Item 4 warrants to Investment Quebec Apparently this part of the 4.5M loan deal. Basically wt will be issued at 10% discount of sp at that day. I think it is a good a thing. These funds hold to their shares so if the exercise them they will provide additional funds on top of the loan and they won't sell like other financing that brings sp lower. I will vote this yes definitely. Below the details as published. I will vote no for share consolidation.
APPROVAL OF IQ WARRANTS
On February 16, 2022, the Corporation announced a $4.5 million loan offer from Qubec's Ministre de l'conomie et de l'Innovation ("MEI") under the BioMed Propulsion Program, managed by IQ as part of the Economic Development Fund, under the responsibility of the MEI (the "IQ Loan"). The goal of the BioMed Propulsion Program is to financially support Quebec companies in the life-sciences sector with a high growth potential to allow them to market their research findings. This funding will support the development of ARDS-003 in the indication of acute respiratory distress syndrome whether or not it is caused by COVID- 19, as well as in patients with Sepsis.
In connection with the IQ Loan, the Corporation has agree to grant to IQ, on each disbursement date, Common Share purchase warrants (the "IQ Warrants") having a value equal to 25% of the amount so disbursed on each such disbursement date, with the number of such IQ Warrants to be calculated based on the closing trading price of the Common Shares the day preceding the request for disbursement from the Corporation to IQ, with each IQ Warrant entitling IQ to purchase one Common Share at a price equal to the applicable closing trading price of the Common Shares, less a discount of 10%. Because the number of IQ Warrants issuable under the IQ Loan is based on the market price of the Common Shares in the future, the maximum number of IQ Warrants issuable cannot be readily determined as of the date of this Circular. Assuming that the Common Shares trade at a price of $0.07 (being the closing market price of the Common Shares on the TSX on the trading day prior to the date of this Circular) on the day preceding each disbursement date, and assuming a full disbursement of the IQ Loan, a maximum of 16,071,428 Warrants would be issuable. Assuming the exercise by IQ of all such Warrants, IQ would own 16,071,428 Common Shares, representing approximately 3.88% of the currently issued and outstanding Common Shares, on a on a pre-transaction, non-diluted basis. Assuming that the Common Shares trade at a price of $0.065 (being the 52-week lowest price of the Common Shares on the TSX) on the day preceding each disbursement date, and assuming a full disbursement of the IQ Loan, a maximum of 17,307,692 Warrants would be issuable Assuming the exercise by IQ of all such Warrants, IQ would own 17,307,692 Common Shares, representing approximately 4.17% of the currently issued and outstanding Common Shares, on a on a pre- transaction, non-diluted basis.
To the Corporation’s knowledge, IQ does not own any Common Shares as at the date of this Circular. As at the date of this Circular, the Corporation does not expect that the issuance of the IQ Warrants will have any impact on the control of the Corporation, nor will it result in the creation of a new insider of the Corporation.
Section 607(i) of the TSX Company Manual provides that, unless otherwise approved by the listed issuer’s security holders (other than security holders receiving warrants directly or indirectly and such security holders’ associates and affiliates), warrants to purchase listed securities may only be issued in such a placement if the warrant exercise price is not less than the market price of the underlying security at either the date of the binding agreement obligating the listed issuer to issue the warrants or some future date provided for in the binding agreement. If IQ exercises the IQ Warrants, the Corporation would be obligated to issue Common Shares at a price per Common Share lower than the market price at such time. Therefore, under the TSX Company Manual, Shareholder approval is required to enable the IQ Warrants to be issued.
Accordingly, at the Meeting, Shareholders will be asked to consider and, if thought advisable, pass an ordinary resolution authorizing the Corporation to grant the IQ Warrants to IQ and approving the terms of the IQ Warrants (the "IQ Warrant Resolution"). The full text of the IQ Warrant Resolution is as follows:
"BE IT RESOLVED, as an ordinary resolution of the shareholders of Tetra Bio-Pharma Inc. (the "Corporation"), that:
1. The grant of common share purchase warrants (the "IQ Warrants") to Investissement Qubec ("IQ"), having an exercise price lower than market price, upon the terms and in accordance with the provisions of the offer letter from IQ dated February 4, 2022, is hereby confirmed, ratified and approved;
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2. Any officer or director of the Corporation is hereby authorized and directed, for and on behalf of the Corporation, to do all things and execute and deliver all such agreements, documents and instruments necessary or desirable in connection with the foregoing, and make all necessary filings and applications with all applicable regulatory authorities, including the Toronto Stock Exchange; and
3. Notwithstanding the approval of this ordinary resolution by shareholders of the Corporation, the board of directors of the Corporation (the "Board") is authorized, at its sole discretion and without further approval of or notice to the shareholders of the Corporation, to revoke this resolution at any time prior to making the necessary filings under the Canada Business Corporations Act if determined, in the Board's sole discretion, to be in the best interest of the Corporation."
The Board has unanimously determined, after careful consideration of among other things, the financial condition and financial needs of the Corporation, the alternatives available to the Corporation, the fact that the IQ Loan described above is in the best interest of the Corporation and its Shareholders and that the proceeds of the IQ Loan will be used to pursue the Corporation ARDS-003 drug development program. Accordingly, the Board has unanimously approved the IQ Loan. In reaching its determination, the Board also considered and evaluated, among other things: current industry, economic and market conditions and trends, including the impact of the COVID-19 pandemic. For the reasons outlined above, the Board believes that obtaining Shareholder approval at the Meeting to issue the IQ Warrants to IQ is in the best interest of the Corporation.
The approval of the IQ Warrant Resolution at the Meeting is a condition precedent to the disbursement of the IQ Loan. Accordingly, if less than a majority of votes are cast in favour of the IQ Warrant Resolution, Tetra will not receive any of the funds under the IQ Loan. If less than a majority of votes are cast in favour of the IQ Warrant Resolution, Tetra would not have sufficient capital to fund its ARDS-003 drug development, unless it secures capital from debt or equity markets. There is no guarantee that Tetra will be able to obtain additional capital on attractive terms, or at all.