Document:

drrx-ex101_6.htm

Exhibit 10.1

 

THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT

THIS THIRD AMENDMENT to Loan and Security Agreement (this “Amendment”) is entered into as of December 31, 2019, by and between OXFORD FINANCE LLC, a Delaware limited liability company with an office located at 133 North Fairfax Street, Alexandria, Virginia 22314 (“Oxford”), as collateral agent (in such capacity, “Collateral Agent”), the Lenders listed on Schedule 1.1 of the Loan Agreement (as defined below) or otherwise party thereto from time to time including Oxford in its capacity as a Lender (each a “Lender” and collectively, the “Lenders”) and DURECT CORPORATION, a Delaware corporation with offices located at 10260 Bubb Road, Cupertino, CA 95014 (“Borrower”).

Recitals

A.Collateral Agent, Lenders and Borrower have entered into that certain Loan and Security Agreement dated as of July 28, 2016 (as amended from time to time, including by that certain First Amendment to Loan and Security Agreement dated as of February 28, 2018 and that certain Second Amendment to Loan and Security Agreement dated as of November 1, 2018, collectively, the “Loan Agreement”).

B.Lenders have extended credit to Borrower for the purposes permitted in the Loan Agreement.  

C.Borrower has requested that Collateral Agent and Lenders (i) modify the repayment schedule (ii) extend the Maturity Date and (iii) make certain other revisions to the Loan Agreement as more fully set forth herein.

D.Collateral Agent and Lenders have agreed to amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.

Agreement

Now, Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

1.Definitions.  Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

2.Amendments to Loan Agreement.  

2.1Section 2.5 (Fees).  New Section 2.5(g) is hereby added to the Loan Agreement to read as follows:

“(g)Third Amendment Fee.A fully earned, non-refundable amendment fee of Eight Hundred Twenty-Five Thousand Dollars ($825,000.00) (the “Third Amendment Fee”) to be shared between the Lenders pursuant to their respective Commitment Percentages due and payable on January 3, 2020;”

 

2.2Section 10 (Notices). Borrower’s notice information in Section 10 of the Loan Agreement hereby is amended and restated as follows:

	

	
 

1

 

		
		
	
“If to Borrower:
	
DURECT Corporation

10260 Bubb Road

Cupertino, CA 95014

Attn:  Michael H. Arenberg

Email: mike.arenberg@durect.com

	
with a copy (which shall not constitute notice) to:
	
Orrick Herrington & Sutcliffe

51 West 52nd Street

New York, NY 10019-6142

Attn: Stephen Thau

email:  sthau@orrick.com”

 

 

2.3Section 13.1 (Definitions).  The following terms and their respective definitions hereby are added or amended and restated in their entirety, as applicable, to Section 13.1 of the Loan Agreement as follows:

“Amortization Date” is December 1, 2021.

	
“Maturity Date” is May 1, 2024.
	

	
 

“Prepayment Fee” is, with respect to any Term Loan subject to prepayment prior to the Maturity Date, whether by mandatory or voluntary prepayment, acceleration or otherwise, an additional fee payable to the Lenders in amount equal to:

(i)for a prepayment made on or after the Funding Date of such Term Loan through and including the first anniversary of the Third Amendment Effective Date, two and one half percent (2.50%) of the principal amount of such Term Loan prepaid;

(ii)for a prepayment made after the date which is after the first anniversary of the Third Amendment Effective Date through and including the second anniversary of the of the Third Amendment Effective Date, one and one half percent (1.50%) of the principal amount of such Term Loan prepaid; and

(iii)for a prepayment made after the second anniversary of the Third Amendment Effective Date and prior to the Maturity Date, three-quarters of one percent (0.75%) of the principal amount of such Term Loan prepaid. 

“Third Amendment Effective Date” is December 31, 2019.

3.Limitation of Amendment.

3.1The amendments set forth in Section 2 above are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Collateral Agent or any Lender may now have or may have in the future under or in connection with any Loan Document.

3.2This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

2

 

4.Representations and Warranties.  To induce Collateral Agent and Lenders to enter into this Amendment, Borrower hereby represents and warrants to Collateral Agent and Lenders as follows:

4.1Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default has occurred and is continuing;

4.2Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

4.3The organizational documents of Borrower delivered to Collateral Agent and Lenders on the Effective Date, or subsequent thereto, remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

4.4The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized;

4.5The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower;

4.6The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower; and

4.7This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

5.Counterparts.  This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

6.Effectiveness.  This Amendment shall be deemed effective upon the due execution and delivery to Collateral Agent and Lenders of (i) this Amendment by each party hereto, (ii) the due execution and delivery to Collateral Agent of the Corporate Borrowing Certificate attached hereto as Exhibit A, and (iii) Borrower’s payment of all Lenders’ Expenses incurred through the date of this Amendment.

7.Condition Subsequent.  As a condition subsequent to this Amendment, Borrower agrees to pay the Third Amendment Fee as required by Section 2.5(g) of the Loan Agreement by no later January 3, 2020.

[Balance of Page Intentionally Left Blank]

 

 

3

 

 

In Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.

		
	
COLLATERAL AGENT AND LENDER:

 

OXFORD FINANCE LLC 

 

 

By: /s/ Joshua Friedman

Name: Joshua Friedman

Title: Chief Financial Officer

 
	
 

	
 

 
	
 

	
 

BORROWER:

 

DURECT CORPORATION

 

By: /s/ Michael H. Arenberg

Name: Michael H. Arenberg

Title: Chief Financial Officer

 
	
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Third Amendment to Loan and Security Agreement]

 

 

CORPORATE BORROWING CERTIFICATE

				
	
Borrower:
	
DURECT CORPORATION
	
Date: December 31, 2019

	
Lenders
	
OXFORD FINANCE LLC, as Collateral Agent and Lender
	
 

	
 
	
 
	
 

	
 
	
 
	
 

I hereby certify as follows, as of the date set forth above:

1.I am the Secretary, Assistant Secretary or other officer of Borrower.  My title is as set forth below.

2.Borrower’s exact legal name is set forth above.  Borrower is a corporation existing under the laws of the State of Delaware.

3.Attached hereto as Exhibit A and Exhibit B, respectively, are true, correct and complete copies of (i) Borrower’s Certificate of Incorporation (including amendments), as filed with the Secretary of State of the state in which Borrower is incorporated as set forth in paragraph 2 above; and (ii) Borrower’s Bylaws.  Neither such Certificate of Incorporation nor such Bylaws have been amended, annulled, rescinded, revoked or supplemented, and such Certificate of Incorporation and such Bylaws remain in full force and effect as of the date hereof.  

4.The following resolutions were duly and validly adopted by the Borrower’s Board of Directors at a duly held meeting of such directors (or pursuant to a unanimous written consent or other authorized corporate action).  Such resolutions are in full force and effect as of the date hereof and have not been in any way modified, repealed, rescinded, amended or revoked, and Collateral Agent and Lenders may rely on them until Collateral Agent and each Lender receives written notice of revocation from Borrower.

[Balance of Page Intentionally Left Blank]

 

 

 

 

Resolved, that any one of the following officers or employees of Borrower, whose names, titles and signatures are below, may act on behalf of Borrower:

				
	
Name
	
Title
	
Signature
	
Authorized to Add or Remove Signatories

	
 
	
 
	
 
	
☐

	
 
	
 
	
 
	
☐

	
 
	
 
	
 
	
☐

	
 
	
 
	
 
	
☐

 

Resolved Further, that any one of the persons designated above with a checked box beside his or her name may, from time to time, add or remove any individuals to and from the above list of persons authorized to act on behalf of Borrower.

Resolved Further, that such individuals may, on behalf of Borrower:

Borrow Money.  Borrow money from Lenders.

Execute Loan Documents.  Execute any loan documents Collateral Agent or any Lender requires. 

Grant Security.  Grant Collateral Agent and Lenders a security interest in any of Borrower’s assets.

Negotiate Items.  Negotiate or discount all drafts, trade acceptances, promissory notes, or other indebtedness in which Borrower has an interest and receive cash or otherwise use the proceeds.

Further Acts.  Designate other individuals to request advances, pay fees and costs and execute other documents or agreements (including documents or agreement that waive Borrower’s right to a jury trial) they believe to be necessary to effectuate such resolutions.

 

Resolved Further, that all acts authorized by the above resolutions and any prior acts relating thereto are ratified.

5.The persons listed above are Borrower’s officers or employees with their titles and signatures shown next to their names.

			
	
 
	
 
	
By:  

	
 
	
 
	
Name:  

	
 
	
 
	
Title:  

 

*** If the Secretary, Assistant Secretary or other certifying officer executing above is designated by the resolutions set forth in paragraph 4 as one of the authorized signing officers, this Certificate must also be signed by a second authorized officer or director of Borrower.

	
I, the __________________________ of Borrower, hereby certify as to paragraphs 1 through 5 above, as 
	

[print title]

of the date set forth above.

			
	
 
	
 
	
By:  

	
 
	
 
	
Name:  

	
 
	
 
	
Title:Blueprint

 

 Exhibit 4.2

 

NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS
EXERCISABLE 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 EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES. 

 

UNLESS
PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY
MUST NOT TRADE THE SECURITY BEFORE [THE DATE THAT IS 4 MONTHS AND ONE DAY AFTER
THE DISTRIBUTION DATE WILL BE INSERTED].

 

EXHIBIT
A

CLASS A COMMON SHARE PURCHASE WARRANT

 

EDESA BIOTECH, INC.

 

	

Warrant
Shares: _______

	
 

	

Initial
Exercise Date: ___, 20[__]

	
 

	
 

	

Issue
Date: ___, 2020

	
 

	
 

	
 

 

THIS
CLASS A COMMON SHARE PURCHASE WARRANT (the “Warrant”) certifies that,
for value received, _____________ or its assigns (the
“Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the six
(6) month anniversary of the date hereof (the “Initial Exercise Date”)
and on or prior to 5:00 p.m. (New York City time) on the third
(3rd)
anniversary of the Initial Exercise Date (the “Termination Date”), but
not thereafter, to subscribe for and purchase from Edesa Biotech,
Inc., a British Columbia corporation (the “Company”), up to
_____
shares (as subject to adjustment hereunder, the “Warrant Shares”) of the
Company’s common shares (the “Common Shares”). The
purchase price of one Common Share under this Warrant shall be
equal to the Exercise Price, as defined in Section
2(b).

 

Section
1.                                Definitions.
Capitalized terms used and not otherwise defined herein shall have
the meanings set forth in that certain Securities Purchase
Agreement (the “Purchase Agreement”),
dated January 6, 2020, among the Company and the purchasers
signatory thereto.

 

 

1

 

 

Section
2.             
Exercise.

 

a) Exercise
of Warrant. Exercise of the purchase rights represented by
this Warrant may be made, in whole or in part, at any time or times
on or after the Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a duly executed
facsimile copy or PDF copy submitted by e-mail (or e-mail
attachment) of the Notice of Exercise in the form annexed hereto
(the “Notice of
Exercise”). Within the earlier of (i) two (2) Trading
Days and (ii) the number of Trading Days comprising the Standard
Settlement Period (as defined in Section 2(d)(i) herein) following
the date of exercise as aforesaid, the Holder shall deliver the
aggregate Exercise Price for the Warrant Shares specified in the
applicable Notice of Exercise by wire transfer or cashier’s
check drawn on a United States bank unless the cashless exercise
procedure specified in Section 2(c) below is specified in the
applicable Notice of Exercise. No ink-original Notice of Exercise
shall be required, nor shall any medallion guarantee (or other type
of guarantee or notarization) of any Notice of Exercise be
required. Notwithstanding anything herein to the contrary, the
Holder shall not be required to physically surrender this Warrant
to the Company until the Holder has purchased all of the Warrant
Shares available hereunder and the Warrant has been exercised in
full, in which case, the Holder shall surrender this Warrant to the
Company for cancellation within three (3) Trading Days of the date
on which the final Notice of Exercise is delivered to the Company.
Partial exercises of this Warrant resulting in purchases of a
portion of the total number of Warrant Shares available hereunder
shall have the effect of lowering the outstanding number of Warrant
Shares purchasable hereunder in an amount equal to the applicable
number of Warrant Shares purchased. The Holder and the Company
shall maintain records showing the number of Warrant Shares
purchased and the date of such purchases. The Company shall deliver
any objection to any Notice of Exercise within one (1) Trading Day
of receipt of such notice. The
Holder and any assignee, by acceptance of this Warrant, acknowledge
and agree that, by reason of the provisions of this paragraph,
following the purchase of a portion of the Warrant Shares
hereunder, the number of Warrant Shares available for purchase
hereunder at any given time may be less than the amount stated on
the face hereof.

 

Without
limiting the rights of a Holder to receive Warrant Shares on a
“cashless exercise”, in no event will the Company be
required to net cash settle a Warrant exercise.

 

b) Exercise Price. The exercise
price per one Common Share under this Warrant shall be $4.80, subject to
adjustment hereunder (the “Exercise
Price”).

 

c) Cashless Exercise. If at the
time of exercise hereof there is no effective registration
statement registering, or the prospectus contained therein is not
available for the issuance or resale of the Warrant Shares to or by
the Holder, then this Warrant may also be exercised, in whole or in
part, at such time by means of a “cashless exercise” in
which the Holder shall be entitled to receive a number of Warrant
Shares equal to the quotient obtained by dividing [(A-B) (X)] by
(A), where:

 

 

2

 

 

(A) =
as applicable: (i) the VWAP on the Trading Day immediately
preceding the date of the applicable Notice of Exercise if such
Notice of Exercise is (1) both executed and delivered pursuant to
Section 2(a) hereof on a day that is not a Trading Day or (2) both
executed and delivered pursuant to Section 2(a) hereof on a Trading
Day prior to the opening of “regular trading hours” (as
defined in Rule 600(b)(64) of Regulation NMS promulgated under the
federal securities laws) on such Trading Day, (ii) at the option of
the Holder, either (y) the VWAP on the Trading Day immediately
preceding the date of the applicable Notice of Exercise or (z) the
Bid Price of the Common Shares on the principal Trading Market as
reported by Bloomberg L.P. as of the time of the Holder’s
execution of the applicable Notice of Exercise if such Notice of
Exercise is executed during “regular trading hours” on
a Trading Day and is delivered within two (2) hours thereafter
(including until two (2) hours after the close of “regular
trading hours” on a Trading Day) pursuant to Section 2(a)
hereof or (iii) the VWAP on the date of the applicable Notice of
Exercise if the date of such Notice of Exercise is a Trading Day
and such Notice of Exercise is both executed and delivered pursuant
to Section 2(a) hereof after the close of “regular trading
hours” on such Trading Day;

 

(B) =
the Exercise Price of this Warrant, as adjusted hereunder;
and

 

(X) =
the number of Warrant Shares that would be issuable upon exercise
of this Warrant in accordance with the terms of this Warrant if
such exercise were by means of a cash exercise rather than a
cashless exercise.

 

If Warrant Shares are issued in such a cashless exercise, the
parties acknowledge and agree that in accordance with Section
3(a)(9) of the Securities Act, the Warrant Shares shall take on the
characteristics of the Warrants being exercised, and the holding
period of the Warrant Shares being issued may be tacked on to the
holding period of this Warrant.  The Company agrees not
to take any position contrary to this Section 2(c).

 

“Bid Price” means, for any
date, the price determined by the first of the following clauses
that applies: (a) if the Common Shares are then listed or quoted on
a Trading Market, the bid price of the Common Shares for the time
in question (or the nearest preceding date) on the Trading Market
on which the Common Shares are 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)), (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 are 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 Group, Inc. (or a similar
organization or agency succeeding to its functions of reporting
prices), the most recent bid price per Common Share so reported, or
(d) in all other cases, the fair market value of a Common
Share as determined by an independent appraiser selected in good
faith by the Holders 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.

 

 

 

3

 

 

“VWAP” means, for any
date, the price determined by the first of the following clauses
that applies: (a) if the Common Shares are 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 are 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)),
(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 are 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 Group, Inc. (or
a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per Common Share so
reported, or (d) in all other cases, the fair market value of
a Common Share as determined by an independent appraiser selected
in good faith by the Holders 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.

 

Notwithstanding
anything herein to the contrary, on the Termination Date, this
Warrant shall be automatically exercised via cashless exercise
pursuant to this Section 2(c).

 

d) Mechanics of
Exercise.

 

i. Delivery of Warrant Shares Upon
Exercise. The Company shall cause the Warrant Shares
purchased hereunder to be transmitted by the Transfer Agent to the
Holder by crediting the account of the Holder’s or its
designee’s balance account with The Depository Trust Company
through its Deposit or Withdrawal at Custodian system
(“DWAC”) if the Company is
then a participant in such system and either (A) there is an
effective registration statement permitting the issuance of the
Warrant Shares to or resale of the Warrant Shares by the Holder or
(B) the Warrant Shares are eligible for resale by the Holder
without volume or manner-of-sale limitations pursuant to Rule 144
(assuming cashless exercise of the Warrants), and otherwise by
physical delivery of a certificate, registered in the
Company’s share register in the name of the Holder or its
designee, for the number of Warrant Shares to which the Holder is
entitled pursuant to such exercise to the address specified by the
Holder in the Notice of Exercise by the date that is the earlier of
(i) the earlier of (A) three (3) Trading Days after the delivery to
the Company of the Notice of Exercise and (B) one (1) Trading Day
after delivery of the aggregate Exercise Price to the Company and
(ii) the number of Trading Days comprising the Standard Settlement
Period after the delivery to the Company of the Notice of Exercise
(such date, the “Warrant Share Delivery
Date”). Upon delivery of the Notice of Exercise, the
Holder shall be deemed for all corporate purposes to have become
the holder of record of the Warrant Shares with respect to which
this Warrant has been exercised, irrespective of the date of
delivery of the Warrant Shares, provided that payment of the
aggregate Exercise Price (other than in the case of a cashless
exercise) is received within the earlier of (i) two (2) Trading
Days and (ii) the number of Trading Days comprising the Standard
Settlement Period following delivery of the Notice of Exercise. The
Company agrees to maintain a transfer agent that is a participant
in the FAST program so long as this Warrant remains outstanding and
exercisable. As used herein, “Standard Settlement
Period” means the standard settlement period,
expressed in a number of Trading Days, on the Company’s
primary Trading Market with respect to the Common Shares as in
effect on the date of delivery of the Notice of
Exercise.

 

 

 

4

 

 

ii. Delivery of New Warrants Upon
Exercise. If this Warrant shall have been exercised in part,
the Company shall, at the request of a Holder and upon surrender of
this Warrant, at the time of delivery of the Warrant Shares,
deliver to the Holder a new Warrant evidencing the rights of the
Holder to purchase the unpurchased Warrant Shares called for by
this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.

 

iii. Reserved.

 

iv. Reserved.

 

v. No Fractional Shares or Scrip.
No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of
a share which the Holder would otherwise be entitled to purchase
upon such exercise, 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 Exercise Price or round up
to the next whole share.

 

vi. Charges, Taxes and Expenses.
Issuance of Warrant Shares shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such Warrant Shares, all of which taxes
and expenses shall be paid by the Company, and such Warrant Shares
shall be issued in the name of the Holder or in such name or names
as may be directed by the Holder; provided, however, that in the event that
Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto. The Company shall pay all Transfer Agent fees
required for same-day processing of any Notice of Exercise and all
fees to the Depository Trust Company (or another established
clearing corporation performing similar functions) required for
same-day electronic delivery of the Warrant Shares.

 

vii. Closing
of Books. The Company will not close its shareholder books
or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.

 

 

 

5

 

 

e) Holder’s Exercise
Limitations. Unless otherwise agreed by the Company and
Holder, the Company shall not knowingly effect any exercise of this
Warrant, and a Holder shall not have the right to exercise any
portion of this Warrant, pursuant to Section 2 or otherwise, to the
extent that after giving effect to such issuance after exercise as
set forth on the applicable Notice of Exercise, 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 the
number of Common Shares issuable upon exercise of this Warrant with
respect to which such determination is being made, but shall
exclude the number of Common Shares which would be issuable upon
(i) exercise of the remaining, nonexercised portion of this Warrant
beneficially owned by the Holder or any of its Affiliates or
Attribution Parties and (ii) exercise or conversion of the
unexercised or nonconverted portion of any other securities of the
Company (including, without limitation, any other Common Share
Equivalents) subject to a limitation on conversion or exercise
analogous to the limitation contained herein 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 2(e), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder, it being acknowledged by the
Holder that the Company is not representing to the Holder that such
calculation is in compliance with Section 13(d) of the Exchange Act
and the Holder is solely responsible for any schedules required to
be filed in accordance therewith. To the extent that the limitation
contained in this Section 2(e) applies, the determination of
whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates and
Attribution Parties) and of which portion of this Warrant is
exercisable shall be in the sole discretion of the Holder, and the
submission of a Notice of Exercise shall be deemed to be the
Holder’s determination of whether this Warrant is exercisable
(in relation to other securities owned by the Holder together with
any Affiliates and Attribution Parties) and of which portion of
this Warrant is exercisable, in each case subject to the Beneficial
Ownership Limitation, 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 2(e), in determining the number of outstanding
Common Shares, a Holder may rely on the number of outstanding
Common Shares as reflected in (A) the Company’s most recent
periodic or annual report filed with the Commission, as the case
may be, (B) a more recent public announcement by the Company or (C)
a more recent written notice by the Company or the Transfer Agent
setting forth the number of Common Shares outstanding.  Upon
the written or oral request of a Holder, the Company shall within
one (1) 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 Warrant, by the Holder or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding Common Shares was reported. The “Beneficial Ownership
Limitation” shall be 9.99% of the number of Common
Shares outstanding immediately after giving effect to the issuance
of Common Shares issuable upon exercise of this Warrant. The
Holder, upon notice to the Company, may increase or decrease the
Beneficial Ownership Limitation provisions of this Section 2(e),
provided that the Beneficial Ownership Limitation in no event
exceeds 9.99% of the number of Common Shares outstanding
immediately after giving effect to the issuance of Common Shares
upon exercise of this Warrant held by the Holder and the provisions
of this Section 2(e) shall continue to apply. Any increase in the
Beneficial Ownership Limitation will not be effective until the
61st day
after such notice is delivered to the Company. The provisions of
this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section
2(e) 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 Warrant.

 

 

 

6

 

 

Section
3.             
Certain
Adjustments.

 

a) Share Dividends and Splits. If
the Company, at any time while this Warrant is outstanding: (i)
pays a share dividend or otherwise makes a distribution or
distributions on Common Shares or any other equity or equity
equivalent securities payable in Common Shares (which, for
avoidance of doubt, shall not include any Common Shares issued by
the Company upon exercise of this Warrant), (ii) subdivides
outstanding Common Shares into a larger number of shares, (iii)
combines (including by way of reverse share split) outstanding
Common Shares into a smaller number of shares, or (iv) issues by
reclassification of Common Shares any capital shares of the
Company, then in each case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of Common
Shares (excluding treasury shares, if any) outstanding immediately
before such event and of which the denominator shall be the number
of Common Shares outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted such that the aggregate Exercise Price of
this Warrant shall remain unchanged. Any adjustment made pursuant
to this Section 3(a) shall become effective immediately after the
record date for the determination of shareholders 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.

 

b) Reserved.

 

c) Reserved.

 

d) Reserved.

 

 

 

7

 

 

e) Fundamental Transaction. If, at
any time while this Warrant is outstanding, (i) the Company,
directly or indirectly, in one or more related transactions effects
any merger 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 are 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 share purchase agreement or other
business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person or group of Persons whereby such
other Person or group 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 share
purchase agreement or other business combination) (each a
“Fundamental
Transaction”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the
number of Common Shares of the successor or acquiring corporation
or of the Company, if it is the surviving corporation, and any
additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of Common Shares for which this Warrant is
exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise
of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one Common Share in
such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Shares are given
any choice as to the securities, cash or property to be received in
a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental Transaction.
The Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the
“Successor
Entity”) to assume in writing all of the obligations
of the Company under this Warrant and the other Transaction
Documents in accordance with the provisions of this Section 3(e)
pursuant to written agreements in form and substance reasonably
satisfactory to the Holder and approved by the Holder (without
unreasonable delay) prior to such Fundamental Transaction and
shall, at the option of the Holder, deliver to the Holder in
exchange for this Warrant a security of the Successor Entity
evidenced by a written instrument substantially similar in form and
substance to this Warrant which is exercisable for a corresponding
number of capital shares of such Successor Entity (or its parent
entity) equivalent to the Common Shares acquirable and receivable
upon exercise of this Warrant (without regard to any limitations on
the exercise of this Warrant) prior to such Fundamental
Transaction, and with an exercise price which applies the exercise
price hereunder to such capital shares (but taking into account the
relative value of the Common Shares pursuant to such Fundamental
Transaction and the value of such capital shares, such number of
capital shares and such exercise price being for the purpose of
protecting the economic value of this Warrant immediately prior to
the consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of
this Warrant and the other Transaction Documents referring to the
“Company” shall refer instead to the Successor Entity),
and may exercise every right and power of the Company and shall
assume all of the obligations of the Company under this Warrant and
the other Transaction Documents with the same effect as if such
Successor Entity had been named as the Company herein.

 

 

 

8

 

 

f) Calculations. All calculations
under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 3, the number of Common Shares deemed to be issued and
outstanding as of a given date shall be the sum of the number of
Common Shares (excluding treasury shares, if any) issued and
outstanding.

 

g) Notice to Holder of Adjustment to
Exercise Price. Whenever the Exercise Price is adjusted
pursuant to any provision of this Section 3, the Company shall
promptly deliver to the Holder by facsimile or email a notice
setting forth the Exercise Price after such adjustment and any
resulting adjustment to the number of Warrant Shares and setting
forth a brief statement of the facts requiring such
adjustment.

 

Section
4.             
Transfer of
Warrant.

 

a) Transferability. Subject to
compliance with any applicable securities laws and the conditions
set forth in Section 4(d) hereof and to the provisions of Section
4.1 of the Purchase Agreement, this Warrant and all rights
hereunder (including, without limitation, any registration rights)
are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company or its designated
agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company unless the Holder
has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within two (2) Trading Days
of the date on which the Holder delivers an assignment form to the
Company assigning this Warrant in full. The Warrant, if
properly assigned in accordance herewith, may be exercised by a new
holder for the purchase of Warrant Shares without having a new
Warrant issued.

 

 

 

9

 

 

b) New Warrants. This Warrant may
be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which
may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with
such notice. All Warrants issued on transfers or exchanges shall be
dated the Issue Date of this Warrant and shall be identical with
this Warrant except as to the number of Warrant Shares issuable
pursuant thereto.

 

c) Warrant Register. The Company
shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.

 

d) Transfer Restrictions. If, at
the time of the surrender of this Warrant in connection with any
transfer of this Warrant, the transfer of this Warrant shall not be
either (i) registered pursuant to an effective registration
statement under the Securities Act and under applicable state
securities or blue sky laws or (ii) eligible for resale without
volume or manner-of-sale restrictions or current public information
requirements pursuant to Rule 144, the Company may require, as a
condition of allowing such transfer, that the Holder or transferee
of this Warrant, as the case may be, comply with the provisions of
Section 4.1 of the Purchase Agreement.

 

e) Representation by the Holder.
The Holder, by the acceptance hereof, represents and warrants that
it is acquiring this Warrant and, upon any exercise hereof, will
acquire the Warrant Shares issuable upon such exercise, for its own
account and not with a view to or for distributing or reselling
such Warrant Shares or any part thereof in violation of the
Securities Act or any applicable state securities law, except
pursuant to sales registered or exempted under the Securities
Act.

 

Section
5.             
Miscellaneous.

 

a) No Rights as Shareholder Until
Exercise. This Warrant does not entitle the Holder to any
voting rights, dividends or other rights as a shareholder of the
Company prior to the exercise hereof as set forth in Section
2(d)(i).

 

b) Loss, Theft, Destruction or Mutilation
of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any share
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and upon surrender and
cancellation of such Warrant or share certificate, if mutilated,
the Company will make and deliver a new Warrant or share
certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or share certificate.

 

 

 

10

 

 

c) Saturdays, Sundays, Holidays,
etc. If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein
shall not be a Business Day, then, such action may be taken or such
right may be exercised on the next succeeding Business
Day.

 

d) Authorized Shares.

 

The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Shares a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any purchase
rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of issuing the necessary
Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which
the Common Shares may be listed. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant and payment for
such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).

 

Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.

 

 

 

11

 

 

 

 

Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.

 

e) Jurisdiction. All questions
concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.

 

f) Restrictions. The Holder
acknowledges that the Warrant Shares acquired upon the exercise of
this Warrant, if not registered, and the Holder does not utilize
cashless exercise, will have restrictions upon resale imposed by
state and federal securities laws.

 

g) Nonwaiver and Expenses. No
course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such
right or otherwise prejudice the Holder’s rights, powers or
remedies, notwithstanding the fact that all rights hereunder
terminate on the Termination Date.

 

h) Notices. Any notice, request or
other document required or permitted to be given or delivered to
the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.

 

i) Limitation of Liability. No
provision hereof, in the absence of any affirmative action by the
Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the purchase price of
any Common Shares or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the
Company.

 

j) Remedies. The Holder, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this
Warrant and hereby agrees to waive and not to assert the defense in
any action for specific performance that a remedy at law would be
adequate.

 

k) Successors and Assigns. Subject
to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Company
and the successors and permitted assigns of Holder. The provisions
of this Warrant are intended to be for the benefit of any Holder
from time to time of this Warrant and shall be enforceable by the
Holder or holder of Warrant Shares.

 

l) Amendment. This Warrant may be
modified or amended or the provisions hereof waived with the
written consent of the Company and the
Holder.

 

 

 

12

 

 

m) Severability. Wherever
possible, each provision of this Warrant shall be interpreted in
such manner as to be effective and valid under applicable law, but
if any provision of this Warrant shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this
Warrant.

 

n) Headings. The headings used in
this Warrant are for the convenience of reference only and shall
not, for any purpose, be deemed a part of this
Warrant.

 

 

********************

 

(Signature Page Follows)

 

 

13

 

 

 

IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.

 

 

 

	
 

	

EDESA BIOTECH, INC.

	
 

	

 

 

By:__________________________________________

     Name:

     Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

 

 

NOTICE OF EXERCISE

 

TO:            

EDESA
BIOTECH, INC.

 

(1) The undersigned
hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.

 

(2) Payment shall take
the form of (check applicable box):

 

[ ] in
lawful money of the United States; or

 

[ ] if
permitted the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection
2(c), to exercise this Warrant with respect to the maximum number
of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 2(c).

 

(3) Please issue said
Warrant Shares in the name of the undersigned or in such other name
as is specified below:

 

_______________________________

 

 

The
Warrant Shares shall be delivered to the following DWAC Account
Number:

 

_______________________________

 

_______________________________

 

_______________________________

 

(4) Accredited
Investor. The undersigned is an “accredited investor”
as defined in Regulation D promulgated under the Securities Act of
1933, as amended.

 

[SIGNATURE
OF HOLDER]

 

Name of
Investing Entity:
________________________________________________________________________

Signature of Authorized Signatory of Investing
Entity:
_________________________________________________

Name of
Authorized Signatory:
___________________________________________________________________

Title
of Authorized Signatory:
____________________________________________________________________

Date:
________________________________________________________________________________________

 

 

 

 

 

 

 

 

  EXHIBIT B

 

ASSIGNMENT FORM

 (To assign the foregoing Warrant, execute this form and
supply required information. Do not use this form to purchase
shares.)

 

FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to

 

	

Name:

	
______________________________________

	
 

	

(Please Print)

 

	

Address:

	
______________________________________ 

	

 

 

Phone Number:

Email Address:

 

	

(Please
Print)

______________________________________

______________________________________

 

	

Dated: _______________ __, ______

 

	
 

	

Holder’s Signature:
______________________________________

 

	
 

	

Holder’s Address:
______________________________________

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