immediately prior to the Effective Time under their terms. |
On January 15, 2024 and January 23, 2024, the parties to the BCA entered into letter agreements (the “Closing Letter Agreements”) pursuant to which, among other things, Psyence Biomedical, Parent, Psyence II, Original Target and Merger Sub (collectively, the “Psyence Parties”) agreed, (X) on a conditional basis, to waive the closing conditions contained in the BCA that, at or prior to the closing of the Business Combination (the “Closing”), (i) NCAC shall have no less than $20,000,000, net of liabilities, as of the Closing (the “Minimum Cash Condition”) and (ii) the PIPE Investment in the PIPE Investment Amount shall have occurred or shall be ready to occur substantially concurrently with the Closing (the “PIPE Investment Condition”) and (Y) to waive certain deliverables under Section 3.6 of the BCA (the “Closing Deliverables”). Upon the Closing, the Psyence Parties waived in full the Minimum Cash Condition, the PIPE Investment Condition and the Closing Deliverables.
As previously disclosed, on January 15, 2024, in connection with the Business Combination, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) by and among (i) the Company, (ii) Psyence II, (iii) Sponsor, and (iv) certain investors (the “Investors”) relating to up to four senior secured convertible notes (collectively, the “Notes” and the transactions pursuant to the Securities Purchase Agreement, the “Financing”), obligations under which are guaranteed by certain assets of the Company and Psyence II, issuable to the Investors at or after the Closing, as the case may be, for the aggregate principal amount of up to $12,500,000 in exchange for up to $10,000,000 in subscription amounts.
The Note for the first tranche of the Financing (the “First Tranche Note”), for a total of $3,125,000 of principal in exchange for a total of $2,500,000 in subscription amounts was issued to the Investors substantially concurrently with, and contingent upon, the Closing. The Financing closed immediately prior to the Business Combination.
The Company Common Shares and the Company Warrants are traded on The Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “PBM” and “PBMWW,” respectively.
Except as otherwise indicated or required by context, references in this Shell Company Report on Form 20-F (the “Report”) to “we,” “us,” “our,” “Psyence Biomedical” or the “Company” refer to Psyence Biomedical Ltd., a corporation organized under the laws of Ontario, Canada.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report and the documents incorporated by reference herein include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements relate to, among others, our plans, objectives and expectations for our business, operations and financial performance and condition, and can be identified by terminology such as “may,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” and similar expressions that do not relate solely to historical matters. Forward-looking statements are based on management’s belief and assumptions and on information currently available to management. Although we believe that the expectations reflected in forward-looking statements are reasonable, such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements.
Forward-looking statements in this Report and in any document incorporated by reference in this Report may include, but are not limited to, statements about:
| · | the ability of Psyence Biomedical to realize the benefits expected from the Business Combination and to maintain the listing of the Company Common Shares or the Company Warrants on Nasdaq; |
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| · | risks that the Business Combination disrupts current plans of Psyence Biomedical or diverts management’s attention from Psyence Biomedical’s ongoing business operations and potential difficulties in Psyence Biomedical’s employee retention as a result of the Business Combination; |
| · | volatility in the price of the securities of the Company due to a variety of factors, including changes in the competitive and highly regulated industries in which the Company operates, variations in performance across competitors, changes in laws and regulations affecting the Company’s business and changes in the Company’s capital structure; |
| · | Psyence Biomedical’s success in retaining or recruiting, or changes required in, its officers, key employees or directors; |
| · | factors relating to the business, operations and financial performance of the Company, including, but not limited to: |
| · | the Company’s ability to achieve successful clinical results; |
| · | the Company currently has no products approved for commercial sale; |
| · | the Company’s ability to obtain regulatory approval for its product candidates, and any related restrictions or limitations of any approved products; |
| · | the Company’s ability to obtain licensing of third-party intellectual property rights for future discovery and development of the Company’s product candidates; |
| · | the Company’s ability to commercialize product candidates and achieve market acceptance of such product candidates; |
| · | the Company’s success is dependent on product candidates which it licenses from third parties; |
| · | the ability to respond to general economic conditions; |
| · | the Company has incurred significant losses since inception, and it expects to incur significant losses for the foreseeable future and may not be able to achieve or sustain profitability in the future; |
| · | the Company requires substantial additional capital to finance its operations, and if it is unable to raise such capital when needed or on acceptable terms, it may be forced to delay, reduce, and/or eliminate one or more of its development programs or future commercialization efforts; |
| · | the Company’s ability to develop and maintain effective internal controls; |
| · | assumptions regarding interest rates and inflation; |
| · | competition and competitive pressures from other companies worldwide in the industries in which the Company operates; and |
| · | litigation and the ability to adequately protect the Company’s intellectual property rights. |
Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the factors discussed under the “Risk Factors” section of the proxy statement/prospectus (the “Proxy Statement/Prospectus”) forming a part of the Registration Statement on Form F-4 of the Company (File No. 333-273553) (the “Registration Statement”) filed in connection with the Business Combination, which section is incorporated herein by reference. Accordingly, you should not rely on these forward-looking statements, which speak only as of the date of this Report. We undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this Report or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks described in the reports we will file from time to time with the SEC after the date of this Report.
Although we believe the expectations reflected in the forward-looking statements were reasonable at the time made, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assume responsibility for the accuracy or completeness of any of these forward-looking statements. You should carefully consider the cautionary statements contained or referred to in this section in connection with the forward looking statements contained in this Report and any subsequent written or oral forward-looking statements that may be issued by the Company or persons acting on its behalf.
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| ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
| A. | Directors and Senior Management |
Information regarding the directors and executive officers of the Company after the closing of the Business Combination is included in the Proxy Statement/Prospectus under the section titled “Management of Pubco Following the Business Combination” and is incorporated herein by reference.
The business address for each of the directors and executive officers of the Company is 121 Richmond Street West, Penthouse Suite 1300, Toronto, Ontario M5H 2K1.
| B. | Advisers |
Ellenoff Grossman & Schole LLP, 1345 Avenue of the Americas, New York, New York 10105, United States, has acted as U.S. securities counsel for the Company and will continue to act as U.S. securities counsel to the Company following the completion of the Business Combination.
WeirFoulds LLP, 66 Wellington Street West, Suite 4100, P.O. Box 35, TD Bank Tower, Toronto, Ontario, Canada M5K 1B7, has acted as counsel for the Company with respect to Ontario law and will continue to act as counsel for the Company with respect to Ontario law following the completion of the Business Combination.
| C. | Auditors |
For the fiscal years ended March 31, 2023, 2022 and 2021, MNP LLP, has acted as the independent registered public accounting firm for Psyence Biomedical and is expected to continue to act as the Company’s independent registered public accounting firm for the fiscal year ended March 31, 2024.
| ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
Not applicable.
| ITEM 3. | KEY INFORMATION |
| A. | [Reserved.] |
| B. | Capitalization and Indebtedness |
The following table sets forth the capitalization of the Company on an unaudited pro forma combined basis as of September 30, 2023, after giving effect to the Business Combination and the Financing:
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| Pro Forma Ownership | Shares | Number of Percent Outstanding |
||||
| Rollover equity shares of Psyence Biomedical shareholders | 5,000,000 | 37.34 | % | |||
| NCAC Public Shareholders | 119,659 | 0.89 | % | |||
| Members of Sponsor | 3,765,071 | 28.12 | % | |||
| Sponsor | 2,389,929 | 17.85 | % | |||
| Cantor and CCM | 520,000 | 3.88 | % | |||
| Financing Investors | 1,300,000 | 9.71 | % | |||
| Other Third Party Advisers | 296,000 | 2.21 | % | |||
| Total shares outstanding | 13,390,659 | 100 | % | |||
The information set forth below in Item 10 under the section titled “Securities Purchase Agreement and Related Agreements” is incorporated herein by reference.
| C. | Reasons for the Offer and Use of Proceeds |
Not applicable.
| D. | Risk Factors |
The risk factors related to the business and operations of Psyence Biomedical are described in the Proxy Statement/Prospectus under the section titled “Risk Factors,” which is incorporated herein by reference.
| ITEM 4. | INFORMATION ON THE COMPANY |
| A. | History and Development of the Company |
See “Explanatory Note” in this Report for additional information regarding the Company and the BCA. Certain additional information about the Company is included in the Proxy Statement/Prospectus under the section titled “Information About Psyence” and is incorporated herein by reference. The material terms of the Business Combination are described in the Proxy Statement/Prospectus under the section titled “The Business Combination Agreement,” which is incorporated herein by reference.
The Company is subject to certain of the informational filing requirements of the Exchange Act. Since the Company is a “foreign private issuer,” it is exempt from the rules and regulations under the Exchange Act prescribing the furnishing and content of proxy statements, and the officers, directors and principal shareholders of the Company are exempt from the reporting and “short-swing” profit recovery provisions contained in Section 16 of the Exchange Act with respect to their purchase and sale of Company Common Shares. In addition, the Company is not required to file reports and financial statements with the SEC as frequently or as promptly as U.S. public companies whose securities are registered under the Exchange Act. However, the Company is required to file with the SEC an Annual Report on Form 20-F containing financial statements audited by an independent accounting firm. The SEC also maintains a website at www.sec.gov that contains reports and other information that the Company files with or furnishes electronically to the SEC.
The website address of the Company is www.psyence.com. The information contained on the website does not form a part of, and is not incorporated by reference into, this Report.
| B. | Business Overview |
Information regarding the business of the Company is included in the Proxy Statement/Prospectus under the sections titled “Information About Psyence” and below under Item 5, which are incorporated herein by reference.
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| C. | Organizational Structure |
The Company is the therapeutic division of Psyence Group Inc., a life science biotechnology company listed on the Canadian Securities Exchange (CSE:PSYG), with a focus on natural psychedelics. Psyence Group Inc. develops natural psilocybin products for the healing of psychological trauma and its mental health consequences in the context of palliative care. The Company has commenced the clinical trial process to evaluate the safety and efficacy of its product candidates. We refer to Parent and its subsidiaries and affiliates prior to the consummation of the Business Combination as the “Psyence Group.”
The Psyence Group was created through various corporate transactions, including a prior business combination of Mindhealth Corp. with Cardinal Capital Partners Inc., a public company, in January 2021, resulting in Parent’s public listing in Canada. MindHealth Biomed Corp. (“MindHealth”) was a private corporation incorporated under the laws of British Columbia on May 21, 2020. Mind Health (Pty) Ltd (“MindHealth Lesotho”) is a private entity incorporated under the laws of the Kingdom of Lesotho, which in May 2020, was granted permission by the Minister of Health (Lesotho) to import, cultivate, produce, manufacture and export psilocybin mushrooms. The governmentally licensed commercial psilocybin cultivation and production facilities operated by MindHealth Lesotho under the name “Psyence Production” are situated in the Kingdom of Lesotho. On May 22, 2020, MindHealth Lesotho became a subsidiary of MindHealth. Pursuant to the Business Combination, the Psyence therapeutics business was be separated from the Psyence Group and included in the newly Nasdaq-listed Psyence Biomed, while the other two divisions of the Psyence Group (Psyence Production and Psyence Function) remained under the Psyence Group. We intend to utilize the funds raised in the Business Combination to provide us with the capital to advance natural psilocybin into a Phase IIb clinical trial study to be conducted under an approved protocol in Australia (the “Phase IIb Study”). The Phase IIb Study, along with its associated assets, contracts and intellectual property constitute the business assets being held by Psyence following the Business Combination.
Canadian Restructuring
Prior to the date of the BCA, (i) Parent formed Psyence II and Psyence Biomedical as wholly-owned subsidiaries, (ii) promptly after entering into the BCA, Parent and Psyence Biomed Corp., a corporation organized under the laws of British Columbia, were amalgamated, and thereafter (iii) Parent (x) transferred the shares of Psyence Australia Pty Ltd. and its related business assets to Psyence II while (y) retaining the shares of Good Psyence (Pty) Ltd (RF) (South Africa), Psyence Jamaica Ltd (Jamaica), Psyence UK Group Ltd., Psyence Therapeutics Corp. (Ontario, Canada), Mind Health (Pty) Ltd (Lesotho), and Psyence South Africa (Pty) Ltd (South Africa) (collectively, the “Excluded Assets”) (such transactions, collectively, the “Canadian Restructuring”).
Psyence Biomedical conducts its operations through its subsidiaries based in Ontario and Australia and also owns a subsidiary in the Cayman Islands, as listed below:
| Name | Country of Incorporation and Place of Business | Proportion of Ordinary Shares Held by Psyence Biomedical |
||||
| Psyence Biomed II Corp | Ontario, Canada | 100 | % | |||
| Psyence Australia Pty Ltd | Australia | Indirect 100 | % | |||
| Newcourt Acquisition Corp | Cayman Islands | Indirect 100 | % | |||
The diagram below depicts a simplified version of Psyence Biomedical immediately following the consummation of the Business Combination.
| D. | Property, Plants and Equipment |
Information regarding the facilities of the Company is included in the Proxy Statement/Prospectus under the section titled “Information About Psyence — Headquarters and Operational Office,” which is incorporated herein by reference.
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| ITEM 4A. | UNRESOLVED STAFF COMMENTS |
None.
| ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
PSYENCE BIOMEDICAL MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless the context otherwise requires, all references in this section to the “Company,” “we,” “us” or “our” refer to the business of Psyence Group Inc. prior to the consummation of the Business Combination, which will be the business of Psyence Biomedical and its subsidiaries following the consummation of the Business Combination.
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the information under “Selected Historical Financial Data of Psyence” and our historical condensed consolidated interim financial statements and the related notes included elsewhere in this Report. This discussion and analysis should also be read together with the interim financial statements of Psyence Biomedical for the three and six months periods ended September 30, 2023 and 2022 and the pro forma financial information as of September 30, 2023 and 2022 included elsewhere in this Report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” set forth in the Proxy Statement/Prospecuts and elsewhere in this statement.
The numbers presented here have been translated to USD and are presented in USD.
Overview
Psyence Group Inc.is a life science biotechnology company listed on the Canadian Securities Exchange (CSE: PSYG) with a focus on natural psychedelics. Psyence Biomedical, also referred to as “Psyence Therapeutics”, is a division of Psyence, which is developing natural psilocybin medicinal formulations and treatment protocols for the treatment of adjustment disorder in patients with an incurable cancer diagnosis.
Recent Developments
See “Explanatory Note” in this Report for additional information regarding the Company and the BCA.
Results of Operations
Sales and marketing costs
For the 3-month period ended September 30, 2023, the Company incurred sales and marketing costs of $1,095, consisting primarily of expenses for conferences, content, promotional materials and website design costs. For the 3-month period ended September 30, 2022, sales and marketing costs of $0 were incurred.
For the 6-month period ended September 30, 2023, the Company incurred sales and marketing costs of $2,122 consisting primarily of expenses for conferences, content, promotional materials and website design costs. For the 6-month period ended September 30, 2022, sales and marketing costs of $0 were incurred.
For the year ended March 31, 2023, we incurred sales and marketing costs of $7,024, consisting primarily of expenses for conferences, content, promotional materials and website design costs. For the year ended March 31, 2022, sales and marketing costs of $17,440 were incurred, consisting of costs to create awareness of the Company and its activities, due to its recent establishment.
Research and development
For the 3-month period ended September 30, 2023, the Company incurred research and development costs of ($8,530) due to foreign exchange fluctuations, as compared to $1,984 for the 3-month period ended September 30, 2022.
For the 6-month period ended September 30, 2023, the Company incurred research and development costs of $791,439, as compared to $160,676 for the 6-month period ended September 30, 2022. The costs for both periods were incurred as we commenced clinical trials. The increase in costs reflect the higher costs associated with the Company’s Phase IIb palliative care clinical trial, as opposed to costs related to Phase IIa palliative care clinical trial.
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For the year ended March 31, 2023, we incurred research and development costs of $1,607,565. This consisted of $1,372,850 of costs related to the clinical trial for the treatment of adjustment disorder, $170,072 for the formulation and licensing of PEX010 and $64,644 for general research.
General and administration costs
For the 3-month period ended September 30, 2023, the Company incurred general and administrative costs of ($16,105) due to option expense reversals, which consisted of bank fees, salaries and wages and operational costs, compared with $80,604 for the year ended 3-month period ended September 30, 2022. General and administrative costs decreased during the period in comparison to the preceding period as result of a decrease in payroll related costs.
For the 6-month period ended September 30, 2023, the Company incurred general and administrative costs of $85,569, which consisted of bank fees, salaries and wages and operational costs, compared with $172,588 for the 6-month period ended September 30, 2022. General and administrative costs decreased slightly during the period in comparison to the preceding period as result of a decrease in payroll related costs.
For the year ended March 31, 2023, the Company incurred general and administrative costs of $366,132, which consisted of bank fees, salaries and wages and operational costs, compared with $384,747 for the year ended March 31, 2022. General and administrative costs decreased slightly during the year ended March 31, 2023 in comparison to the year ended March 31, 2022 as result of a decrease in payroll related costs.
Professional and consulting fees
For the 3-month period ended September 30, 2023, professional and consulting fees totaled $199,516. This consisted of $129,461 paid to consultants for product development, financial, business strategies and administrative services, legal fees of $46,413 paid to legal practitioners for various corporate matters, and $23,642 for accounting services and audit fees.
For the 3-month period ended September 30, 2022, professional and consulting fees totaled $178,767. This consisted of $178,153 paid to consultants for product development, financial, business strategies and administrative services and legal fees of $614 paid to legal practitioners for various corporate matters.
For the 6-month period ended September 30, 2023, professional and consulting fees totaled $584,427. This consisted of $248,131 paid to consultants for product development, financial, business strategies and administrative services, legal fees of $312,455 paid to legal practitioners for various corporate matters, and $23,841 for accounting services and audit fees.
For the 6-month period ended September 30, 2022, professional and consulting fees totaled $341,744. This consisted of $340,373 paid to consultants for product development, financial, business strategies and administrative services and legal fees of $1,371 paid to legal practitioners for various corporate matters.
For the year ended March 31, 2023, professional and consulting fees totaled $1,251,474. This consisted of $825,866 paid to consultants for business strategies, financial and administrative services, legal fees of $250,523 paid to legal practitioners for various corporate matters, and $175,085 for accounting services and audit fees.
The professional and consulting fees for the period increased from the preceding period due to the Business Combination.
Other gains and losses
For the 3-month period ended September 30, 2023, and 2022, the Company incurred/(received) interest of $27,906 and ($854), respectively and had a foreign exchange loss of $113,997 and loss of $1,570, respectively.
For the 6-month period ended September 30, 2023, and 2022, the Company incurred/(received) interest of $27,423 and ($1,005), respectively and had a foreign exchange loss of $115,434 and $2,890, respectively.
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For the years ended March 31, 2023 and 2022, the Company earned interest income of $1,553 and $0, respectively, and had a foreign exchange gain of $26,890 and loss of $2,278, respectively.
Liquidity and Capital Resources
Since incorporation, the operations have been financed from investment by our parent, Psyence Group Inc. and a loan advance based off the Company’s eligibility to receive a rebate from the Australian Tax Office. Our main use for liquidity is funding scientific research, clinical studies, salaries and professional and consulting fees. Our ability to fund operations and to make planned cash flows are subject to prevailing economic conditions, regulatory and financial, business, and other factors, some of which are beyond the Company’s control.
As of September 30, 2023, we had a cash balance of $605,480 and negative working capital of $982,671. This is as result of the trade payables relating to the Phase IIb Clinical Study. Working capital represents the excess of current assets over current liabilities. The Company prioritizes expenditure, both capital and operational, by regularly reviewing its available cash and cash equivalent balances against the spend required to deliver on its key strategic objectives and milestones.
As of March 31, 2023, we had a cash balance of including restricted cash of $1,363,900 and negative working capital of $200,545. This is as result of the trade payables relating to the Phase IIb Clinical Study. Working capital represents the excess of current assets over current liabilities. The Company prioritizes expenditure, both capital and operational, by regularly reviewing its available cash and cash equivalent balances against the spend required to deliver on its key strategic objectives and milestones.
The Company’s current expenditure obligations include commitments for the Phase IIb palliative care clinical trial. The Company expects to continue funding these projects with available cash and cash equivalents, and therefore, is subject to risks including, but not limited to, an inability to raise additional funds through the issuance of equity, debt instruments or similar means of financing to support the Company’s continued development, including operating requirements and to meet its liabilities and commitments at they become due.
The Company has experienced operating losses and cash outflows from operations since incorporation and by nature of its business, will require ongoing financing to continue its research and development operations. The Company’s ability to access both public and private capital is dependent upon, among other things, general and sectoral market conditions and the capital markets generally, market perceptions about the Company and its business operations, and the trading prices of the Company’s securities from time to time. There can be no assurance that additional funds can be raised upon terms acceptable to the Company, or at all, as funding for early-stage companies remain challenging generally.
The Company’s primary capital needs are funds to advance its research and development activities and for working capital purposes. These activities include staffing, pre-clinical studies, clinical trials, professional and consulting fees and general and administrative costs. There are uncertainties regarding the Compay’s ability to continue as a going concern. There is no assurance that additional capital or other types of financing will be available if needed or that these financings will be on terms at least as favorable for the Company as those previously obtained, or at all.
Critical Accounting Policies
The preparation of financial statements in conformity with IFRS requires management to make certain estimates, judgments and assumptions concerning the future. Actual results may differ from these estimates. The Company’s management reviews these estimates, judgments, and assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted prospectively in the period in which the estimates are revised. The following are deemed to be critical accounting policies as these require a high level of subjectivity and judgement and could have a material impact on Psyence’s financial statements.
Going concern
Our audited financial statements included elsewhere in this Report have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations.
8
Management routinely plans future activities including forecasting future cash flows and forming judgements collectively with directors of the Company.
Judgement is required in determining if the Company’s has sufficient cash reserves, together with all other available information, to continue as a going concern for a period of at least twelve months.
As of September 30, 2023 the Company has concluded that a material uncertainty exists that casts significant doubt about the Company’s ability to continue as a going concern.
Quantitative and Qualitative Disclosures About Financial instruments and financial risk management
In the normal course of business, the Company is exposed to a variety of financial risks: credit risk, liquidity risk, foreign exchange risk and interest rate risk. These financial risks are subject to normal credit standards, financial controls, risk management, as well as monitoring. The Psyence Board has overall responsibility for the establishment and oversight of the Company’s risk management framework.
Credit risk
Credit risk arises from cash and cash equivalents held with banks. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The objective of managing counterparty credit risk is to prevent losses on financial assets. The Company minimizes the credit risk of cash and cash equivalents by depositing with only reputable financial institutions. The Company also assesses the credit quality of counterparties, taking into account their financial position, past experience and other factors.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.
The Company manages liquidity risk through an ongoing review of future commitments and cash balances available. Historically, the Company’s main source of funding has been through investments from its parent. The Company’s access to financing is always uncertain and there can be no assurance of continued access to significant equity or debt funding on terms satisfactory to the Company, or at all.
Foreign exchange risk
Foreign currency risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because they are denominated in currencies that differ from the respective functional currency.
The Company operates internationally and is exposed to foreign exchange risk from the South African Rand, Great British Pound, Australian Dollar and United States Dollar. Foreign exchange risk arises from transactions as well as recognized financial assets and liabilities denominated in foreign currencies.
A 10% adverse change in exchange rate would have resulted in a loss of $110,468 as of September 30, 2023.
Management mitigates the risk of adverse exchange rate movements by holding funds in Canadian and US dollars.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company has no significant interest-bearing assets or liabilities and therefore its income and operating cash flows are substantially independent of changes in market interest rates.
9
Capital management
The Company’s objectives when managing its capital are to safeguard its ability to continue as a going concern, to meet its capital expenditures for its continued operations, and to maintain a flexible capital structure which optimizes the cost of capital within a framework of acceptable risk. The Company manages its capital structure and adjusts it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust its capital structure, the Company may issue new shares, issue debt, or acquire or dispose of assets. The Company is not subject to externally imposed capital requirements.
Management reviews its capital management approach on an ongoing basis. The Company considers its shareholders’ equity balance as capital.
Related Party Transactions
All related party transactions are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. All amounts either due from or due to related parties other than specifically disclosed are non-interest bearing, unsecured and have no fixed terms of repayments. The Company incurred the following transactions with related parties during the 6 month period ended September 30, 2023 and September 30, 2022:
Compensation to key management personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. Key management personnel include the Company’s executive officers and Board of Directors.
| Key Management Personnel | September 30, 2023 | September 30, 2022 | ||||||
| Short term benefits | 251,514 | 327,439 | ||||||
Short-term benefits consist of consulting fees, payroll and other benefits paid to key management personnel.
The Company incurred the following transactions with related parties during the years ended March 31, 2023 and March 31, 2022:
| Key Management Personnel | March 31, 2023 | March 31, 2022 | ||||||
| Short term benefits | 593,717 | 610,233 | ||||||
| Share based compensation | 174,778 | 295,188 | ||||||
| Total | 768,495 | 905,421 | ||||||
Short term benefits consist of consulting fees, payroll and other benefits paid to key management personnel. Share based compensation is options granted to key management personnel. Accounts payable included balances for related parties of $74,156 ($17,610 – March 31, 2022 & $22,366 – March 31, 2021).
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2023. We do not participate in transactions that create relationships with entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non- emerging growth companies. As such, our financial statements may not be comparable to companies that comply with public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of executive compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,” whichever is earlier
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| ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
| A. | Directors and Senior Management |
Information regarding the directors and executive officers of the Company after the closing of the Business Combination is included in the Proxy Statement/Prospectus under the section titled “Management of Pubco Following the Business Combination” and is incorporated herein by reference.
| B. | Compensation |
Information regarding the compensation of the directors and executive officers of the Company, is included in the Proxy Statement/Prospectus under the section titled “Executive Compensation of Psyence” and is incorporated herein by reference. A summary of the Company’s 2023 Incentive Plan, which was approved by the shareholders of the Company prior to the completion of the Business Combination, is included in the Proxy Statement/Prospectus under the sections titled “Management of Pubco Following the Business Combination — Equity Incentive Plan” and “Proposal No. 5 – The Incentive Plan Proposal” and are incorporated herein by reference.
Indemnification
The Company has entered into indemnification agreements with its directors and executive officers. Information regarding such indemnification agreements is included in the Proxy Statement/Prospectus under the section titled “Management of Pubco Following the Business Combination — Limitation on Liability and Indemnification of Officers and Directors” and is incorporated herein by reference.
| C. | Board Practices |
Information regarding the board of directors of the Company subsequent to the Business Combination is included in the Proxy Statement/Prospectus under the section titled “Management of Pubco Following the Business Combination” and is incorporated herein by reference.
| D. | Employees |
Information regarding the employees of the Company is included in the Proxy Statement/Prospectus under the sections titled “Management of Pubco Following the Business Combination” and “Information Related to Pubco” and are incorporated herein by reference.
| E. | Share Ownership |
Information regarding the ownership of the Company Common Shares by our directors and executive officers is set forth in Item 7.A of this Report and is incorporated herein by reference.
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| F. | Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation |
Not applicable.
| ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
| A. | Major Shareholders |
The following table sets forth information relating to the beneficial ownership of the Company Common Shares as of the Closing Date by:
| · | each person, or group of affiliated persons, known by us to beneficially own more than 5% of outstanding Company Common Shares; |
| · | each of our directors; |
| · | each of our executive officers; and |
| · | all of our directors and executive officers as a group. |
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, and includes shares underlying options and warrants that are currently exercisable or exercisable within 60 days. In computing the number of shares beneficially owned by a person or entity and the percentage ownership of that person or entity in the table below, all shares subject to options or warrants held by such person or entity were deemed outstanding if such securities are currently exercisable, or exercisable within 60 days of the Closing Date. These shares were not deemed outstanding, however, for the purpose of computing the percentage ownership of any other person or entity.
The percentage of Company Common Shares beneficially owned is computed on the basis of 13,390,659 Company Common Shares outstanding on the Closing Date, after giving effect to the Business Combination and the Financing.
Unless otherwise indicated, we believe that all persons named in the table below have sole voting and investment power with respect to all Company Common Shares beneficially owned by them. To our knowledge, no Company Common Shares beneficially owned by any executive officer or director have been pledged as security.
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| Name of Beneficial Owner(1) | Number of Company Common Shares |
% of Company Common Shares |
|||||
| 5% Holders | |||||||
| Tabula Rasa Limited(2) | 4,149,929 | 30.99 | % | ||||
| Harraden Circle Investors, LP / Harraden Circle Special Opportunities, LP(3) | 1,300,000 | 9.71 | % | ||||
| Newcourt SPAC Sponsor LLC | 2,949,929 | (4) | 21.30 | % | |||
| Psyence Group Inc | 5,000,000 | 37.34 | % | ||||
| Directors and Executive Officers | |||||||
| Dr. Neil Maresky | - | - | |||||
| Warwick Corden-Lloyd | - | - | |||||
| Jody Aufrichtig | - | - | |||||
| Marc Balkin | - | - | |||||
| Christopher (Chris) Bull | - | - | |||||
| Dr. Seth Feuerstein | - | - | |||||
| All Directors and Executive Officers as a group (six individuals) | - | - | |||||
* Less than 1%.
Notes:
(1) Unless otherwise noted, the business address of each of those listed in the table above is 121 Richmond Street West, Penthouse Suite 1300, Toronto, Ontario M5H 2K1.
(2) Consists of (i) 1,300,000 Company Common Shares held by Tabula Rasa Limited and (ii) 2,389,929 Company Common Shares and 460,000 private placement warrants exercisable into Company Common Shares held by the Sponsor, of which Tabula Rasa Limited is the sole manager.
(3) Includes (i) 650,000 Company Common Shares held by Harraden Circle Investors, LP, and (ii) 650,000 Company Common Shares held by Harraden Circle Special Opportunities, LP. The principal business office of Harraden Circle Investors, LP and Harraden Circle Special Opportunities, LP is located at 299 Park Avenue, 21st Floor, New York, NY 10171. The Company Common Shares reported herein are directly beneficially owned by Harraden Circle Investors, LP (“Harraden Fund”). Harraden Circle Investors GP, LP (“Harraden GP”) is the general partner to Harraden Fund, and Harraden Circle Investors GP, LLC (“Harraden LLC”) is the general partner of Harraden GP. Harraden Circle Investments, LLC (“Harraden Adviser”) is investment manager to Harraden Fund and other high net worth individuals. Frederick V. Fortmiller, Jr. is the managing member of each of Harraden LLC and Harraden Adviser. In such capacities, each of Harraden GP, Harraden LLC, Harraden Adviser and Mr. Fortmiller may be deemed to indirectly beneficially own the Company Common Shares reported herein directly beneficially owned by Harraden Fund.
(4) Consists of 2,389,929 Company Common Shares and 460,000 private placement warrants exercisable into Company Common Shares held by the Sponsor. Tabula Rasa Limited, a British Virgin Islands company with limited liability, is the sole manager of Sponsor. Carl Linde is the director of Fiducia Trustees Limited, the sole corporate director of Tabula Rasa Limited. Consequently, Mr. Linde is deemed to be the beneficial owner of the shares held by our sponsor and to have voting and dispositive control over such securities. Mr. Linde disclaims beneficial ownership of any shares other than to the extent he may have a pecuniary interest therein, directly or indirectly.
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| B. | Related Party Transactions |
Information regarding certain related party transactions is included in the Proxy Statement/Prospectus under the section titled “Certain Psyence and Pubco Relationships and Related Person Transactions” and is incorporated herein by reference.
| C. | Interests of Experts and Counsel |
Not applicable.
| ITEM 8. | FINANCIAL INFORMATION |
| A. | Consolidated Statements and Other Financial Information |
See Item 18 of this Report for consolidated financial statements and other financial information.
| B. | Significant Changes |
A discussion of significant changes since September 30, 2023, is provided under Item 4 and Item 10 of this Report and is incorporated herein by reference.
| ITEM 9. | THE OFFER AND LISTING |
| A. | Offer and Listing Details |
Nasdaq Listing of Company Common Shares and Company Warrants
The Company Common Shares and the Company Warrants are listed on Nasdaq under the symbols “PBM” and “PBMWW,” respectively. Holders of the Company Common Shares and Company Warrants should obtain current market quotations for their securities.
Lock-ups
Information regarding the lock-up restrictions applicable to the Company Common Shares is included in the Proxy Statement/Prospectus under the section titled “Certain Agreements Related to the Business Combination” and is incorporated herein by reference.
In addition, pursuant to various agreements entered into in connection with the Closing, including the Securities Purchase Agreement, the following parties are subject to lock-ups as set forth below:
McDermott Will & Emery LLP (“MWE”), NCAC, J.V.B. Financial Group, LLC, acting through its Cohen & Company Capital Markets division (“CCM”), Cantor Fitzgerald & Co. (“Cantor”) and RNA (each, a “Lock-Up Party”) entered into lock-up arrangements which are substantially identical to each other, pursuant to which the applicable Lock-Up Party agreed not to, during the period (the “Lock-Up Period”) commencing from the Closing and ending on the earliest of (x) one hundred eighty (180) days after the Closing; provided, however, that in the event that the Investors delay investment of the Subscription Amounts (as defined in the Securities Purchase Agreement) with respect to the Second Tranche Note (as defined in the Securities Purchase Agreement) due to the occurrence of an event outlined in Section 2.1(b) of the Securities Purchase Agreement, such period shall be extended by 60 days or such earlier date as the deficiency is resolved, and (y) subsequent to the Closing, the date on which Psyence Biomedical consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated third party that results in all of Psyence Biomedical’s shareholders having the right to exchange the Company Common Shares for cash, securities or other property, (i) lend, offer, pledge, hypothecate, encumber, donate, assign, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares issued or issuable to the applicable Lock-Up Party pursuant to their respective agreements (“Restricted Securities”), (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Restricted Securities, or (iii) publicly disclose the intention to do any of the foregoing, whether any such transaction described in clauses (i), (ii) or (iii) above is to be settled by delivery of Restricted Securities or other securities, in cash or otherwise (any of the foregoing described in clauses (i), (ii) or (iii), a “Prohibited Transfer”). The lock-up provisions provide for certain exemptions for transfers to permitted transferees.
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Further, pursuant to documents entered into by NCAC upon the initial public offering of NCAC, certain shares are restricted until: (i) in the case of the founder shares, the earlier of (a) one year after the Closing and (b) subsequent to the Closing, (x) the date on which Psyence Biomedical completes a liquidation, merger, share exchange, reorganization or other similar transaction that results in all of Psyence Biomedical’s public shareholders having the right to exchange their Company Common Shares for cash, securities or other property or (y) if the last reported sale price of the Company Common Shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Closing, and (ii) in the case of placement units, placement shares, placement warrants issued in connection with NCAC’s initial public offering, as well as any Company Common Shares issued upon exercise thereof, 30 days after the Closing.
Warrants
Upon the completion of the Business Combination, there were 13,070,000 Company Warrants outstanding. The Company Warrants, which entitle the holder to purchase one Company Common Share at an exercise price of $11.50 per share, will become exercisable 30 days after the completion of the Business Combination. The Warrants will expire five years after the completion of the Business Combination or earlier upon redemption or liquidation in accordance with their terms.
| B. | Plan of Distribution |
Not applicable.
| C. | Markets |
The Company Common Shares and Company Warrants are listed on Nasdaq under the symbols “PBM” and “PBMWW,” respectively. There can be no assurance that the Company Common Shares and/or Company Warrants will remain listed on Nasdaq.
| D. | Selling Shareholders |
Not applicable.
| E. | Dilution |
Not applicable.
| F. | Expenses of the Issue |
Not applicable.
| ITEM 10. | ADDITIONAL INFORMATION |
| A. | Share Capital |
The Company’s authorized share capital consists of an unlimited number of Common Shares, each without par value.
Information regarding the Company’s share capital is included in the Proxy Statement/Prospectus under the section titled “Description of Pubco Securities” and is incorporated herein by reference.
15
| B. | Articles of Association and By-Laws |
Information regarding certain material provisions of the Company’s articles of incorporation and amended and restated by-laws is included in the Proxy Statement/Prospectus under the section titled “Description of Pubco Securities” and is incorporated herein by reference.
| C. | Material Contracts |
Material Contracts Relating to the Company’s Operations
Information pertaining to the Company’s material contracts is included in the Proxy Statement/Prospectus under the headings “Information about Psyence” and “Risk Factors—Risks Relating to Psyence’s Business and Industry,” each of which is incorporated herein by reference.
Material Contracts Relating to the Business Combination
Business Combination Agreement
The description of the BCA is included in the Proxy Statement/Prospectus, in the section titled “The Business Combination Agreement,” and is incorporated herein by reference.
Related Agreements
The description of the material provisions of certain additional agreements entered into pursuant to the BCA is included in the Proxy Statement/Prospectus in the section titled “Certain Agreements Related to the Business Combination,” and is incorporated herein by reference.
Securities Purchase Agreement and Related Agreements
As previously disclosed, on January 15, 2024, Psyence Biomedical entered into the Securities Purchase Agreement relating to up to four series of senior secured convertible notes, each series divided equally in principal amount between the Investors (collectively, the “Notes”), obligations under which will be guaranteed by certain assets of Psyence Biomedical and Psyence II, issuable to the Investors at or after the Closing, as the case may be, for the aggregate principal amount of up to $12,500,000 in exchange for up to $10,000,000 in financing provided or to be provided by the Investors.
The two First Tranche Notes, in an aggregate principal amount of $3,125,000, were delivered by Psyence Biomedical to the Investors, on January 25, 2024, in exchange for an aggregate of $2,500,000 in financing, which occurred substantially concurrently with, and was contingent upon, the consummation of the Business Combination. On the original issuance date of the First Tranche Notes, interest began accruing at 8.0% per annum based on the outstanding principal amount of the First Tranche Notes, and is payable monthly in arrears in cash or in Company Common Shares (at the Conversion Price). The initial Conversion Price of the First Tranche Notes was $10.00; provided, however, that such Conversion Price is subject to certain adjustments according to the terms and reset dates included in the First Tranche Notes and may be reduced to a Conversion Floor of $1.00, until the First Reset Date (as such term is defined in the First Tranche Notes), then to $0.50 on the Second Reset Date (as such term is defined in the First Tranche Notes) and to $0 thereafter.
Two Second Tranche Notes, in an aggregate principal amount of $3,125,000, will be delivered by Psyence Biomedical to the Investors in exchange for an aggregate of an additional $2,500,000 in financing (the “Second Tranche Financing”), subject to certain conditions. The Investors’ obligation to provide the Second Tranche Financing is contingent upon the Initial Resale Registration Statement (defined below) having been declared effective by the SEC. the Investors also are not obligated to provide the Second Tranche Financing, subject to certain cure periods, if (i) the Company has received a deficiency notice from Nasdaq or any national exchange, (ii) the Company or the Investors are aware of circumstances which would lead to the issuance of a deficiency notice from Nasdaq or any national exchange, (iii) a stop order or suspension of trading shall have been imposed by the SEC, Nasdaq or any other governmental or regulatory body with respect to public trading in the Common Shares of the Company, or (iv) the Company has not filed all required reports under section 13 or 15(d) of the Exchange Act, as applicable, and submitted electronically every interactive data file during the prior 12 months (or for such shorter period that the Company was required to file such reports). If these conditions have been satisfied, the Second Tranche Financing will be funded, in full, unless two times the median of Daily Value Traded of the Company Common Shares traded, during the immediately preceding 30 trading days, is less than $2,500,000, where “Daily Value Traded” means, for any date, the volume weighted average price of the Company Common Shares multiplied by the number of Company Common Shares traded (the “Market Value Traded”). In such case, the Investors are required to invest an amount equal to the Market Value Traded as of the Second Tranche Closing and on the later of (i) each subsequent 30 day anniversary of the Second Tranche Closing or (ii) the effectiveness of the registration statement registering the underlying shares for such portion of the Second Tranche Note, the Investors will invest an amount equal to the Market Value Traded as of such date, until the Second Tranche Note is funded in full, subject to the conditions set forth in the Securities Purchase Agreement.
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Providing any financing with respect to the Third Tranche Notes and the Fourth Tranche Notes is at the sole discretion of the Investors. With respect to any financing relating to the Third Tranche Notes, the Investors may issue a commitment letter to Psyence Biomedical on or before the 30th day following the last funding of the Second Tranche Financing, assuming that the Second Tranche Financing has been provided. With respect to the Fourth Tranche Notes, the Investors may issue a commitment letter to Psyence Biomedical on or before the 90th day after the last funding of the Second Tranche Financing, assuming that the Second Tranche Financing is provided. The Third Tranche Notes would be in an aggregate principal amount of $3,125,000 and would be delivered in exchange for an additional $2,500,000 in financing. This would be the same for the Fourth Tranche Notes. Additionally, in consideration of the willingness of the Investors to enter into the transactions that are the subject of the Securities Purchase Agreement and the Notes, including providing the financing, Psyence Biomedical agreed that it or certain of its shareholders would pay the Investors a structuring fee by delivering to the Investors an aggregate of 3,000,000 Company Common Shares (the “Structuring Shares”). At the initial closing of the financing under the terms of the Securities Purchase Agreement, and concurrent with the closing of the Business Combination, 1,300,000 of the Structuring Shares were delivered to the Investors. The remaining 1,700,000 are subject the terms of Call Option Agreements, by and among the Investors and certain members of the Sponsor, pursuant to which such Company Common Shares are deliverable to the Investors no later than two business days after requested by the Investors; provided that no amounts shall be requested at any time that the Investors own in excess of 9.9% of the Company .
In order to secure the repayment of the Notes by Psyence Biomedical and Psyence II, pursuant to the terms and conditions of a General Security Agreement, dated January 25, 2024 (the “Security Agreement”), each agreed to grant to the Investors a security interest, subject to certain exceptions, in all of the Collateral (as such term is defined in the Security Agreement) in each of their possessions, including a pledge of all equity securities owned by either of them, provided that no Company Common Shares are pledged equity securities.
Pursuant to a Guaranty, dated January 25, 2024. Psyence II also agreed to guaranty all of Psyence Biomedical’s obligations to the Investors under the Notes including, without limitation, payment of all installments of principal and interest thereunder.
In connection with the foregoing, on January 25, 2024, Psyence Biomedical and the Investors entered into a registration rights agreement (the “Registration Rights Agreement”), pursuant to which Psyence Biomedical has agreed to file a registration statement covering the resale of the Company Common Shares issuable upon conversion of the First Tranche Notes (the “Initial Resale Registration Statement”) and any additional registration statements required to be filed to register the resale of the Company Common Shares issuable upon any of the other Notes, as applicable, and to use its best efforts to have the Initial Resale Registration Statement and such registration statement(s), as applicable, declared effective by the SEC as soon as practicable, but in no event later than the applicable Effectiveness Deadline (as defined in the Registration Rights Agreement for such applicable registration statement). The Registration Rights Agreement contains certain penalty provisions, subject to certain conditions and cure periods, for the Company failing to (i) file a registration statement by certain deadlines set forth in the Registration Rights Agreement, (ii) cause a registration statement to be declared effective by certain deadlines set forth in the Registration Rights Agreement, (iii) maintain certain circumstances and conditions allowing the resale of certain securities or (iv) satisfy the requirements of Rule 144(c)(1) under the Exchange Act if a registration statement is not effective. The Registration Rights Agreement also provides the Investors with customary piggyback registration rights under certain circumstances.
In connection with the foregoing, on January 25, 2024, NCAC and Psyence Biomedical entered into a lock-up agreement with certain shareholders of Psyence Biomedical, pursuant to which such shareholders agreed not to, during the period (the “Lock-Up Period”) commencing from the Closing and ending on the earliest of (x) one hundred eighty (180) days after the Closing; provided, however, that in the event that the Investors delay investment of the Subscription Amounts (as defined in the Securities Purchase Agreement) with respect to the Second Tranche Note (as defined in the Securities Purchase Agreement) due to the occurrence of an event outlined in Section 2.1(b) of the Securities Purchase Agreement, such period shall be extended by 60 days or such earlier date as the deficiency is resolved, and (y) subsequent to the Closing, the date on which Psyence Biomedical consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated third party that results in all of Psyence Biomedical’s shareholders having the right to exchange the Company Common Shares for cash, securities or other property, (i) lend, offer, pledge, hypothecate, encumber, donate, assign, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares issued or issuable to the applicable shareholder pursuant to their respective agreements (“Restricted Securities”), (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Restricted Securities, or (iii) publicly disclose the intention to do any of the foregoing, whether any such transaction described in clauses (i), (ii) or (iii) above is to be settled by delivery of Restricted Securities or other securities, in cash or otherwise (any of the foregoing described in clauses (i), (ii) or (iii), a “Prohibited Transfer”). The lock-up provisions provide for certain exemptions for transfers to permitted transferees.
17
The foregoing description of the Securities Purchase Agreement, the Guaranty, the Registration Rights Agreement, the General Security Agreement, the Lock-Up Agreement and the Note are qualified in their entirety by the full text of such agreements (or their forms), which are filed as Exhibit 4.3, Exhibit 4.4, Exhibit 4.15, Exhibit 4.16, Exhibit 4.17 and Exhibit 4.18 hereto, respectively and are incorporated herein by reference.
Closing Fee Agreements
Amendment to CCM Engagement Letter
On January 25, 2024, NCAC and CCM, entered into an amendment (the “CCM Amendment”) to that certain Engagement Letter dated as of February 9, 2023, by and among NCAC and CCM (the “Initial Engagement Letter”). Pursuant to the CCM Amendment, NCAC agreed to pay CCM a revised transaction fee, in lieu of (i) the $982,500 owed to CCM as deferred underwriting commission and (ii) fees outstanding under the Initial Engagement Letter, in connection with the Business Combination in an amount equal to 150,000 Company Common Shares (the “CCM Fee Shares”), plus reimbursable expenses incurred as of the Closing Date in the amount of approximately $12,901, which was paid from NCAC’s trust account at the Closing of the Business Combination.
In addition to the obligation to deliver the CCM Fee Shares to CCM, the terms of the CCM Amendment also include registration rights obligations on the part of the Company, which include obligations to use reasonable best efforts to file a resale registration statement covering the CCM Fee Shares and to maintain the effectiveness thereof while CCM continues to hold the CCM Fee Shares, in accordance with the terms of the CCM Amendment.
The foregoing description of the CCM Amendment is qualified in its entirety by the full text of the CCM Amendment, which is filed as Exhibit 4.12 hereto and is incorporated herein by reference.
Modified Cantor Deferred Underwriting Fee Payment Obligations
As previously disclosed, pursuant to the Underwriting Agreement, dated as of October 19, 2021 (as amended or modified, the “Underwriting Agreement”), entered into in connection with NCAC’s initial public offering, NCAC previously agreed to pay to Cantor, in Cantor’s capacity as representative of the underwriters, deferred underwriting commissions in an aggregate amount of $5,567,500 (reflecting Cantor’s portion of the $6,550,000 deferred underwriting commission, after giving effect to the waiver of 50% of the original $13,100,000 deferred underwriting fee) (the “Cantor Deferred Fee”).
On January 25, 2024, NCAC and Cantor, in consideration of redemption levels by NCAC public shareholders, among other factors, entered into a fee modification agreement (the “Cantor Fee Modification Agreement”), pursuant to which, among other things, Cantor agreed to accept, in lieu of payment of the Cantor Deferred Fee in cash at the Closing, an aggregate of 150,000 shares (the “Cantor Fee Shares”), payable and delivered, at Closing.
In addition to the Company’s obligation to deliver the Cantor Fee Shares to Cantor, free and clear of specified restrictions, the terms of the Cantor Fee Modification Agreement also include registration rights obligations on the part of the Company, which include obligations to use commercially reasonable efforts to file a resale registration statement covering the Cantor Fee Shares and to maintain the effectiveness thereof while Cantor continues to hold the Cantor Fee Shares, in each case in accordance with the terms of the Cantor Fee Modification Agreement. The Cantor Fee Modification Agreement also includes a penalty provision that will require the Company to deliver to Cantor $5,567,500 in cash in the event that Cantor is unable to timely sell or transfer Cantor Fee Shares or the shares and warrants purchased in the private placement by Cantor in connection with NCAC’s initial public offering, due to continuing restrictions thereunder resulting from a failure by the Company to satisfy certain post-closing registration-related covenants and agreements in accordance with terms of the Cantor Fee Modification Agreement, following notice and reasonable opportunity to cure on the part of the Company.
The foregoing description of the Cantor Fee Modification Agreement is qualified in its entirety by the full text of the Cantor Fee Modification Agreement, which is filed as Exhibit 4.13 hereto and is incorporated herein by reference.
18
MWE Fee Agreement
On January 25, 2024, NCAC and MWE entered into an agreement (the “MWE Fee Agreement”). Pursuant to the MWE Fee Agreement, NCAC agreed to pay MWE a fee (the “MWE Amended Fee”) for the legal services provided by MWE to NCAC, in lieu of outstanding legal fees due to MWE. The MWE Fee Agreement provides that the MWE Amended Fee will be comprised of (i) US$100,000 due upon the Closing, (ii) an additional US$100,000, payable on or prior to the 90th day after the Closing and (iii) 125,000 Company Common Shares (the “MWE Fee Shares”), payable and delivered, at Closing.
In addition to the obligation to deliver the MWE Amended Fee, the terms of the MWE Fee Agreement also include registration rights obligations on the part of the Company, which include obligations to use commercially reasonable efforts to file a resale registration statement covering the MWE Fee Shares and to maintain the effectiveness thereof while MWE continues to hold the MWE Fee Shares, in accordance with the terms of the MWE Fee Agreement.
Amendments to RNA Engagement Letter
On January 25, 2024, NCAC and RNA Advisors, LLC, entered into an amendment (the “RNA Amendment”) to that certain Engagement Letter dated as of February 2, 2023, by and among NCAC and RNA. Pursuant to the RNA Amendment, NCAC agreed to pay RNA a revised transaction fee (the “RNA Amended Fee”) in connection with the Business Combination to be comprised of (i) US$25,000 due upon the Closing, (ii) an additional US$25,000, payable on or prior to the 90th day after the Closing and (iii) 21,000 Company Common Shares (the “RNA Fee Shares”), payable and delivered, at Closing.
In addition to the obligation to deliver the RNA Amended Fee, the terms of the RNA Amendment also include registration rights obligations on the part of the Company, which include obligations to use reasonable best efforts to file a resale registration statement covering the RNA Fee Shares and to maintain the effectiveness thereof while RNA continues to hold the RNA Fee Shares, in accordance with the terms of the RNA Amendment.
Amendments to Maxim Engagement Letter
On January 25, 2024, NCAC and Maxim Group LLC (“Maxim”), entered into an amendment (the “Maxim Amendment”) to that certain Engagement Letter dated as of April 28, 2023, by and among Psyence Group, Inc. and Maxim. Pursuant to the Maxim Amendment, Psyence Group, Inc. agreed to pay Maxim a revised transaction fee in connection with the Business Combination in an amount equal to 150,000 Company Common Shares (the “Maxim Fee Shares”).
In addition to the obligation to deliver the Maxim Fee Shares to Maxim, the terms of the Maxim Amendment also include registration rights obligations on the part of the Company, which include obligations to use reasonable best efforts to file a resale registration statement covering the Maxim Fee Shares and to maintain the effectiveness thereof while Maxim continues to hold the Maxim Fee Shares, in accordance with the terms of the Maxim Amendment.
The foregoing description of the Maxim Amendment is qualified in its entirety by the full text of the Maxim Amendment, which is filed as Exhibit 4.14 hereto and is incorporated herein by reference.
19
| D. | Exchange Controls and Other Limitations Affecting Security Holders |
Limitations on the ability to acquire and hold shares of the Company may be imposed by the Competition Act (Canada) (the “Competition Act”). This legislation permits the Commissioner of Competition to review any acquisition of a significant interest in us. This legislation grants the Commissioner jurisdiction, for up to three years, to challenge this type of acquisition before the Competition Tribunal if the Commissioner believes that it would, or would be likely to, result in a substantial lessening or prevention of competition in any market in Canada.
| E. | Taxation |
Information regarding certain tax consequences of owning and disposing of the Company Common Shares and Company Warrants is included in the Proxy Statement/Prospectus under the section titled “Material U.S. Federal Income Tax Considerations” and “Material Cayman Islands Tax Considerations” and is incorporated herein by reference.
| F. | Dividends and Paying Agents |
The Company has not paid any dividends to its shareholders. Following the completion of the Business Combination, the Company’s board of directors will consider whether or not to institute a dividend policy. The determination to pay dividends will depend on many factors, including, among others, the Company’s financial condition, current and anticipated cash requirements, contractual restrictions and financing agreement covenants, solvency tests imposed by applicable corporate law and other factors that the Company’s board of directors may deem relevant.
| G. | Statement by Experts |
The financial statements of Newcourt Acquisition Corp as of December 31, 2022 and 2021 and for the year ended December 31, 2022 and for the period February 25, 2021 through December 31, 2021 appearing in the Proxy Statement/Prospectus were so included in reliance upon the report (which contains an explanatory paragraph relating to Newcourt Acquisition Corp’s ability to continue as a going concern as described in Note 1 to the financial statements) of Citrin Cooperman & Company, LLP, an independent registered public accounting firm, upon the authority of said firm as experts in accounting and auditing.
The carve-out consolidated financial statements of Psyence Biomed Corp. as of March 31, 2023, 2022 and 2021 and for each of the years in the two-year period ended March 31, 2023 included in the Proxy Statement/Prospectus have been audited by MNP LLP, independent registered public accounting firm, as set forth in their report thereon, appearing therein, and were included in reliance upon such report given on the authority of such firm as experts in accounting and auditing. The consolidated financial statements of Psyence Biomed Corp. as of March 31, 2023, 2022 and 2021 and for each of the years in the two-year period ended March 31, 2023, included in the Proxy Statement/Prospectus, have been audited by MNP LLP, independent registered public accounting firm, as stated in their report appearing therein. Such consolidated financial statements were included in reliance upon the report of such firm given their authority as experts in accounting and auditing.
| H. | Documents on Display |
We are subject to the informational requirements of the Exchange Act. Accordingly, we are 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 that contains reports, proxy and information statements and other information we have filed electronically with the SEC. 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 are not 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.
20
We also make available on our website, free of charge, our annual reports and the text of our reports on Form 6-K, including any amendments to these reports, as well as certain other SEC filings, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Our website address is www.psyence.com. The reference to our website is an inactive textual reference only, and information contained therein or connected thereto is not incorporated into this Report.
| I. | Subsidiary Information |
Not applicable.
| J. | Annual Report to Security Holders. |
Not applicable.
| ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS |
The information set forth under Item 5 above is incorporated into herein by reference.
| ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
Information pertaining to the Company Warrants is described in the Proxy Statement/Prospectus under the section titled “Description of Pubco Securities—Warrants” and is incorporated herein by reference.
The information pertaining to the Notes and set forth in Item 10 herein under the section titled “Material Contracts—Securities Purchase Agreement” is incorporated herein by reference.
Not applicable.
21
| ITEM 17. | FINANCIAL STATEMENTS |
See Item 18.
| ITEM 18. | FINANCIAL STATEMENTS |
The audited financial statements for NCAC are contained on pages F-2 to F-23 of the Proxy Statement/Prospectus and are incorporated herein by reference.
The unaudited financial statements of NCAC as of and for the three and nine months ended September 30, 2023 are contained on pages F-2 through F-20 hereto and are incorporated herein by reference.
The audited carve-out consolidated financial statements for Psyence Biomedical are contained on pages F-64 to F-80 of the Proxy Statement/Prospectus and are incorporated herein by reference.
The unaudited financial statements of Psyence Biomedical as of and for the six months ended September 30, 2023 are contained on pages F-21 through F-34 hereto and are incorporated herein by reference.
The unaudited pro forma condensed combined financial information of Psyence Biomedical is filed as Exhibit 15.1 hereto and incorporated herein by reference.
22
| ITEM 19. | EXHIBITS |
23
| * | Filed herewith. |
| # | Certain schedules, annexes and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K, but will be furnished supplementally to the SEC upon request. |
| ## | Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K. |
24
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this report on its behalf.
| Dated: January 31, 2024 | PSYENCE BIOMEDICAL LTD. | |
| By: | /s/ Neil Maresky | |
| Name: | Neil Maresky | |
| Title: | Chief Executive Officer | |
25
INDEX TO FINANCIAL STATEMENTS
Interim Unaudited Financial Statements for Newcourt Acquisition Corp for the Three and Nine Months Ended September 30, 2023:
Carve-Out Unaudited Condensed Consolidated Interim Financial Statements for Psyence Biomed Corp. for the Three and Six Months Ended September 30, 2023:
F-1
NEWCOURT ACQUISITION CORP
| September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | 88,174 | $ | 128,678 | ||||
| Prepaid expenses | 20,683 | 248,224 | ||||||
| Interest income receivable | 53,659 | 828,810 | ||||||
| Total current assets | 162,516 | 1,205,712 | ||||||
| LONG TERM ASSETS | ||||||||
| Investments held in Trust Account | 12,518,199 | 257,725,405 | ||||||
| TOTAL ASSETS | $ | 12,680,715 | $ | 258,931,117 | ||||
| LIABILITIES, REDEEMABLE ORDINARY SHARES AND SHAREHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | 1,007,704 | $ | 417,712 | ||||
| Deferred underwriting fee payable | 13,100,000 | 13,100,000 | ||||||
| Due to affiliate | 70,000 | 100,000 | ||||||
| Advances from Sponsor | 1,607,770 | — | ||||||
| Derivative warrant liabilities | 392,100 | 653,500 | ||||||
| Total current liabilities | 16,177,574 | 14,271,212 | ||||||
| COMMITMENTS AND CONTINGENCIES (Note 6) | ||||||||
| REDEEMABLE ORDINARY SHARES | ||||||||
| Class A ordinary shares subject to possible redemption, $0.0001 par value, 1,113,021 and 25,000,000 shares at redemption value of $11.30 and $10.34 per share on September 30, 2023 and December 31, 2022 | 12,571,858 | 258,554,215 | ||||||
| SHAREHOLDERS’ DEFICIT | ||||||||
| Preference shares, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding at September 30, 2023 and December 31, 2022 | — | — | ||||||
| Class A ordinary shares; $0.0001 par value; 100,000,000 shares authorized; 1,140,000 shares issued and outstanding (excluding 1,113,021 and 25,000,000 shares subject to possible redemption at September 30, 2023 and December 31, 2022) | 114 | 114 | ||||||
| Class B ordinary shares; $0.0001 par value; 10,000,000 shares authorized; 6,535,000 shares issued and outstanding at September 30, 2023 and December 31, 2022 | 654 | 654 | ||||||
| Additional paid-in capital | — | — | ||||||
| Accumulated deficit | (16,069,485 | ) | (13,895,078 | ) | ||||
| TOTAL SHAREHOLDERS’ DEFICIT | (16,068,717 | ) | (13,894,310 | ) | ||||
| TOTAL LIABILITIES, REDEEMABLE ORDINARY SHARES AND SHAREHOLDERS’ DEFICIT | $ | 12,680,715 | $ | 258,931,117 | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-2
NEWCOURT ACQUISITION CORP
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| General and administrative | $ | 557,054 | $ | 163,133 | $ | 1,840,635 | $ | 783,051 | ||||||||
| Total operating expenses | 557,054 | 163,133 | 1,840,635 | 783,051 | ||||||||||||
| OTHER INCOME | ||||||||||||||||
| Interest income on investments held in Trust Account | 170,688 | 799,271 | 844,137 | 921,104 | ||||||||||||
| Change in fair value of warrants | (261,400 | ) | 130,700 | 261,400 | 5,625,800 | |||||||||||
| Total other income (loss) | (90,712 | ) | 929,971 | 1,105,537 | 6,546,904 | |||||||||||
| NET (LOSS) INCOME | $ | (647,766 | ) | $ | 766,838 | $ | (735,098 | ) | $ | 5,763,853 | ||||||
| Weighted average shares outstanding of Class A ordinary shares | 1,159,593 | 22,000,000 | 2,505,890 | 22,000,000 | ||||||||||||
| Basic and diluted net (loss) income per share, Class A | $ | 0.15 | $ | 0.04 | $ | 0.49 | $ | 0.21 | ||||||||
| Weighted average shares outstanding of Class B ordinary shares | 6,535,000 | 6,535,000 | 6,535,000 | 6,535,000 | ||||||||||||
| Basic and diluted net (loss) income per share, Class B | $ | (0.08 | ) | $ | (0.00 | ) | $ | (0.08 | ) | $ | 0.17 | |||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-3
NEWCOURT ACQUISITION CORP
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
| Ordinary shares | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | Paid-in | Accumulated | Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance, December 31, 2022 | 1,140,000 | $ | 114 | 6,535,000 | $ | 654 | $ | — | (13,895,078 | ) | $ | (13,894,310 | ) | |||||||||||||||
| Accretion of Class A ordinary shares to redemption value | — | — | — | — | — | (733,104 | ) | (733,104 | ) | |||||||||||||||||||
| Net loss | — | — | — | — | — | (24,489 | ) | (24,489 | ) | |||||||||||||||||||
| Balance, March 31, 2023 | 1,140,000 | 114 | 6,535,000 | 654 | — | (14,652,671 | ) | (14,651,903 | ) | |||||||||||||||||||
| Accretion of Class A ordinary shares to redemption value | — | — | — | — | — | (435,345 | ) | (435,345 | ) | |||||||||||||||||||
| Net loss | — | — | — | — | — | (62,843 | ) | (62,843 | ) | |||||||||||||||||||
| Balance, June 30, 2023 | 1,140,000 | 114 | 6,535,000 | 654 | — | (15,150,859 | ) | (15,150,091 | ) | |||||||||||||||||||
| Accretion of Class A ordinary shares to redemption value | — | — | — | — | — | (270,860 | ) | (270,860 | ) | |||||||||||||||||||
| Net loss | — | — | — | — | — | (647,766 | ) | (647,766 | ) | |||||||||||||||||||
| Balance, September 30, 2023 | 1,140,000 | $ | 114 | 6,535,000 | $ | 654 | $ | — | $ | (16,069,485 | ) | $ | (16,068,717 | ) | ||||||||||||||
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
| Ordinary shares | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | Paid-in | Accumulated | Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance,December 31, 2021 | 1,140,000 | $ | 114 | 6,535,000 | $ | 654 | $ | — | $ | (18,355,177 | ) | $ | (18,354,409 | ) | ||||||||||||||
| Net income | — | — | — | — | — | 2,952,586 | 2,952,586 | |||||||||||||||||||||
| Balance, March 31, 2022 | 1,140,000 | 114 | 6,535,000 | 654 | — | (15,402,591 | ) | (15,401,823 | ) | |||||||||||||||||||
| Net income | — | — | — | — | — | 2,044,429 | 2,044,429 | |||||||||||||||||||||
| Balance, June 30, 2022 | 1,140,000 | 114 | 6,535,000 | 654 | — | (13,358,162 | ) | (13,357,394 | ) | |||||||||||||||||||
| Accretion of Class A ordinary shares to redemption value | — | — | — | — | — | (923,528 | ) | (923,528 | ) | |||||||||||||||||||
| Net income | — | — | — | — | — | 766,838 | 766,838 | |||||||||||||||||||||
| Balance, September 30, 2022 | 1,140,000 | $ | 114 | 6,535,000 | $ | 654 | $ | — | $ | (13,514,852 | ) | $ | (13,514,084 | ) | ||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-4
NEWCOURT ACQUISITION CORP
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net (loss) income | $ | (735,098 | ) | $ | 5,763,853 | |||
| Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||
| Interest income on investments held in Trust Account | (844,137 | ) | (921,104 | ) | ||||
| Change in fair value of warrants | (261,400 | ) | (5,625,800 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | 227,541 | 231,367 | ||||||
| Due to affiliate | (30,000 | ) | 10,000 | |||||
| Accounts payable and accrued expenses | 589,992 | 108,338 | ||||||
| Net cash flows used in operating activities | (1,053,102 | ) | (433,346 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Deposits to Trust Account | (595,172 | ) | — | |||||
| Withdrawals from Trust account in connection with Class A ordinary shares redemption | 247,421,666 | — | ||||||
| Net cash flows provided by investing activities | 246,826,494 | — | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Redemption of Class A ordinary shares | (247,421,666 | ) | — | |||||
| Advances from Sponsor | 1,607,770 | — | ||||||
| Net cash flows used in financing activities | (245,813,896 | ) | — | |||||
| NET CHANGE IN CASH | (40,504 | ) | (433,346 | ) | ||||
| CASH, BEGINNING OF PERIOD | 128,678 | 648,282 | ||||||
| CASH, END OF PERIOD | $ | 88,174 | $ | 214,936 | ||||
| Non-cash investing and financing activities: | ||||||||
| Accretion of Class A ordinary shares to redemption value | $ | 1,439,309 | $ | — | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-5
NEWCOURT ACQUISITION CORP
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023
(UNAUDITED)
Note 1 – Description of Organization and Business Operations
Newcourt Acquisition Corp. (the “Company” or “Newcourt”) was incorporated in the Cayman Islands on February 25, 2021. The Company is a blank check company formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (the “Business Combination”).
The Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
On January 9, 2023, the Company entered into a Business Combination Agreement (as amended by the amending agreement dated as of February 15, 2023, the “Business Combination Agreement”) with Newcourt SPAC Sponsor LLC, a Delaware limited liability company (the “Sponsor”), Psyence Group Inc., a corporation organized under the laws of Ontario, Canada (“Parent”), and Psyence Biomed Corp., a corporation organized under the laws of British Columbia, Canada.
As of September 30, 2023, the Company had not commenced any operations. All activity through September 30, 2023, relates to the Company’s formation and Initial Public Offering (“IPO”), which is described below. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income earned on investments from the proceeds derived from the IPO. On October 22, 2021, the Company consummated the IPO of 22,000,000 units (“Units”) with respect to the Class A ordinary shares included in the Units being offered (the “Public Shares”) at $10.00 per Unit generating gross proceeds of $220,000,000, which is discussed in Note 3. The Company has selected December 31 as its fiscal year end.
Simultaneously with the closing of the IPO, the Company consummated the sale of 1,080,000 units (“Private Placement Units”) at a price of $10.00 per Private Placement Unit in a private placement to the Company’s sponsor, Newcourt SPAC Sponsor LLC (the “Sponsor”) and underwriters Cantor Fitzgerald & Co. (“Cantor”), and Cohen & Company Capital Markets (“CCM”), generating gross proceeds of $10,800,000, which is described in Note 4.
Offering costs for the IPO amounted to $15,937,545, consisting of $3,787,971 of underwriting fees, $11,000,000 of deferred underwriting fees payable (which are held in the Trust Account (defined below)) and $1,149,574 of other costs.
Simultaneously with the closing of the IPO, the Company consummated the closing of the sale of 3,000,000 additional Units upon receiving notice of the underwriters’ election to partially exercise their over-allotment option (“Over-allotment Units”), generating additional gross proceeds of $30,000,000 and incurring additional offering costs of $2,100,000 in underwriting fees all of which is deferred until completion of the Company’s Business Combination. As described in Note 6, the $13,100,000 of deferred underwriting fee payable is contingent upon the consummation of a Business Combination by January 22, 2024, 27 months from the closing of the IPO, subject to the terms of the underwriting agreement. Simultaneously with the exercise of the over-allotment, the Company consummated the Private Placement of an additional 60,000 Private Placement Units to the Sponsor, generating gross proceeds of $600,000.
Following the closing of the IPO and exercise of the over-allotment, $255,000,000 ($10.20 per Unit) from the net proceeds of the sale of the Units in the IPO and the Private Placement Warrants was placed in a trust account (“Trust Account”) and will be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account, as described below.
F-6
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust Account excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account at the time of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance the Company will be able to successfully effect a Business Combination.
The Company will provide the holders of the outstanding Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.20 per Public Share, plus any pro rata interest then in the Trust Account, net of taxes payable). There will be no redemption rights with respect to the Company’s warrants.
All of the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a shareholder vote or tender offer in connection with the Company’s Business Combination and in connection with certain amendments to the Company’s amended and restated memorandum and articles of association (as amended from time to time, the “Certificate of Incorporation”). In accordance with Accounting Standards Codification (“ASC”) 480-10-S99, redemption provisions not solely within the control of a company require Class A ordinary shares subject to redemption to be classified outside of permanent equity. Given that the Public Shares will be issued with other freestanding instruments (i.e., public warrants), the initial carrying value of Class A ordinary shares classified as temporary equity will be the allocated proceeds determined in accordance with ASC 470-20. The Class A ordinary shares are subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. While redemptions cannot cause the Company’s net tangible assets to fall below $5,000,001, the Public Shares are redeemable and are classified as such on the balance sheet until such date that a redemption event takes place.
Redemptions of the Company’s Public Shares may be subject to the satisfaction of conditions, including minimum cash conditions, pursuant to an agreement relating to the Company’s Business Combination. If the Company seeks shareholder approval of the Business Combination, the Company will proceed with a Business Combination if a majority of the shares voted are voted in favor of the Business Combination, or such other vote as required by law or stock exchange rule. If a shareholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a shareholder vote for business or other reasons, the Company will, pursuant to its Certificate of Incorporation, conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (the “SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, shareholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company decides to obtain shareholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks shareholder approval in connection with a Business Combination, Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the IPO in favor of approving a Business Combination. Additionally, each Public Shareholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the foregoing, the Certificate of Incorporation provides that a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Class A ordinary shares sold in the IPO, without the prior consent of the Company.
F-7
The Company’s Sponsor, officers and directors (the “Initial Shareholders”) have agreed not to propose an amendment to the Certificate of Incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the Public Shareholders with the opportunity to redeem their Class A ordinary shares in conjunction with any such amendment.
On January 6, 2023, the Company’s shareholders approved an amendment (the “ First Extension Amendment”) to the amended and restated memorandum and articles of association to extend the date by which the Company must consummate an initial business combination for an initial three (3) months from January 22, 2023 to April 22, 2023 and up to three (3) times for an additional one (1) month each time from April 22, 2023 to July 22, 2023 (which is 21 months from the closing of our IPO). If the Company is unable to complete a Business Combination by July 22, 2023, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to us to pay the Company’s franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining shareholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
On July 11, 2023, the Company held an extraordinary general meeting of shareholders (the “EGM”) for the purpose of considering and voting on the Second Extension Amendment, the Redemption Limitation Amendment and the Trust Agreement Amendment (each as defined below) and, if presented, the proposal to adjourn the EGM to a later date. At the EGM, the shareholders of the Company approved an amendment (the “Second Extension Amendment”) to the Company’s Amended and Restated Memorandum and Articles of Association to extend the date by which the Company must consummate an initial business combination for six (6) months from July 22, 2023 to January 22, 2024 (which is 27 months from the closing of our IPO). At the EGM, the shareholders of the Company also approved an amendment (the “Redemption Limitation Amendment”) to the Charter to eliminate the limitation that the Company shall not redeem public shares to the extent that such redemption would cause the Company’s net tangible assets to be less than $5,000,001. At the EGM, the shareholders of the Company approved the amendment to the Company’s investment management trust agreement, dated as of October 19, 2021, by and between the Company and Continental Stock Transfer & Trust Company (the “Trust Agreement Amendment”). Pursuant to the Trust Agreement Amendment, the Company will deposit into the Company’s trust account (the “Trust Account”), for each one-month extension, the lesser of (a) $45,000 and (b) $0.03 for each public share outstanding after giving effect to the redemption.
In connection with the EGM, shareholders holding 389,511 public shares exercised their right to redeem their shares for a pro rata portion of the funds in the Company’s Trust Account. As a result, approximately $4.3 million (approximately $11.07 per public share) will be removed from the Trust Account to pay such holders and approximately $12.3 million will remain in the Trust Account. Following redemptions, the Company has 1,113,021 public shares outstanding.
On July 31, 2023, the Company entered into an Amended and Restated Business Combination Agreement with Sponsor, Parent, Psyence Biomedical Ltd., a corporation organized under the laws of Ontario, Canada (“Pubco,” and after the Closing, the “Combined Company”), Psyence (Cayman) Merger Sub, a Cayman Islands exempted company and a direct and wholly owned subsidiary of Pubco (“Merger Sub”), Psyence Biomed Corp., a corporation organized under the laws of British Columbia, Canada, and Psyence Biomed II Corp., a corporation organized under the laws of Ontario, Canada (“Psyence”) in connection with the proposed business combination between the parties that was previously announced on January 13, 2023. The Business Combination Agreement provides for the following transaction structure: (i) Parent will contribute Psyence to Pubco in a share for share exchange (the “Company Exchange”) and (ii) immediately following the Company Exchange, Merger Sub will merge with and into NCAC, with NCAC being the surviving company in the merger (the “Merger”) and each outstanding ordinary share of NCAC will convert into the right to receive one common share of Pubco.
F-8
The Initial Shareholders have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Initial Shareholders should acquire Public Shares in or after the IPO, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to its deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.20 per shares held in the Trust Account. In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
On April 3, 2023, the Company received a written notice (the “Letter”) from the Nasdaq Listing Qualifications Department of The Nasdaq Stock Market (“Nasdaq”) indicating that the Company was not in compliance with Listing Rule 5450(b)(2)(A), requiring the Company to maintain a Market Value of Listed Securities (“MVLS”) of $50,000,000 for the continued listing of its securities on The Nasdaq Global Market. The Letter is only a notification of deficiency, not of imminent delisting, and has no current effect on the listing or trading of the Company’s securities on Nasdaq.
The Letter states that the Company has 180 calendar days, or until October 2, 2023, to regain compliance with Listing Rule 5450(b)(2)(A). If at any time during this compliance period the Company’s MLVS closes at $50,000,000 or more for a minimum of ten consecutive business days, Nasdaq will provide the Company with a written confirmation of compliance, and this matter will be closed. If compliance is not achieved by October 2, 2023, the Letter states that the Company will receive written notification that its securities are subject to delisting. At that time, the Company may appeal the delisting determination to a Hearings Panel. The Letter further notes that alternatively, the Company may be eligible to transfer the listing of its securities to The Nasdaq Capital Market (provided that it then satisfies the requirements for continued listing on that market).
On October 27, 2023, the Company received written notice from Nasdaq stating that the Company had not regained compliance with the MVLS Rule.
On November 2, 2023, the Company received a letter from Nasdaq stating that the Company has regained compliance under the MVLS Rule by maintaining a MVLS of greater than $50,000,000 for the last ten consecutive business days, from October 20, 2023 to November 2, 2023. As such, this matter is now closed.
During the three months ended September 30, 2023, the Sponsor made a monthly deposit of $33,391 into the Trust Account to extend the time available for the Company to consummate its initial business combination to August 22, 2023, totaling an additional $100,172. As of September 30, 2023, the Company deposited a total of $595,172 into the Trust Account.
Liquidity and Capital Resources
As of September 30, 2023, the Company had $88,174 in its operating bank accounts, $12,518,199 in securities held in the Trust Account to be used for a Business Combination or to repurchase or redeem its ordinary share in connection therewith and working capital deficit of $16,015,058. As of September 30, 2023, $623,872 of the amount on deposit in the Trust Account represented interest income, which is available to pay the Company’s tax obligations.
F-9
Prior to the completion of the IPO, the Company lacked the liquidity it needed to sustain operations for a reasonable period of time, which is considered to be one year from the issuance date of the financial statement. The Company has since completed its IPO at which time capital in excess of the funds deposited in the Trust Account and/or used to fund offering expenses was released to the Company for general working capital purposes. Accordingly, management has since re-evaluated the Company’s liquidity and financial condition and determined that sufficient capital exists to sustain operations for at least one year from the date that the financial statement was issued, and therefore substantial doubt has been alleviated.
In connection with the Company’s assessment of going concern considerations in accordance with the authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the mandatory liquidation and subsequent dissolution described in the financial statements, should the Company be unable to complete a Business Combination, raises substantial doubt about the Company’s ability to continue as a going concern. If a Business Combination is not consummated by January 22, 2024, 27 months from the closing of the IPO, there will be a mandatory liquidation and subsequent dissolution. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. It is uncertain that the Company will be able to consummate a Business Combination by the specified period.
Also, in connection with the Company’s assessment of going concern considerations in accordance with ASU No. 2014-15 management has determined that if the Company is unable to raise additional funds to alleviate liquidity needs as well as complete a Business Combination by January 22, 2024, 27 months from the closing of the IPO, then the Company will cease all operations except for the purpose of liquidating. The liquidity condition as well as the date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K/A filed with the SEC on September 19, 2023. The interim results for the period ended September 30, 2023 are not necessarily indicative of the results to be expected for any future periods.
Emerging Growth Company
The Company is an emerging growth company as defined in Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), which exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised, and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
F-10
This may make comparison of the Company’s financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Making estimates requires management to exercise significant judgment. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2023 and December 31, 2022.
Investments Held in Trust Account
At September 30, 2023 and December 31, 2022, substantially all of the assets held in the Trust Account were held in U.S. Treasury securities. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in interest earned on marketable securities held in Trust Account in the accompanying condensed statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information. Interest receivable balance as at September 30, 2023 pertains to interest income on investments held in Trust and will be included in the investment balance when received by the Company. Interest income received is reinvested into the investments held in Trust account.
Offering Costs associated with the IPO
Offering costs, including additional underwriting fees associated with the underwriters’ exercise of the over-allotment option, consist principally of legal, accounting, underwriting fees and other costs directly related to the IPO. Offering costs, including those attributable to the underwriters’ exercise of the over-allotment option in full, amounted to $18,037,545, consisting of $3,787,971 of underwriting fees, $13,100,000 of deferred underwriting fees payable (which are held in the Trust Account (defined below)) and $1,149,574 of other costs.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Deposit Insurance Corporation coverage and Securities Investor Protection Corporation Insurance coverage limits of $250,000 and $500,000 (including cash of $250,000). At September 30, 2023, the Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
F-11
Fair Value of Financial Instruments
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3: Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability.
Income Taxes
ASC Topic 740, Income taxes, prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.
The Company’s management determined that the Cayman Islands is the Company’s major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. As of September 30, 2023 and December 31, 2022, there were no unrecognized tax benefits and no amounts accrued for interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company is considered to be an exempted Cayman Islands company with no connection to any other taxable jurisdiction and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States of America. As such, the Company’s tax provision was zero for the period presented. There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman Islands income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s financial statements. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC 480. Class A ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument and is measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, Class A ordinary shares is classified as stockholders’ equity. The Company’s Class A ordinary shares features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events.
On January 6, 2023, shareholders holding 23,497,468 ordinary shares exercised their right to redeem their shares for a pro rata portion of the funds in the Company’s Trust Account. On July 11, 2023, shareholders holding 389,511 public shares exercised their right to redeem their shares for a pro rata portion of the funds in the Company’s Trust Account. Accordingly, on September 30, 2023, 1,113,021 shares of Class A ordinary shares subject to possible redemption is presented as temporary equity, outside of the stockholders’ deficit section of the Company’s condensed balance sheet.
F-12
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable Class A ordinary share to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary share are affected by charges against additional paid in capital and accumulated deficit.
At September 30, 2023, the Class A ordinary shares subject to possible redemption reflected in the balance sheet is reconciled in the following table:
| Gross proceeds | $ | 250,000,000 | ||
| Less: | ||||
| Proceeds allocated to Public Warrants | (15,375,000 | ) | ||
| Class A ordinary share issuance costs | (16,928,049 | ) | ||
| Plus: Accretion of carrying value to redemption value | 37,303,049 | |||
| Class A ordinary share subject to possible redemption as on December 31, 2021 | 255,000,000 | |||
| Plus: Accretion of carrying value to redemption value | 3,554,215 | |||
| Class A ordinary share subject to possible redemption as on December 31, 2022 | 258,554,215 | |||
| Less : Redemption of ordinary shares | (247,421,666 | ) | ||
| Plus: Accretion of carrying value to redemption value | 1,439,309 | |||
| Class A ordinary share subject to possible redemption as on September 30, 2023 | $ | 12,571,858 |
Net (Loss) Income per Ordinary Share
The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares (the “Founder Shares”). Earnings and losses are shared pro rata between the two classes of shares. Public Warrants (see Note 3) and Private Placement Warrants (see Note 4) to purchase 13,070,000 Class A ordinary share at $11.50 per share were issued on October 22, 2021. At September 30, 2023 and December 31, 2022, no Public Warrants or Private Placement Warrants have been exercised. The 13,070,000 potential Class A ordinary shares for outstanding Public Warrants and Private Placement Warrants to purchase the Company’s stock were excluded from diluted earnings per share for the three and nine months ended September 30, 2023 and 2022 because they are contingently exercisable, and the contingencies have not yet been met. As a result, diluted net (loss) income per ordinary share is the same as basic net (loss) income per ordinary share for the period. The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net (loss) income per share for each class of stock.
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||
| Class A | Class B | Class A | Class B | Class A | Class B | Class A | Class B | |||||||||||||||||||||||||
| ordinary | ordinary | ordinary | ordinary | ordinary | ordinary | ordinary | ordinary | |||||||||||||||||||||||||
| share | share | share | share | share | share | share | share | |||||||||||||||||||||||||
| Basic and diluted net (loss) income per share: | ||||||||||||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||||||||
| Allocation of net (loss) income before accretion income | $ | (97,620 | ) | $ | (550,146 | ) | $ | 774,266 | $ | (7,428 | ) | $ | (203,750 | ) | $ | (531,348 | ) | $ | 4,654,781 | $ | 1,109,072 | |||||||||||
| Accretion of Class A ordinary shares to redemption value | 270,860 | — | — | — | 1,439,309 | — | — | — | ||||||||||||||||||||||||
| Net income (loss) including accretion of Class A Redeemable shares to redemption value | $ | 173,240 | $ | (550,146 | ) | $ | 774,266 | $ | (7,428 | ) | $ | 1,235,559 | $ | (531,348 | ) | $ | 4,654,781 | $ | 1,109,072 | |||||||||||||
| Denominator: | ||||||||||||||||||||||||||||||||
| Weighted average shares outstanding | 1,159,593 | 6,535,000 | 22,000,000 | 6,535,000 | 2,505,890 | 6,535,000 | 22,000,000 | 6,535,000 | ||||||||||||||||||||||||
| Basic and diluted net income (loss) per share | $ | 0.15 | $ | (0.08 | ) | $ | 0.04 | $ | (0.00 | ) | $ | 0.49 | $ | (0.08 | ) | $ | 0.21 | $ | 0.17 | |||||||||||||
F-13
Accounting for Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the instruments are free standing financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted at the time of warrant issuance and as of each subsequent period end date while the instruments are outstanding. Management has concluded that the Public Warrants and Private Placement Warrants issued pursuant to the warrant agreement qualify as derivative warrant liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statements of operations. The fair value of warrants issued by the Company in connection with the Public Offering and Private Placement has been estimated using Black-Scholes pricing model at each measurement date.
Stock Compensation Expense
In connection with the Company’s IPO, Founder Shares were sold to certain independent directors from among the Sponsor’s pool of Founder Shares at the price paid by the Sponsor (par value of $0.0001). Although these Founder Shares were purchased by the independent directors for value, under ASC 718, “Compensation – Stock Compensation,” these Founder Shares may be deemed stock-based compensation.
The Company accounts for stock-based compensation expense in accordance with ASC 718, under which stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date and recognized over the requisite service period. To the extent a stock-based award is subject to a performance condition, the amount of expense recorded in a given period, if any, reflects an assessment of the probability of achieving such performance condition, with compensation recognized once the event is deemed probable to occur. The fair value of equity awards has been estimated using a market approach. Forfeitures are recognized as incurred.
As of October 6, 2021, the fair value of the 95,000 Founder Shares granted to certain independent directors by the Sponsor was $600,530 or $6.32 per share. The Company used a Monte Carlo Model simulation to arrive at the fair value of the stock compensation. The key assumptions in the option pricing model utilized are assumptions related to expected separation date of Units, anticipated business combination date, purchase price, share-price volatility, expected term, exercise date, risk-free interest rate and present value. The expected volatility as of the IPO closing date was derived based upon similar Special Purpose Acquisition Company (“SPAC”) warrants and technology exchange funds which with the Company’s stated industry target and terms until the exercise date. The Company’s Founder Shares sold to independent directors (see Note 5) was deemed within the scope of ASC 718 and are subject to a performance condition, namely the occurrence of a Business Combination. Compensation expense related to the 95,000 Founder Shares is recognized only when the performance condition is probable of occurrence, or more specifically when a Business Combination is consummated. Therefore, no stock-based compensation expense has been recognized for the nine months ended September 30, 2023.
Recent Accounting Pronouncements
The Company’s management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statement.
Note 3 — Initial Public Offering
Pursuant to the IPO, the Company sold 25,000,000 units (including 3,000,000 units as part of the underwriters’ partial exercise of the over-allotment option) at a price of $10.00 per Unit. Each Unit consists of one Class A ordinary share (such Class A ordinary shares included in the Units being offered, the “Public Shares”), and one-half a redeemable warrant (each, a “Public Warrant”). Each Public Warrant entitles the holder to purchase three quarters of one Class A ordinary share at a price of $11.50 per share, subject to adjustment (see Note 7).
F-14
Note 4 — Private Placement
On October 22, 2021, simultaneously with the consummation of the IPO and the underwriters’ exercise of their over-allotment option, the Company consummated the issuance and sale (“Private Placement”) of 1,140,000 Units (the “Placement Units”) in a private placement transaction at a price of $10.00 per Placement Unit, generating gross proceeds of $11,400,000. The Placement Units were purchased by Cantor (187,000 Units), CCM (33,000 Units) and the Sponsor (920,000 Units). Each whole Private Placement Unit will consist of one Placement Share and one-half of a redeemable warrant (“Placement Warrant”). Each whole Placement Warrant will be exercisable to purchase one Class A ordinary share at a price of $11.50 per share. A portion of the proceeds from the Private Placement Units was added to the proceeds from the IPO to be held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Units will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Placement Units and all underlying securities will be worthless.
Note 5 — Related Party Transactions
Founder Shares
On March 11, 2021, the Sponsor paid $25,000 to fund certain obligations of the Company in consideration for 5,912,500 Class B ordinary shares (the “Founder Shares”) of the Company par value $0.0001 (“Class B ordinary shares”) for an aggregate price of $25,000. In September 2021, the Company effected a dividend of approximately 0.017 shares for each Class B ordinary share outstanding, resulting in there being an aggregate of 6,015,000 Founder Shares outstanding. On October 19, 2021, the Company effected a dividend of approximately 0.099 shares for each outstanding Class B ordinary share, resulting in there being an aggregate of 6,611,500 Founder Shares outstanding. The Founder Shares will automatically convert into Class A ordinary shares at the time of the Company’s initial Business Combination and are subject to certain transfer restrictions, as described in Note 6. Holders of Founder Shares may also elect to convert their Class B ordinary shares into an equal number of Class A ordinary shares, subject to adjustment, at any time. The initial shareholders have agreed to forfeit up to 841,500 Founder Shares to the extent that the over-allotment option is not exercised in full by the underwriters. Since the underwriters exercised the over-allotment option only in part, the Sponsor did forfeit 76,500 Founder Shares.
The Initial Shareholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last sale price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s shareholders having the right to exchange their ordinary shares for cash, securities or other property.
Related Party Loans
On January 6, 2023, the Company issued an unsecured promissory note in the amount of up to $495,000 to the Sponsor (the “Extension Loan”). This loan is non-interest bearing, non-convertible and payable on the consummation of the Company’s initial business combination. $495,000 is outstanding under this loan and shown under Advances from Sponsor as of September 30, 2023.
On January 17, 2023, the Company issued an unsecured promissory note in the amount of up to $1,000,000 to the Sponsor (the “2023 Note”). This loan is non-interest bearing and payable on the consummation of the Company’s initial business combination. At maturity, the Sponsor may elect to convert any portion or all of the amount outstanding under the 2023 Note, up to a maximum of $1,000,000, into units of the entity surviving or resulting from the Initial Business Combination at a conversion price of $10.00 per unit. $1,000,000 is outstanding under this loan and shown under Advances from Sponsor as of September 30, 2023.
F-15
On July 13, 2023, the Company issued an unsecured promissory note in the amount of up to $700,000 to the Sponsor (the “July 2023 Note”). This loan is non-interest bearing and payable on the consummation of the Company’s initial business combination. At maturity date, by providing written notice to the Company, the Sponsor may elect to convert any portion or all of the amount outstanding under the July 2023 Note, up to a maximum of $1,000,000, into securities of the Company. The issuance of the July 2023 Note was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended. $112,770 is outstanding under this loan and shown under Advances from Sponsor as of September 30, 2023.
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into units of the post Business Combination entity at a price of $10.00 per unit. The units would be identical to the Private Placement Units. As of September 30, 2023, there were no Working Capital Loans outstanding.
Support Services
Following the completion of the IPO, the Company disburses a monthly fee of approximately $20,000 to an affiliate of the Sponsor for office space, administrative, and shared personnel support services. For the three and nine months concluding on September 30, 2022, a total of $30,000 and $200,000 was incurred, with corresponding payments of $60,000 and $147,742 made to an entity associated with the chief financial officer for support services. In the three and nine months ending on September 30, 2023, expenses of $60,000 and $120,000 were incurred, respectively. As of September 30, 2023, $70,000 remains unpaid, while as of December 31, 2022, $100,000 remains outstanding. These amounts are reflected on the balance sheet as due to the affiliate.
Note 6 — Commitments and Contingencies
Registration Rights
The holders of Founder Shares, Private Placement Units and warrants that may be issued upon conversion of Working Capital Loans, if any, will be entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to Class A ordinary shares) pursuant to a registration rights agreement signed in connection with the IPO. These holders will be entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day option from the final prospectus relating to the IPO to purchase up to 3,300,000 additional Units to cover over-allotments, if any, at the IPO price less the underwriting discounts and commissions. On October 22, 2021, the underwriters elected to partially exercise the over-allotment option purchasing 3,000,000 units.
The underwriters were paid a cash underwriting discount of $0.20 per unit net of reimbursements to the Company of $612,029 to pay for outside advisors, or $3,787,971 in the aggregate at the closing of the IPO. The underwriters have agreed to defer the cash underwriting discount of $0.20 per share related to the over-allotment to be paid at Business Combination ($600,000 in the aggregate). In addition, the underwriters are entitled to a deferred underwriting commissions of $0.50 per unit, or $12,500,000 from the closing of the IPO. The total deferred fee is $13,100,000, consisting of the $12,500,000 deferred portion and the $600,000 cash discount agreed to be deferred until Business Combination. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely if the Company completes a Business Combination, subject to the terms of the underwriting agreement.
F-16
Note 7 — Shareholders’ Deficit
Ordinary shares
Class A ordinary shares—The Company is authorized to issue 100,000,000 Class A ordinary shares with a par value of $0.0001 per share. As of September 30, 2023 and December 31, 2022, there were 1,140,000 (excluding 1,113,021 Class A ordinary shares and 25,000,000 Class A ordinary shares subject to possible redemption, respectively) Class A ordinary shares issued and outstanding.
Class B ordinary shares—The Company is authorized to issue 10,000,000 Class B ordinary shares with a par value of $0.0001 per share. Holders of Class B ordinary shares are entitled to one vote for each share. As of September 30, 2023 and December 31, 2022, there were 6,535,000 Class B ordinary shares outstanding after giving effect to the forfeiture of 76,500 shares to the Company by the Sponsor for no consideration since the underwriters’ 45-day over-allotment option was not exercised in full.
Holders of Class A ordinary shares and Class B ordinary shares will vote together as a single class on all other matters submitted to a vote of shareholders except as required by law.
The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of the initial Business Combination on a one-for-one basis, subject to adjustment. In the case that additional Class A ordinary shares, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in the IPO and related to the closing of the initial Business Combination,the ratio at which Class B ordinary shares shall convert into Class A ordinary shares will be adjusted (unless the holders of a majority of the outstanding Class B ordinary shares agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of Class A ordinary shares issuable upon conversion of all Class B ordinary shares will equal, in the aggregate, on an as-converted basis, approximately 22.74% of the sum of the total number of all ordinary shares outstanding upon the completion of the IPO plus all Class A ordinary shares and equity-linked securities issued or deemed issued in connection with the initial Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination and any private placement-equivalent warrants issued to the Sponsor or its affiliates upon conversion of loans made to the Company). Holders of Founder Shares may also elect to convert their Class B ordinary shares into an equal number of Class A ordinary shares, subject to adjustment as provided above, at any time.
Preference Shares —The Company is authorized to issue 1,000,000 preference shares with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. For the period presented, there were no preference shares issued or outstanding.
Warrants—The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the IPO. No warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the Class A ordinary shares issuable upon exercise of the warrants and a current prospectus relating to such Class A ordinary shares. Notwithstanding the foregoing, if a registration statement covering the Class A ordinary shares issuable upon exercise of the Public Warrants is not effective within a specified period following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
Once the warrants become exercisable, the Company may redeem the Public Warrants:
| · | in whole and not in part; |
| · | at a price of $0.01 per warrant; |
| · | upon not less than 30 days’ prior written notice of redemption; |
| · | if, and only if, the reported last sale price of the Class A ordinary shares equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30 trading day period commencing at any time after the warrants become exercisable and ending on the third business day prior to the notice of redemption to warrant holders; and |
| · | if, and only if, there is a current registration statement in effect with respect to the Class A ordinary shares underlying the warrants. |
F-17
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.
The Private Placement Warrants are identical to the Public Warrants underlying the Units being sold in the IPO, except that the Private Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are exercisable for cash or on a cashless basis, at the holder’s option, and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Placement Warrants.
The exercise price and number of Class A ordinary shares issuable on exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or the Company’s recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuances of Class A ordinary shares at a price below their respective exercise prices. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per Class A ordinary share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors, and in the case of any such issuance to the Initial Shareholders or their affiliates, without taking into account any Founder Shares held by them prior to such issuance), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates a Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of (i) the Market Value or (ii) the price at which the Company issues the additional Class A ordinary shares or equity-linked securities.
Note 8 — Fair Value Measurements
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3: Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability.
F-18
At September 30, 2023 and December 31, 2022, there were 13,070,000 warrants outstanding (12,500,000 Public Warrants and 570,000 Private Placement Warrants).
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2023 (unaudited) and December 31, 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| Quoted | Significant | Significant | ||||||||||||||
| Prices | Other | Other | ||||||||||||||
| in Active | Observable | Unobservable | ||||||||||||||
| September 30, | Markets | Inputs | Inputs | |||||||||||||
| Description | 2023 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| Assets: | ||||||||||||||||
| Money Market Fund held in Trust Account | $ | 12,518,199 | $ | 12,518,199 | — | — | ||||||||||
| Liabilities: | ||||||||||||||||
| Warrant Liability - Public Warrants | $ | 375,000 | $ | 375,000 | — | — | ||||||||||
| Warrant Liability - Private Placement Warrants | $ | 17,100 | — | — | $ | 17,100 | ||||||||||
| Quoted | Significant | Significant | ||||||||||||||
| Prices | Other | Other | ||||||||||||||
| in Active | Observable | Unobservable | ||||||||||||||
| December 31, | Markets | Inputs | Inputs | |||||||||||||
| Description | 2022 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| Assets: | ||||||||||||||||
| Money Market Fund held in Trust Account | $ | 257,725,405 | $ | 257,725,405 | — | — | ||||||||||
| Liabilities: | ||||||||||||||||
| Warrant Liability - Public Warrants | $ | 625,000 | $ | 625,000 | — | — | ||||||||||
| Warrant Liability - Private Placement Warrants | $ | 28,500 | — | — | $ | 28,500 | ||||||||||
The Company utilizes a Black-Scholes simulation model to value the warrants at each reporting period, with changes in fair value recognized in the statement of operations. The estimated fair value of the warrant liability is determined using Level 3 inputs. Inherent in a Black-Scholes pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its ordinary shares based on industry historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.
The following table provides quantitative information regarding Level 3 fair value measurements at September 30, 2023 (unaudited) and December 31, 2022:
| September 30, 2023 | December 31, 2022 | |||||||
| Share Price | $ | 11.25 | $ | 10.28 | ||||
| Exercise Price | $ | 11.50 | $ | 11.50 | ||||
| Term (years) | 5.31 | 5.62 | ||||||
| Volatility | 6.2 | % | 4.10 | % | ||||
| Risk Free Rate | 4.50 | % | 3.90 | % | ||||
| Dividend Yield | 0.00 | % | 0.00 | % | ||||
F-19
At September 30, 2023, the fair value of the Public Warrants and Private Placement Warrants was $0.03. At December 31, 2022, the fair value of the Public Warrants and Private Placement Warrants was $0.05.
The following table presents the changes in the fair value of Level 3 warrant liabilities:
| Private Placement | ||||
| Warrants | ||||
| Fair value as of December 31, 2022 | $ | 28,500 | ||
| Change in fair value | (11,400 | ) | ||
| Fair value as of March 31, 2023 (unaudited) | $ | 17,100 | ||
| Change in fair value | (11,400 | ) | ||
| Fair value as of June 30, 2023 (unaudited) | $ | 5,700 | ||
| Change in fair value | 11,400 | |||
| Fair value as of September 30, 2023 (unaudited) | $ | 17,100 | ||
There were no transfers in or out of Level 3 from other levels in the fair value hierarchy for the nine months ended September 30, 2023.
Note 9 — Subsequent Events
The Company has evaluated subsequent events through the date these financial statements were available for issuance and determined that other than the items disclosed below, there were no subsequent events that would require adjustment or disclosure.
On October 20, 2023, the Sponsor, holding all of the issued and outstanding Class B ordinary shares of the Company elected to convert its Class B ordinary shares into Class A ordinary shares of the Company on a one-for-one basis (the “Conversion”). As a result, 6,535,000 of the Company’s Class B ordinary shares were cancelled and 6,535,000 Class A ordinary shares of the Company were issued to the Sponsor. The Sponsor agreed that all of the terms and conditions applicable to the Founder Shares set forth in the Letter Agreement, dated October 19, 2021, by and among the Company, its officers, its directors and the Sponsor (the “Letter Agreement”), shall continue to apply to the Class A Shares into which the Founder Shares converted, including the voting agreement, transfer restrictions and waiver of any right, title, interest or claim of any kind to the Trust Account (as defined in the Letter Agreement) or any monies or other assets held therein.
F-20
Psyence Biomed Corp.
Carve-Out Unaudited Condensed Consolidated Interim Financial Statements
For the three and six months ended September 30, 2023
Expressed in Canadian Dollars
(CAD $)
F-21
PSYENCE BIOMED CORP.
Carve-Out Condensed Consolidated Interim Financial Statements (unaudited)
Management's Responsibility for Financial Reporting
The accompanying carve-out unaudited condensed consolidated interim financial statements of the Company have been prepared by management in accordance with International Financial Reporting Standards. These carve-out financial statements contain estimates based on management’s judgment. Management maintains an appropriate system of internal controls to provide reasonable assurance that transactions are authorized, assets safeguarded, and proper records maintained.
The Audit Committee of the Board of Directors reviews the results of the audit and the carve-out condensed consolidated interim financial statements prior to submitting the carve-out condensed consolidated interim financial statements to the Board for approval.
“Dr. Neil Maresky”
___________________
Chief Executive Officer
Toronto, Canada
January 31, 2024
 | F-22 |
PSYENCE BIOMED CORP.
Carve-Out Condensed Consolidated Interim Financial Statements (unaudited)
Carve-Out Condensed Consolidated Interim Statements of Financial Position
As at September 30, 2023 and March 31, 2023
| CAD $ | Note | As at | As at March 31, 2023 | ||||||||
| ASSETS | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | 5 | 818,609 | 1,805,766 | ||||||||
| Restricted cash | 5 | 40,000 | 40,000 | ||||||||
| Other receivables | 25,400 | 202,150 | |||||||||
| Prepaids | 20,982 | 104,276 | |||||||||
| Total current assets | 904,991 | 2,152,192 | |||||||||
| TOTAL ASSETS | 904,991 | 2,152,192 | |||||||||
| LIABILITIES | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable and accrued liabilities | 6 | 1,237,068 | 2,423,467 | ||||||||
| Loan payable | 10 | 996,495 | - | ||||||||
| Total current liabilities | 2,233,563 | 2,423,467 | |||||||||
| TOTAL LIABILITIES | 2,233,563 | 2,423,467 | |||||||||
| EQUITY | |||||||||||
| Net parent investment | (1,328,572 | ) | (271,275 | ) | |||||||
| NET PARENT INVESTMENT | (1,328,572 | ) | (271,275 | ) | |||||||
TOTAL LIABILITIES AND NET PARENT INVESTMENT | 904,991 | 2,152,192 | |||||||||
Nature of operations and going concern (note 1)
Approved on behalf of Board of Directors
| “Dr. Neil Maresky” | “Jody Aufrichtig” | |
| Chief Executive Officer and Director | Executive Chairman and Director |
The accompanying notes are an integral part of the Carve-Out Condensed Consolidated Interim Financial Statements
| F-23 |
PSYENCE BIOMED CORP.
Carve-Out Condensed Consolidated Interim Financial Statements (unaudited)
Carve-Out Condensed Consolidated Interim Statements of Net Loss and Comprehensive Loss
For the three and six months ended September 30, 2023 and September 30, 2022
| CAD $ | Note | Three months ending September 30, 2023 |
Three months ending September 30, 2022 |
Six months ending September 30, 2023 |
Six months ending September 30, 2022 |
|||||||||
| Expenses | ||||||||||||||
| Sales and marketing | 1,471 | - | 2,848 | - | ||||||||||
| Research and development | (11,454 | ) | 2,533 | 1,062,212 | 207,446 | |||||||||
| General and administrative | (21,627 | ) | 102,912 | 114,845 | 222,825 | |||||||||
| Professional fees and consulting fees | 267,918 | 228,242 | 784,375 | 441,219 | ||||||||||
| Foreign exchange loss | 141,626 | 2,005 | 154,927 | 3,731 | ||||||||||
| Interest Expense/(Income) | 37,474 | (1,090 | ) | 36,805 | (1,298 | ) | ||||||||
| NET LOSS | 10 | 426,862 | 334,602 | 2,156,012 | 873,923 | |||||||||
| TOTAL COMPREHENSIVE LOSS | 426,862 | 334,602 | 2,156,012 | 873,923 |
The accompanying notes are an integral part of the Carve-Out Condensed Consolidated Interim Financial Statements
| F-24 |
PSYENCE BIOMED CORP.
Carve-Out Condensed Consolidated Interim Financial Statements (unaudited)
Carve-Out Condensed Consolidated Statements of Changes in Net Parent Investment
For the periods ended September 30, 2023 and September 30, 2022
| Note | Net parent investment | ||||
| Opening balance as at April 1, 2022 | 2,122,696 | ||||
| Net investment returned to parent in the year | (1,237,340 | ) | |||
| Net loss | (873,923 | ) | |||
| Balance, September 30, 2022 | 11,433 | ||||
| Opening balance as at April 1, 2023 | (271,275 | ) | |||
| Net investment by parent in the year | 1,098,715 | ||||
| Net loss | (2,156,012 | ) | |||
| Balance, September 30, 2023 | (1,328,572 | ) | |||
The accompanying notes are an integral part of the Carve-Out Condensed Consolidated Interim Financial Statements
| F-25 |
PSYENCE BIOMED CORP.
Carve-Out Condensed Consolidated Interim Financial Statements (unaudited)
Carve-Out Condensed Consolidated Statements of Cash Flows
For the six months period ended September 30, 2023 and September 30, 2022
| Note | Six months ended September 30, 2023 |
Six months ended September 30, 2022 |
|||||||||
| Net loss | (2,156,012 | ) | (873,923 | ) | |||||||
| Non-cash adjustment: | |||||||||||
| Share based compensation | 11 | (54,625 | ) | 78,964 | |||||||
| Changes in working capital: | |||||||||||
| Other receivables | 176,750 | (76,209 | ) | ||||||||
| Prepaids | 83,294 | 6,730 | |||||||||
| Accounts payable and accrued liabilities | 6 | (189,904 | ) | 122,690 | |||||||
| Cash used in operating activities | (2,140,497 | ) | (741,748 | ) | |||||||
| Increase in restricted cash | 5 | - | - | ||||||||
| Cash used in investing activities | - | - | |||||||||
| Amounts advanced from/(to) parent | 193,810 | (1,339,171 | ) | ||||||||
| Proceeds received from loan | 959,530 | - | |||||||||
| Cash provided from/(used in) financing activities | 1,153,340 | (1,339,171 | ) | ||||||||
| Change in cash and cash equivalents | (987,157 | ) | (2,080,919 | ) | |||||||
| Cash and cash equivalents, beginning of period | 1,805,766 | 2,191,095 | |||||||||
| Cash and cash equivalents, end of period | 818,609 | 110,176 | |||||||||
The accompanying notes are an integral part of the Carve-Out Condensed Consolidated Interim Financial Statements
| F-26 |
PSYENCE BIOMED CORP.
Carve-Out Condensed Consolidated Interim Financial Statements (unaudited)
Notes to the Carve-Out Condensed Consolidated Interim Financial Statements
1. Nature of operations and going concern
Psyence Biomed Corp. (the “Company” or “PBC”) is a life science biotechnology company owned by Psyence Group Inc. (“Psyence Group”). It is pioneering the use of natural psychedelics in the treatment of psychological trauma and mental health disorders. It was incorporated under the laws of the province of British Columbia, Canada on May 21, 2020. The Company’s registered office is at 121 Richmond Street West, PH Suite 1300, Toronto, Ontario M5H 2K1.
The Company is currently conducting clinical trials to evaluate the safety and effectiveness of natural psilocybin in treating adjustment disorder in patients with an incurable cancer diagnosis in a palliative care context (the “Clinical Trials”).
The UK Medicines and Healthcare products Regulatory Agency (MHRA) granted full approval for the Company’s Stage I clinical study, including ethics review board approval, on September 15, 2022.
In January 2023, the Company signed a letter of intent with iNGENū Pty Ltd to conduct a Phase IIb study in Australia to further develop the Company’s licensed natural psilocybin drug product. The study will evaluate the safety and efficacy of psilocybin-assisted psychotherapy versus psychotherapy alone for the treatment of adjustment disorder due to an incurable cancer diagnosis in a palliative care context.
Over 75 patients will participate in the study, which will use FDA-recommended primary endpoints. The investigational product will be the proprietary botanical drug candidate PEX010 sourced from Filament Health Corp. Upon successful completion of the study, Psyence intends to conduct a multinational Phase III registrational study.
On February 15, 2023, the Company incorporated a wholly-owned subsidiary by the name of Psyence Australia Pty Ltd., registered in Victoria, Australia.
On January 9, 2023 Psyence Group announced that it had entered into a definitive business combination agreement (the “Business Combination Agreement”) with Newcourt Acquisition Corp (NASDAQ: NCAC), a special purpose acquisition company (“SPAC”) formed for the purpose of acquiring or merging with one or more businesses (“Newcourt”). Newcourt has entered into the Business Combination Agreement with the Company, in order to create a public company leveraging natural psilocybin in the treatment of palliative care (the “Pubco”).
The transaction is anticipated to conclude early in 2024, with the Pubco to go public. The transaction is expected to be completed by the Company acquiring the SPAC through the merger of the SPAC with a subsidiary of PBC. As a consequence of the transaction, the SPAC will become a wholly-owned subsidiary of PBC, the SPAC shareholders will become shareholders of PBC, and PBC would complete filings to become a public company in the United States in which Psyence Group would retain a significant ownership stake. The actual level of Psyence Group ownership of PBC upon conclusion of the Business Combination will depend on the ultimate size of the PIPE financing the SPAC intends to complete in conjunction with the Business Combination, the extent of redemptions by SPAC shareholders and the impact of such redemptions on the SPAC shareholder base.
The purpose of these carve-out condensed consolidated interim financial statements (the “Financial Statements”) is to provide historical financial information of PBC, to reflect PBC as if it had been operating separately from Psyence Group and its subsidiaries that do not partake in the Clinical Trials. The Financial Statements have been prepared on a “carve-out basis” from the consolidated financial statements of Psyence Group Inc. for the purposes of presenting the financial position, results of operations and cash flows of the Company and investments and operations relevant to the Clinical Trials on a stand-alone basis.
These Financial Statements are prepared on a going concern basis, which contemplates 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 business. During the period ended September 30, 2023, the Company incurred a net loss and comprehensive loss of $2,156,012 (Period ended September 30, 2022: $873,923) and the Company has no sources of revenue. The ability of the Company to continue operations is dependent on the Company’s ability to raise additional financing. There is no certainty that additional financing at terms that are acceptable will be available, and an inability to obtain financing would have a direct impact on the Company’s ability to continue as a going concern. These conditions indicate a material uncertainty that cast substantial doubt on the Company’s ability to continue as a going concern.
These Financial Statements do not reflect the adjustments to the carrying values and classifications of assets and liabilities that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.
| F-27 |
PSYENCE BIOMED CORP.
Carve-Out Condensed Consolidated Interim Financial Statements (unaudited)
2. Basis of presentation
Statement of compliance
The Financial Statements of the Company have been prepared using accounting policies in compliance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”).
The Financial Statements were authorized for issue on January 31, 2024 by the directors of the Company.
Carve-Out Condensed Consolidated Interim Statements of Financial Position
The carve-out condensed consolidated interim statements of financial position include the assets and liabilities that are the Clinical Trial related assets and liabilities, which have been determined in the following manner:
| · | Cash is comprised of cash and cash equivalents which the Company utilizes for working capital purposes. |
| · | Restricted cash is held in a guaranteed investment certificate with a bank as collateral for a credit facility agreement. |
| · | Other receivables are comprised of sales tax receivable from the Canadian Revenue Agency and the Australian Taxation Office. |
| · | Prepaids consists of a research report retainer and accounting fees prepaid. |
| · | Accounts payable and accrued liabilities consists of audit, consulting fees and legal fees related to the Company and its Clinical Trials. |
| · | Investments in subsidiaries and joint ventures of the Company that do not contain Clinical Trial related assets and liabilities have been excluded. |
Carve-Out Condensed Consolidated Interim Statements of Net Loss and Comprehensive Loss
| · | The carve-out condensed consolidated interim statements of net loss and comprehensive loss include operating expenses that are related to the Company and its Clinical Trials. |
| · | Psyence Group issued share-based compensation which has been included in the Company’s carve-out condensed consolidated statements of net loss and comprehensive loss based on the proportionate share of services received by the Company from the holder. |
Basis of consolidation
These Financial Statement incorporate the accounts of PBC and its subsidiaries relevant to the Clinical Trials. A subsidiary is an entity controlled by PBC and its results are consolidated into the financial results of the Company from the effective date of control up to the effective date of loss of control.
Control exists when an investor is exposed, or has the rights, to variable returns from the involvement with the investee and has liability to affect those returns through its power over the investee.
| F-28 |
PSYENCE BIOMED CORP.
Carve-Out Condensed Consolidated Interim Financial Statements (unaudited)
The subsidiaries of PBC relevant to the Clinical Trials that have been consolidated for the purpose of these Financial Statements are as follows:
| Name of entity | Place of incorporation | % ownership | Accounting method | |||||||
| Psyence Australia Pty Ltd. | Australia | 100 | % | Consolidated | ||||||
Inter-company balances and transactions are eliminated upon consolidation.
Basis of measurement
These Financial Statements have been prepared on an accrual basis, are based on historical costs and are presented in Canadian dollars, unless otherwise noted.
Functional and presentation currency
These Financial Statements are presented in Canadian Dollars (“CAD $”), which is also PBC’s functional currency. The functional currency of Psyence Australia Pty Ltd. is determined to be United States Dollars (“USD”).
3. Significant accounting policies
IFRS 9 Financial instruments
The Company recognizes a financial asset or a financial liability when, and only when, it becomes a party to the contractual provisions of the instrument. Such financial assets or financial liabilities are initially recognized at fair value plus or minus transaction costs that are directly attributable to the acquisition or issue of financial instruments that are not classified as fair value through profit or loss.
The classification and measurement approach for financial assets reflect the business model in which assets are managed and their cash flow characteristics. Financial assets are classified and measured based on these categories: amortized cost, fair value through other comprehensive income (“FVOCI”) and fair value through profit and loss (“FVTPL”). Financial assets are not reclassified subsequent to their initial recognition unless the Company identifies changes in its business model in managing financial assets.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as FVTPL:
| · | The financial asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and |
| · | The contractual terms of the financial asset 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 measure the investment at FVOCI whereby changes in the investment’s fair value (realized and unrealized) will be recognized permanently in OCI with no reclassification to profit or loss. The election is made on an investment-by-investment basis.
A financial asset shall be measured at FVTPL unless it is measured at amortized cost or at FVOCI.
Financial liabilities are classified and measured based on two categories – amortized cost or FVTPL:
Amortized cost
Financial liabilities are classified as measured at amortized cost unless they fall into one of the following categories: financial liabilities at FVTPL, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition, financial guarantee contracts, commitments to provide a loan at a below-market interest rate, or contingent consideration recognized by an acquirer in a business combination.
| F-29 |
PSYENCE BIOMED CORP.
Carve-Out Condensed Consolidated Interim Financial Statements (unaudited)
FVTPL
Financial liabilities are classified as FVTPL if they fall into one of the five exemptions detailed above.
Classification and measurement of the financial instruments is as follows:
| Financial instrument | Classification | |
| Cash and cash equivalents | Amortized cost | |
| Restricted cash | Amortized cost | |
| Accounts payable and accrued liabilities | Amortized cost | |
| Loan payable | Amortized cost |
Under IFRS 9, the Company applies a forward-looking expected credit loss (“ECL”) model, at each balance sheet date, to financial assets measured at amortized cost or those measured at FVOCI, except for investments in equity instruments.
The three-stage approach to recognizing ECL under IFRS 9 is intended to reflect the increase in credit risk of a financial instrument and are:
| · | Stage 1 is comprised of all financial instruments that have not had a significant increase in credit risk since initial recognition or that have low credit risk at the reporting date. The Company recognizes an impairment loss for those financial instruments at an amount equal to the twelve-month expected credit loss following the balance sheet date. | |
| · | Stage 2 is comprised of all financial instruments that have had a significant increase in credit risk since initial recognition but that do not have objective evidence of a credit loss event. The Company recognizes an impairment loss for those financial instruments at an amount equal to the lifetime expected credit losses. | |
| · | Stage 3 is comprised of all financial instruments that have objective evidence of impairment at the reporting date. The Company recognizes an impairment loss for those financial instruments at an amount equal to the lifetime expected credit losses. |
Impairment losses are recorded in the carve-out statements of net loss and comprehensive loss with the carrying amount of the financial assets reduced through the use of impairment allowance accounts.
The Company reverses impairment losses on financial assets carried at amortized cost when the decrease in impairment can be objectively related to an event occurring after the impairment loss was initially recognized.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and, when applicable, short-term, highly liquid deposits which are either cashable or with original maturities of less than three months at the date of their acquisition.
Related party transactions
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control. Related parties may be individuals or entities. A transaction is considered to be a related party transaction when there is transfer of resources or obligations between related parties.
Provisions
Provisions are recognized when the Company has a present obligation, legal or constructive as a result of a previous event, if it is probable that the Company will be required to settle the obligation and a reliable estimate can be made of the obligation. The amount recognized is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligations. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate of the expected future cash flows.
Net parent investment
The net parent investment represents the net financings that the Company received from Psyence Group to fund its operations through contributions to the Clinical Trials, cash extended to the Company's subsidiaries and joint ventures that were not related to the Clinical Trials, and the net effect of cost allocations from transactions with Psyence Group, all of which did not require repayments.
| F-30 |
PSYENCE BIOMED CORP.
Carve-Out Condensed Consolidated Interim Financial Statements (unaudited)
Research and development
Expenditures on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are recognized in the carve-out statements of net loss and comprehensive loss as incurred.
Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to complete development and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are expensed as incurred. Research and development expenses include all direct and indirect operating expenses supporting the products in development. The costs incurred in establishing and maintaining patents are expensed as incurred.
Foreign currency translation
The Financial Statements are presented in CAD $ which is PBC’s functional currency. The functional currency of its subsidiary consolidated within these Financial Statements is USD.
In each individual entity, a foreign currency transaction is initially recorded in the functional currency of the entity, by applying the exchange rate between the functional currency and the foreign currency at the date of the transaction.
At the end of the reporting period, monetary assets and liabilities of the Company which are denominated in foreign currencies are translated at the period-end exchange rate. Non-monetary assets and liabilities are translated at rates in effect at the date the assets were acquired, and liabilities incurred.
The resulting exchange gains or losses arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition, are included in profit or loss in the period in which they arise.
For the purpose of presenting these Financial Statements, the assets and liabilities of the subsidiary are translated into CAD $ at the exchange rates prevailing at the end of the reporting period. Income and expenses are translated at the average rates for the period. Exchange differences arising are recognized in net parent investment.
4. Critical accounting estimates and judgements
The preparation of financial statements in conformity with IFRS requires management to make certain estimates, judgments and assumptions concerning the future. Actual results may differ from these estimates. The Company’s management reviews these estimates, judgments, and assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted prospectively in the period in which the estimates are revised. The following are deemed to be critical accounting policies by as these require a high level of subjectivity and judgement and could have a material impact on PBC’s financial statements.
Going concern
These Financial Statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations.
Management routinely plans future activities including forecasting future cash flows and forming judgements collectively with directors of the Company.
Judgement is required in determining if the Company's has sufficient cash reserves, together with all other available information, to continue as a going concern for a period of at least twelve months.
As at September 30, 2023 the Company has concluded that a material uncertainty exists that casts significant doubt about the Company’s ability to continue as a going concern.
| F-31 |
PSYENCE BIOMED CORP.
Carve-Out Condensed Consolidated Interim Financial Statements (unaudited)
Contingencies
From time to time, the Company is named as a party to claims or involved in proceedings, including legal, regulatory and tax related, in the ordinary course of its business. While the outcome of these matters may not be estimable at the reporting date, the Company makes provisions, where possible, for the estimated outcome of such claims or proceedings. Should a loss result from the resolution of any claims or proceedings that differs from these estimates, the difference will be accounted for as a charge to profit or loss in that period. The actual results may vary and may cause significant adjustments.
Share based compensation
The allocation of the expenses associated with the options and warrants granted by Psyence Group to the Company is based on the proportion of services received from the employees and consultants who have been granted the options. However, determining the proportion of services received by the Company involves judgment. Additionally, estimating the fair value for share-based payment transactions requires judgement in determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This also requires estimation of the most appropriate inputs to the valuation model including the expected life of the share option or warrant, volatility, dividend yield and share price.
5. Cash, restricted cash and cash equivalents
Cash and cash equivalents include the following amounts:
| September 30, 2023 | March 31, 2023 | |||||
| Unrestricted cash held with chartered banks | 813,382 | 1,800,539 | ||||
| Held in trust for brokerage account | 5,227 | 5,227 | ||||
| Restricted Cash | 40,000 | 40,000 | ||||
| Total | 858,609 | 1,845,766 | ||||
| · | an amount held in trust by a brokerage firm as security for foreign currency exchanges; |
| · | unrestricted cash held with chartered banks and |
| · | the Company entered into a cash collateral agreement with a major chartered bank in Canada with regards to a credit facility against which the Company deposited $40,000 in a guaranteed investment certificate with the bank. Amounts are held in restricted cash on the carve-out statements of financial position. |
6. Accounts payable and accrued liabilities
Accounts payable and accrued liabilities include the following amounts:
| September 30, 2023 | March 31, 2023 | |||||
| Trade payables | 1,994,702 | 2,203,468 | ||||
| Accrued liabilities | 238,861 | 219,999 | ||||
| Total | 2,233,563 | 2,423,467 | ||||
7. Capital management
The Company manages its cash and net parent investment as capital. The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue the development of natural health business, to maintain a flexible capital structure which optimizes the cost of capital at an acceptable risk level.
| F-32 |
PSYENCE BIOMED CORP.
Carve-Out Condensed Consolidated Interim Financial Statements (unaudited)
The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust its capital structure, the Company may obtain additional funding from its parent, issue new debt, acquire or dispose of assets or adjust the amount of cash and cash equivalents on hand.
In order to facilitate the management of its capital requirements, the Company prepares annual budgets that are updated as necessary depending on various factors, including successful capital deployment and general industry conditions. The annual and updated budgets are approved by the Board of Directors.
Management considers its approach to capital management to be appropriate given the relative size of the Company. There were no changes in the Company’s approach to capital management during the year.
8. Transactions with related parties
All related party transactions are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. All amounts either due from or due to related parties other than specifically disclosed are non-interest bearing, unsecured and have no fixed terms of repayments. The Company incurred the following transactions with related parties during the periods ended September 30, 2023 and September 30, 2022:
Compensation to key management personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. Key management personnel include the Company’s executive officers and Board of Directors.
| Key Management Personnel | September 30, 2023 |
September 30, 2022 | ||||
| Short term benefits | 251,514 | 327,439 | ||||
| Total | 251,514 | 327,439 | ||||
Short term benefits consist of consulting fees, payroll and other benefits paid to key management personnel.
9. Net Parent Investment
As at September 30, 2023 the Company had inter-company loans of $6,805,885 (March 31, 2023 - $6,612,075) to Psyence Group, which it received in order to fund its operations. The loans are non-interest bearing and repayable on demand.
10. Loan payable
On August 21, 2023 the Company entered into a loan agreement (the “Loan Agreement”) via its Australian subsidiary Psyence Australia (Pty) Ltd (the “Borrower”), to borrow up to AUD$1,100,000 by way of a secured loan (the “Loan”) from RH Capital Finance Co., LLC. The Loan is secured by way of a General Security Agreement and parent company guarantee against the assets of the Borrower and the Company. The loan was granted to the Borrower after it successfully registered its research and development activities with the Australian Federal Government. The Borrower benefits from the Australian Federal Government’s Research & Development tax incentive program, which provides up to a 43.5% rebate on research and development expenses in Australia. The Loan bears interest at 16% per annum subject to a minimum interest chargeable period of 91 days, and is repayable at the earlier of: (a) 21 business days after the notice of assessment (in respect of R&D refunds) is issued by the Australian Taxation Office to the Borrower for the financial year ended June 30, 2023 (b) an event of default and (c) 30 November 2023.
$37,615 in interest expense was incurred during the six months ended September 30, 2023. The loan and all outstanding interest was repaid after quarter end after the Australian Taxation Office refunded 43.5% of expenditure incurred on research and development in Australia.
| F-33 |
PSYENCE BIOMED CORP.
Carve-Out Condensed Consolidated Interim Financial Statements (unaudited)
11. Share based compensation
During the period ended September 30, 2023, $54,625 was reversed due to voluntary cancelled options (Period ended September 30, 2022 - $0 was recognized) for options and restricted stock units (“RSU’s”) granted by Psyence Group under professional fees and consulting expenses and general and administrative expenses on the carve-out condensed consolidated intereim statements of net loss and comprehensive loss.
Options and RSUs granted were subject to various time-based vesting terms. This allocation was based on services received from consultants and employees who were granted options in Psyence Group.
12. Financial instruments and financial risk management
In the normal course of business, the Company is exposed to a variety of financial risks: credit risk, liquidity risk, foreign exchange risk and interest rate risk. These financial risks are subject to normal credit standards, financial controls, risk management as well as monitoring. The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework.
Credit risk
Credit risk arises from cash and cash equivalents held with banks. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The objective of managing counterparty credit risk is to prevent losses on financial assets. The Company minimizes the credit risk of cash and cash equivalents by depositing with only reputable financial institutions.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.
The Company manages liquidity risk through an ongoing review of future commitments and cash balances available. Historically, the Company’s main source of funding has been through investments from its parent. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant equity or debt funding.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company has no significant interest-bearing assets or liabilities and therefore its income and operating cash flows are substantially independent of changes in market interest rates.
Foreign exchange risk
Foreign currency risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because they are denominated in currencies that differ from the respective functional currency.
As at September 30, 2023, a 10% fluctuation in foreign exchange rates would result in a $110,468 impact to profit or loss.
13. Subsequent Events
The loan agreement with RH Capital Finance Co., LLC was repaid in full on October 5, 2023 when the Company received the research and development rebate of AUD $1,336,622 ($1,165,935) from the Australian Taxation office which was utilised to settle the loan payable.
On January 25, 2024 (the “Closing Date”), Psyence Biomedical Ltd., a corporation organized under the laws of Ontario, Canada (“Psyence Biomedical”), consummated the previously announced business combination pursuant to the Amended and Restated Business Combination Agreement (as amended, the “BCA”), dated as of July 31, 2023, by and among Psyence Biomedical, Newcourt, Newcourt SPAC Sponsor LLC, a Delaware limited liability company (“Sponsor”), Psyence Group, a corporation organized under the laws of Ontario, Canada, Psyence (Cayman) Merger Sub, a Cayman Islands exempted company and a direct and wholly owned subsidiary of Pubco (“Merger Sub”), the Company, and Psyence Biomed II Corp., a corporation organized under the laws of Ontario, Canada (“Psyence II”).
Prior to the execution of the BCA, Psyence Group formed Psyence II and Psyence Biomedical as wholly owned subsidiaries, and prior to the Closing, Psyence Group and the Company were amalgamated. Thereafter, Psyence Group transferred the shares of Psyence Australia Pty Ltd. and its related business assets that were previously owned by the Company to Psyence II.
The following transactions occurred pursuant to the terms of the BCA (collectively, the “Business Combination”) at the effective time of the Merger (the “Effective Time”):
| · | Psyence Group contributed Psyence II to the Psyence Biomedical in a share for share exchange (the “Company Exchange”). |
| · | Following the Company Exchange, Merger Sub merged with and into NCAC, with NCAC being the surviving company in the merger (the “Merger”) and each outstanding ordinary share of NCAC was converted into the right to receive one common share of the Psyence Biomedical (“Company Common Share”). |
| · | Each outstanding warrant to purchase NCAC Class A ordinary shares was converted at the Effective Time into a warrant to acquire one Company Psyence Biomedical Common Share (the “Company Psyence Biomedical Warrants”) on substantially the same terms as were in effect immediately prior to the Effective Time under their terms. |
On January 15, 2024 and January 23, 2024, the parties to the Business Combination Agreement entered into letter agreements (the “Closing Letter Agreements”) pursuant to which, among other things, Psyence Biomedical, Psyence Group, the Company and Merger Sub (collectively, the “Psyence Parties”) agreed, (X) on a conditional basis, to waive the closing conditions contained in the BCA that, at or prior to the closing of the Business Combination (the “Closing”), (i) Newcourt shall have no less than $20,000,000, net of liabilities, as of the Closing (the “Minimum Cash Condition”) and (ii) the PIPE Investment in the PIPE Investment Amount shall have occurred or shall be ready to occur substantially concurrently with the Closing (the “PIPE Investment Condition”) and (Y) to waive certain deliverables under Section 3.6 of the Business Combination Agreement (the “Closing Deliverables”). Upon the Closing, the Psyence Parties waived in full the Minimum Cash Condition, the PIPE Investment Condition and the Closing Deliverables.
On January 15, 2024, in connection with the Business Combination, Psyence Biomedical entered into a securities purchase agreement (the “Securities Purchase Agreement”) by and among (i) Psyence Biomedical, (ii) Psyence II, (iii) Sponsor and (iv) certain investors (the “Investors”) relating to up to four senior secured convertible notes (collectively, the “Notes” and the transactions pursuant to the Securities Purchase Agreement, the “Financing”), obligations under which will be guaranteed by certain assets of Psyence Biomedical and Psyence II, issuable to the Investors at or after the Closing, as the case may be, for the aggregate principal amount of up to $12,500,000 in exchange for up to $10,000,000 in subscription amounts.
The Note for the first tranche of the Financing (the “First Tranche Note”), for a total of $3,125,000 of principal in exchange for a total of $2,500,000 in subscription amounts and was issued to the Investors substantially concurrently with, and contingent upon, the Closing. The Financing closed immediately prior to the Business Combination.
Upon the closing of the first tranche of the Financing, the Minimum Cash Condition and PIPE Investment Condition were deemed waived by the Psyence Parties.
The transaction concluded on January 25, 2024, with the closing of the BCA, and with the Pubco went public on January 26, 2024. The transaction was completed by Psyence Biomedical acquiring the SPAC through the merger of the SPAC with the Company. Psyence Group relinquished full control of the Company and in return received 5,000,000 shares in Psyence Biomedical, a newly listed NASDAQ entity.
| F-34 |
Exhibit 4.4
Execution Version
FORM OF GUARANTY
In consideration of loans, advances, and all other credit transactions and financial accommodations given or to be given or to be continued from time to time to Psyence Biomedical Ltd., (“Borrower”) by [ ] and any of its affiliates (collectively, “Lender”), the undersigned Psyence Biomed II Corp. (“Guarantor”) hereby agrees with Lender as follows:
1. Guarantor hereby irrevocably and unconditionally guarantees the punctual payment and performance to Lender of any and all present and future obligations and liabilities of Borrower to Lender when due, whether at stated maturity by acceleration or otherwise, whether now or hereafter existing or arising, direct or indirect, liquidated or contingent, secured or unsecured, due or to become due, joint or several, and howsoever arising, and whether for principal, interest (including, without limitation, interest accruing after the commencement of any bankruptcy or insolvency proceeding, whether or not allowed or allowable thereunder), premiums, costs, expenses, indemnity payments, fees, claims, damages, costs, taxes and expenses of enforcement, including, without limitation, all attorneys’ fees incurred by Lender in connection with the enforcement of any of its rights against Borrower, Guarantor or any other person liable for any of the foregoing, in each case, all as set forth in the promissory note, dated as of the date hereof, in the principal amount of $1,562,000 from Borrower for the benefit of Lender (the “Note”), or in any other document, instrument or agreement heretofore or hereafter executed or delivered in connection therewith (the Note and each such other document, instrument or agreement, as amended, supplemented or otherwise modified from time to time and any replacements thereof, are hereinafter collectively referred to as the “Loan Documents”), whether or not the principal obligation under the Note is undersecured or oversecured or whether the interest obligation under the Note is deemed allowable or provable or interest is deemed to be accruing against Borrower (collectively, the “Guaranteed Obligations”).
2.1 General Representations and Warranties. Guarantor represents and warrants to Lender that: (i) the execution, delivery and performance by Guarantor of this Agreement, any other Loan Document to which Guarantor is a party and any other agreement executed in connection herewith by Guarantor do not and will not violate or conflict with, if Guarantor is a non-natural person, its constituent documents or, if Guarantor is a trust, the trust agreement governing the trust, and, in all cases, with any law, rule, regulation, judgment or order binding on Guarantor or Guarantor’s assets, or any agreement or instrument to which Guarantor is a party or by which Guarantor or Guarantor’s assets are bound; (ii) this Agreement, any other Loan Document to which Guarantor is a party and any other agreement executed in connection herewith by Guarantor have been duly authorized and executed by Guarantor, and constitute legal, valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with their respective terms and Guarantor will receive direct or indirect benefits by reason of the extension of credit by Lender to Borrower; (iii) no authorization, consent, approval or license from, or filing or registration with, any court, governmental agency, fiscal authority or public office is necessary in connection with the execution, delivery or performance by Guarantor of this Agreement, any other Loan Document to which Guarantor is a party or any other agreement executed in connection herewith by Guarantor, except such as have been taken or obtained and are in full force and effect; (iv) there are no pending or threatened investigations, actions, suits or proceedings against or affecting Guarantor, or if applicable, any of Guarantor’s subsidiaries, before any arbitrator, court, commission, bureau or other governmental agency or instrumentality, which (A) purports to affect the legality, validity or enforceability of this Agreement, any other Loan Document to which Guarantor is a party or the consummation of the transactions contemplated hereby or (B) could reasonably be expected to have a material adverse effect on the financial condition, operations, business, assets or prospects of Guarantor, and if applicable, Guarantor’s subsidiaries; (v) the financial statements of Guarantor previously delivered to Lender are true, correct and complete and fairly present the financial condition of Guarantor, and if applicable, Guarantor’s subsidiaries, as of the date thereof and there has been no material adverse change in the financial condition of Guarantor, and if applicable, Guarantor’s subsidiaries, since the date of the last financial statement of Guarantor delivered to Lender; (vi) Guarantor is, and after giving effect to the incurrence of all obligations hereunder will be and will continue to be, solvent; (vii) the information regarding Guarantor set forth opposite Guarantor’s signature below (“Guarantor Information”) is true, correct and complete on the date hereof; (viii) Guarantor has all necessary right, power and authority to own Guarantor’s property and assets, to transact the business in which Guarantor is engaged and to grant to Lender the guaranty hereunder, and has taken all necessary action to authorize all filings and recordations in connection herewith; (ix) there is no tax, levy, impost, deduction, charge or withholding imposed by Guarantor’s country or any political subdivision thereof on or by virtue of the execution, delivery or enforcement of this Agreement; (x) Guarantor has, independently and without reliance upon Lender and based on such documents and information as Guarantor has deemed appropriate, made Guarantor’s own credit analysis and decision to enter into this Agreement, and Guarantor has established adequate means of obtaining from any other source on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the financial condition, operations, properties and prospects of Borrower and any other relevant party; (xi) no person, including Lender, Borrower, has made any representation to Guarantor as to any matter which may affect or in any way relate to the financial condition, relationships or transactions of Borrower, or any other person, including the business, assets, liabilities, type or value of any security therefor, financial condition, management or control of Borrower or any such other person; and (xii) Lender is not obligated to notify Guarantor or any other person of any change in the business, assets, liabilities, type or value of any security therefor, financial condition, management or control of Borrower or of any other person, and none of such changes shall release or otherwise impair any of the rights of Lender against Guarantor;
2.2 Additional Representations and Warranties for Business Entities. If Guarantor is a non-natural person, it also represents and warrants to Lender that: (i) Guarantor is duly organized and validly existing in good standing under the laws of Guarantor’s jurisdiction of formation, and is duly qualified in each jurisdiction where Guarantor’s business or property so requires; (ii) all necessary actions have been taken by the managers, directors, members, partners or shareholders of Guarantor, as the case may be for the execution, delivery of, and performance by Guarantor under, this Agreement and the other Loan Documents to which it is a party; (iii) Guarantor is owned, directly or indirectly, and controlled by those parties or party set forth opposite Guarantor’s signature; and (iv) Guarantor is not an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
2.3 Reserved.
2.4 Additional Representations and Warranties for Foreign Individuals or Non-Natural Persons1. If Guarantor is a foreign individual or a non-natural person, Guarantor also represents and warrants to Lender that: (i) this Agreement is in proper legal form under the law of Guarantor’s country (as set forth opposite Guarantor’s signature) for the enforcement thereof against Guarantor under such law; and to ensure the legality, validity, enforceability or admissibility in evidence of this Agreement in Guarantor’s country it is not necessary that this Agreement or any other document be filed or recorded with any court or other authority in Guarantor’s country or that any stamp or similar tax be paid on or in respect of this Agreement; (ii) under the laws of Guarantor’s country or any political or taxing authority thereof or therein to which Guarantor is subject, Guarantor will not be required to make any deduction or withholding from any payment Guarantor may make to Lender hereunder; (iii) there is no tax, levy, impost, deduction, charge or withholding imposed by Guarantor’s country or any political subdivision thereof on or by virtue of the execution, delivery or enforcement of this Agreement; (iv) the submission by Guarantor to the jurisdiction of the courts specified in this Agreement and any appointment of agent for the service of process of such courts are valid and binding upon Guarantor and not subject to revocation; and (v) to the best of Guarantor’s knowledge, there are no treaties or laws which would preclude the recognition of any judgment rendered by any state or federal court sitting in the State of New York, and the enforcement of any such judgment, by the courts of Guarantor’s country, and Guarantor agrees that Guarantor shall interpose no defense or claim against and shall consent to the issuance of all necessary documents by the courts of Guarantor’s country in order to execute upon such judgment.
3. Guarantor covenants and agrees with Lender that so long as this Agreement remains in effect or any portion of the Guaranteed Obligations or other amount is owing to Lender hereunder or under any Loan Document: (a) Guarantor is not engaged in, nor will it engage in, any business or transaction for which any property remaining with Guarantor constitutes unreasonably small capital; (b) Guarantor has not made, nor will it make, any transfer, nor incurred, nor will incur, any obligation (including pursuant to this Agreement) with actual intent to hinder, delay or defraud any person; (c) Guarantor is presently informed of the financial condition of Borrower and of all other circumstances that a diligent inquiry would reveal and that bear upon the risk of nonpayment of the Guaranteed Obligations, and Guarantor will continue to keep informed of Borrower’s financial condition, the status of other guarantors, if any, and of all other circumstances that bear upon the risk of nonpayment; (d) Guarantor will promptly notify Lender of the occurrence of any Default hereunder or otherwise in respect of the Guaranteed Obligations and of any default under any Loan Document to which Guarantor is a party or which has a party that Guarantor owns or controls; (e) Lender shall not be obligated to notify Guarantor or any other person of any change in the business, assets, liabilities, type or value of any security therefor, financial condition, management or control of Borrower or of any other person, and none of such changes shall release or otherwise impair any of the rights of Lender against Guarantor; (f) Guarantor will not change any of the Guarantor Information without the prior written consent of Lender; (g) Lender may rely upon any written (including, without limitation, fax), telephonic or oral communication in good faith believed by Lender to have been authorized by Guarantor; provided, however, that if any such communication is oral or telephonic, it shall be promptly confirmed in writing (including, without limitation, by fax) (but the lack of such confirmation or any conflict between such confirmation and the relevant telephonic or oral communications shall not affect any action taken by Lender in reliance on such telephonic or oral communications prior to receipt of such confirmation); (h) Guarantor shall deliver to Lender from time to time as requested by Lender, within ten Business Days of Lender’s request, financial statements that have been previously prepared by Guarantor and are then available to Guarantor, which financial statements shall be prepared in accordance with sound accounting principles and are otherwise consistent with the financial statements of Guarantor previously delivered to Lender, certified to Lender by Guarantor as accurately reflecting the financial condition of Guarantor as of the date thereof and, in all events, Guarantor shall deliver to Lender such additional financial or other information as Lender may from time to time reasonably request; (i) Guarantor shall not become insolvent; (j) Guarantor shall not incur or suffer to exist indebtedness of Guarantor, whether recourse or nonrecouse, absolute or contingent (including, but not limited to, guarantees), whether now existing or hereafter arising without written approval of Lender, other than inter-company indebtedness with affiliates of Guarantor, (k) Guarantor shall not create, incur, assume or suffer to exist any lien upon any of its property, whether now owned or hereafter acquired, other than in favor of Lender, (l) Guarantor shall not dispose of any of its property, whether now owned or hereafter acquired, having a fair market value in excess of $100,000, (m) if Guarantor is a non-natural person, Guarantor shall not sell, transfer, pledge or encumber or permit the sale, transfer, pledge or encumbrance of any interest in Guarantor, directly or indirectly, that would cause a change in Guarantor’s direct parent company and (n) if Guarantor is a non-natural person, Guarantor shall not seek or effect its liquidation, dissolution, winding up, consolidation, division or merger.
4. Upon the happening of any of the following (each a “Default”) with respect to Guarantor or any other person liable for any of the Guaranteed Obligations: (i) failure to pay any Guaranteed Obligation when due, (ii) dissolution, liquidation or suspension of such person’s business, (iii) default in the payment of any indebtedness in excess of $100,000, other than with respect to inter-company indebtedness with affiliates of Guarantor, (iv) failure to furnish financial information to Lender in accordance with Section 3 hereof, (v) any representation made to Lender shall be false or misleading in any material respect when made or deemed made, (vi) a material adverse change in Guarantor’s ability to perform and pay the Guaranteed Obligations, as determined by Lender in its reasonable discretion, (vii) default in the performance or observance of any covenant, agreement or obligation hereunder and the failure to cure any such default within ten Business Days’ of Lender’s request, or default in the performance or observance of any covenant, agreement or obligation under any other Loan Document, after the expiration of any applicable cure or grace periods, (viii) insolvency (howsoever determined), (ix) the commencement of any proceedings by or against any of them under any bankruptcy, reorganization, arrangement of debt, insolvency, receivership, liquidation, dissolution or similar laws relating to the relief of debtors, or the making of an assignment for the benefit of creditors, and with respect to any such proceeding brought against any of them, the failure to dismiss such proceeding within 60 days, or (x) one or more judgments have been entered against Guarantor in the aggregate amount exceeding $200,000 in excess of any applicable insurance coverage; then and in any such event, and at any time thereafter, Lender may, at its sole election, without notice to Borrower or any other person (except as otherwise provided in the Loan Documents), make the Guaranteed Obligations to Lender, whether or not then due, immediately due and payable hereunder by Guarantor, provided that in the event of any Default described in Section 4(ix) above, such Guaranteed Obligations shall automatically become due and payable without any election by Lender. Guarantor will forthwith pay the Guaranteed Obligations then due and payable, upon notice of such default and request for payment, but without any other written legal notice or demand, in United States Dollars in immediately available funds at the office of Lender set forth in the signature page hereto and Lender shall be entitled to enforce the obligations of Guarantor hereunder.
5. Guarantor hereby irrevocably, unconditionally and expressly waives, to the fullest extent permitted by applicable law, all defenses, counterclaims, rights of setoff, any requirement that Lender first proceed against Borrower any guarantor or any other security, any requirement that Lender join Borrower or any other party in any action against Guarantor hereunder, all requirements for notice of any kind, demand, protest, presentment, notice of non-payment, default or dishonor of any Guaranteed Obligation, notice of acceptance hereof or notice that credit has been extended in reliance on this Agreement, notice of inability to enforce performance of the Guaranteed Obligations, notice of acceleration of maturity of any Guaranteed Obligations, demand for performance or observance of, and any enforcement of any provision of any Loan Document or the Guaranteed Obligations or any pursuit or exhaustion of rights or remedies against Borrower Guarantor or any other person in respect of the Guaranteed Obligations or any requirement of diligence or promptness on the part of Lender in connection with any of the foregoing, marshalling of assets and the like, including without limitation, any right to notice or judicial hearing in connection with Lender’s taking possession of or disposition of any collateral, any notice of any sale, transfer or other disposition by Lender of any Guaranteed Obligation, any requirement that Lender first proceed against Borrower, any collateral or any other person or non-natural person liable for any of the Guaranteed Obligations, any sale, lease or transfer of any of the assets of Borrower or Guarantor to any other person, or any other change of form, structure, or status under any law in respect of Borrower or Guarantor or any change in the interests in Borrower or Guarantor, any increase in principal amount of, or extension of the time for payment of the principal of or interest on, any Guaranteed Obligation, and all damages occasioned by any of the foregoing (except as finally determined by a competent court to have been the direct result of Lender’s gross negligence or willful misconduct). No invalidity, irregularity or unenforceability of any Guaranteed Obligations shall affect, impair or be a defense to any of Guarantor’s obligations or agreements or any of Lender’s rights or remedies hereunder. Lender may from time to time, without notice to or consent by Guarantor, and without affecting or impairing Guarantor’s obligations or agreements or Lender’s rights and remedies hereunder: (i) change the manner, place, timing or terms of payment of, or the interest rate on, any of the Guaranteed Obligations, any security therefore or other guaranty thereof, or increase, renew, extend, settle, compromise, accelerate, or alter any of the same or otherwise modify, amend, waive, change or consent to departure from any term of any Loan Document or any other guaranty of any of the Guaranteed Obligations and the guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed, accelerated or altered, (ii) sell, release, exchange, settle, compromise or otherwise dispose of or deal with any property or other security for any of the Guaranteed Obligations or subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of Borrower to their respective creditors other than Lender and Guarantor, (iii) exercise (in such order as Lender may choose), or refrain from exercising, any rights against Borrower Guarantor or any other person or non-natural person liable for any of the Guaranteed Obligations and (iv) apply any sums by whomsoever paid or howsoever realized to any of the Guaranteed Obligations regardless of what Guaranteed Obligations remain unpaid. To the fullest extent permitted by law, Guarantor also waives any and all rights or defenses (other than payment) which Borrower or Guarantor may now or hereafter have to the payment of the Guaranteed Obligations, together with all suretyship defenses, which could otherwise be asserted by Guarantor, including defenses arising by reason of (w) any “one action” or “anti-deficiency” law that would otherwise prevent Lender from bringing any action, including, without limitation, any claim for a deficiency, or exercising any right or remedy (including, without limitation, any right of set-off) against Guarantor before or after the commencement or completion of any foreclosure action or sale of any collateral for the Guaranteed Obligations, whether judicially, by exercise of power of sale or otherwise, (x) any other law that in any other way would otherwise require any election of remedies by Lender, (y) any act or omission on the part of Lender which may impair or prejudice the rights of Guarantor, including rights to obtain subrogation, exoneration, contribution, indemnification or any other reimbursement from Borrower, Guarantor or any other person, or otherwise operate as a deemed release or discharge or (z) any statute of limitations or any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than the obligation of the principal.
6. Neither the liabilities of Guarantor hereunder, nor Lender’s rights hereunder, shall be reduced, limited, terminated or in any other way affected by reason of any guaranty executed in favor of Lender by any other person (and the guaranty hereunder shall be enforceable against Guarantor without regard to such other guaranty or guaranties or any release or consent to departure from, or any amendment or waiver of, any such other guaranty or guaranties).
7. Until final and prior payment in full to Lender of all Guaranteed Obligations, Guarantor hereby waives any claim or other right which Guarantor may now have or hereafter acquire against Borrower or any other person arising out of the existence or performance of Guarantor’s obligations under this Agreement or otherwise with respect to any of the Guaranteed Obligations, such waiver to include, without limitation, any and all rights by subrogation, reimbursement, exoneration, contribution, indemnification and any right to participate in any claim or remedy of Lender against Borrower any collateral, or any other person by reason of any payment made to or for the benefit of Lender hereunder or otherwise with respect to any of the Guaranteed Obligations, and the right to take or receive from Borrower directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of any such claim or rights. In any bankruptcy proceeding relating to Borrower, Lender shall be entitled to file a proof of claim on Guarantor’s behalf and accept, receipt for and apply amounts so received to the Guaranteed Obligations. Guarantor hereby unconditionally and irrevocably agrees that, until final payment in full of all of the Guaranteed Obligations to Lender, all present and future indebtedness of Borrower to Guarantor shall be and hereby is subordinated in right and time of payment and security to the prior and final payment in full of all of the Guaranteed Obligations to Lender and that until such time Guarantor will not exercise any rights, claims or remedies which Guarantor may acquire by way of subrogation, contribution or the like, whether arising under this Agreement or otherwise with respect to any of the Guaranteed Obligations. If any amount shall be paid to Guarantor in violation of these provisions, such amount shall be deemed to have been paid to Guarantor for, and shall be held in trust for, the benefit of Lender, and shall forthwith be paid over to Lender (with any necessary endorsements) to be credited and applied upon the Guaranteed Obligations, whether matured or unmatured in accordance with their terms.
8. This Agreement constitutes an absolute, unconditional, irrevocable, present and continuing guaranty of payment and not of collection and all liabilities to which the guaranty hereunder applies or may apply under the terms hereof shall be conclusively presumed to have been created in reliance hereon. This Agreement shall not be affected or impaired by (i) the death, incapacity, present or future financial condition, dissolution, bankruptcy, insolvency, reorganization, liquidation or the like of Borrower, Guarantor or any other person; (ii) any receipt of any other collateral security, failure to perfect a security interest therein, or release thereof; (iii) any limitation on Borrower’s liability with respect to any of the Guaranteed Obligations now or hereafter imposed by any statute, regulation or other applicable law; (iv) any merger or consolidation of Borrower or Guarantor with or into any other person, or the sale, lease or other disposition of any or all assets of Borrower to any other person; (v) any notice from Guarantor not to renew, extend or otherwise modify any Guaranteed Obligation; (vi) any validity, illegality, irregularity, unenforceability, avoidance or contractual or other subordination of all or any part of the Guaranteed Obligations; or (vii) any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor or any defense which Borrower could assert on the Guaranteed Obligations (including, without limitation, failure of consideration, breach of warranty, fraud, payment, accord and satisfaction, strict foreclosure, statute of frauds, bankruptcy, infancy, statute of limitations, lender liability and usury).
9. Any acknowledgment or new promise, whether by payment of principal or interest or otherwise and whether by Borrower or others (including Guarantor), with respect to any of the Guaranteed Obligations shall, if the statute of limitations in favor of Guarantor against Lender shall have commenced to run, toll the running of such statute of limitations and, if the period of such statute of limitations shall have expired, prevent the operation of such statute of limitations.
10. Each and every default in respect of the Guaranteed Obligations and each and every default hereunder shall give rise to a separate cause of action hereunder, and separate suits may be brought hereunder as each cause of action arises, but nothing herein shall preclude Lender from accelerating payment of the Guaranteed Obligations upon the occurrence of any default or of the liabilities of Guarantor as herein provided.
11. If any claim is ever made upon Lender for repayment or recovery of any amount or amounts received by Lender in payment or on account of any of the Guaranteed Obligations, including claims in connection with any insolvency, bankruptcy or reorganization of Borrower, and claims of invalid, fraudulent or preferential transfers, and Lender repays all or part of said amount by reason of (a) any judgment, decree or order of any court or administrative body having jurisdiction over Lender or any of its property, or (b) any settlement or compromise of any such claim effected by Lender with any such claimant (including Borrower), then and in such event Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding upon Guarantor, notwithstanding any revocation or termination hereof or the cancellation of the Note, any other Loan Document or any other instrument evidencing any Guaranteed Obligation, and Guarantor shall be and remain liable to Lender hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by Lender.
12. In the event and to the extent that any provision of this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions, or of such provision in any other jurisdiction, shall not in any way be affected or impaired thereby.
13. No failure or delay by Lender in exercising any right or remedy and no course of dealing between Lender and Guarantor shall operate as a waiver thereof, nor shall any single or partial exercise of any right preclude any other or future exercise thereof. All rights and remedies of Lender shall be cumulative and may be exercised singly or concurrently. No notice to or demand on Guarantor shall entitle Guarantor to any other or further notice or demand, or constitute a waiver of Lender’s rights.
14. This Agreement may not be modified, changed, waived or discharged orally, except by a writing signed by the parties hereto. Any waiver of any provision of this Agreement or any consent to any departure by Guarantor therefrom shall be effective only in the specific instance and for the specific purpose for which given. This Agreement shall be and remain the independent obligation of Guarantor, shall inure to the benefit of and be enforceable by Lender and its successors, transferees and assigns, and shall be binding upon Guarantor and Guarantor’s heirs, legal representatives, executors, successors and assigns, provided that Guarantor may not transfer, assign or delegate any of Guarantor’s rights or obligations hereunder, and, at Lender’s option, any such purported transfer, assignment or delegation shall be void. This Agreement shall terminate upon final payment in full to Lender of all of the Guaranteed Obligations and termination of any obligation of Lender to make advances or other financial accommodations, and shall continue to be effective or shall be reinstated, as the case may be, if at any time payment of or on account of any of the Guaranteed Obligations is rescinded or must otherwise be restored or returned by Lender upon the insolvency, bankruptcy or reorganization of Guarantor or any other person or otherwise, all as though such payment had not been made.
15. Guarantor will indemnify and hold Lender harmless for, and pay in U.S. dollars all liabilities, losses, damages, claims, taxes, penalties, costs, fees and expenses of any kind whatsoever, including, without limitation, attorneys’ fees, imposed upon, incurred by or asserted against Lender in connection with this Agreement and the enforcement of Lender’s rights hereunder. All payments hereunder shall be made without defense, setoff or counterclaim, and free and clear of, and without deduction for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, and all interest, penalties and other liabilities with respect thereto (collectively, “Taxes”), now or hereafter imposed, levied, collected, withheld or assessed by any jurisdiction, or any department, agency, state, political subdivision or taxing authority thereof or therein. If any Taxes are so levied or imposed, Guarantor agrees to pay the full amount thereof, and such additional amounts as may be necessary so that each net payment received by Lender will not be less than the amount provided for herein, provided that any subsequent reimbursement received by Lender from such authority for such withholding or deduction, after its remittance, is reimbursed as soon as practicable to Guarantor. Guarantor will furnish to Lender within 30 days after each payment of Taxes is due, originals or certified copies of tax receipts evidencing such payment. The provisions of this Section shall survive repayment of the Guaranteed Obligations and termination of this Agreement.
16. Any notice hereunder shall be effective: if sent by mail, three (3) days after deposit in the mails, postage prepaid; if sent by facsimile, when sent with a confirmation received; if delivered by hand or courier when delivered against a receipt therefor; if sent by overnight courier, on the next Business Day to the address for such party listed on the signature page hereto. Each party may change its address for notices by written notice to the other, provided that any notice or other communication delivered prior to receipt of the notice of a change of address shall be deemed effective as set forth above.
17.1 EACH OF GUARANTOR AND LENDER, BY ITS ACCEPTANCE HEREOF, HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A JURY TRIAL IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. In any action or proceeding arising out of or relating to this Agreement, Guarantor hereby irrevocably submits to, and accepts for both Guarantor and Guarantor’s property, the exclusive jurisdiction of the courts of the State of New York and of the Federal courts of the United States, in either case sitting in New York County, provided, that nothing in this Agreement shall be deemed or operate to preclude Lender from bringing suit or taking other legal action in any other jurisdiction whether to collect the Obligations or to enforce a judgment or other court order in favor of Lender, or otherwise. Guarantor expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court. GUARANTOR HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY ACTION OR SUIT BROUGHT BY LENDER IN CONNECTION HEREWITH. GUARANTOR DOES HEREBY DESIGNATE AND APPOINT CORPORATION SERVICE COMPANY (CSC) AT 19 WEST 44TH STREET, SUITE 200, NEW YORK, NY 10036 (THE “SERVICE AGENT”), AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON THE SERVICE AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE OF GUARANTOR MAILED OR DELIVERED TO GUARANTOR IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON GUARANTOR (UNLESS LOCAL LAW REQUIRES ANOTHER METHOD OF SERVICE), IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK. GUARANTOR (i) HEREBY AUTHORIZES LENDER TO MAKE SUCH ANNUAL OR OTHER PAYMENTS REQUIRED BY THE SERVICE AGENT TO PROVIDE THE ABOVE-DESCRIBED SERVICE (“SERVICE FEES”) AND TO CHARGE ANY OF GUARANTOR’S ACCOUNTS WITH LENDER OR ANY OF ITS AFFILIATES FOR SUCH SERVICE FEES OR TO ADD THE AMOUNT OF SUCH SERVICE FEES TO THE PRINCIPAL AMOUNT OF THE OBLIGATIONS AND TREATED AS A PRINCIPAL PORTION OF THE OBLIGATIONS FOR ALL PURPOSES THEREOF, NOTWITHSTANDING THAT THE PRINCIPAL AMOUNT OF THE OBLIGATIONS MAY THEREBY EXCEED THE MAXIMUM AMOUNT OF THE NOTE, (ii) MAY, AT ANY TIME AND FROM TIME TO TIME, AUTHORIZE LENDER TO DESIGNATE AND PAY A SUBSTITUTE SERVICE AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH OFFICE SHALL BE DESIGNATED AS THE ADDRESS FOR SERVICE OF PROCESS), AND (iii) HEREBY AUTHORIZES LENDER TO DESIGNATE A SUBSTITUTE SERVICE AGENT (AND NOTIFY GUARANTOR PROMPTLY THEREAFTER) IF THE CURRENT SERVICING AGENT CEASES TO HAVE AN OFFICE IN NEW YORK CITY OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR. Guarantor hereby irrevocably waives any objection Guarantor may now or hereafter have to the laying of venue in the aforesaid courts, and any claim that any of the aforesaid courts is an inconvenient forum. To the extent that Guarantor or Guarantor’s property may have or hereafter acquire immunity, on the grounds of sovereignty or otherwise, from any judicial process in connection with this Agreement, Guarantor hereby irrevocably waives, to the fullest extent permitted by applicable law, any such immunity and agrees not to claim same. Guarantor agrees that a final judgment in any such action or proceeding shall be conclusive, and may be enforced in any other jurisdiction by suit on the judgment or in any other permitted manner. Guarantor further agrees that any action or proceeding by Guarantor against Lender in respect to any matters arising out of, or in any way relating to, this Agreement or the Obligations or any of the other obligations or agreements of Guarantor hereunder shall be brought only in the State and County of New York.
17.2 If, for the purpose of obtaining a judgment in any court with respect to any obligation of Guarantor under this Agreement it becomes necessary to convert into any other currency any amount in U.S. dollars due hereunder, then that conversion shall be made at the average of the buying spot rates of exchange for freely transferable U.S. dollars (the “Exchange Rate”) in effect at the lending office selected by Lender as at the close of business on the day before the day on which judgment is rendered. If there is a change in the Exchange Rate prevailing between the day before the day on which judgment is rendered and the date of payment of the judgment, then Guarantor shall pay such additional amount as may be necessary to ensure that the amount paid on the date of payment is the amount in such currency which, when converted at the Exchange Rate in effect on the date of payment, is the amount in U.S. dollars then due. Any additional amount owing by Guarantor hereunder shall be due as a separate debt, and shall not be affected by or merged into any judgment obtained for any other amounts due hereunder.
18. If this Agreement is signed by two or more parties as Guarantor, they shall be jointly and severally liable hereunder, and the term “Guarantor” as used herein shall mean the debtors parties hereto, and each of them. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be as effective as delivery of an original executed counterpart.
19. Lender shall have the exclusive right to determine the application of payments and credits, if any, from Guarantor or Borrower or from any other person on account of the Guaranteed Obligations or the liabilities of Guarantor hereunder.
20. This Agreement has been executed and delivered by Guarantor after arms’-length negotiations between Guarantor or a duly authorized representative of Guarantor and Lender, Guarantor having been represented by counsel of choice of Guarantor during such negotiations, and this Agreement shall not be construed against Lender on the ground that Lender has prepared the same. The Section headings hereof are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. Guarantor waives any obligation which may now or hereafter exist on the part of Lender to inform Guarantor of the risks being undertaken by entering this Agreement or of any changes in such risks.
21.1 For the purposes of this Section 21 the following terms have the following meanings:
“Sanctions” means any trade, economic or financial sanctions laws, sanctions regulations, embargoes or restrictive measures administered, enacted or enforced by a Sanctions Authority.
“Sanctions Authority” means any of the United Nations “UN”), the United States of America (“US”), the European Union (“EU”), the United Kingdom of Great Britain and Northern Ireland (“UK”) and the governments and official institutions or agencies of any of foregoing, including but not limited to, the Office of the President of the US, the Office of Foreign Assets Control (“OFAC”) of the US Department of Treasury, the US Department of State, the US Department of Commerce and Her Majesty’s Treasury of the United Kingdom (“HMT”).
“Sanctions Target” means any person who is (A) the subject or target of any Sanctions, or (B) owned 50% or more by, or otherwise controlled by, or acting on behalf of, one or more persons referenced in clause (A) above, or (C) located, organized or resident in a Sanctioned Country.
“Sanctions Violation” means any violation of any Sanctions of any Sanctions Authority.
“Sanctioned Country” means any country or territory that is the subject or target of country-wide or territory-wide Sanctions targeted by OFAC, EU and HMT.
21.2 Guarantor represents and warrants to Lender that (A) Guarantor is not in violation of, and agrees with Lender that Guarantor shall not hereafter violate, any laws, rules or regulations relating to terrorism or money laundering including the law commonly known as the U.S. Patriot Act (any such violation, a “Patriot Act Offense”), (B) neither Guarantor nor its affiliates has nor intends to have any business operations or other dealings (x) in any Sanctioned Country, (y) with any Specially Designated National (“SDN”) on OFAC’s SDN list or with a person targeted by asset freeze sanctions imposed by the UN, EU or HMT, or (z) involving services of a Sanctioned Country, and (C) Guarantor shall deliver to Lender any certification or other evidence, including evidence of identification, required by Lender to confirm compliance by Guarantor with the provisions hereof. With regard to Sanctions Violations of US Sanctions, this provision shall apply only if and to the extent that it does not result in a violation of the Council Regulation (EC) No. 2271/96 of 22 November 1996 as amended by Commission Delegated Regulation (EU) 2018/1100 of 6 June 2018, section 7 of the German Foreign Trade Ordinance (Außenwirtschaftsverordnung - AWV) or any other applicable anti-boycott or similar laws or regulations. Notwithstanding the foregoing, in the event that Guarantor uses any part of the proceeds advanced under any Loan Document in actual violation of any Sanctions, Lender shall have the right to exercise all remedies available to it in accordance with the provisions of Section 6 hereof. In addition, Guarantor will not directly or indirectly use any part of the proceeds advanced under the Loan Documents, or lend, contribute or otherwise make available such proceeds to any person (1) to fund or facilitate any activities of or business with a person that, at the time of such funding or facilitation, is a Sanctions Target, or (2) to fund or facilitate any activities of, or business in, a Sanctioned Country, or (3) to fund or facilitate any activity or business that, at the time of such funding or facilitation, is subject to Sanctions, or (4) in any other manner that will result in a Sanctions Violation, or (5) who has been previously indicted for or convicted of any felony involving a crime or crimes of moral turpitude or for any Patriot Act Offense including the crimes of conspiracy to commit, or aiding and abetting another to commit, a Patriot Act Offense or (6) is currently under investigation by any governmental authority for alleged criminal activity.
22. This Agreement represents the entire agreement of Guarantor and Lender with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.
23. Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by Lender (or any affiliate of Lender) to or for the credit or the account of Guarantor against any and all of the Guaranteed Obligations, whether or not Lender shall have made any demand under this Agreement, the Note, any other Loan Document or otherwise, and although such obligations may be unmatured. Lender agrees promptly to notify Guarantor after any such setoff and application, provided, however, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of Lender under this Section are in addition to any other rights and remedies (including, without limitation, other rights of setoff) that Lender may have.
24. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES WOULD DIRECT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION). THE PARTIES AGREE THAT THE STATE OF NEW YORK IS LENDER’S JURISDICTION FOR PURPOSES OF ARTICLES 8 AND 9 OF THE UCC.
25. ALL OR CERTAIN OF THE GUARANTEED OBLIGATIONS MAY BE PAYABLE ON DEMAND. GUARANTOR ACKNOWLEDGES AND AGREES THAT, IN SUCH EVENT, NO PROVISION HEREOF OR OF ANY OTHER AGREEMENT BETWEEN GUARANTOR AND LENDER IS INTENDED TO OR SHALL IN ANY WAY LIMIT, PREJUDICE OR OTHERWISE AFFECT THE DEMAND NATURE OF SUCH OBLIGATIONS, AND THAT LENDER SHALL HAVE THE ABSOLUTE AND UNCONDITIONAL RIGHT TO DEMAND PAYMENT OF SUCH GUARANTEED OBLIGATIONS IN ITS DISCRETION, REGARDLESS OF THE EXISTENCE OF ANY PROVISION HEREOF OR OF ANY COMPLIANCE OR NON-COMPLIANCE BY GUARANTOR WITH ANY SUCH PROVISION.
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IN WITNESS WHEREOF, Guarantor has executed and delivered this Agreement as of the 25th day of January, 2024.
| Guarantor Information: | ||
| Address for Notices: | Guarantor: Psyence Biomed II Corp. | |
121 Richmond Street West, Penthouse Suite 1300 Toronto, Ontario M5H 2K1 |
||
| Telephone No.: 416-346-7764 | By: | |
| Facsimile No.: N/A | Name: Neil Maresky | |
| Title: Chief Executive Officer and Director | ||
Direct Controlling Parties (if Guarantor is a non-natural person - see §2.2):
Neil Maresky (CEO/Director)
Type of Organization:
A corporation organized under the laws of Ontario, Canada
| Address: | ||
| Lender | ||
| By: | ||
| Name: | ||
| Title: Authorized Signatory | ||
Exhibit 4.8
Execution Version
Psyence
Biomedical Ltd.
2023 EQUITY INCENTIVE PLAN
| 1. | Purpose. The purposes of this Plan are to: |
| (a) | attract, retain, and motivate Employees, Directors, and Consultants, |
| (b) | provide additional incentives to Employees, Directors, and Consultants, and |
| (c) | promote the success of the Company’s business, |
by providing Employees, Directors, and Consultants with opportunities to acquire the Company’s Shares, or to receive monetary payments based on the value of such Shares. Additionally, the Plan is intended to assist in further aligning the interests of the Company’s Employees, Directors, and Consultants to those of its shareholders.
| 2. | Definitions. As used herein, the following definitions will apply: |
| (a) | “Administrator” means a committee of at least one Director of the Company as the Board may appoint to administer this Plan or, if no such committee has been appointed by the Board, the Board. |
| (b) | “Applicable Laws” means the requirements relating to the administration of equity-based awards or equity compensation plans under corporate laws, securities laws, the Code, any stock exchange or quotation system on which the Shares are listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan. |
| (c) | “Award” means, individually or collectively, a grant under the Plan of Share Options, Share Appreciation Rights, Restricted Shares, Restricted Share Units, or Other Share-Based Awards. |
| (d) | “Award Agreement” means the written or electronic agreement, consistent with the terms of the Plan, between the Company and the Participant, setting forth the terms, conditions, and restrictions applicable to each Award granted under the Plan. |
| (e) | “Board” means the Company’s Board of Directors, as constituted from time to time and, where the context so requires, reference to the “Board” may refer to a committee to whom the Board has delegated authority to administer any aspect of this Plan. |
| (f) | “Cause” shall have the meaning ascribed to such term, or term of similar effect, in any offer letter, employment, consulting, severance, or similar agreement, including any Award Agreement, between the Participant and the Company or any Subsidiary; provided, that in the absence of an offer letter, employment, severance, or similar agreement containing such definition, “Cause” means: |
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Execution Version
| (i) | any willful, material violation by the Participant of any law or regulation applicable to the business of the Company, a Subsidiary, or other affiliate of the Company; |
| (ii) | the Participant’s conviction for, or guilty plea to, a felony (or crime of similar magnitude under Applicable Laws) or a crime involving moral turpitude, or any willful perpetration by the Participant of a common law fraud, act of material dishonesty, embezzlement, or misappropriation or similar conduct against the Company, a Subsidiary, or other affiliate of the Company; |
| (iii) | the Participant’s commission of an act of personal dishonesty which involves personal profit in connection with the Company, a Subsidiary, other affiliate of the Company, or any other entity having a business relationship with any of the foregoing; |
| (iv) | any material breach or violation by the Participant of any fiduciary duties or duties of care to the Company or provision of any agreement or understanding between the Company, a Subsidiary, or other affiliate of the Company and the Participant regarding the terms of the Participant’s service as an Employee, officer, Director, or Consultant to the Company, a Subsidiary, or other affiliate of the Company, including without limitation, the willful and continued failure or refusal of the Participant to perform the material duties required of such Participant as an Employee, officer, Director, or Consultant of the Company, a Subsidiary, or other affiliate of the Company, other than as a result of having a Disability, or a breach of any applicable invention assignment, confidentiality, non-competition, non-solicitation, restrictive covenant, or similar agreement between the Company, a Subsidiary, or other affiliate of the Company and the Participant; |
| (v) | the Participant’s gross misconduct or incompetence in the performance of the Participant’s duties or obligations to the Company, a Subsidiary, or other affiliate of the Company; |
| (vi) | any refusal by the Participant to carry out a reasonable directive of the chief executive officer, the Board or the Participant’s direct supervisor, which involves the business of the Company, a Subsidiary, or other affiliate of the Company and was capable of being lawfully performed; |
| (vii) | the Participant’s violation of the code of ethics of the Company or any Subsidiary; |
| (viii) | the Participant’s disregard of the policies of the Company, a Subsidiary, or other affiliate of the Company so as to cause loss, harm, damage, or injury to the property, reputation, or employees of the Company, a Subsidiary, or other affiliate of the Company; |
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Execution Version
| (ix) | any other misconduct by the Participant that is injurious to the financial condition or business reputation of, or is otherwise injurious to, the Company, a Subsidiary, or other affiliate of the Company; or |
| (x) | any other act, omission, or circumstance that constitutes cause at law to terminate the employment of an employee without notice or compensation in lieu of notice. |
| (g) | “Change in Control” means the occurrence of any of the following events: |
| (i) | any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; |
| (ii) | the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; |
| (iii) | a change in the composition of the Board occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who either (A) are Directors as of the Effective Date, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or |
| (iv) | the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation. |
Notwithstanding the foregoing, a transaction shall not constitute a Change in Control if its sole purpose is to change the jurisdiction of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction. In addition, if a Change in Control constitutes a payment event with respect to any Award which provides for a deferral of compensation and is subject to Code Section 409A, then notwithstanding anything to the contrary in the Plan or applicable Award Agreement, the transaction with respect to such Award must also constitute a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) to the extent required by Code Section 409A.
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Execution Version
| (h) | “Code” means the U.S. Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code. |
| (i) | “Company” means Psyence Biomedical Ltd., a corporation organized under the laws of Ontario, Canada, or any successor thereto. |
| (j) | “Consultant” means a consultant or adviser who provides bona fide services to the Company, its Parent, or any Subsidiary as an independent contractor and who qualifies as a consultant or advisor under Instruction A.1.(a)(1) of Form S-8 under the Securities Act. |
| (k) | “Director” means a member of the Board. |
| (l) | “Disability” means total and permanent disability as defined in Code Section 22(e)(3), provided that in the case of an Award other than an Incentive Share Option, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time. |
| (m) | “Effective Date” shall have the meaning set forth in Section 24. |
| (n) | “Employee” means any person, including officers and Directors, employed by the Company, its Parent, or any Subsidiary. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company. |
| (o) | “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended. |
| (p) | “Fair Market Value” means, as of any date, the value of a Share, determined as follows: |
| (i) | if the Shares are readily tradable on an established securities market, its Fair Market Value will be the volume weighted average trading price for such shares during the thirty (30) days immediately preceding the day of determination; |
| (ii) | if the Shares are regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value will be the mean between the high bid and low asked prices for a Share for the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or |
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Execution Version
| (iii) | if the Shares are not readily tradable on an established securities market, the Fair Market Value will be determined in good faith by the Administrator. |
Notwithstanding the preceding, for federal, state, and local income tax reporting purposes and for such other purposes as the Administrator deems appropriate, Fair Market Value shall be determined by the Administrator in accordance with uniform and nondiscriminatory standards adopted by it from time to time. In addition, the determination of Fair Market Value in all cases shall be in accordance with the requirements set forth under Code Section 409A to the extent necessary for an Award to comply with, or be exempt from, Code Section 409A. The Administrator’s determination shall be conclusive and binding on all persons.
| (q) | “Incentive Share Option” means a Share Option intended to qualify as an incentive stock option within the meaning of Code Section 422 and the regulations promulgated thereunder. |
| (r) | “Non-Employee Director” means a Director who is a “non-employee director” within the meaning of Exchange Act Rule 16b-3. |
| (s) | “Nonqualified Share Option” means a Share Option that by its terms, or in operation, does not qualify or is not intended to qualify as an Incentive Share Option. |
| (t) | “Other Share-Based Awards” means any other awards not specifically described in the Plan that are valued in whole or in part by reference to, or are otherwise based on, Shares and are created by the Administrator pursuant to Section 11. |
| (u) | “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Code Section 424(e). |
| (v) | “Participant” means the holder of an outstanding Award granted under the Plan. |
| (w) | “Period of Restriction” means the period during which the transfer of Restricted Shares is subject to restrictions and a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of certain performance criteria, or the occurrence of other events as determined by the Administrator. |
| (x) | “Plan” means this Psyence Biomedical Ltd. 2023 Equity Incentive Plan, as amended and restated. |
| (y) | “Restricted Shares” means Shares, subject to a Period of Restriction or certain other specified restrictions (including, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 or issued pursuant to the early exercise of a Share Option. |
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Execution Version
| (z) | “Restricted Share Unit” or “RSU” means an unfunded and unsecured promise to deliver Shares, cash, other securities, or other property, subject to certain restrictions (including, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 10. |
| (aa) | “Service” means service as a Service Provider. In the event of any dispute over whether and when Service has terminated, the Administrator shall have sole discretion to determine whether such termination has occurred and the effective date of such termination. |
| (bb) | “Service Provider” means an Employee, Director, or Consultant, including any prospective Employee, Director, or Consultant who has accepted an offer of employment or service and will be an Employee, Director, or Consultant after the commencement of their service. |
| (cc) | “Share Appreciation Right” or “SAR” means an Award pursuant to Section 8 that is designated as a SAR. |
| (dd) | “Shares” means the Company’s common shares without par value. |
| (ee) | “Share Option” means an option granted pursuant to the Plan to purchase Shares, whether designated as an Incentive Share Option or a Nonqualified Share Option. |
| (ff) | “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Code Section 424(f). |
| (gg) | “Substitute Award” has the meaning set forth in Section 3(d). |
| 3. | Awards. |
| (a) | Award Types. The Plan permits the grant of Share Options, Share Appreciation Rights, Restricted Share, Restricted Share Units, and Other Share-Based Awards. |
| (b) | Award Agreements. Awards shall be evidenced by Award Agreements (which need not be identical) in such forms as the Administrator may from time to time approve; provided, however, that in the event of any conflict between the provisions of the Plan and any such Award Agreements, the provisions of the Plan shall prevail. |
| (c) | Date of Grant. The date of grant of an Award will be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such later date as is determined by the Administrator, consistent with Applicable Laws. Notice of the determination will be provided to each Participant within a reasonable time after the date of such grant. |
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| (d) | Substitute Awards. In connection with an entity’s merger or consolidation with the Company, any Subsidiary, or the Company’s or any Subsidiary’s acquisition of an entity’s property or stock, the Administrator may grant Awards in substitution for any options or other shares or share-based awards granted before such merger or consolidation by such entity or its affiliate. Substitute Awards may be granted on such terms as the Administrator deems appropriate, notwithstanding limitations on Awards in the Plan. Substitute Awards will not count against the Plan Share Limit (nor shall Shares subject to a Substitute Award be added to the Shares available for Awards under the Plan as provided below in Section 4(c), (d), or (e) below), except that Shares acquired by exercise of substitute Incentive Share Options will count against the maximum number of Shares that may be issued pursuant to the exercise of Incentive Share Options under Section 4(f). Additionally, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan (so long as not adopted in contemplation of such acquisition or combination), the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan, and shall not reduce the Plan Share Limit (and Shares available for Awards under the Plan as provided below in Section 4(c), (d), or (e) below); provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not Service Providers prior to such acquisition or combination. |
| 4. | Shares Available for Awards. |
| (a) | Basic Limitation. Subject to the provisions of Section 14, the maximum aggregate number of Shares that may be issued under the Plan is 2,008,5991 (the “Plan Share Limit”). The Shares subject to the Plan may be authorized, but unissued, or reacquired shares. |
| (b) | Annual Increase in Available Shares. On the first day of each calendar year during the term of the Plan, commencing on January 1, 2025 and continuing until (and including) January 1, 2034, the number of Shares available under the Plan Share Limit shall automatically increase by a number equal to the lesser of (i) one percent (1%) of the total number of Shares issued and outstanding on December 31 of the calendar year immediately preceding the date of such increase and (ii) a number of Shares determined by the Board. |
| (c) | Awards Not Settled in Shares Delivered to Participant. Upon payment in Shares pursuant to the exercise or settlement of an Award, the number of Shares available for issuance under the Plan shall be reduced only by the number of Shares actually issued in such payment. If a Participant pays the exercise price (or purchase price, if applicable) of an Award through the tender of Shares, or if the Shares are tendered or withheld to satisfy any tax withholding obligations, the number of the Shares so tendered or withheld shall again be available for issuance pursuant to future Awards under the Plan, although such Shares shall not again become available for issuance as Incentive Share Options. |
1 Note: 15% of the fully-diluted outstanding stock immediately following the Closing.
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| (d) | Cash-Settled Awards. Shares shall not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash. |
| (e) | Lapsed Awards. If any outstanding Award expires or is terminated or canceled without having been exercised or settled in full, or if the Shares acquired pursuant to an Award subject to forfeiture or repurchase are forfeited or repurchased by the Company, the Shares allocable to the terminated portion of such Award or such forfeited or repurchased Shares shall again be available for grant under the Plan. |
| (f) | Code Section 422 Limitations. No more than 2,008,5992 Shares (subject to adjustment pursuant to Section 14) may be issued under the Plan upon the exercise of Incentive Share Options. |
| (g) | Share Reserve. The Company, during the term of the Plan, shall at all times keep available such number of Shares authorized for issuance as will be sufficient to satisfy the requirements of the Plan. |
| 5. | Administration. The Plan will be administered by the Administrator. |
| (a) | Powers of the Administrator. Subject to the provisions of the Plan, the Administrator will have the authority, in its discretion to: |
| (i) | determine Fair Market Value; |
| (ii) | select the Service Providers to whom Awards may be granted; |
| (iii) | determine the type or types of Awards to be granted to Participants under the Plan and number of the Shares to be covered by each Award; |
| (iv) | approve forms of Award Agreements for use under the Plan; |
| (v) | determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may be exercised (which may be based on performance criteria), any vesting criteria or Periods of Restriction, any vesting acceleration or waiver of forfeiture or repurchase restrictions, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Administrator, in its sole discretion, will determine; |
2 Note: This will be the same number as the Plan Share Limit in Section 4(a).
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| (vi) | construe and interpret the terms of the Plan, any Award Agreement, and Awards granted pursuant to the Plan; |
| (vii) | prescribe, amend, and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws and/or qualifying for preferred tax treatment under applicable tax laws; |
| (viii) | modify or amend each Award (subject to Section 18(c)), including (A) the discretionary authority to extend the post-termination exercisability period of Awards and (B) accelerate the satisfaction of any vesting criteria or waiver of forfeiture or repurchase restrictions; |
| (ix) | allow Participants to satisfy withholding tax obligations by electing to have the Company withhold from the Shares or cash to be issued upon exercise or vesting of an Award that number of the Shares or cash having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of any Shares to be withheld will be determined on the date that the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares or cash withheld for this purpose will be made in such form and under such conditions as the Administrator may deem necessary or advisable; |
| (x) | authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator; |
| (xi) | allow a Participant to defer the receipt of the payment of cash or the delivery of the Shares that would otherwise be due to such Participant under an Award, subject to compliance (or exemption) from Code Section 409A; |
| (xii) | determine whether Awards will be settled in cash, Shares, other securities, other property, or in any combination thereof; |
| (xiii) | determine whether Awards will be adjusted for dividend equivalents; |
| (xiv) | create Other Stock-Share Awards for issuance under the Plan; |
| (xv) | impose such restrictions, conditions, or limitations as it determines appropriate as to the timing and manner of any resales by a Participant or other subsequent transfers by the Participant of any securities issued as a result of or under an Award, including without limitation, (A) restrictions under an insider trading policy, and (B) restrictions as to the use of a specified brokerage firm for such resales or other transfers; and |
| (xvi) | make all other determinations and take any other action deemed necessary or advisable for administering the Plan and due compliance with Applicable Laws, stock market or exchange rules or regulations or accounting or tax rules or regulations. |
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| (b) | Prohibition on Repricing. Notwithstanding anything to the contrary in Section 5(a) and except for an adjustment pursuant to Section 14 or a repricing approved by shareholders, in no case may the Administrator (i) amend an outstanding Share Option or SAR Award to reduce the exercise price of the Award, (ii) cancel, exchange, or surrender an outstanding Share Option or SAR in exchange for cash or other awards for the purpose of repricing the Award, or (iii) cancel, exchange, or surrender an outstanding Share Option or SAR in exchange for a Share Option or SAR with an exercise price that is less than the exercise price of the original Award. |
| (c) | Section 16. To the extent desirable to qualify transactions hereunder as exempt under Exchange Act Rule 16b-3, the transactions contemplated hereunder will be approved by the entire Board or a committee of two or more Non-Employee Directors. |
| (d) | Delegation of Authority. Except to the extent prohibited by Applicable Laws, the Administrator may delegate to one or more officers of the Company some or all of its authority under the Plan, including the authority to grant all types of Awards, in accordance with Applicable Law (except that such delegation shall not apply to any Award for a Participant then covered by Section 16 of the Exchange Act), and the Administrator may delegate to one or more committees of the Board (which may consist solely of one Director) some or all of its authority under this Plan, including the authority to grant all types of Awards, in accordance with Applicable Law. Such delegation may be revoked at any time. The acts of such delegates shall be treated as acts of the Administrator, and such delegates shall report regularly to the Administrator regarding the delegated duties and responsibilities and any Awards granted. |
| (e) | Effect of Administrator’s Decision. The Administrator’s decisions, determinations, and interpretations will be final and binding on all persons, including Participants and any other holders of Awards. |
| 6. | Eligibility. The Administrator has the discretion to select any Service Provider to receive an Award, although Incentive Share Options may be granted only to Employees. Designation of a Participant in any year shall not require the Administrator to designate such person to receive an Award in any other year or, once designated, to receive the same type or amount of Award as granted to the Participant in any other year. The Administrator shall consider such factors as it deems pertinent in selecting Participants and in determining the type and amount of their respective Awards. |
| 7. | Share Options. The Administrator, at any time and from time to time, may grant Share Options under the Plan to Service Providers. Each Share Option shall be subject to such terms and conditions consistent with the Plan as the Administrator may impose from time to time, subject to the following limitations: |
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| (a) | Exercise Price. The per share exercise price for Shares to be issued pursuant to exercise of a Share Option will be determined by the Administrator, but shall be no less than 100% of the Fair Market Value per Share on the date of grant, subject to Section 7(e). Notwithstanding the foregoing, in the case of a Share Option that is a Substitute Award, the exercise price for Shares subject to such Share Option may be less than the Fair Market Value per Share on the date of grant; provided that the exercise price of any Substitute Award shall be determined in accordance with the applicable requirements of Code Sections 424 and 409A. |
| (b) | Exercise Period. Share Options granted under the Plan shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator; provided, however, that no Share Option shall be exercisable later than ten (10) years after the date it is granted. Share Options shall terminate at such earlier times and upon such conditions or circumstances as the Administrator shall in its discretion set forth in such Award Agreement at the date of grant; provided, however, the Administrator may, in its sole discretion, later waive any such condition. |
| (c) | Payment of Exercise Price. To the extent permitted by Applicable Laws, the Participant may pay the Share Option exercise price by: |
| (i) | cash; |
| (ii) | check; |
| (iii) | surrender of other Shares which meet the conditions established by the Administrator to avoid adverse accounting consequences to the Company (as determined by the Administrator); |
| (iv) | if approved by the Administrator, as determined in its sole discretion, by a broker-assisted cashless exercise in accordance with procedures approved by the Administrator, whereby payment of the exercise price may be satisfied, in whole or in part, with Shares subject to the Share Option by delivery of an irrevocable direction to a securities broker (on a form prescribed by the Administrator) to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of the aggregate exercise price; |
| (v) | if approved by the Administrator for a Nonqualified Share Option, as determined in its sole discretion, by delivery of a notice of “net exercise” to the Company, pursuant to which the Participant shall receive the number of Shares underlying the Share Option so exercised reduced by the number of Shares equal to the aggregate exercise price of the Share Option divided by the Fair Market Value on the date of exercise; |
| (vi) | such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws; or |
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| (vii) | any combination of the foregoing methods of payment. |
| (d) | Exercise of Share Option. |
| (i) | Procedure for Exercise. Any Share Option granted hereunder will be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. A Share Option may not be exercised for a fraction of a Share. Exercising a Share Option in any manner will decrease the number of Shares thereafter available for purchase under the Share Option, by the number of Shares as to which the Share Option is exercised. |
| (ii) | Exercise Requirements. A Share Option will be deemed exercised when the Company receives: (A) written or electronic notice of exercise (in accordance with the Award Agreement) from the person entitled to exercise the Share Option, and (B) full payment of the exercise price (including provision for any applicable tax withholding). |
| (iii) | Non-Exempt Employees. If a Share Option is granted to an Employee who is a non-exempt employee for purposes of the U.S. Fair Labor Standards Act of 1938, as amended, the Share Option will not be first exercisable for any Shares until at least six (6) months following the date of grant of the Share Option (although the Share Option may vest prior to such date). Consistent with the provisions of the Worker Economic Opportunity Act, (A) if such non-exempt Employee dies or suffers a Disability, (B) upon a Change in Control in which such Share Option is not assumed, continued, or substituted, or (C) upon the Participant’s retirement (as such term may be defined in the Participant’s Award Agreement, in another agreement between the Participant and the Company or a Subsidiary, or, if no such definition, in accordance with the then current employment policies and guidelines of the Company or employing Subsidiary), the vested portion of any Share Option may be exercised earlier than six (6) months following the date of grant. The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of a Share Option will be exempt from the Participant’s regular rate of pay. To the extent permitted and/or required for compliance with the U.S. Worker Economic Opportunity Act to ensure that any income derived by a non-exempt employee in connection with the exercise, vesting, or issuance of any Shares under any other Award will be exempt from the employee’s regular rate of pay, the provisions of this Section 7(d)(iii) will apply to all Awards and are hereby incorporated by reference into such Award Agreements. |
| (iv) | Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, the Participant may exercise the Share Option within such period of time as is specified in the Award Agreement to the extent that the Share Option is vested on the date of termination (but in no event later than the expiration of the term of such Share Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Share Option will remain exercisable for three (3) months (or twelve (12) months in the case of termination on account of Disability or death) following the Participant’s termination. If a Participant commits an act of Cause, all vested and unvested Share Options shall be forfeited as of such date. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to a Share Option, the Shares covered by the unvested portion of the Share Option will be forfeited and will revert to the Plan and again will become available for grant under the Plan. If after termination, the Participant does not exercise a Share Option as to all of the vested Shares within the time specified by the Administrator, the Share Option will terminate, and remaining Shares covered by such Share Option will be forfeited and will revert to the Plan and again will become available for grant under the Plan. |
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| (v) | Extension of Exercisability. A Participant may not exercise a Share Option at any time that the issuance of Shares upon such exercise would violate Applicable Laws. Except as otherwise provided in the Award Agreement, if a Participant ceases to be a Service Provider for any reason other than for Cause and, at any time during the last thirty (30) days of the applicable post-termination exercise period: (A) the exercise of the Participant’s Share Option would be prohibited solely because the issuance of Shares upon such exercise would violate Applicable Laws, or (B) the immediate sale of any Shares issued upon such exercise would violate the Company’s trading policy, then the applicable post-termination exercise period will be extended to the last day of the calendar month that commences following the date the Award would otherwise expire, with an additional extension of the exercise period to the last day of the next calendar month to apply if any of the foregoing restrictions apply at any time during such extended exercise period, generally without limitation as to the maximum permitted number of extensions); provided, however, that in no event may such Award be exercised after the expiration of its maximum term. |
| (vi) | Beneficiary. If a Participant dies while a Service Provider, the Share Option may be exercised following the Participant’s death by the Participant’s designated beneficiary, provided such beneficiary has been designated and received by the Administrator prior to the Participant’s death in a form acceptable to the Administrator. If no such beneficiary has been properly designated by the Participant, then such Share Option may be exercised by the personal representative of the Participant’s estate or by the persons to whom the Share Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. |
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| (vii) | Shareholder Rights. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent or depositary of the Company), no right to vote or receive dividends or any other rights as a shareholder will exist with respect to the Shares, notwithstanding the exercise of the Share Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 14 or the applicable Award Agreement. |
| (e) | Incentive Share Option Limitations. |
| (i) | Each Share Option will be designated in the Award Agreement as either an Incentive Share Option or a Nonqualified Share Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Share Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company, its Parent, or any Subsidiary) exceeds US$100,000, such Share Options will be treated as Nonqualified Share Options. For purposes of this Section 7(e)(i), Incentive Share Options will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Share Option is granted. |
| (ii) | In the case of an Incentive Share Option, the term will be ten (10) years from the date of grant or such shorter term as may be provided in the Award Agreement. Moreover, in the case of an Incentive Share Option granted to a Participant who, at the time the Incentive Share Option is granted, owns shares representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, its Parent, or any Subsidiary, the term of the Incentive Share Option will be five (5) years from the date of grant or such shorter term as may be provided in the Award Agreement. |
| (iii) | No Share Option shall be treated as an Incentive Share Option unless this Plan has been approved by the shareholders of the Company in a manner intended to comply with the shareholder approval requirements of Code Section 422(b)(1), provided that any Share Option intended to be an Incentive Share Option shall not fail to be effective solely on account of a failure to obtain such approval, but rather such Share Option shall be treated as a Nonqualified Share Option unless and until such approval is obtained. |
| (iv) | In the case of an Incentive Share Option, the terms and conditions of such grant shall be subject to and comply with such rules as may be prescribed by Code Section 422. If for any reason a Share Option intended to be an Incentive Share Option (or any portion thereof) shall not qualify as an Incentive Share Option, then, to the extent of such nonqualification, such Share Option or portion thereof shall be regarded as a Nonqualified Share Option appropriately granted under this Plan. |
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| 8. | Share Appreciation Rights. The Administrator, at any time and from time to time, may grant SARs to Service Providers. Each SAR shall be subject to such terms and conditions, consistent with the Plan, as the Administrator may impose from time to time, subject to the following limitations: |
| (a) | SAR Award Agreement. Each SAR Award will be evidenced by an Award Agreement that will specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine. |
| (b) | Number of Shares. The Administrator will have complete discretion to determine the number of Shares subject to any SAR Award. |
| (c) | Exercise Price and Other Terms. The per share exercise price for the Shares that will determine the amount of the payment to be received upon exercise of a SAR will be determined by the Administrator and will be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant. Notwithstanding the foregoing, in the case of a SAR that is a Substitute Award, the exercise price for Shares subject to such SAR may be less than the Fair Market Value per Share on the date of grant; provided that the exercise price of any Substitute Award shall be determined in accordance with the applicable requirements of Code Sections 424 and 409A. Otherwise, the Administrator, subject to the provisions of the Plan, will have complete discretion to determine the terms and conditions of SARs granted under the Plan. |
| (d) | Expiration of Share Appreciation Rights. A SAR granted under the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement. Notwithstanding the foregoing, the rules of Section 7(d) relating to the maximum term and exercise also will apply to SARs. |
| (e) | Payment of Share Appreciation Right Amount. Upon exercise of a SAR, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying: |
| (i) | The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times |
| (ii) | The number of Shares with respect to which the SAR is exercised. |
| (f) | Payment Form. At the discretion of the Administrator, the payment upon SAR exercise may be in cash, in Shares, other securities, or other property of equivalent value, or in some combination thereof. |
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| (g) | Tandem Awards. Any Share Option granted under this Plan may include tandem SARs (i.e., SARs granted in conjunction with an Award of Share Options under this Plan). The Administrator also may award SARs to a Service Provider independent of any Share Option. |
| 9. | Restricted Shares. The Administrator, at any time and from time to time, may grant Restricted Shares to Service Providers in such amounts as the Administrator, in its sole discretion, will determine, subject to the following limitations: |
| (a) | Restricted Share Agreement. Each Award of Restricted Shares will be evidenced by an Award Agreement that will specify the Period of Restriction and the applicable restrictions, the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, will determine. Restricted Shares may be awarded in consideration for (i) cash, check, bank draft or money order payable to the Company, (ii) past services to the Company, its Parent, or any Subsidiary, or (iii) any other form of legal consideration (including future services) that may be acceptable to the Administrator, in its sole discretion, and permissible under Applicable Laws. |
| (b) | Removal of Restrictions. Unless the Administrator determines otherwise, Restricted Shares will be held by the Company as escrow agent until the restrictions on such Award have lapsed. The Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed. |
| (c) | Voting Rights. During the Period of Restriction, a Participant holding Restricted Shares may exercise the voting rights applicable to those Shares, unless the Administrator determines otherwise. |
| (d) | Dividends and Other Distributions. During the Period of Restriction, a Participant holding Restricted Shares will be entitled to receive all dividends and other distributions paid with respect to such Restricted Shares unless otherwise provided in the Award Agreement. If any such dividends or distributions are paid in Shares, such Shares will be subject to the same restrictions on transferability and forfeitability as the Restricted Shares with respect to which they were paid. |
| (e) | Transferability. Restricted Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction. |
| (f) | Return of Restricted Shares to Company. On the date set forth in the Award Agreement, the Restricted Shares for which restrictions have not lapsed will be forfeited and will revert to the Company and again will become available for grant under the Plan. |
| 10. | Restricted Share Units (RSUs). The Administrator, at any time and from time to time, may grant RSUs under the Plan to Service Providers. Each RSU shall be subject to such terms and conditions, consistent with the Plan, as the Administrator may impose from time to time, subject to the following limitations: |
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| (a) | RSU Award Agreement. Each Award of RSUs will be evidenced by an Award Agreement that will specify the terms, conditions, and restrictions related to the grant, including the number of RSUs and such other terms and conditions as the Administrator, in its sole discretion, will determine. |
| (b) | Vesting Criteria and Other Terms. The Administrator will set vesting criteria in its discretion, which, depending on the extent to which the criteria are met, will determine the number of RSUs that will be paid out to the Participant. The Administrator may set vesting criteria based upon the achievement of Company-wide, business unit, or individual goals (including, but not limited to, continued employment or Service), or any other basis determined by the Administrator in its discretion. |
| (c) | Earning Restricted Share Units. Upon meeting the applicable vesting criteria, the Participant will be entitled to receive a payout as determined by the Administrator. Notwithstanding the foregoing, at any time after the grant of RSUs, the Administrator, in its sole discretion, may reduce or waive any vesting criteria that must be met to receive a payout. |
| (d) | Form and Timing of Payment. Payment of earned RSUs will be made as soon as practicable after the date(s) determined by the Administrator and set forth in the Award Agreement. The Administrator, in its sole discretion, may settle earned RSUs in cash, Shares, other securities, other property, or a combination of both. |
| (e) | Voting and Dividend Equivalent Rights. The holders of RSUs shall have no voting rights as the Company’s shareholders. Prior to settlement or forfeiture, RSUs awarded under the Plan may, at the Administrator’s discretion, provide for a right to dividend equivalents. Such right entitles the holder to be credited with an amount equal to all dividends paid on one Share while the RSU is outstanding. Dividend equivalents may be converted into additional RSUs. Settlement of dividend equivalents may be made in the form of cash, Shares, other securities, other property, or in a combination of the foregoing. Prior to distribution, any dividend equivalents shall be subject to the same conditions and restrictions as the RSUs to which they attach. |
| (f) | Cancellation. On the date set forth in the Award Agreement, all unearned RSUs will be forfeited to the Company. |
| 11. | Other Share-Based Awards. Other Share-Based Awards may be granted either alone, in addition to, or in tandem with, other Awards granted under the Plan and/or cash awards made outside of the Plan. The Administrator shall have authority to determine the Service Providers to whom and the time or times at which Other Share-Based Awards shall be made, the amount of such Other Share-Based Awards, and all other conditions of the Other Share-Based Awards including any dividend and/or voting rights. |
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| 12. | Vesting. |
| (a) | Vesting Conditions. Each Award may or may not be subject to vesting, a Period of Restriction, and/or other conditions as the Administrator may determine. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Award Agreement. Vesting conditions may include Service-based conditions, performance-based conditions, such other conditions as the Administrator may determine, or any combination thereof. An Award Agreement may provide for accelerated vesting upon certain specified events. |
| (b) | Performance Criteria. The Administrator may establish performance-based conditions for an Award which may be based on the attainment of specific levels of performance of the Company (and/or one or more Subsidiaries, divisions, business segments or operational units, or any combination of the foregoing) and may include, without limitation, any of the following: (i) net earnings or net income (before or after taxes); (ii) basic or diluted earnings per share (before or after taxes); (iii) revenue or revenue growth (measured on a net or gross basis); (iv) gross profit or gross profit growth; (v) operating profit (before or after taxes); (vi) return measures (including, but not limited to, return on assets, capital, invested capital, equity, or sales); (vii) cash flow (including, but not limited to, operating cash flow, free cash flow, net cash provided by operations and cash flow return on capital); (viii) financing and other capital raising transactions (including, but not limited to, sales of the Company’s equity or debt securities); (ix) earnings before or after taxes, interest, depreciation and/or amortization; (x) gross or operating margins; (xi) productivity ratios; (xii) share price (including, but not limited to, growth measures and total shareholder return); (xiii) expense targets; (xiv) margins; (xv) productivity and operating efficiencies; (xvi) customer satisfaction; (xvii) customer growth; (xviii) working capital targets; (xix) measures of economic value added; (xx) inventory control; (xxi) enterprise value; (xxii) sales; (xxiii) debt levels and net debt; (xxiv) combined ratio; (xxv) timely launch of new facilities; (xxvi) client retention; (xxvii) employee retention; (xxviii) timely completion of new product rollouts; (xxix) cost targets; (xxx) reductions and savings; (xxxi) productivity and efficiencies; (xxxii) strategic partnerships or transactions; and (xxxiii) personal targets, goals or completion of projects. Any one or more of the performance criteria may be used on an absolute or relative basis to measure the performance of the Company and/or one or more Subsidiaries as a whole or any business unit(s) of the Company and/or one or more Subsidiaries or any combination thereof, as the Administrator may deem appropriate, or any of the above performance criteria may be compared to the performance of a selected group of comparison or peer companies, or a published or special index that the Administrator, in its sole discretion, deems appropriate, or as compared to various stock market indices. The Administrator also has the authority to provide for accelerated vesting of any Award based on the achievement of performance criteria specified in this paragraph. Any performance criteria that are financial metrics, may be determined in accordance with United States Generally Accepted Accounting Principles (“GAAP”) or may be adjusted when established to include or exclude any items otherwise includable or excludable under GAAP. |
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| (c) | Default Vesting. Unless otherwise set forth in an individual Award Agreement, each Award shall vest over a three (3) year period, with one-third (1/3) of the Award vesting on the first annual anniversary of the date of grant and the remaining portion vesting annually thereafter. |
| (d) | Leaves of Absence. Unless the Administrator provides otherwise, vesting of Awards granted hereunder will be suspended during any Employee’s unpaid leave of absence and will resume on the date the Employee returns to work on a regular schedule as determined by the Administrator; provided, however, that no vesting credit will be awarded for the time vesting has been suspended during such leave of absence. A Service Provider will not cease to be an Employee in the case of (i) any leave of absence approved by the Company or the employing Subsidiary, although any leave of absence not provided for in the applicable employee manual of the Company or employing Subsidiary needs to be approved by the Administrator, or (ii) transfers between locations of the Company or between the Company, its Parent, or any Subsidiary. For purposes of Incentive Share Options, no leave of absence may exceed ninety (90) days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company or employing Subsidiary is not so guaranteed, then three (3) months following the 91st day of such leave any Incentive Share Option held by the Participant will cease to be treated as an Incentive Share Option and will be treated for federal tax purposes as a Nonqualified Share Option. |
| (e) | In the event a Service Provider’s regular level of time commitment in the performance of services for the Company, its Parent, or any Subsidiary is reduced (for example, and without limitation, if the Service Provider is an Employee of the Company and the Employee has a change in status from a full-time Employee to a part-time Employee) after the date of grant of any Award to the Service Provider, the Administrator has the right in its sole discretion to (i) make a corresponding reduction in the number of Shares subject to any portion of such Award that is scheduled to vest or become payable after the date of such change in time commitment, and (ii) in lieu of or in combination with such a reduction, extend the vesting or payment schedule applicable to such Award. In the event of any such reduction, the Service Provider will have no right with respect to any portion of the Award that is so reduced or extended. |
| 13. | Non-Transferability of Awards. Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner, except to the Participant’s estate or legal representative, and may be exercised, during the lifetime of the Participant, only by the Participant, although the Administrator, in its discretion, may permit Award transfers for purposes of estate planning or charitable giving. If the Administrator makes an Award transferable, such Award will contain such additional terms and conditions as the Administrator deems appropriate. |
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| 14. | Adjustments; Dissolution or Liquidation; Change in Control. |
| (a) | Adjustments. In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, share split, reverse share split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs such that an adjustment is determined by the Administrator (in its sole discretion) to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Administrator shall, in such manner as it may deem equitable, adjust the number and class of Shares which may be delivered under the Plan, the number, class and price of Shares subject to outstanding awards, and the numerical limits in Section 4. Notwithstanding the preceding, the number of Shares subject to any Award always shall be a whole number. |
| (b) | Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for a Participant to have the right to exercise an Award, to the extent applicable, until ten (10) days prior to such transaction as to all of the Shares covered thereby, including Shares as to which the Award would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option or forfeiture rights applicable to any Award shall lapse 100%, and that any Award vesting shall accelerate 100%, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously vested and, if applicable, exercised, an Award will terminate immediately prior to the consummation of such proposed action. |
| (c) | Change in Control. |
| (i) | In the event of a Change in Control, each outstanding Award shall be assumed or an equivalent award substituted by the acquiring or successor corporation or a parent of the acquiring or successor corporation. |
| (ii) | Unless determined otherwise by the Administrator, in the event that the successor corporation refuses to assume or substitute for the Award, the Participant shall fully vest in and have the right to exercise the Award as to all of the Shares, including those as to which it would not otherwise be vested or exercisable, all applicable restrictions will lapse, and all performance objectives and other vesting criteria will be deemed achieved at targeted levels. If a Share Option is not assumed or substituted in the event of a Change in Control, the Administrator shall notify the Participant in writing or electronically that the Share Option shall be exercisable, to the extent vested, for a period of up to fifteen (15) days from the date of such notice, and the Share Option shall terminate upon the expiration of such period. |
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| (iii) | For the purposes of this Section 14(c), the Award shall be considered assumed if, following the Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether shares, cash, or other securities or property) received in the Change in Control by holders of Shares for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change in Control is not solely common shares of the acquiring or successor corporation or its parent, the Administrator may, with the consent of the acquiring or successor corporation, provide for the consideration to be received, for each Share subject to the Award, to be solely common shares of the acquiring or successor corporation or its parent equal in fair market value to the per share consideration received by holders of Shares in the Change in Control. Payments under this provision may be delayed to the same extent that payment of consideration to the holders of the Shares in connection with the Change in Control is delayed as a result of escrows, earn outs, holdbacks, or any other contingencies. Notwithstanding anything herein to the contrary, an Award that vests, is earned, or is paid out upon the satisfaction of one or more performance goals will not be considered assumed if the Company or the acquiring or successor corporation modifies any of such performance goals without the Participant’s consent; provided, however, that a modification to such performance goals only to reflect the acquiring or successor corporation’s post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption. |
| 15. | Taxes. |
| (a) | General. It is a condition to each Award under the Plan that a Participant or such Participant’s successor shall make such arrangements that may be necessary, in the opinion of the Administrator or the Company, for the satisfaction of any federal, state, local, or foreign withholding tax obligations that arise in connection with any Award granted under the Plan. The Company shall not be required to issue any Shares or make any cash payment under the Plan unless such obligations are satisfied. |
| (b) | Share Withholding. To the extent that Applicable Laws subject a Participant to tax withholding obligations, the Administrator may permit such Participant to satisfy all or part of such obligations by having the Company, its Parent, or a Subsidiary withhold all or a portion of any Share that otherwise would be issued to such Participant or by surrendering all or a portion of any Share that the Participant previously acquired. Such Share shall be valued on the date withheld or surrendered. Any payment of taxes by assigning Shares to the Company, its Parent, or a Subsidiary may be subject to restrictions, including any restrictions required by the Securities and Exchange Commission, accounting, or other rules. |
| 21 |
Execution Version
| (c) | Discretionary Nature of Plan. The benefits and rights provided under the Plan are wholly discretionary and, although provided by the Company, do not constitute regular or periodic payments. Unless otherwise required by Applicable Laws, the benefits and rights provided under the Plan are not to be considered part of a Participant’s salary or compensation or for purposes of calculating any severance, resignation, redundancy or other end of service payments, vacation, bonuses, long-term service awards, indemnification, pension or retirement benefits, or any other payments, benefits, or rights of any kind. By acceptance of an Award, a Participant waives any and all rights to compensation or damages as a result of the termination of Service for any reason whatsoever insofar as those rights result or may result from this Plan or any Award. |
| (d) | Code Section 409A. Awards will be designed and operated in such a manner that they are either exempt from the application of, or comply with, the requirements of Code Section 409A and will be construed and interpreted in accordance with such intent, except as otherwise determined in the sole discretion of the Administrator. To the extent that an Award or payment, or the settlement or deferral thereof, is subject to Code Section 409A, the Award will be granted, paid, settled, or deferred in a manner that will meet the requirements of Code Section 409A, such that the grant, payment, settlement, or deferral will not be subject to the additional tax or interest applicable under Code Section 409A. |
| (e) | Deferral of Award Settlement. The Administrator, in its discretion, may permit selected Participants to elect to defer distributions of Restricted Shares or RSUs in accordance with procedures established by the Administrator to assure that such deferrals comply with applicable requirements of the Code. Any deferred distribution, whether elected by the Participant or specified by the Award Agreement or the Administrator, shall comply with Code Section 409A, to the extent applicable. |
| (f) | Limitation on Liability. Neither the Company, nor its Parent, nor any Subsidiary, nor any person serving as Administrator shall have any liability to a Participant in the event an Award held by the Participant fails to achieve its intended characterization under applicable tax law. |
| 16. | No Rights as a Service Provider. Neither the Plan, nor an Award Agreement, nor any Award shall confer upon a Participant any right with respect to continuing a relationship as a Service Provider, nor shall they interfere in any way with the right of the Participant or the right of the Company, its Parent, or any Subsidiary to terminate such relationship at any time, with or without cause. |
| 22 |
Execution Version
| 17. | Recoupment Policy. All Awards granted under the Plan, all amounts paid under the Plan and all Shares issued under the Plan shall be subject to recoupment, clawback, or recovery by the Company in accordance with Applicable Laws and with Company policy (whenever adopted) regarding same, whether or not such policy is intended to satisfy the requirements of the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act, the U.S. Sarbanes-Oxley Act, or other Applicable Laws, as well as any implementing regulations and/or listing standards. |
| 18. | Amendment and Termination of the Plan. |
| (a) | Amendment and Termination. The Board may at any time amend, alter, suspend, or terminate the Plan. |
| (b) | Shareholder Approval. The Company may obtain shareholder approval of any Plan amendment to the extent necessary or, as determined by the Administrator in its sole discretion, desirable to comply with Applicable Laws, including any amendment that (i) increases the number of Shares available for issuance under the Plan or (ii) changes the persons or class of persons eligible to receive Awards. |
| (c) | Effect of Amendment or Termination. No amendment, alteration, suspension, or termination of the Plan will materially impair the rights of any Participant with respect to outstanding Awards, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan will not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination. |
| 19. | Conditions Upon Issuance of Shares. |
| (a) | Legal Compliance. Shares will not be issued pursuant to an Award unless the exercise of such Award and the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of counsel for the Company with respect to such compliance. |
| (b) | Investment Representations. As a condition to the exercise or receipt of an Award, the Company may require the person exercising or receiving such Award to represent and warrant at the time of any such exercise or receipt that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required or desirable. |
| 20. | Severability. Notwithstanding any contrary provision of the Plan or an Award Agreement, if any one or more of the provisions (or any part thereof) of this Plan or an Award Agreement shall be held invalid, illegal, or unenforceable in any respect, such provision shall be modified so as to make it valid, legal, and enforceable, and the validity, legality, and enforceability of the remaining provisions (or any part thereof) of the Plan or Award Agreement, as applicable, shall not in any way be affected or impaired thereby. |
| 23 |
Execution Version
| 21. | Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority will not have been obtained. |
| 22. | Shareholder Approval. The Plan will be subject to approval by the shareholders of the Company within twelve (12) months after the date the Plan is adopted. Such shareholder approval will be obtained in the manner and to the degree required under Applicable Laws. All Awards hereunder are contingent on approval of the Plan by shareholders. Notwithstanding any other provision of this Plan, if the Plan is not approved by the shareholders within twelve (12) months after the date the Plan is adopted, the Plan and any Awards hereunder shall be automatically terminated. |
| 23. | Choice of Law. The Plan will be governed by and construed in accordance with the internal laws of Province of Ontario, Canada, without reference to any choice of law principles. |
| 24. | Effective Date. |
| (a) | The Plan shall be effective as of ________________ ___, 20__, the date on which the Plan was adopted by the Board and the Company’s shareholders (the “Effective Date”). |
| (b) | Unless terminated earlier under Section 18, this Plan shall terminate on ________ ___, 20__, ten years after the Effective Date. |
| 24 |
Exhibit 4.9
DIRECTOR’S AND OFFICER’S INDEMNITY AGREEMENT
This Agreement is made on _________________, 2024
BETWEEN:
[Name of individual being indemnified as a director or officer], a businessperson having a notice delivery address at [address] and an email address at [email].
(hereinafter called the “Individual”)
Of The First Part
-and-
Psyence Biomedical Ltd, a company existing under the laws of the Province of Ontario and having its notice delivery address at 121 Richmond Street West, Penthouse Suite, 1300 Toronto, Ontario, M5H 2K1 Attention: Neil Maresky and an email address at neil@psyence.com.
(hereinafter called the “Corporation”)
Of The Second Part
This Agreement Witnesseth that in consideration of the Individual agreeing to act as a director and/or officer of the Corporation or any subsidiary company, partnership, joint venture, trust or other enterprise (each of the Corporation and any such other subsidiary company, partnership, joint venture, trust or other enterprise, the “Company”) and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), it is agreed between the parties hereto as follows:
| 1. | Services to the Corporation |
The Individual agrees to serve/continue to serve as a director or officer of the Corporation for so long as the Individual remains duly elected or appointed or until he or she tenders his or her resignation or is no longer serving in such capacity. This Agreement shall not be deemed an employment agreement between the Corporation (or any of its subsidiaries) and the Individual. The Individual specifically acknowledges that his or her service to the Corporation is set out in a written employment or consulting agreement between the Individual and the Corporation, or, with respect to service as a director or officer of the Corporation, by the Company's constating documents or applicable law.
| 2. | Indemnity |
Subject to any limitations under the Business Corporations Act (Ontario) (the “OBCA”), the rules of The Nasdaq Stock Market (stock exchange based in New York City) (“NASDAQ Rules”) (as applicable), the U.S. Securities and Exchange Commission (“SEC”) (as applicable), and as hereinafter provided, the Corporation, to the extent permitted under applicable law, hereby irrevocably agrees to fully indemnify and save harmless the Individual from and against all costs, charges, expenses, losses, damages, fees (including any legal, professional or advisory fees or disbursements and all taxes payable thereon), liabilities, and against all judgments, penalties, fines and amounts paid to settle or dispose of any claim and reasonably incurred in connection with legal, civil, criminal, administrative or investigative proceedings or other proceedings of any nature or kind, without limitation, whether formal or informal, and whether incurred alone or jointly with others, including any amounts which the Individual may suffer, sustain, incur or be required to pay in respect of the investigation, defence, settlement or appeal of or preparation for any claim or proceeding or any action to establish a right to indemnification under this Agreement, and, for greater certainty, all taxes, interest, penalties and related outlays of the Individual arising from any indemnification of the Individual pursuant to this Agreement (collectively, the “Expenses”), where the Individual is or was a party or is threatened to be made a party to any threatened, pending or completed proceedings, whether legal, civil, criminal, administrative, investigative or of any other nature or kind, by reason of the fact that the Individual is or was a director or an officer of the Corporation or by reason of the Individual serving at the request of the Company, as applicable, as a trustee, officer, director, or agent of another corporation, body corporate, partnership, joint venture, trust or other enterprise.
Indemnification under this Section 2 applies to the Individual if the Individual acted honestly and in good faith with a view to the best interests of the relevant Company and, in the case of criminal proceedings, the Individual had no reasonable cause to believe that his or her conduct was unlawful (the “Conditions”). For the purposes of any determination made in regard to this indemnity, the Individual shall be deemed to have had no reasonable cause to believe that his or her conduct was unlawful and to have acted in good faith and in the best interests of the relevant Company. The Corporation shall have the burden of establishing that the Conditions have not been satisfied. The knowledge and/or actions or failure to act of any other director, officer, trustee or agent of the Company or any other entity shall not be imputed to the Individual for the purpose of determining the right to indemnification under this Agreement.
For the purposes of this Section 2, the termination of any proceedings by any judgment, order, settlement, conviction or the entering of a nolle prosequi does not, by itself, create a presumption that the Individual did not act honestly and in good faith and with a view to the best interests of the relevant Company or that the Individual had reasonable cause to believe that his or her conduct was unlawful.
| 3. | Entitlement to Indemnification |
Provided that the Conditions have been fulfilled, subject to the OBCA, the NASDAQ Rules (as applicable) and the SEC (as applicable), the Corporation shall indemnify the Individual under Section 2 in connection with any legal (civil or criminal), administrative, investigative or other proceeding to which the Individual is or was a party by reason of the fact that the Individual is or was a director or an officer of the Company, or by reason of the Individual serving at the request of the Corporation and/or the Company, as applicable, as a trustee, officer, director, or agent of another corporation, body corporate, partnership, joint venture, trust or other enterprise, including, without limitation, if the Individual is not wholly successful in such proceeding, and regardless of whether the Individual was judged by the court or other competent authority to have committed any fault or omitted to do anything that the Individual ought to have done. Without limitation, the termination of any claim, issue or matter in such a proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.
| 4. | Scope and Survival |
This Agreement extends to all acts, omissions, circumstances and events, whether occurring before or after the date of this Agreement. This Agreement shall survive any resignation by the Individual as a director and/or officer or any other circumstance by reason of which the Individual shall cease to be a director and/or officer of any Company or by reason of the Individual serving at the request of the Corporation and/or the Company, as applicable, as a trustee, officer, director, or agent of another corporation, body corporate, partnership, joint venture, trust or other enterprise.
The Corporation shall use commercially reasonable efforts to obtain and maintain directors’ and officers’ liability insurance in such amounts and covering all or part of the Expenses which may be payable hereunder as may be approved by the Corporation’s board of directors from time to time, acting reasonably. A copy of all such insurance policies shall be provided to the Individual.
Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnification payment in connection with any claim involving Individual for (i) an accounting of profits made from the purchase and sale (or sale and purchase) by Individual of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended from time to time (the “Exchange Act”) or similar provisions of state statutory law or common law, (ii) any reimbursement of the Company by the Individual of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Individual from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act) or (iii) any reimbursement of the Company by Individual of any compensation pursuant to any compensation recoupment or clawback policy adopted by the board of directors or the compensation committee of the board of directors, including but not limited to any such policy adopted to comply with stock exchange listing requirements implementing Section 10D of the Exchange Act.
| 5. | Timely Notification |
Within five business days of the Individual or the Corporation becoming aware of any claim, demand, action or proceeding which may give rise to indemnification hereunder (a “Claim”), such party shall give written notice thereof, in the case of the Individual to the Corporation, and in the case of the Company to the Individual, as soon as is reasonably practicable, provided however that failure by the Individual to give such notice to the Corporation in a timely fashion shall not disentitle the Individual to the right to indemnity hereunder except and to the extent that the Corporation suffers actual material prejudice by reason of the delay due to the loss of substantive defences.
| 6. | Investigation |
The Corporation shall conduct such investigation of each matter of which it receives notice pursuant to Section 5 as is reasonably necessary in the circumstances, and shall pay all Expenses of such investigation, to the extent applicable.
| 7. | Assumption of Defence |
The Corporation shall be entitled to participate, at its expense, in the defence of any Claim. If the Corporation so elects after receipt of notice of a Claim, or the Individual in such notice so directs, the Corporation shall promptly assume control of the negotiation, settlement or defence of any Claim, in which case such defence shall be conducted by counsel chosen by the Corporation. If the Corporation elects to assume such control, the Individual shall have the right to participate in the negotiation, settlement or defence of such Claim and to retain counsel to act on the Individual’s behalf, provided that the fees and disbursements of such counsel shall be paid by the Individual unless the Corporation consents to the retention of such counsel or unless the parties to any such Claim include both the relevant Company and the Individual and the Individual shall have been advised by counsel that representation of both the relevant Company and the Individual by the same counsel would be inappropriate due to actual or potential differing interests between them, including the availability of legal defences to the Individual which are different from or additional to those available to the relevant Company. The Individual and the Corporation shall cooperate fully with each other and their respective counsel in the investigation and defence of any Claim and shall make available to each other all relevant books, records, documents and files and shall otherwise assist such counsel in the proper and adequate defence of any Claim.
| 8. | Settlement |
The Corporation may, with the prior written consent of the Individual (which consent shall not be unreasonably withheld or delayed), enter into a settlement or other agreement to compromise a Claim.
If the Individual refuses after being requested by the Corporation, acting reasonably, to give consent to the terms of a proposed settlement or compromise which is otherwise acceptable to the Corporation, the Corporation may require the Individual to negotiate or defend the Claim independently of the Corporation. In such event, any amount recovered by the claimant in excess of the amount for which settlement or compromise could have been made by the Corporation shall not be recoverable under this Agreement or under the constating documents of the relevant Company, it being further agreed by the parties that in such event the Corporation shall only be responsible for all Expenses up to the time at which such settlement could have been made.
The Corporation shall not be liable for any settlement of any Claim effected without its prior written consent (which consent shall not be unreasonably withheld or delayed).
The Individual shall have the right to negotiate a settlement in respect of any Claim, provided however that in such circumstances the Individual shall, unless the Corporation has approved such settlement, pay any compensation or other payment to be made under the settlement and the costs of negotiating and implementing the settlement, and shall not seek indemnity from the Corporation in respect of such compensation, payment or costs.
| 9. | Payment of Expenses |
Subject as herein provided, upon demand, the Corporation shall pay all Expenses, for which the Individual is entitled to be indemnified hereunder promptly as they are incurred and in advance of the final disposition of any action or proceeding. For clarity, subject as hereafter provided, it shall not be necessary for the Individual to pay such Expenses, and then seek reimbursement; the Individual may provide bills and statements of account to the Corporation for direct payment by the Corporation (including reimbursement for time spent by the Individual in connection with any action or proceeding, at reasonable per diem rates).
Payment of the Individual’s Expenses, as provided in the foregoing paragraph shall be subject to the prior provision by or on behalf of the Individual to the Corporation of an undertaking, to repay to the Corporation any amounts paid by the Corporation which are subsequently determined not to be payable by the Corporation in accordance with Section 2 which are recovered by the Individual from any third party.
If a claim for indemnification under this Agreement is not paid in full by the Corporation within thirty (30) days after a written claim therefor has been received by it and the applicable approval of the Court has been obtained where required, whichever is later, the Individual may any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim, and the Individual will also be entitled to be paid all Expenses of prosecuting such claim including but not limited to fees as between solicitor and own client on a full indemnity basis.
| 10. | Payment of Witness Expenses |
Notwithstanding any other provision of this Agreement, to the extent that the Individual is, by reason of the fact that the Individual is or was a director or officer of the relevant Company, a witness or participant other than as a named party in a proceeding, the Corporation shall pay to the Individual: (i) all out-of-pocket expenses actually and reasonably incurred by the Individual or on the Individual’s behalf in connection therewith; and (ii) if the Individual is not currently an officer or employee of, and does not currently hold a position equivalent to that of an officer of, the relevant Company, the Corporation will compensate the Individual, at a rate equal to the then applicable board meeting fee received by directors of the Corporation, for each day of required attendance at or preparation for the proceeding (prorated for partial days).
| 11. | Availability of Other Rights |
This Agreement shall not operate to abridge or exclude any other rights, in law or in equity, to which the Individual or any Company may be entitled by operation of law or under any statute, constitutive documents of any Company, agreement, vote of the shareholders of any Company or otherwise. Further, subject to the limitations herein provided, in particular those set out in Section 2, the indemnity provided by this Agreement shall remain in full force and effect notwithstanding any act or omission of the Individual as a director and/or officer, including any act or omission under or pursuant to the relevant provisions of the statute under which the relevant Company exists or was organised, incorporated, amalgamated or continued.
For clarity, the preceding paragraph does not permit the Corporation, or its directors, shareholders or officers to terminate or modify this Agreement by resolution or alteration of the Corporation’s Notice of Articles and Articles.
No action or proceeding brought or instituted under this Agreement and no recovery pursuant hereto shall be a bar or defence to any further action or proceeding which may be brought under this Agreement.
| 12. | Additional Protection |
Notwithstanding any other provision of this Agreement, the Corporation hereby agrees to indemnify the Individual to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by other provisions of this Agreement, the OBCA, the NASDAQ Rules (as applicable), the SEC (as applicable) and the Corporation’s Notice of Articles and Articles, or by other statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of a company incorporated or continued under the OBCA to indemnify any person who is or was a director or officer of any Company (an “Agent”), such changes, shall, without any formality, be within the purview of the Individual’s rights and the Corporation’s obligations under this Agreement. In the event of any change in applicable law, statute or rule which narrows the right of a company incorporated or continued under the OBCA to indemnify an Agent, such changes, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties’ respective rights and obligations hereunder.
The liability of the Corporation and the rights of the Individual hereunder shall not be affected, discharged, impaired, mitigated or released by reason of the Corporation’s bankruptcy, insolvency, receivership or other similar proceeding of creditors or the winding-up or dissolution of the Corporation.
| 13. | Taxable Benefits |
Should any payment made to the Individual pursuant to this Agreement be deemed to constitute a taxable benefit or otherwise be or become subject to any tax or levy, then the Corporation shall pay such amount as may be necessary to ensure that the amount received by or on behalf of the Individual, after the payment of, or withholding for, such tax, fully reimburses the Individual for the actual cost, charge, expense or liability incurred by or on behalf of the Individual.
| 14. | Subrogation |
To the extent permitted by law, the Corporation shall be subrogated to all rights which the Individual may have under all policies of insurance or other contracts pursuant to which the Individual may be entitled to reimbursement of, or indemnification in respect of, all or any part of the costs, charges and expenses which are borne by the Corporation pursuant to this Agreement. Any insurance proceeds recovered by the Individual following indemnification shall be repaid to the Corporation.
| 15. | Dispute Resolution Procedure |
Any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, shall be determined by arbitration. The arbitration shall take place in the City of Toronto, in the Province of Ontario. The arbitration decision and award shall be final and binding on all parties and will not be subject to any appeal.
| 16. | Governing Law |
This Agreement shall be construed in accordance with and governed by the laws of the Province of Ontario.
| 17. | Severability |
Each section, and each provision within each section, of this Agreement is severable, the one from the other, and if for any reason any section or provision of this Agreement is not enforceable or is otherwise invalid at law, the remainder of this Agreement shall nonetheless be given full force and effect in accordance with its terms.
| 18. | Further Assurances |
The parties hereto shall execute such further assurances as they may reasonably request in order that the other party may resist and defend a Claim and otherwise enjoy the full benefits of this Agreement in accordance with its terms and for that purpose shall enter into such further assignments, powers of attorney and other documents as may reasonably be required in the circumstances. For greater certainty, each party hereby agrees that the other party may, in the conduct of the defence of any such Claim, in the name of the first party or otherwise, file such pleadings or other documents and take such proceedings as may reasonably be required, in the opinion of the other party and subject to the first party's consent, to effectively make out the defence.
| 19. | Entire Agreement |
The provisions herein constitute the entire agreement between the parties, and supersede all previous expectations, understandings, communications, representations and agreements, whether verbal or written, between the parties with respect of the subject matter hereof.
| 20. | Amendment |
No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be binding unless in the form of a writing signed by the party against whom enforcement of the waiver is sought, and no such waiver shall operate as a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided herein, no failure to exercise or any delay in exercising any right or remedy hereunder shall constitute a waiver thereof.
| 21. | No Assignment; Enurement and Successors |
No party may assign their rights or obligations hereunder without the prior written consent of the other party. This Agreement is irrevocable and enures to, and is binding upon, the parties hereto and their respective heirs, successors and legal representatives.
| 22. | Notices |
All notices or other communications required or permitted to be given under this Agreement shall be sufficiently given for all purposes hereunder if in writing and personally delivered, delivered by recognized courier service or by certified mail, return receipt requested, or sent by email communication to the appropriate address or email address of the party as set forth on the first page of this Agreement. Notices and other communications shall be effective upon receipt by the person to be notified.
| 23. | Time of the Essence |
Time shall be of the essence for all matters in respect of this Agreement.
| 24. | Independent Legal Advice |
This Agreement was prepared by the solicitors for the Corporation. The Individual has been asked to obtain independent legal advice before signing this Agreement and the Individual represents, by signing this Agreement that the Individual has obtained such advice or has declined to seek independent legal advice on this Agreement, despite having been given the opportunity to do so.
| 25. | Counterparts |
This Agreement may be executed in any number of counterparts, each of which when executed and delivered (by electronic copy or otherwise) will be deemed to be an original, and all of which together will constitute one and the same document.
[This space is intentionally blank. The next page is the signature page.]
In Witness Whereof the Corporation and the Individual have executed this Agreement as of the day and year first above written.
| Signed, Sealed and Delivered in the presence of |
||
| Name of witness (please print) | ||
| Signature of witness | ||
| [Name of Individual] |
| Psyence Biomedical Ltd. | ||
| Per: | ||
|
Authorized Signatory I have authority to bind the Corporation. | ||
Exhibit 4.12
Execution Version
AMENDMENT TO ENGAGEMENT LETTER
This Amendment (this “Amendment”) is made and entered into as of January 22, 2024 (the “Amendment Effective Date”) by and between J.V.B. Financial Group, LLC, acting through its Cohen & Company Capital Markets division (“CCM”), and Newcourt Acquisition Corp (“Client”).
RECITALS
WHEREAS, CCM and Client are party to that certain Engagement Letter dated as of February 9, 2023 (the “Engagement Letter”);
WHEREAS, Client has entered into that certain Amended and Restated Business Combination Agreement, dated as of July 31, 2023 (as may be amended from time to time, the “Business Combination Agreement,” and the transactions contemplated thereby, the “Transaction”) with Psyence Biomed II Corp. (including any affiliates thereof, “Psyence”) and certain other parties. For the avoidance of doubt, for purposes hereof, all references to “Client” herein shall also refer to any successor entity to Client following the Transaction. For the avoidance of doubt, following the Transaction with Psyence, for purposes hereof, all references to the “Client” herein shall also refer to “Psyence Biomedical Ltd.”, the public entity parent to Client (the “Successor”);
WHEREAS, in connection with the Business Combination Agreement and the closing of the Transaction (the “Closing”), CCM and Client desire to amend the Engagement Letter to modify the Transaction Fee (as defined below) payable by Client to CCM pursuant to the Engagement Letter as amended hereby; and
WHEREAS, Section 10(h) of the Engagement Letter provides that the Engagement Letter may not be amended or modified except in writing signed by each party thereto.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and by their signatures to this Amendment, CCM and Client hereby amend the Engagement Letter in the following manner:
1. Definitions. Unless otherwise indicated herein, words and terms which are defined in the Engagement Letter shall have the same meaning where used in this Amendment without any definition included herein.
2. Amendments to the Engagement Letter.
(a) Section 1 of the Engagement Letter is hereby amended in its entirety to read as follows:
1
“1. Fee and Expenses. Client shall pay CCM a transaction fee (the “Transaction Fee”)
in consideration for the services provided hereunder in an amount equal to 150,000 shares of common stock (the “Shares”) of the publicly listed post-business combination company (the “Post-Closing Company”) which shares shall be issued to CCM (or its affiliated designee) in book entry form at the close of the Transaction and shall be duly authorized, validly issued, fully paid and non-assessable when issued. Client agrees that it will use reasonable best efforts to file with the Securities and Exchange Commission (at Client’s sole cost and expense) a registration statement registering the resale of the Shares (the “Registration Statement”) as promptly as practicable following the issuance thereof to CCM (or its designee), and in any case within thirty (30) days of such issuance, and shall use its reasonable best efforts to have the Registration Statement declared effective as soon as practicable after the filing thereof. Client agrees to cause the Registration Statement, or another shelf registration statement that includes the Shares, to remain effective until the earliest of (i) the second anniversary of the date on which the Registration Statement is declared effective, (ii) the date on which CCM ceases to hold any Shares covered by such Registration Statement, or (iii) the first date on which CCM is able to sell all of its Shares issued hereunder under Rule 144 without limitation as to the manner of sale or the amount of such securities that may be sold and without the requirement for Client to be in compliance with the current public information required under Rule 144(c)(1) (or Rule 144(i)(2), if applicable).
The fees described in this Section 1 are compensation for the Engagement, which consists of work directly related to the Transaction. Any work outside of the scope of the Engagement shall be subject to additional compensation as separately agreed by the parties hereto.
Client also agrees to reimburse CCM upon consummation of the Transaction or upon termination of this letter agreement as amended from time to time, for CCM’s reasonable and documented out-of-pocket expenses, including the reasonable fees and disbursements of outside attorneys arising in connection with any matter referred to herein, whether or not a Transaction is consummated, plus any sales, use or similar taxes (including additions to such taxes, if any) on any such expenses.”
(b) Section 11 is hereby added to the Engagement Letter and it shall read as follows:
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“11. Lock-Up.
(a) CCM hereby agrees not to, during the period (the “Lock-Up Period”) commencing from the Closing and ending on the earliest of (x) one hundred eighty (180) days after the Closing; provided, however, that in the event that Purchaser (as defined in that certain Securities Purchase Agreement by and among Successor, Psyence and the other parties thereto, dated as of January 15, 2024 (as may be amended from time to time in accordance with the terms thereof, the “Securities Purchase Agreement”) delays investment of the Subscription Amounts (as defined in the Securities Purchase Agreement) with respect to the Second Tranche Note (as defined in the Securities Purchase Agreement) due to the occurrence of an event outlined in Section 2.1(b) of the Securities Purchase Agreement, such period shall be extended by 60 days or such earlier date as the deficiency is resolved, and (y) subsequent to the Closing, the date on which the Successor consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated third party that results in all of Successor’s shareholders having the right to exchange the common shares of the Successor for cash, securities or other property, (i) lend, offer, pledge, hypothecate, encumber, donate, assign, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Shares issued or issuable to CCM pursuant to this letter agreement as it may be amended from time to time (“Restricted Securities”), (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Restricted Securities, or (iii) publicly disclose the intention to do any of the foregoing, whether any such transaction described in clauses (i), (ii) or (iii) above is to be settled by delivery of Restricted Securities or other securities, in cash or otherwise (any of the foregoing described in clauses (i), (ii) or (iii), a “Prohibited Transfer”). The foregoing sentence shall not apply to the transfer of any or all of the Restricted Securities (I) by gift, will or intestate succession upon death, (II) to any Permitted Transferee (as defined below), (III) pursuant to a court order or settlement agreement related to the distribution of assets in connection with the dissolution of marriage or civil union, or (IV) to Successor in accordance with the requirements of the Business Combination Agreement; provided, however, that in any of cases (I), (II) or (III) it shall be a condition to such transfer that the transferee executes and delivers to Successor an agreement stating that the transferee is receiving and holding the Restricted Securities subject to the provisions of this Section 11 applicable to CCM, and there shall be no further transfer of such Restricted Securities except in accordance with such section. As used in this letter agreement as amended from time to time, the term “Permitted Transferee” shall mean: (A) if the holder is an individual, members of the holder’s immediate family (for purposes hereof, “immediate family” shall mean with respect to any natural person, any of the following: such person’s spouse or domestic partner, the siblings of such person and his or her spouse or domestic partner, and the direct descendants and ascendants (including adopted and step children and parents) of such person and his or her spouse or domestic partner and siblings), (B) any trust for the direct or indirect benefit of the holder or the immediate family of the holder, (C) if the holder is a trust, to the trustor or beneficiary of such trust or to the estate of a beneficiary of such trust, (D) if the holder is an entity, as a distribution to limited partners, shareholders, members of, or owners of similar equity interests in the holder upon the liquidation and dissolution of the holder, and (E) to any affiliate of the holder. CCM further agrees to execute such agreements as may be reasonably requested by Successor that are consistent with the foregoing or that are necessary to give further effect thereto.
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(b) If any Prohibited Transfer is made or attempted contrary to the provisions of this Section 11, such purported Prohibited Transfer shall be null and void ab initio, and Successor shall refuse to recognize any such purported transferee of the Restricted Securities as one of its equity holders for any purpose. In order to enforce this Section 11, Successor may impose stop-transfer instructions with respect to the Restricted Securities of CCM (and Permitted Transferees and assigns thereof) until the end of the Lock-Up Period.
(c) During the Lock-Up Period, each certificate evidencing any Restricted Securities shall be stamped or otherwise imprinted with a legend in substantially the following form, in addition to any other applicable legends:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN AN ENGAGEMENT LETTER, DATED FEBRUARY 9, 2023, AS AMENDED ON JANUARY 22, 2024, BY AND AMONG J.V.B. FINANCIAL GROUP, LLC AND NEWCOURT ACQUISITION CORP (ALONG WITH ANY SUCCESSORS THERETO, THE “ISSUER”). A COPY OF THE ENGAGEMENT LETTER, AS AMENDED, WILL BE FURNISHED WITHOUT CHARGE BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST.”
(d) In the event of any conflict or inconsistency between this Section 11 and any agreement between CCM and Client entered into prior to the Closing, this Section 11 shall control.
(e) The parties hereto agree that irreparable damage would occur if any of the provisions contained in paragraphs (a) through (c) of this Section 11 (the “Lockup Provisions”) and the registration rights obligations set forth in Section 1were not performed in accordance with the terms hereof, and, accordingly, that the parties shall be entitled to an injunction or injunctions to prevent breaches of the Lockup Provisions and such registration rights obligations or to enforce specifically the performance of the terms and provisions thereof, without proof of actual damages or otherwise, in addition to any other remedy to which they are entitled at law or in equity. Each of the parties hereto hereby further waives (i) any defense in any action for specific performance that a remedy at law would be adequate, and (ii) any requirement under any law to post security or a bond as a prerequisite to obtaining equitable relief.”
(f) Notwithstanding anything contained herein to the contrary, if any other lock-up agreement in existence on the date of the Closing is amended or modified, or any provision therein is waived, in such a manner that results in such lock-up agreement having less restrictive terms and conditions than those set forth in this Section 11, then, effective as of the amendment, modification or waiver of such other lock-up agreement, this Section 11 shall automatically be deemed to be amended or modified to reflect the terms and conditions contained in the amendment, modification or waiver of such other lock-up agreement.
3. Continued Validity of Engagement Letter. Except as specifically amended hereby, the Engagement Letter shall remain in full force and effect and all of the rights and obligations under the Engagement Letter are affirmed. In the event of a conflict between this Amendment and the Engagement Letter, this Amendment shall control.
4. Governing Law; Dispute Resolution. This Amendment and any controversy arising out of or relating to this Amendment shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to the conflicts of law principles thereof. Section 10 of the Engagement Letter is hereby incorporated by reference into this Amendment as if such provision were set forth in full herein mutatis mutandis and shall apply hereto.
5. Counterparts. This Amendment may be executed in two or more counterparts (including facsimile or “pdf” counterparts), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written.
| J.V.B. FINANCIAL GROUP, LLC | ||
| By: | /s/ Jerry Serowik | |
| Name: | Jerry Serowik | |
| Title: | Head of Capital Markets | |
| NEWCOURT ACQUISITION CORP | ||
| Name: | Marc Balkin | |
| By: | /s/ Marc Balkin | |
| Title: | Chief Executive Officer | |
| PSYENCE BIOMEDICAL LTD | ||
| By: | /s/ Jody Aufrichtig | |
| Name: | Jody Aufrichtig | |
| Title: | Chairman of the Board and Strategic Business Development Officer | |
Exhibit 4.13
Execution Version
FEE MODIFICATION AGREEMENT
January 25, 2024
WHEREAS, pursuant to that certain Underwriting Agreement between Newcourt Acquisition Corp (together with any successor entity thereto, the “Company”) and Cantor Fitzgerald & Co., as Representative of the several Underwriters (“CF&CO”), dated October 19, 2021 (as may be amended from time to time, the “Underwriting Agreement”), entered into in connection with the Company’s initial public offering (“IPO”), CF&CO is entitled to deferred underwriting commissions of $5,567,500 in the aggregate (after giving effect to the waiver (the “Waiver”) of 50% of the original $11,135,000 deferred underwriting fee, which waiver CF&CO hereby reaffirms) (the “Deferred Fee”), upon the consummation of a Business Combination. Capitalized terms used herein and not defined shall have the respective meanings ascribed to such terms in the Underwriting Agreement.
WHEREAS, the Company has entered into that certain Amended and Restated Business Combination Agreement, dated as of July 31, 2023 (as may be amended from time to time, the “Business Combination Agreement,” and the transactions contemplated thereby, the “Transaction”) with Psyence Biomed II Corp. (including any affiliates thereof, “Psyence”) and certain other parties. For the avoidance of doubt, following the Transaction with Psyence, for purposes hereof, all references to the “Company” herein shall also refer to any public successor entity to the Company following the Transaction, in particular “Psyence Biomedical Ltd.,” the contemplated public entity parent to the Company (the “Successor”).
WHEREAS, as of the date hereof, CF&CO has become a party to that certain lock-up agreement by and among the Successor, the Company and certain other shareholders of the Successor (the “Lock-Up Agreement”), with respect to (x) 187,000 New Common Shares (as defined herein) and (y) 93,500 warrants to purchase New Common Shares, in each case, purchased in a private placement in connection with the Company’s IPO (collectively, the “CF&CO IPO PP Securities”).
For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and CF&CO (collectively the “Parties” and each, a “Party”), hereby agree as follows:
| 1. | Fee Reduction: In the event that the Company consummates the Transaction, |
| (a) | CF&CO agrees that it will forfeit the entirety of the $5,567,500 Deferred Fee that would otherwise be payable by the Company to CF&CO pursuant to the Underwriting Agreement, and, in lieu thereof, and in satisfaction in full of the obligations to deliver the Deferred Fee to CF&CO, the Company shall instead pay CF&CO, upon the closing of the Transaction (the “Closing”), a non-refundable fee equal to 150,000 shares (the “CF&CO Fee Shares”) of the publicly traded common equity securities of the Successor, as the public entity that survives the Transaction (together with any equity securities issued or delivered in exchange for such securities, the “New Common Shares”). |
| (b) | For the avoidance of doubt, (i) such agreements apply only to the consummation of the Transaction and not to any other potential Business Combination that may be contemplated or consummated by the Company, (ii) the Resale Rights Obligations (as defined below) hereunder apply only to the CF&CO Fee Share issuable hereunder and the CF&CO IPO PP Securities for so long as CF&CO (or any of its affiliates) owns or may be deemed the beneficial owner of such shares, and (iii) the Parties hereto acknowledge and agree that the delivery hereunder of the CF&CO Fee Shares (in accordance with Section 4) and the satisfaction in full of the Resale Rights Obligations (in accordance with Section 2), together with the other mutual agreements, terms, covenants and obligations hereunder, in each case, shall represent, and are intended to be treated as, having satisfied the Company’s obligations under the Underwriting Agreement with regard to the Deferred Fee, such that, following execution hereof and delivery of the CF&CO Fee Shares hereunder in accordance with terms of this Agreement (including, for the avoidance of doubt, the fulfillment in full of the Resale Rights Obligations), CF&CO shall have no continuing rights or remedies pursuant to the Underwriting Agreement, except to the sole extent expressly otherwise agreed herein, subject, in all events, to the modifications and terms represented hereby. |
| 2. | Registration Rights: The Company shall issue the CF&CO Fee Shares to CF&CO with “registration rights,” enabling CF&CO to resell, freely trade and otherwise dispose of the CF&CO Fee Shares (as further described below), consistent with the “registration rights” received by any investor in any “public investment in private equity” (or “PIPE”) that closes substantially concurrently with the Transaction (or if no PIPE closes in connection therewith, then substantially consistent with those received by the Sponsor with respect to any of the equity securities it holds in the Company); and in connection therewith, the Company hereby agrees that it (or any Successor) shall: |
| (a) | Prepare and, as soon as practicable, but in no event later than sixty (60) days following the Closing, use its commercially reasonable efforts to file with the United States Securities and Exchange Commission (the “SEC”) a re-sale registration statement on Form F-1 (or S-1 or any successor form, as applicable) (the “Resale Registration Statement”) to register the re-sale of the CF&CO Fee Shares and the CF&CO IPO PP Securities (collectively, the “CF&CO Securities”) by CF&CO; |
| (b) | Use its commercially reasonable efforts to cause the Resale Registration Statement to be declared effective by the SEC by (i) the 90th calendar day after the date of the initial filing thereof, if the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Resale Registration Statement will not be reviewed by the SEC, (ii) by the 120th calendar day after the date of the initial filing thereof, if such Resale Registration Statement is subject to review by the SEC, or (iii) in any event, no later than the earlier of (x) 180th calendar day after the Closing and (y) the expiration of the Lock-up Period; |
| (c) | Use its commercially reasonable efforts to maintain (i) the effectiveness of the Resale Registration Statement and (ii) the authorization for quotation and listing of the New Common Shares on the Nasdaq Stock Market (or any other “national securities exchange” registered with the SEC under Section 6 of the Exchange Act), in each case, until the earlier of (x) the date upon which all of the CF&CO Securities have been sold, disposed or otherwise transferred by CF&CO (and/or any of its affiliates) or are otherwise no longer outstanding and (y) the two (2) year anniversary of the date of the effectiveness of the Resale Registration Statement; |
| (d) | From and after the Closing and for so long as the Resale Rights Obligations shall be required to continue hereunder, file timely (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Sections 13(a) or 15(d) of the Exchange Act; |
| (e) | Upon CF&CO’s request, promptly (i) instruct and cause its legal counsel to promptly provide the necessary “blanket” legal opinion(s) to the Company’s duly appointed transfer agent for the New Common Shares (the “Transfer Agent”) so that such Transfer Agent may remove any “restrictive legends” from the CF&CO Securities, (ii) instruct and cause its Transfer Agent to remove any such “restrictive legends” from the CF&CO Securities and (iii) take any such further action as CF&CO may reasonably request, in each case, to enable CF&CO to promptly resell, freely trade or otherwise dispose of the CF&CO Securities, either (x) in reliance upon the Registration Statement, or (y) without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act (or any successor rule promulgated thereafter by the SEC); and |
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| (f) | Upon reasonable request and reasonable advance notice by CF&CO, deliver to CF&CO a written certification of a duly authorized officer as to whether it has complied with the requirements set forth in Sections 2(d) & (e) above (such obligations set forth in Sections 2(a)-(f) above, the “Resale Rights Obligations”). |
| 3. | Issuance of CF&CO Fee Shares Without Restrictions: The Company (or its Successor) hereby agrees that, upon the Closing, the Company shall issue, transfer and deliver, or cause to be issued, transferred and delivered, the entire amount of the CF&CO Fee Shares to CF&CO in book-entry form by irrevocable instruction from the Company to the Transfer Agent. Any CF&CO Fee Shares issued, transferred and delivered to CF&CO shall be validly issued, fully paid and non-assessable and free and clear of all liens, encumbrances and other restrictions on the pledge, sale or other transfer of such CF&CO Fee Shares (collectively, any “Restrictions”), other than (a) contractual transfer restrictions hereunder during the Lock-up Period (as defined below), (b) transfer restrictions under applicable federal and state securities laws during the Lock-up Period, and (c) liens, claims or encumbrances imposed due to actions of CF&CO. |
| 4. | Company Default: Without limiting any rights or remedies available to CF&CO hereunder, in the event that the Company (or its Successor) is unable to, or otherwise does not, (i) issue, transfer and deliver or cause to be issued, transferred and delivered, the full amount of the CF&CO Fee Shares to CF&CO promptly upon the Closing free and clear of all Restrictions, or (ii) comply with, or cause to be complied with, all of the Resale Rights Obligations, such that CF&CO is unable to promptly resell, freely trade or otherwise dispose of the CF&CO Securities immediately upon the expiration of the Lock-up Period, then, in each case, at the sole election of CF&CO made by written notice provided to the Company, the Company shall promptly (but in any event within five (5) Business Days) after receipt of such written notice pay to CF&CO the entire amount of the Deferred Fee, in cash, in an amount equal to $5,567,500, as contemplated by the Underwriting Agreement, as modified by the Waiver (any such payment, the “Default Payment”). However, in the event that, prior to the expiration of the Lock Period, CF&CO becomes aware of facts and circumstances that it reasonably believes would constitute a breach of the Company’s Resale Rights Obligations hereunder, CF&CO shall promptly notify the Company of the same and permit the Company a reasonable opportunity (up to the earlier of (x) thirty (30) calendar days and (y) the expiration of the Lock-up Period) to cure or otherwise mitigate any effects thereof, provided, however that any failure by CF&CO to notify the Company of any such failure shall not relieve the Company of timely fulfilment of its Resale Rights Obligations hereunder. |
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| 5. | Lock-Up: |
| (a) | CF&CO hereby agrees not to, during the period (the “Lock-Up Period”) commencing on the Closing and ending on the earliest of (x) one hundred eighty (180) days after the Closing, provided, however, that in the event that Purchaser (as defined in that certain Securities Purchase Agreement by and among Successor, Psyence and the other parties thereto, dated as of January 15, 2024 (as may be amended from time to time in accordance with the terms thereof, the “Securities Purchase Agreement”) delays investment of the Subscription Amounts (as defined in the Securities Purchase Agreement) with respect to the Second Tranche Note (as defined in the Securities Purchase Agreement) due to the occurrence of an event outlined in Section 2.1(b) of the Securities Purchase Agreement, such period shall be extended by 60 days or such earlier date as the deficiency is resolved and (y) subsequent to the Closing, the date on which the Successor consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated third party that results in all of Successor’s shareholders having the right to exchange their New Common Shares for cash, securities or other property, (i) lend, offer, pledge, hypothecate, encumber, donate, assign, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any CF&CO Fee Shares issued or issuable to CF&CO pursuant to this Agreement (the “Restricted Securities”), (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Restricted Securities, or (iii) publicly disclose the intention to do any of the foregoing, whether any such transaction described in clauses (i), (ii) or (iii) above is to be settled by delivery of Restricted Securities or other securities, in cash or otherwise (any of the foregoing actions described in clauses (i), (ii) or (iii), a “Prohibited Transfer”). The foregoing sentence shall not apply to the transfer of any or all of the Restricted Securities (I) by gift, will or intestate succession upon death, (II) to any Permitted Transferee (defined below), or (III) pursuant to a court order or settlement agreement related to the distribution of assets in connection with the dissolution of marriage or civil union or (IV) to the Successor; provided, however, that in any of cases (I), (II) or (III) it shall be a condition to such transfer that the transferee executes and delivers to Successor an agreement stating that the transferee is receiving and holding the Restricted Securities subject to the provisions of this Agreement applicable to CF&CO, and there shall be no further transfer of such Restricted Securities except in accordance with this Agreement. As used in this Agreement, the term “Permitted Transferee” shall mean: (A) if the holder is an individual, members of the holder’s immediate family (for purposes of this Agreement, “immediate family” shall mean with respect to any natural person, any of the following: such person’s spouse or domestic partner, the siblings of such person and his or her spouse or domestic partner, and the direct descendants and ascendants (including adopted and step children and parents) of such person and his or her spouse or domestic partner and siblings), (B) any trust for the direct or indirect benefit of the holder or the immediate family of the holder, (C) if the holder is a trust, to the trustor or beneficiary of such trust or to the estate of a beneficiary of such trust, (D) if the holder is an entity, as a distribution to limited partners, shareholders, members of, or owners of similar equity interests in the holder upon the liquidation and dissolution of the holder and (E) to any affiliate of the holder. CF&CO further agrees to execute such agreements as may be reasonably requested by Successor that are consistent with the foregoing or that are necessary to give further effect thereto. However, for the avoidance of doubt the restrictions on Prohibited Transfers set forth in this Section 5(a) shall not apply to, and Restricted Securities shall not include, any other equity securities of the Company (or any Successor) that CF&CO (and/or any of its affiliates) may beneficially own or acquire separate and apart from the CF&CO Fee Shares set forth herein, including any New Common Shares or other common equity securities or warrants of the Company (or any Successor) acquired by CF&CO subsequent to the Company’s IPO, and any exercise thereof, whether “cashless” or “net,” it being understood that any New Common Shares received upon such exercise will remain also not be subject to the restrictions of this Section 5(a) during the Lock-up Period. |
| (b) | If any Prohibited Transfer is made or attempted contrary to the provisions of this Agreement, such purported Prohibited Transfer shall be null and void ab initio, and Successor shall refuse to recognize any such purported transferee of the Restricted Securities as one of its equity holders for any purpose. In order to enforce this Section 5, Successor may impose stop-transfer instructions with the Transfer Agent with respect to the Restricted Securities of CF&CO (and Permitted Transferees and assigns thereof) until the end of the Lock-Up Period. |
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| (c) | During the Lock-Up Period, each certificate evidencing any Restricted Securities shall be stamped or otherwise imprinted with a legend in substantially the following form, in addition to any other applicable legends: |
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN A FEE MODIFICATION AGREEMENT, DATED AS OF January 22, 2024, BY AND AMONG NEWCOURT ACQUISITION CORP (ALONG WITH ANY SUCCESSORS THERETO, THE “ISSUER”) AND CANTOR FITZGERALD & CO. A COPY OF SUCH AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST.”
| (d) | In the event of any conflict or inconsistency between this Section 5 and any agreement between CF&CO and the Company entered into prior to the Closing, this Section 5 shall control. |
| (e) | NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO AGREEMENTS AMONG NEW YORK RESIDENTS ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS OF SUCH JURISDICTION. ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES OR THE COURTS OF THE STATE OF NEW YORK, IN EACH CASE, LOCATED IN THE CITY AND COUNTY OF NEW YORK, AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. |
| (f) | EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. |
| (g) | The parties hereto agree that irreparable damage would occur if any of the provisions contained in paragraphs (a) through (c) of this Section 5 (the “Lockup Provisions”) and the Resale Rights Obligations were not performed in accordance with the terms hereof, and, accordingly, that the parties shall be entitled to an injunction or injunctions to prevent breaches of the Lockup Provisions and the Resale Rights Obligations or to enforce specifically the performance of the terms and provisions thereof, without proof of actual damages or otherwise, in addition to any other remedy to which they are entitled at law or in equity; provided, however, in the event of any payment by the Company (or Successor) of any Default Payment hereunder, the terms and provisions set forth in this Section 5(g) shall not be available as remedies to CF&CO, though CF&CO shall not be limited, as a result of this clause of Section 5(g) from seeking other damages to which they may be entitled hereunder solely as a result of the delivery and receipt of Default Payments. Each of the parties hereto hereby further waives (i) any defense in any action for specific performance that a remedy at law would be adequate and (ii) any requirement under any law to post security or a bond as a prerequisite to obtaining equitable relief. |
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| (h) | Notwithstanding anything contained herein to the contrary, if the Lock-Up Agreement or any other lock-up arrangement between the Company (or any Successor) and any of its shareholders in existence on the date of the Closing is amended, modified or released, or any provision therein is amended, modified or waived, in such a manner that results in such Lock-Up Agreement or arrangement having less restrictive terms and conditions than those Lockup Provisions set forth in this Section 5, then, effective as of such amendment, release, modification or waiver of such other Lock-Up Agreement or arrangement, the Lockup Provisions set forth in this Section 5 shall automatically be deemed to also be amended, modified, released or waived to reflect the terms and conditions contained in the amendment, modification, release or waiver of such other Lock-Up Agreement or arrangement. |
| 6. | No Fees Refundable: For the avoidance of doubt, once paid or issued, no fees payable hereunder, whether in cash or New Common Shares, respectively, will be refundable under any circumstances. |
| 7. | Further Assurances: Each of the Company and CF&CO will, upon request of the other, execute such other documents, instruments or agreements as may be reasonable or necessary to effectuate the agreements set forth in this letter agreement (the “Agreement”). |
| 8. | Confidentiality: This Agreement (including the terms set forth herein) is confidential, and except as set forth in this Section 8, neither this Agreement (including the terms set forth herein) nor CF&CO’s role in the Transaction may be filed publicly or otherwise disclosed by the Company to any other party (except to Psyence) without such Party’s prior written consent, not to be unreasonably withheld, delayed or conditioned. Notwithstanding the foregoing, if the Company (or the Successor) is required by applicable law, regulation, SEC or applicable stock exchange requirement or legal process to disclose this Agreement or its terms, the Company (or the Successor) may do so without the consent of CF&CO, so long as it provides CF&CO with a reasonable opportunity to review and comment on such disclosure prior to its filing, publication or dissemination and the Company (or the Successor) considers in good faith any reasonable comments provided by CF&CO with respect to such disclosure. |
| 9. | Termination: This agreement will terminate automatically upon the earlier of: |
| (a) | the consummation by the Company of the Transaction and (x) the issuance, transfer and delivery of the CF&CO Fee Shares to CF&CO, free and clear of all Restrictions, upon the terms set forth herein, (y) the effectiveness of the Resale Registration Statement related thereto, and (z) the removal of all restrictive legends on all CF&CO Securities enabling CF&CO to promptly resell, freely trade or otherwise dispose of such CF&CO Securities; and |
| (b) | the termination of the Business Combination Agreement and/or the abandonment by the Company of the Transaction. |
In the event of a termination pursuant to Section 9(b) above, (x) the Company agrees to provide prompt notice of such decision to terminate the Business Combination Agreement and/or abandon the Transaction to CF&CO; and (y) the Deferred Fee shall become due and payable by the Company to CF&CO, in cash, in an amount equal to $5,567,500, upon the consummation of any Business Combination (other than the Transaction), as contemplated by the Underwriting Agreement. However, assuming that no termination occurs pursuant to Section 9(b) above, nothing contained in this paragraph shall otherwise be construed or interpreted as affecting the extent to which the Underwriting Agreement is considered modified hereby, to the extent set forth and agreed by the parties hereto herein.
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| 10. | Satisfaction of Underwriting Agreement Obligations; Exclusive Remedies: Each of the Company and CF&CO hereby agree that the terms of this Agreement are intended to supersede, and shall be treated as amending and replacing in their entirety, (i) the terms and provisions of the Underwriting Agreement relating to the Deferred Fee or the amount, type or timing of its payment under the Underwriting Agreement. Furthermore, assuming that this Agreement is not terminated pursuant to Section 9(b) hereof, any remedies available to CF&CO hereunder shall serve as the sole and exclusive remedies of CF&CO with regard to the subject matters hereof and with regard to the obligations in respect of Deferred Fee under the Underwriting Agreement. |
| 11. | Successor: This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. Prior to the Closing, if the Successor is to be an entity other than Psyence Biomedical Ltd., and if the agreements executed by the Company in connection therewith do not directly or indirectly expressly provide for the assumption by such Successor of the Company’s obligations hereunder, the Company shall cause such Successor to promptly (x) execute and deliver to CF&CO a joinder agreement, in form and substance reasonably satisfactory to CF&CO, pursuant to which the Successor shall join this Agreement as a signatory and a party and thus be subject to all of the terms and conditions set forth herein, and (y) comply with the obligations and covenants of the Company set forth herein. |
| 12. | Entire Agreement; Interpretation. This Agreement, together with the terms of the Underwriting Agreement expressly incorporated herein pursuant to Section 13 hereof, represent the full agreement and understanding between the parties hereto with respect to the subject matters hereof. The parties to this Agreement hereby acknowledge and agree that the terms and provisions hereof are intended and shall be construed as modifying and superseding terms and provisions of the Underwriting Agreement with regard to Deferred Underwriting Commissions and the Deferred Fee, and no party shall at any time after this Agreement is executed take actions or have rights to pursue remedies other than as set forth and agreed herein with respect to the subject matters hereof. |
| 13. | Incorporation by Reference: The terms of this Agreement shall be interpreted, enforced, governed by and construed in a manner consistent with the provisions of the Underwriting Agreement. Without limiting the foregoing, Sections 10.1, 10.2, 10.3, 10.5, 10.6, 10.7, 10.8, 10.9 and 10.10 of the Underwriting Agreement are hereby incorporated by reference into this letter agreement, provided, however, that the terms and provisions set forth in Sections 5(f)-(g) above shall govern, in the event of any inconsistencies between Sections 5(f)-(g) hereof and any of the foregoing sections of the Underwriting Agreement, with regard to any actions, disputes or claims arising under this Agreement. Except as expressly set forth herein, the provisions of the Underwriting Agreement are not amended and remain in full force and effect. |
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IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be executed and delivered by its duly authorized signatory as of the date first set forth above.
| CANTOR FITZGERALD & CO. | ||
| By: | /s/ Sage Kelly | |
| Name: | Sage Kelly | |
| Title: | Global Head of Investment Banking | |
| NEWCOURT ACQUISITION CORP | ||
| By: | /s/ Marc Balkin | |
| Name: | Marc Balkin | |
| Title: | Chief Executive Officer | |
Acknowledged and agreed to:
| PSYENCE BIOMED LTD. | ||
| By: | /s/ Neil Maresky | |
| Name: | Neil Maresky | |
| Title: | CEO and Director | |
(Signature page to Fee Reduction Agreement)
Exhibit 4.14
Execution Version
AMENDMENT TO ENGAGEMENT LETTER
This Amendment (this “Amendment”) is made and entered into as of January 25, 2024 (the “Amendment Effective Date”) by and between Maxim Group LLC (“Maxim”) and Psyence Group Inc (the “Company”).
RECITALS
WHEREAS, Maxim and the Company are party to that certain Engagement Letter dated as of April 28, 2023 (the “Engagement Letter”);
WHEREAS, the Company has entered into that certain Amended and Restated Business Combination Agreement, dated as of July 31, 2023 (as may be amended from time to time, the “Business Combination Agreement,” and the transactions contemplated thereby, the “Transaction”) with Psyence Biomed II Corp. (including any affiliates thereof, “Psyence”) and certain other parties. For the avoidance of doubt, for purposes hereof, all references to “the Company” herein shall also refer to any successor entity to The Company following the Transaction. For the avoidance of doubt, following the Transaction with Psyence, for purposes hereof, all references to the “Company” herein shall also refer to “Psyence Biomedical Ltd.”, the public entity subsidiary of the Company (the “Successor”);
WHEREAS, in connection with the Business Combination Agreement and the closing of the Transaction (the “Closing”), Maxim and the Company desire to amend the Engagement Letter to modify the Transaction Fee (as defined below) payable by the Company to Maxim pursuant to the Engagement Letter as amended hereby; and
WHEREAS, Section 12 of the Engagement Letter provides that the Engagement Letter may not be amended or modified except in writing signed by each party thereto.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and by their signatures to this Amendment, Maxim and the Company hereby amend the Engagement Letter in the following manner:
1. Definitions. Unless otherwise indicated herein, words and terms which are defined in the Engagement Letter shall have the same meaning when used in this Amendment without any definition included herein.
2. Amendments to the Engagement Letter.
(a) Section 3 of the Engagement Letter (Compensation) is hereby amended in its entirety to read as follows:
“1. Fee and Expenses. The Company shall pay Maxim a transaction fee (the “Transaction Fee”) in consideration for the services provided hereunder in an amount equal to 150,000 shares of common stock (the “Shares”) of the publicly listed post-business combination company (the “Post-Closing Company”) which shares shall be issued to Maxim (or its affiliated designee) in book entry form at the close of the Transaction and shall be duly authorized, validly issued, fully paid and non-assessable when issued. The Company agrees that it will use reasonable best efforts to file with the Securities and Exchange Commission (at the Company’s sole cost and expense) a registration statement registering the resale of the Shares (the “Registration Statement”) as promptly as practicable following the issuance thereof to Maxim (or its designee), and in any case within thirty (30) days of such issuance, and shall use its reasonable best efforts to have the Registration Statement declared effective as soon as practicable after the filing thereof. The Company agrees to cause the Registration Statement, or another shelf registration statement that includes the Shares, to remain effective until the earliest of (i) the second anniversary of the date on which the Registration Statement is declared effective, (ii) the date on which Maxim ceases to hold any Shares covered by such Registration Statement, or (iii) the first date on which Maxim is able to sell all of its Shares issued hereunder under Rule 144 without limitation as to the manner of sale or the amount of such securities that may be sold and without the requirement for the Company to be in compliance with the current public information required under Rule 144(c)(1) (or Rule 144(i)(2), if applicable).
The fees described in this Section 3 are compensation for the Engagement, which consists of work directly related to the Transaction. Any work outside of the scope of the Engagement shall be subject to additional compensation as separately agreed by the parties hereto.”
(b) Section 19 is hereby added to the Engagement Letter and it shall read as follows:
“Section 19. Lock-Up.
(a) Maxim hereby agrees not to, during the period (the “Lock-Up Period”) commencing from the Closing and ending on the earliest of (x) one hundred eighty (180) days after the Closing; provided, however, that in the event that Purchaser (as defined in that certain Securities Purchase Agreement by and among Successor, and the other parties thereto, dated as of January 15, 2024 (as may be amended from time to time in accordance with the terms thereof, the “Securities Purchase Agreement”) delays investment of the Subscription Amounts (as defined in the Securities Purchase Agreement) with respect to the Second Tranche Note (as defined in the Securities Purchase Agreement) due to the occurrence of an event outlined in Section 2.1(b) of the Securities Purchase Agreement, such period shall be extended by 60 days or such earlier date as the deficiency is resolved, and (y) subsequent to the Closing, the date on which the Successor consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated third party that results in all of Successor’s shareholders having the right to exchange the common shares of the Successor for cash, securities or other property, (i) lend, offer, pledge, hypothecate, encumber, donate, assign, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Shares issued or issuable to Maxim pursuant to this letter agreement as it may be amended from time to time (“Restricted Securities”), (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Restricted Securities, or (iii) publicly disclose the intention to do any of the foregoing, whether any such transaction described in clauses (i), (ii) or (iii) above is to be settled by delivery of Restricted Securities or other securities, in cash or otherwise (any of the foregoing described in clauses (i), (ii) or (iii), a “Prohibited Transfer”). The foregoing sentence shall not apply to the transfer of any or all of the Restricted Securities (I) by gift, will or intestate succession upon death, (II) to any Permitted Transferee (as defined below), (III) pursuant to a court order or settlement agreement related to the distribution of assets in connection with the dissolution of marriage or civil union, or (IV) to Successor in accordance with the requirements of the Business Combination Agreement; provided, however, that in any of cases (I), (II) or (III) it shall be a condition to such transfer that the transferee executes and delivers to Successor an agreement stating that the transferee is receiving and holding the Restricted Securities subject to the provisions of this Section 19 applicable to Maxim, and there shall be no further transfer of such Restricted Securities except in accordance with such section. As used in this letter agreement as amended from time to time, the term “Permitted Transferee” shall mean: (A) if the holder is an individual, members of the holder’s immediate family (for purposes hereof, “immediate family” shall mean with respect to any natural person, any of the following: such person’s spouse or domestic partner, the siblings of such person and his or her spouse or domestic partner, and the direct descendants and ascendants (including adopted and step children and parents) of such person and his or her spouse or domestic partner and siblings), (B) any trust for the direct or indirect benefit of the holder or the immediate family of the holder, (C) if the holder is a trust, to the trustor or beneficiary of such trust or to the estate of a beneficiary of such trust, (D) if the holder is an entity, as a distribution to limited partners, shareholders, members of, or owners of similar equity interests in the holder upon the liquidation and dissolution of the holder, and (E) to any affiliate of the holder. Maxim further agrees to execute such agreements as may be reasonably requested by Successor that are consistent with the foregoing or that are necessary to give further effect thereto.
(b) If any Prohibited Transfer is made or attempted contrary to the provisions of this Section 19, such purported Prohibited Transfer shall be null and void ab initio, and Successor shall refuse to recognize any such purported transferee of the Restricted Securities as one of its equity holders for any purpose. In order to enforce this Section 19, Successor may impose stop-transfer instructions with respect to the Restricted Securities of Maxim (and Permitted Transferees and assigns thereof) until the end of the Lock-Up Period.
(c) During the Lock-Up Period, each certificate evidencing any Restricted Securities shall be stamped or otherwise imprinted with a legend in substantially the following form, in addition to any other applicable legends:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN AN ENGAGEMENT LETTER, DATED APRIL 28, 2023, AS AMENDED ON JANUARY 25, 2024, BY AND AMONG MAXIM GROUP LLC AND PSYENCE GROUP INC. (ALONG WITH ANY SUCCESSORS THERETO, THE “ISSUER”). A COPY OF THE ENGAGEMENT LETTER, AS AMENDED, WILL BE FURNISHED WITHOUT CHARGE BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST.”
(d) In the event of any conflict or inconsistency between this Section 19 and any agreement between Maxim and the Company entered into prior to the Closing, this Section 19 shall control.
(e) The parties hereto agree that irreparable damage would occur if any of the provisions contained in paragraphs (a) through (c) of this Section 19 (the “Lockup Provisions”) and the registration rights obligations set forth in Section 19 were not performed in accordance with the terms hereof, and, accordingly, that the parties shall be entitled to an injunction or injunctions to prevent breaches of the Lockup Provisions and such registration rights obligations or to enforce specifically the performance of the terms and provisions thereof, without proof of actual damages or otherwise, in addition to any other remedy to which they are entitled at law or in equity. Each of the parties hereto hereby further waives (i) any defense in any action for specific performance that a remedy at law would be adequate, and (ii) any requirement under any law to post security or a bond as a prerequisite to obtaining equitable relief.
(f) Notwithstanding anything contained herein to the contrary, if any other lock-up agreement in existence on the date of the Closing is amended or modified, or any provision therein is waived, in such a manner that results in such lock-up agreement having less restrictive terms and conditions than those set forth in this Section 19, then, effective as of the amendment, modification or waiver of such other lock-up agreement, this Section 19 shall automatically be deemed to be amended or modified to reflect the terms and conditions contained in the amendment, modification or waiver of such other lock-up agreement.”
3. Continued Validity of Engagement Letter. Except as specifically amended hereby, the Engagement Letter shall remain in full force and effect and all of the rights and obligations under the Engagement Letter are affirmed. In the event of a conflict between this Amendment and the Engagement Letter, this Amendment shall control.
4. Counterparts. This Amendment may be executed in two or more counterparts (including facsimile or “pdf” counterparts), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written.
| MAXIM GROUP LLC | ||
| By: | /s/ Lester Brafman | |
| Name: | Lester Brafman | |
| Title: | CEO | |
| PSYENCE GROUP INC | ||
| By: | /s/ Neil Maresky | |
| Name: | Neil Maresky | |
| Title: | CEO and Director | |
Exhibit 4.15
FORM OF REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of January 25, 2024, is by and among Psyence Biomedical Ltd., a corporation existing under the laws of Ontario, Canada (the “Company”), and the undersigned buyers (each, a “Buyer,” and collectively, the “Buyers”).
RECITALS
A. In connection with the Securities Purchase Agreement by and among the parties hereto, dated as of January 15, 2024 (the “Securities Purchase Agreement”), the Company has agreed, upon the terms and subject to the conditions of the Securities Purchase Agreement, to issue and sell to each Buyer the Notes (as defined in the Securities Purchase Agreement) which will be convertible into Underlying Shares (as defined in the Securities Purchase Agreement) in accordance with the terms of the Notes.
B. To induce the Buyers to consummate the transactions contemplated by the Securities Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “1933 Act”), and applicable state securities laws.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each of the Buyers hereby agree as follows:
| 1. | DEFINITIONS. |
Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Securities Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:
(a) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to “stay at home”, “shelter-in-place”, “non-essential employee” or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York generally are open for use by customers on such day.
(b) “Closing Date” shall have the meaning set forth in the Securities Purchase Agreement.
(c) “Effective Date” means the date that the applicable Registration Statement has been declared effective by the SEC.
(d) “Effectiveness Deadline” means (i) with respect to the initial Registration Statement required to be filed pursuant to Section 2(a), the earlier of the (A) 60th calendar day after the First Tranche Closing Date and (B) 2nd Business Day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Registration Statement will not be reviewed or will not be subject to further review and (ii) with respect to any additional Registration Statements that may be required to be filed by the Company pursuant to this Agreement, the earlier of the (A) 60th calendar day following the date on which the Company was required to file such additional Registration Statement and (B) 2nd Business Day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Registration Statement will not be reviewed or will not be subject to further review.
(e) “Filing Deadline” means (i) with respect to the initial Registration Statement required to be filed pursuant to Section 2(a), the 15th calendar day after the First Tranche Closing Date and (ii) with respect to any additional Registration Statements that may be required to be filed by the Company pursuant to this Agreement, the date on which the Company was required to file such additional Registration Statement pursuant to the terms of this Agreement.
(f) “First Tranche Closing Date” shall have the meaning set forth in the Securities Purchase Agreement.
(g) “Investor” means a Purchaser or any transferee or assignee of any Registrable Securities or Notes, as applicable, to whom a Purchaser assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9 and any transferee or assignee thereof to whom a transferee or assignee of any Registrable Securities or Notes, as applicable, assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9.
(h) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization or a government or any department or agency thereof.
(i) “register,” “registered,” and “registration” refer to a registration effected by preparing and filing one or more Registration Statements in compliance with the 1933 Act and pursuant to Rule 415 and the declaration of effectiveness of such Registration Statement(s) by the SEC.
(j) “Registrable Securities” means (i) the Underlying Shares, and (ii) any capital stock of the Company issued or issuable with respect to the Underlying Shares or the Notes, including, without limitation, (1) as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise (2) any Common Shares issued as a result of any “make whole,” penalty or damages provisions, of the Securities Purchase Agreement or the Notes and (2) shares of capital stock of the Company into which the Common Shares (as defined in the Notes) are converted or exchanged and shares of capital stock of a Successor Entity (as defined in the Notes) into which the Common Shares are converted or exchanged, in each case, without regard to any limitations on conversion of the Notes.
(k) “Registration Statement” means a registration statement or registration statements of the Company filed under the 1933 Act covering Registrable Securities.
(l) “Required Holders” shall mean each of [ ] and [ ] or their permitted assigns.
(m) “Required Registration Amount” means, as of any time of determination, 300% of the maximum number of Underlying Shares issuable upon conversion of the Notes (assuming for purposes hereof that any such conversion shall not take into account any limitations on the conversion of the Notes set forth in the Notes), all subject to adjustment as provided in Section 2(d) and/or Section 2(f).
(n) “Rule 144” means Rule 144 promulgated by the SEC under the 1933 Act, as such rule may be amended from time to time, or any other similar or successor rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration.
(o) “Rule 415” means Rule 415 promulgated by the SEC under the 1933 Act, as such rule may be amended from time to time, or any other similar or successor rule or regulation of the SEC providing for offering securities on a continuous or delayed basis.
(p) “SEC” means the United States Securities and Exchange Commission or any successor thereto.
| 2. | REGISTRATION. |
(a) Mandatory Registration. The Company shall prepare and, as soon as practicable, but in no event later than the Filing Deadline, file with the SEC an initial Registration Statement on Form F-3 covering the resale of all of the Registrable Securities, provided that such initial Registration Statement shall register for resale at least the number of Common Shares equal to the Required Registration Amount as of the date such Registration Statement is initially filed with the SEC; provided further that if Form F-3 is unavailable for such a registration, the Company shall use such other form as is required by Section 2(c). Such initial Registration Statement, and each other Registration Statement required to be filed pursuant to the terms of this Agreement, shall contain (except if otherwise directed by the Required Holders) the “Selling Stockholders” and “Plan of Distribution” sections in substantially the form attached hereto as Exhibit B. The Company shall use its best efforts to have such initial Registration Statement, and each other Registration Statement required to be filed pursuant to the terms of this Agreement, declared effective by the SEC as soon as practicable, but in no event later than the applicable Effectiveness Deadline for such Registration Statement.
(b) Legal Counsel. Subject to Section 5 hereof, Loeb & Loeb LLP, counsel solely to the Buyers (“Legal Counsel”) shall review and oversee any registration, solely on behalf of the Buyers, pursuant to this Section 2.
(c) Ineligibility to Use Form F-3. In the event that Form F-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on Form F-1 or another appropriate form reasonably acceptable to the Required Holders and (ii) undertake to register the resale of the Registrable Securities on Form F-3 as soon as such form is available, provided that the Company shall maintain the effectiveness of all Registration Statements then in effect until such time as a Registration Statement on Form F-3 covering the resale of all the Registrable Securities has been declared effective by the SEC and the prospectus contained therein is available for use.
(d) Sufficient Number of Shares Registered. In the event the number of shares available under any Registration Statement is insufficient to cover all of the Registrable Securities required to be covered by such Registration Statement or an Investor’s allocated portion of the Registrable Securities pursuant to Section 2(h), the Company shall amend such Registration Statement (if permissible), or file with the SEC a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover at least the Required Registration Amount as of the Trading Day immediately preceding the date of the filing of such amendment or new Registration Statement, in each case, as soon as practicable, but in any event not later than fifteen (15) days after the necessity therefor arises (but taking account of any Staff position with respect to the date on which the Staff will permit such amendment to the Registration Statement and/or such new Registration Statement (as the case may be) to be filed with the SEC). The Company shall use its best efforts to cause such amendment to such Registration Statement and/or such new Registration Statement (as the case may be) to become effective as soon as practicable following the filing thereof with the SEC, but in no event later than the applicable Effectiveness Deadline for such Registration Statement. For purposes of the foregoing provision, the number of shares available under a Registration Statement shall be deemed “insufficient to cover all of the Registrable Securities” if at any time the number of Common Shares available for resale under the applicable Registration Statement is less than the product determined by multiplying (i) the Required Registration Amount as of such time by (ii) 0.90. The calculation set forth in the foregoing sentence shall be made without regard to any limitations on conversion, amortization and/or redemption of the Notes (and such calculation shall assume (A) that the Notes are then convertible in full into Common Shares at the then prevailing Conversion Rate (as defined in the Notes) and (B) the initial outstanding principal amount of the Notes remains outstanding through the scheduled Maturity Date (as defined in the Notes) and no redemptions of the Notes occur prior to the scheduled Maturity Date).
(e) Effect of Failure to File and Obtain and Maintain Effectiveness of any Registration Statement. If (i) a Registration Statement covering the resale of all of the Registrable Securities required to be covered thereby (disregarding any reduction pursuant to Section 2(f)) and required to be filed by the Company pursuant to this Agreement is (A) not filed with the SEC on or before the Filing Deadline for such Registration Statement (a “Filing Failure”) (it being understood that if the Company files a Registration Statement without affording each Investor and Legal Counsel the opportunity to review and comment on the same as required by Section 3(c) hereof, the Company shall be deemed to not have satisfied this clause (i)(A) and such event shall be deemed to be a Filing Failure) or (B) not declared effective by the SEC on or before the Effectiveness Deadline for such Registration Statement (an “Effectiveness Failure”) (it being understood that if on the Business Day immediately following the Effective Date for such Registration Statement the Company shall not have filed a “final” prospectus for such Registration Statement with the SEC under Rule 424(b) in accordance with Section 3(b) (whether or not such a prospectus is technically required by such rule), the Company shall be deemed to not have satisfied this clause (i)(B) and such event shall be deemed to be an Effectiveness Failure), (ii) other than during an Allowable Grace Period (as defined below), on any day after the Effective Date of a Registration Statement sales of all of the Registrable Securities required to be included on such Registration Statement (disregarding any reduction pursuant to Section 2(f)) cannot be made pursuant to such Registration Statement (including, without limitation, because of a failure to keep such Registration Statement effective, a failure to disclose such information as is necessary for sales to be made pursuant to such Registration Statement, a suspension or delisting of (or a failure to timely list) the Common Shares on the Principal Market (as defined in the Securities Purchase Agreement) or any other limitations imposed by the Principal Market, or a failure to register a sufficient number of Common Shares or by reason of a stop order) or the prospectus contained therein is not available for use for any reason (a “Maintenance Failure”), or (iii) if a Registration Statement is not effective for any reason or the prospectus contained therein is not available for use for any reason, and either (x) the Company fails for any reason to satisfy the requirements of Rule 144(c)(1), including, without limitation, the failure to satisfy the current public information requirement under Rule 144(c) or (y) the Company has ever been an issuer described in Rule 144(i)(1)(i) or becomes such an issuer in the future, and the Company shall fail to satisfy any condition set forth in Rule 144(i)(2) (a “Current Public Information Failure”) as a result of which any of the Investors are unable to sell Registrable Securities without restriction under Rule 144 (including, without limitation, volume restrictions), then, as partial relief for the damages to any holder by reason of any such delay in, or reduction of, its ability to sell the underlying Common Shares (which remedy shall not be exclusive of any other remedies available at law or in equity, including, without limitation, specific performance), the Company shall pay to each holder of Registrable Securities relating to such Registration Statement an amount in cash equal to five percent (5%) of such Investor’s original principal amount stated in such Investor’s Note on the Closing Date (1) on the date of such Filing Failure, Effectiveness Failure, Maintenance Failure or Current Public Information Failure, as applicable, and (2) on every thirty (30) day anniversary of (I) a Filing Failure until such Filing Failure is cured; (II) an Effectiveness Failure until such Effectiveness Failure is cured; (III) a Maintenance Failure until such Maintenance Failure is cured; and (IV) a Current Public Information Failure until the earlier of (i) the date such Current Public Information Failure is cured and (ii) such time that such public information is no longer required pursuant to Rule 144 (in each case, prorated for periods totaling less than thirty (30) days). The payments to which a holder of Registrable Securities shall be entitled pursuant to this Section 2(e) are referred to herein as “Registration Delay Payments.” Following the initial Registration Delay Payment for any particular event or failure (which shall be paid on the date of such event or failure, as set forth above), without limiting the foregoing, if an event or failure giving rise to the Registration Delay Payments is cured prior to any thirty (30) day anniversary of such event or failure, then such Registration Delay Payment shall be made on the third (3rd) Business Day after such cure. In the event the Company fails to make Registration Delay Payments in a timely manner in accordance with the foregoing, such Registration Delay Payments shall bear interest at the rate of two percent (2%) per month (prorated for partial months) until paid in full. Notwithstanding the foregoing, no Registration Delay Payments shall be owed to an Investor (other than with respect to a Maintenance Failure resulting from a suspension or delisting of (or a failure to timely list) the Common Shares on the Principal Market) with respect to (A) any period during which all of such Investor’s Registrable Securities may be sold by such Investor without restriction under Rule 144 (including, without limitation, volume restrictions) and without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or (B) any failure to register the Required Registered Amount related to the Second Tranche Note (other than the initial portion equal to the Market Value Traded as of the Second Tranche Closing), if such failure is solely due to objections from the Staff with respect to the amount or nature of the Underlying Shares being registered thereunder provided, however, that the Company shall promptly register the balance of the Required Registered Amount in accordance with Section 2(d) of this Agreement.
(f) Offering. Notwithstanding anything to the contrary contained in this Agreement, but subject to the payment of the Registration Delay Payments pursuant to Section 2(e), in the event the staff of the SEC (the “Staff”) or the SEC seeks to characterize any offering pursuant to a Registration Statement filed pursuant to this Agreement as constituting an offering of securities by, or on behalf of, the Company, or in any other manner, such that the Staff or the SEC do not permit such Registration Statement to become effective and used for resales in a manner that does not constitute such an offering and that permits the continuous resale at the market by the Investors participating therein (or as otherwise may be acceptable to each Investor) without being named therein as an “underwriter,” then the Company shall reduce the number of shares to be included in such Registration Statement by all Investors until such time as the Staff and the SEC shall so permit such Registration Statement to become effective as aforesaid. In making such reduction, the Company shall reduce the number of shares to be included by all Investors on a pro rata basis (based upon the number of Registrable Securities otherwise required to be included for each Investor) unless the inclusion of shares by a particular Investor or a particular set of Investors are resulting in the Staff or the SEC’s “by or on behalf of the Company” offering position, in which event the shares held by such Investor or set of Investors shall be the only shares subject to reduction (and if by a set of Investors on a pro rata basis by such Investors or on such other basis as would result in the exclusion of the least number of shares by all such Investors); provided, that, with respect to such pro rata portion allocated to any Investor, such Investor may elect the allocation of such pro rata portion among the Registrable Securities of such Investor. In addition, in the event that the Staff or the SEC requires any Investor seeking to sell securities under a Registration Statement filed pursuant to this Agreement to be specifically identified as an “underwriter” in order to permit such Registration Statement to become effective, and such Investor does not consent to being so named as an underwriter in such Registration Statement, then, in each such case, the Company shall reduce the total number of Registrable Securities to be registered on behalf of such Investor, until such time as the Staff or the SEC does not require such identification or until such Investor accepts such identification and the manner thereof. Any reduction pursuant to this paragraph will first reduce all Registrable Securities other than those issued pursuant to the Securities Purchase Agreement. In the event of any reduction in Registrable Securities pursuant to this paragraph, an affected Investor shall have the right to require, upon delivery of a written request to the Company signed by such Investor, the Company to file a registration statement within twenty (20) days of such request (subject to any restrictions imposed by Rule 415 or required by the Staff or the SEC) for resale by such Investor in a manner acceptable to such Investor, and the Company shall following such request cause to be and keep effective such registration statement in the same manner as otherwise contemplated in this Agreement for registration statements hereunder, in each case until such time as: (i) all Registrable Securities held by such Investor have been registered and sold pursuant to an effective Registration Statement in a manner acceptable to such Investor or (ii) all Registrable Securities may be resold by such Investor without restriction (including, without limitation, volume limitations) pursuant to Rule 144 (taking account of any Staff position with respect to “affiliate” status) and without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or (iii) such Investor agrees to be named as an underwriter in any such Registration Statement in a manner acceptable to such Investor as to all Registrable Securities held by such Investor and that have not theretofore been included in a Registration Statement under this Agreement (it being understood that the special demand right under this sentence may be exercised by an Investor multiple times and with respect to limited amounts of Registrable Securities in order to permit the resale thereof by such Investor as contemplated above).
(g) Piggyback Registrations. Without limiting any obligation of the Company hereunder or under the Securities Purchase Agreement, if there is not an effective Registration Statement covering all of the Registrable Securities or the prospectus contained therein is not available for use and the Company shall determine to prepare and file with the SEC a registration statement or offering statement relating to an offering for its own account or the account of others under the 1933 Act of any of its equity securities (other than on Form F-4 or Form S-8 (each as promulgated under the 1933 Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the Company’s stock option or other employee benefit plans), then the Company shall deliver to each Investor a written notice of such determination and, if within fifteen (15) days after the date of the delivery of such notice, any such Investor shall so request in writing, the Company shall include in such registration statement or offering statement all or any part of such Registrable Securities such Investor requests to be registered; provided, however, the Company shall not be required to register any Registrable Securities pursuant to this Section 2(g) that are eligible for resale pursuant to Rule 144 without restriction (including, without limitation, volume restrictions) and without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or that are the subject of a then-effective Registration Statement.
(h) Allocation of Registrable Securities. The initial number of Registrable Securities included in any Registration Statement and any increase in the number of Registrable Securities included therein shall be allocated pro rata among the Investors based on the number of Registrable Securities held by each Investor at the time such Registration Statement covering such initial number of Registrable Securities or increase thereof is declared effective by the SEC. In the event that an Investor sells or otherwise transfers any of such Investor’s Registrable Securities, each transferee or assignee (as the case may be) that becomes an Investor shall be allocated a pro rata portion of the then-remaining number of Registrable Securities included in such Registration Statement for such transferor or assignee (as the case may be). Any Common Shares included in a Registration Statement and which remain allocated to any Person which ceases to hold any Registrable Securities covered by such Registration Statement shall be allocated to the remaining Investors, pro rata based on the number of Registrable Securities then held by such Investors which are covered by such Registration Statement.
(i) No Inclusion of Other Securities. The Company shall in no event include any securities other than Registrable Securities on any Registration Statement filed in accordance herewith without the prior written consent of the Required Holders. Until the Applicable Date (as defined in the Securities Purchase Agreement), the Company shall not enter into any agreement providing any registration rights to any of its security holders, except as otherwise permitted under the Securities Purchase Agreement.
| 3. | RELATED OBLIGATIONS. |
The Company shall use its best efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof, and, pursuant thereto, the Company shall have the following obligations:
(a) The Company shall promptly prepare and file with the SEC a Registration Statement with respect to all the Registrable Securities (but in no event later than the applicable Filing Deadline) and use its best efforts to cause such Registration Statement to become effective as soon as practicable after such filing (but in no event later than the Effectiveness Deadline). Subject to Allowable Grace Periods, the Company shall keep each Registration Statement effective (and the prospectus contained therein available for use) pursuant to Rule 415 for resales by the Investors on a delayed or continuous basis at then-prevailing market prices (and not fixed prices) at all times until the earlier of (i) the date as of which all of the Investors may sell all of the Registrable Securities required to be covered by such Registration Statement (disregarding any reduction pursuant to Section 2(f)) without restriction pursuant to Rule 144 (including, without limitation, volume restrictions) and without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or (ii) the date on which the Investors shall have sold all of the Registrable Securities covered by such Registration Statement (the “Registration Period”). Notwithstanding anything to the contrary contained in this Agreement, the Company shall ensure that, when filed and at all times while effective, each Registration Statement (including, without limitation, all amendments and supplements thereto) and the prospectus (including, without limitation, all amendments and supplements thereto) used in connection with such Registration Statement (1) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein (in the case of prospectuses, in the light of the circumstances in which they were made) not misleading and (2) will disclose (whether directly or through incorporation by reference to other SEC filings to the extent permitted) all material information regarding the Company and its securities. The Company shall submit to the SEC, within one (1) Business Day after the later of the date that (i) the Company learns that no review of a particular Registration Statement will be made by the Staff or that the Staff has no further comments on a particular Registration Statement (as the case may be) and (ii) the consent of Legal Counsel is obtained pursuant to Section 3(c) (which consent shall be immediately sought), a request for acceleration of effectiveness of such Registration Statement to a time and date not later than twenty-four (24) hours after the submission of such request. The Company shall respond in writing to comments made by the SEC in respect of a Registration Statement as soon as practicable, but in no event later than fifteen (15) days after the receipt of comments by or notice from the SEC that an amendment is required in order for a Registration Statement to be declared effective.
(b) Subject to Section 3(r) of this Agreement, the Company shall prepare and file with the SEC such amendments (including, without limitation, post-effective amendments) and supplements to each Registration Statement and the prospectus used in connection with each such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be necessary to keep each such Registration Statement effective at all times during the Registration Period for such Registration Statement, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities of the Company required to be covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement; provided, however, by 8:30 a.m. (New York time) on the Business Day immediately following each Effective Date, the Company shall file with the SEC in accordance with Rule 424(b) under the 1933 Act the final prospectus to be used in connection with sales pursuant to the applicable Registration Statement (whether or not such a prospectus is technically required by such rule). In the case of amendments and supplements to any Registration Statement which are required to be filed pursuant to this Agreement (including, without limitation, pursuant to this Section 3(b)) by reason of the Company filing a report on Form 8-K, Form 10-Q or Form 10-K or any analogous report under the Securities Exchange Act of 1934, as amended (the “1934 Act”), the Company shall, if permitted under the applicable rules and regulations of the SEC, have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on the same day on which the 1934 Act report is filed which created the requirement for the Company to amend or supplement such Registration Statement.
(c) The Company shall (A) permit Legal Counsel and legal counsel for each other Investor to review and comment upon (i) each Registration Statement at least five (5) Business Days prior to its filing with the SEC and (ii) all amendments and supplements to each Registration Statement (including, without limitation, the prospectus contained therein) (except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any similar or successor reports) within a reasonable number of days prior to their filing with the SEC, and (B) not file any Registration Statement or amendment or supplement thereto in a form to which Legal Counsel or any legal counsel for any other Investor reasonably objects. The Company shall not submit a request for acceleration of the effectiveness of a Registration Statement or any amendment or supplement thereto or to any prospectus contained therein without the prior consent of Legal Counsel, which consent shall not be unreasonably withheld. The Company shall promptly furnish to Legal Counsel and legal counsel for each other Investor, without charge, (i) copies of any correspondence from the SEC or the Staff to the Company or its representatives relating to each Registration Statement, provided that such correspondence shall not contain any material, non-public information regarding the Company or any of its Subsidiaries (as defined in the Securities Purchase Agreement), (ii) after the same is prepared and filed with the SEC, one (1) copy of each Registration Statement and any amendment(s) and supplement(s) thereto, including, without limitation, financial statements and schedules, all documents incorporated therein by reference, if requested by an Investor, and all exhibits and (iii) upon the effectiveness of each Registration Statement, one (1) copy of the prospectus included in such Registration Statement and all amendments and supplements thereto. The Company shall reasonably cooperate with Legal Counsel and legal counsel for each other Investor in performing the Company’s obligations pursuant to this Section 3.
(d) The Company shall promptly furnish to each Investor whose Registrable Securities are included in any Registration Statement, without charge, (i) after the same is prepared and filed with the SEC, at least one (1) copy of each Registration Statement and any amendment(s) and supplement(s) thereto, including, without limitation, financial statements and schedules, all documents incorporated therein by reference, if requested by an Investor, all exhibits and each preliminary prospectus, (ii) upon the effectiveness of each Registration Statement, ten (10) copies of the prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as such Investor may reasonably request from time to time) and (iii) such other documents, including, without limitation, copies of any preliminary or final prospectus, as such Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by such Investor.
(e) The Company shall use its best efforts to (i) register and qualify, unless an exemption from registration and qualification applies, the resale by Investors of the Registrable Securities covered by a Registration Statement under such other securities or “blue sky” laws of all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions, such amendments (including, without limitation, post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(e), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify Legal Counsel, legal counsel for each other Investor and each Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.
(f) The Company shall notify Legal Counsel, legal counsel for each other Investor and each Investor in writing of the happening of any event, as promptly as practicable after becoming aware of such event, as a result of which the prospectus included in a Registration Statement, as then in effect, may include an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material, non-public information regarding the Company or any of its Subsidiaries), and, subject to Section 3(r), promptly prepare a supplement or amendment to such Registration Statement and such prospectus contained therein to correct such untrue statement or omission and deliver ten (10) copies of such supplement or amendment to Legal Counsel, legal counsel for each other Investor and each Investor (or such other number of copies as Legal Counsel, legal counsel for each other Investor or such Investor may reasonably request). The Company shall also promptly notify Legal Counsel, legal counsel for each other Investor and each Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to Legal Counsel, legal counsel for each other Investor and each Investor by e-mail on the same day of such effectiveness and by overnight mail), and when the Company receives written notice from the SEC that a Registration Statement or any post-effective amendment will be reviewed by the SEC, (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information, (iii) of the Company’s reasonable determination that a post- effective amendment to a Registration Statement would be appropriate; and (iv) of the receipt of any request by the SEC or any other federal or state governmental authority for any additional information relating to the Registration Statement or any amendment or supplement thereto or any related prospectus. The Company shall respond as promptly as practicable to any comments received from the SEC with respect to each Registration Statement or any amendment thereto (it being understood and agreed that the Company’s response to any such comments shall be delivered to the SEC no later than fifteen (15) Business Days after the receipt thereof).
(g) The Company shall (i) use its best efforts to prevent the issuance of any stop order or other suspension of effectiveness of each Registration Statement or the use of any prospectus contained therein, or the suspension of the qualification, or the loss of an exemption from qualification, of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and (ii) notify Legal Counsel, legal counsel for each other Investor and each Investor who holds Registrable Securities of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.
(h) If any Investor may be required under applicable securities law to be described in any Registration Statement as an underwriter and such Investor consents to so being named an underwriter, at the request of any Investor, the Company shall furnish to such Investor, on the date of the effectiveness of such Registration Statement and thereafter from time to time on such dates as an Investor may reasonably request (i) a letter, dated such date, from the Company’s independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the Investors, and (ii) an opinion, dated as of such date, of counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to the Investors.
(i) If any Investor may be required under applicable securities law to be described in any Registration Statement as an underwriter and such Investor consents to so being named an underwriter, upon the written request of such Investor, the Company shall make available for inspection by (i) such Investor, (ii) legal counsel for such Investor and (iii) one (1) firm of accountants or other agents retained by such Investor (collectively, the “Inspectors”), all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the “Records”), as shall be reasonably deemed necessary by each Inspector, and cause the Company’s officers, directors and employees to supply all information which any Inspector may reasonably request; provided, however, each Inspector shall agree in writing to hold in strict confidence and not to make any disclosure (except to such Investor) or use of any Record or other information which the Company’s board of directors determines in good faith to be confidential, and of which determination the Inspectors are so notified, unless (1) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required under the 1933 Act, (2) the release of such Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or (3) the information in such Records has been made generally available to the public other than by disclosure in violation of this Agreement or any other Transaction Document (as defined in the Securities Purchase Agreement). Such Investor agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential. Nothing herein (or in any other confidentiality agreement between the Company and such Investor, if any) shall be deemed to limit any Investor’s ability to sell Registrable Securities in a manner which is otherwise consistent with applicable laws and regulations.
(j) The Company shall hold in confidence and not make any disclosure of information concerning an Investor provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required to be disclosed in such Registration Statement pursuant to the 1933 Act, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other Transaction Document. The Company agrees that it shall, upon learning that disclosure of such information concerning an Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to such Investor and allow such Investor, at such Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.
(k) Without limiting any obligation of the Company under the Securities Purchase Agreement, the Company shall use its best efforts either to (i) cause all of the Registrable Securities covered by each Registration Statement to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange, (ii) secure designation and quotation of all of the Registrable Securities covered by each Registration Statement on an Eligible Market (as defined in the Securities Purchase Agreement), or (iii) if, despite the Company’s best efforts to satisfy the preceding clauses (i) or (ii) the Company is unsuccessful in satisfying the preceding clauses (i) or (ii), without limiting the generality of the foregoing, to use its best efforts to arrange for at least two market makers to register with the Financial Industry Regulatory Authority (“FINRA”) as such with respect to such Registrable Securities. In addition, the Company shall cooperate with each Investor and any broker or dealer through which any such Investor proposes to sell its Registrable Securities in effecting a filing with FINRA pursuant to FINRA Rule 5110 as requested by such Investor. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 3(k).
(l) The Company shall cooperate with the Investors who hold Registrable Securities being offered and, to the extent applicable, facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts (as the case may be) as the Investors may reasonably request from time to time and registered in such names as the Investors may request.
(m) If requested by an Investor, the Company shall as soon as practicable after receipt of notice from such Investor and subject to Section 3(r) hereof, (i) incorporate in a prospectus supplement or post-effective amendment such information as an Investor reasonably requests to be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering; (ii) make all required filings of such prospectus supplement or post-effective amendment after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments to any Registration Statement or prospectus contained therein if reasonably requested by an Investor holding any Registrable Securities.
(n) The Company shall use its best efforts to cause the Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.
(o) The Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under the 1933 Act) covering a twelve-month period beginning not later than the first day of the Company’s fiscal quarter next following the applicable Effective Date of each Registration Statement.
(p) The Company shall otherwise use its best efforts to comply with all applicable rules and regulations of the SEC in connection with any registration hereunder.
(q) Within one (1) Business Day after a Registration Statement which covers Registrable Securities is declared effective by the SEC, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investors whose Registrable Securities are included in such Registration Statement) confirmation that such Registration Statement has been declared effective by the SEC in the form attached hereto as Exhibit A.
(r) Notwithstanding anything to the contrary herein (but subject to the last sentence of this Section 3(r)), at any time after the Effective Date of a particular Registration Statement, the Company may delay the disclosure of material, non-public information concerning the Company or any of its Subsidiaries the disclosure of which at the time is not, in the good faith opinion of the board of directors of the Company, in the best interest of the Company and, in the opinion of counsel to the Company, otherwise required (a “Grace Period”), provided that the Company shall promptly notify the Investors in writing of the (i) existence of material, non-public information giving rise to a Grace Period (provided that in each such notice the Company shall not disclose the content of such material, non-public information to any of the Investors) and the date on which such Grace Period will begin and (ii) date on which such Grace Period ends, provided further that (I) no Grace Period shall exceed ten (10) consecutive days and during any three hundred sixty five (365) day period all such Grace Periods shall not exceed an aggregate of thirty (30) days, (II) the first day of any Grace Period must be at least five (5) Trading Days after the last day of any prior Grace Period and (III) no Grace Period may exist during the sixty (60) Trading Day period immediately following the Effective Date of such Registration Statement (provided that such sixty (60) Trading Day period shall be extended by the number of Trading Days during such period and any extension thereof contemplated by this proviso during which such Registration Statement is not effective or the prospectus contained therein is not available for use) (each, an “Allowable Grace Period”). For purposes of determining the length of a Grace Period above, such Grace Period shall begin on and include the date the Investors receive the notice referred to in clause (i) above and shall end on and include the later of the date the Investors receive the notice referred to in clause (ii) above and the date referred to in such notice. The provisions of Section 3(g) hereof shall not be applicable during the period of any Allowable Grace Period. Upon expiration of each Grace Period, the Company shall again be bound by the first sentence of Section 3(f) with respect to the information giving rise thereto unless such material, non-public information is no longer applicable. Notwithstanding anything to the contrary contained in this Section 3(r), the Company shall cause its transfer agent to deliver unlegended Common Shares to a transferee of an Investor in accordance with the terms of the Securities Purchase Agreement in connection with any sale of Registrable Securities with respect to which such Investor has entered into a contract for sale, and delivered a copy of the prospectus included as part of the particular Registration Statement to the extent applicable, prior to such Investor’s receipt of the notice of a Grace Period and for which the Investor has not yet settled.
(s) The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by each Investors of its Registrable Securities pursuant to each Registration Statement.
(t) Neither the Company nor any Subsidiary or affiliate thereof shall identify any Investor as an underwriter in any public disclosure or filing with the SEC, the Principal Market or any Eligible Market and any Buyer being deemed an underwriter by the SEC shall not relieve the Company of any obligations it has under this Agreement or any other Transaction Document (as defined in the Securities Purchase Agreement); provided, however, that the foregoing shall not prohibit the Company from including the disclosure found in the "Plan of Distribution" section attached hereto as Exhibit B in the Registration Statement.
(u) Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Buyers in this Agreement or otherwise conflicts with the provisions hereof.
| 4. | OBLIGATIONS OF THE INVESTORS. |
(a) At least five (5) Business Days prior to the first anticipated filing date of each Registration Statement, the Company shall notify each Investor in writing of the information the Company requires from each such Investor with respect to such Registration Statement. It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities of a particular Investor that such Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect and maintain the effectiveness of the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.
(b) Each Investor, by such Investor’s acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of each Registration Statement hereunder, unless such Investor has notified the Company in writing of such Investor’s election to exclude all of such Investor’s Registrable Securities from such Registration Statement.
(c) Each Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(g) or the first sentence of 3(f), such Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until such Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(g) or the first sentence of Section 3(f) or receipt of notice that no supplement or amendment is required. Notwithstanding anything to the contrary in this Section 4(c), the Company shall cause its transfer agent to deliver unlegended Common Shares to a transferee of an Investor in accordance with the terms of the Securities Purchase Agreement in connection with any sale of Registrable Securities with respect to which such Investor has entered into a contract for sale prior to the Investor’s receipt of a notice from the Company of the happening of any event of the kind described in Section 3(g) or the first sentence of Section 3(f) and for which such Investor has not yet settled.
| 5. | EXPENSES OF REGISTRATION. |
All reasonable expenses, other than underwriting discounts and commissions, incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, FINRA filing fees (if any) and fees and disbursements of counsel for the Company shall be paid by the Company. The Company shall reimburse Legal Counsel for its fees and disbursements in connection with registration, filing or qualification pursuant to Sections 2 and 3 of this Agreement which amount shall be limited to $25,000 for each such registration, filing or qualification.
| 6. | INDEMNIFICATION. |
(a) To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend each Investor and each of its directors, officers, shareholders, members, partners, employees, agents, advisors, representatives (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding the lack of such title or any other title) and each Person, if any, who controls such Investor within the meaning of the 1933 Act or the 1934 Act and each of the directors, officers, shareholders, members, partners, employees, agents, advisors, representatives (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding the lack of such title or any other title) of such controlling Persons (each, an “Indemnified Person”), against any losses, obligations, claims, damages, liabilities, contingencies, judgments, fines, penalties, charges, costs (including, without limitation, court costs, reasonable attorneys’ fees and costs of defense and investigation), amounts paid in settlement or expenses, joint or several, (collectively, “Claims”) incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an Indemnified Person is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading or (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to a Registration Statement or (iv) any violation of this Agreement (the matters in the foregoing clauses (i) through (iv) being, collectively, “Violations”). Subject to Section 6(c), the Company shall reimburse the Indemnified Persons, promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person for such Indemnified Person expressly for use in connection with the preparation of such Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available by the Company pursuant to Section 3(d); and (ii) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of any of the Registrable Securities by any of the Investors pursuant to Section 9.
(b) In connection with any Registration Statement in which an Investor is participating, such Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, each of its officers who signs the Registration Statement and each Person, if any, who controls the Company within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Party”), against any Claim or Indemnified Damages to which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation, in each case, to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use in connection with such Registration Statement; and, subject to Section 6(c) and the below provisos in this Section 6(b), such Investor will reimburse an Indemnified Party any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such Claim; provided, however, the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Investor, which consent shall not be unreasonably withheld or delayed, provided further that such Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to such Investor as a result of the applicable sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of any of the Registrable Securities by any of the Investors pursuant to Section 9.
(c) Promptly after receipt by an Indemnified Person or Indemnified Party (as the case may be) under this Section 6 of notice of the commencement of any action or proceeding (including, without limitation, any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party (as the case may be) shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party (as the case may be); provided, however, an Indemnified Person or Indemnified Party (as the case may be) shall have the right to retain its own counsel with the fees and expenses of such counsel to be paid by the indemnifying party if: (i) the indemnifying party has agreed in writing to pay such fees and expenses; (ii) the indemnifying party shall have failed promptly to assume the defense of such Claim and to employ counsel reasonably satisfactory to such Indemnified Person or Indemnified Party (as the case may be) in any such Claim; or (iii) the named parties to any such Claim (including, without limitation, any impleaded parties) include both such Indemnified Person or Indemnified Party (as the case may be) and the indemnifying party, and such Indemnified Person or such Indemnified Party (as the case may be) shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Person or such Indemnified Party and the indemnifying party (in which case, if such Indemnified Person or such Indemnified Party (as the case may be) notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, then the indemnifying party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the indemnifying party, provided further that in the case of clause (iii) above the indemnifying party shall not be responsible for the reasonable fees and expenses of more than one (1) separate legal counsel for such Indemnified Person or Indemnified Party (as the case may be). The Indemnified Party or Indemnified Person (as the case may be) shall reasonably cooperate with the indemnifying party in connection with any negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person (as the case may be) which relates to such action or Claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person (as the case may be) reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent; provided, however, the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified Person (as the case may be), consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person (as the case may be) of a release from all liability in respect to such Claim or litigation, and such settlement shall not include any admission as to fault on the part of the Indemnified Party. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person (as the case may be) with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party (as the case may be) under this Section 6, except to the extent that the indemnifying party is materially and adversely prejudiced in its ability to defend such action.
(d) The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred.
(e) The indemnity and contribution agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.
| 7. | CONTRIBUTION. |
To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however: (i) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 6 of this Agreement, (ii) no Person involved in the sale of Registrable Securities which Person is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to contribution from any Person involved in such sale of Registrable Securities who was not guilty of fraudulent misrepresentation; and (iii) contribution by any seller of Registrable Securities shall be limited in amount to the amount of net proceeds received by such seller from the applicable sale of such Registrable Securities pursuant to such Registration Statement. Notwithstanding the provisions of this Section 7, no Investor shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Investor from the applicable sale of the Registrable Securities subject to the Claim exceeds the amount of any damages that such Investor has otherwise been required to pay, or would otherwise be required to pay under Section 6(b), by reason of such untrue or alleged untrue statement or omission or alleged omission.
| 8. | REPORTS UNDER THE 1934 ACT. |
With a view to making available to the Investors the benefits of Rule 144, the Company agrees to:
(a) make and keep public information available, as those terms are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such requirements (it being understood and agreed that nothing herein shall limit any obligations of the Company under the Securities Purchase Agreement) and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and
(c) furnish to each Investor so long as such Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company, if true, that it has complied with the reporting, submission and posting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company with the SEC if such reports are not publicly available via EDGAR, and (iii) such other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration.
| 9. | ASSIGNMENT OF REGISTRATION RIGHTS. |
All or any portion of the rights under this Agreement shall be automatically assignable by each Investor to any transferee or assignee (as the case may be) of all or any portion of such Investor’s Registrable Securities or Notes if: (i) such Investor agrees in writing with such transferee or assignee (as the case may be) to assign all or any portion of such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such transfer or assignment (as the case may be); (ii) the Company is, within a reasonable time after such transfer or assignment (as the case may be), furnished with written notice of (a) the name and address of such transferee or assignee (as the case may be), and (b) the securities with respect to which such registration rights are being transferred or assigned (as the case may be); (iii) immediately following such transfer or assignment (as the case may be) the further disposition of such securities by such transferee or assignee (as the case may be) is restricted under the 1933 Act or applicable state securities laws if so required; (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this sentence such transferee or assignee (as the case may be) agrees in writing with the Company to be bound by all of the provisions contained herein; (v) such transfer or assignment (as the case may be) shall have been made in accordance with the applicable requirements of the Securities Purchase Agreement and the Notes (as the case may be); and (vi) such transfer or assignment (as the case may be) shall have been conducted in accordance with all applicable federal and state securities laws.
| 10. | AMENDMENT OF REGISTRATION RIGHTS. |
PROVISIONS OF THIS AGREEMENT MAY BE AMENDED AND THE OBSERVANCE THEREOF MAY BE WAIVED (EITHER GENERALLY OR IN A PARTICULAR INSTANCE AND EITHER RETROACTIVELY OR PROSPECTIVELY), ONLY WITH THE WRITTEN CONSENT OF THE COMPANY AND THE REQUIRED HOLDERS; PROVIDED THAT ANY SUCH AMENDMENT OR WAIVER THAT COMPLIES WITH THE FOREGOING, BUT THAT DISPROPORTIONATELY, MATERIALLY AND ADVERSELY AFFECTS THE RIGHTS AND OBLIGATIONS OF ANY INVESTOR RELATIVE TO THE COMPARABLE RIGHTS AND OBLIGATIONS OF THE OTHER INVESTORS SHALL REQUIRE THE PRIOR WRITTEN CONSENT OF SUCH ADVERSELY AFFECTED INVESTOR. ANY AMENDMENT OR WAIVER EFFECTED IN ACCORDANCE WITH THIS SECTION 10 SHALL BE BINDING UPON EACH INVESTOR AND THE COMPANY, PROVIDED THAT NO SUCH AMENDMENT SHALL BE EFFECTIVE TO THE EXTENT THAT IT (1) APPLIES TO LESS THAN ALL OF THE HOLDERS OF REGISTRABLE SECURITIES OR (2) IMPOSES ANY OBLIGATION OR LIABILITY ON ANY INVESTOR WITHOUT SUCH INVESTOR’S PRIOR WRITTEN CONSENT (WHICH MAY BE GRANTED OR WITHHELD IN SUCH INVESTOR’S SOLE DISCRETION). NO WAIVER SHALL BE EFFECTIVE UNLESS IT IS IN WRITING AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE WAIVING PARTY. NO CONSIDERATION SHALL BE OFFERED OR PAID TO ANY PERSON TO AMEND OR CONSENT TO A WAIVER OR MODIFICATION OF ANY PROVISION OF THIS AGREEMENT UNLESS THE SAME CONSIDERATION (OTHER THAN THE REIMBURSEMENT OF LEGAL FEES) ALSO IS OFFERED TO ALL OF THE PARTIES TO THIS AGREEMENT.
| 11. | MISCELLANEOUS. |
(a) Solely for purposes of this Agreement, a Person is deemed to be a holder of Registrable Securities whenever such Person owns, or is deemed to own, of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from such record owner of such Registrable Securities.
(b) Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by electronic mail (provided that such sent email is kept on file (whether electronically or otherwise) by the sending party and the sending party does not receive an automatically generated message from the recipient’s email server that such e-mail could not be delivered to such recipient); or (iii) one (1) Business Day after deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party to receive the same. The mailing addresses and e-mail addresses for such communications shall be:
If to the Company:
With a copy (for informational purposes only) to:
If to the Transfer Agent:
Continental Stock Transfer & Trust Company
1 State Street, 30th floor
New York, NY 10004
Telephone: (212) 509-4000
Attention:
E-Mail:
If to Legal Counsel:
Loeb & Loeb LLP
345 Park Avenue
New York, NY 10154
Attention: Mitchell S. Nussbaum
Email: mnussbaum@loeb.com
If to a Buyer, to its mailing address and/or email address set forth on the Schedule of Buyers attached to the Securities Purchase Agreement, with copies to such Buyer’s representatives as set forth on the Schedule of Buyers, or to such other mailing address and/or email address and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s e-mail containing the time, date and recipient’s e-mail or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by e-mail or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.
(c) Any Investor may deliver a written notice (an “Opt-Out Notice”) to the Company requesting that such Investor not receive notices from the Company otherwise required by the last sentence of Section 3(e), the first sentence of Section 3(f) or Section 3(g)(ii); provided, however, that the Investor may later revoke any such Opt-Out Notice in writing. Following receipt of an Opt-Out Notice from the Investor (unless subsequently revoked), (i) the Company shall not deliver any such notices to the Investor and the Investor shall no longer be entitled to the rights associated with any such notice and (ii) each time prior to the Investor’s intended use of an effective Registration Statement, the Investor will notify the Company in writing at least two (2) Business Days in advance of such intended use, and if a notice of an event contemplated by Section 3 was previously delivered (or would have been delivered but for the provisions of this Section 11(c)) and a related suspension period remains in effect, the Company will so notify the Investor within one (1) Business Day of the Investor’s notification to the Company by delivering to the Investor a copy of such previous notice provided to the other Investors.
(d) Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof. The Company and each Investor acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that each party hereto shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement by any other party hereto and to enforce specifically the terms and provisions hereof (without the necessity of showing economic loss and without any bond or other security being required), this being in addition to any other remedy to which any party may be entitled by law or equity.
(e) All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(f) If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
(g) This Agreement, the other Transaction Documents, the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein constitute the entire agreement among the parties hereto and thereto solely with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement, the other Transaction Documents, the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein supersede all prior agreements and understandings among the parties hereto solely with respect to the subject matter hereof and thereof; provided, however, nothing contained in this Agreement or any other Transaction Document shall (or shall be deemed to) (i) have any effect on any agreements any Investor has entered into with the Company or any of its Subsidiaries prior to the date hereof with respect to any prior investment made by such Investor in the Company, (ii) waive, alter, modify or amend in any respect any obligations of the Company or any of its Subsidiaries or any rights of or benefits to any Investor or any other Person in any agreement entered into prior to the date hereof between or among the Company and/or any of its Subsidiaries and any Investor and all such agreements shall continue in full force and effect or (iii) limit any obligations of the Company under any of the other Transaction Documents.
(h) Subject to compliance with Section 9 (if applicable), this Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties hereto. This Agreement is not for the benefit of, nor may any provision hereof be enforced by, any Person, other than the parties hereto, their respective permitted successors and assigns and the Persons referred to in Sections 6 and 7 hereof.
(i) The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision in which they are found.
(j) This Agreement may be executed in two or more identical counterparts, each of which shall be deemed an original, but all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an email which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.
(k) Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
(l) The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party. Notwithstanding anything to the contrary set forth in Section 10, terms used in this Agreement but defined in the other Transaction Documents shall have the meanings ascribed to such terms on the First Tranche Closing Date in such other Transaction Documents unless otherwise consented to in writing by each Investor.
(m) All consents and other determinations required to be made by the Investors pursuant to this Agreement shall be made, unless otherwise specified in this Agreement, by the Required Holders, determined as if all of the outstanding Notes then held by the Investors have been converted for Registrable Securities without regard to any limitations on redemption, amortization and/or conversion of the Notes then held by Investors.
(n) This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
(o) The obligations of each Investor under this Agreement and the other Transaction Documents are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under this Agreement or any other Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Investor pursuant hereto or thereto, shall be deemed to constitute the Investors as, and the Company acknowledges that the Investors do not so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Investors are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by the Transaction Documents or any matters, and the Company acknowledges that the Investors are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or the transactions contemplated by this Agreement or any of the other the Transaction Documents. Each Investor shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other Transaction Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose. The use of a single agreement with respect to the obligations of the Company contained herein was solely in the control of the Company, not the action or decision of any Investor, and was done solely for the convenience of the Company and not because it was required or requested to do so by any Investor. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and an Investor, solely, and not between the Company and the Investors collectively and not between and among Investors.
[signature page follows]
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.
| COMPANY: | ||
| PSYENCE BIOMEDICAL LTD. | ||
| By: | ||
| Name: Neil Maresky | ||
| Title: Chief Executive Officer | ||
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.
| BUYERS: | ||
| By: | ||
| Name: | ||
| Title: | ||
| By: | ||
| Name: | ||
| Title: | ||
Exhibit 4.16
FORM OF GENERAL SECURITY AGREEMENT
This General Security Agreement is made as of January 25, 2024.
| TO: | Name: | |
| Address: | ||
| Attention: | ||
| E-mail: |
RECITALS:
A. Psyence Biomed II Corp. and Psyence Biomedical Ltd (each a “Debtor” and collectively, the “Debtors”) are, or may become, indebted or liable to [ ] (the “Creditor”) pursuant to or in connection with the terms of a securities purchase agreement dated as of January 15, 2023 between the Debtors and the Creditors (as amended, supplemented, restated or replaced from time to time, the “SPA”) or otherwise.
B. To secure the payment and performance of its Secured Liabilities, each Debtor has agreed to grant to the Creditor the Security Interests with respect to its Collateral in accordance with the terms of this Agreement.
For good and valuable consideration, the receipt and adequacy of which are acknowledged by each Debtor, each Debtor severally (and not jointly or jointly and severally) agrees with and in favour of the Creditor as follows:
1. Definitions. In this Agreement capitalized terms used but not otherwise defined in this Agreement shall have the meanings given to them in the SPA, and the following terms have the following meanings:
“Accessions”, “Account”, “Chattel Paper”, “Certificated Security”, “Consumer Goods”, “Document of Title”, “Electronic Chattel Paper”, “Equipment”, “Futures Account”, “Futures Contract”, “Futures Intermediary”, “Goods”, “Instrument”, “Intangible”, “Inventory”, “Investment Property”, “Money”, “Proceeds”, “Securities Account”, “Securities Intermediary”, “Security”, “Security Certificate”, “Security Entitlement”, “Tangible Chattel Paper” and “Uncertificated Security” have the respective defined meanings given to the uncapitalized forms thereof in the PPSA. 1
“Agreement” means this agreement, including the Exhibits and recitals to this agreement, the Supplements and the Schedules, as it or they may be amended, supplemented, restated or replaced from time to time, and the expressions “hereof”, “herein”, “hereto”, “hereunder”, “hereby” and similar expressions refer to this Agreement and not to any particular section or other portion of this Agreement.
“Books and Records” means, with respect to any Debtor, all books, records, files, papers, disks, documents and other repositories of data recording in any form or medium, evidencing or relating to the Personal Property of such Debtor which are at any time owned by such Debtor or to which such Debtor (or any Person on such Debtor’s behalf) has access.
| - 2 - |
“Collateral” means, with respect to any Debtor, all of the present and future:
(a) undertaking;
| (b) | Personal Property (including any Personal Property that may be described in any Schedule to this Agreement or any schedules, documents or listings that such Debtor may from time to time provide to the Creditor in connection with this Agreement); and |
| (c) | real property (including any real property that may be described in any Schedule to this Agreement or any schedules, documents or listings that such Debtor may from time to time provide to the Creditor in connection with this Agreement and including all fixtures, improvements, buildings and other structures placed, installed or erected from time to time on any such real property), |
of such Debtor, including Books and Records, Contracts, Intellectual Property Rights and Permits, and including all such property in which such Debtor now or in the future has any right, title or interest whatsoever, whether owned, leased, licensed, possessed or otherwise held by such Debtor, and all Proceeds of any of the foregoing, wherever located. For the avoidance of doubt and notwithstanding anything else herein, “Collateral” shall not include any Excluded Property.
“Contracts” means, with respect to any Debtor, all contracts and agreements to which such Debtor is at any time a party or pursuant to which such Debtor has at any time acquired rights, and includes (i) all rights of such Debtor to receive money due and to become due to it in connection with a contract or agreement, (ii) all rights of such Debtor to damages arising out of, or for breach or default with respect to, a contract or agreement, and (iii) all rights of such Debtor to perform and exercise all remedies in connection with a contract or agreement.
“SPA” has the meaning set out in the recitals hereto.
“Creditor” has the meaning set out in the recitals hereto.
“Debtors” means the Persons delivering a signature page to this Agreement and any other Person which hereafter delivers a Supplement, and “Debtor” means any one of them.
“Equity Securities” means, in respect of any Person, any and all shares, interests, participations, rights in, or other equivalents (however designated and whether voting or non-voting) of, such Person’s capital, whether outstanding on the date hereof or issued after the date hereof, including any interest in a partnership, limited partnership or other similar Person and any beneficial interest in a trust but excluding any debt securities convertible into any of the foregoing.
“Excluded Property” means any of the following:
| (a) | Consumer Goods; |
| (b) | the last day of the term of any lease or agreement for lease of real property; and |
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| (c) | Restricted Property. |
“Exhibits” means the exhibits to this Agreement.
“Guarantee” means the New York law guarantee dated as of the date hereof from Psyence Biomed II Corp. in favour of the Creditor.
“Intellectual Property Rights” means, with respect to any Debtor, all industrial and intellectual property rights of such Debtor or in which such Debtor has any right, title or interest, including copyrights, patents, inventions (whether or not patented), trade-marks, get-up and trade dress, industrial designs, integrated circuit topographies, plant breeders’ rights, know how and trade secrets, registrations and applications for registration for any such industrial and intellectual property rights, and all Contracts related to any such industrial and intellectual property rights.
“Issuer” has the meaning given to that term in the STA.
“Loan Documents” means the SPA, the Note and the Guarantee.
“Note” means the senior secured convertible note issued by Psyence Biomedical Ltd. to the Creditor pursuant to the SPA.
“Organizational Documents” means, with respect to any Person, such Person’s articles or other charter documents, by-laws, unanimous shareholder agreement, shareholder agreement, shareholder declaration, partnership agreement or trust agreement, as applicable, and any and all other similar agreements, documents and instruments relative to such Person.
“Permits” means, with respect to any Debtor, all permits, licences, waivers, exemptions, consents, certificates, authorizations, approvals, franchises, rights-of-way, easements and entitlements that such Debtor has, requires or is required to have, to own, possess or operate any of its property or to operate and carry on any part of its business.
“Personal Property” means personal property and includes Accounts, Chattel Paper, Documents of Title, Equipment, Goods, Instruments, Intangibles, Inventory, Investment Property and Money.
“Pledged Certificated Securities” means, with respect to any Debtor, any and all Collateral of such Debtor that is a Certificated Security.
“Pledged Equity Securities” means, with respect to any Debtor, any and all Collateral of such Debtor that are Equity Securities.
“Pledged Futures Accounts” means, with respect to any Debtor, any and all Collateral of such Debtor that is a Futures Account.
“Pledged Futures Contracts” means, with respect to any Debtor, any and all Collateral of such Debtor that is a Futures Contract.
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“Pledged Futures Intermediary” means, at any time, any Person which is at such time a Futures Intermediary at which a Pledged Futures Account is maintained.
“Pledged Futures Intermediary’s Jurisdiction” means, with respect to any Pledged Futures Intermediary, its jurisdiction as determined under section 7.1(4) of the PPSA.
“Pledged Issuer” means, with respect to any Debtor at any time, any Person which is an Issuer of, or with respect to, any Pledged Equity Securities of such Debtor at such time.
“Pledged Issuer’s Jurisdiction” means, with respect to any Pledged Issuer, its jurisdiction as determined under section 44 of the STA.
“Pledged Securities” means, with respect to any Debtor, any and all Collateral of such Debtor that is a Security.
“Pledged Securities Accounts” means, with respect to any Debtor, any and all Collateral of such Debtor that is a Securities Account.
“Pledged Securities Intermediary” means, at any time, any Person which is at such time a Securities Intermediary at which a Pledged Securities Account is maintained.
“Pledged Securities Intermediary’s Jurisdiction” means, with respect to any Securities Pledged Securities Intermediary, its jurisdiction as determined under section 45(2) of the STA.
“Pledged Security Certificates” means, with respect to any Debtor, any and all Security Certificates of such Debtor representing the Pledged Certificated Securities.
“Pledged Security Entitlements” means, with respect to any Debtor, any and all Collateral of such Debtor that is a Security Entitlement.
“Pledged Uncertificated Securities” means, with respect to any Debtor, any and all Collateral of such Debtor that is an Uncertificated Security.
“PPSA” means the Personal Property Security Act of the Province referred to in the “Governing Law” section of this Agreement, as such legislation may be amended, renamed or replaced from time to time, and includes all regulations from time to time made under such legislation.
“Receiver” means an interim receiver, a receiver, a manager, a receiver and manager, sequestrator, monitor, conservator, custodian, administrator, trustee, liquidator or other similar official.
“Release Date” means the date on which all the Secured Liabilities of each Debtor have been indefeasibly paid and discharged in full and there are no further obligations under the SPA pursuant to which further Secured Liabilities of any Debtor might arise.
“Reporting Pledged Issuer” means a Pledged Issuer that is a “reporting issuer”, as such term is defined under applicable Canadian securities laws.
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“Restricted Property” means any Contract, Intellectual Property Right, or Permit with respect to which the grant of any Security Interest would result in the termination or breach of such Contract, Intellectual Property Right, or Permit, or otherwise be prohibited or ineffective (whether by the terms thereof or under applicable Law), together with all Accounts, Chattel Paper and other rights thereunder or resulting therefrom; provided that:
| (a) | if the condition with respect to any property causing such termination, breach, prohibition or ineffectiveness shall no longer be in effect or otherwise apply, then such property shall cease to be Restricted Property and the Security Interests shall immediately and automatically attach thereto; and |
| (b) | if a term in a Contract that prohibits or restricts the grant of the Security Interests in the whole of an Account or Chattel Paper forming part of Restricted Property is unenforceable against the Agent under applicable Law, then such Account or Chattel Paper shall not constitute Restricted Property and the Security Interests shall attach thereto. |
“Schedules” means the schedules to this Agreement.
“Secured Liabilities” means, with respect to any Debtor, all present and future indebtedness, liabilities and obligations of any and every kind, nature and description (whether direct or indirect, joint or several, absolute or contingent, matured or unmatured) of such Debtor to the Creditor whenever and however incurred, in connection with or with respect to the Loan Documents, and any unpaid balance thereof.
“Security Interests” means, with respect to any Debtor, the liens created by such Debtor in favour of the Creditor under this Agreement.
“SPA” has the meaning set out in the recitals hereto.
“STA” means the Securities Transfer Act of the Province referred to in the “Governing Law” section of this Agreement, as such legislation may be amended, renamed or replaced from time to time, and includes all regulations from time to time made under such legislation.
“Supplement” has the meaning given to that term in Section 33.
“ULC” means an Issuer that is an unlimited company, unlimited liability corporation or unlimited liability company.
“ULC Laws” means the Companies Act (Nova Scotia), the Business Corporations Act (Alberta), the Business Corporations Act (British Columbia), the Business Corporations Act (Prince Edward Island) and any other present or future Laws governing ULCs.
“ULC Shares” means shares or other equity interests in the capital stock of a ULC.
2. Grant of Security Interests. As general and continuing collateral security for the due payment and performance of its Secured Liabilities, each Debtor pledges, mortgages, charges and assigns (by way of security) to the Creditor, and grants to the Creditor a security interest in, the Collateral of such Debtor.
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3. Limitations on Grant of Security Interests. Excluded Property shall not be subject to the Security Interests, but shall, to the extent permitted by applicable Law, be held in trust by the applicable Debtor for the benefit of the Creditor (for its own benefit and for the benefit of the other Secured Parties) and, on the exercise by the Creditor of any of its rights or remedies under this Agreement following an Event of Default, shall be assigned by such Debtor as directed by the Creditor. For greater certainty, no Intellectual Property Right in any trade-mark, get-up or trade dress is presently assigned to the Creditor by sole virtue of the grant of the Security Interests contained in Section 2.
4. Attachment; No Obligation to Advance. Each Debtor confirms that value has been given by the Creditor to such Debtor, that such Debtor has rights in its Collateral, or the power to transfer rights in its Collateral to a secured party, existing at the date of this Agreement or the date of any Supplement, as applicable, and that such Debtor and the Creditor have not agreed to postpone the time for attachment of the Security Interests to any of the Collateral of such Debtor. The Security Interests with respect to the Collateral of each Debtor created by this Agreement shall have effect and be deemed to be effective whether or not the Secured Liabilities of such Debtor or any part thereof are owing or in existence before or after or upon the date of this Agreement or the date of any Supplement, as applicable. Neither the execution and delivery of this Agreement or any Supplement nor the provision of any financial accommodation by the Creditor shall oblige the Creditor to make any financial accommodation or further financial accommodation available to any Debtor or any other Person.
5. Representations and Warranties. Each Debtor represents and warrants to the Creditor that, as of the date of this Agreement or the date of any Supplement, as applicable:
| (a) | Debtor Information. All of the information set out in the Schedules and Supplements, as applicable, with respect to such Debtor is accurate and complete. |
| (b) | Consents and Transfer Restrictions. Except for any consent that has been obtained and is in full force and effect, no consent of any Person (including any counterparty with respect to any Contract, any account debtor with respect to any Account, or any Governmental Authority with respect to any Permit) is required, or is purported to be required, for the execution, delivery, performance and enforcement of this Agreement (this representation being given without reference to the exclusions contained in Section 3). For the purposes of complying with any transfer restrictions contained in the Organizational Documents of any Pledged Issuer, such Debtor hereby irrevocably consents to any transfer of such Debtor’s Pledged Equity Securities of such Pledged Issuer. |
| (c) | No Consumer Goods. Such Debtor does not own any Consumer Goods which are material in value or which are material to the business, operations, property, condition or prospects (financial or otherwise) of such Debtor. |
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| (d) | Intellectual Property Rights. All registrations and applications for registration pertaining to any Intellectual Property Rights of such Debtor and all other material Intellectual Property Rights of such Debtor, and the nature of such Debtor’s right, title or interest therein, are described in the Schedules and Supplements as applicable, with respect to such Debtor. |
| (e) | Due Authorization. The Pledged Securities of such Debtor have been duly authorized and validly issued and are fully paid and non-assessable. |
| (f) | Warrants, Options, etc. There are no outstanding warrants, options or other rights to purchase, or other agreements outstanding with respect to, or property that is now or hereafter convertible into, or that requires the issuance or sale of, any Pledged Equity Securities of such Debtor. |
| (g) | No Required Disposition. Except for this Agreement, there is no existing agreement, option, right or privilege capable of becoming an agreement or option pursuant to which such Debtor would be required to sell, redeem or otherwise dispose of any Pledged Equity Securities of such Debtor or under which any Pledged Issuer has any obligation to issue any Securities of such Pledged Issuer to any Person. |
6. Survival of Representations and Warranties. All representations and warranties made by each Debtor in this Agreement (a) are material, (b) shall be considered to have been relied on by the Creditor, and (c) shall survive the execution and delivery of this Agreement and any Supplement or any investigation made at any time by or on behalf of the Creditor and any disposition or payment of the Secured Liabilities until the Release Date.
7. Covenants. Each Debtor covenants and agrees with the Creditor that:
| (a) | Further Documentation. Such Debtor shall from time to time, at the expense of such Debtor, promptly and duly authorize, execute and deliver such further instruments and documents, and take such further action, as the Creditor may request for the purpose of obtaining or preserving the full benefits of, and the rights and powers granted by, this Agreement (including the filing of any financing statements or financing change statements under any applicable legislation with respect to the Security Interests). Such Debtor acknowledges that this Agreement has been prepared based on the existing Laws in the Province referred to in the “Governing Law” section of this Agreement and that a change in such Laws, or the Laws of other jurisdictions, may require the execution and delivery of different forms of security documentation. Accordingly, such Debtor agrees that the Creditor shall have the right to require that this Agreement be amended, supplemented, restated or replaced, and that such Debtor shall immediately on request by the Creditor authorize, execute and deliver any such amendment, supplement, restatement or replacement (i) to reflect any changes in such Laws, whether arising as a result of statutory amendments, court decisions or otherwise, (ii) to facilitate the creation and registration of appropriate security in all appropriate jurisdictions, or (iii) if such Debtor merges or amalgamates with any other Person or enters into any corporate reorganization, in each case in order to confer on the Creditor liens similar to, and having the same effect as, the Security Interests. |
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| (b) | Maintenance of Records. At the written request of the Creditor, such Debtor shall mark any Collateral of such Debtor specified by the Creditor to evidence the existence of the Security Interests. |
| (c) | Maintenance of Collateral. Such Debtor shall maintain all tangible Collateral of such Debtor in good operating condition, ordinary wear and tear excepted, and such Debtor shall provide all maintenance, service and repairs necessary for such purpose. Such Debtor shall maintain in good standing all registrations and applications with respect to the Intellectual Property Rights of such Debtor except to the extent that any failure to do so could not reasonably be expected to be materially adverse to such Debtor or the Creditor. |
| (d) | Further Identification of Collateral. Such Debtor shall promptly furnish to the Creditor such statements and schedules further identifying and describing the Collateral of such Debtor, and such other reports in connection with the Collateral of such Debtor, as the Creditor may from time to time reasonably request, including an updated list of any motor vehicles or other “serial number” goods owned by such Debtor and classified as Equipment, including vehicle identification numbers. |
| (e) | Amalgamation, Merger or Consolidation. Such Debtor shall not permit any Pledged Issuer of such Debtor to amalgamate, merge or consolidate unless all of the outstanding capital stock of the surviving or resulting corporation is, upon such amalgamation, merger or consolidation, pledged under this Agreement, and no cash, securities or other property is distributed with respect to the outstanding shares of any other constituent corporation. |
| (f) | Agreements re Intellectual Property Rights. Promptly upon request from time to time by the Creditor, such Debtor shall authorize, execute and deliver any and all agreements, instruments, documents and papers that the Creditor may request to evidence the Security Interests in any Intellectual Property Rights of such Debtor and, where applicable, the goodwill of the business of such Debtor connected with the use of, and symbolized by, any such Intellectual Property Rights. |
| (g) | Instruments; Documents of Title; Chattel Paper. Promptly upon request from time to time by the Creditor, such Debtor shall deliver to the Creditor, endorsed and/or accompanied by such instruments of assignment and transfer in such form and substance as the Creditor may reasonably request, any and all Instruments, Documents of Title and Tangible Chattel Paper of such Debtor in each case having a face amount, or pertaining to an asset with a fair market value, in excess of Cdn.$100,000 and included in or relating to the Collateral of such Debtor as the Creditor may specify in its request. Promptly upon request from time to time by the Creditor, such Debtor shall deliver to the Creditor any and all such documents, agreements and other materials as may be required from time to time to provide the Creditor with control over all Electronic Chattel Paper of such Debtor in the manner provided under section 1(3) of the PPSA. |
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| (h) | Pledged Certificated Securities. Such Debtor shall deliver to the Creditor any and all Pledged Security Certificates (other than ULC Shares) of such Debtor and other materials as may be required from time to time to provide the Creditor with control over all Pledged Certificated Securities of such Debtor in the manner provided under section 23 of the STA. At the request of the Creditor, such Debtor shall cause all Pledged Security Certificates of such Debtor to be registered in the name of the Creditor or its nominee. |
| (i) | Pledged Uncertificated Securities. Such Debtor shall deliver to the Creditor any and all such documents, agreements and other materials as may be required from time to time to provide the Creditor with control over all Pledged Uncertificated Securities of such Debtor in the manner provided under section 24 of the STA. |
| (j) | Pledged Security Entitlements. Such Debtor shall deliver to the Creditor any and all such documents, agreements and other materials as may be required from time to time to provide the Creditor with control over all Pledged Security Entitlements of such Debtor in the manner provided under section 25 or 26 of the STA. |
| (k) | Pledged Futures Contracts. Such Debtor shall deliver to the Creditor any and all such documents, agreements and other materials as may be required from time to time to provide the Creditor with control over all Pledged Futures Contracts of such Debtor in the manner provided under section 1(2) of the PPSA. |
| (l) | Transfer Restrictions. If the constating documents of any Pledged Issuer (other than a ULC) restrict the transfer of the Securities of such Pledged Issuer, then such Debtor shall deliver to the Creditor a certified copy of a resolution of the directors, shareholders, unitholders or partners of such Pledged Issuer, as applicable, consenting to the transfer(s) contemplated by this Agreement, including any prospective transfer of the Collateral of such Debtor by the Creditor upon a realization on the Security Interests. |
| (m) | Notices. Such Debtor shall advise the Creditor promptly, in reasonable detail, of: |
| (i) | any change to a Pledged Securities Intermediary’s Jurisdiction, Pledged Issuer’s Jurisdiction, or Pledged Future Intermediary’s Jurisdiction; |
| (ii) | any change in the location of the jurisdiction of organization or amalgamation, registered office, head office, chief executive office or domicile of such Debtor; |
| (iii) | any change in the name of such Debtor; |
| (iv) | any merger, consolidation or amalgamation of such Debtor with any other Person; |
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| (v) | any additional jurisdiction in which such Debtor has tangible Personal Property; |
| (vi) | any acquisition of any right, title or interest in real property by such Debtor; |
| (vii) | any acquisition of any Intellectual Property Rights which are the subject of a registration or application with any governmental intellectual property or other governing body or registry; |
| (viii) | any acquisition of any Instrument, Document of Title or Chattel Paper having a face amount, or pertaining to an asset with a fair market value, in excess of Cdn.$100,000; or |
| (ix) | any occurrence of any event, claim or occurrence that could reasonably be expected to have a material adverse effect on the value of the Collateral of such Debtor or on the Security Interests. |
Such Debtor shall not effect or permit any of the changes referred to in clauses (ii) through (viii) above unless all filings have been made and all other actions taken that are required in order for the Creditor to continue at all times following such change to have a valid and perfected first priority Security Interest with respect to all of the Collateral of such Debtor.
8. Voting Rights. Unless an Event of Default has occurred and is continuing, each Debtor shall be entitled to exercise all voting power from time to time exercisable with respect to the Pledged Equity Securities of such Debtor and give consents, waivers and ratifications with respect thereto; provided, however, that no vote shall be cast or consent, waiver or ratification given or action taken which would be, or would have a reasonable likelihood of being, prejudicial to the interests of the Creditor or which would have the effect of reducing the value of the Collateral of such Debtor as security for the Secured Liabilities of such Debtor or imposing any restriction on the transferability of any of the Collateral of such Debtor. Immediately upon the occurrence and during the continuance of any Event of Default, all such rights of the applicable Debtor to vote and give consents, waivers and ratifications shall cease and the Creditor or its nominee shall be entitled to exercise all such voting rights and to give all such consents, waivers and ratifications.
9. Dividends; Interest. Unless an Event of Default has occurred and is continuing, each Debtor shall be entitled to receive any and all cash dividends, interest, principal payments and other forms of cash distribution on the Pledged Equity Securities of such Debtor which it is otherwise entitled to receive, but any and all stock and/or liquidating dividends, distributions of property, returns of capital or other distributions made on or with respect to the Pledged Equity Securities of such Debtor, whether resulting from a subdivision, combination or reclassification of the outstanding capital stock of any Pledged Issuer of such Debtor or received in exchange for such Pledged Equity Securities or any part thereof or as a result of any amalgamation, merger, consolidation, acquisition or other exchange of property to which any Pledged Issuer of such Debtor may be a party or otherwise, and any and all cash and other property received in exchange for any Pledged Equity Securities of such Debtor shall be and become part of the Collateral of such Debtor subject to the Security Interests and, if received by such Debtor, shall forthwith be delivered to the Creditor or its nominee (accompanied, if appropriate, by proper instruments of assignment and/or stock powers of attorney executed by such Debtor in accordance with the Creditor’s instructions) to be held subject to the terms of this Agreement; and if any of the Pledged Security Certificates have been registered in the name of the Creditor or its nominee, the Creditor shall execute and deliver (or cause to be executed and delivered) to such Debtor all such dividend orders and other instruments as such Debtor may request for the purpose of enabling such Debtor to receive the dividends, distributions or other payments which such Debtor is authorized to receive and retain pursuant to this Section. If an Event of Default has occurred and is continuing, all rights of such Debtor pursuant to this Section shall cease and the Creditor shall have the sole and exclusive right and authority to receive and retain the cash dividends, interest, principal payments and other forms of cash distribution which such Debtor would otherwise be authorized to retain pursuant to this Section. Any money and other property paid over to or received by the Creditor pursuant to the provisions of this Section shall be retained by the Creditor as additional Collateral hereunder and be applied in accordance with the provisions of this Agreement.
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10. Rights on Event of Default. If an Event of Default has occurred and is continuing, then and in every such case the Security Interests of each Debtor shall become enforceable and the Creditor, in addition to any rights now or hereafter existing under applicable Law may, personally or by agent, at such time or times as the Creditor in its discretion may determine, do any one or more of the following:
| (a) | Rights under PPSA, etc. Exercise against any or all Debtors all of the rights and remedies granted to secured parties under the PPSA and any other applicable statute, or otherwise available to the Creditor by contract, at law or in equity. |
| (b) | Demand Possession. Demand possession of any or all of the Collateral of any or all Debtors, in which event each such Debtor shall, at the expense of such Debtor, immediately cause the Collateral of such Debtor designated by the Creditor to be assembled and made available and/or delivered to the Creditor at any place designated by the Creditor. |
| (c) | Take Possession. Enter on any premises where any Collateral of any or all Debtors is located and take possession of, disable or remove such Collateral. |
| (d) | Deal with Collateral. Hold, store and keep idle, or operate, lease or otherwise use or permit the use of, any or all of the Collateral of any or all Debtors for such time and on such terms as the Creditor may determine, and demand, collect and retain all earnings and other sums due or to become due from any Person with respect to any of the Collateral of any or all Debtors. |
| (e) | Carry on Business. Carry on, or concur in the carrying on of, any or all of the business or undertaking of any or all Debtors and enter on, occupy and use (without charge by such Debtor) any of the premises, buildings, plant and undertaking of, or occupied or used by, any or all Debtors. |
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| (f) | Enforce Collateral. Seize, collect, receive, enforce or otherwise deal with any Collateral of any or all Debtors in such manner, on such terms and conditions and at such times as the Creditor deems advisable. |
| (g) | Dispose of Collateral. Realize on any or all of the Collateral of any or all Debtors and sell, lease, assign, give options to purchase, or otherwise dispose of and deliver any or all of the Collateral of any or all Debtors (or contract to do any of the above), in one or more parcels at any public or private sale, at any exchange, broker’s board or office of the Creditor or elsewhere, with or without advertising or other formality, except as required by applicable Law, on such terms and conditions as the Creditor may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery. |
| (h) | Court-Approved Disposition of Collateral. Obtain from any court of competent jurisdiction an order for the sale or foreclosure of any or all of the Collateral of any or all Debtors. |
| (i) | Purchase by Creditor. At any public sale, and to the extent permitted by Law on any private sale, bid for and purchase any or all of the Collateral of any or all Debtors offered for sale and, upon compliance with the terms of such sale, hold, retain, sell or otherwise dispose of such Collateral without any further accountability to any Debtor or any other Person with respect to such holding, retention, sale or other disposition, except as required by Law. In any such sale to the Creditor, the Creditor may, for the purpose of making payment for all or any part of the Collateral of any Debtor so purchased, use any claim for any or all of the Secured Liabilities of such Debtor then due and payable to it as a credit against the purchase price. |
| (j) | Collect Accounts. Notify (whether in its own name or in the name of any Debtor) the account debtors under any Accounts of any or all Debtors of the assignment of such Accounts to the Creditor and direct such account debtors to make payment of all amounts due or to become due to any or all Debtors with respect to such Accounts directly to the Creditor and, upon such notification and at the expense of any such Debtor, enforce collection of any such Accounts, and adjust, settle or compromise the amount or payment of such Accounts, in such manner and to such extent as the Creditor deems appropriate in the circumstances. |
| (k) | Right of Set off. Set off and apply any and all deposits (general or special, time or demand, provisional or final) held, and other obligations owing by, the Creditor to or for the credit or the account of any Debtor against its Secured Liabilities, regardless of whether such deposits or obligations may be unmatured or their currency. |
| (l) | Transfer of Collateral. Transfer any Collateral of any or all Debtors that is Pledged Equity Securities into the name of the Creditor or its nominee. |
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| (m) | Voting. Vote any or all of the Pledged Equity Securities of any or all Debtors (whether or not transferred to the Creditor or its nominee) and give or withhold all consents, waivers and ratifications with respect thereto and otherwise act with respect thereto as though it were the outright owner thereof. |
| (n) | Exercise Other Rights. Exercise any and all rights, privileges, entitlements and options pertaining to any Collateral of any or all Debtors that is Pledged Equity Securities as if the Creditor were the absolute owner of such Pledged Equity Securities. |
| (o) | Dealing with Contracts and Permits. Deal with any and all Contracts and Permits of any or all Debtors to the same extent as any such Debtor might (including the enforcement, realization, sale, assignment, transfer, and requirement for continued performance), all on such terms and conditions and at such time or times as may seem advisable to the Creditor. |
| (p) | Payment of Liabilities. Pay any liability secured by any lien against any Collateral of any or all Debtors. Each such Debtor shall immediately on demand reimburse the Creditor for all such payments and, until paid, any such reimbursement obligation shall form part of the Secured Liabilities of such Debtor and shall be secured by the Security Interests of such Debtor. |
| (q) | Borrow and Grant liens. Borrow money for the maintenance, preservation or protection of any Collateral of any or all Debtors or for carrying on any of the business or undertaking of any or all Debtors and grant liens on any Collateral of any or all Debtors (in priority to the Security Interests of any or all Debtors or otherwise) as security for the money so borrowed. Each such Debtor shall immediately on demand reimburse the Creditor for all such borrowings and, until paid, any such reimbursement obligations shall form part of the Secured Liabilities of such Debtor and shall be secured by the Security Interests of such Debtor. |
| (r) | Appoint Receiver. Appoint by instrument in writing one or more Receivers of any or all Debtors or any or all of the Collateral of any or all Debtors with such rights, powers and authority (including any or all of the rights, powers and authority of the Creditor under this Agreement) as may be provided for in the instrument of appointment or any supplemental instrument, and remove and replace any such Receiver from time to time. To the extent permitted by applicable Law, any Receiver appointed by the Creditor shall (for purposes relating to responsibility for the Receiver’s acts or omissions) be considered to be the agent of any such Debtor and not of the Creditor. |
| (s) | Court-Appointed Receiver. Obtain from any court of competent jurisdiction an order for the appointment of a Receiver of any or all Debtors or of any or all of the Collateral of any or all Debtors. |
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| (t) | Consultants. Require any or all Debtors to engage a consultant of the Creditor’s choice, or engage a consultant on its own behalf, such consultant to receive the full cooperation and support of each such Debtor and its agents and employees, including unrestricted access to the premises of each such Debtor and the Books and Records of each such Debtor; all reasonable fees and expenses of such consultant shall be for the account of each such Debtor and each such Debtor hereby authorizes any such consultant to report directly to the Creditor and to disclose to the Creditor any and all information obtained in the course of such consultant’s employment. |
The Creditor may exercise any or all of the foregoing rights and remedies without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except as required by applicable Law) to or on any Debtor or any other Person, and each Debtor hereby waives each such demand, presentment, protest, advertisement and notice to the extent permitted by applicable Law. None of the above rights or remedies shall be exclusive of or dependent on or merge in any other right or remedy, and one or more of such rights and remedies may be exercised independently or in combination from time to time. Each Debtor acknowledges and agrees that any action taken by the Creditor hereunder following the occurrence and during the continuance of an Event of Default shall not be rendered invalid or ineffective as a result of the curing of the Event of Default on which such action was based.
11. Realization Standards. To the extent that applicable Law imposes duties on the Creditor to exercise remedies in a commercially reasonable manner and without prejudice to the ability of the Creditor to dispose of the Collateral in any such manner, each Debtor acknowledges and agrees that it is not commercially unreasonable for the Creditor to (or not to) (a) incur expenses reasonably deemed significant by the Creditor to prepare the Collateral of such Debtor for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (b) fail to obtain third party consents for access to the Collateral of such Debtor to be disposed of, (c) fail to exercise collection remedies against account debtors or other Persons obligated on the Collateral of such Debtor or to remove liens against the Collateral of such Debtor, (d) exercise collection remedies against account debtors and other Persons obligated on the Collateral of such Debtor directly or through the use of collection agencies and other collection specialists, (e) dispose of Collateral of such Debtor by way of public auction, public tender or private contract, with or without advertising and without any other formality, (f) contact other Persons, whether or not in the same business of such Debtor, for expressions of interest in acquiring all or any portion of the Collateral of such Debtor, (g) hire one or more professional auctioneers to assist in the disposition of the Collateral of such Debtor, whether or not such Collateral is of a specialized nature or an upset or reserve bid or price is established, (h) dispose of the Collateral of such Debtor by utilizing internet sites that provide for the auction of assets of the types included in such Collateral or that have the reasonable capacity of doing so, or that match buyers and sellers of assets, (i) dispose of assets in wholesale rather than retail markets, (j) disclaim disposition warranties, such as title, possession or quiet enjoyment, (k) purchase insurance or credit enhancements to insure the Creditor against risks of loss, collection or disposition of the Collateral of such Debtor or to provide to the Creditor a guaranteed return from the collection or disposition of such Collateral, (l) to the extent deemed appropriate by the Creditor, obtain the services of other brokers, investment bankers, consultants and other professionals to assist the Creditor in the collection or disposition of any of the Collateral of such Debtor, (m) dispose of Collateral of such Debtor in whole or in part, (n) dispose of Collateral of such Debtor to a customer of the Creditor, and (o) establish an upset or reserve bid price with respect to Collateral of such Debtor.
| - 15 - |
12. Grant of Licence. For the purpose of enabling the Creditor to exercise its rights and remedies under this Agreement when the Creditor is entitled to exercise such rights and remedies, and for no other purpose, each Debtor grants to the Creditor an irrevocable, non-exclusive licence (exercisable without payment of royalty or other compensation to such Debtor) to use or sublicense any or all of the Intellectual Property Rights of such Debtor, including in such licence reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout of the same. For any trade-marks, get-up and trade dress and other business indicia, such licence includes an obligation on the part of the Creditor to maintain the standards of quality maintained by such Debtor or, in the case of trade-marks, get-up and trade dress or other business indicia licensed to such Debtor, the standards of quality imposed upon such Debtor by the relevant licence. For copyright works, such licence shall include the benefit of any waivers of moral rights and similar rights.
13. Securities Laws. The Creditor is authorized, in connection with any offer or sale of any Pledged Equity Securities of any Debtor, to comply with any limitation or restriction as it may be advised by counsel is necessary to comply with applicable Law, including compliance with procedures that may restrict the number of prospective bidders and purchasers, requiring that prospective bidders and purchasers have certain qualifications, and restricting prospective bidders and purchasers to Persons who will represent and agree that they are purchasing for their own account or investment and not with a view to the distribution or resale of such Securities. In addition to and without limiting Section 11, each Debtor further agrees that compliance with any such limitation or restriction shall not result in a sale being considered or deemed not to have been made in a commercially reasonable manner, and the Creditor shall not be liable or accountable to such Debtor for any discount allowed by reason of the fact that such Pledged Equity Securities are sold in compliance with any such limitation or restriction. If the Creditor chooses to exercise its right to sell any or all Pledged Equity Securities of any Debtor, upon written request, such Debtor shall cause each applicable Pledged Issuer to furnish to the Creditor all such information as the Creditor may request in order to determine the number of shares and other instruments included in the Collateral of such Debtor which may be sold by the Creditor in exempt transactions under any Laws governing securities, and the rules and regulations of any applicable securities regulatory body thereunder, as the same are from time to time in effect.
| - 16 - |
14. ULC Shares. Each Debtor acknowledges that certain of the Collateral of such Debtor may now or in the future consist of ULC Shares, and that it is the intention of the Creditor and each Debtor that the Creditor should not under any circumstances prior to realization thereon be held to be a “member” or a “shareholder”, as applicable, of a ULC for the purposes of any ULC Laws. Therefore, notwithstanding any provisions to the contrary contained in this Agreement, the SPA or any other Loan Document, where a Debtor is the registered owner of ULC Shares which are Collateral of such Debtor, such Debtor shall remain the sole registered owner of such ULC Shares until such time as such ULC Shares are effectively transferred into the name of the Creditor or any other Person on the books and records of the applicable ULC. Accordingly, each Debtor shall be entitled to receive and retain for its own account any dividend on or other distribution, if any, with respect to such ULC Shares (except for any dividend or distribution comprised of Pledged Security Certificates of such Debtor, which shall be delivered to the Creditor to hold hereunder) and shall have the right to vote such ULC Shares and to control the direction, management and policies of the applicable ULC to the same extent as such Debtor would if such ULC Shares were not pledged to the Creditor pursuant hereto. Nothing in this Agreement, the SPA or any other Loan Document is intended to, and nothing in this Agreement, the SPA or any other Loan Document shall, constitute the Creditor or any Person other than the applicable Debtor, a member or shareholder of a ULC for the purposes of any ULC Laws (whether listed or unlisted, registered or beneficial), until such time as notice is given to such Debtor and further steps are taken pursuant hereto or thereto so as to register the Creditor or such other Person, as specified in such notice, as the holder of the ULC Shares. To the extent any provision hereof would have the effect of constituting the Creditor as a member or a shareholder, as applicable, of any ULC prior to such time, such provision shall be severed herefrom and shall be ineffective with respect to ULC Shares which are Collateral of any Debtor without otherwise invalidating or rendering unenforceable this Agreement or invalidating or rendering unenforceable such provision insofar as it relates to Collateral of any Debtor which is not ULC Shares. Except upon the exercise of rights of the Creditor to sell, transfer or otherwise dispose of ULC Shares in accordance with this Agreement, each Debtor shall not cause or permit, or enable a Pledged Issuer that is a ULC to cause or permit, the Creditor to: (a) be registered as a shareholder or member of such Pledged Issuer; (b) have any notation entered in their favour in the share register of such Pledged Issuer; (c) be held out as shareholders or members of such Pledged Issuer; (d) receive, directly or indirectly, any dividends, property or other distributions from such Pledged Issuer by reason of the Creditor holding the Security Interests over the ULC Shares; or (e) act as a shareholder of such Pledged Issuer, or exercise any rights of a shareholder including the right to attend a meeting of shareholders of such Pledged Issuer or to vote its ULC Shares.
15. Application of Proceeds. All Proceeds of Collateral of any Debtor received by the Creditor or a Receiver shall be applied in accordance with the SPA.
16. Continuing Liability of Debtor. Each Debtor shall remain liable for any Secured Liabilities of such Debtor that are outstanding following realization of all or any part of the Collateral of such Debtor and the application of the Proceeds thereof.
17. Creditor’s Appointment as Attorney-in-Fact. Effective upon the occurrence and during the continuance of an Event of Default, each Debtor constitutes and appoints the Creditor and any officer or agent of the Creditor, with full power of substitution, as such Debtor’s true and lawful attorney-in-fact with full power and authority in the place of such Debtor and in the name of such Debtor or in its own name, from time to time in the Creditor’s discretion, to take any and all appropriate action and to execute any and all documents and instruments as, in the opinion of such attorney, may be necessary or desirable to accomplish the purposes of this Agreement. Without limiting the effect of this Section, each Debtor grants the Creditor an irrevocable proxy to vote the Pledged Equity Securities of such Debtor and to exercise all other rights, powers, privileges and remedies to which a holder thereof would be entitled (including giving or withholding written consents of shareholders, calling special meetings of shareholders and voting at such meetings), which proxy shall be effective, automatically and without the necessity of any action (including any transfer of any Pledged Equity Securities of such Debtor on the books and records of a Pledged Issuer or Pledged Securities Intermediary, as applicable), upon the occurrence of an Event of Default. These powers are coupled with an interest and are irrevocable until the Release Date. Nothing in this Section affects the right of the Creditor as secured party or any other Person on the Creditor’s behalf, to sign and file or deliver (as applicable) all such financing statements, financing change statements, notices, verification statements and other documents relating to the Collateral and this Agreement as the Creditor or such other Person considers appropriate. Each Debtor hereby ratifies and confirms, and agrees to ratify and confirm, whatever lawful acts the Creditor or any of the Creditor’s sub-agents, nominees or attorneys do or purport to do in exercise of the power of attorney granted to the Creditor pursuant to this Section.
| - 17 - |
18. Performance by Creditor of Debtor’s Obligations. If any Debtor fails to perform or comply with any of the obligations of such Debtor under this Agreement, the Creditor may, but need not, perform or otherwise cause the performance or compliance of such obligation, provided that such performance or compliance shall not constitute a waiver, remedy or satisfaction of such failure. The expenses of the Creditor incurred in connection with any such performance or compliance shall be payable by such Debtor to the Creditor immediately on demand, and until paid, any such expenses shall form part of the Secured Liabilities of such Debtor and shall be secured by the Security Interests of such Debtor.
19. 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 such 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.
20. Rights of Creditor; Limitations on Creditor’s Obligations.
| (a) | Limitations on Creditor’s Liability. The Creditor shall not be liable to any Debtor or any other Person for any failure or delay in exercising any of the rights of such Debtor under this Agreement (including any failure to take possession of, collect, sell, lease or otherwise dispose of any Collateral of such Debtor, or to preserve rights against prior parties). Neither the Creditor, a Receiver, nor any agent of the Creditor (including, in Alberta or British Columbia, any sheriff) is required to take, or shall have any liability for any failure to take or delay in taking, any steps necessary or advisable to preserve rights against other Persons under any Collateral of any Debtor in its possession. Neither the Creditor, any Receiver, nor any agent of the Creditor shall be liable for any, and each Debtor shall bear the full risk of all, loss or damage to any and all of the Collateral of such Debtor (including any Collateral of such Debtor in the possession of the Creditor, any Receiver, or any agent of the Creditor) caused for any reason other than the gross negligence or wilful misconduct of the Creditor, such Receiver or such agent of the Creditor. |
| - 18 - |
| (b) | Debtors Remain Liable under Accounts and Contracts. Notwithstanding any provision of this Agreement, each Debtor shall remain liable under each of the documents giving rise to the Accounts of such Debtor and under each of the Contracts of such Debtor to observe and perform all the conditions and obligations to be observed and performed by such Debtor thereunder, all in accordance with the terms of each such document and Contract. The Creditor shall have no obligation or liability under any Account of any Debtor (or any document giving rise thereto) or Contract of any Debtor by reason of or arising out of this Agreement or the receipt by the Creditor of any payment relating to such Account or Contract pursuant hereto, and in particular (but without limitation), the Creditor shall not be obligated in any manner to perform any of the obligations of any Debtor under or pursuant to any Account of such Debtor (or any document giving rise thereto) or under or pursuant to any Contract of such Debtor, to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any Account of such Debtor (or any document giving rise thereto) or under any Contract of such Debtor, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time. |
| (c) | Collections on Accounts and Contracts. Each Debtor shall be authorized to, at any time that an Event of Default is not continuing, collect the Accounts of such Debtor and payments under the Contracts of such Debtor in the normal course of the business of such Debtor and for the purpose of carrying on the same. |
| (d) | Use of Agents. The Creditor may perform any of its rights or duties under this Agreement by or through agents and is entitled to retain counsel and to act in reliance on the advice of such counsel concerning all matters pertaining to its rights and duties under this Agreement. |
21. Dealings by Creditor. The Creditor shall not be obliged to exhaust its recourse against any Debtor or any other Person or against any other security it may hold with respect to the Secured Liabilities of such Debtor or any part thereof before realizing upon or otherwise dealing with the Collateral of such Debtor in such manner as the Creditor may consider desirable. The Creditor may grant extensions of time and other indulgences, take and give up security, accept compositions, grant releases and discharges and otherwise deal with any Debtor and any other Person, and with any or all of the Collateral of any Debtor, and with other security and sureties, as the Creditor may see fit, all without prejudice to the Secured Liabilities of any Debtor or to the rights and remedies of the Creditor under this Agreement. The powers conferred on the Creditor under this Agreement are solely to protect the interests of the Creditor in the Collateral of each Debtor and shall not impose any duty upon the Creditor to exercise any such powers.
22. Communication. Any notice or other communication required or permitted to be given under this Agreement will be made in accordance with the terms of the SPA.
23. Release of Information. Each Debtor authorizes the Creditor to provide a copy of this Agreement and such other information as may be requested of the Creditor (i) to the extent necessary to enforce the Creditor’s rights, remedies and entitlements under this Agreement, (ii) to any assignee or prospective assignee of all or any part of its Secured Liabilities, and (iii) as required by applicable Law.
| - 19 - |
24. Waiver. No Debtor shall assert, and each Debtor hereby waives (to the fullest extent permitted by applicable Law), (i) any claim against the Creditor (or any director, officer or employee thereof), on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, and (ii) all of the rights, benefits and protections given by any present or future statute that imposes limitations on the rights, powers or remedies of a secured party or on the methods of, or procedures for, realization of security, including any “seize or sue” or “anti-deficiency” statute or any similar provision of any other statute.
25. Release of Debtor. Upon the written request of any Debtor given at any time on or after the Release Date, the Creditor shall at the expense of such Debtor, release such Debtor and the Collateral of such Debtor from the Security Interests and such release shall serve to terminate any licence granted in this Agreement. Upon such release, and at the request and expense of such Debtor, the Creditor shall execute and deliver to such Debtor such releases and discharges as such Debtor may reasonably request.
26. Additional Security. This Agreement is in addition to, and not in substitution of, any and all other security previously or concurrently delivered by any Debtor or any other Person to the Creditor, all of which other security shall remain in full force and effect.
27. Alteration or Waiver. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Creditor. The Creditor shall not, by any act or delay, be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Creditor, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Creditor of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Creditor would otherwise have on any future occasion. Neither the taking of any judgment nor the exercise of any power of seizure or sale shall extinguish the liability of any Debtor to pay the Secured Liabilities of such Debtor, nor shall the same operate as a merger of any covenant contained in this Agreement or of any other liability, nor shall the acceptance of any payment or other security constitute or create any novation.
28. Amalgamation. If any Debtor is a corporation, such Debtor acknowledges that if it amalgamates or merges with any other corporation or corporations, then (i) the Collateral and the Security Interests of such Debtor shall extend to and include all the property and assets of the amalgamated corporation and to any property or assets of the amalgamated corporation thereafter owned or acquired, (ii) the term “Debtor”, where used in this Agreement, shall extend to and include the amalgamated corporation, and (iii) the term “Secured Liabilities”, where used in this Agreement, shall extend to and include the Secured Liabilities of the amalgamated corporation.
| - 20 - |
29. Governing Law; Attornment. 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. Without prejudice to the ability of the Creditor to enforce this Agreement in any other proper jurisdiction, each Debtor irrevocably submits and attorns to the non-exclusive jurisdiction of the courts of such province. To the extent permitted by applicable Law, each Debtor irrevocably waives any objection (including any claim of inconvenient forum) that it may now or hereafter have to the venue of any legal proceeding arising out of or relating to this Agreement in the courts of such Province.
30. Interpretation. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “or” is disjunctive; the word “and” is conjunctive. The word “shall” is mandatory; the word “may” is permissive. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set out herein), (b) any reference herein to any statute or any section thereof shall, unless otherwise expressly stated, be deemed to be a reference to such statute or section as amended, restated or re-enacted from time to time, (c) any reference herein to any Person shall be construed to include such Person’s successors and permitted assigns, (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, and (e) all references herein to Sections and Schedules shall be construed to refer to Sections and Schedules to, this Agreement, Section headings are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. Any reference in this Agreement to a Permitted lien is not intended to subordinate or postpone, and shall not be interpreted as subordinating or postponing, or as any agreement to subordinate or postpone, any Security Interest to any Permitted lien.
31. Paramountcy. In the event of any conflict or inconsistency between the provisions of this Agreement and the provisions of the SPA then, notwithstanding anything contained in this Agreement, the provisions contained in the SPA shall prevail to the extent of such conflict or inconsistency and the provisions of this Agreement shall be deemed to be amended to the extent necessary to eliminate such conflict or inconsistency, it being understood that the purpose of this Agreement is to add to, and not detract from, the rights granted to the Creditor under the SPA. If any act or omission of any or all Debtors is expressly permitted under the SPA but is expressly prohibited under this Agreement, such act or omission shall be permitted. If any act or omission relative to any matter that is not addressed in the SPA is expressly prohibited under this Agreement, but the SPA does not expressly permit such act or omission, or if any act relative to any matter that is not addressed in the SPA is expressly required to be performed under this Agreement but the SPA does not expressly relieve any or all Debtors from such performance, such circumstance shall not constitute a conflict or inconsistency between the applicable provisions of this Agreement and the provisions of the SPA.
| - 21 - |
32. Successors and Assigns. This Agreement shall enure to the benefit of, and be binding on, each Debtor and its successors and permitted assigns, and shall enure to the benefit of, and be binding on, the Creditor and its successors and assigns. No Debtor may assign this Agreement, or any of its rights or obligations under this Agreement. The Creditor may assign this Agreement and any of its rights and obligations hereunder to any Person. If any Debtor or the Creditor is an individual, then the term “Debtor” or “Creditor”, as applicable, shall also include his or her heirs, administrators and executors.
33. Additional Debtors. Additional Persons may from time to time after the date of this Agreement become Debtors under this Agreement by executing and delivering to the Creditor a supplemental agreement (together with all schedules thereto, a “Supplement”) to this Agreement, in substantially the form attached hereto as Exhibit A. Effective from and after the date of the execution and delivery by any Person to the Creditor of a Supplement:
| (a) | such Person shall be, and shall be deemed for all purposes to be, a Debtor under this Agreement with the same force and effect, and subject to the same agreements, representations, indemnities, liabilities, obligations and Security Interests, as if such Person had been an original signatory to this Agreement as a Debtor; and |
| (b) | all Collateral of such Person shall be subject to the Security Interest from such Person as security for the due payment and performance of the Secured Liabilities of such Person in accordance with the provisions of this Agreement. |
The execution and delivery of a Supplement by any additional Person shall not require the consent of any Debtor and all of the Secured Liabilities of each Debtor and the Security Interests granted thereby shall remain in full force and effect, notwithstanding the addition of any new Debtor to this Agreement.
34. Acknowledgment of Receipt/Waiver. Each Debtor acknowledges receipt of an executed copy of this Agreement and, to the extent permitted by applicable Law, waives the right to receive a copy of any financing statement or financing change statement registered in connection with this Agreement or any verification statement issued with respect to any such financing statement or financing change statement.
35. Electronic Signature and Counterparts. Delivery of an executed counterpart of a signature page of this Agreement or any other Loan Document by telecopy, emailed pdf. or any other electronic means that reproduces an image of, or otherwise constitutes, the actual executed signature page shall be effective as delivery of a manually executed counterpart. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to any document to be signed in connection with this Agreement or any other Loan Document and the transactions contemplated hereby shall be deemed to include Electronic Signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law; provided that nothing herein shall require the Agent to accept electronic signatures in any form or format without its prior written consent.
| S-1 |
IN WITNESS WHEREOF the undersigned has caused this Agreement to be duly executed as of the date first written above.
| PSYENCE BIOMED II CORP. | |||
| By: | |||
| Name: | Neil Maresky | ||
| Title: | CEO and Director | ||
| S-2 |
IN WITNESS WHEREOF the undersigned has caused this Agreement to be duly executed as of the date first written above.
| PSYENCE BIOMEDICAL LTD. | |||
| By: | |||
| Name: | Neil Maresky | ||
| Title: | CEO and Director | ||
SCHEDULE A-1
DEBTOR INFORMATION
Full legal name: PSYENCE BIOMED II CORP
Prior names: Nil
Predecessor companies: Nil
Jurisdiction of incorporation, continuance, amalgamation or other organization: Ontario
Address of chief executive office: 121 Richmond Street West, Penthouse Suite 1300, Toronto, ON, M5H 2K1
Address of registered office or head office: 121 Richmond Street West, Penthouse Suite 1300, Toronto, ON, M5H 2K1
Jurisdictions in which all tangible Personal Property is kept: Ontario, British Columbia
Instruments, Documents of Title and Chattel Paper of such Debtor having a face amount, or pertaining to an asset with a fair market value of, in excess of Cdn.$100,000: Nil
Pledged Certificated Securities:
| Pledged Issuer | Securities
Owned |
%
of issued and outstanding Securities of Pledged Issuer |
Security
Certificate Numbers |
Security Certificate Location |
| Psyence Australia Pty. Ltd. | ● common shares | [100%] | [C-1] | [Toronto] |
Pledged Securities Accounts: Nil
Pledged Uncertificated Securities: Nil
| - 2 - |
Pledged Futures Accounts: Nil
Registered trade-marks and applications for trademark registrations: Nil
Patents and patent applications: Nil
Copyright registrations and applications for copyright registrations: Nil
Industrial designs/registered designs and applications for registered designs: Nil
SCHEDULE A-2
DEBTOR INFORMATION
Full legal name: PSYENCE BIOMEDICAL LTD.
Prior names: Nil
Predecessor companies: Nil
Jurisdiction of incorporation, continuance, amalgamation or other organization: Ontario
Address of chief executive office: 121 Richmond Street West, Penthouse Suite 1300, Toronto, ON, M5H 2K1
Address of registered office or head office: 121 Richmond Street West, Penthouse Suite 1300, Toronto, ON, M5H 2K1
Jurisdictions in which tangible Personal Property is kept: Ontario
Instruments, Documents of Title and Chattel Paper of such Debtor having a face amount, or pertaining to an asset with a fair market value of, in excess of Cdn.$100,000: Nil
Pledged Certificated Securities:
| Pledged Issuer | Securities
Owned |
%
of issued and outstanding Securities of Pledged Issuer |
Security Certificate Numbers |
Security Certificate Location |
| Psyence Biomed II Corp. | ● common shares | [100%] | [C-1] | [Toronto] |
| [Surviving Cayman Co.] | ● common shares | [100%] | [C-1] | [Toronto] |
Pledged Securities Accounts: Nil
Pledged Uncertificated Securities: Nil
| - 2 - |
Pledged Futures Accounts: Nil
Registered trade-marks and applications for trademark registrations: Nil
Patents and patent applications: Nil
Copyright registrations and applications for copyright registrations: Nil
Industrial designs/registered designs and applications for registered designs: Nil
EXHIBIT A
FORM OF SUPPLEMENT
TO
GENERAL SECURITY AGREEMENT
| TO: | Name: | |
| Address: | ||
| Attention: | ||
| E-mail: |
RECITALS:
A. Reference is made to the General Security Agreement (the “Security Agreement”) dated as of January ●, 2024 entered into by Psyence Biomed II Corp and Psyence Biomedical Ltd and certain of their affiliates which thereafter signs a Supplement, in favour of the Creditor.
B. Capitalized terms used but not otherwise defined in this Supplement have the respective meanings given to such terms in the Security Agreement, including the definitions of terms incorporated in the Security Agreement by reference to other agreements.
C. Section 33 of the Security Agreement provides that additional Persons may from time to time after the date of the Security Agreement become Debtors under the Security Agreement by executing and delivering to the Creditor a supplemental agreement to the Security Agreement in the form of this Supplement.
D. The undersigned (the “New Debtor”) has agreed to become a Debtor under the Security Agreement by executing and delivering this Supplement to the Creditor.
For good and valuable consideration, the receipt and adequacy of which are acknowledged by the New Debtor, the New Debtor agrees with and in favour of the Creditor as follows:
1. The New Debtor has received a copy of, and has reviewed, the Security Agreement and is executing and delivering this Supplement to the Creditor pursuant to Section 34 of the Security Agreement.
2. Effective from and after the date this Supplement is executed and delivered to the Creditor by the New Debtor:
| (a) | the New Debtor shall be, and shall be deemed for all purposes to be, a Debtor under the Security Agreement with the same force and effect, and subject to the same agreements, representations, indemnities, liabilities, obligations and Security Interests, as if the New Debtor had been, as of the date of this Supplement, an original signatory to the Security Agreement as a Debtor; and |
| - 2 - |
(b) all Collateral of the New Debtor shall be subject to the Security Interests granted by the New Debtor as security for the due payment and performance of the Liabilities of the New Debtor in accordance with the provisions of the Security Agreement.
In furtherance of the foregoing, the New Debtor, as general and continuing collateral security for the due payment and performance of its Secured Liabilities, pledges, mortgages, charges and assigns (by way of security) to the Creditor, and grants to the Creditor a security interest in, the Collateral of the New Debtor. The terms and provisions of the Security Agreement are incorporated by reference in this Supplement.
3. The New Debtor represents and warrants to the Creditor that each of the representations and warranties made or deemed to have been made by it under the Security Agreement as a Debtor are true and correct on the date of this Supplement.
4. All of the information set out in Schedule A to this Supplement with respect to the New Debtor is accurate and complete as of the date of this Supplement.
5. Upon this Supplement bearing the signature of any Person claiming to have authority to bind the New Debtor coming into the possession of the Creditor, this Supplement and the Security Agreement shall be deemed to be finally and irrevocably executed and delivered by, and be effective and binding on, and enforceable against, the New Debtor free from any promise or condition affecting or limiting the liabilities of the New Debtor. No statement, representation, agreement or promise by any officer, employee or agent of the Creditor, unless expressly set forth in this Supplement, forms any part of this Supplement or has induced the New Debtor to enter into this Supplement and the Security Agreement or in any way affects any of the agreements, obligations or liabilities of the New Debtor under this Supplement and the Security Agreement.
6. Delivery of an executed signature page to this Supplement by the New Debtor by facsimile or other electronic transmission shall be as effective as delivery by the New Debtor of a manually executed copy of this Supplement by the New Debtor.
7. This Supplement shall be governed by and construed in accordance with the laws of the Province of Ontario, and the federal laws of Canada applicable therein.
| - 3 - |
8. This Supplement and the Security Agreement shall be binding upon the New Debtor and its successors. The New Debtor shall not assign its rights and obligations under this Supplement or the Security Agreement, or any of its rights or obligations in this Supplement or the Security Agreement.
| Dated: | [MONTH] [DAY], [YEAR] | ||||
| [NEW DEBTOR] | |||||
| By: | |||||
| Name: | |||||
| Title: | |||||
SCHEDULE A
DEBTOR INFORMATION
Full legal name:
Prior names:
Predecessor companies:
Jurisdiction of incorporation or organization:
Address of chief executive office:
Jurisdictions in which tangible Personal Property is kept:
Description of all material Permits:
Subsidiaries of the New Debtor:
Instruments, Documents of Title and Chattel Paper of the New Debtor having a face amount, or pertaining to an asset with a fair market value of, in excess of Cdn.$100,000:
| - 2 - |
Pledged Certificated Securities:
| Pledged Issuer | Securities
Owned |
%
of issued and outstanding Securities of Pledged Issuer |
Security
Certificate Numbers |
Security
Certificate Location |
| [SUBCO] | [100 common shares] | [100%] | [C-1] | [Toronto] |
Pledged Securities Accounts:
| Pledged
Securities Intermediary |
Securities Account Number |
Pledged
Securities Intermediary’s Jurisdiction |
Pledged
Security Entitlements |
| [BROKERAGE HOUSE] | [NUMBER] | [Ontario] | [100 common shares of [COMPANY]] |
Pledged Uncertificated Securities:
| Pledged Issuer | Pledged
Issuer’s Jurisdiction |
Securities Owned | %
of issued and outstanding Securities of Pledged Issuer |
| [LIMITED PARTNERSHIP] | [Ontario] | [100 limited partnership units] | [50% of all limited partnership interests] |
| - 3 - |
Pledged Futures Accounts:
| Pledged
Futures Intermediary |
Futures Account Number |
Pledged
Futures Intermediary’s Jurisdiction |
Pledged Futures Contracts |
| [BROKERAGE HOUSE] | [NUMBER] | [Ontario] | [Brief description of Contract] |
Registered trade-marks and applications for trademark registrations:
| Country | Trade-mark | Application No. | Application
Date |
Registration
No. |
Registration Date |
Licensed
to or by Debtor |
| [Y/N] | ||||||
Patents and patent applications:
| Country | Title | Patent No. | Application Date |
Date of Grant | Licensed
to or by Debtor |
| [Y/N] | |||||
Copyright registrations and applications for copyright registrations:
| Country | Work | Application No. | Application Date |
Registration No. | Licensed
to or by Debtor |
| [Y/N] | |||||
Industrial designs/registered designs and applications for registered designs:
| Country | Design | Application No. | Application
Date |
Registration
No. |
Issue Date | Licensed
to or by Debtor |
| [Y/N] | ||||||
Exhibit 4.17
Execution Version
FORM OF LOCK-UP AGREEMENT
THIS LOCK-UP AGREEMENT (this “Agreement”) is made and entered into as of January 25, 2024, by and among (i) Psyence Biomedical Ltd, a corporation organized under the laws of Ontario, Canada and a wholly-owned subsidiary of the Parent (“NewCo”), (ii) Newcourt Acquisition Corp, a Cayman Islands exempted company (“SPAC”), and (iii) the undersigned (“Holder”). Any capitalized term used but not defined in this Agreement will have the meaning ascribed to such term in the Business Combination Agreement.
WHEREAS, on July 31, 2023, (i) SPAC, (ii) Newcourt SPAC Sponsor LLC (the “Sponsor”), (iii) NewCo, (iv) Psyence Group Inc., a corporation organized under the laws of Ontario, Canada (“Parent”), (v) Psyence Biomed II Corp., a corporation organized under the laws of Ontario, Canada (“Target”), (vi) Psyence (Cayman) Merger Sub, a newly formed Cayman Islands exempted company and a wholly-owned subsidiary of NewCo (“Merger Sub”), (vii) Psyence Biomed Corp., a corporation organized under the laws of British Columbia, Canada (now continued under the laws of the Province of Ontario), entered into that certain Amended and Restated Business Combination Agreement (as may be amended from time to time in accordance with the terms thereof, the “Business Combination Agreement”), pursuant to which, subject to the terms and conditions thereof, among other matters, (i) Parent will contribute Target to NewCo in exchange for NewCo Common Shares (defined below) (the “Share Exchange”) and (ii) immediately following the Share Exchange, Merger Sub will merge with and into SPAC, with SPAC being the surviving company in the merger (the “Merger”) and each outstanding security of SPAC immediately prior to the effective time of the Merger will convert into the right to receive a substantially equivalent security of NewCo, all upon the terms and subject to the conditions set forth in the Business Combination Agreement and in accordance with the provisions of applicable law;
WHEREAS, at the closing of the transaction contemplated by the Business Combination Agreement (the “Closing”), Holder will be the holder of the number of common shares of NewCo (“NewCo Common Shares”) and warrants of NewCo (“NewCo Warrants”) in such amounts as set forth underneath Holder’s name on the signature page hereto;
WHEREAS, on January 15, 2024, NewCo, Target, Sponsor and the funds, accounts, and/other investment vehicles managed by [ ] (“Purchaser”) entered into that certain Securities Purchase Agreement (as may be amended from time to time in accordance with the terms thereof, the “Securities Purchase Agreement”); and
WHEREAS, pursuant to the Business Combination Agreement, and in view of the valuable consideration to be received by Holder thereunder, the parties desire to enter into this Agreement, pursuant to which the NewCo Common Shares or NewCo Warrants to be issued to Holder in exchange for certain ordinary shares and/or units of SPAC (all such securities, together with any securities paid as dividends or distributions with respect to such securities or into which such securities are exchanged or converted, the “Restricted Securities”) shall become subject to limitations on disposition as set forth herein; provided, however, that the following securities, which are currently held by Sponsor, shall be freely tradable immediately following the Closing: (i) 1,300,000 ordinary shares of SPAC to be transferred to Tabula Rasa Ltd prior to the Closing; (ii) 400,000 ordinary shares of SPAC to be transferred to Launchpad Capital Opportunities Fund LP (Series SPAC) prior to the Closing; and (iii) 1,300,000 ordinary shares of SPAC to be transferred to Purchaser prior to the Closing.
NOW, THEREFORE, in consideration of the premises set forth above, which are incorporated in this Agreement as if fully set forth below, and intending to be legally bound hereby, the parties hereby agree as follows:
1. Lock-Up Provisions.
(a) Holder hereby agrees not to, during the period (the “Lock-Up Period”) commencing from the Closing ending on the earliest of (x) one hundred eighty (180) days after the Closing; provided, however, that in the event that Purchaser delays investment of the Subscription Amounts (as defined in the Securities Purchase Agreement) with respect to the Second Tranche Note (as defined in the Securities Purchase Agreement) due to the occurrence of an event outlined in Section 2.1(b) of the Securities Purchase Agreement, such period shall be extended by 60 days or such earlier date as the deficiency is resolved and (y) subsequent to the Closing, the date on which the NewCo consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated third party that results in all of NewCo’s shareholders having the right to exchange their NewCo Common Shares for cash, securities or other property (a “Subsequent Transaction”): (i) lend, offer, pledge, hypothecate, encumber, donate, assign, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Restricted Securities, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Restricted Securities, or (iii) publicly disclose the intention to do any of the foregoing, whether any such transaction described in clauses (i), (ii) or (iii) above is to be settled by delivery of Restricted Securities or other securities, in cash or otherwise (any of the foregoing described in clauses (i), (ii) or (iii), a “Prohibited Transfer”). The foregoing sentence shall not apply to the transfer of any or all of the Restricted Securities owned by Holder (I) by gift, will or intestate succession upon the death of Holder, (II) to any Permitted Transferee (defined below), or (III) pursuant to a court order or settlement agreement related to the distribution of assets in connection with the dissolution of marriage or civil union or (IV) to NewCo in accordance with the requirements of the Business Combination Agreement; provided, however, that in any of cases (I), (II) or (III) it shall be a condition to such transfer that the transferee executes and delivers to NewCo an agreement stating that the transferee is receiving and holding the Restricted Securities subject to the provisions of this Agreement applicable to Holder, and there shall be no further transfer of such Restricted Securities except in accordance with this Agreement. As used in this Agreement, the term “Permitted Transferee” shall mean: (A) the members of Holder’s immediate family (for purposes of this Agreement, “immediate family” shall mean with respect to any natural person, any of the following: such person’s spouse or domestic partner, the siblings of such person and his or her spouse or domestic partner, and the direct descendants and ascendants (including adopted and step children and parents) of such person and his or her spouse or domestic partner and siblings), (B) any trust for the direct or indirect benefit of Holder or the immediate family of Holder, (C) if Holder is a trust, to the trustor or beneficiary of such trust or to the estate of a beneficiary of such trust, (D) if Holder is an entity, as a distribution to limited partners, shareholders, members of, or owners of similar equity interests in Holder upon the liquidation and dissolution of Holder and (E) to any affiliate of Holder. Holder further agrees to execute such agreements as may be reasonably requested by NewCo that are consistent with the foregoing or that are necessary to give further effect thereto.
(b) If any Prohibited Transfer is made or attempted contrary to the provisions of this Agreement, such purported Prohibited Transfer shall be null and void ab initio, and NewCo shall refuse to recognize any such purported transferee of the Restricted Securities as one of its equity holders for any purpose. In order to enforce this Section 1, NewCo may impose stop-transfer instructions with respect to the Restricted Securities of Holder (and Permitted Transferees and assigns thereof) until the end of the Lock-Up Period.
(c) During the Lock-Up Period, each certificate evidencing any Restricted Securities shall be stamped or otherwise imprinted with a legend in substantially the following form, in addition to any other applicable legends:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN A LOCK-UP AGREEMENT, DATED AS OF January 25, 2024, BY AND AMONG THE ISSUER OF SUCH SECURITIES (THE “ISSUER”), A CERTAIN REPRESENTATIVE OF THE ISSUER NAMED THEREIN AND THE ISSUER’S SECURITY HOLDER NAMED THEREIN, AS AMENDED. A COPY OF SUCH LOCK-UP AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST.”
(d) For the avoidance of any doubt, Holder shall retain all of its rights as a shareholder of NewCo with respect to the Restricted Securities during the Lock-Up Period, including the right to vote any Restricted Securities, but subject to the obligations under the Business Combination Agreement.
2. Miscellaneous.
(a) Termination of Business Combination Agreement. This Agreement shall be binding upon Holder upon Holder’s execution and delivery of this Agreement, but this Agreement shall only become effective upon the Closing. Notwithstanding anything to the contrary contained herein, in the event that the Business Combination Agreement is terminated in accordance with its terms prior to the Closing, this Agreement shall automatically terminate and become null and void, and the parties shall not have any rights or obligations hereunder.
(b) Binding Effect; Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns. This Agreement and all obligations of Holder are personal to Holder and may not be transferred or delegated by Holder at any time except pursuant to the terms and conditions set forth herein. NewCo may freely assign any or all of its rights under this Agreement, in whole or in part, to any successor entity (whether by merger, consolidation, equity sale, asset sale or otherwise) without obtaining the consent or approval of Holder.
(c) Third Parties. The parties hereto hereby acknowledge and agree that Purchaser is a third-party beneficiary of the representations, warranties and covenants of this Agreement, and that Purchaser is otherwise an express third-party beneficiary of this Agreement, entitled to enforce the terms hereof as if it were an original party hereto. Subject to the foregoing rights of Purchaser as a third-party beneficiary, nothing contained in this Agreement or in any instrument or document executed by any party in connection with the transactions contemplated hereby shall create any rights in, or be deemed to have been executed for the benefit of, any person or entity that is not a party hereto or thereto or a successor or permitted assign of such a party.
(d) Governing Law; Jurisdiction. This Agreement and any dispute or controversy arising out of or relating to this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflict of law principles thereof. All Actions arising out of or relating to this Agreement shall be heard and determined exclusively in the Court of Chancery of the State of Delaware, or to the extent such Court does not have subject matter jurisdiction, any federal court within the State of Delaware (and any courts having jurisdiction over appeals therefrom) (the “Specified Courts”). Each party hereto hereby (i) submits to the exclusive jurisdiction of any Specified Court for the purpose of any Action arising out of or relating to this Agreement brought by any party hereto and (ii) irrevocably waives, and agrees not to assert by way of motion, defense or otherwise, in any such Action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the Action is brought in an inconvenient forum, that the venue of the Action is improper, or that this Agreement or the transactions contemplated hereby may not be enforced in or by any Specified Court. Each party agrees that a final judgment in any Action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Each party irrevocably consents to the service of the summons and complaint and any other process in any other action or proceeding relating to the transactions contemplated by this Agreement, on behalf of itself, or its property, by personal delivery of copies of such process to such party at the applicable address set forth in Section 2(g). Nothing in this Section 2(d) shall affect the right of any party to serve legal process in any other manner permitted by applicable law.
(e) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO (i) CERTIFIES THAT NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (ii) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 2(e).
(f) Interpretation. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement. In this Agreement, unless the context otherwise requires: (i) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (ii) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding or succeeding such term and shall be deemed in each case to be followed by the words “without limitation”; (iii) the words “herein,” “hereto,” and “hereby” and other words of similar import shall be deemed in each case to refer to this Agreement as a whole and not to any particular section or other subdivision of this Agreement; and (iv) the term “or” means “and/or”. The parties have participated jointly in the negotiation and drafting of this Agreement. Consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.
(g) Notices. All notices, consents, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered (i) in person, (ii) by facsimile or other electronic means, with affirmative confirmation of receipt, (iii) one Business Day after being sent, if sent by reputable, nationally recognized overnight courier service or (iv) three (3) Business Days after being mailed, if sent by registered or certified mail, pre-paid and return receipt requested, in each case to the applicable party at the following addresses (or at such other address for a party as shall be specified by like notice):
|
If to SPAC, to:
Newcourt Acquisition Corp |
With a copy (which shall not constitute notice) to:
McDermott Will & Emery LLP One Vanderbilt Avenue New York, New York 10017 Attn: Ari Edelman, Esq. Telephone No.: (212) 547-5372 Email: aedelman@mwe.com |
|
If to NewCo, to:
Psyence Biomed II Corp. 121 Richmond Street West, Penthouse Suite, 1300 Toronto, Ontario M5H 2K1 Attn: Taryn Vos, General Counsel Telephone No: +27 744 604 171 Email: Taryn@Psyence.com
|
With a copy (which will not constitute notice) to:
Ellenoff Grossman & Schole LLP 1345 Avenue of the Americas, 11th Fl., New York, New York 10105 Attn: Stuart Neuhauser, Esq. Lloyd N. Steele, Esq. Telephone No.: (212) 370-1300 Email: sneuhauser@egsllp.com lsteele@egsllp.com
-and to –
WeirFoulds LLP 66 Wellington Street West, Suite 4100 Toronto, ON M5K 1B7 Attn: Rob Eberschlag T: 416-365-1110 Email: reberschlag@weirfoulds.com |
| If to Holder, to: the address set forth below Holder’s name on the signature page to this Agreement. |
(h) Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of NewCo, Holder and Purchaser. No failure or delay by a party in exercising any right hereunder shall operate as a waiver thereof. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.
(i) Severability. In case any provision in this Agreement shall be held invalid, illegal or unenforceable in a jurisdiction, such provision shall be modified or deleted, as to the jurisdiction involved, only to the extent necessary to render the same valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby nor shall the validity, legality or enforceability of such provision be affected thereby in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties will substitute for any invalid, illegal or unenforceable provision a suitable and equitable provision that carries out, so far as may be valid, legal and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision.
(j) Specific Performance. Each party acknowledges that its obligations under this Agreement are unique, recognizes and affirms that in the event of a breach of this Agreement by such party, money damages will be inadequate and such party will have no adequate remedy at law, and agrees that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by Holder in accordance with their specific terms or were otherwise breached. Accordingly, each party shall be entitled to an injunction or restraining order to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, without the requirement to post any bond or other security or to prove that money damages would be inadequate, this being in addition to any other right or remedy to which such party may be entitled under this Agreement, at law or in equity.
(k) Entire Agreement; Supersedes Prior Agreements. This Agreement constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled. For the avoidance of doubt, the terms of this Agreement supersede all prior restrictions with respect to securities currently held by the Holder, including, but not limited to, any restrictions on transfer set forth in (i) the Business Combination Agreement; (ii) the Letter Agreement, dated October 19, 2021, by and among the SPAC, the Sponsor and the officers and directors of the SPAC; (iii) the Placement Unit Subscription Agreement, dated October 19, 2021, by and between the SPAC and the Sponsor; (iv) the Placement Unit Subscription Agreement, dated October 19, 2021, by and among the SPAC and Cantor Fitzgerald & Co.; and (v) the Placement Unit Subscription Agreement, dated October 19, 2021, by and among the SPAC and J.V.B. Financial Group, LLC. Notwithstanding the foregoing, nothing in this Agreement shall limit any of the rights or remedies of any party hereto under any other agreement or any certificate or instrument delivered in connection with the Business Combination Agreement, and nothing in any other agreement, certificate or instrument shall limit any of the rights or remedies or any of the obligations of Holder under this Agreement.
(l) Further Assurances. From time to time, at another party’s request and without further consideration (but at the requesting party’s reasonable cost and expense), each party shall execute and deliver such additional documents and take all such further action as may be reasonably necessary to consummate the transactions contemplated by this Agreement.
(m) Counterparts; Facsimile. This Agreement may also be executed and delivered by facsimile signature or by email in portable document format in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties have executed this Lock-Up Agreement as of the date first written above.
| NewCo: | ||
| PSYENCE BIOMEDICAL LTD | ||
| By: | ||
| Name: | Neil Maresky | |
| Title: | Chief Executive Officer and Director | |
| SPAC: | ||
| NEWCOURT ACQUISITION CORP | ||
| By: | ||
| Name: | Mark Balkin | |
| Title: | Chief Executive Officer | |
Acknowledged:
| PSYENCE BIOMED II CORP. | ||
| By: | ||
| Name: | Neil Maresky | |
| Title: | Chief Executive Officer and Director | |
| PSYENCE (CAYMAN) MERGER SUB | ||
| By: | ||
| Name: | Neil Maresky | |
| Title: | Chief Executive Officer and Director | |
| PSYENCE BIOMED CORP. | ||
| By: | ||
| Title: | CEO and Director | |
| By: | ||
| Michael Jordaan | ||
| By: | ||
| Name: | Daniel Rogers | |
| Name: | Rohit Bodas | |
| Name: | Simran Aggarwal | |
| Name: | Nicole Farb | |
[Signature to Lock-Up Agreement]
Execution Version
IN WITNESS WHEREOF, the parties have executed this Lock-Up Agreement as of the date first written above.
| Holder: | ||
| NEWCOURT SPAC SPONSOR LLC | ||
| By: | /s/ Mark Balkin | |
| Name: | Mark Balkin | |
| Title: | Manager | |
Number and Type of NewCo Common Shares Subject to Lock-Up:
| NewCo Common Shares: | 4,455,000 | |
| NewCo Warrants: | 460,000 |
Address for Notice:
Address:
Facsimile No.:
Telephone No.:
Email:
[Signature to Lock-Up Agreement]
IN WITNESS WHEREOF, the parties have executed this Lock-Up Agreement as of the date first written above.
| Holder: | ||
| PSYENCE GROUP INC. | ||
| By: | /s/ Neil Maresky | |
| Name: | Neil Maresky | |
| Title: | Holder | |
Number and Type of NewCo Common Shares Subject to Lock-Up:
| NewCo Common Shares: | 5,000,000 | |
| NewCo Warrants: | 0 |
Address for Notice:
Address:
Facsimile No.:
Telephone No.:
Email:
[Signature to Lock-Up Agreement]
Execution Version
IN WITNESS WHEREOF, the parties have executed this Lock-Up Agreement as of the date first written above.
| Holder: | ||
| CANTOR FITZGERALD & CO. | ||
| By: | /s/ Sage Kelly | |
| Name: | Sage Kelly | |
| Title: | Global Head of Investment Banking | |
Number and Type of NewCo Common Shares Subject to Lock-Up:
| NewCo Common Shares: | 187,000 | |
| NewCo Warrants: | 93,500 |
Address for Notice:
Address:
Cantor Fitzgerald & Co.
110 East 59th Street
New York, NY 10022
Facsimile No.:
Telephone No.:
Email:
[Signature to Lock-Up Agreement]
Execution Version
IN WITNESS WHEREOF, the parties have executed this Lock-Up Agreement as of the date first written above.
| Holder: | ||
| J.V.B. FINANCIAL GROUP LLC | ||
| By: | /s/ Jerry Serowik | |
| Name: | Jerry Serowik | |
| Title: | Head of Capital Markets | |
Number and Type of NewCo Common Shares Subject to Lock-Up:
| NewCo Common Shares: | 33,000 | |
| NewCo Warrants: | 16,500 |
Address for Notice:
Address:
Address: 1825 NW Corporate Blvd Ste 100
Boca Raton, FL 33431
Facsimile No.:
Telephone No.:
Email:
[Signature to Lock-Up Agreement]
Exhibit 4.18
Execution Version
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
UNLESS PERMITTED UNDER CANADIAN 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) [INSERT THE DISTRIBUTION DATE], AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY OF CANADA.
Original Issue Date: January__, 2024
Maturity Date: January__, 2027
Principal Amount: $ ¨
Loan Amount: $ ¨
FORM OF SENIOR SECURED CONVERTIBLE NOTE
DUE JANUARY__, 2027
THIS SENIOR SECURED CONVERTIBLE NOTE is a duly authorized and validly issued Convertible Promissory Note of Psyence Biomedical Ltd., a corporation existing under the laws of Ontario, Canada (the “Company”), having its principal place of business at ________________ designated as its Convertible Note due January__, 2027 (this “Note”).
FOR VALUE RECEIVED, the Company promises to pay to [ ] or its registered assigns (collectively, the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of U.S. $[ ], accrued Interest and other amounts due and payable unless prepaid earlier or converted, on January___, 2027, unless the Holder has given notice to the Company that it elects to accelerate the Maturity Date to the extent explicitly permitted by this Note (the “Maturity Date”). In exchange for delivery of the Note on the Original Issuance Date referred to above, the Holder shall deliver U.S. $[ ] in United States dollars to the Company on the Original Issuance Date. The Holder’s allocation of principal and interest are set forth on Exhibit A hereto. This Note is subject to the following additional provisions:
Section 1. Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Note, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:
“Attribution Parties” shall have the meaning set forth in Section 5(f).
“Bankruptcy Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof (such law to include any applicable corporations legislation to the extent the relief sought thereunder relates to or involves the compromise, settlement, adjustment or arrangement of debt), (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian, monitor, trustee, receiver, receiver-manager or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts, (g) the Company or any Significant Subsidiary thereof admits in writing that it is insolvent or generally unable to pay its debts as they become due, (h) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
| 1 |
“Beneficial Ownership Limitation” shall have the meaning set forth in Section 5(f).
“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which commercial banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“Buy-In” shall have the meaning set forth in Section 5(e)(v).
“Change of Control Transaction” means the occurrence after the date hereof of any of the following: (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 50% of the voting securities of the Company (other than by means of conversion or exercise of this Note and the Securities issued together with this Note, (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of such transaction, (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a two year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above. Notwithstanding the foregoing, the Business Combination shall not be deemed to be a Change of Control Transaction for any purposes hereunder.
“Common Shares” means the common shares of the Company.
“Conversion Date” shall have the meaning set forth in Section 5(e)iii.
“Conversion Floor” means an amount equal to $1.00 until the First Reset Date, $0.50 until the Second Reset Date, and none thereafter.
“Conversion Price” shall have the meaning set forth in Section 5(b).
“Conversion Reset” means the reset of the Conversion Price at the following times and amounts:
(i) the five time downward adjustment of the Conversion Price on the following dates (i) the date that is five days prior to the date on which the Registration Statement is declared effective (the “First Reset Date”), (ii) the three month anniversary of the closing of the Business Combination (the “Second Reset Date”), (iii) the six month anniversary of the closing of the Business Combination, (iv) the nine month anniversary of the closing of the Business Combination, and (v) the twelve month anniversary of the closing of the Business Combination, upon which times the Conversion Price shall be reset to the lower of (a) the Initial Conversion Price or (b) the average daily VWAP for the previous ten (10) Trading Days prior to such reset but in no event lower than the Conversion Floor;
(ii) in the event that the Company sells, enters any agreement to sell or grants any right to reprice, or otherwise disposes of or issues (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Shares or any securities of the Company or any of its subsidiaries which would entitle the holder thereof to acquire or sell on behalf of the Company at any time Common Shares (including, without limitation, through conversion or other option rights (including pursuant to any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive Common Shares or other securities)) at an effective price per share less than the then existing Conversion Price, then the Conversion Price shall be modified to equal such reduced price as of such date; provided that, such offering shall include, for the avoidance of doubt, any Variable Rate Transaction or other registered offering or similar financing; or
(iii) in the event that the Company shall fail for any reason to remain listed as a public company on The Nasdaq Stock Market LLC or on another national exchange, the Conversion Price shall be reset to the average daily VWAP of the five prior Trading Days and the Conversion Floor will be eliminated;
“Conversion Shares” means, collectively, the Common Shares issuable upon conversion of this Note in accordance with the terms hereof.
“Event of Default” shall have the meaning set forth in Section 6(a).
“Fundamental Transaction” means the occurrence after the date hereof of any of the following: (i) the Company, directly or indirectly, in one or more related transactions effects any merger, amalgamation, or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Shares are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Shares, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Shares or any compulsory share exchange pursuant to which the Common Shares is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding Common Shares (not including any Common Shares held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination). Notwithstanding the foregoing, the Business Combination shall not be deemed to be a Fundamental Transaction for any purposes hereunder.
“Indebtedness” means: (a) all obligations for borrowed money; (b) all obligations evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, current swap agreements, interest rate hedging agreements, interest rate swaps, or other financial products; (c) all obligations or liabilities secured by a lien or encumbrance on any asset of the Company, irrespective of whether such obligation or liability is assumed; and (d) any obligation guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse) any of the foregoing obligations of any other person.
“Interest” shall have the meaning set forth in Section 2(a).
“Interest Payment Date” shall have the meaning set forth in Section 2(a).
“Mandatory Default Amount” means the (a) the outstanding principal amount of this Note, (b) accrued but unpaid Interest, and (c) all other amounts, costs, expenses and liquidated damages due in respect of this Note.
“New York Courts” shall have the meaning set forth in Section 8(d).
“Note” means this Senior Secured Convertible Note;
“Note Register” means the ledger that records the record owners of the Notes as maintained by the Company.
“Notice of Conversion” shall have the meaning set forth in Section 5(c)(ii).
“Original Issue Date” means the date of issuance of this Note.
“Paying Agent” shall have the meaning set forth in Section 5(e).
“Purchase Agreement” means the Securities Purchase Agreement, dated as of __, 2024 among, inter alios, the Company and the Purchaser, as amended, modified or supplemented from time to time in accordance with its terms.
“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date hereof, among the Company and the original Purchaser, in the form of Exhibit B attached to the Purchase Agreement.
“Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale of the Underlyingi Shares for this Note and the Second Tranche Note (as such term is defined in the Purchase Agreement) by Holder as provided for in the Registration Rights Agreement.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Security Agreement” means that certain General Security Agreement, dated as of [__________], 2024, from the Company and Psyence in favor of Purchaser.
“Share Delivery Date” shall have the meaning set forth in Section 5(c)(iii).
“Trading Day” means a day on which the principal Trading Market is open for trading.
“Trading Market” means any of the following markets or exchanges on which the Common Shares is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the OTCQB, or the OTCQX (or any successors to any of the foregoing).
“Variable Rate Transactions” has the meaning contained in the Purchase Agreement.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Shares is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Shares for such date (or the nearest preceding date) on the Trading Market on which the Common Shares is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)); provided, however, that if the Common Shares is then listed or quoted on more than one Trading Market, then the Trading Market for purposes of any calculations to be made pursuant to the terms of this Note shall be the Trading Market selected by the Holder in its sole discretion, (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Shares for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Shares is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Shares are then reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Shares so reported, or (d) in all other cases, the fair market value of a share of Common Shares as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
Section 2. Interest.
(a) Interest on this Note shall commence accruing on the Original Issuance Date at 8% per annum (the “Interest”) based on the outstanding principal amount of this Note and shall be computed on the basis of a 360-day year assuming a 30-day month (i.e. 30/360 basis) and shall be payable by the Company to the Holder in cash or in Common Shares (at the Conversion Price) at the option of the Company. Interest shall be payable monthly in arrears (each such date the interest payment is due, an “Interest Payment Date”).
(b) From and after the occurrence of any Event of Default, the Interest rate shall automatically be increased to the lower of 20% per annum (the “Default Interest”) or the highest amount permitted by law, shall compound monthly, and shall be due and payable on the first Trading Day of each calendar month.
(c) For the purposes of the Interest Act (Canada) and disclosure thereunder, whenever any interest or any fee to be paid hereunder or in connection herewith is to be calculated on the basis of a 360-day or 365-day year, the yearly rate of interest to which the rate used in such calculation is equivalent is the rate so used multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by 360 or 365, as applicable. The rates of interest under this Note are nominal rates, and not effective rates or yields. The principle of deemed reinvestment of interest does not apply to any interest calculation under this Note.
(d) If any provision of this Note would oblige the Company to make any payment of interest or other amount payable to the Holder in an amount or calculated at a rate which would be prohibited by law or would result in a receipt by the Holder of “interest” at a “criminal rate” (as such terms are construed under the Criminal Code (Canada)), then, notwithstanding such provision, such amount or rate shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by applicable law or so result in a receipt by the Holder of “interest” at a “criminal rate”, such adjustment to be effected, to the extent necessary (but only to the extent necessary), as follows:
(i) first, by reducing the amount or rate of interest; and
(ii) thereafter, by reducing any fees, commissions, costs, expenses, premiums and other amounts required to be paid which would constitute interest for purposes of section 347 of the Criminal Code (Canada).
(e) All payments under this Note or any other Transaction Document shall be made free and clear of and without deduction or withholding for any taxes except as required by applicable law; provided that if the payor shall be required to deduct or withhold any taxes from such payments, then the sum payable by the payor shall be increased as necessary so that, after making all required deductions or withholdings (including deductions or withholdings applicable to additional sums payable under this clause) the Holder receives an amount equal to the sum it would have received had no such deduction or withholding been made.
Section 3. Reserved.
Section 4. Registration of Transfers and Exchanges.
a) Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.
b) Investment Representations. This Note has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.
c) Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.
Section 5. Conversion.
a) Conversion Privilege. The Holder shall have the right, at the Holder’s sole option, on any business day to convert all or any portion of the Note on any Conversion Date at the Conversion Price.
b) Conversion Price. The Conversion Price commencing on the first Trading Day following the closing of the Business Combination shall be $10.00; provided, however, that in the event that Holder and its Affiliates have not received at least the sum of Five Million Dollars ($5,000,000) as a return on its investment prior to the First Reset Date (including through the sale of Structuring Shares received pursuant to the Purchase Agreement), the Conversion Price shall be adjusted, at any time, to the lower of (i) $10.00 and (ii) the lowest daily VWAP during the period commencing on the First Tranche Closing date until the earlier of (i) the Conversion Date or (ii) First Reset Date (the “Initial Conversion Price”); which Initial Conversion Price shall be subject to a Conversion Reset as set forth in this Note (as adjusted or reset, the “Conversion Price”).
c) Dividends; Stock Splits. If the Company, at any time while this Note is outstanding: (i) pays a share dividend or otherwise makes a distribution or distributions payable in Common Shares on Common Shares or any Common Share Equivalents (which, for avoidance of doubt, shall not include any Common Shares issued by the Company upon conversion of, or payment of interest on, the Notes), (ii) subdivides outstanding Common Shares into a larger number of shares, (iii) combines (including by way of a reverse share split) outstanding Common Shares into a smaller number of shares or (iv) issues, in the event of a reclassification of Common Shares, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of Common Shares (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of Common Shares outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. Any adjustment pursuant to this Section 5(c) shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 5(c) occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect such event.
d) Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 5 hereof and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.
e) Mechanics of Conversion.
i. Conversion Shares Issuable Upon Conversion. The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted, by the Conversion Price.
ii. Notice of Conversion. Before the Holder of the Note shall be entitled to convert all or any portion of the Note as set forth above, the Holder shall (1) complete, manually sign and deliver an irrevocable notice to the Company as set forth in the Form of Notice of Conversion (or a facsimile or electronic version thereof) in substantially the form attached hereto as Exhibit A (a “Notice of Conversion”) at the office of the Company, if applicable, and state in writing therein the principal amount of Notes to be converted, the numbers Conversion Shares and the name or names (with addresses) in which the Holder wishes the Common Shares to be delivered upon settlement of the conversion to be registered, and (2) if required, pay all transfer or similar taxes, if any.
iii. Delivery of Conversion Shares Upon Conversion. The Note shall be deemed to have been converted immediately prior to the close of business on any date (the “Conversion Date”) that the Holder has complied with the requirements set forth in subsection (ii) above. Not later than two (2) Business Days following the applicable conversion of the Note (the “Share Delivery Date”), the Company shall electronically deliver, or cause to be delivered via DWAC transfer, to the Holder the Conversion Shares. The Company shall deliver any Conversion Shares required to be delivered by the Company under this Section 5(c) electronically through the Depository Trust Company or another established clearing corporation performing similar functions.
iv. Obligation Absolute; Partial Liquidated Damages. The Company’s obligation to issue and deliver the Conversion Shares upon conversion of this Note in accordance with the terms hereof is absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. Upon the Closing, the Company may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part of this Note shall have been sought and obtained, and the Company posts a surety bond for the benefit of the Holder in the amount of 150% the outstanding principal amount of this Note, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to the Holder to the extent it obtains judgment. In the absence of such injunction, the Company shall issue Conversion Shares or, if applicable, cash, upon a conversion. If the Company fails for any reason to deliver to the Holder such Conversion Shares pursuant to Section 5(c)(iii) by the Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of principal amount being converted, $7 per Trading Day (increasing to $10 per Trading Day on the fifth (5th) Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Share Delivery Date until such Conversion Shares are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 6 hereof for the Company’s failure to deliver Conversion Shares within the period specified herein and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.
v. Compensation for Buy-In on Failure to Timely Deliver Conversion Shares Upon Conversion. In addition to any other rights available to the Holder, if the Company fails for any reason to deliver to the Holder such Conversion Shares by the Share Delivery Date pursuant to Section 5(c)(iii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, Common Shares to deliver in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s total purchase price (including any brokerage commissions) for the Common Shares so purchased exceeds (y) the product of (1) the aggregate number of Common Shares that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of the Holder, either reissue (if surrendered) this Note in a principal amount equal to the principal amount of the attempted conversion (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of Common Shares that would have been issued if the Company had timely complied with its delivery requirements under Section 5(c)(iii). For example, if the Holder purchases Common Shares having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this Note with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver Conversion Shares upon conversion of this Note as required pursuant to the terms hereof.
vi. Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Shares for the sole purpose of issuance upon conversion of this Note, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder, not less than the greater of (i) 300% of such aggregate number of shares of the Common Shares as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable upon the conversion of the then outstanding principal amount of this Note assuming a minimum Conversion Price of $0.50 until the Second Reset Date and the actual Conversion Price thereafter, . The Company covenants that all Common Shares that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable and, if the Registration Statement is then effective under the Securities Act, shall be registered for public resale in accordance with such Registration Statement (subject to such Holder’s compliance with its obligations under the Registration Rights Agreement).
vii Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of all or any portion of this Note. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or Amortization Conversion Price, as applicable, or round up to the next whole share.
viii. Transfer Taxes and Expenses. The issuance of Conversion Shares on conversion of this Note shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the Holder of this Note so converted and the Company shall not be required to issue or deliver such Conversion Shares unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. The Company shall pay all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion Shares.
f) Holder’s Conversion Limitations. The Company shall not effect any conversion of this Note to the extent that after giving effect to the conversion, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of Common Shares beneficially owned by the Holder and its Affiliates and Attribution Parties shall include all Common Shares beneficially owned by the Attribution Parties pursuant to the terms of the Purchase Agreement and the number of Common Shares issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of Common Shares which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 5(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 5(d) applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other securities owned by the Holder together with any Affiliates or Attribution Parties) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company that the conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 5(d), in determining the number of outstanding Common Shares, the Holder may rely on the number of outstanding Common Shares as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of Common Shares outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of Common Shares then outstanding. In any case, the number of outstanding Common Shares shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding Common Shares was reported. The “Beneficial Ownership Limitation” shall be 9.9% of the number of shares of the Common Shares outstanding immediately after giving effect to the issuance Common Shares issuable upon conversion of this Note held by the Holder. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 5(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note.
g) Maintenance of Office or Agency. The Company may maintain in the contiguous United States an office or agency where the Notes may be surrendered for registration of transfer or exchange or for presentation for payment or repurchase (“Paying Agent”).
h) Notice to Holder. Whenever the Conversion Price is adjusted as a result of any Conversion Reset, the Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the Conversion Price after such Company action or adjustment and any resulting adjustment to the number of Conversion Shares and setting forth a brief statement of the facts requiring such adjustment.
i) Make Whole. If the VWAP (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)) for the thirty (30) Trading Days beginning on the Trading Date following a Conversion Date (the “30 Day VWAP”) is lower than the Conversion Price on the Conversion Date, the Company shall make a payment in cash or Common Shares, at its election but subject to the limitations set forth below (the “Make Whole Payment”). In the event that the Company elects to make a Make Whole Payment in Common Shares, it shall transfer to the Holder the number of Common Shares (the “Make Whole Shares”) equal to the difference between (A) the principal amount converted on the Conversion Date divided by 30 Day VWAP and (B) principal amount converted divided by the Conversion Price on the Conversion Date. In the event that the Company elects to pay the Make Whole Payment in cash it shall pay an amount equal to the number of Make Whole Shares multiplied by the 30 Day VWAP. The Company shall make the Make Whole Payment no later than thirty-five (35) Trading Days after the Conversion Date for which such payment is due. Notwithstanding the foregoing, the Company may not pay the Make Whole Payment in Conversion Shares if the Make Whole Shares are not registered on an effective Registration Statement, unless waived in writing by the Holder or (ii) if the issuance of the Make Whole Shares would result in the Holder exceeding the Beneficial Ownership Limitation.
Section 6. Events of Default.
a) “Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or 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):
i. any default in the payment of (A) the principal amount of this Note or (B) liquidated damages and other amounts owing to the Holder on this Note, as and when the same shall become due and payable (whether on the Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of default under clause (B) above, is not cured within 10 Trading Days of delivery of a notice of the same to the Company by the Holder;
ii. the Company shall fail to observe or perform any other covenant, obligation, or agreement contained in this Note (other than a breach by the Company of its obligations to deliver Common Shares to the Holder upon conversion, which breach is addressed in clause (xi) below) or in any Transaction Document, which failure is not cured, if possible to cure, within the earlier to occur of (A) 5 Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B) 10 Trading Days after the Company has become or should have become aware of such failure;
iii. the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy Event;
iv. the Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any Indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation greater than $100,000, whether such Indebtedness now exists or shall hereafter be created, and (b) results in such Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;
v. other than with respect to the Business Combination, the Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of all or in excess of 33% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction);
vi. the Company shall fail for any reason to deliver Conversion Shares to the Holder by the Share Delivery Date pursuant to Section 5(c) or the Company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’s intention to not honor a conversion of this Note in accordance with the terms hereof;
vii. the Company shall fail for any reason to remain listed as a public company on The Nasdaq Stock Market LLC (“Nasdaq”);
viii. any monetary judgment, writ or similar final process shall be entered or filed against the Company, any Subsidiary or any of their respective property or other assets for more than $100,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days;
ix. the Company or a subsidiary enters into a Variable Rate Transaction or a similar transaction in violation of the terms of the Purchase Agreement without the prior written consent of the Holder;
x. the Company or its subsidiary, directly or indirectly, prepays, repurchases or declares or pays any cash dividend or distribution on any of its capital stock without the prior written consent of the Holder;
xi. the Company or its subsidiaries, suffer to exist any Lien on the Collateral other than the Lien granted pursuant to the Security Agreement or as otherwise permitted under the terms of the Purchase Agreement;
xii. the Company fails to cause the Registration Statement to become effective within three (3) months following the First Tranche Closing (as such term is defined in the Purchase Agreement);
xiii. the Company shall have received a deficiency notice from Nasdaq or any other national securities exchange on which the Securities are listed which has not been resolved for more than sixty (60) days after notice thereof; or
xiv. the Common Shares cease to be listed on a national securities exchange, which for the avoidance of doubt shall exclude the OTCQB, the OTCQX and the Pink markets (or any successors to any of the foregoing), or upon the filing of a Form 25.
b) Remedies Upon Event of Default. If any Event of Default occurs, and upon the date specified by Purchaser in a written notice to be delivered to the Company at Purchaser’s discretion, the outstanding principal amount of this Note, accrued but unpaid Interest through acceleration, plus liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount. Additionally, Purchaser may pursue the rights and remedies provided to Purchaser under the Security Agreement. Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 6(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.
Section 7. Prepayment. At any time following one (1) year after the Original Issue Date of the Note, and provided that no Event of Default has occurred and is continuing on the applicable prepayment date, but subject in all cases to the terms of the Purchase Agreement, the Company may repay any portion of the outstanding principal amount of the Note upon at least thirty (30) Trading Days’ written notice (the “Prepayment Notice Period”) of the Holder (the “Prepayment Notice”) by paying an amount equal to 130% of the principal amount of the Note then being prepaid (representing a 30% prepayment premium payable to the Holder which shall not constitute a principal repayment) plus accrued but unpaid Interest through the prepayment date. Notwithstanding the foregoing, if the Company elects to prepay this Note pursuant to the provisions of this Section 7, the Holder shall continue to have the right to exercise Holder’s conversion privilege in accordance with Section 5 hereof.
Section 8. Miscellaneous.
a) Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder shall be in writing and delivered personally, by facsimile, by email attachment, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile number, email address, or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 8(a). Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, by email attachment, or sent by a nationally recognized overnight courier service addressed to Holder at the facsimile number, email address or address of the Holder appearing on the books of the Company, or if no such facsimile number or email attachment or address appears on the books of the Company, at the principal place of business of such Holder, as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment to the email address set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment to the email address set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.
b) Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and liquidated damages, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company.
c) Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.
d) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
e) Amendment; Waiver. The provisions of this Note, including the provisions of this Section 8(e), may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holder. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion.
f) Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.
g) Execution and Counterparts. This Note may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
h) Successors and Assigns. This Note shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each such holder. Neither party may assign its rights or obligations hereunder without the prior written consent of the other parties hereto.
i) Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note.
j) Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
k) Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.
l). Judgment Currency. If, for the purposes of obtaining judgment in any court in any jurisdiction with respect to this Note or any other Transaction Document, it becomes necessary to convert into a particular currency (the “Judgment Currency”) any amount due under this Note or under any other Transaction Document in any currency other than the Judgment Currency (the “Currency Due”), then conversion shall be made at the rate of exchange prevailing on the Business Day before the day on which judgment is given. For this purpose “rate of exchange” means the rate at which the Holder is able, on the relevant date, to purchase the Currency Due with the Judgment Currency in accordance with its normal practice. In the event that there is a change in the rate of exchange prevailing between the Business Day before the day on which the judgment is given and the date of receipt by the Holder of the amount due, the Company will, on the date of receipt by the Holder, pay such additional amounts, if any, or be entitled to receive reimbursement of such amount, if any, as may be necessary to ensure that the amount received by the Holder on such date is the amount in the Judgment Currency which when converted at the rate of exchange prevailing on the date of receipt by the Holder is the amount then due under this Note or such other Transaction Document in the Currency Due. If the amount of the Currency Due which the Holder is so able to purchase is less than the amount of the Currency Due originally due to it, the Company shall indemnify and save the Holder harmless from and against all loss or damage arising as a result of such deficiency. This indemnity shall constitute an obligation separate and independent from the other obligations contained in this Note and the other Transaction Documents, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by the Holder from time to time and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due under this Note or any other Transaction Document or under any judgment or order.
*********************
(Signature Pages Follow)
N WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.
| PSYENCE BIOMEDICAL LTD. | |||
| By: | |||
| Name: | |||
| Title: | |||
Exhibit A
[FORM OF NOTICE OF CONVERSION]
| To: | [Name and Address of the Company] |
The undersigned registered owner of this Note hereby exercises the option to convert this Note, or the portion hereof below designated, into Common Shares in accordance with the terms of the Note, and directs that any cash payable and any Common Shares issuable and deliverable upon such conversion, together with any cash for any fractional share, and any Notes representing any unconverted principal amount hereof, be issued and delivered to the registered Holder hereof unless a different name has been indicated below. If any Common Shares or any portion of this Note not converted are to be issued in the name of a Person other than the undersigned, the undersigned will pay all documentary, stamp or similar issue or transfer taxes, if any in accordance with Section 5(c)(viii) of the Note. Capitalized terms used herein but not defined shall have the meanings ascribed to such terms in the Note.
| Dated: | |||
| Signature | |||
| (City, State and Zip Code) Please print name and address |
|||
| Principal amount to be converted (if less than all): | |
| $__________,000 | |
| Number of Conversion Shares:________________ |
Exhibit 15.1
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Introduction
Psyence Biomedical is providing the following unaudited pro forma condensed combined financial information to aid you in your analysis of the financial aspects of the Business Combination.
The following unaudited pro forma condensed combined balance sheet as of September 30, 2023 combines the historical balance sheet of NCAC as of September 30, 2023 with the historical carve-out consolidated balance sheets of Psyence Biomed Corp. as of September 30, 2023, giving pro forma effect to the Business Combination, as if it had occurred as of September 30, 2023.
The following unaudited pro forma condensed combined statements of operations for the six months ended September 30, 2023 combine the historical statement of operations of NCAC for the nine months ended September 30, 2023 less the three months ended March 31, 2023, and the historical carve-out consolidated statements of net loss and comprehensive loss of Psyence Biomed Corp. for the six months ended September 30, 2023, giving pro forma effect to the Business Combination as if it had occurred on April 1, 2022, the beginning of the earliest period presented.
The following unaudited pro forma condensed combined statements of operations for the year ended March 31, 2023 combine the historical statement of operations of NCAC for the year ended December 31, 2022, and the historical carve-out consolidated statements of net loss and comprehensive loss of Psyence Biomed Corp. for the year ended March 31, 2023, giving pro forma effect to the Business Combination as if it had occurred on April 1, 2022, the beginning of the earliest period presented.
The unaudited pro forma condensed combined financial statements have been derived from:
| · | the historical audited financial statements of NCAC as of December 31, 2022 and for the year ended December 31, 2022 and the related notes thereto included elsewhere in this Form 20-F; |
| · | the historical unaudited financial statements of NCAC as of March 31, 2023 and for the three months ended March 31, 2023 and the related notes thereto; and |
| · | the historical unaudited financial statements of NCAC as of September 30, 2023 and for the nine months ended September 30, 2023 and the related notes thereto included elsewhere in this Form 20-F; and |
| · | the historical audited carve-out consolidated financial statements of Psyence Biomed Corp. as of September 30, 2023 and for the six months ended September 30, 2023 (the “Carve-Out interim Consolidated Financial Statements”) and the related notes thereto included elsewhere in this Form 20-F; and |
| · | the historical audited carve-out consolidated financial statements of Psyence Biomed Corp. as of and for the years ended March 31, 2023 and 2022 (the “Carve-Out Consolidated Financial Statements”) and the related notes thereto included elsewhere in this Form 20-F. |
This information should be read together with the Carve-Out Consolidated Financial Statements of Psyence Biomed Corp. and its related notes and NCAC’s financial statements and related notes, “Psyence Biomed Corp. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other financial information included elsewhere in this Form 20-F.
| 1 |
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF SEPTEMBER 30, 2023
(In USD)
| Original Target (IFRS, |
IFRS Conversion and |
Actual Redemption |
|||||||||||||||||||
| Historical) – USD (Note 4) |
NCAC (U.S. GAAP Historical) |
Presentation Alignment (Note 4) |
Transaction Accounting Adjustments |
Pro Forma Combined |
|||||||||||||||||
| ASSETS | |||||||||||||||||||||
| Current assets | |||||||||||||||||||||
| Cash and cash equivalents | $ | 605,480 | $ | 88,174 | $ | — | $ | 1,351,130 | A | $ | 2,275,445 | ||||||||||
| (1,613,859 | ) | B | |||||||||||||||||||
| (50,000 | ) | H | |||||||||||||||||||
| 2,500,000 | J | ||||||||||||||||||||
| (605,480 | ) | O | |||||||||||||||||||
| Restricted cash | 29,586 | — | — | (29,586 | ) | O | — | ||||||||||||||
| Other receivables | 18,787 | — | — | — | 18,787 | ||||||||||||||||
| Interest receivable | — | 53,659 | — | (53,659 | ) | A | — | ||||||||||||||
| Prepaid expenses and other assets | 15,519 | 20,683 | — | — | 36,202 | ||||||||||||||||
| Total current assets | 669,372 | 162,516 | — | 1,499,250 | 2,330,434 | ||||||||||||||||
| Non-current assets | |||||||||||||||||||||
| Investments held in Trust Account | — | 12,518,199 | — | (1,297,471 | ) | A | — | ||||||||||||||
| (11,493,744 | ) | K | |||||||||||||||||||
| 100,172 | L | ||||||||||||||||||||
| 172,844 | M | ||||||||||||||||||||
| Total non-current assets | — | 12,518,199 | — | (12,518,199 | ) | — | |||||||||||||||
| Total assets | $ | 669,372 | $ | 12,680,715 | $ | — | $ | (11,019,653 | ) | $ | 2,330,434 | ||||||||||
| LIABILITIES | |||||||||||||||||||||
| Current liabilities | |||||||||||||||||||||
| Accounts payable and accrued liabilities | $ | 914,990 | $ | 1,007,704 | $ | — | $ | (618,551 | ) | B | $ | 1,304,143 | |||||||||
| Deferred underwriting fee payable | — | 13,100,000 | — | (13,100,000 | ) | I | — | ||||||||||||||
| Loan to affiliate | 737,053 | 70,000 | — | 1,460,657 | B | 2,267,710 | |||||||||||||||
| Loan from Sponsor | — | 1,607,770 | — | (50,000 | ) | H | 1,657,942 | ||||||||||||||
| 100,172 | L | ||||||||||||||||||||
| Convertible Note | — | — | — | 484,496 | J | 484,496 | |||||||||||||||
| Derivative warrant liability | — | 392,100 | — | (392,100 | ) | O | 594,685 | ||||||||||||||
| — | 594,685 | P | |||||||||||||||||||
| Common stock subject to possible redemption | — | — | 12,571,858 | (a) | (1,078,114 | ) | E | — | |||||||||||||
| (11,493,744 | ) | K | |||||||||||||||||||
| Total current liabilities | 1,652,043 | 16,177,574 | 12,571,858 | (24,092,499 | ) | 6,308,976 | |||||||||||||||
| Total liabilities | 1,652,043 | 16,177,574 | 12,571,858 | (24,092,499 | ) | 6,308,976 | |||||||||||||||
| Class A ordinary shares subject to possible redemption | — | 12,571,585 | (12,571,858 | )(a) | — | — | |||||||||||||||
| EQUITY | |||||||||||||||||||||
| Net parent investment | (982,671 | ) | — | — | 982,671 | C | — | ||||||||||||||
| NCAC Class B ordinary shares | — | 654 | — | (654 | ) | G | — | ||||||||||||||
| NCAC Class A ordinary shares | — | 114 | — | 500 | C | 1,339 | |||||||||||||||
| 45 | B | ||||||||||||||||||||
| 12 | E | ||||||||||||||||||||
| 523 | G | ||||||||||||||||||||
| 2 |
| Original Target (IFRS, |
IFRS Conversion and |
Actual Redemption |
|||||||||||||||||||
| Historical) – USD (Note 4) |
NCAC (U.S. GAAP Historical) |
Presentation Alignment (Note 4) |
Transaction Accounting Adjustments |
Pro Forma Combined |
|||||||||||||||||
| 130 | J | ||||||||||||||||||||
| 15 | I | ||||||||||||||||||||
| Additional paid-in capital | — | — | — | (988,955 | ) | B | 71,542,872 | ||||||||||||||
| 4,110,908 | C | ||||||||||||||||||||
| (3,904,541 | ) | D | |||||||||||||||||||
| 1,078,102 | E | ||||||||||||||||||||
| 131 | G | ||||||||||||||||||||
| 1,499,985 | I | ||||||||||||||||||||
| (635,066 | ) | N | |||||||||||||||||||
| 2,015,374 | J | ||||||||||||||||||||
| 68,366,934 | F | ||||||||||||||||||||
| Accumulated deficit | — | (16,069,485 | ) | — | (1,467,055 | ) | B | (75,522,753 | ) | ||||||||||||
| (5,094,079 | ) | C | |||||||||||||||||||
| 3,904,541 | D | ||||||||||||||||||||
| (68,366,934 | ) | F | |||||||||||||||||||
| 392,100 | O | ||||||||||||||||||||
| (594,685 | ) | P | |||||||||||||||||||
| 11,600,000 | I | ||||||||||||||||||||
| 172,844 | M | ||||||||||||||||||||
| Total equity | (982,671 | ) | (16,068,717 | ) | — | 13,072,846 | (3,978,542 | ) | |||||||||||||
| Total equity and liabilities | $ | 669,372 | $ | 12,680,715 | $ | — | $ | (11,019,653 | ) | $ | 2,330,434 | ||||||||||
See accompanying notes to the unaudited pro forma condensed combined financial information.
| 3 |
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT
OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2023
(in USD)
| Original Target (IFRS, |
IFRS Conversion and |
Actual Redemption |
|||||||||||||||||||
| Historical) – USD (Note 4) |
NCAC (U.S. GAAP Historical)(1) |
Presentation Alignment (Note 4) |
Transaction Accounting Adjustments |
Pro Forma Combined |
|||||||||||||||||
| Operating expenses | |||||||||||||||||||||
| Sales and marketing | $ | (2,122 | ) | $ | — | $ | — | $ | — | $ | (2,122 | ) | |||||||||
| Research and development | (791,439 | ) | — | — | — | (791,439 | ) | ||||||||||||||
| General and administrative | (85,569 | ) | (290,985 | ) | — | 60,000 | BB | (316,554 | ) | ||||||||||||
| Professional fees and consulting fees | (584,427 | ) | (778,157 | ) | — | — | (1,362,584 | ) | |||||||||||||
| Foreign exchange gain (loss) | (115,434 | ) | — | — | — | (115,434 | ) | ||||||||||||||
| Interest income | (27,423 | ) | — | 358,533 | (b) | (358,533 | ) | AA | (27,423 | ) | |||||||||||
| Total operating expense | (1,606,414 | ) | (1,069,142 | ) | 358,533 | (298,533 | ) | (2,615,556 | ) | ||||||||||||
| Other income and (expense) | |||||||||||||||||||||
| Interest income on marketable securities held in Trust Account | — | 358,533 | (358,533 | )(b) | — | — | |||||||||||||||
| Profit (loss) before income tax | (1,606,414 | ) | (710,609 | ) | — | (298,533 | ) | (2,615,556 | ) | ||||||||||||
| Income tax (expense) benefit | — | — | — | — | — | ||||||||||||||||
| Net income (loss) | $ | (1,606,414 | ) | $ | (710,609 | ) | $ | — | $ | (298,533 | ) | $ | (2,615,556 | ) | |||||||
| Basic and diluted net loss per share, redeemable Class A ordinary shares | $ | 0.20 | |||||||||||||||||||
| Basic and diluted net loss per share, Class B ordinary shares | $ | (0.08 | ) | ||||||||||||||||||
| Pro forma weighted average number of shares outstanding – basic and diluted | 13,390,659 | ||||||||||||||||||||
| Pro forma loss per share – basic and diluted | $ | (0.20 | ) | ||||||||||||||||||
| (1) | Combine the historical statement of operations of NCAC for the six months ended September 30, 2023 derived from the nine month ended September 30, 2023 less the three months ended March 31, 2023. |
| 4 |
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT
OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2023
(in USD)
| Original Target (IFRS, |
IFRS Conversion and |
Actual Redemption |
|||||||||||||||||||
| Historical) – USD (Note 4) |
NCAC (U.S. GAAP Historical)(1) |
Presentation Alignment (Note 4) |
Transaction Accounting Adjustments |
Pro Forma Combined |
|||||||||||||||||
| Operating expenses | |||||||||||||||||||||
| Sales and marketing | $ | (7,024 | ) | $ | — | $ | — | $ | — | $ | (7,024 | ) | |||||||||
| Research and development | (1,607,565 | ) | — | — | — | (1,607,565 | ) | ||||||||||||||
| General and administrative | (366,132 | ) | (869,379 | ) | — | 220,000 | BB | (70,849,500 | ) | ||||||||||||
| (68,833,989 | ) | CC | |||||||||||||||||||
| Professional fees and consulting fees | (1,251,474 | ) | (424,598 | ) | — | — | (1,676,072 | ) | |||||||||||||
| Foreign exchange gain (loss) | 26,890 | — | — | — | 26,890 | ||||||||||||||||
| Interest income | 1,553 | — | 3,551,791 | (b) | (3,551,791 | ) | AA | 1,553 | |||||||||||||
| Total operating expense | (3,203,752 | ) | (1,293,977 | ) | 3,551,791 | (73,165,780 | ) | (74,111,718 | ) | ||||||||||||
| Other income and (expense) | |||||||||||||||||||||
| Change in fair value of warrants | — | 5,756,500 | — | — | 5,756,500 | ||||||||||||||||
| Interest income on marketable securities held in Trust Account |
— | 3,551,791 | (3,551,791 | )(b) | — | — | |||||||||||||||
| Profit (loss) before income tax | (3,203,752 | ) | 8,014,314 | — | (73,165,780 | ) | (68,355,218 | ) | |||||||||||||
| Income tax (expense) benefit | — | — | — | — | — | ||||||||||||||||
| Net income (loss) | $ | (3,203,752 | ) | $ | 8,014,314 | $ | — | $ | (73,165,780 | ) | $ | (68,355,218 | ) | ||||||||
| Basic and diluted net loss per share, redeemable Class A ordinary shares | $ | 0.38 | |||||||||||||||||||
| Basic and diluted net loss per share, Class B ordinary shares | $ | 0.25 | |||||||||||||||||||
| Pro forma weighted average number of shares outstanding – basic and diluted | 13,390,659 | ||||||||||||||||||||
| Pro forma loss per share – basic and diluted | $ | (5.10 | ) | ||||||||||||||||||
| (1) | Combine the historical statement of operations of NCAC for the year ended December 31, 2022 |
| 5 |
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Note 1 — Description of the Business Combination
On January 25, 2024 (the “Closing Date”), Psyence Biomedical Ltd., a corporation organized under the laws of Ontario, Canada (“Psyence Biomedical” or the “Company”), consummated the previously announced business combination pursuant to the Amended and Restated Business Combination Agreement (as amended, the “BCA”), dated as of July 31, 2023, by and among the Company, Newcourt Acquisition Corp., a Cayman Islands exempted company (“NCAC”), Newcourt SPAC Sponsor LLC, a Delaware limited liability company (“Sponsor”), Psyence Group Inc., a corporation organized under the laws of Ontario, Canada (“Parent”), Psyence (Cayman) Merger Sub, a Cayman Islands exempted company and a direct and wholly owned subsidiary of Pubco (“Merger Sub”), Psyence Biomed Corp., a corporation organized under the laws of British Columbia, Canada (“Original Target”), and Psyence Biomed II Corp., a corporation organized under the laws of Ontario, Canada (“Psyence II”).
Prior to the execution of the Amended and Restated Business Combination Agreement, Parent formed Psyence II and Psyence Biomedical as wholly owned subsidiaries, and prior to the Closing, Parent and the Original Target were amalgamated. Thereafter, Parent transferred the shares of Psyence Australia Pty Ltd. and its related business assets that were previously owned by the Original Target to Psyence II.
The following transactions occurred pursuant to the terms of the BCA (collectively, the “Business Combination”) at the effective time of the Merger (the “Effective Time”):
| · | Parent contributed Psyence II to the Company in a share for share exchange (the “Company Exchange”). | |
| · | Following the Company Exchange, Merger Sub merged with and into NCAC, with NCAC being the surviving company in the merger (the “Merger”) and each outstanding ordinary share of NCAC was converted into the right to receive one common share of the Company (“Company Common Share”). | |
| · | Each outstanding warrant to purchase NCAC Class A ordinary shares was converted at the Effective Time into a warrant to acquire one Company Common Share (the “Company Warrants”) on substantially the same terms as were in effect immediately prior to the Effective Time under their terms. |
On January 15, 2024 and January 23, 2024, the parties to the Business Combination Agreement entered into letter agreements (the “Closing Letter Agreements”) pursuant to which, among other things, Psyence Biomedical, Parent, the Company, Original Target and Merger Sub (collectively, the “Psyence Parties”) agreed, (X) on a conditional basis, to waive the closing conditions contained in the BCA that, at or prior to the closing of the Business Combination (the “Closing”), (i) Newcourt shall have no less than $20,000,000, net of liabilities, as of the Closing (the “Minimum Cash Condition”) and (ii) the PIPE Investment in the PIPE Investment Amount shall have occurred or shall be ready to occur substantially concurrently with the Closing (the “PIPE Investment Condition”) and (Y) to waive certain deliverables under Section 3.6 of the Business Combination Agreement (the “Closing Deliverables”). Upon the Closing, the Psyence Parties waived in full the Minimum Cash Condition, the PIPE Investment Condition and the Closing Deliverables.
On January 15, 2024, in connection with the Business Combination, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) by and among (i) the Company, (ii) Psyence II, (iii) Sponsor and (iv) certain investors (the “Investors”) relating to up to four senior secured convertible notes (collectively, the “Notes” and the transactions pursuant to the Securities Purchase Agreement, the “Financing”), obligations under which will be guaranteed by certain assets of the Company and Psyence II, issuable to the Investors at or after the Closing, as the case may be, for the aggregate principal amount of up to $12,500,000 in exchange for up to $10,000,000 in subscription amounts.
The Note for the first tranche of the Financing (the “First Tranche Note”), for a total of $3,125,000 of principal in exchange for a total of $2,500,000 in subscription amounts and was issued to the Investors substantially concurrently with, and contingent upon, the Closing. The Financing closed immediately prior to the Business Combination.
Upon the closing of the first tranche of the Financing, the Minimum Cash Condition and PIPE Investment Condition were deemed waived by the Psyence Parties.
Merger Consideration
As consideration for all of the issued and outstanding Psyence II common shares that the Company shall receive in the Company Exchange, the Company shall issue to Parent, 5,000,000 Company Common Shares.
Note 2 — Basis of Presentation
The adjustments presented on the pro forma combined financial statements have been identified and presented to provide an understanding of the Company upon consummation of the Business Combination for illustrative purposes.
The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). The Company has elected not to present Management’s Adjustments and will only be presenting Transaction Accounting Adjustments in the following unaudited pro forma condensed combined financial information. The historical financial information has been adjusted to reflect the pro forma adjustments that are directly attributable to the Business Combination and the Security Purchase Agreement financing as described below.
| 6 |
Actual Redemptions
On January 18, 2024, in connection with the extraordinary general meeting of shareholders held in connection with the proposed Business Combination, NCAC’s public shareholders holding 929,727 public shares validly elected to redeem their shares for a pro rata portion of the funds in the NCAC’s Trust Account. As a result, approximately $10.74 million (approximately $11.56 per public share redeemed in connection with the Extension Meeting) was removed from the Trust Account to pay such holders. On January 22, 2024, in connection with the NCAC’s Extension Meeting, shareholders holding 63,635 public shares exercised their right to redeem their shares for a pro rata portion of the funds in the NCAC’s Trust Account. As a result, approximately $735,000 (approximately $11.56 per public share redeemed in connection with the Extension Meeting) was removed from the Trust Account to pay such holders. The total shares redeemed was 993,362 resulting in approximately $11.49 was removed from the Trust Account to pay such holders. Following such redemptions, NCAC had 119,659 public shares outstanding and approximately $1.38 million remained in the Trust Account.
Financing Arrangements
On January 15, 2024, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) by and among the Company, Psyence, Sponsor and a purchaser (the “Purchaser”) relating to up to four senior secured convertible notes (collectively, the “Notes”), obligations under which will be guaranteed by certain assets of the Company and Psyence, issuable to the Purchaser at or after the Closing, as the case may be, for the aggregate principal amount of up to $12,500,000 in exchange for up to $10,000,000 in subscription amounts.
The First Tranche Note will be a total of $3,125,000 of principal in exchange for a total of $2,500,000 in subscription amounts and will be issuable to the Purchaser substantially concurrently with, and contingent upon, the consummation of the Business Combination or at such other time and place as the Company and the Purchaser mutually agree upon.
The Second Tranche Note will be a total of $3,125,000 of principal in exchange for a total of $2,500,000 in subscription amounts; provided, however, that, in the event that the Market Value Traded as of the Second Tranche Closing is less than the full subscription amount of the Second Tranche Note, (A) Purchaser will invest an amount equal to the Market Value Traded as of the Second Tranche Closing and (B) on the later of (i) each subsequent 30 day anniversary of the Second Tranche Closing or (ii) the effectiveness of the registration statement registering the underlying shares for such portion of the Second Tranche Note, Purchaser will invest an amount equal to the Market Value Traded as of such date, until the Second Tranche Note is funded in full, subject to the conditions set forth in the Securities Purchase Agreement.
The Third Tranche Note, if any, will be a total of $3,125,000 of principal in exchange for a total of $2,500,000 in subscription amounts.
The Fourth Tranche Note, if any, will be a total of $3,125,000 of principal in exchange for a total of $2,500,000 in subscription amounts.
The material terms of the Notes are as follows: On the original issuance date, interest shall begin accruing at 8.0% per annum based on the outstanding principal amount of the Note, payable monthly in arrears in cash or in common shares of the Company’s (“Common Shares”) (at the Conversion Price). For purposes of the Notes, the Conversion Price, commencing on the first trading day following the closing of the Business Combination shall be $10.00; provided, however, it may be subject to adjustments according to the terms and reset dates included in the Note.
Additionally, in consideration of the willingness of the Purchaser to enter into the transactions that are the subject of the Securities Purchase Agreement and the Notes, the Company or certain of its shareholders shall deliver a structuring fee of Common Shares (the “Structuring Shares”) in connection with the Note per the terms of the attached agreement, with (i) 1,300,000 Structuring Shares delivered to the Purchaser at the First Tranche Closing and (ii) following the First Tranche Closing, 1,700,000 Structuring Shares delivered pursuant to the terms set forth in the call option agreements to be entered into between Purchaser and certain shareholders of the Company.
In connection with the foregoing, the Company and the Purchaser will enter into a registration rights agreement, pursuant to which the Company will file a Registration Statement covering the resale of registrable securities issuable pursuant to the Note.
In connection with the foregoing and as a condition to each closing under the Securities Purchase Agreement, NCAC Sponsor and Parent, shall have entered into a lock-up agreement, pursuant to which, NCAC Sponsor and Parent will agree, subject to customary exceptions, not to offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or dispose of, directly or indirectly, any Common Shares or any securities convertible into or exercisable or exchangeable for Common Shares (the “Lock-Up Securities”), whether currently owned or acquired later by NCAC Sponsor or Parent, or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities until 180 days following the closing of the Business Combination, or such later date pursuant to the terms set forth therein.
The Structuring Shares are deemed to be representative of a freestanding financial instrument issued in a bundled transaction with the Note. The Structuring Shares to be issued as part of the bundled transaction are classified and accounted for as equity; therefore, the proceeds are required to be allocated based on the relative fair values of the base instrument (i.e., Note) and the Structuring Shares in accordance with the guidance in ASC 470, Debt. The accounting position is currently under review and is subject to change.
The pro forma condensed combined financial information is for illustrative purposes only. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the Company will experience. Original Target and NCAC have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
The historical carve-out consolidated financial statements of Original Target. have been prepared in accordance with IFRS as issued by the IASB and in its presentation currency of the Canadian Dollar (“CDN” or “CDN$”). The historical financial statements of NCAC have been prepared in accordance with U.S. GAAP in its presentation currency of the U.S. dollar (“USD” or “$”). The condensed combined pro forma financial information reflects IFRS and in USD, the basis of accounting used by the registrant, the Company, and no material accounting policy difference is identified in converting NCAC’s historical financial statements from U.S. GAAP to IFRS or Original Target from CDN to USD. The adjustments presented in the pro forma condensed combined financial information have been identified and presented to provide relevant information necessary for an accurate understanding of the Company after giving effect to the Business Combination.
| 7 |
The pro forma condensed combined financial information reflects the actual redemptions as described above.
The following table sets out the share ownership of Pubco following Closing on a pro forma basis:
| Pro Forma Ownership | Shares | Number of Percent Outstanding | ||||||
| Rollover equity shares of Psyence Biomedical shareholders | 5,000,000 | 37.34 | % | |||||
| NCAC Public Shareholders | 119,659 | 0.89 | % | |||||
| Members of Sponsor | 3,765,071 | 28.12 | % | |||||
| Sponsor | 2,389,929 | 17.85 | % | |||||
| Cantor and CCM | 520,000 | 3.88 | % | |||||
| Financing Investors | 1,300,000 | 9.71 | % | |||||
| Other Third Party Advisers | 296,000 | 2.21 | % | |||||
| Total shares outstanding | 13,390,659 | 100 | % | |||||
| (1) | 1,300,000 Backstop Shares were transferred to Financing Investors. |
Included in the shares outstanding and weighted average shares outstanding as presented in the pro forma combined financial statements are an aggregate of 13.39 million the Company Common Shares that were issued to NCAC’s shareholders, Original Target’s shareholders, Financing Investors and to Third Party shareholders.
| 8 |
The pro forma adjustments do not have an income tax effect as they are either (i) incurred by legal entities that are not subject to a corporate income tax, or (ii) permanently nondeductible or nontaxable based on the laws of the relevant jurisdiction.
Note 3 — Accounting for the Business Combination
The Business Combination will be accounted for as a capital reorganization in accordance with IFRS. Under this method of accounting, NCAC will be treated as the “acquired” company for financial reporting purposes, and Original Target will be the accounting “acquirer.” This determination was primarily based on the assumption that Original Target shareholders will hold the largest minority of the voting power of the Company, Original Target’s operations will substantially comprise the ongoing operations of the Company, Original Target’s designees are expected to comprise a majority of the governing body of the Company, and Original Target’s senior management will comprise the senior management of the Company. However, NCAC does not meet the definition of a “business” pursuant to IFRS 3 Business Combinations, and thus, for accounting purposes, the Business Combination will be accounted for as a capital reorganization. The net assets of NCAC will be stated at historical cost, with no goodwill or other intangible assets recorded. The deemed costs of the shares issued by Original Target, which represents the fair value of the shares that Original Target would have had to issue for the ratio of ownership interest in the Company to be the same as if the Business Combination had taken the legal form of Original Target acquiring shares of NCAC, in excess of the net assets of NCAC will be accounted for as stock-based compensation under IFRS 2 Share-Based Payment.
Note 4 — U.S. GAAP to IFRS Conversion and Presentation Alignment
The historical financial information of NCAC has been adjusted to give effect to the differences between U.S. GAAP and IFRS as issued by the IASB for the purposes of the unaudited pro forma condensed combined financial information. One adjustment required to convert NCAC’s balance sheet from U.S. GAAP to IFRS for purposes of the unaudited pro forma condensed combined financial information was to reclassify NCAC Class A ordinary shares subject to redemption to non-current financial liabilities under IFRS 2, as shareholders have the right to require NCAC to redeem NCAC Public Shares and NCAC has an irrevocable obligation to deliver cash or another financial instrument for such redemption.
Further, as part of the preparation of the unaudited pro forma condensed combined financial information, certain reclassifications were made to align NCAC’s historical financial information in accordance with the presentation of Psyence Biomed Corp.’s historical carve-out consolidated financial information, see below for effect of conversion on the financial statements.
In addition, as part of the preparation of the unaudited pro forma condensed combined financial information since the reporting currency will be in United States dollars (“USD”), Original Target’s historical carve-out consolidated financial information was converted from Canadian dollars (“CDN”) to USD in accordance with the presentation of functional currency of Psyence Australia Pty, Ltd.’s historical financial information and the Company’s anticipated reporting currency, see below for effect of conversion on the financial statements.
| 9 |
NCAC’s Balance Sheet as of September 30, 2023
| NCAC’s financial statements have been prepared in accordance with U.S. GAAP and in USD currency and converted to IFRS as follows: |
| As of September 30, 2023 | U.S. GAAP | IFRS Conversion adjustment | Footnote reference | After conversion | ||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash | $ | 88,174 | $ | 88,174 | ||||||||||
| Interest receivable | 53,659 | 53,659 | ||||||||||||
| Prepaid expenses | 20,683 | 20,683 | ||||||||||||
| Total current assets | 162,516 | 162,516 | ||||||||||||
| Investments held in Trust Account | 12,518,199 | 12,518,199 | ||||||||||||
| Total assets | $ | 12,680,715 | $ | 12,680,715 | ||||||||||
| LIABILITIES, ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable and accrued expenses | $ | 1,007,704 | $ | 1,007,704 | ||||||||||
| Deferred underwriting commissions | 13,100,000 | 13,100,000 | ||||||||||||
| Due to affiliate | 70,000 | 70,000 | ||||||||||||
| Loan from sponsor | 1,607,770 | 1,607,770 | ||||||||||||
| Derivative warrant liability | 392,100 | 392,100 | ||||||||||||
| Class A ordinary shares subject to possible redemption, | — | 12,571,858 | (a) | 12,571,858 | ||||||||||
| Total current liabilities | 16,177,574 | 28,749,432 | ||||||||||||
| Total liabilities | 16,177,574 | 28,749,432 | ||||||||||||
| Commitments and contingencies | ||||||||||||||
| Class A ordinary shares subject to possible redemption, | 12,571,585 | (12,571,858 | ) | (a) | — | |||||||||
| Class A ordinary shares | 114 | 114 | ||||||||||||
| Class B ordinary shares | 654 | 654 | ||||||||||||
| Additional paid-in capital | — | — | ||||||||||||
| Accumulated deficit | (16,069,485 | ) | (16,069,485 | ) | ||||||||||
| Total shareholders’ deficit | (16,068,717 | ) | (16,068,717 | ) | ||||||||||
| Total liabilities, ordinary shares subject to possible redemption and shareholders’ deficit | $ | 12,680,715 | $ | 12,680,715 | ||||||||||
| (a) | To reclassify and present redeemable NCAC Public Shares as other liabilities under IFRS, as shareholders have the right to require NCAC to redeem the NCAC Public Shares and NCAC has an irrevocable obligation to deliver cash or another financial instrument for such redemption. |
| 10 |
U.S. GAAP to IFRS Conversion of NCAC’s Statement of Operations for the six months ended September 30, 2023
NCAC’s financial statements have been prepared in accordance with U.S. GAAP and in USD currency and is converted to IFRS as follows:
| For the Six Months Ended September 30, 2023 | U.S. GAAP | IFRS Conversion adjustment |
Footnote reference |
After conversion |
||||||||||
| General and administrative | $ | (1,069,142 | ) | $ | (1,069,142 | ) | ||||||||
| Interest earned on investments held in Trust Account | — | 358,533 | (b) | 358,533 | ||||||||||
| Income (loss) from operations | (1,069,142 | ) | (710,609 | ) | ||||||||||
| Other income (expense): | ||||||||||||||
| Interest earned on investments held in Trust Account | 358,533 | (358,533 | ) | (b) | — | |||||||||
| Change in fair value of warrant liabilities | — | — | ||||||||||||
| Total other income (expense) | 358,533 | — | ||||||||||||
| Net income (loss) | $ | (710,609 | ) | $ | (710,609 | ) | ||||||||
U.S. GAAP to IFRS Conversion of NCAC’s Statement of Operations for the year ended December 31, 2022
NCAC’s financial statements have been prepared in accordance with U.S. GAAP and in USD currency and is converted to IFRS as follows:
| For the Year Ended December 31, 2022 | U.S. GAAP | IFRS Conversion adjustment |
Footnote reference |
After conversion |
||||||||||
| General and administrative | $ | (1,293,977 | ) | $ | (1,293,977 | ) | ||||||||
| Interest earned on investments held in Trust Account | — | 3,551,791 | (b) | 3,551,791 | ||||||||||
| Income (loss) from operations | (1,293,977 | ) | 2,257,814 | |||||||||||
| Other income (expense): | ||||||||||||||
| Interest earned on investments held in Trust Account | 3,551,791 | (3,551,791 | ) | (b) | — | |||||||||
| Change in fair value of warrant liabilities | 5,756,500 | 5,756,500 | ||||||||||||
| Total other income (expense) | 9,308,291 | 5,756,500 | ||||||||||||
| Net income (loss) | $ | 8,014,314 | $ | 8,014,314 | ||||||||||
| (b) | To reclassify and present interest earned on investments held in trust from non-operating income (expense) to other income from operating expenses. |
Original Target’s Carve-Out Condensed Consolidated Interim Statement of Financial Position as of September 30, 2023 and Carve-Out Condensed Consolidated Statement of Net Loss and Comprehensive Loss for the six months ended September 30, 2023
Original Targets’s carve-out consolidated financial statements have been prepared in accordance CDN currency and is converted to USD to conform with the Company expected reporting currency as follows:
| As of September 30, 2023 | IFRS before conversion (in CDN) |
USD to CDN Exchange Rate as of March 31, 2023 |
IFRS after conversion to (in USD) |
||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash | $ | 818,609 | 1.352 | $ | 605,480 | ||||||
| Restricted Cash | 40,000 | 1.352 | 29,586 | ||||||||
| Other receivables | 25,400 | 1.352 | 18,787 | ||||||||
| Prepaid expenses | 20,982 | 1.352 | 15,519 | ||||||||
| Total current assets | 904,991 | 669,372 | |||||||||
| Total assets | $ | 904,991 | $ | 669,372 | |||||||
| LIABILITIES | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued liabilities | $ | 1,237,068 | 1.352 | $ | 914,990 | ||||||
| Loans form affiliates | 996,495 | 1.352 | 737,053 | ||||||||
| Total current liabilities | 2,233,563 | 1,652,043 | |||||||||
| Total liabilities | 2,233,563 | 1,652,043 | |||||||||
| EQUITY | |||||||||||
| Net Parent investment | (1,328,572 | ) | (982,671 | ) | |||||||
| Total shareholders’ deficit | (1,328,572 | ) | (982,671 | ) | |||||||
| Total liabilities and equity | $ | 904,991 | $ | 669,372 | |||||||
| 11 |
| For the Six Months Ended September 30, 2023 | IFRS before conversion (in CDN) |
USD to CDN Average Exchange Rate for the six months ended September 30, 2023 |
IFRS after conversion to (USD) |
||||||||
| Operating expenses | |||||||||||
| Sales and marketing | $ | (2,848 | ) | 1.3421 | $ | (2,122 | ) | ||||
| Research and development | (1,062,212 | ) | 1. 3421 | (791,439 | ) | ||||||
| General and administrative | (114,845 | ) | 1. 3421 | (85,569 | ) | ||||||
| Professional fees and consulting fees | (784,375 | ) | 1. 3421 | (582,427 | ) | ||||||
| Foreign exchange gain (loss) | (154,927 | ) | 1. 3421 | (115,434 | ) | ||||||
| Interest income | (36,805 | ) | 1. 3421 | (27,423 | ) | ||||||
| Net loss | $ | (2,156,011 | ) | $ | (1,606,414 | ) | |||||
| For the Year Ended March 31, 2023 | IFRS before conversion (in CDN) |
USD to CDN Average Exchange Rate for the year ended March 31, 2023 |
IFRS after conversion to (USD) |
||||||||
| Operating expenses | |||||||||||
| Sales and marketing | $ | (9,292 | ) | 1.32297 | $ | (7,024 | ) | ||||
| Research and development | (2,126,762 | ) | 1.32297 | (1,607,565 | ) | ||||||
| General and administrative | (484,382 | ) | 1.32297 | (366,132 | ) | ||||||
| Professional fees and consulting fees | (1,655,663 | ) | 1.32297 | (1,251,474 | ) | ||||||
| Foreign exchange gain (loss) | 35,574 | 1.32297 | 26,890 | ||||||||
| Interest income | 2,054 | 1.32297 | 1,553 | ||||||||
| Net loss | $ | (4,238,471 | ) | $ | (3,203,752 | ) | |||||
Note 5 — Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2023
The pro forma notes and adjustments, based on preliminary estimates that could change materially as additional information is obtained, are as follows:
(A) Reflects the liquidation and reclassification of $1.35 million of funds held in the Trust Account to cash and bank balances that becomes available following the Business Combination.
(B) Represents preliminary estimated transaction costs expected to be incurred by NCAC and Original Target Group of approximately $6.92 million for legal, accounting and printing fees incurred as part of the Business Combination.
For the NCAC transaction costs, $0.78 million were previously accrued and the payable has been paid at closing and reflected as of the pro forma balance sheet date. An amount of $0.54 million is reflected as an adjustment to accumulated losses as these are attributed to the listing cost. In additional 446,000 Original Target shares were issued to service provided with a transaction price value of $10 per share for a total of $4.46 million as a Transaction Fee which were allocated to additional paid-in-capital as these are attributed to Business Combination.
For the Original Target Group transaction costs, $0.29 million of these fees have been paid at closing and $0.17 million have been accrued as of the pro forma balance sheet date. An amount of $0.93 million is reflected as an adjustment to accumulated losses as these are attributed to the listing cost. The remaining amount of $0.99 million is included as an adjustment to additional paid-in capital as these are attributed to Business Combination. Due to cash limitation $1.46 million of transaction cost were included as due and payable.
(C) Represents the exchange of outstanding Original Target Group shares into 5,000,000 the Company’s Common Shares at par value of $0.0001 per share upon the Business Combination.
(D) Represents the elimination of NCAC’s historical accumulated losses after recording the transaction costs to be incurred by NCAC as described in (B) above, the waiver of the underwriting fee described in (I) below and the derecognized warrant liability as described in (O) below.
(E) Reflects the transfer of the 119,659 NCAC shares which did not redeem into permanent equity and shares of the Company.
| 12 |
(F) Represents the preliminary estimated expense recognized, in accordance with IFRS 2, for the excess of the deemed costs of the shares issued by Original Target Group and the fair value of SPAC’s identifiable net assets at the date of the Business Combination, resulting in a $51.37 million increase to accumulated loss. The fair value of shares issued was estimated based on a market price of $10.00 per share (based on the transaction value) and the fair value of the warrants at $0.045 (NCACW as of January 25, 2024 closing date).
| Actual Redemption | ||||||||
| NCAC shareholders | Shares | Dollars | ||||||
| Public warrants | 12,500,000 | |||||||
| Private Placement warrants | 570,000 | |||||||
| Fair value of shares to be issued to NCAC shareholders | $ | 594,685 | ||||||
| Public shareholders | 119,659 | |||||||
| Private Placement Shares | 1,140,000 | |||||||
| Founder shareholders | 3,535,000 | |||||||
| Fair value of shares to be issued to NCAC shareholders | 64,946,590 | |||||||
| Fair value of shares and warrants to be issued to NCAC shareholders | (65,541,275 | ) | ||||||
| Net assets of SPAC as of March 31, 2023 | (16,068,717 | ) | ||||||
| Less: January 2024 redemptions | (11,493,744 | ) | ||||||
| Less: SPAC warrant liabilities | 392,100 | |||||||
| Add: Release of redeemable Class A shares | 12,571,858 | |||||||
| Add: Release of Underwriting fee payable | 11,600,000 | |||||||
| Add: Interest earned in Trust Account | 172,844 | |||||||
| Less: Effect of maximum redemption of SPAC shares | — | |||||||
| Adjusted net assets of SPAC as of September 30, 2023 | (2,825,659 | ) | ||||||
| Difference – being IFRS 2 charge for listing services | $ | 68,366,934 | ||||||
(G) Reflects the conversion of Class B common stock into the Company’s Common stock on a one-for-one basis.
(H) Reflect repayment of $50,000 to the NCAC Sponsor loan at the closing of the Business Combination the remaining portion will be repaid after the closing of the Business Combination. Terms of repayment to be determined.
(I) Reflects the underwriter agreeing to the settlement of deferred underwriting commissions upon the closing of the Business Combination. The underwriter has agreed to settle the fee of $13.1 million by waiving 11.60 million of the fee and the receipt of 150,000 the Company’s Common Shares at $10 per share. The waived portion of the fee reverses the original entry which was applied to the components of the unit issued at NCAC IPO. As a result, the reversal of the transaction was applied to Class A ordinary shares with the related accretion to redemption value effecting accumulated deficit. The transaction cost allocated to the warrants was applied to earnings as such the net impact of the waived fee of $11.60 million was to reverse the accumulated earning impact of both components included in the unit.
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(J) Reflects the proceeds from the proposed Financing Arrangement under the Subscription Agreement where $2,500,000 in proceeds was received at closing in exchange for a Convertible Note and 1,300,000 the Company’s shares transferred from NCAC sponsor. As a result of the ASC 480 Freestanding Instrument Assessment performed at the onset of the memorandum, the Company has determined that the Subscription Agreement is deemed to be representative of TWO freestanding financial instruments, the Note and the Structured Shares. The Structures Shares are deemed to be representative of a freestanding financial instrument issued in a bundled transaction with the Note. The Structured Shares to be issued as part of the bundled transaction are classified and accounted for as equity; therefore, the proceeds are required to be allocated based on the relative fair values of the base instrument (i.e., Note) and the Structured Shares in accordance with the guidance in ASC 470, Debt. As such a debt discount of $2.64 million was recognized against the Note represented by $0.63 million of OID and $2.16 million related to the 1,300,000 Structured shares issued. The accounting for this transaction is preliminary and is subject to change.
(K) Reflects the redemption of 993,362 NCAC Public Shares for a cash payment of $11.49 million, or $11.57 per share on January 18 and 22, 2024 to approve the business combination and extend the date by which NCAC had to close on a business combination from January 22, 2024 to February 22, 2024.
(L) Reflect the borrowings from NCAC Sponsor of $100,172 in order to fund extension payments into the Trust Account.
(M) Reflects the interest earned in the NCAC’s trust subsequent to September 30, 2023 through the January 22, 2024 extension payment date.
(N) Reflects the removal of cash held by a subsidiary of Original Target that will not carry on to the Company.
(O) To derecognize warrant liability that is not being assumed by the Company, but rather re-issued as part of the consideration payable on closing of the RTO.
(P) To recognize the value of warrants re-issued by the Company on closing of the RTO transaction based valued based on the fair value of the NCAC public warrants as of January 25, 2024.
Adjustments to Unaudited Pro Forma Condensed Combined Statement of Operations for the Year Ended March 31, 2023 and for the Six Months ended September 30, 2023
The pro forma notes and adjustments, based on preliminary estimates that could change materially as additional information is obtained, are as follows:
(AA) Reflects the elimination of interest income generated from the investments held in the Trust Account.
(BB) Represents the elimination of administrative service fees that will cease to be paid upon closing of the business combination.
(CC) Represents $68.37 million of expense recognized, in accordance with IFRS 2, for the difference between the deemed costs of the shares issued by Original Target Group and the fair value of NCAC’s identifiable net assets, as described in (F) above and $1.46 million of other cost incurred as described in (B) above. This cost is a nonrecurring item and only reflected in the earlier period presented for the year ended March 31, 2023.
Note 6 — Net Earnings (Loss) per Share
Represents the earnings (loss) per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination, assuming the shares were outstanding since April 1, 2022. As the Business Combination is being reflected as if it had occurred at the beginning of the period presented, the calculation of weighted average shares outstanding for basic and diluted earnings (loss) per share assumes that the shares issued in connection with the Business Combination have been outstanding for the entire period presented. If the number of Public Shares described under the Maximum Redemption Scenario are redeemed, this calculation is retroactively adjusted to eliminate such shares for the entire period.
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The following table sets out the share ownership of the Company following Closing on a pro forma:
| ​ | Actual Redemption | |||
| Weighted average shares outstanding – basic and diluted | ||||
| Rollover equity shares of Original Target Group shareholders | 5,000,000 | |||
| NCAC Public Shareholders | 119,659 | |||
| NCAC Sponsor Private Placement | 1,140,000 | |||
| NCAC Sponsor and Founder shareholders(1) | 3,535,000 | |||
| PIPE Investors | 2,000,000 | |||
| Third Party shareholders | 596,000 | |||
| Total | 13,390,659 | |||
| For the Six Months Ended September 30, 2023 | Actual Redemptions |
|||
| Pro forma net loss | $ | (2,615,556 | ) | |
| Weighted average shares of common stock outstanding – basic and diluted(2) |
13,390,659 | |||
| Net loss per share – basic and diluted | $ | (0.20 | ) | |
| Excluded securities:(3) | ||||
| Public Warrants | 12,500,000 | |||
| Private Placement Warrants | 570,000 | |||
| Year Ended March 31, 2023 | Actual Redemptions |
|||
| Pro forma net loss | $ | (68,355,218 | ) | |
| Weighted average shares of common stock outstanding – basic and diluted(2) |
13,390,659 | |||
| Net loss per share – basic and diluted | $ | (5.10 | ) | |
| Excluded securities:(3) | ||||
| Public Warrants | 12,500,000 | |||
| Private Placement Warrants | 570,000 | |||
| (1) | The 1,300,000 Backstop Shares were transferred by the NCAC Sponsor and issued to financing investor. |
| (2) | Assumes all issued and outstanding shares were outstanding for the entirety of the year. |
| (3) | The potentially dilutive outstanding securities were excluded from the computation of pro forma net loss per share, basic and diluted, because their effect would have been anti-dilutive. |
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Exhibit 15.2
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Psyence Biomedical Ltd. Shell Company Report on Form 20-F of our auditor’s report dated July 28, 2023 relating to the carve-out consolidated financial statements of Psyence Biomed Corp. consisting of the carve-out consolidated statements of financial position as at March 31, 2023, March 31, 2022 and March 31, 2021 and the related carve-out consolidated statements of net loss and comprehensive loss, changes in net parent investment, and cash flows for each of the years in the two-year period ended March 31, 2023, as included in the Registration Statement on Form F-4 (File No. 333-273553), as filed with the United States Securities Exchange Commission (“SEC”).
We also consent to the reference to our firm under the headings “Auditors” and “Statement by Experts” in the Form 20-F.
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
January 31, 2024