Document:

Exhibit

Exhibit 10.3
CUSTODY AGREEMENT
BETWEEN THE FUND AND WELLS FARGO BANK, NATIONAL ASSOCIATION 
EFFECTIVE DECEMBER 11, 2019

CUSTODIAL AGREEMENT

THIS CUSTODIAL AGREEMENT (this “Agreement”) dated as of December 11, 2019, is entered into between VENTURE LENDING & LEASING IX, INC. (the “Owner”) and WELLS FARGO BANK, NATIONAL ASSOCIATION, as custodian (in such capacity, the “Custodian”).

W I T N E S S E T H:
    
WHEREAS, the Owner has acquired or will acquire, from time to time, certain loans and other financings (the “Owner’s Assets”);

WHEREAS, the Owner desires to deposit the proceeds from the Assets and other bookentry or certificated securities (the “Custodial Assets”) and certain certificates, assignment agreements and other documents related to the Assets (the “Documents” and together with the Custodial Assets, the “Assets”) with the Custodian to hold on the Owner’s behalf and to direct the Custodian with respect to the transfer and release thereof;

NOW, THEREFORE, the parties hereto agree as follows:

1. (a) The Owner hereby appoints the Custodian as custodian of the Assets pursuant to the terms of this Agreement and the Custodian accepts such appointment. The Custodian hereby agrees to accept the Assets delivered to the Custodian by the Owner pursuant to the terms hereof, and agrees to hold, release and transfer the same in accordance with the provisions of this Agreement. There shall be, and hereby is, established by the Owner with the Custodian a non-interest bearing securities account which will be designated the “VENTURE LENDING & LEASING IX, INC.- Custodial Account” (referred to herein as the “Custody Account”) and into which the Custodial Assets shall be held and which shall be governed by and subject to this Agreement. In addition, on and after the date hereof, the Custodian may establish any number of subaccounts to the Custody Account deemed necessary or appropriate by the Custodian and Owner in administering the Custody Account (each such subaccount, a “Subaccount” and collectively with the Custody Account, the “Account”). All Assets to be delivered in physical form to the Custodian shall be delivered to the address set forth in Section 12 hereof and all Assets to be delivered in book-entry form to the Custodian shall be delivered in accordance with delivery instructions separately provided by the Custodian. The Custodian shall not be responsible for any other assets of the Owner held or received by the Owner or others or any assets not delivered to Custodian as set forth herein and accepted by the Custodian as hereinafter provided. The Custodian shall have no obligation to accept or hold any security or other asset pursuant to the terms of this Agreement to the extent it reasonably determines that such security or asset does not fall within the definition of “Asset” or holding such security or asset would violate any law, rule, regulation or internal policy applicable to the Custodian. For the avoidance of doubt,other than delivery of the physical certificate in the possession of the Custodian to the Owner, the Custodianshall have no obligations in connection with the transfer or re-registration of any physical certificates representing Assets in connection with any transfer thereof and the Owner shall be responsible for all aspects of transferring re-registering such Assets. Assets or proceeds thereof shall be withdrawn from and credited to the Account only upon Proper Instructions pursuant to Section 4 hereof.

(b) On or prior to the date of delivery of any Document to the Custodian, the Owner shall deliver to the Custodian a checklist (the “Document Checklist”) which shall list each of the Documents being delivered to the Custodian, and whether each Document is an original or a copy. Within five (5) business days of its receipt of any Documents and the Document Checklist, the Custodian shall review the Documents delivered to it and confirm in writing that all Documents required to be delivered pursuant to the Document Checklist have been delivered and are in the possession of the Custodian. In the event any of the Documents identified on the Document Checklist are not delivered to the Custodian, the Custodian shall include as an attachment to such written confirmation an exception list identifying those Documents that have not been delivered to the Custodian. In order to facilitate the foregoing review 

by the Custodian, in connection with each delivery of Documents hereunder to the Custodian, the Owner shall provide to the Custodian an electronic file (in EXCEL or a comparable format acceptable to the Custodian) of the related Document Checklist that contains a list of all required Documents. For the avoidance of doubt, other than the foregoing, the Custodian shall not have any responsibility for reviewing any Documents. All Documents that are originals shall be kept in fire resistant vaults, rooms or cabinets. All Documents that are originals shall be placed together with an appropriate identifying label disclosing the security interest of the Secured Party and maintained in such a manner so as to permit retrieval and access. All Documents that are originals shall be clearly segregated from any other documents or instruments maintained by the Custodian. All Documents that are delivered to the Custodian in electronic format shall be saved and maintained in a manner so as to permit retrieval and access. Upon the Secured Party’s request with five business days’ prior written notice to the Custodian, the Documents shall be subject to the Secured Party’s inspection during normal business hours and at the expense of the Owner.

(c) For the avoidance of doubt, the Account (including income, if any, earned on the investments of funds in such account) will be owned by the Owner, for federal income tax purposes. Such Owner is required to provide to the Custodian (i) an IRS Form W-9 or appropriate IRS Form W-8 no later than the Closing Date, and (ii) any additional IRS forms (or updated versions of any previously submitted IRS forms) or other documentation at such time or times required by applicable law or upon the reasonable request of the Custodian as may be necessary (i) to reduce or eliminate the imposition of U.S. withholding taxes and (ii) to permit Custodian to fulfill its tax reporting obligations under applicable law with respect to the Account or any amounts paid to Owner. If any IRS form or other documentation previously delivered becomes obsolete or inaccurate in any respect, Owner shall timely provide to the Custodian accurately updated and complete versions of such IRS forms or other documentation. Wells Fargo Bank, National Association, both in its individual capacity and in its capacity as Custodian, shall have no liability to Owner or any other person in connection with any tax withholding amounts paid or withheld from the Account pursuant to applicable law arising from Owner’s failure to timely provide an accurate, correct and complete IRS Form W-9, an appropriate IRS Form W-8 or such other documentation contemplated under this paragraph. For the avoidance of doubt, no funds shall be invested with respect to such Account absent the Custodian having first received (i) the requisite Proper Instructions, and (ii) the IRS forms and other documentation required by this paragraph.

(c) In the event the Custodian receives instructions from the Owner to effect a securities transaction as contemplated in 12 CFR 12.1, the Owner acknowledges that upon its written request and at no additional cost, it has the right to receive the notification from the Custodian after the completion of such transaction as contemplated in 12 CFR 12.4(a) or (b). The Owner agrees that, absent specific request, such notifications shall not be provided by the Custodian hereunder, and in lieu of such notifications, the Custodian shall make available periodic account statements in the manner required by this Agreement.  

2. The Custodian shall not invest immediately available funds held hereunder in the absence of Proper Instructions and shall not be liable for not investing or reinvesting funds in accordance with this Agreement in the absence Proper Instructions. In connection with investments of available cash pursuant to Proper Instructions, the Custodian may without liability use a broker-dealer of its own selection, including a broker-dealer owned by or affiliated with the Custodian or any of its affiliates. The Custodian is not responsible for the assets of the Owner which have been placed in accounts with brokers, prime brokers, counterparties, futures commission merchants and other intermediaries. The Custodian or any of its affiliates may receive reasonable compensation with respect to any such investment. It is expressly agreed and understood by the parties hereto that the Custodian shall not in any way whatsoever be liable for losses on any investments, including, but not limited to, losses from market risks due to premature liquidation or resulting from other actions taken pursuant to this Agreement.

3. The Owner shall instruct the Custodian in writing with regard to (a) the exercise of any rights or remedies with respect to the Assets, including, without limitation, waivers and voting rights, and (b) taking any other action in connection with the Assets, including, without limitation, any purchase, sale, conversion, redemption, exchange, retention or other transaction relating to the Assets. In the absence of any instructions provided to the Custodian by the Owner, the Custodian shall have no obligation to take any action with respect to the Assets. Notwithstanding anything herein to the contrary, under no circumstances shall the Custodian be obligated to bring legal action or institute proceedings against any person on behalf of the Owner.

4. The Custodian shall hold the Assets in safekeeping and shall release and transfer same only in accordance with Proper Instructions. “Proper Instructions” shall mean written instructions or cabled, telexed, facsimile or electronically transmitted instructions in respect of any of the matters referred to in this Agreement purported to be signed (except in the case of electronically transmitted instructions) by one or more persons duly authorized to sign on behalf of the Owner as set forth in the Authorized Signers List on Exhibit A hereto (each such person (an “Authorized Signer”) and, in the case of electronically transmitted instructions, in accordance with such authentication procedures as may be agreed by the Custodian and the Owner from time to time, and in the case of any instructions to credit an Asset to the Accounts or to release any Asset from the Accounts, in accordance with the terms hereof. Any electronically delivered instructions, including by email or facsimile, received from or on behalf of any Authorized Signer, or any email or facsimile received from another individual on behalf of the Owner in which any Authorized Signers are also identified as copied, shall constitute Proper Instructions. 

Notwithstanding anything herein to the contrary, upon receipt of any cash distributions attributable to the Assets, until such time as the Custodian otherwise receives a Proper Instruction to the contrary, the Custodian is hereby instructed (such instruction a Proper Instruction hereunder) to remit such amounts pursuant to the following wire instructions:

[Bank Name]
[ABA #]
[Account Name]
[Account #]

In addition, Proper Instructions may include instructions and directions given by electronic transmission administered by the Society for Worldwide Interbank Financial Telecommunication (“SWIFT Messaging”), as well as certain other electronically transmitted instructions, such as FTP or other online portal. The Owner understands that the Custodian cannot determine the identity of the actual sender of Proper Instructions sent by SWIFT Messaging and such other methods of electronically transmitted instructions, and agrees that the Custodian may conclusively presume that such directions have been sent by an Authorized Signer. The Owner shall assure that only Authorized Signers shall transmit Proper Instructions from the Owner to the Custodian and shall safeguard the use and confidentiality of applicable user and authorization codes, passwords, and/or authentication keys upon receipt by the Owner. The Custodian shall not be liable for any losses, costs, or expenses arising directly or indirectly from the Custodian’s reliance upon and compliance with such instructions or directions given by SWIFT Messaging or any other electronically transmitted instructions for which the identity of the actual sender cannot be identified, including but not limited to any overdrafts. The Owner shall assume all risks arising out of the use of SWIFT Messaging and any other electronic transmission methods to submit instructions and directions to the Custodian, including without limitation the risk of the Custodian acting on unauthorized instructions and the risk of interception and misuse by third parties, shall fully inform itself of the protections and risks associated with transmitting instructions and directions to the Custodian by SWIFT Messaging and other electronic transmission methods. The Owner acknowledges that there may be more secure methods of transmitting instructions and directions than SWIFT Messaging and other electronic messaging.

5. The Custodian shall be obligated only for the performance of such duties as are specifically set forth in this Agreement and the Custodian shall satisfy those duties expressly set forth herein so long as it acts in good faith and without gross negligence or willful misconduct. The Custodian may rely and shall be protected in acting or refraining from acting on any written notice, request, waiver, consent or instrument believed by it to be genuine and to have been signed or presented by the proper party or parties. The Custodian shall have no duty to determine or inquire into the happening or occurrence of any event or contingency, and it is agreed that its duties are purely ministerial in nature. The Custodian may consult with and obtain advice from legal counsel as to any provision hereof or its duties hereunder and shall not be liable for action taken or omitted by it in good faith and the advice of such counsel or any opinion of counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith and in reliance thereon. The Custodian shall not be liable for any action taken or omitted by it in good faith and reasonably believed by it to be authorized hereby, except for actions arising from the gross negligence or willful misconduct of the Custodian. The Custodian shall have no liability for loss arising from any cause beyond its 

control, including but not limited to, the act, failure or neglect of any agent or correspondent selected with due care by the Custodian, any delay, error, omission or default of any mail, telegraph, cable or wireless agency or operator; or the acts or edicts of any government or governmental agency or other group or entity exercising governmental powers. Notwithstanding anything in this Agreement to the contrary, in no event shall the Custodian be liable for special, punitive, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits).

Without limiting the generality of the foregoing, the Custodian shall not be subject to any fiduciary or other implied duties and the Custodian shall not be required to exercise any discretion hereunder and shall have no investment or management responsibility and, accordingly, shall have no duty to, or liability for its failure to, provide investment recommendations or investment advice to the parties hereto. It is the intention of the parties hereto that the Custodian shall never be required to use, advance or risk its own funds or otherwise incur financial liability in the performance of any of its duties or the exercise of any of its rights and powers hereunder. The Custodian may exercise any of its rights or powers hereunder or perform any of its duties hereunder either directly or, by or through agents or attorneys, and the Custodian shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed hereunder with due care by it.

The Custodian is not responsible or liable in any manner whatsoever for the sufficiency, correctness, genuineness or validity of this Agreement or any part hereof (except with respect to the Custodian's obligations hereunder) or for the transaction or transactions requiring or underlying the execution of this Agreement, the form or execution hereof or for the identity or authority of any person executing this Agreement or any part hereof (except with respect to the Custodian) or depositing the Assets. The Custodian shall not be deemed to have notice or knowledge of any matter hereunder unless written notice thereof is received by the Custodian. It is expressly acknowledged by the Owner that application and performance by the Custodian of its various duties hereunder may be based upon, and in reliance upon, data, information and notice provided to it by the Owner and/or any related bank agent, obligor or similar party with respect to the Assets, and the Custodian shall have no responsibility for the accuracy of any such information or data provided to it by such persons and shall be entitled to update its records (as it may deem necessary or appropriate). The Custodian shall not be liable for the actions or omissions of, or any inaccuracies in the records of, the Owner or any clearing agency or depository or any other Person and without limiting the foregoing, the Custodian shall not be under any obligation to monitor, evaluate or verify compliance by the Owner or any other Person with any agreement or applicable law.

For the avoidance of doubt and notwithstanding anything herein to the contrary, the Owner agrees that the Custodian shall not have nor shall be implied to have any duties with respect to furnishing reports of the Owner or other information as contemplated by the Investment Advisors Act of 1940 (the “Act”) or Rule 206(4)-2 under the Act, and the Custodian shall only be obligated to furnish information to the Owner or to any third party to the extent directed by the Owner pursuant to Proper Instructions as set forth in this Agreement and agreed to by the Custodian, or as the Owner and Custodian may otherwise agree.

6. The Owner agrees to indemnify, defend and hold the Custodian, its officers, directors, employees and agents (collectively, “Indemnified Persons”) harmless from and against any and all losses, claims, damages, demands, expenses, costs, causes of action, judgments or liabilities that may be incurred by any Indemnified Person arising directly or indirectly out of or in connection with this Agreement, including the reasonable legal costs and expenses as such expenses are incurred (including, without limitation, the expenses of any experts, counsel or agents) of (a) investigating, preparing for or defending itself against any action , claim or liability in connection with its performance hereunder or thereunder or (b) enforcement of the Owner’s indemnification obligations hereunder. The Owner also hereby agrees to hold the Custodian harmless from any liability or loss resulting from any taxes or other governmental charges, and any expense related thereto, which may be imposed, or assessed with respect to any Assets in the Account and also agrees to hold the Custodian and its respective nominees harmless from any liability as record holder of Assets in the Account. The Owner may remit payment for expenses and indemnities owed to the Custodian hereunder or, in the absence thereof, the Custodian may from time to time deduct payment of such amounts from the Account. In no event, however, shall the Owner be obligated to indemnify any Indemnified Person and hold any Indemnified Person harmless if a court of competent jurisdiction determines, on a judgment not subject to appeal, that such losses, claims, damages, demands, expenses, costs, causes of action, judgments or liabilities were incurred by any Indemnified Person 

as a result of its own bad faith, willful misconduct or gross negligence. The provisions of this section shall survive the termination of this Agreement.

7. The Custodian shall be entitled to be paid by the Owner a fee as compensation for its services as set forth in the separate Fee Letter (the “Fee Letter”) agreed to by the parties hereto. Except as otherwise noted, this fee covers account acceptance, set up and termination expenses, plus usual and customary related administrative services such as safekeeping, investment, collection and distribution of assets, including normal record-keeping/reporting requirements. Any additional services beyond those specified in this Agreement, or activities requiring excessive administrator time or out-of-pocket expenses, shall be performed only after reasonable prior notice is given to the Custodian by the Owner and shall be deemed extraordinary expenses for which related costs, transaction charges and additional fees will be billed at the Custodian's standard charges for such items. The Owner agrees to pay or reimburse the Custodian for all out-of-pocket costs and expenses (including without limitation reasonable fees and expenses of legal counsel) incurred, and any disbursements and advances made, in connection with the preparation, negotiation or execution of this Agreement, or in connection with or pursuant to consummation of the transactions contemplated hereby, or the administration of this Agreement or performance by the Custodian of its duties and services under this Agreement.

8. If the Owner is unwilling or unable to pay the Custodian any amounts due hereunder or to indemnify any indemnified party hereunder, the Custodian may, in its sole discretion, withdraw any cash in the account and the Custodian shall apply such cash toward any fees, expenses and indemnities that it (or any indemnified party) may be due hereunder. The Owner hereby consents to and authorizes such action by the Custodian, and the Custodian shall have no liability for any action taken pursuant to this authorization. The Custodian agrees to provide Owner with written notice prior to taking any action pursuant to this Section 8.

9. The Custodian may at any time resign hereunder by giving written notice of its resignation to the Owner at least ninety (90) days prior to the date specified for such resignation to take effect, and upon the effective date of such resignation, the Assets hereunder shall be delivered by it to such person as may be designated in writing by the Owner, whereupon all the Custodian’s obligations hereunder shall cease and terminate. If no such person shall have been designated by such date, all obligations of the Custodian hereunder shall, nevertheless, cease and terminate. The Custodian’s sole responsibility thereafter shall be to keep safely all Assets then held by it and to deliver the same to a person designated by the Owner or in accordance with the direction of a final order or judgment of a court of competent jurisdiction.

The Owner may remove the Custodian at any time by giving the Custodian at least sixty (60) days’ prior written notice. Upon receipt of the identity of the successor Custodian as designated by the Owner in writing, the Custodian shall either deliver the Assets then held hereunder to the successor Custodian, less the Custodian’s fees, costs and expenses or other obligations owed to the Custodian, or hold such Assets (or any portion thereof), pending distribution, until all such fees, costs and expenses or other obligations are paid. Upon delivery of the Assets to successor Custodian, the Custodian shall have no further duties, responsibilities or obligations hereunder.

10. This Agreement shall be construed in accordance with, and governed by, the laws of the State of New York, without giving effect to the conflict of law principles thereof. The parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of any New York State or Federal Court sitting in the Borough of Manhattan in the City of New York in any proceeding arising out of or relating to this Agreement, and the parties hereby irrevocably agree that all claims in respect of any such proceeding may be heard and determined in any such New York State or Federal court. The parties hereby irrevocably waive, to the fullest extent that they may legally do so, the defense of an inconvenient forum to the maintenance of such proceeding. The parties agree that a final non-appealable judgment in any such proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

11. This Agreement may not be assigned or transferred by the Owner. This Agreement shall remain in full force and effect until the earlier to occur of (a) the transfer or release of all of the Assets in accordance with the written instructions of the Owner in respect thereto and (b) the transfer by the Owner of its rights and interests in the Assets. 

The parties hereto shall not be bound by any modification, amendment, termination, cancellation, rescission or supersession of this Agreement unless the same shall be in writing and signed by the Custodian and the Owner. Any organization or entity into which the Custodian may be merged or converted or with which it may be consolidated, or any organization or entity resulting from any merger, conversion or consolidation to which the Custodian shall be a party, or any organization or entity succeeding to all or substantially all of the corporate trust business of the Custodian, shall be the successor of the Custodian hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto.

12. Any delivery of physical Assets or any notices or other communications hereunder (including Proper Instructions delivered to the Custodian) shall be in writing and given at the addresses stated below, by prepaid first class mail, overnight courier or facsimile.

If to the Owner:

VENTURE LENDING & LEASING IX, INC.

If to the Custodian:

Wells Fargo Bank, N.A.
Corporate Trust Services Division
9062 Old Annapolis Rd.
Columbia, Maryland 21045
Attn: CDO Trust Services— VENTURE LENDING & LEASING IX, INC.
Fax: (410) 715-3748
Email: WFWesternTechnology@wellsfargo.com

13. EACH OF THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE PARTIES HERETO. EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER TRANSACTION DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR ITS ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER TRANSACTION DOCUMENT.

14. The Owner acknowledges that in accordance with the Customer Identification Program (CIP) requirements under the USA PATRIOT Act and its implementing regulations, the Custodian in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account with the Custodian. The Owner hereby agrees that it shall provide the Custodian with such information as it may request including, but not limited to, the Owner’s name, physical address, tax identification number and other information that will help the Custodian to identify and verify the Owner’s identity such as organizational documents, certificate of good standing, license to do business, or other pertinent identifying information.

15. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same instrument. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Facsimile signatures and signature pages provided in the form of a “pdf” or similar imaged document transmitted by electronic mail shall be deemed original signatures for all purposes hereunder.

[SIGNATURE PAGE FOLLOWS]Exhibit 4.1

 

DESCRIPTION OF THE REGISTRANT’S
SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE

SECURITIES EXCHANGE ACT OF 1934

 

 

The following summary describes the common
shares, no par value, of XBiotech Inc. (the “Company,” “we,” “our,” “us,” and “our”),
which are the only securities of the Company registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.

 

The following description is a summary and
does not purport to be complete. It is subject to and qualified in its entirety by reference to our Articles, which are incorporated
by reference as an exhibit to the Annual Report on Form 10-K of which this Exhibit 4.1 is a part. We encourage you to read our
Articles and the applicable provisions of the British Columbia Business Corporations Act (“BCBCA”) for additional information.

 

Authorized and Outstanding Stock

 

Our authorized share capital as described
in our Articles consists of an unlimited number of common shares and preferred shares without par value.

 

As of December 31, 2019, 41,519,633 shares
of the Company’s common shares were outstanding. Following the completion of the Company’s modified Dutch auction tender
offer in February 2020, 28,852,927 common shares were outstanding. No preferred shares are outstanding.

 

Common Shares

 

Voting Rights. Holders of
common shares are entitled to one vote in respect of each common share held at any meeting of the Company. Except as otherwise
provided with respect to any particular series of preferred shares and except as otherwise required by law, the registered holders
of preferred shares shall not be entitled as a class to receive notice of or to attend to vote at any meetings of the Company.

 

Under our Articles, the holders of our common
shares will be entitled to one vote for each common share held on all matters submitted to a vote of the shareholders, including
the election of directors. Our Articles do not provide for cumulative voting rights. Because of this, the holders of a plurality
of our common shares entitled to vote in any election of directors can elect all of the directors standing for election, if they
should so choose.

 

Dividend Rights. Subject to
the BCBCA, and subject to the prior rights of any holders of preferred shares, the holders of the common shares in the absolute
discretion of the directors, shall be entitled to receive, and the Company shall pay thereon, out of moneys of the Company properly
applicable to the payment of dividends, when declared by the directors, only such dividends as may be declared from time to time
in respect of the common shares. The preferred shares are entitled to preference over the common shares with respect to the payment
of dividends. We have not paid any dividends since our incorporation. At the discretion of our board of directors, we will consider
paying dividends in future as our operational circumstances may permit having regard to, among other things, our earnings, cash
flow and financial requirements.

 

Liquidation Rights. Subject
to the prior payment to the holders of the preferred shares described below, in the event of the liquidation, dissolution or winding-up
of the Company or other distribution of the assets of the Company among its shareholders, the holders of the shares of our common
shares shall be entitled to share pro rata in the distribution of the balance of the assets. The preferred shares shall be entitled
to a preference over the common shares with respect to the distribution of assets of the Company, whether voluntary or involuntary,
or in the event of any other distribution of assets of the Company among its shareholders for the purpose of winding up its affairs;
and the preferred stock may be given such other preference not inconsistent with our Articles.

 

Other Rights. Our common shares
have no preemptive rights, no conversion rights, no redemption or sinking fund provisions, and are not liable for further call
or assessment.

     

     

    

Listing. Our common shares
currently trade on the Nasdaq Global Select Market under the symbol “XBIT.”

 

Anti-Takeover Provisions

 

Certain Takeover Bid Requirements.
Unless such offer constitutes an exempt transaction, an offer made by a person, an “offeror”, to acquire outstanding
shares of a Canadian entity that, when aggregated with the offeror’s holdings (and those of persons or companies acting jointly
with the offeror), would constitute 20% or more of the outstanding shares in a class, would be subject to the take-over provisions
of Canadian securities laws. The foregoing is a limited and general summary of certain aspects of applicable securities law in
the provinces and territories of Canada, all in effect as of the date hereof.

 

In addition to those takeover bid requirements
noted above, the acquisition of our shares may trigger the application of statutory regimes including among others, the Investment
Canada Act (Canada) and the Competition Act (Canada).

 

Limitations on the ability to acquire and
hold our common shares may be imposed by the Competition Act (Canada). This legislation permits the Commissioner of Competition,
or the Commissioner, to review any acquisition of control over or of a significant interest in us. This legislation grants the
Commissioner jurisdiction, for up to one year, after any such acquisition, to challenge this type of acquisition before the Canadian
Competition Tribunal on the basis that it would, or would be likely to, substantially prevent or lessen competition in any market
in Canada.

 

This legislation also requires any person
who intends to acquire our common shares to file a pre-closing notification with the Canadian Competition Bureau if certain financial
thresholds are exceeded and if that person (and their affiliates) would hold more than 20% of our common shares. If a person (and
its affiliates) already owns 20% or more of our common shares, a notification must be filed when the acquisition of additional
shares would bring that person’s holdings to over 50%. Where a notification is required, the legislation prohibits completion
of the acquisition until the expiration of a statutory waiting period, unless the Commissioner provides written notice that she
does not intend to challenge the acquisition.

 

The Investment Canada Act requires any person
that is a “non-Canadian” (as defined in the Investment Canada Act) who acquires control of an existing Canadian business,
where the acquisition of control is not a reviewable transaction, to file a notification with Industry Canada. The Investment Canada
Act generally prohibits the implementation of a reviewable transaction unless, after review, the relevant minister is satisfied
that the investment is likely to be of net benefit to Canada. Under the Investment Canada Act, the acquisition of control of us
(either through the acquisition of our common shares or all or substantially all our assets) by a non-Canadian who is a World Trade
Organization member country investor, including a US investor, would be reviewable only if our enterprise value was equal to or
greater than a specified amount. Currently, the specified amount for is CAD$600 million, but will eventually increase to CAD$1.0
billion. We believe that we are not a cultural business for Investment Canada Act purposes and that the lower threshold for reviews
of acquisitions of such businesses does not apply. The threshold amount is subject to an annual adjustment on the basis of a prescribed
formula in the Investment Canada Act to reflect changes in Canadian gross domestic product.

 

The acquisition of a majority of the voting
interests of an entity is deemed to be acquisition of control of that entity. The acquisition of less than a majority but one-third
or more of the voting shares of a corporation or an equivalent undivided ownership interest in the voting shares of a corporation
is presumed to be an acquisition of control of that corporation unless it can be established that, on the acquisition, the corporation
is not controlled in fact by the acquirer through the ownership of voting shares. The acquisition of less than one-third of the
voting shares of a corporation is deemed not to be an acquisition of control of that corporation.

 

Under the new national security regime in
the Investment Canada Act, review on a discretionary basis may also be undertaken by the federal government in respect of a much
broader range of investments by a non-Canadian to “acquire, in whole or in part, or to establish an entity carrying on all
or any part of its operations in Canada.” The relevant test is whether such an investment by a non-Canadian could be “injurious
to national security.” The Minister of Industry has broad discretion to determine whether an investor is a non-Canadian and
may be subject to national security review. Review on national security grounds is at the discretion of the federal government
and may occur on a pre- or post-closing basis, subject to certain limitation provisions. The government has the power in a national
security review to direct that the investment not be implemented, to direct that the investor provide undertakings or the investor
implement the investment on prescribed terms or conditions and to order the investor to divest itself of the investment.

    	 	2	 

     

    

There is no law, governmental decree or
regulation in Canada that restricts the export or import of capital or which would affect the remittance of dividends or other
payments by us to non-Canadian holders of our common shares or preferred shares, other than withholding tax requirements.

 

Our Articles do not contain any change of
control limitations with respect to a merger, acquisition or corporate restructuring that involves us.

 

This summary is not a comprehensive description
of relevant or applicable considerations regarding such requirements and, accordingly, is not intended to be, and should not be
interpreted as, legal advice to any prospective purchaser and no representation with respect to such requirements to any prospective
purchaser is made. Prospective investors should consult their own Canadian legal advisors with respect to any questions regarding
securities law in the provinces and territories of Canada.

 

Actions Requiring a Special Majority.
Under the BCBCA and our Articles, certain corporate actions require the approval of a special majority of shareholders, meaning
holders of shares representing not less than 66 2⁄3% of those votes cast in respect of a shareholder vote addressing such
matter. Subject to the BCBCA, those items requiring the approval of a special majority generally relate to fundamental changes
with respect to our business, and include among others, resolutions: (i) to alter its articles or authorized share structure; (ii)
to remove a director before the expiry of his or her term; and (iii) to provide for a sale, lease or exchange of all or substantially
all of the Company’s property.

 

Shareholder Proposals. Under
the BCBCA, shareholders may make proposals for matters to be considered at the annual general meeting of shareholders. Such proposals
must be sent to us in advance of any proposed meeting by delivering a timely written notice in proper form to our registered office
in accordance with the requirements of the BCBCA. The notice must include information on the business the shareholder intends to
bring before the meeting.

 

Advance Notice Provisions.
Our Articles contain provisions (the “Advance Notice Provisions”) which provide that advance notice to the Company
must be made and the procedures set out in the Articles must be followed for persons to be eligible for election to the our board
of directors. Nomination of persons for election to the board of directors may only be made at an annual meeting of shareholders
or at a special meeting of shareholders called for any purpose which includes the election of directors.

 

Among other things, the Advance Notice Provisions
fix a deadline by which holders of record of common shares must submit director nominations to us prior to any annual or special
meeting of shareholders and set forth the specific information that a shareholder must include in the written notice to the Company
for an effective nomination to occur. No person will be eligible for election as a director of the Company unless nominated in
accordance with the provisions of the Advance Notice Provisions.

 

In the case of an annual meeting of shareholders,
notice to us must be made not less than 30 or more than 65 days prior to the date of the annual meeting; provided, however, that
if the annual meeting is to be held on a date that is less than 50 days after the date on which the first public announcement of
the date of the annual meeting was made, notice may be made not later than the close of business on the 10th day following such
public announcement. In the case of a special meeting of shareholders (which is not also an annual meeting), notice to us must
be made not later than the close of business on the 15th day following the day on which the first public announcement of the date
of the special meeting was made.

 

The board of directors may, in its sole
discretion, waive any requirement of the Advance Notice Provisions.

    	 	3	 

     

    

Limitation of Liability and Indemnification

 

We are subject to the provisions of Part
5, Division 5 of the BCBCA. Under Section 160 of the BCBCA, we may, subject to Section 163 of the BCBCA:

 

		(1)	indemnify an individual who:

 

		(a)	is or was a director or officer of the Company;

 

		(b)	is or was a director or officer of another corporation (i) at a time when such corporation is or was an affiliate of the Company;
or (ii) at the Company’s request, or

 

		(c)	at the Company’s request, is or was, or holds or held a position equivalent to that of, a director or officer of a partnership,
trust, joint venture or other unincorporated entity, and including, subject to certain limited exceptions, the heirs and personal
or other legal representatives of that individual (collectively, an “eligible party”), against all eligible penalties
to which the eligible party is or may be liable; and

 

		(2)	after final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by an eligible party in
respect of that proceeding, where:

 

		(a)	“eligible penalty” means a judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of,
and eligible proceeding.

 

		(b)	“eligible proceeding” means a proceeding in which an eligible party or any of the heirs and personal or other legal
representatives of the eligible party, by reason of the eligible party being or having been a director or officer of, or holding
or having held a position equivalent to that of a director or officer of, the Company or an associated corporation (i) is or may
be joined as a party, or (ii) is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to,
the proceeding.

 

		(c)	“proceeding” includes any legal proceeding or investigative action, whether current, threatened , pending or completed.

 

Under Section 161 of the BCBCA, and subject
to Section 163 of the BCBCA, we must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably
incurred by an eligible party in respect of that proceeding if the eligible party (i) has not been reimbursed for those expenses,
and (ii) is wholly successful, on the merits or otherwise, in the outcome of the proceeding or is substantially successful on the
merits in the outcome of the proceeding.

 

Under Section 162 of the BCBCA, and subject
to Section 163 of the BCBCA, we may pay, as they are incurred in advance of the final disposition of an eligible proceeding, the
expenses actually and reasonably incurred by an eligible party in respect of the proceeding, provided that the Company must not
make such payments unless we first receive from the eligible party a written undertaking that, if it is ultimately determined that
the payment of expenses is prohibited under Section 163 of the BCBCA, the eligible party will repay the amounts advanced.

 

Under Section 163 of the BCBCA, we must
not indemnify an eligible party against eligible penalties to which the eligible party is or may be liable or pay the expenses
of an eligible party in respect of that proceeding under Sections 160, 161 or 162 of the BCBCA, as the case may be, if any of the
following circumstances apply:

 

		·	if the indemnity or payment is made under an earlier agreement to
indemnify or pay expenses and, at the time that the agreement to indemnify or pay expenses was made, the Company was prohibited
from giving the indemnity or paying the expenses by the Company’s memorandum or Articles;

    	 	4	 

     

    

		·	if the indemnity or payment is made otherwise than under an earlier
agreement to indemnify or pay expenses and, at the time that the indemnity or payment is made, the Company is prohibited from giving
the indemnity or paying the expenses by the Company’s memorandum or Articles;

 

		·	if, in relation to the subject matter of the eligible proceeding,
the eligible party did not act honestly and in good faith with a view to the best interests of the Company or the associated corporation,
as the case may be; or

 

		·	in the case of an eligible proceeding other than a civil proceeding,
if the eligible party did not have reasonable grounds for believing that the eligible party’s conduct in respect of which
the proceeding was brought was lawful.

 

If an eligible proceeding is brought against
an eligible party by or on behalf of the Company or by or on behalf of an associated corporation, we must not either indemnify
the eligible party against eligible penalties to which the eligible party is or may be liable, or pay the expenses of the eligible
party under Sections 160, 161 or 162 of the BCBCA, as the case may be, in respect of the proceeding.

 

Under Section 164 of the BCBCA, and despite
any other provision of Part 5, Division 5 of the BCBCA and whether or not payment of expenses or indemnification has been sought,
authorized or declined under Part 5, Division 5 of the BCBCA, on application of the Company or an eligible party, the Supreme Court
of British Columbia may do one or more of the following:

 

		·	order us to indemnify an eligible party against any liability incurred
by the eligible party in respect of an eligible proceeding;

 

		·	order us to pay some or all of the expenses incurred by an eligible
party in respect of an eligible proceeding;

 

		·	order the enforcement of, or payment under, an agreement of indemnification
entered into by us;

 

		·	order us to pay some or all of the expenses actually and reasonably
incurred by any person in obtaining an order under Section 164 of the BCBCA; or

 

		·	make any other order the court considers appropriate.

 

Section 165 of the BCBCA provides that we
may purchase and maintain insurance for the benefit of an eligible party or the heirs and personal or other legal representatives
of the eligible party against any liability that may be incurred by reason of the eligible party being or having been a director
or officer of, or holding or having held a position equivalent to that of a director or officer of, the Company or an associated
corporation.

 

Under our Articles, and subject to the BCBCA,
we must indemnify an eligible party and his or her heirs and legal personal representatives against all eligible penalties to which
such person is or may be liable, and we must, after the final disposition of an eligible proceeding, pay the expenses actually
and reasonably incurred by such person in respect of that proceeding. Each eligible party is deemed to have contracted with the
Company on the terms of the indemnity contained in the Articles.

 

Under our Articles, and subject to the BCBCA,
we may agree to indemnify and may indemnify any person (including an eligible party) against eligible penalties and pay expenses
incurred in connection with the performance of services by that person for us.

 

Under our Articles, and subject to the BCBCA,
we may advance expenses to an eligible party.

 

Pursuant to our Articles, the failure of
an eligible party to comply with the BCBCA or the Articles does not, of itself, invalidate any indemnity to which he or she is
entitled under the Articles.

    	 	5	 

     

    

Under our Articles, we may purchase and
maintain insurance for the benefit of an eligible person (or his or her heirs or legal personal representatives) against any liability
incurred by him or her as a director, officer or person who holds or held such equivalent position.

 

Transfer Agent and Registrar

 

The Transfer Agent and Registrar for shares
of our common shares is American Stock Transfer & Trust Company, LLC (“AST”). The address for AST is 6201 15th
Avenue, Brooklyn, New York 11219 and its telephone number is (718) 921-8206.

 

 

 

 

 

 

 

 

6

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