Document:

ex_236525.htm

Exhibit 10.24

 

Execution Version

 

 

LIMITED CONSENT AND AMENDMENT NO. 5 TO THIRD AMENDED AND RESTATED 

CREDIT AGREEMENT

 

This Limited Consent and Amendment No. 5 to Third Amended and Restated Credit Agreement (this “Amendment”), dated as of November 12, 2020, is made by and among GRANITE CONSTRUCTION INCORPORATED, a Delaware corporation (the “Company” and a “Borrower”), GRANITE CONSTRUCTION COMPANY, a California corporation (“GCC” and a “Borrower”), GILC INCORPORATED, a California corporation (“GILC” and a “Borrower”, and together with the Company and GCC, collectively the “Borrowers”), each of the Guarantors (as defined in the Credit Agreement (as defined below)) signatory hereto, BANK OF AMERICA, N.A., a national banking association organized and existing under the laws of the United States (“Bank of America”), in its capacity as administrative agent for the Lenders (as defined in the Credit Agreement) (in such capacity, the “Administrative Agent”), and each of the Lenders signatory hereto.

 

W I T N E S S E T H:

 

WHEREAS, each of the Borrowers, Bank of America, as Administrative Agent, and the Lenders from time to time party thereto have entered into that certain Third Amended and Restated Credit Agreement dated as of May 31, 2018 (as amended by that certain Amendment No. 1 to Third Amended and Restated Credit Agreement dated as of July 29, 2019, that certain Amendment No. 2 to Third Amended and Restated Credit Agreement dated as of October 29, 2019, that certain Amendment No. 3 to Third Amended and Restated Credit Agreement dated as of March 26, 2020 and that certain Amendment No. 4 to Third Amended and Restated Credit Agreement dated as of June 19, 2020, the “Existing Credit Agreement,” and the Existing Credit Agreement as amended by this Amendment, the “Credit Agreement”); capitalized terms used in this Amendment not otherwise defined herein shall have the respective meanings given thereto in the Credit Agreement), pursuant to which the Lenders have made available to the Borrowers a term loan facility and a revolving credit facility, including a letter of credit subfacility and a swing line loan subfacility; and

 

WHEREAS, each of the Guarantors has entered into a Guaranty pursuant to which it has guaranteed certain or all of the obligations of the Borrowers under the Credit Agreement and the other Loan Documents; and

 

WHEREAS, Section 6.01(a) of the Credit Agreement requires that the Company, for the fiscal year of the Company ending December 31, 2019, deliver to the Administrative Agent certain annual financial statements (the “2019 Financial Statements”) on or before June 30, 2020, and Section 6.02(b) of the Credit Agreement requires that the Company concurrently deliver to the Administrative Agent a corresponding Compliance Certificate (the “2019 Compliance Certificate” and, collectively with the 2019 Financial Statements, the “2019 Annual Financials”); and

 

WHEREAS, (a) Section 6.01(b) of the Credit Agreement requires that the Company, (i) for the fiscal quarter of the Company ending March 31, 2020, deliver to the Administrative Agent certain quarterly financial statements (the “March 2020 Quarterly Financial Statements”) on or before June 30, 2020, (ii) for the fiscal quarter of the Company ending June 30, 2020, deliver to the Administrative Agent certain quarterly financial statements (the “June 2020 Quarterly Financial Statements”) within 45 days after the end of such fiscal quarter and (iii) for the fiscal quarter of the Company ending September 30, 2020, deliver to the Administrative Agent certain quarterly financial statements (the “September 2020 Quarterly Financial Statements” and, together with the March 2020 Quarterly Financial Statements and the June 2020 Quarterly Financial Statements, the “2020 Quarterly Financial Statements”) within 45 days after the end of such fiscal quarter and (b) Section 6.02(b) of the Credit Agreement requires that the Company concurrently with the delivery of each of the 2020 Quarterly Financial Statements to the Administrative Agent, deliver to the Administrative Agent a corresponding Compliance Certificate (collectively the “2020 Quarterly Compliance Certificates” and, together with the 2020 Quarterly Financial Statements, the “2020 Quarterly Financials”); and

 

 

 

 

WHEREAS, the Borrowers have requested that the Lenders, and subject to the terms and conditions set forth herein, the Administrative Agent and the Lenders party hereto (which constitute the Required Lenders) are willing to (a) extend the date of delivery for the 2019 Annual Financials and the 2020 Quarterly Financials to February 28, 2021 and (b) to amend the Existing Credit Agreement as set forth below;

 

NOW, THEREFORE, in consideration of the premises and further valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

1.    Amendments. Subject to and in accordance with the terms and conditions set forth herein and in reliance upon the representations and warranties set forth herein the Existing Credit Agreement (other than the Schedules and Exhibits attached thereto) is hereby amended such that, after giving effect to all such amendments, it shall read in its entirety as set forth on Annex A attached hereto.

 

2.    Limited Consent. Effective as of the Amendment Effective Date (as defined below) and subject to the terms and conditions set forth herein and in reliance upon representations and warranties set forth herein, pursuant to Section 10.01 of the Credit Agreement the Lenders party hereto (which constitute the Required Lenders) hereby consent to extend the date of delivery for the 2019 Annual Financials and the 2020 Quarterly Financials from November 15, 2020 to February 28, 2021.

 

3.    Effectiveness; Conditions Precedent. This Amendment, the amendments to the Existing Credit Agreement provided in Section 1 hereof and the Limited Consent provided in Section 2 hereof shall be effective as of the date first written above upon the satisfaction of the following conditions precedent (the date of such satisfaction, the “Amendment Effective Date”):

 

(a)    the Administrative Agent shall have received counterparts of this Amendment, duly executed by each Borrower, the Administrative Agent, and the Required Lenders; and

 

(b)    all fees and expenses incurred or payable in connection with the execution and delivery of this Amendment (including the reasonable fees and expenses of counsel to the Administrative Agent) that have been requested to be paid on or before the date hereof shall have been paid in full.

 

4.    Representations and Warranties. In order to induce the Administrative Agent and the Lenders to enter into this Amendment, the Borrowers represent and warrant to the Administrative Agent and the Lenders as follows:

 

(a)    The representations and warranties made by the Borrowers in Article V of the Credit Agreement and in each of the other Loan Documents to which it is a party are, in each case, true and correct in all material respects on and as of the date hereof, except to the extent that such representations and warranties expressly relate to an earlier date;

 

(b)    The Persons appearing as Guarantors on the signature pages to this Amendment constitute all Persons who are required to be Guarantors pursuant to the terms of the Credit Agreement and the other Loan Documents, including without limitation all Persons who became Subsidiaries or were otherwise required to become Guarantors after the Closing Date and prior to the date hereof, and each of such Persons has become and remains a party to a Guaranty as a Guarantor;

 

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(c)    This Amendment has been duly authorized, executed and delivered by the Borrowers and the Guarantors and constitutes a legal, valid and binding obligation of such parties, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting the rights of creditors, and subject to equitable principles of general application;

 

(d)    After giving effect to this Amendment, no Default or Event of Default has occurred and is continuing or would result from the effectiveness of this Amendment; and

 

(e)    (i) An amendment fee shall have been received by the Administrative Agent for each Lender executing this Amendment by 3:00 p.m. (New York time) on November 11, 2020 for the account of such Lender, paid to the Administrative Agent, equal to 0.075% (7.5 bps) multiplied by each such Lender’s aggregate outstanding loans and unused commitments as of the date hereof; (ii) any fees as may have been agreed to separately in writing shall have been received by the applicable Arrangers and Lenders; and (iii) all other reasonable fees and expenses incurred or payable in connection with the execution and delivery of this Amendment (including the reasonable fees and expenses of counsel to the Administrative Agent) that have been requested to be paid on or before the date hereof shall have been paid in full.

 

5.    Consent of the Guarantors. Each of the Guarantors hereby consents, acknowledges and agrees to the amendments set forth herein and hereby confirms and ratifies in all respects the Guaranty to which such Guarantor is a party (including without limitation the continuation of such Guarantor’s payment and performance obligations thereunder upon and after the effectiveness of this Amendment and the amendments and consents contemplated hereby) and the enforceability of such Guaranty against such Guarantor in accordance with its terms.

 

6.    Entire Agreement. This Amendment, together with all the Loan Documents (collectively, the “Relevant Documents”), sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relating to such subject matter. No promise, condition, representation or warranty, express or implied, not set forth in the Relevant Documents shall bind any party hereto, and no such party has relied on any such promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as otherwise expressly stated in the Relevant Documents, no representations, warranties or commitments, express or implied, have been made by any party to the other in relation to the subject matter hereof or thereof. None of the terms or conditions of this Amendment may be changed, modified, waived or canceled orally or otherwise, except in writing and in accordance with Section 10.01 of the Credit Agreement.

 

7.    Full Force and Effect of Credit Agreement. Except as hereby specifically amended, waived, modified or supplemented, the Credit Agreement, each Security Instrument, and each other Loan Document is hereby confirmed and ratified in all respects and shall be and remain in full force and effect according to its respective terms. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, be deemed (a) to be a waiver of, or consent to, or a modification or amendment of, any other term or condition of the Credit Agreement or any other Loan Document other than as expressly set forth herein, (b) to prejudice any right or rights which the Administrative Agent or the Lenders may now have or may have in the future under or in connection with the Credit Agreement (including as a result of the failure to deliver the 2019 Annual Financials or 2020 Quarterly Financials by no later than February 28, 2021) or the other Loan Documents or any of the instruments or agreements referred to therein, as the same may be amended, restated, supplemented or modified from time to time, or (c) to be a commitment or any other undertaking or expression of any willingness to engage in any further discussion with the Borrowers, any of their Subsidiaries or any other Person with respect to any other waiver, amendment, modification or any other change to the Credit Agreement or the Loan Documents or any rights or remedies arising in favor of the Lenders or the Administrative Agent, or any of them, under or with respect to any such documents.

 

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8.    Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Amendment by telecopy, facsimile or other electronic transmission (including .pdf) shall be effective as delivery of a manually executed counterpart of this Amendment.

 

9.    Governing Law. This Amendment shall in all respects be governed by, and construed in accordance with, the laws of the State of California applicable to contracts executed and to be performed entirely within such State, and shall be further subject to the provisions of Sections 10.14 and 10.15 of the Credit Agreement.

 

10.    Enforceability. Should any one or more of the provisions of this Amendment be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto.

 

11.    References. All references in any of the Loan Documents to the “Credit Agreement” shall mean the Credit Agreement, as amended hereby.

 

12.    Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the Borrowers, the Administrative Agent and each of the Guarantors and Lenders, and their respective successors, legal representatives, and assignees to the extent such assignees are permitted assignees as provided in Section 10.06 of the Credit Agreement.

 

13.    No Novation. Neither the execution and delivery of this Amendment nor the consummation of any other transaction contemplated hereunder is intended to constitute a novation of the Credit Agreement or of any of the other Loan Documents or any obligations thereunder.

 

[Signature pages follow.]

 

4

 

 

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be made, executed and delivered by their duly authorized officers as of the day and year first above written.

 

BORROWERS:

 

 

GRANITE CONSTRUCTION INCORPORATED

 

By:            /s/ Jigisha Desai                                     

Name:       Jigisha Desai                                     

Title:         SVP and CFO                  

 

By:             /s/ Kenneth B. Olson                             

Name:       Kenneth B. Olson                  

Title:         VP and Treasurer

 

 

GRANITE CONSTRUCTION COMPANY

 

By:             /s/ Jigisha Desai                                     

Name:       Jigisha Desai                  

Title:         SVP and CFO                  

 

 

By:             /s/ Kenneth B. Olson                              

Name:       Kenneth B. Olson                   

Title:         VP and Treasurer

 

GILC INCORPORATED 

 

By:             /s/ Jigisha Desai                                       

Name:       Jigisha Desai                   

Title:         SVP and CFO                  

 

 

By:             /s/ Kenneth B. Olson                                 

Name:       Kenneth B. Olson                  

Title:         VP and Treasurer

 

 

 

Granite Construction Incorporated

Limited Consent and Amendment No. 5 to Third Amended and Restated Credit Agreement

Signature Page

 

 

 

GUARANTORS:

 

GRANITE CONSTRUCTION INCORPORATED

 

By:             /s/ Jigisha Desai                                    

Name:       Jigisha Desai          

Title:         SVP and CFO         

 

 

By:             /s/ Kenneth B. Olson                              

Name:       Kenneth B. Olson                   

Title:         VP and Treasurer          

 

 

GRANITE CONSTRUCTION COMPANY

 

 

By:             /s/ Jigisha Desai                                       

Name:       Jigisha Desai                   

Title:         SVP and CFO          

 

 

By:             /s/ Kenneth B. Olson                                

Name:       Kenneth B. Olson                   

Title:         VP and Treasurer          

 

 

GRANITE CONSTRUCTION NORTHEAST, 

INC.

 

By:             /s/ Jigisha Desai                                       

Name:       Jigisha Desai                   

Title:         SVP and CFO         

 

 

By:             /s/ Kenneth B. Olson                                 

Name:       Kenneth B. Olson                   

Title:         VP and Treasurer          

 

 

Granite Construction Incorporated

Limited Consent and Amendment No. 5 to Third Amended and Restated Credit Agreement

Signature Page

 

 

 

INTERMOUNTAIN SLURRY SEAL, INC.

 

By:             /s/ Robert K. Chase                               

Name:       Robert K. Chase                                     

Title:         VP, Treasurer and Assistant Secretary          

 

 

By:             /s/ Ashley M. Stinson                              

Name:       Ashley M. Stinson

Title:         VP and Assistant Secretary          

 

 

 

GILC INCORPORATED

 

By:             /s/ Jigisha Desai                                     

Name:       Jigisha Desai          

Title:         SVP and CFO          

 

 

By:             /s/ Kenneth B. Olson                               

Name:       Kenneth B. Olson                   

Title:         VP and Treasurer          

 

 

LAYNE CHRISTENSEN COMPANY

 

By:             /s/ Jigisha Desai                                          

Name:       Jigisha Desai                   

Title:         SVP and CFO          

 

 

By:             /s/ Kenneth B. Olson                                

Name:       Kenneth B. Olson                   

Title:         VP and Treasurer          

 

 

LAYNE HEAVY CIVIL, INC.

 

 

By:             /s/ Ashley M. Stinson                               

Name:       Ashley M. Stinson

Title:         Treasurer and Assistant Secretary

 

By:             /s/ Anita M. Clerisse                                   

Name:       Anita M. Clerisse

Title:         Assistant Treasurer

 

Granite Construction Incorporated

Limited Consent and Amendment No. 5 to Third Amended and Restated Credit Agreement

Signature Page

 

 

 

GRANITE INLINER, LLC

 

 

By:             /s/ Ashley M. Stinson                           

Name:       Ashley M. Stinson

Title:         Secretary

 

By:             /s/ Anita M. Clerisse                              

Name:       Anita M. Clerisse

Title:         Treasurer

 

 

Granite Construction Incorporated

Limited Consent and Amendment No. 5 to Third Amended and Restated Credit Agreement

Signature Page

 

 

 

ADMINISTRATIVE AGENT:

 

BANK OF AMERICA, N.A.,

as Administrative Agent

 

 

By:             /s/ Bridgett J. Manduk Mowry                    

Name:       Bridgett J. Manduk Mowry                   

Title:         Vice President

 

 

Granite Construction Incorporated

Limited Consent and Amendment No. 5 to Third Amended and Restated Credit Agreement

Signature Page

 

 

 

LENDERS:

 

BANK OF AMERICA, N.A., as a Lender, Swing

Line Lender and L/C Issuer

 

 

By:              /s/ Mukesh Singh                                        

Name:        Mukesh Singh                  

Title:          Director       

   

 

Granite Construction Incorporated

Limited Consent and Amendment No. 5 to Third Amended and Restated Credit Agreement

Signature Page

 

 

 

BANK OF THE WEST

 

 

By:               /s/ Adriana Collins                                          

Name:        Adriana Collins                                      

Title:          Director

    

 

Granite Construction Incorporated

Limited Consent and Amendment No. 5 to Third Amended and Restated Credit Agreement

Signature Page

 

 

 

U.S. BANK NATIONAL ASSOCIATION

 

 

By:              /s/ Edward B. Hanson                                         

Name:        Edward B. Hanson                                      

Title:          Senior Vice President

 

 

Granite Construction Incorporated

Limited Consent and Amendment No. 5 to Third Amended and Restated Credit Agreement

Signature Page

 

 

 

BMO HARRIS BANK, N.A.

 

 

By:              /s/ Michael Gift                                                

Name:        Michael Gift                                      

Title:          Managing Director

        

 

Granite Construction Incorporated

Limited Consent and Amendment No. 5 to Third Amended and Restated Credit Agreement

Signature Page

 

 

 

BBVA USA F/K/A COMPASS BANK

 

 

By:              /s/ Aaron Lloyd                                                  

Name:        Aaron Lloyd                                      

Title:          Director

 

 

Granite Construction Incorporated

Limited Consent and Amendment No. 5 to Third Amended and Restated Credit Agreement

Signature Page

 

 

 

HSBC BANK USA, NATIONAL ASSOCIATION

 

 

By:              /s/ Darren Santos                                                

Name:        Darren Santos                                      

Title:          Senior Vice President

 

 

Granite Construction Incorporated

Limited Consent and Amendment No. 5 to Third Amended and Restated Credit Agreement

Signature Page

 

 

 

TRUIST BANK (formerly known as

BRANCH BANKING AND TRUST COMPANY)

 

 

By:              /s/ Katherine Bass                                                     

Name:        Katherine Bass                                       

Title:          Director

 

 

Granite Construction Incorporated

Limited Consent and Amendment No. 5 to Third Amended and Restated Credit Agreement

Signature Page

 

 

 

COMERICA BANK

 

 

By:              /s/ Mark C. Skrzynski Jr.                                              

Name:        Mark C. Skrzynski Jr.                                      

Title:          Vice President

 

Granite Construction Incorporated

Limited Consent and Amendment No. 5 to Third Amended and Restated Credit Agreement

Signature Page

 

 

 

 

Annex A

 

 

 

 

See Attached.

 

 

 

 

Published CUSIP Numbers:

Deal: 387329AH8

Revolver: 387329AJ4

Term: 387329AK1

 

THIRD AMENDED AND RESTATED CREDIT AGREEMENT1

 

Dated as of May 31, 2018

among

 

 

 

 

GRANITE CONSTRUCTION INCORPORATED,

GRANITE CONSTRUCTION COMPANY and

GILC INCORPORATED,

as the Borrowers,

 

BANK OF AMERICA, N.A.,

as Administrative Agent, Collateral Agent,

Swing Line Lender and L/C Issuer,

 

BMO HARRIS BANK N.A.,

BBVA COMPASS,

and

HSBC BANK USA, N.A.,

as Co-Documentation Agents

 

BANK OF THE WEST and

U.S. BANK NATIONAL ASSOCIATION,

as Co-Syndication Agents

 

and the Other Lenders Party Hereto

 

BofA SECURITIES, INC.,

as Joint Lead Arranger and Sole Bookrunner

and

 

BANK OF THE WEST and

U.S. BANK NATIONAL ASSOCIATION,

as Joint Lead Arrangers

1 Conformed version to include Amendment No. 1 to Third Amended and Restated Credit Agreement dated as of July 29, 2019, Amendment No. 2 to Third Amended and Restated Credit Agreement dated as of October 29, 2019, Amendment No. 3 to Third Amended and Restated Credit Agreement dated as of March 26, 2020, Limited Consent and Amendment No. 4 to Third Amended and Restated Credit Agreement dated as of June 19, 2020 and Limited Consent and Amendment No. 5 to Third Amended and Restated Credit Agreement dated as of November 12, 2020.

 

 

 

 

TABLE OF CONTENTS

Pages

 

	ARTICLE I.	DEFINITIONS AND ACCOUNTING TERMS	1
	 	 	 	 
	1.01	 	Defined Terms|	1
	1.02	 	Other Interpretive Provisions  	41
	1.03	 	Accounting Terms	42
	1.04	 	Rounding	43
	1.05	 	Exchange Rates; Currency Equivalents	43
	1.06	 	Additional Alternative Currencies	43
	1.07	 	Change of Currency	44
	1.08	 	Times of Day    	44
	1.09	 	Letter of Credit Amounts	44
	1.10	 	Amendment and Restatement	45
	1.11	 	Interest Rates	46
	 	 	 	 
	ARTICLE II.	THE COMMITMENTS AND CREDIT EXTENSIONS	46
	 	 	 	 
	2.01	 	Loans 	46
	2.02	 	Borrowings, Conversions and Continuations of Revolving Credit Loans  	47
	2.03	 	Letters of Credit	49
	2.04	 	Swing Line Loans	59
	2.05	 	Prepayments	62
	2.06	 	Termination or Reduction of Commitments	63
	2.07	 	Repayment of Loans	64
	2.08	 	Interest	64
	2.09	 	Fees	65
	2.10	 	Computation of Interest and Fees; Retroactive Adjustments of Applicable Rate	65
	2.11	 	Evidence of Debt	66
	2.12	 	Payments Generally; Administrative Agent’s Clawback	67
	2.13	 	Sharing of Payments by Lenders	69
	2.14	 	Increase in Commitments	69
	2.15	 	Cash Collateral	73
	2.16	 	Defaulting Lenders	74
	 	 	 	 
	ARTICLE III.	TAXES, YIELD PROTECTION AND ILLEGALITY	77
	 	 	 	 
	3.01	 	Taxes	77
	3.02	 	Illegality	82
	3.03	 	Inability to Determine Rates	82
	3.04	 	Increased Costs; Reserves on Eurodollar Rate Loans	85
	3.05	 	Compensation for Losses	87
	3.06	 	Mitigation Obligations; Replacement of Lenders	87
	3.07	 	Survival	88
	 	 	 	 
	ARTICLE IV.	CONDITIONS PRECEDENT TO CREDIT EXTENSIONS	88
	 	 	 	 
	4.01	 	Conditions to Effectiveness and Initial Credit Extension	88

 

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	4.02	 	Conditions to all Credit Extensions	92
	 	 	 	 
	ARTICLE V.	REPRESENTATIONS AND WARRANTIES	93
	 	 	 	 
	5.01	 	Existence, Qualification and Power	93
	5.02	 	Authorization; No Contravention	93
	5.03	 	Governmental Authorization; Other Consents	94
	5.04	 	Binding Effect	94
	5.05	 	Financial Statements; No Material Adverse Effect	94
	5.06	 	Litigation	95
	5.07	 	No Default	95
	5.08	 	Ownership of Property; Liens	95
	5.09	 	Environmental Compliance	95
	5.10	 	Insurance	96
	5.11	 	Taxes	96
	5.12	 	ERISA Compliance	96
	5.13	 	Subsidiaries; Equity Interests	97
	5.14	 	Margin Regulations; Investment Company Act	97
	5.15	 	Disclosure	98
	5.16	 	Intellectual Property; Licenses, Etc	98
	5.17	 	Swap Contracts	98
	5.18	 	Labor Relations	98
	5.19	 	Solvency	98
	5.20	 	Taxpayer Identification Number	98
	5.21	 	Representations as to Foreign Obligors	99
	5.22	 	OFAC	99
	5.23	 	Security Instruments	100
	5.24	 	Anti-Corruption Laws	100
	5.25	 	Not an Affected Financial Institution	100
	5.26	 	Beneficial Ownership	100
	 	 	 	 
	ARTICLE VI.	AFFIRMATIVE COVENANTS	100
	 	 	 	 
	6.01	 	Financial Statements	100
	6.02	 	Certificates; Other Information	101
	6.03	 	Notices	103
	6.04	 	Payment of Obligations	104
	6.05	 	Preservation of Existence, Etc	104
	6.06	 	Maintenance of Properties	105
	6.07	 	Maintenance of Insurance	105
	6.08	 	Compliance with Laws	105
	6.09	 	Books and Records	105
	6.10	 	Inspection Rights	106
	6.11	 	Environmental Laws	106
	6.12	 	Use of Proceeds	106
	6.13	 	Anti-Corruption Laws	106
	6.14	 	New Material Subsidiaries; Additional Guarantors; After-Acquired Real Property; Release of Collateral	107

 

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	6.15	 	Appraisals	109
	 	 	 	 
	ARTICLE VII.	NEGATIVE COVENANTS	109
	 	 	 	 
	7.01	 	Liens	109
	7.02	 	Investments	112
	7.03	 	Indebtedness	114
	7.04	 	Fundamental Changes	117
	7.05	 	Dispositions	117
	7.06	 	Sanctions	118
	7.07	 	Restricted Payments	118
	7.08	 	Change in Nature of Business	120
	7.09	 	Transactions with Affiliates	120
	7.10	 	Burdensome Agreements	121
	7.11	 	Use of Proceeds	121
	7.12	 	Financial Covenants	122
	7.13	 	Anti-Corruption Laws	122
	 	 	 	 
	ARTICLE VIII.	EVENTS OF DEFAULT AND REMEDIES 	122
	 	 	 	 
	8.01	 	Events of Default	122
	8.02	 	Remedies Upon Event of Default	125
	8.03	 	Application of Funds	126
	 	 	 	 
	ARTICLE IX.	ADMINISTRATIVE AGENT 	127
	 	 	 	 
	9.01	 	Appointment and Authority 	127
	9.02	 	Rights as a Lender	127
	9.03	 	Exculpatory Provisions	127
	9.04	 	Reliance by Administrative Agent 	129
	9.05	 	Delegation of Duties	129
	9.06	 	Resignation of Administrative Agent  	129
	9.07	 	Non-Reliance on the Administrative Agent, the Arrangers and the Other Lenders	131
	9.08	 	No Other Duties, Etc 	132
	9.09	 	Administrative Agent May File Proofs of Claim 	132
	9.10	 	Collateral and Guaranty Matters	132
	9.11	 	Secured Cash Management Agreements, Secured Hedge Agreements, Secured Card Related Products Agreements and Secured Bilateral Letters of Credit	134
	9.12	 	Lender ERISA Status	135
	 	 	 	 
	ARTICLE X.	MISCELLANEOUS	136
	 	 	 	 
	10.01	 	Amendments, Etc 	136
	10.02	 	Notices; Effectiveness; Electronic Communication 	138
	10.03	 	No Waiver; Cumulative Remedies; Enforcement 	141
	10.04	 	Expenses; Indemnity; Damage Waiver 	141
	10.05	 	Payments Set Aside	144
	10.06	 	Successors and Assigns	144

 

iii

 

 

	10.07	 	Treatment of Certain Information; Confidentiality	149
	10.08	 	Right of Setoff 	150
	10.09	 	Interest Rate Limitation	151
	10.10	 	Counterparts; Integration; Effectiveness 	151
	10.11	 	Survival of Representations and Warranties    	151
	10.12	 	Severability	151
	10.13	 	Replacement of Lenders	152
	10.14	 	Governing Law; Jurisdiction; Etc 	152
	10.15	 	Arbitration and Waiver of Jury Trial  	153
	10.16	 	California Judicial Reference	155
	10.17	 	No Advisory or Fiduciary Responsibility	155
	10.18	 	Electronic Execution of Assignments and Certain Other Documents	156
	10.19	 	USA PATRIOT Act 	156
	10.20	 	Judgment Currency	156
	10.21	 	Keepwell	157
	10.22	 	Acknowledgement and Consent to Bail-In of Affected Financial Institutions	157
	10.23	 	Acknowledgement Regarding Any Supported QFCs	158

             

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	SCHEDULES	 	 
	 	 	 
	1.01(e)	 	Existing Letters of Credit
	1.01(g)	 	Guarantors
	2.01	 	Commitments and Applicable Percentages
	5.05(d)	 	Project Debt
	5.06	 	Litigation
	5.09	 	Environmental Matters
	5.13(a)	 	Subsidiaries and Other Equity Investments
	5.13(b)	 	Permitted Notes Guarantors
	5.16	 	Intellectual Property Matters
	7.01 	 	Existing Liens
	7.02(a)	 	Existing Investments
	7.02(b)	 	Investment Policy
	7.02(g)	 	Investments by any GLC Venture
	7.03	 	Existing Indebtedness
	7.03(m)(i)	 	Project Debt Outstanding
	7.09  	 	Transactions with Affiliates
	10.02	 	Administrative Agent’s Office; Certain Addresses for Notices
	 	 	 
	EXHIBITS	 	 
	 	Form of
	 	 	 
	A	 	Loan Notice
	B 	 	Swing Line Loan Notice
	C-1	 	Revolving Credit Note
	C-2 	 	Term Note
	D	 	Compliance Certificate
	E	 	Assignment and Assumption
	F	 	Guaranty
	G	 	Pledge Agreement
	H	 	Security Agreement
	I	 	List of Mortgaged Properties
	J	 	Permitted Notes Intercreditor Agreement
	K	 	U.S. Tax Compliance Certificates

     

v

 

 

 

THIRD AMENDED AND RESTATED CREDIT AGREEMENT

 

This THIRD AMENDED AND RESTATED CREDIT AGREEMENT (“Agreement”) is entered into as of May 31, 2018, among GRANITE CONSTRUCTION INCORPORATED, a Delaware corporation (the “Company” and a “Borrower”), GRANITE CONSTRUCTION COMPANY, a California corporation (“GCC” and a “Borrower”), GILC INCORPORATED, a California corporation (“GILC” and a “Borrower”, and together with Company and GCC, collectively, the “Borrowers”), each lender from time to time party hereto (collectively, the “Lenders” and individually, a “Lender”), and BANK OF AMERICA, N.A., as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer.

 

The Borrowers, the lenders party thereto (the “Existing Lenders”) and Bank of America, N.A., as administrative agent, are parties to that certain Second Amended and Restated Credit Agreement dated as of October 28, 2015 (as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Existing Credit Agreement”), pursuant to which such Existing Lenders originally agreed to provide the Borrowers with a revolving credit facility, including a swing line subfacility, multicurrency letter of credit subfacility, and term loan facility.

 

The Borrowers have requested that the Existing Credit Agreement be amended and restated in order to, among other things, extend the maturity date, provide for a revolving credit facility and a term loan facility and make certain other amendments to the Existing Credit Agreement (the “Restatement”), and the Lenders and the Administrative Agent are willing to do so on the terms and conditions set forth herein.

 

In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

 

ARTICLE I.  DEFINITIONS AND ACCOUNTING TERMS 

 

1.01    Defined Terms|. As used in this Agreement, the following terms shall have the meanings set forth below:

 

“80% Threshold” has the meaning set forth in the definition of “Material Subsidiary”.

 

“2019 Notes” means the Company’s 6.11% Series 2007-A Senior Notes due December 11, 2019 and any additional notes issued pursuant to the 2019 Notes Agreement.

 

“2019 Notes Agreement” means that certain Note Purchase Agreement dated as of December 12, 2007, among the Company, the purchasers of the Company’s Series 2007-A Senior Notes due December 11, 2019 party thereto, and the purchasers of additional notes from time to time party thereto.

 

“Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of the assets of a Person, or of any business or division of a Person (other than a Person that is a Subsidiary), (b) the acquisition of the capital stock, partnership interests, membership interests or equity of any Person (other than a Person that is a Subsidiary), whether or not causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person.

 

“Act” means USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).

 

1

 

 

“Adjustment” has the meaning set forth in Section 3.03(c).

 

“Administrative Agent” means Bank of America in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

 

“Administrative Agent’s Office” means, with respect to any currency, the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02 with respect to such currency, or such other address or account with respect to such currency as the Administrative Agent may from time to time notify to the Company and the Lenders.

 

“Administrative Questionnaire” means an Administrative Questionnaire in a form approved by the Administrative Agent.

 

“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.

 

“Affiliate” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

 

“Aggregate Commitments” means the Commitments of all the Lenders.

 

“Agreement” means this Third Amended and Restated Credit Agreement.

 

“Aircraft Security Agreement” means that certain Aircraft Security Agreement dated as of May 18, 2011 executed by GILC in favor of the Administrative Agent and for the benefit of the Secured Parties.

 

“Alternative Currency” means each of Canadian Dollars, Euro, Mexican Pesos, Sterling, Yen and each other currency (other than Dollars) that is approved in accordance with Section 1.06.

 

“Alternative Currency Equivalent” means, at any time, with respect to any amount denominated in Dollars, the equivalent amount thereof in the applicable Alternative Currency as determined by the Administrative Agent or the L/C Issuer, as the case may be, at such time on the basis of the Spot Rate (determined in respect of the most recent Revaluation Date) for the purchase of such Alternative Currency with Dollars.

 

“Amendment No. 3 Effective Date” means March 26, 2020.

 

2

 

 

“Applicable Percentage” means (a) in respect of the Term Facility, with respect to any Term Lender at any time, the percentage (carried out to the ninth decimal place) of the Term Facility represented by (i) on or prior to the Closing Date, such Term Lender’s Term Commitment at such time, and (ii) thereafter, the principal amount of such Term Lender’s Term Loans at such time plus such Term Lender’s undrawn Term Commitment (if any) at such time, and (b) in respect of the Revolving Credit Facility, with respect to any Revolving Credit Lender at any time, the percentage (carried out to the ninth decimal place) of the Revolving Credit Facility represented by such Revolving Credit Lender’s Revolving Credit Commitment at such time, subject to adjustment as provided in Section 2.16. If the commitment of each Revolving Credit Lender to make Revolving Credit Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02, or if the Revolving Credit Commitments have expired, then the Applicable Percentage of each Revolving Credit Lender in respect of the Revolving Credit Facility shall be determined based on the Applicable Percentage of such Revolving Credit Lender in respect of the Revolving Credit Facility most recently in effect, giving effect to any subsequent assignments. The initial Applicable Percentage of each Lender in respect of each Facility is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.

 

“Applicable Rate” means (a) from the Amendment No. 3 Effective Date to the first Business Day immediately following the date of delivery (the “Delivery Date”) of the Compliance Certificate for the fiscal quarter ending March 31, 2021, (i) for Eurodollar Rate Loans and for Letter of Credit Fees for Financial Letters of Credit, 3.00% per annum, (ii) for Base Rate Loans, 2.00% per annum, (iii) for the commitment fee pursuant to Section 2.10(a), 0.40% per annum and (iv) for Letter of Credit Fees for Performance Letters of Credit, 1.35% per annum, and (b) from the first Business Day immediately following the Delivery Date and from time to time thereafter, the following percentages per annum, based upon the Consolidated Leverage Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to Section 6.02(b):

 

	
			Applicable Rate for Term Facility and Revolving Credit Facility

			 

			
	
			Pricing 

			Level

				
			Consolidated 

			Leverage Ratio

				
			Commitment

			Fee

				
			Applicable Rate for

			Eurodollar Loans

			and Financial Letter

			of Credit Fee

				
			Applicable Rate for

			Performance Letter

			of Credit Fee

				
			Applicable Rate for 

			Base Rate Loans

			
	
			1

				
			Less than 0.50 to 1.00

				
			0.175%

				
			1.000%

				
			0.667%

				
			0.000%

			
	
			2

				
			Greater than or equal to 0.50 to 1.00 but less than 1.00 to 1.00

				
			0.200%

				
			1.250%

				
			0.833%

				
			0.250%

			
	
			3

				
			Greater than or equal to 1.00 to 1.00 but less than 1.50 to 1.00

				
			0.250%

				
			1.500%

				
			1.000%

				
			0.500%

			
	
			4

				
			Greater than or equal to 1.50 to 1.00 but less than 2.00 to 1.00

				
			0.300%

				
			1.625%

				
			1.050%

				
			0.625%

			
	
			5

				
			Greater than or equal to 2.00 to 1.00 but less than 2.50 to 1.00

				
			0.350%

				
			1.750%

				
			1.200%

				
			0.750%

			
	
			6

				
			Greater than or equal to 2.50 to 1.00

				
			0.400%

				
			2.000%

				
			1.350%

				
			1.000%

			

 

3

 

 

Any increase or decrease in the Applicable Rate resulting from a change in the Consolidated Leverage Ratio shall become effective as of the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 6.02(b); provided, however, that if a Compliance Certificate is not delivered when due in accordance with such Section, then, upon the request of the Required Lenders, Pricing Level 6 shall apply as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered and shall remain in effect until the date on which such Compliance Certificate is delivered.

 

Notwithstanding anything to the contrary contained in this definition, the determination of the Applicable Rate for any period shall be subject to the provisions of Section 2.10(b).

 

“Applicable Revolving Credit Percentage” means with respect to any Revolving Credit Lender at any time, such Revolving Credit Lender’s Applicable Percentage in respect of the Revolving Credit Facility at such time.

 

“Appropriate Lender” means, at any time, (a) with respect to any of the Term Facility or the Revolving Credit Facility, a Lender that has a Commitment with respect to such Facility or holds a Term Loan or a Revolving Credit Loan, respectively, at such time, (b) with respect to the Letter of Credit Sublimit, (i) the L/C Issuer and (ii) if any Letters of Credit have been issued pursuant to Section 2.03(a), the Revolving Credit Lenders and (c) with respect to the Swing Line Sublimit, (i) the Swing Line Lender and (ii) if any Swing Line Loans are outstanding pursuant to Section 2.04(a), the Revolving Credit Lenders.

 

“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

 

“Arrangers” means BofA Securities, Inc. and its successors, in its capacity as a joint lead arranger and sole bookrunner, and Bank of The West, and U.S. Bank National Association, and their respective successors, each in its capacity as a joint lead arranger.

 

4

 

 

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 10.06(b)), and accepted by the Administrative Agent, in substantially the form of Exhibit E or any other form (including electronic documentation generated by MarkitClear or other electronic platform) approved by the Administrative Agent.

 

“Attributable Indebtedness” means, on any date, (a) in respect of any capital lease of any Person, the capitalized amount thereof that would appear as a liability on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear as a liability on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a capital lease.

 

“Audited Financial Statements” means the audited consolidated balance sheet of the Company and its Subsidiaries for the fiscal year ended December 31, 2017, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year of the Company and its Subsidiaries, including the notes thereto.

 

“Availability Period” means, in respect of the Revolving Credit Facility, the period from and including the Closing Date to the earliest of (a) the Maturity Date, (b) the date of termination of the Revolving Credit Commitments pursuant to Section 2.06, and (c) the date of termination of the commitment of each Revolving Credit Lender to make Revolving Credit Loans and of the obligation of the L/C Issuer to make L/C Credit Extensions pursuant to Section 8.02.

 

“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.

 

“Bail-In Legislation” means, (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, rule, regulation or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).

 

“Bank of America” means Bank of America, N.A. and its successors.

 

“Bankruptcy Code” means the federal Bankruptcy Reform Act of 1978 (11 U.S.C. §101 et seq.).

 

“Base Rate” means for any day a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 1/2 of 1%, (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate,” and (c) the Eurodollar Rate plus 1.00%. The “prime rate” is a rate set by Bank of America based upon various factors including Bank of America’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such prime rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. If the Base Rate shall be less than zero, such rate shall be deemed zero for purposes of this Agreement. If the Base Rate is being used as an alternate rate of interest pursuant to Section 3.03 hereof, then the Base Rate shall be the greater of clauses (a) and (b) above and shall be determined without reference to clause (c) above.

 

5

 

 

“Base Rate Loan” means a Loan that bears interest based on the Base Rate.

 

“Base Rate Revolving Loan” means a Revolving Credit Loan that is a Base Rate Loan.

 

“Beneficial Ownership Certification” means a certification regarding beneficial ownership required by the Beneficial Ownership Regulation.

 

“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.

 

“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in Section 4975 of the Code or (c) any Person whose assets include (for purposes of ERISA Section 3(42) or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan”.

 

“Borrowers” has the meaning specified in the introductory paragraph hereto. All singular references to the Borrower shall mean any Borrower, each Borrower, the Borrower that has received a Credit Extension hereunder or all of the Borrowers, as the context may require.

 

“Borrower Materials” has the meaning specified in Section 6.02.

 

“Borrowing” means a Revolving Credit Borrowing, a Swing Line Borrowing or a Term Borrowing, as the context may require.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agent’s Office is located and, if such day relates to any Eurodollar Rate Loan, means any such day that is also a London Banking Day.

 

“Canadian Dollar” means the lawful currency of Canada.

 

“Card Related Products Agreement” means any agreement to provide credit, purchasing, debit and other credit related card arrangements.

 

“Card Related Products Bank” means any Person that, (a) at the time it enters into a Card Related Products Agreement, is a Lender or an Affiliate of a Lender that has executed and delivered to the Administrative Agent a letter of undertaking in the form approved by the Administrative Agent, or (b) is party to a Card Related Products Agreement on the date that such Person or its Affiliate becomes a Lender, in each case in its capacity as a party to such Card Related Products Agreement.

 

6

 

 

“Cash Collateralize” means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of one or more of the L/C Issuer or the Lenders, as collateral for L/C Obligations or obligations of the Lenders to fund participations in respect of L/C Obligations, cash or deposit account balances or, if the Administrative Agent and the L/C Issuer shall agree in their sole discretion, other credit support, in each case pursuant to documentation in form and substance satisfactory to the Administrative Agent and the L/C Issuer. “Cash Collateral” shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.

 

“Cash Management Agreement” means any agreement that is not prohibited by the terms hereof to provide cash management services, including treasury, depository, overdraft, electronic funds transfer and other cash management arrangements.

 

“Cash Management Bank” means any Person in its capacity as a party to a Cash Management Agreement that, (a) at the time it enters into a Cash Management Agreement with a Loan Party, is a Lender or an Affiliate of a Lender that has executed and delivered to the Administrative Agent a letter of undertaking in the form approved by the Administrative Agent, or (b) at the time it (or its Affiliate) becomes a Lender, is a party to a Cash Management Agreement with a Loan Party, in each case in its capacity as a party to such Cash Management Agreement (even if such Person ceases to be a Lender or such Person’s Affiliate ceased to be a Lender); provided, however, that for any of the foregoing to be included as a “Secured Cash Management Agreement” on any date of determination by the Administrative Agent, the applicable Cash Management Bank (other than the Administrative Agent or an Affiliate of the Administrative Agent) must have delivered a written notice to the Administrative Agent prior to such date of determination.

 

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

 

“Change of Control” means an event or series of events by which:

 

(a)    any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of 35% or more of the equity securities of the Company entitled to vote for members of the board of directors or equivalent governing body of the Company on a fully-diluted basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option right); or

 

7

 

 

(b)    during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Company cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body.

 

“Closing Date” means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 10.01.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Collateral” means, collectively, all property of each Borrower, each Guarantor or any other Person in which the Collateral Agent or any Lender is granted a Lien under any Security Instrument as security for all or any portion of the Obligations. Notwithstanding anything to the contrary contained herein or in any other Loan Document, the Collateral shall not include any property that would otherwise constitute a general intangible to the extent that the grant of a security interest in such property is prohibited by any requirement of Law of a Governmental Authority, requires a consent not obtained from any Governmental Authority pursuant to such requirement of Law or is prohibited by, or constitutes a breach or default under or results in the termination of or requires any consent not obtained under, any contract, license, permit, agreement, instrument or other document evidencing or giving rise to such property or, in the case of any investment property, any applicable shareholder, joint venture or similar agreement, except in each case to the extent that such requirement of Law or the term in such contract, license, agreement, instrument or other document or shareholder, joint venture or similar agreement providing for such prohibition, breach, default or termination or requiring such consent is ineffective under applicable Law; provided that this exclusion shall not apply to capital stock in Joint Ventures or Subsidiaries acquired or created after the Closing Date unless after reasonable best efforts the relevant Borrower or Guarantor is unable either to avoid the conditions set forth in this exclusion or to obtain consents, waivers or approvals thereof.

 

“Collateral Agent” means Bank of America in its capacity as Collateral Agent under the Loan Documents pursuant to Section 9.10, or any successor collateral agent.

 

“Commitment” means a Term Commitment or a Revolving Credit Commitment, as the context may require.

 

8

 

 

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.

 

“Common Stock” means the common stock, par value $0.01 per share, of the Company.

 

“Company” has the meaning specified in the introductory paragraph hereto.

 

“Compliance Certificate” means a certificate substantially in the form of Exhibit D.

 

“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

 

“Consolidated EBITDA” means, for any Subject Period, for the Company and its Subsidiaries on a consolidated basis (excluding, however, any Project Debt Entity), an amount equal to Consolidated Net Income for such period plus Consolidated Tax Expenses for such period and the following to the extent deducted in calculating such Consolidated Net Income: (a) Consolidated Interest Expense for such period, (b) depreciation and amortization expense for such period, (c) any non-cash charges for such period including, but not limited to, (i) non-cash expenses related to stock and equity options, (ii) non-cash expenses related to an Acquisition, and (iii) non-cash impairment charges (excluding any such non-cash charges that represent the accrual of, or reserve for, anticipated cash charges in any future period), (d) one-time, non-recurring cash fees and expenses, not to exceed $10,000,000 for all (A) Acquisitions, related to cost savings, restructuring, severance, integration, or consolidation related to an Acquisition, and (B) incurrences of Permitted Convertible Debt and Permitted Call Spread Transactions, and, with respect to clauses (A) and (B) to include without limitation advisory, legal, financing, and consulting fees related to an Acquisition or the incurrence of Permitted Convertible Debt and Permitted Call Spread Transactions, incurred during such Subject Period in connection with the signing a definitive agreement or an offering, as applicable, and (e) any write-downs associated with the Tappan Zee, I35, K-Bridge, AZ-202 and PA500 construction projects for the fiscal quarters ending December 31, 2019 (and not to exceed, in the aggregate, $184,000,000 for such Subject Period), March 31, 2020 (and not to exceed, in the aggregate, $173,000,000 for such Subject Period), June 30, 2020 (and not to exceed, in the aggregate, $89,000,000 for such Subject Period) and September 30, 2020 (and not to exceed, in the aggregate, $36,000,000 for such Subject Period); provided that all components of Consolidated EBITDA for such period shall include or exclude, as the case may be, without duplication, on the same basis and in a manner consistent with the foregoing provisions of this definition, such components of Consolidated EBITDA attributable to any Investment permitted pursuant to Section 7.02(n) other than Construction JV Investments arising in the Ordinary Course of Business consummated during such period or any business or assets that have been Disposed of after the first day of such period and prior to the end of such period, in each case as determined on a pro forma basis, in accordance with Regulation S-X promulgated by the SEC.

 

“Consolidated Fixed Charge Coverage Ratio” means, as of any date of determination, the ratio of (a) Consolidated EBITDA, measured for the Subject Period ending on such date, to (b) Consolidated Fixed Charges, measured for the Subject Period ending on such date.

 

9

 

 

“Consolidated Fixed Charges” means, for any Subject Period, for the Company and its Subsidiaries on a consolidated basis, the sum of (a) Consolidated Interest Expenses paid in cash, plus (b) the aggregate amount of Federal, state, local and foreign taxes paid in cash, plus (c) the aggregate principal amount of all regularly scheduled principal payments of Consolidated Funded Indebtedness (for the avoidance of doubt, excluding all payments in respect of revolving Indebtedness and prepayments in respect of all Indebtedness), plus (d) the lesser amount of (i) the aggregate amount of all capital expenditures and (ii) $37,500,000, plus (e) the aggregate amount of all Restricted Payments made in cash.

 

“Consolidated Funded Indebtedness” means, as of any date of determination, for the Company and its Subsidiaries on a consolidated basis, the sum of (a) the outstanding principal amount of all obligations, whether current or long-term, for borrowed money (including Obligations hereunder) and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, with or without recourse, but not including Project Debt, plus (b) Attributable Indebtedness in respect of capital leases, Synthetic Lease Obligations and sale-leaseback transactions, but not including Project Debt, plus (c) without duplication, all Guarantee Obligations with respect to Indebtedness of the types specified in subsections (a) and (b) above of Persons other than any Borrower or any Subsidiary.

 

“Consolidated Interest Coverage Ratio” means, as of any date of determination, the ratio of (a) Consolidated EBITDA, measured for the Subject Period ending on such date, to (b) Consolidated Interest Expense, measured for the Subject Period ending on such date.

 

“Consolidated Interest Expense” means, for any Subject Period, for the Company and its Subsidiaries on a consolidated basis, the sum of (a) all interest, premium payments, fees, charges and related expenses of the Company and its Subsidiaries in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, plus (b) the portion of rent expense of the Company and its Subsidiaries with respect to such period under capital leases that is treated as interest in accordance with GAAP and the portion of Synthetic Lease Obligations payable by the Company and its Subsidiaries with respect to such period that would be treated as interest in accordance with GAAP if such lease were treated as a capital lease under GAAP; excluding for purposes of clause (a) and (b) hereof, such amounts in respect of Project Debt.

 

“Consolidated Leverage Ratio” means, as of any date of determination, the ratio of (a) Consolidated Funded Indebtedness as of such date to (b) Consolidated EBITDA, measured for the Subject Period ending on or most recently ended prior to such date.

 

“Consolidated Net Income” means, for any Subject Period, for the Company and its Subsidiaries on a consolidated basis, the net income of the Company and its Subsidiaries from continuing operations, excluding extraordinary items and excluding gains and losses from Dispositions for that period; not including, however, net income in respect of or attributable to any Project Debt Entity unless and until such net income has been received by a Borrower or Subsidiary (other than a Project Debt Entity) in the form of dividends or similar distributions.

 

10

 

 

“Consolidated Stockholders’ Equity” means, as of any date of determination for the Company and its Subsidiaries (excluding Project Debt Entities) on a consolidated basis, stockholders’ equity as of that date, determined in accordance with GAAP.

 

“Consolidated Tangible Net Worth” means, as of any date of determination, the amount equal to Consolidated Stockholders’ Equity on that date minus the Intangible Assets of the Company and its Subsidiaries (excluding Project Debt Entities) (determined on a consolidated basis in accordance with GAAP) on that date.

 

“Consolidated Tax Expense” means, for any period, all provisions for taxes based on Consolidated Net Income (including, without limitation, any additions to such taxes, and any penalties and interest with respect thereto), all as determined for the Company and its Subsidiaries on a consolidated basis in accordance with GAAP.

 

“Construction JV” means any Joint Venture entered into by the Company or any of its Subsidiaries, initially, with any one or more other Persons in the Ordinary Course of Business solely for purposes of undertaking or completing a construction project; provided that a Construction JV shall not be deemed to cease being a Construction JV after the withdrawal or buy-out of such other Person(s) from the Joint Venture or the purchase, acquisition or redemption of such other Person’s interest in such Joint Venture.

 

“Construction JV Investments” means Investments in any Construction JV arising upon any initial capital contribution to or subsequent capital contribution in such Construction JV, and participated in ratably by all then existing co-joint venturers having an interest in such Construction JV, solely for purposes of undertaking or completing a construction project and Investments arising in connection with the purchase, acquisition, redemption or buy-out of another co-joint venturer’s interest in such Construction JV; provided Construction JV Investments shall not include the incurrence, directly or indirectly, of any Guarantee Obligation by the Company or any of its Subsidiaries.

 

“Contingent Acquisition Obligation” means those contingent obligations (including, without limitation, purchase price adjustments, indemnification obligations and “earnouts”) of a Borrower or Subsidiary incurred in favor of a seller (or other third party entitled thereto) under or with respect to any Acquisition or Investment permitted hereunder.

 

“Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

 

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

 

“Covered Entity” has the meaning specified in Section 10.23.

 

“Covered Party” has the meaning specified in Section 10.23.

 

11

 

 

“Credit Extension” means each of the following: (a) a Borrowing and (b) an L/C Credit Extension.

 

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect.

 

“Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

 

“Default Rate” means (a) when used with respect to Obligations other than Letter of Credit Fees, an interest rate equal to (i) the Base Rate plus (ii) the Applicable Rate, if any, applicable to Base Rate Loans plus (iii) 2% per annum; provided, however, that with respect to a Eurodollar Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate) otherwise applicable to such Loan plus 2% per annum, and (b) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Rate plus 2% per annum.

 

“Defaulting Lender” means, subject to Section 2.16(b), any Lender that (a) has failed to (i) fund all or any portion of its Loans within two Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Company in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to the Administrative Agent, the L/C Issuer, the Swing Line Lender or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit or Swing Line Loans) within two Business Days of the date when due, (b) has notified the Company, the Administrative Agent, the L/C Issuer or the Swing Line Lender in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three Business Days after written request by the Administrative Agent or the Company, to confirm in writing to the Administrative Agent and the Company that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Company), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity, or (iii) become the subject of a Bail-In Action; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above, and of the effective date of such status, shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.16(b)) as of the date established therefor by the Administrative Agent in a written notice of such determination, which shall be delivered by the Administrative Agent to the Company, the L/C Issuer, the Swing Line Lender and each other Lender promptly following such determination.

 

12

 

 

“Designated Jurisdiction” means any country or territory to the extent that such country or territory itself is the subject of any Sanction.

 

“Direct Foreign Subsidiary” means a Foreign Subsidiary a majority of whose Voting Securities, or a majority of whose Subsidiary Securities, are owned by any Borrower or a Domestic Subsidiary.

 

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (in one transaction or in a series of transactions and whether effected pursuant to a Division or otherwise) of any property by any Person (including any sale and leaseback transaction and any issuance of equity interests by a Subsidiary of such Person), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith; provided that the term “Disposition” shall not apply to or include any lease of real property or any unwinding of a Permitted Call Spread Transaction.

 

“Division” means the division of the assets, liabilities and/or obligations of a Person (the “Dividing Person”) among two or more Persons (whether pursuant to a “plan of division” or similar arrangement), which may or may not include the Dividing Person and pursuant to which the Dividing Person may or may not survive.

 

“Dollar” and “$” mean lawful money of the United States.

 

“Dollar Equivalent” means, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect to any amount denominated in any Alternative Currency, the equivalent amount thereof in Dollars as determined by the Administrative Agent or the L/C Issuer, as the case may be, at such time on the basis of the Spot Rate (determined in respect of the most recent Revaluation Date) for the purchase of Dollars with such Alternative Currency.

 

“Domestic Subsidiary” means any Subsidiary that is organized under the laws of any political subdivision of the United States, other than any such Subsidiary that is treated as a disregarded entity for U.S. federal income tax purposes if substantially all of the assets of such Subsidiary consist of capital stock of one or more direct or indirect Subsidiaries organized under the laws of any jurisdiction other than the United States or any political subdivision thereof.

 

13

 

 

“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

 

“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

 

“EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

 

“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 10.06(b)(iii) and (v) (subject to such consents, if any, as may be required under Section 10.06(b)(iii)).

 

“Environmental Claims” means all claims, however asserted, by any Governmental Authority or any other Person alleging potential liability or responsibility for violation of any Environmental Law or for release or injury to the environment or threat to public health, personal injury (including sickness, disease or death), property damage, natural resources damage, or otherwise alleging liability or responsibility for damages (punitive or otherwise), cleanup, removal, remedial or response costs, restitution, civil or criminal penalties, injunctive relief, or other type of relief, resulting from or based upon (a) the presence, placement, discharge, emission or release (including intentional and unintentional, negligent and non-negligent, sudden or non-sudden, accidental or non-accidental placement, spills, leaks, discharges, emissions or releases) of any Hazardous Material at, in or from property, whether or not owned by the Company or any of its Subsidiaries, or (b) any other circumstances forming the basis of any violation, or alleged violation, of any Environmental Law.

 

“Environmental Laws” means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.

 

“Environmental Permits” has the meaning set forth in Section 5.09(b).

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

 

14

 

 

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan that requires the Company or an ERISA Affiliate to provide notice to the PBGC (other than such an event as to which the requirement of 30 days’ notice has been waived by the PBGC); (b) the withdrawal of the Company or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which such entity was a “substantial employer” as defined in Section 4001(a)(2) of ERISA or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization, in either case, within the meaning of Title IV of ERISA; (d) the filing of a notice of intent to terminate, or the treatment of a Pension Plan amendment as a termination, under Section 4041 or 4041A of ERISA; (e) the institution by the PBGC of proceedings to terminate a Pension Plan; (f) any event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (g) the determination that any Pension Plan is considered an at-risk plan or a plan in endangered or critical status within the meaning of Sections 430, 431 and 432 of the Code or Sections 303, 304 and 305 of ERISA; or (h) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate.

 

“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

 

“Euro” and “€” mean the single currency of the Participating Member States.

 

“Eurodollar Rate” means:

 

(a)    for any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the London Interbank Offered Rate as administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) for U.S. Dollars for a period equal in length to such Interest Period) (“LIBOR”) as published on the applicable Bloomberg screen page (or such other commercially available source providing such quotations as may be designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period;

 

(b)    for any interest calculation with respect to a Base Rate Loan on any date, the rate per annum equal to LIBOR, at or about 11:00 a.m., London time, determined two Business Days prior to such date for Dollar deposits with a term of one month commencing that day; and

 

(c)    if the Eurodollar Rate shall be less than 0.75%, such rate shall be deemed 0.75%, for purposes of this Agreement.

 

“Eurodollar Rate Loan” means a Revolving Credit Loan or a Term Loan that bears interest at a rate based on clause (a) of the definition of “Eurodollar Rate.”

 

“Event of Default” has the meaning specified in Section 8.01.

 

15

 

 

“Excluded Swap Obligation” means, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guaranty of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any Guaranty thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act (determined after giving effect to any “keepwell, support or other agreement” for the benefit of such Guarantor and any and all guarantees of such Guarantor’s Swap Obligations by other Loan Parties) at the time the Guaranty of such Guarantor, or a grant by such Guarantor of a security interest, becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guaranty or security interest is or becomes excluded in accordance with the first sentence of this definition.

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to any Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its Lending Office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Company under Section 10.13) or (ii) such Lender changes its Lending Office, except in each case to the extent that, pursuant to Section 3.01(a)(ii) or (c), amounts with respect to such Taxes were payable either to such Lender's assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its Lending Office, (c) Taxes attributable to such Recipient’s failure to comply with Section 3.01(e) and (d) any U.S. federal withholding Taxes imposed pursuant to FATCA.

 

“Existing Credit Agreement” has the meaning specified in the recitals hereto.

 

“Existing Lenders” has the meaning specified in the recitals hereto.

 

“Existing Letters of Credit” means those letters of credit outstanding immediately prior to the effectiveness of this Agreement, as more particularly described on Schedule 1.01(e).

 

“Facility” means the Term Facility or the Revolving Credit Facility, as the context may require.

 

16

 

 

“Facility Termination Date” means the date as of which all of the following shall have occurred: (a) the Aggregate Commitments have been terminated in full, (b) all Obligations have been paid in full, other than (i) contingent indemnification obligations, (ii) the undrawn portion of Letters of Credit and (iii) all fees relating to any Letters of Credit accruing after such date (which fees shall be payable solely for the account of the L/C Issuer and shall be computed (based on interest rates and the Applicable Rate then in effect) on such undrawn amounts to the respective expiry dates of the Letters of Credit), in each case as have been fully Cash Collateralized or as to which other arrangements with respect thereto satisfactory to the Administrative Agent and the L/C Issuer shall have been made, (c) the Commitments of all Lenders, if any, shall have terminated or expired, (d) the obligations and liabilities of the Borrowers and each other Loan Party under all Secured Hedge Agreements, Secured Cash Management Agreements and Secured Bilateral Letters of Credit shall have been fully, finally and irrevocably paid and satisfied in full and the Secured Hedge Agreements, Secured Cash Management Agreements and Secured Bilateral Letters of Credit shall have expired or been terminated, or other arrangements satisfactory to the applicable Cash Management Bank, Hedge Bank or LOC Bank shall have been made with respect thereto, (e) the obligations and liabilities of the Borrowers and each other Loan Party under all Secured Card Related Products Agreements shall have been fully, finally and irrevocably paid and satisfied in full and the Secured Card Related Products Agreements shall have expired or been terminated, or other arrangements satisfactory to the applicable Card Related Products Bank shall have been made with respect thereto, and (f) each Guarantor shall have fully, finally and irrevocably paid and satisfied in full its respective obligations and liabilities arising under the Loan Documents (except for future obligations consisting of, or arising out of, continuing indemnities and other contingent Obligations of the Borrowers or any Loan Party that may be owing to any Related Party of the Administrative Agent or any Lender pursuant to the Loan Documents and expressly survive termination of this Agreement).

 

“FASB ASC” means the Accounting Standards Codification of the Financial Accounting Standards Board.

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471 (b) (1) of the Code.

 

“Federal Funds Rate” means, for any day, the rate per annum calculated by the Federal Reserve Bank of New York based on such day’s federal funds transactions by depository institutions (as determined in such manner as the Federal Reserve Bank of New York shall set forth on its public website from time to time) and published on the next succeeding Business Day by the Federal Reserve Bank of New York as the federal funds effective rate; provided that if the Federal Funds Rate as so determined would be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

 

“Fee Letter” means those certain separate letter agreements, dated March 23, 2018, among the Company, the Administrative Agent and the Arrangers as applicable.

 

“Financial Letter of Credit” means any Letter of Credit that is a “financial standby letter of credit” as set forth in applicable Laws promulgated from time to time by the FRB.

 

“Financial Letter of Credit Sublimit” means an amount equal to $50,000,000. The Financial Letter of Credit Sublimit is part of, and not in addition to, the Letter of Credit Sublimit.

 

17

 

 

“Foreign Lender” means (a) if any Borrower is a U.S. Person, a Lender that is not a U.S. Person, and (b) if any Borrower is not a U.S. Person, a Lender that is resident or organized under the laws of a jurisdiction other than that in which such Borrower is resident for tax purposes. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

 

“Foreign Obligor” means a Loan Party that is a Foreign Subsidiary.

 

“Foreign Subsidiary” means any Subsidiary other than a Domestic Subsidiary.

 

“FRB” means the Board of Governors of the Federal Reserve System of the United States.

 

“Fronting Exposure” means, at any time there is a Defaulting Lender, (a) with respect to the L/C Issuer, such Defaulting Lender’s Applicable Percentage of the outstanding L/C Obligations other than L/C Obligations as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof, and (b) with respect to the Swing Line Lender, such Defaulting Lender’s Applicable Percentage of Swing Line Loans other than Swing Line Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders in accordance with the terms hereof.

 

“Fund” means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its activities.

 

“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.

 

“GLC Venture” means any Joint Venture, now or hereafter formed by the Company or any of its Subsidiaries with any other Person in the Ordinary Course of Business of the Company or such Subsidiary for the purpose of engaging in the business of real estate development and/or Disposition of real estate or interests in real estate or entities owning real estate; provided that a GLC Venture shall not be deemed to cease being a GLC Venture after the withdrawal or buy-out of such other Person(s) from the Joint Venture or the purchase, acquisition or redemption of such other Person’s interest in such Joint Venture.

 

“Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

 

18

 

 

“Guarantee Obligation” means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien). The amount of any Guarantee Obligation of any guaranteeing Person shall be deemed to be the lower of (x) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (y) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing Person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing Person’s maximum reasonably anticipated liability in respect thereof as determined by the Company in good faith.

 

“Guarantor Assessment Date” means each of (a) the date on which the Company delivers or is obligated to deliver to the Administrative Agent financial statements pursuant to Section 6.01(a) or (b), (b) the date on which a Borrower consummates any Acquisition of all or substantially all of the assets or capital stock of another Person, or acquires or creates any new or additional Subsidiary, (c) the date on which any Subsidiary becomes a Permitted Notes Guarantor, (d) the date on which a Borrower sells, transfers, divests or otherwise Disposes of any Subsidiary or all or substantially of the assets of any Subsidiary, and (e) with respect to Target and its Subsidiaries, the Indenture Termination Date.

 

“Guarantors” means, collectively, (a) the Company, (b) all of the Subsidiaries listed on Schedule 1.01(g), together with all other Persons who, following the Closing Date, execute and deliver a guaranty or guaranty joinder or supplement pursuant to Section 6.14, and (c) with respect to (i) Secured Obligations owing by any Loan Party under any Secured Hedge Agreement, Secured Cash Management Agreement or Secured Bilateral Letter of Credit and (ii) the payment and performance by each Specified Loan Party of its obligations under its Guaranty with respect to all Swap Obligations, each Borrower.

 

“Guaranty” means that certain Third Amended and Restated Guaranty Agreement dated as of the Closing Date executed by the Guarantors in favor of the Administrative Agent and for the benefit of the Secured Bank Creditors, substantially in the form attached as Exhibit F hereto and reasonably satisfactory to Administrative Agent, as supplemented from time to time by the execution and delivery of any Guaranty Joinder Agreements executed and delivered pursuant to Section 6.14.

 

19

 

 

“Guaranty Joinder Agreement” means each Guaranty Joinder Agreement, substantially in the form thereof attached to the Guaranty, executed and delivered by a Subsidiary to Administrative Agent pursuant to Section 6.14.

 

“Hazardous Materials” means, collectively, as of any date: (a) any petroleum or petroleum products, flammable explosives, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, and transformers or other equipment that contain dielectric fluid containing polychlorinated biphenyls (PCB’s); (b) any chemicals or other materials or substances which as of such date are defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants,” “contaminants,” “infectious wastes,” “pollutants” or words of similar import under any Environmental Law; and (c) any other chemical or other material or substance, exposure to which or use of which as of such date is prohibited, limited or regulated under any Environmental Law.

 

“Hedge Bank” means any Person that (a) at the time that it enters into any Swap Contract not prohibited by the terms of this Agreement, is a Lender or an Affiliate of a Lender that has executed and delivered to the Administrative Agent a letter of undertaking in the form approved by the Administrative Agent, or (b) is party to an interest rate Swap Contract on the date that such Person or its Affiliate becomes a Lender, in each case in such Person’s capacity as a party to such Swap Contract.

 

“Honor Date” has the meaning specified in Section 2.03(c)(i).         

 

“Impacted Loans” has the meaning assigned to such term in Section 3.03(a).

 

“Incorporated Covenants” has the meaning specified in Section 2.14(i).

 

“Increase Effective Date” has the meaning specified in Section 2.14(a).

 

“Increase Joinder” has the meaning specified in Section 2.14(e).

 

“Incremental Commitments” means Incremental Revolving Commitments and/or the Incremental Term Commitments.

 

“Incremental Revolving Commitment” has the meaning specified in Section 2.14(a).

 

“Incremental Term Commitments” has the meaning specified in Section 2.14(a).

 

“Incremental Term Loan Maturity Date” has the meaning specified in Section 2.14(e).

 

“Incremental Term Loans” means any loans made pursuant to any Incremental Term Commitments.

 

“Indebtedness” means, as to any Person at a particular time, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

 

(a)    all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

 

20

 

 

(b)    all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), reimbursement agreements, bankers’ acceptances, bank guaranties, surety bonds and similar instruments (in each case, whether or not such obligations are contingent or absolute); provided that the amount of any such contingent obligation permitted under this clause (b) shall be deemed to be equal to the maximum reasonably anticipated liability in respect thereof;

 

(c)    net obligations under any Swap Contract in an amount equal to the Swap Termination Value thereof;

 

(d)    all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the Ordinary Course of Business);

 

(e)    indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

 

(f)    capital leases and Synthetic Lease Obligations; and

 

(g)    all Guarantee Obligations of such Person in respect of any of the foregoing.

 

For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any Joint Venture (other than a Joint Venture that is itself a corporation or limited liability company) in which such Person is a general partner or joint venturer, unless such Indebtedness is (i) expressly made non-recourse to such Person and to such Person’s assets (subject only to customary exceptions acceptable to the Required Lenders) or (ii) Project Debt. The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date. The amount of any capital lease or Synthetic Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date.

 

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in clause (a), Other Taxes.

 

“Indemnitees” has the meaning specified in Section 10.04(b).

 

“Indenture Termination Date” has the meaning assigned to such term in Section 6.14(e).

 

“Information” has the meaning specified in Section 10.07.

 

“Initial Closing Date” means October 11, 2012.

 

21

 

 

“Intangible Assets” means assets that are considered to be intangible assets under GAAP, including customer lists, goodwill, computer software, copyrights, trade names, trademarks, patents, franchises, licenses, unamortized deferred charges, unamortized debt discount and capitalized research and development costs.

 

“Interest Payment Date” means, (a) as to any Loan other than a Base Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date; provided, however, that if any Interest Period for a Eurodollar Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan (including a Swing Line Loan), the last Business Day of each March, June, September and December and the Maturity Date.

 

“Interest Period” means, as to each Eurodollar Rate Loan, the period commencing on the date such Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar Rate Loan and ending on the date one, two, three or six months (or such other period that is twelve months or less requested by Company and consented to by all of the Lenders) thereafter, as selected by the Company in its Loan Notice; provided that:

 

(a)    any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

 

(b)    any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

 

(c)    no Interest Period shall extend beyond the Maturity Date.

 

“Investment” means, as to any Person, any acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, guaranty of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in or with such other Person, (c) the provision of goods or services to another Person for consideration other than cash payable in full upon the delivery or provision of such goods or services (other than trade accounts payable in the Ordinary Course of Business), or (d) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit of that Person. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment, minus any dividends, distributions or other amounts returned or repaid in respect of such Investment.

 

“IP Rights” has the meaning specified in Section 5.16.

 

“IRS” means the United States Internal Revenue Service.

 

22

 

 

“ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice, Inc. (or such later version thereof as may be in effect at the time of issuance).

 

“Issuer Documents” means with respect to any Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by the L/C Issuer and any Borrower (or any Subsidiary) or in favor of the L/C Issuer and relating to such Letter of Credit.

 

“Joint Venture” means a single-purpose corporation, partnership, limited liability company, joint venture or other similar legal arrangement (whether created by contract or conducted through a separate legal entity) now or hereafter formed by one Person with another Person in order to conduct a common venture or enterprise with such Person.

 

“Latest Maturity Date” means the latest of the Maturity Date for the Revolving Credit Facility, the Maturity Date for the Term Facility, and any Incremental Term Loan Maturity Date applicable to existing Incremental Term Loans, as of any date of determination.

 

“Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.

 

“L/C Advance” means, with respect to each Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Applicable Percentage. All L/C Advances shall be denominated in Dollars.

 

“L/C Borrowing” means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Revolving Credit Borrowing. All L/C Borrowings shall be denominated in Dollars.

 

“L/C Credit Extension” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.

 

“L/C Issuer” means Bank of America in its capacity as issuer of Letters of Credit hereunder, or any successor issuer of Letters of Credit hereunder, in each case, with the commitments of each L/C Issuer as set forth in Schedule 2.01.

 

“L/C Obligations” means, as at any date of determination, the aggregate amount available to be drawn under all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings. For purposes of computing the amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.09. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.

 

23

 

 

“Lender” means each of the Persons identified as a “Lender” on the signature pages hereto, including each Revolving Credit Lender and/or each Term Lender, as the context may require, each other Person that becomes a “Lender” in accordance with this Agreement and their successors and assigns and, as the context requires, includes the Swing Line Lender.

 

“Lender Increase Notice” has the meaning assigned to such term in Section 2.14(b).

 

“Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Company and the Administrative Agent, which office may include any Affiliate of such Lender or any domestic or foreign branch of such Lender or such Affiliate. Unless the context otherwise requires each reference to a Lender shall include its applicable Lending Office.

 

“Letter of Credit” means any standby letter of credit issued hereunder and shall include each Existing Letter of Credit. Letters of Credit may be issued in Dollars or in an Alternative Currency.

 

“Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the L/C Issuer.

 

“Letter of Credit Expiration Date” means the day that is seven days prior to the Maturity Date of the Revolving Credit Facility then in effect (or, if such day is not a Business Day, the next preceding Business Day).

 

“Letter of Credit Fee” has the meaning specified in Section 2.03(h).

 

“Letter of Credit Sublimit” means an amount equal to the lesser or the Aggregate Commitments and $100,000,000. The Letter of Credit Sublimit is part of, and not in addition to, the Aggregate Commitments.

 

“LIBOR” has the meaning specified in the definition of “Eurodollar Rate”.

 

“LIBOR Screen Rate” means the LIBOR quote on the applicable screen page the Administrative Agent designates to determine LIBOR (or such other commercially available source providing such quotations as may be designated by the Administrative Agent from time to time).

 

“LIBOR Successor Rate” has the meaning provided in Section 3.03(c).

 

24

 

 

“LIBOR Successor Rate Conforming Changes” means, with respect to any proposed LIBOR Successor Rate, any conforming changes to the definition of Base Rate, Interest Period, timing and frequency of determining rates and making payments of interest and other administrative matters as may be appropriate, in the reasonable discretion of the Administrative Agent, to reflect the adoption of such LIBOR Successor Rate and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent determines that adoption of any portion of such market practice is not administratively feasible or that no market practice for the administration of such LIBOR Successor Rate exists, in such other manner of administration as the Administrative Agent determines in consultation with the Company).

 

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).

 

“Loan” means an extension of credit by a Lender to the Borrowers under Article II in the form of a Revolving Credit Loan, a Term Loan or a Swing Line Loan. All Loans shall be denominated in Dollars.

 

“Loan Documents” means, collectively, this Agreement, each Note, each Issuer Document, each Security Instrument, the Post-Closing Agreement, the affirmation agreement referenced in Section 4.01(a)(iii), any agreement creating or perfecting rights in Cash Collateral pursuant to the provisions of Section 2.15 of this Agreement, the Fee Letter, the Guaranty and the Permitted Notes Intercreditor Agreement.

 

“Loan Notice” means a notice of (a) a Term Borrowing, (b) a Revolving Credit Borrowing, (c) a conversion of Loans from one Type to the other, or (d) a continuation of Eurodollar Rate Loans, pursuant to Section 2.02(a), which shall be substantially in the form of Exhibit A or such other form as may be approved by the Administrative Agent (including any form on an electronic platform or electronic transmission system as shall be approved by the Administrative Agent), appropriately completed and signed by a Responsible Officer of the Company.

 

“Loan Parties” means, collectively, the Borrowers and the Guarantors.

 

“LOC Bank” means any Lender or Affiliate of a Lender that has issued (or issues) a performance or financial standby letter of credit or trade or commercial letter of credit for the account of the Company and/or any (or one or more) Subsidiary of the Company that is permitted to be secured by a Lien on Collateral pursuant to Section 7.01(x). For the avoidance of doubt (i) at any point that a Lender ceases to be a Lender then such Person (and any Affiliate of such Person) shall cease to be a LOC Bank and (ii) at such time the issuer of any performance or financial standby letter of credit or trade or commercial letter of credit for the account of the Company and/or any (or one or more) Subsidiary of the Company becomes a Lender (or becomes an Affiliate of a Lender) such Person shall automatically become a LOC Bank until such time that such Person (or Affiliate of such Person) ceases to be a Lender.

 

“London Banking Day” means any day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.

 

25

 

 

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, condition (financial or otherwise) of the Company or the Company and its Subsidiaries taken as a whole; (b) a material impairment of the rights and remedies of the Administrative Agent, the Collateral Agent or any Lender under any Loan Document, or the ability of any Loan Party to perform its obligations under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party.

 

“Material Subsidiary” means,

 

(a)    as of the last day of any fiscal quarter of the Company, any Subsidiary that meets either of the following conditions at such time: (i) such Subsidiary’s consolidated total revenues for the period of the immediately preceding four fiscal quarters is equal to or greater than 10% of the consolidated total revenues of the Company and its Subsidiaries for such period, determined in accordance with GAAP, in each case as reflected in the most recent annual or quarterly (as applicable) financial statements required to be delivered pursuant to Section 6.01; or (ii) such Subsidiary’s total assets, as of the last day of the immediately preceding fiscal quarter, are equal to or greater than 10% of the consolidated total assets of the Company and its Subsidiaries as of such date, determined in accordance with GAAP, in each case as reflected in the most recent annual or quarterly (as applicable) financial statements of the Company required to be delivered pursuant to Section 6.01; and

 

(b)    as of any other Guarantor Assessment Date, any Subsidiary that has, on a pro forma basis, based upon the then most recently delivered financial statements delivered pursuant to Section 6.01, and after giving effect to the applicable Acquisition, divestiture or creation, as though occurring on the first day of the four fiscal quarter period ending on the effective date of such delivered financial statements, (i) total revenues for the period of the immediately preceding four fiscal quarters is equal to or greater than 10% of the consolidated total revenues of the Company and its Subsidiaries for such period, determined in accordance with GAAP, or (ii) total assets equal to or greater than 10% of the consolidated total assets of the Company and its Subsidiaries as of such date, determined in accordance with GAAP;

 

provided, however, that if at any time Subsidiaries qualifying as Material Subsidiaries pursuant to clause (a) or (b) above which, in the aggregate and together with the total assets and total revenues of the Company, do not represent at least 80% of the consolidated total assets and consolidated total revenues of the Company and its Subsidiaries (the “80% Threshold”), the Company shall designate additional Domestic Subsidiaries or, to the extent no material adverse tax consequences shall result, Foreign Subsidiaries as Material Subsidiaries until the 80% Threshold is satisfied collectively by all Material Subsidiaries; and provided further, however, that, in accordance with Section 6.14(e), in no event shall the Target or any of its Subsidiaries be considered a “Material Subsidiary” hereunder until the Indenture Termination Date, and, until such Indenture Termination Date occurs, the assets and revenues of the Target and its Subsidiaries shall not be included in the calculations to determine the 80% Threshold and Subsidiaries that comprise Material Subsidiaries pursuant to clause (a) or (b) above. Once a Subsidiary qualifies as or is designated by the Company as a Material Subsidiary, it shall continue to constitute a Material Subsidiary throughout the term of this Agreement, until such time as the Company provides to the Administrative Agent a certificate in accordance with Section 6.14(b) that such Subsidiary is no longer required to be designated as such pursuant to the terms hereof.

 

26

 

 

“Maturity Date” means May 31, 2023; provided, however, that if such date is not a Business Day, the Maturity Date shall be the preceding Business Day.

 

“Mexican Pesos” means the lawful currency of Mexico.

 

“Minimum Collateral Amount” means, at any time, (a) with respect to Cash Collateral consisting of cash or deposit account balances provided to reduce or eliminate Fronting Exposure during the existence of a Defaulting Lender, an amount equal to 102% of the Fronting Exposure of the L/C Issuer with respect to Letters of Credit issued and outstanding at such time that could not be reallocated to Non-Defaulting Lenders in accordance with Section 2.16(a)(iv), (b) with respect to Cash Collateral consisting of cash or deposit account balances provided in accordance with the provisions of Section 2.15(a)(i), (a)(ii) or (a)(iii), an amount equal to 102% of (i) if in respect of a Cash Collateral requirement under Section 2.15(a)(i), the amount of the applicable L/C Borrowing, and (ii) if in respect of a Cash Collateral requirement under Section 2.15(a)(ii) or (a)(iii), the Outstanding Amount of all L/C Obligations, and (c) otherwise, 102% of the amounts reasonably expected to be owing.

 

“Mortgage” means any mortgage, deed of trust, trust deed or other equivalent document now or hereafter encumbering any fee-owned real property of any Loan Party in favor of the Collateral Agent, on behalf of the Secured Parties, as security for any of the Obligations, each of which shall be in form and substance reasonably acceptable to the Collateral Agent.

 

“Mortgaged Properties” means, collectively, the real properties owned by the Loan Parties and identified on Exhibit I, including, without limitation, all buildings, improvements, structures and fixtures now or subsequently located thereon and owned by any such Loan Party.

 

“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

 

“Multiple Employer Plan” means a Plan which has two or more contributing sponsors (including the Company or any ERISA Affiliate) at least two of whom are not under common control, as such a plan is described in Section 4064 of ERISA.

 

“Non-Consenting Lender” means any Lender that does not approve any consent, waiver or amendment that (a) requires the approval of all Lenders or all affected Lenders in accordance with the terms of Section 10.01 and (b) has been approved by the Required Lenders.

 

“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting Lender at such time.

 

27

 

 

“Note” means a Term Note or a Revolving Credit Note, as the context may require.

 

“Obligations” means (a) all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan, or Letter of Credit and (b) all costs and expenses incurred in connection with enforcement and collection of the foregoing, including the fees, charges and disbursements of counsel, in each case whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof pursuant to any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding; provided that the Obligations shall exclude any Excluded Swap Obligations.

 

“OFAC” means the Office of Foreign Assets Control of the United States Department of the Treasury.

 

“Ordinary Course of Business” means, in respect of any transaction involving the Company or any Subsidiary of the Company, (a) the ordinary course of such Person’s business, substantially as conducted by any such Person prior to or as of the Closing Date, or in a manner reasonably related thereto, and undertaken by such Person in good faith and not for purposes of evading any covenant or restriction in any Loan Document, or (b) transactions outside the ordinary course of such Person’s then-existing business, as long as the Company provides written notice to the Administrative Agent and the Lenders prior to such Person undertaking such business, specifically referencing this definition, provided that the Required Lenders shall not have delivered written objections to the Administrative Agent within five (5) Business Days after their receipt of such written notice.

 

“Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, Joint Venture, trust or other form of business entity, the partnership, Joint Venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

 

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

 

“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 3.06).

 

28

 

 

“Outstanding Amount” means (a) with respect to Term Loans, Revolving Credit Loans and Swing Line Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of Term Loans, Revolving Credit Loans and Swing Line Loans, as the case may be, occurring on such date; and (b) with respect to any L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements by the Borrowers of Unreimbursed Amounts.

 

“Overnight Rate” means, for any day, (a) with respect to any amount denominated in Dollars, the greater of (i) the Federal Funds Rate and (ii) an overnight rate determined by the Administrative Agent, the L/C Issuer, or the Swing Line Lender, as the case may be, in accordance with banking industry rules on interbank compensation, and (b) with respect to any amount denominated in an Alternative Currency, the rate of interest per annum at which overnight deposits in the applicable Alternative Currency, in an amount approximately equal to the amount with respect to which such rate is being determined, would be offered for such day by a branch or Affiliate of Bank of America in the applicable offshore interbank market for such currency to major banks in such interbank market. If the Overnight Rate shall be less than 0.75%, such rate shall be deemed 0.75%, for purposes of this Agreement.

 

“Participant” has the meaning specified in Section 10.06(d).

 

“Participant Register” has the meaning specified in Section 10.06(d).

 

“Participating Member State” means any member state of the European Union that has the Euro as its lawful currency in accordance with legislation of the European Union relating to Economic and Monetary Union.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“Pension Act” means the Pension Protection Act of 2006.

 

“Pension Funding Rules” means the rules of the Code and ERISA regarding minimum required contributions (including any installment payment thereof) to Pension Plans and set forth in, with respect to plan years ending prior to the effective date of the Pension Act, Section 412 of the Code and Section 302 of ERISA, each as in effect prior to the Pension Act and, thereafter, Sections 412, 430, 431, 432 and 436 of the Code and Sections 302, 303, 304 and 305 of ERISA.

 

“Pension Plan” means any employee pension benefit plan (including a Multiple Employer Plan or a Multiemployer Plan) that is maintained or is contributed to by the Company and any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code.

 

29

 

 

“Performance Letter of Credit” means any Letter of Credit that is a “performance standby letter of credit” as set forth in applicable Laws promulgated from time to time by the FRB.

 

“Permitted Call Spread Transaction” means (a) any call or capped call option (or substantively equivalent derivative transaction) relating to the Common Stock (or other securities or property following a merger event, reclassification or other change of the Common Stock) purchased by the Company in connection with the issuance of any Permitted Convertible Indebtedness and settled in Common Stock (or such other securities or property), cash or a combination thereof (such amount of cash determined by reference to the price of the Common Stock or such other securities or property), and cash in lieu of fractional shares of Common Stock, or (b) any call option, warrant or right to purchase (or substantively equivalent derivative transaction) relating to the Common Stock (or other securities or property following a merger event, reclassification or other change of the Common Stock) sold by the Company substantially concurrently with any purchase by the Company of an option described in clause (a) and settled in Common Stock (or such other securities or property), cash or a combination thereof (such amount of cash determined by reference to the price of the Common Stock or such other securities or property), and cash in lieu of fractional shares of Common Stock; provided that the terms, conditions and covenants of each such transaction described in clause (a) or clause (b) shall be such as are customary for transactions of such type (as determined by the board of directors of the Company, or a committee thereof, in good faith).

 

“Permitted Convertible Indebtedness” means unsecured Indebtedness of the Company that is convertible into shares of Common Stock (or other securities or property following a merger event, reclassification or other change of the Common Stock), cash or a combination thereof (such amount of cash determined by reference to the price of the Common Stock or such other securities or property), and cash in lieu of fractional shares of Common Stock; provided that (x) the final maturity date of such Permitted Convertible Indebtedness is not prior to the Maturity Date and (y) the terms, conditions and covenants of such Permitted Convertible Indebtedness shall be such as are customary for transactions of such type (as determined by the board of directors of the Company, or a committee thereof, in good faith).

 

“Permitted Lien” means any Lien permitted by Section 7.01.

 

“Permitted Lowercase Acquisition” means the acquisition (including by way of merger) by the Company and/or its Subsidiary of the Target as contemplated in the Transaction Agreement.

 

“Permitted Notes” means, collectively, the 2019 Notes and any Indebtedness serving to extend, renew or refinance all or a portion thereof so long as (a) the aggregate outstanding principal amount (or accreted value, if applicable) of all Permitted Notes outstanding at any time is not greater than the sum of (i) the aggregate principal amount (or accreted value, if applicable) of the Permitted Notes as of the Closing Date and (ii) an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such refinancing, (b) such Indebtedness has a maturity that is not prior to, and a weighted average life to maturity equal to or greater than, the remaining Weighted Average Life to Maturity of the extended, renewed or refinanced 2019 Notes, (c) such Indebtedness shall have pricing, fees (including upfront fees and original issue discount), optional prepayment, redemption premiums and subordination terms as determined by the Company and the Persons providing such Indebtedness; provided that such Indebtedness does not provide for greater or additional scheduled amortization payments due prior to the Maturity Date than the extended, renewed or refinanced 2019 Notes, (d) if secured, the terms and conditions of such Indebtedness (except as otherwise provided in clauses (b) and (c) above) are (taken as a whole) no more favorable to the Persons providing such Indebtedness than those applicable to the extended, renewed or refinanced Permitted Notes (except for covenants or other provisions applicable only to periods after the then Maturity Date), (e) such Indebtedness is secured on a pari passu or junior basis to the Obligations or is unsecured and (f) if secured, the Persons providing such Indebtedness shall be bound by the terms of the Permitted Notes Intercreditor Agreement.

 

30

 

 

“Permitted Notes Documents” means the 2019 Notes, the 2019 Notes Agreement, all other Permitted Notes, and all note purchase agreements, promissory notes, guaranties and other documents evidencing or relating to or executed in connection with any such Indebtedness.

 

“Permitted Notes Guarantor” means, at any time, any Subsidiary that is at such time a guarantor of Indebtedness of the Company pursuant to any Permitted Notes Documents.

 

“Permitted Notes Intercreditor Agreement” means (a) the Intercreditor and Collateral Agency Agreement dated as of the Initial Closing Date, among the Administrative Agent (on behalf of the Secured Bank Creditors), the Permitted Noteholders, the Collateral Agent (on behalf of the Secured Parties) and the Loan Parties, attached as Exhibit J, as modified, amended, amended and restated or supplemented from time to time and (b) any other intercreditor agreement subsequently executed among the Administrative Agent (on behalf of the Secured Bank Creditors), the Permitted Noteholders, the Collateral Agent (on behalf of the Secured Parties) and the Loan Parties (it being understood that an intercreditor agreement having terms substantially similar to the Permitted Notes Intercreditor Agreement dated as of the Initial Closing Date is satisfactory to the extent such Indebtedness is secured on a pari passu basis with the Obligations).

 

“Permitted Noteholders” means, collectively, the holders from time to time of the Permitted Notes.

 

“Person” means any natural person, corporation, limited liability company, trust, Joint Venture, association, company, partnership, Governmental Authority or other entity.

 

“Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA (including a Pension Plan), maintained for employees of the Company or any ERISA Affiliate or any such Plan to which the Company or any ERISA Affiliate is required to contribute on behalf of any of its employees.

 

“Platform” has the meaning specified in Section 6.02.

 

“Pledge Agreement” means that certain Amended and Restated Securities Pledge Agreement dated as of the Initial Closing Date among the Borrowers, certain Guarantors and the Collateral Agent, for the benefit of the Secured Parties, substantially in the form of Exhibit G, as supplemented from time to time by the execution and delivery of Pledge Joinder Agreements pursuant to Section 6.14, as the same may be otherwise supplemented (including by Pledge Agreement Supplement).

 

31

 

 

“Pledge Agreement Supplement” means, with respect to each Pledge Agreement, the Pledge Agreement Supplement in the form affixed as an Exhibit to such Pledge Agreement.

 

“Pledge Joinder Agreement” means each Pledge Joinder Agreement, substantially in the form thereof attached to the Pledge Agreement, executed and delivered by a Guarantor to the Administrative Agent pursuant to Section 6.14.

 

“Pledged Interests” means the Subsidiary Securities heretofore pledged to the Collateral Agent and the Subsidiary Securities required to be pledged as Collateral pursuant to this Agreement or the terms of any Pledge Agreement; provided that notwithstanding any contrary provision in any Loan Document, in the case of any Foreign Subsidiary, “Pledged Interests” shall be limited to a pledge of 65% of the Voting Securities and 100% of the other Subsidiary Securities issued by such Foreign Subsidiary.

 

“Post-Closing Agreement” means that certain Post-Closing Agreement dated as of the Closing Date among the Borrowers and the Administrative Agent.

 

“Prior Loan Documents” has the meaning set forth in Section 1.10(c).

 

“Project Debt” means, in respect of any GLC Venture (the “obligor”), any Indebtedness of such obligor incurred in the Ordinary Course of Business of such obligor and of the Company and its Subsidiaries, which may be secured by a Lien on assets of such obligor, but as to which there is no general recourse to any Loan Party except against such obligor (a) for breach of customary representations and warranties, or (b) to the extent such obligor is a limited liability company, corporation, limited partnership or other entity as to which no Loan Party (other than obligor) is, directly or indirectly (at law, through any Guarantee Obligation or otherwise), liable to pay the debts of such obligor.

 

“Project Debt Entity” means at any time, any GLC Venture obligated in respect of Project Debt at such time.

 

“Proposed New Lender” has the meaning assigned to such term in Section 2.14(b).

 

“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.

 

“Public Lender” has the meaning specified in Section 6.02.

 

“Recipient” means the Administrative Agent, any Lender, the L/C Issuer or any other recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder.

 

“Register” has the meaning specified in Section 10.06(c).

 

32

 

 

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.

 

“Release” means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, including the movement of Hazardous Materials through ambient air, soil, surface water, ground water, wetlands, land or subsurface strata.

 

“Relevant Governmental Body” means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York for the purpose of recommending a benchmark rate to replace LIBOR in loan agreements similar to this Agreement.

 

“Relief Period” means the five fiscal quarters ending March 31, 2020, June 30, 2020, September 30, 2020, December 31, 2020 and March 31, 2021.

 

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30-day notice period has been waived.

 

“Request for Credit Extension” means (a) with respect to a Borrowing, conversion or continuation of Revolving Credit Loans or Term Loans, a Loan Notice, (b) with respect to an L/C Credit Extension, a Letter of Credit Application, and (c) with respect to a Swing Line Loan, a Swing Line Loan Notice.

 

“Required Lenders” means, at any time, Lenders holding more than 50% of the sum of the (a) Total Outstandings (with the aggregate amount of each Revolving Credit Lender’s risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed “held” by such Revolving Credit Lender for purposes of this definition) and (b) aggregate unused Commitments; provided that the amount of any participation in any Swing Line Loan and Unreimbursed Amounts that such Defaulting Lender has failed to fund that have not been reallocated to and funded by another Lender shall be deemed to be held by the Lender that is the Swing Line Lender or L/C Issuer, as the case may be, in making such determination; and provided, further, that (x) the unused Revolving Credit Commitment of, and the portion of the Total Revolving Credit Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders and (y) the portion of the Term Facility held by any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.

 

“Required Revolving Lenders” means, as of any date of determination, Revolving Credit Lenders holding more than 50% of the sum of the (a) Total Revolving Credit Outstandings (with the aggregate amount of each Revolving Credit Lender’s risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed “held” by such Revolving Credit Lender for purposes of this definition) and (b) aggregate unused Revolving Credit Commitments; provided that the unused Revolving Credit Commitment of, and the portion of the Total Revolving Credit Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Revolving Lenders.

 

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“Required Term Lenders” means, as of any date of determination, Term Lenders holding more than 50% of the Term Facility on such date; provided that the portion of the Term Facility held by any Defaulting Lender shall be excluded for purposes of making a determination of Required Term Lenders.

 

“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.

 

“Responsible Officer” means the president, chief operating officer, chief executive officer, chief financial officer, treasurer, secretary, assistant secretary or controller of a Loan Party and, solely for purposes of the delivery of incumbency certificates pursuant to Section 4.01, the secretary or assistant secretary of a Loan Party, and, solely for purposes of notices given to Article II, any other officer or employee of the applicable Loan Party so designated by any of the foregoing officers in a notice to the Administrative Agent or any other officer or employee of the applicable Loan Party designated in or pursuant to an agreement between the applicable Loan Party and the Administrative Agent. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

 

“Restatement” has the meaning specified in the recitals hereto.

 

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other equity interest of the Company or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such capital stock or other equity interest or of any option, warrant or other right to acquire any such capital stock or other equity interest; provided, that any payments or other distributions made in respect of the Target 8% Notes, the Target 4.25% Notes or Permitted Convertible Debt, in each case whether in equity as a result of any conversion thereof or in cash, shall not be deemed to constitute Restricted Payments.

 

“Revaluation Date” means, with respect to any Letter of Credit, each of the following: (a) each date of issuance of a Letter of Credit denominated in an Alternative Currency, (b) each date of an amendment of any such Letter of Credit having the effect of increasing the amount thereof (solely with respect to the increased amount), (c) each date of any payment by the L/C Issuer under any Letter of Credit denominated in an Alternative Currency, (d) in the case of the Existing Letters of Credit denominated in an Alternative Currency, the Closing Date, and (e) such additional dates as the Administrative Agent or the L/C Issuer shall determine or the Required Revolving Lenders shall require.

 

“Revolving Credit Borrowing” means a borrowing consisting of simultaneous Revolving Credit Loans of the same Type and, in the case of Eurodollar Rate Loans, having the same Interest Period made by each of the Revolving Credit Lenders pursuant to Section 2.01(b).

 

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“Revolving Credit Commitment” means, as to each Revolving Credit Lender, its obligation to (a) make Revolving Credit Loans to the Borrowers pursuant to Section 2.01(b), (b) purchase participations in L/C Obligations, and (c) purchase participations in Swing Line Loans, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement. The aggregate principal amount of the Revolving Credit Commitments of all of the Lenders as in effect on the Amendment No. 3 Effective Date is $275,000,000.

 

“Revolving Credit Exposure” means, as to any Lender at any time, the aggregate principal amount at such time of its outstanding Revolving Credit Loans and such Lender’s participation in L/C Obligations and Swing Line Loans at such time.

 

“Revolving Credit Facility” means, at any time, the aggregate amount of the Revolving Credit Lenders’ Revolving Credit Commitments at such time.

 

“Revolving Credit Lender” means, at any time, any Lender that has a Revolving Credit Commitment at such time.

 

“Revolving Credit Loan” has the meaning specified in Section 2.01(b).

 

“Revolving Credit Note” means a promissory note made by the Borrowers in favor of a Revolving Credit Lender evidencing Revolving Credit Loans or Swing Line Loans, as the case may be, made by such Revolving Credit Lender, substantially in the form of Exhibit C-1.

 

“Sanction(s)” means any sanction administered or enforced by the United States Government (including without limitation, OFAC), the United Nations Security Council, the European Union, Her Majesty’s Treasury (“HMT”) or other relevant sanctions authorities in which the Company or any of its Subsidiaries does business.

 

“Scheduled Unavailability Date” has the meaning provided in Section 3.03(c).

 

“SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

 

“Secured Bank Creditors” means, collectively, with respect to each of the Security Instruments, the Administrative Agent, the Collateral Agent, the Lenders, the L/C Issuer, the Hedge Banks, the Cash Management Banks, the Card Related Products Banks, the LOC Banks, each co-agent or sub-agent appointed by the Administrative Agent from time to time pursuant to Section 9.05 and the other Persons the Secured Obligations owing to which are or are purported to be secured by the Collateral under the terms of the Security Instruments.

 

“Secured Bilateral Letter of Credit” means any performance or financial standby letter of credit or trade or commercial letter of credit that is permitted to be secured by a Lien on Collateral pursuant to Section 7.01(x) and that is issued by an LOC Bank for the account of the Company and/or any (or one or more) Subsidiary of the Company.

 

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“Secured Card Related Products Agreement” means any Card Related Products Agreement permitted by Article VII that is entered into by and between any Loan Party and any Card Related Products Bank.

 

“Secured Cash Management Agreement” means any Cash Management Agreement permitted by Article VII that is entered into by and between any Loan Party and any Cash Management Bank.

 

“Secured Hedge Agreement” means any Swap Contract permitted by Article VII that is entered into by and between any Loan Party and any Hedge Bank.

 

“Secured Obligations” means (a) all Obligations, (b) all obligations of any Loan Party arising under Secured Card Related Products Agreements, Secured Cash Management Agreements, Secured Hedge Agreements and, if and only if permitted under Section 7.01(x), Secured Bilateral Letters of Credit and (c) all costs and expenses incurred in connection with enforcement and collection of the foregoing, including the fees, charges and disbursements of counsel, in each case whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding; provided that “Secured Obligations” shall exclude any Excluded Swap Obligations.

 

“Secured Parties” means, collectively, the Secured Bank Creditors and the Permitted Noteholders.

 

“Security Agreement” means that certain Amended and Restated Security Agreement dated as of the Initial Closing Date among the Borrowers, the Guarantors and the Collateral Agent, attached as Exhibit H, as supplemented from time to time by the execution and delivery of Security Joinder Agreements pursuant to Section 6.14, and as modified, amended, amended and restated or supplemented from time to time.

 

“Security Instruments” means, collectively, the Pledge Agreement, the Security Agreement, the Aircraft Security Agreement, the Mortgages and all other agreements (including control agreements), instruments and other documents, whether now existing or hereafter in effect, pursuant to which any Borrower or any Subsidiary or other Person shall grant or convey to the Collateral Agent or the Lenders a Lien in, or any other Person shall acknowledge any such Lien in, property as security for all or any portion of the Secured Obligations or any other obligation under any Loan Document, as any of them has been or may be amended, amended and restated, modified or supplemented from time to time.

 

“Security Joinder Agreement” means each Security Joinder Agreement, substantially in the form attached to the Security Agreement, executed and delivered by a Guarantor or any other Person to the Administrative Agent pursuant to Section 6.14.

 

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“SOFR” with respect to any day means the secured overnight financing rate published for such day by the Federal Reserve Bank of New York, as the administrator of the benchmark (or a successor administrator) on the Federal Reserve Bank of New York’s website (or any successor source) and, in each case, that has been selected or recommended by the Relevant Governmental Body.

 

“SOFR-Based Rate” means SOFR or Term SOFR.

 

“Solvent” means, as to any Person at any time, that: (a) the fair value of the property of such Person is greater than the amount of such Person’s liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated for purposes of Section 101(32) of the Bankruptcy Code and, in the alternative, for purposes of the California Uniform Fraudulent Transfer Act; (b) the present fair saleable value of the property of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person is able to realize upon its property and pay its debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business; (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature; and (e) such Person is not engaged in business or a transaction for which such Person’s property would constitute unreasonably small capital.

 

“Specified Loan Party” means any Loan Party that is not an “eligible contract participant” under the Commodity Exchange Act (determined prior to giving effect to Section 29 of the Guaranty).

 

“Spot Rate” for a currency means the rate determined by the Administrative Agent or the L/C Issuer, as applicable, to be the rate quoted by the Person acting in such capacity as the spot rate for the purchase by such Person of such currency with another currency through its principal foreign exchange trading office at approximately 9:00 a.m. on the date two Business Days prior to the date as of which the foreign exchange computation is made; provided that the Administrative Agent or the L/C Issuer may obtain such spot rate from another financial institution designated by the Administrative Agent or the L/C Issuer if the Person acting in such capacity does not have as of the date of determination a spot buying rate for any such currency; and provided further that the L/C Issuer may use such spot rate quoted on the date as of which the foreign exchange computation is made in the case of any Letter of Credit denominated in an Alternative Currency.

 

“Sterling” and “£” mean the lawful currency of the United Kingdom.

 

“Subject Period” means, as of any date of determination, the four consecutive fiscal quarter period ending on such date.

 

“Subsidiary” of a Person means a corporation, partnership, Joint Venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Company.

 

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“Subsidiary Securities” means the shares of capital stock or other equity interests issued by or equity participations in any Material Subsidiary, whether or not constituting a “security” under Article 8 of the Uniform Commercial Code as in effect in any jurisdiction.

 

“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

 

“Swap Obligations” means with respect to any Guarantor any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.

 

“Swap Termination Value” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).

 

“Swing Line Borrowing” means a borrowing of a Swing Line Loan pursuant to Section 2.04.

 

“Swing Line Lender” means Bank of America in its capacity as provider of Swing Line Loans, or any successor swing line lender hereunder, in each case, with the commitments of each Swing Line Lender as set forth in Schedule 2.01.

 

“Swing Line Loan” has the meaning specified in Section 2.04(a).

 

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“Swing Line Loan Notice” means a notice of a Swing Line Borrowing pursuant to Section 2.04(b), which shall be substantially in the form of Exhibit B or such other form as approved by the Administrative Agent (including any form on an electronic platform or electronic transmission system as shall be approved by the Administrative Agent), appropriately completed and signed by a Responsible Officer of the Company.

 

“Swing Line Sublimit” means, at any time, an amount equal to the lesser of (a) $20,000,000 and (b) the Aggregate Commitments. The Swing Line Sublimit is part of, and not in addition to, the Aggregate Commitments.

 

“Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).

 

“Target” means Layne Christensen Company.

 

“Target 4.25% Notes” means the 4.25% unsecured convertible notes of Target issued pursuant to the Target 4.25% Indenture.

 

“Target 4.25% Indenture” means that certain Indenture, dated as of November 12, 2013, between Target and U.S. Bank National Association, as trustee.

 

“Target 8% Notes” means the 8% senior secured convertible notes of Target issued pursuant to the Target 8% Indenture.

 

“Target 8% Indenture” means that certain Indenture, dated as of March 2, 2015, among Target, the Guarantors (as defined therein) party thereto and U.S. Bank National Association, as trustee and collateral agent.

 

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

“Term Borrowing” means a borrowing consisting of simultaneous Term Loans of the same Type and, in the case of Eurodollar Rate Loans, having the same Interest Period made by each of the Term Lenders pursuant to Section 2.01(a).

 

“Term Commitment” means, as to each Term Lender, its obligation to make Term Loans to the Borrowers pursuant to Section 2.01(a) in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Term Lender’s name on Schedule 2.01 under the caption “Term Commitment”. The aggregate principal amount of the Term Commitments of all of the Lenders as in effect on the Closing Date is $150,000,000.

 

“Term Facility” means, at any time, the aggregate principal amount of the Term Loans and unused Term Commitments of all Term Lenders outstanding at such time.

 

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“Term Lender” means any Lender that has a Term Commitment or an outstanding Term Loan at such time.

 

“Term Loan” means an advance made by any Term Lender under the Term Facility; provided, that the aggregate principal amount of the Term Loan outstanding on the Amendment No. 3 Effective Date is $138,750,000.

 

“Term Note” means a promissory note made by the Borrowers in favor of a Term Lender evidencing Term Loans made by such Term Lender, substantially in the form of Exhibit C-2.

 

“Term SOFR” means the forward-looking term rate for any period that is approximately (as determined by the Administrative Agent) as long as any of the Interest Period options set forth in the definition of “Interest Period” and that is based on SOFR and that has been selected or recommended by the Relevant Governmental Body, in each case as published on an information service as selected by the Administrative Agent from time to time in its reasonable discretion.

 

“Transaction Agreement” means that certain Agreement and Plan of Merger by and among the Company, the Target and a newly created subsidiary of the Company into which the Target will merge (with the Target as the surviving corporation).

 

“Total Outstandings” means the aggregate Outstanding Amount of all Loans and all L/C Obligations.

 

“Total Revolving Credit Outstandings” means the aggregate Outstanding Amount of all Revolving Credit Loans, Swing Line Loans and L/C Obligations.

 

“Type” means, with respect to a Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan.

 

“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended form time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person subject to IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.

 

“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.

 

“United States” and “U.S.” mean the United States of America.

 

“Unreimbursed Amount” has the meaning specified in Section 2.03(c)(i).

 

“U.S. Person” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.

 

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“U.S. Tax Compliance Certificate” has the meaning specified in Section 3.01(e)(ii)(B)(III).

 

“Voting Securities” means shares of capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency.

 

“Weighted Average Life to Maturity” means, when applied to any Indebtedness, at any date, the quotient obtained by dividing: (a) the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment of such Indebtedness multiplied by the amount of such payment by (b) the sum of all such payments.

 

“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.

 

“Yen” and “¥” mean the lawful currency of Japan.

 

1.02    Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

 

(a)    The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “hereto,” “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

 

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(b)    In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”

 

(c)    Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

 

(d)    Any reference herein to a merger, consolidation, amalgamation, assignment, sale, disposition or transfer, or similar term, shall be deemed to apply to a division of or by a limited liability company, or an allocation of assets to a series of a limited liability company (or the unwinding of such a division or allocation), as if it were a merger, consolidation, amalgamation, assignment, sale, disposition or transfer, or similar term, as applicable, to, of or with a separate Person. Any Division of a limited liability company shall constitute a separate Person hereunder (and each Division of any limited liability company that is a Subsidiary, joint venture or any other like term shall also constitute such a Person or entity).

 

1.03    Accounting Terms.

 

(a)    Generally. All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein. Notwithstanding the foregoing, for purposes of determining compliance with any covenant (including the computation of any financial covenant) contained herein, Indebtedness of the Company and its Subsidiaries shall be deemed to be carried at 100% of the outstanding principal amount thereof, and the effects of FASB ASC 825 on financial liabilities shall be disregarded.

 

(b)    Changes in GAAP. If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Company or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Company shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Company shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

 

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(c)    Consolidation of Variable Interest Entities. All references herein to consolidated financial statements of the Company and its Subsidiaries or to the determination of any amount for the Company and its Subsidiaries on a consolidated basis or any similar reference shall, in each case, be deemed to include each variable interest entity that the Company is required to consolidate pursuant to FASB ASC 810 as if such variable interest entity were a Subsidiary as defined herein.

 

(d)    Pro Forma Basis. All defined terms used in the calculation of the financial covenants set forth in Section 7.12 hereof shall be calculated on an historical pro forma basis giving effect (by inclusion or exclusion, as applicable), during any period of measurement that includes the merger or any Acquisition permitted by Sections 7.02 and 7.04, as applicable, to the actual historical results of the Person so acquired.

 

1.04    Rounding. Any financial ratios required to be maintained by the Company pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

 

1.05    Exchange Rates; Currency Equivalents.

 

(a)    The Administrative Agent or the L/C Issuer, as applicable, shall determine the Spot Rates as of each Revaluation Date to be used for calculating Dollar Equivalent amounts of Credit Extensions and Outstanding Amounts denominated in Alternative Currencies. Such Spot Rates shall become effective as of such Revaluation Date and shall be the Spot Rates employed in converting any amounts between the applicable currencies until the next Revaluation Date to occur. Except for purposes of financial statements delivered by Loan Parties hereunder or calculating financial covenants hereunder or except as otherwise provided herein, the applicable amount of any currency (other than Dollars) for purposes of the Loan Documents shall be such Dollar Equivalent amount as so determined by the Administrative Agent or the L/C Issuer, as applicable.

 

(b)    Wherever in this Agreement in connection with the issuance, amendment or extension of a Letter of Credit, an amount, such as a required minimum or multiple amount, is expressed in Dollars, but such Letter of Credit is denominated in an Alternative Currency, such amount shall be the relevant Alternative Currency Equivalent of such Dollar amount (rounded to the nearest unit of such Alternative Currency, with 0.5 of a unit being rounded upward), as determined by the Administrative Agent or the L/C Issuer, as the case may be.

 

1.06    Additional Alternative Currencies.

 

(a)    The Company may from time to time request that Letters of Credit be issued in a currency other than those specifically listed in the definition of “Alternative Currency;” provided that such requested currency is a lawful currency (other than Dollars) that is readily available and freely transferable and convertible into Dollars. Such request shall be subject to the approval of the Administrative Agent and the L/C Issuer.

 

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(b)    Any such request shall be made to the Administrative Agent not later than 11:00 a.m., ten Business Days prior to the date of the desired Credit Extension (or such other time or date as may be agreed by the Administrative Agent and the L/C Issuer, in its or their sole discretion). The Administrative Agent shall promptly notify the L/C Issuer thereof. The L/C Issuer shall notify the Administrative Agent, not later than 11:00 a.m., five Business Days after receipt of such request (or such other time or date as may be agreed by the Administrative Agent and the L/C Issuer, in its or their sole discretion) whether it consents, in its sole discretion, to the issuance of Letters of Credit in such requested currency.

 

(c)    Any failure by the L/C Issuer to respond to such request within the time period specified in the preceding sentence shall be deemed to be a refusal by the L/C Issuer to permit Letters of Credit to be issued in such requested currency. If the Administrative Agent and the L/C Issuer consent to the issuance of Letters of Credit in such requested currency, the Administrative Agent shall so notify the Company and such currency shall thereupon be deemed for all purposes to be an Alternative Currency hereunder for purposes of any Letter of Credit issuances. If the Administrative Agent shall fail to obtain consent to any request for an additional currency under this Section 1.06, the Administrative Agent shall promptly so notify the Company.

 

1.07    Change of Currency. Each obligation of the Borrowers to make a payment denominated in the national currency unit of any member state of the European Union that adopts the Euro as its lawful currency after the date hereof shall be redenominated into Euro at the time of such adoption. If, in relation to the currency of any such member state, the basis of accrual of interest expressed in this Agreement in respect of that currency shall be inconsistent with any convention or practice in the London interbank market for the basis of accrual of interest in respect of the Euro, such expressed basis shall be replaced by such convention or practice with effect from the date on which such member state adopts the Euro as its lawful currency.

 

(a)    Each provision of this Agreement shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time specify to be appropriate to reflect the adoption of the Euro by any member state of the European Union and any relevant market conventions or practices relating to the Euro.

 

(b)    Each provision of this Agreement also shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time specify to be appropriate to reflect a change in currency of any other country and any relevant market conventions or practices relating to the change in currency.

 

1.08    Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Pacific time (daylight or standard, as applicable).

 

1.09    Letter of Credit Amounts. Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the Dollar Equivalent of the stated amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.

 

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1.10    Amendment and Restatement. In order to facilitate the Restatement and otherwise to effectuate the desires of the Borrowers, the Administrative Agent and the Lenders:

 

(a)    Simultaneously with the Closing Date, the parties hereby agree that the Commitments shall be as set forth in Schedule 2.01 and the portion of Loans and other Outstanding Amounts outstanding under the Existing Credit Agreement shall be reallocated in accordance with such Commitments and the requisite assignments shall be deemed to be made in such amounts by and between the Lenders and from each Lender to each other Lender, with the same force and effect as if such assignments were evidenced by applicable assignment agreements required pursuant to Section 10.06 of the Existing Credit Agreement. Notwithstanding anything to the contrary in Section 10.06 of the Existing Credit Agreement or Section 10.06 of this Agreement, no other documents or instruments, including any assignment agreements, shall be executed in connection with these assignments (all of which requirements are hereby waived), and such assignments shall be deemed to be made with all applicable representations, warranties and covenants as if evidenced by an assignment agreement. On the Closing Date, the Lenders shall make full cash settlement with each other either directly or through the Administrative Agent, as the Administrative Agent may direct or approve, with respect to all assignments, reallocations and other changes in Commitments (as such term is defined in the Existing Credit Agreement) such that after giving effect to such settlements each Lender’s Applicable Percentage shall be as set forth on Schedule 2.01.

 

(b)    Each Borrower, the Administrative Agent, and the Lenders hereby agree that upon the effectiveness of this Agreement, the terms and provisions of the Existing Credit Agreement which in any manner govern or evidence the Obligations, the rights and interests of the Administrative Agent and the Lenders and any terms, conditions or matters related to any thereof, shall be and hereby are amended and restated in their entirety by the terms, conditions and provisions of this Agreement, and the terms and provisions of the Existing Credit Agreement, except as otherwise expressly provided herein, shall be superseded by this Agreement.

 

(c)    Notwithstanding this amendment and restatement of the Existing Credit Agreement, including anything in this Section 1.10, and in any related “Loan Documents” (as such term is defined in the Existing Credit Agreement and referred to herein, individually or collectively, as the “Prior Loan Documents”), (i) all of the indebtedness, liabilities and obligations owing by any Loan Party under the Existing Credit Agreement and other Prior Loan Documents shall continue as Obligations hereunder and all indebtedness, liabilities and obligations of any Person other than a Loan Party under the Existing Credit Agreement and other Prior Loan Documents shall continue as obligations of such Person hereunder, and (ii) each of this Agreement and the Notes and any other Loan Document (as defined herein) that is amended and restated in connection with this Agreement is given as a substitution of, and not as a payment of, the indebtedness, liabilities and obligations of the Borrowers under the Existing Credit Agreement or any Prior Loan Document and neither the execution and delivery of such documents nor the consummation of any other transaction contemplated hereunder is intended to constitute a novation of the Existing Credit Agreement or of any of the other Prior Loan Documents or any obligations thereunder. Upon the effectiveness of this Agreement, all Loans owing by the Borrowers and outstanding under the Existing Credit Agreement shall continue as Loans hereunder and shall constitute advances hereunder, and all Letters of Credit outstanding under the Existing Credit Agreement and any of the Prior Loan Documents shall continue as Letters of Credit hereunder. Base Rate Loans under the Existing Credit Agreement shall accrue interest at the Base Rate hereunder and the parties hereto agree that the Interest Periods for all Eurodollar Rate Loans outstanding under the Existing Credit Agreement on the Closing Date shall remain in effect without renewal, interruption or extension as Eurodollar Rate Loans under this Agreement and accrue interest at the Eurodollar Rate hereunder; provided, that on and after the Closing Date, the Applicable Rate applicable to any Loan or Letter of Credit hereunder shall be as set forth in the definition of Applicable Rate in Section 1.01, without regard to any margin applicable thereto under the Existing Credit Agreement prior to the Closing Date.

 

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1.11    Interest Rates. The Administrative Agent does not warrant, nor accept responsibility, nor shall the Administrative Agent have any liability with respect to the administration, submission or any other matter related to the rates in the definition of “Eurodollar Rate” or with respect to any rate that is an alternative or replacement for or successor to any of such rate (including, without limitation, any LIBOR Successor Rate) or the effect of any of the foregoing, or of any LIBOR Successor Rate Conforming Changes.

 

ARTICLE II.  THE COMMITMENTS AND CREDIT EXTENSIONS

 

2.01    Loans.

 

(a)    The Term Borrowing. Subject to the terms and conditions set forth herein, each Term Lender severally agrees to make a term loan to the Borrowers in Dollars on the Closing Date in an aggregate amount equal to $150,000,000 (the “Term Borrowing”). The Term Borrowing shall consist of Term Loans made simultaneously by the Term Lenders in accordance with their respective Applicable Percentage of the Term Facility.

 

Amounts borrowed under this Section 2.01(a) and repaid or prepaid may not be reborrowed. Term Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein. Term Loans may be made in Dollars only.

 

(b)    Revolving Credit Loans. Subject to the terms and conditions set forth herein, each Revolving Credit Lender severally agrees to make loans (each such loan, a “Revolving Credit Loan”) to the Borrowers from time to time, on any Business Day during the Availability Period, in an aggregate amount not to exceed at any time outstanding the amount of such Lender’s Commitment; provided, however, that after giving effect to any Revolving Credit Borrowing, (a) the Total Revolving Credit Outstandings shall not exceed the Revolving Credit Facility, and (b) the Revolving Credit Exposure of each Revolving Credit Lender shall not exceed such Revolving Credit Lender’s Revolving Credit Commitment. Within the limits of each Revolving Credit Lender’s Revolving Credit Commitment, and subject to the other terms and conditions hereof, the Borrowers may borrow under this Section 2.01(b), prepay under Section 2.05, and reborrow under this Section 2.01(b). Revolving Credit Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein; provided, however, that any Revolving Credit Loans made on the Closing Date shall be Base Rate Loans, unless a funding indemnity letter in form and substance reasonably satisfactory to the Administrative Agent has been delivered by the Borrowers to the Administrative Agent not later than 10:00 a.m. three Business Days prior to the Closing Date. Revolving Credit Loans may be made in Dollars only.

 

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2.02    Borrowings, Conversions and Continuations of Revolving Credit Loans.

 

(a)    Each Term Borrowing, each Revolving Credit Borrowing, each conversion of Term Loans or Revolving Credit Loans from one Type to the other, and each continuation of Eurodollar Rate Loans shall be made upon the Company’s irrevocable notice to the Administrative Agent, which may be given by (A) telephone, or (B) a Loan Notice; provided that any telephone notice must be confirmed promptly by delivery to the Administrative Agent of a Loan Notice. Each such notice must be received by the Administrative Agent not later than 9:00 a.m. (i) three Business Days prior to the requested date of any Borrowing of, conversion to or continuation of Eurodollar Rate Loans or of any conversion of Eurodollar Rate Loans to Base Rate Loans, and (ii) on the requested date of any Borrowing of Base Rate Loans; provided, however, that if the Company wishes to request Eurodollar Rate Loans having an Interest Period other than one, two, three or six months in duration as provided in the definition of “Interest Period,” the applicable notice must be received by the Administrative Agent not later than 9:00 a.m. four Business Days prior to the requested date of such Borrowing, conversion or continuation, whereupon the Administrative Agent shall give prompt notice to the Lenders of such request and determine whether the requested Interest Period is acceptable to all of them. Not later than 10:00 a.m., three Business Days before the requested date of such Borrowing, conversion or continuation, the Administrative Agent shall notify the Company (which notice may be by telephone) whether or not the requested Interest Period has been consented to by all the Lenders. Each Borrowing of, conversion to or continuation of Eurodollar Rate Loans shall be in a principal amount of $3,000,000 or a whole multiple of $1,000,000 in excess thereof. Except as provided in Sections 2.03(c) and 2.04(c), each Borrowing of or conversion to Base Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof. Each Loan Notice (whether telephonic or written) shall specify (i) whether the Company is requesting a Term Borrowing, a Revolving Credit Borrowing, a conversion of Term Loans or Revolving Credit Loans from one Type to the other, or a continuation of Eurodollar Rate Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Loans to be borrowed, converted or continued, (iv) the Type of Loans to be borrowed or to which existing Loans are to be converted, (v) if applicable, the duration of the Interest Period with respect thereto and (vi) the Borrower for which such Borrowing is requested. If the Company fails to specify a Type of Loan in a Loan Notice, then the applicable Loans shall be made as Base Rate Loans. Notwithstanding the foregoing, with respect to any Eurodollar Rate Loan made hereunder, if the Company fails to specify a Type of Loan in the Loan Notice relating to such outstanding Eurodollar Rate Loan or fails to deliver a Loan Notice requesting continuation or conversion of such outstanding Eurodollar Rate Loan, then such Eurodollar Rate Loan shall be continued as a Eurodollar Rate Loan with an Interest Period of one month. If the Company requests a Borrowing of, conversion to, or continuation of Eurodollar Rate Loans in any such Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month. Any automatic continuation of a Eurodollar Rate Loan shall be effective as of the last day of the Interest Period then in effect with respect to such Eurodollar Rate Loan.

 

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(b)    Following receipt of a Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount of its Applicable Percentage of the applicable Loans, and if no timely notice of a conversion or continuation is provided by the Company, the Administrative Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans described in the preceding subsection. In the case of a Term Borrowing or a Revolving Credit Borrowing, each Appropriate Lender shall make the amount of its Loan available to the Administrative Agent in immediately available funds at the Administrative Agent’s Office not later than 11:00 a.m. on the Business Day specified in the applicable Loan Notice. Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Borrowing is the initial Credit Extension, Section 4.01), the Administrative Agent shall make all funds so received available to the Company or the applicable Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of the Company on the books of Bank of America with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Company; provided, however, that if, on the date the Loan Notice with respect to such Borrowing is given by the Company, there are L/C Borrowings outstanding, then the proceeds of such Borrowing, first, shall be applied to the payment in full of any such L/C Borrowings, and second, shall be made available to the Borrowers as provided above.

 

(c)    Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurodollar Rate Loan. During the existence of a Default, no Loans may be requested as, converted to or continued as Eurodollar Rate Loans without the consent of the Required Lenders.

 

(d)    The Administrative Agent shall promptly notify the Company and the Lenders of the interest rate applicable to any Interest Period for Eurodollar Rate Loans upon determination of such interest rate. At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Company and the Lenders of any change in Bank of America’s prime rate used in determining the Base Rate promptly following the public announcement of such change.

 

(e)    After giving effect to all Term Borrowings, all conversions of Term Loans from one Type to the other, and all continuations of Term Loans as the same Type, there shall not be more than five Interest Periods in effect with respect to the Term Facility. After giving effect to all Revolving Credit Borrowings, all conversions of Revolving Credit Loans from one Type to the other, and all continuations of Revolving Credit Loans as the same Type, there shall not be more than ten Interest Periods in effect with respect to the Revolving Credit Facility.

 

(f)    The Obligations of the Company and each other Borrower shall be joint and several in nature.

 

(g)    Each Subsidiary of the Company that is a “Borrower” hereunder hereby irrevocably appoints the Company as its agent for all purposes relevant to this Agreement and each of the other Loan Documents, including (i) the giving and receipt of notices, (ii) the execution and delivery of all documents, instruments and certificates contemplated herein and all modifications hereto, and (iii) the receipt of the proceeds of any Loans made by the Lenders, to any such Borrower hereunder. Any acknowledgment, consent, direction, certification or other action which might otherwise be valid or effective only if given or taken by all Borrowers, or by each Borrower acting singly, shall be valid and effective if given or taken only by the Company, whether or not any such other Borrower joins therein. Any notice, demand, consent, acknowledgement, direction, certification or other communication delivered to the Company in accordance with the terms of this Agreement shall be deemed to have been delivered to each Borrower.

 

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2.03    Letters of Credit.

 

(a)    The Letter of Credit Commitment.

 

(i)    Subject to the terms and conditions set forth herein, (A) the L/C Issuer agrees, in reliance upon the agreements of the Revolving Credit Lenders set forth in this Section 2.03, (1) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, to issue Letters of Credit for the account of any Borrower or its Subsidiaries, and to amend or extend Letters of Credit previously issued by it, in accordance with subsection (b) below, and (2) to honor drawings under the Letters of Credit; and (B) the Revolving Credit Lenders severally agree to participate in Letters of Credit issued for the account of any Borrower or its Subsidiaries and any drawings thereunder; provided that after giving effect to any L/C Credit Extension with respect to any Letter of Credit, (1) the Total Outstandings shall not exceed the Aggregate Commitments, (2) the Revolving Credit Exposure of any Lender shall not exceed such Lender’s Commitment, (3) the Outstanding Amount of the L/C Obligations shall not exceed the Letter of Credit Sublimit and (4) the Outstanding Amount of the L/C Obligations under Financial Letters of Credit shall not exceed the Financial Letter of Credit Sublimit. Each request by the Company for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by the Company that the L/C Credit Extension so requested complies with the conditions set forth in the proviso to the preceding sentence. Within the foregoing limits, and subject to the terms and conditions hereof, each Borrower’s ability to obtain Letters of Credit shall be fully revolving, and accordingly any Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed. All Existing Letters of Credit shall be deemed to have been issued pursuant hereto, and from and after the Closing Date shall be subject to and governed by the terms and conditions hereof.

 

(ii)    The L/C Issuer shall not issue any Letter of Credit, if:

 

(A)    subject to Section 2.03(b)(iii), the expiry date of the requested Letter of Credit would occur more than twelve months after the date of issuance or last extension, unless the Required Revolving Lenders have approved such expiry date; or

 

(B)    the expiry date of the requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless the Borrowers shall have made arrangements acceptable to the L/C Issuer to Cash Collateralize such Letter of Credit.

 

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(iii)    The L/C Issuer shall not be under any obligation to issue any Letter of Credit if:

 

(A)    any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the L/C Issuer from issuing the Letter of Credit, or any Law applicable to the L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer refrain from, the issuance of letters of credit generally or the Letter of Credit in particular or shall impose upon the L/C Issuer with respect to the Letter of Credit any restriction, reserve or capital requirement (for which the L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the L/C Issuer in good faith deems material to it;

 

(B)    the issuance of the Letter of Credit would violate one or more policies of the L/C Issuer applicable to letters of credit generally;

 

(C)    except as otherwise agreed by the Administrative Agent and the L/C Issuer, the Letter of Credit is in an initial stated amount less than the Dollar Equivalent of $1,000,000;

 

(D)    the Letter of Credit is to be denominated in a currency other than Dollars or an Alternative Currency;

 

(E)    any Revolving Credit Lender is at that time a Defaulting Lender, unless (a) the L/C Issuer has entered into arrangements, including the delivery of Cash Collateral, satisfactory to the L/C Issuer (in its sole discretion) with such Revolving Credit Lender to eliminate the L/C Issuer’s actual or potential Fronting Exposure (after giving effect to Section 2.16(a)(iv)) with respect to the Defaulting Lender arising from either the Letter of Credit then proposed to be issued or that Letter of Credit and all other L/C Obligations as to which the L/C Issuer has actual or potential Fronting Exposure, as it may elect in its sole discretion or (b) the Borrowers have delivered Cash Collateral as required pursuant to Section 2.15(a); or

 

(F)    the Letter of Credit contains any provisions for automatic reinstatement of the stated amount after any drawing thereunder.

 

(iv)    The L/C Issuer shall not amend any Letter of Credit if the L/C Issuer would not be permitted at such time to issue the Letter of Credit in its amended form under the terms hereof.

 

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(v)    The L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) the L/C Issuer would have no obligation at such time to issue the Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of the Letter of Credit does not accept the proposed amendment to the Letter of Credit.

 

(vi)    The L/C Issuer shall act on behalf of the Revolving Credit Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and the L/C Issuer shall have all of the benefits and immunities (A) provided to the Administrative Agent in Article IX with respect to any acts taken or omissions suffered by the L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and Issuer Documents pertaining to such Letters of Credit as fully as if the term “Administrative Agent” as used in Article IX included the L/C Issuer with respect to such acts or omissions, and (B) as additionally provided herein with respect to the L/C Issuer.

 

(b)    Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of Credit.

 

(i)    Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Company delivered to the L/C Issuer (with a copy to the Administrative Agent) in the form of a Letter of Credit Application, appropriately completed and signed by two (2) Responsible Officers of the Company. Such Letter of Credit Application may be sent by facsimile, by United States mail, by overnight courier, by electronic transmission using the system provided by the L/C Issuer, by personal delivery or by any other means acceptable to the L/C Issuer. Such Letter of Credit Application must be received by the L/C Issuer and the Administrative Agent not later than 9:00 a.m. at least two Business Days (or such later date and time as the Administrative Agent and the L/C Issuer may agree in a particular instance in their sole discretion) prior to the proposed issuance date or date of amendment, as the case may be. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount and currency thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; (G) the purpose and nature of the requested Letter of Credit; and (H) such other matters as the L/C Issuer may require. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the L/C Issuer may require. Additionally, the Company shall furnish to the L/C Issuer and the Administrative Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any Issuer Documents, as the L/C Issuer or the Administrative Agent may require.

 

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(ii)    Promptly after receipt of any Letter of Credit Application, the L/C Issuer will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Company and, if not, the L/C Issuer will provide the Administrative Agent with a copy thereof. Unless the L/C Issuer has received written notice from any Revolving Credit Lender, the Administrative Agent or any Loan Party, at least one Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Article IV shall not then be satisfied, then, subject to the terms and conditions hereof, the L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Company (or the applicable Borrower or Subsidiary) or enter into the applicable amendment, as the case may be, in each case in accordance with the L/C Issuer’s usual and customary business practices. Immediately upon the issuance of each Letter of Credit, each Revolving Credit Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Revolving Credit Lender’s Applicable Percentage times the amount of such Letter of Credit.

 

(iii)    If the Company so requests in any applicable Letter of Credit Application, the L/C Issuer may, in its sole discretion, agree to issue a Letter of Credit that has automatic extension provisions (each, an “Auto-Extension Letter of Credit”); provided that any such Auto-Extension Letter of Credit must permit the L/C Issuer to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “Non-Extension Notice Date”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued. Unless otherwise directed by the L/C Issuer, the Company shall not be required to make a specific request to the L/C Issuer for any such extension. Once an Auto-Extension Letter of Credit has been issued, the Revolving Credit Lenders shall be deemed to have authorized (but may not require) the L/C Issuer to permit the extension of such Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided, however, that the L/C Issuer shall not permit any such extension if (A) the L/C Issuer has determined that it would not be permitted, or would have no obligation, at such time to issue such Letter of Credit in its revised form (as extended) under the terms hereof (by reason of the provisions of clause (ii) or (iii) of Section 2.03(a) or otherwise), or (B) it has received notice (which may be by telephone or in writing) on or before the day that is seven Business Days before the Non-Extension Notice Date (1) from the Administrative Agent that the Required Revolving Lenders have elected not to permit such extension or (2) from the Administrative Agent, any Revolving Credit Lender or the Company that one or more of the applicable conditions specified in Section 4.02 is not then satisfied, and in each such case directing the L/C Issuer not to permit such extension.

 

(iv)    Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the L/C Issuer will also deliver to the Company and the Administrative Agent a true and complete copy of such Letter of Credit or amendment.

 

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(c)    Drawings and Reimbursements; Funding of Participations.

 

(i)    Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the L/C Issuer shall notify the Company and the Administrative Agent thereof. In the case of a Letter of Credit denominated in Dollars or a Letter of Credit denominated in an Alternative Currency, the Company shall reimburse the L/C Issuer in Dollars. In the case of a Letter of Credit denominated in an Alternative Currency, the L/C Issuer shall notify the Company of the Dollar Equivalent of amount of the drawing promptly following the determination thereof. In the case of any such reimbursement in Dollars of a drawing under a Letter of Credit denominated in an Alternative Currency, the L/C Issuer shall notify the Company of the Dollar Equivalent of the amount of the drawing promptly following the determination thereof. Not later than 11:00 a.m. on the date of any payment by the L/C Issuer under a Letter of Credit (each such date, an “Honor Date”), the Company shall reimburse the L/C Issuer through the Administrative Agent in the Dollar Equivalent of the amount of such drawing and in the applicable currency; provided that if such notice is not provided to such Borrower prior to 11:00 a.m. on the Honor Date, then the Company shall reimburse the L/C Issuer through the Administrative Agent in an amount equal to the amount of such drawing by 10:00 a.m. on the next succeeding Business Day and such extension of time shall be reflected in computing fees in respect of any Letter of Credit. If the Company fails to so reimburse the L/C Issuer by such time, the Administrative Agent shall promptly notify each Revolving Credit Lender of the Honor Date, the amount of the unreimbursed drawing (expressed in Dollars in the amount of the Dollar Equivalent thereof in the case of a Letter of Credit denominated in an Alternative Currency) (the “Unreimbursed Amount”), and the amount of such Revolving Credit Lender’s Applicable Percentage thereof. In such event, the Company shall be deemed to have requested a Revolving Credit Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02 for the principal amount of Base Rate Loans, but subject to the amount of the unutilized portion of the Aggregate Commitments and the conditions set forth in Section 4.02 (other than the delivery of a Loan Notice). Any notice given by the L/C Issuer or the Administrative Agent pursuant to this Section 2.03(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

 

(ii)    Each Revolving Credit Lender shall upon any notice pursuant to Section 2.03(c)(i) make funds available (and the Administrative Agent may apply Cash Collateral provided for this purpose) for the account of the L/C Issuer, in Dollars, at the Administrative Agent’s Office in an amount equal to its Applicable Percentage of the Unreimbursed Amount not later than 11:00 a.m. on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.03(c)(iii), each Revolving Credit Lender that so makes funds available shall be deemed to have made a Base Rate Revolving Loan to the Company in such amount. The Administrative Agent shall remit the funds so received to the L/C Issuer in Dollars.

 

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(iii)    With respect to any Unreimbursed Amount that is not fully refinanced by a Revolving Credit Borrowing of Base Rate Loans because the conditions set forth in Section 4.02 cannot be satisfied or for any other reason, the Company shall be deemed to have incurred from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate. In such event, each Revolving Credit Lender’s payment to the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.03(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.03.

 

(iv)    Until each Revolving Credit Lender funds its Revolving Credit Loan or L/C Advance pursuant to this Section 2.03(c) to reimburse the L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Revolving Credit Lender’s Applicable Percentage of such amount shall be solely for the account of the L/C Issuer.

 

(v)    Each Revolving Credit Lender’s obligation to make Revolving Credit Loans or L/C Advances to reimburse the L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the L/C Issuer, any Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default; or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Revolving Credit Lender’s obligation to make Revolving Credit Loans pursuant to this Section 2.03(c) is subject to the conditions set forth in Section 4.02 (other than delivery by the Company of a Loan Notice). No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Company or any other Borrower to reimburse the L/C Issuer for the amount of any payment made by the L/C Issuer under any Letter of Credit, together with interest as provided herein.

 

(vi)    If any Revolving Credit Lender fails to make available to the Administrative Agent for the account of the L/C Issuer any amount required to be paid by such Revolving Credit Lender pursuant to the foregoing provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii), then, without limiting the other provisions of this Agreement, the L/C Issuer shall be entitled to recover from such Revolving Credit Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the L/C Issuer at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the L/C Issuer in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the L/C Issuer in connection with the foregoing. If such Revolving Credit Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lender’s Revolving Credit Loan included in the relevant Revolving Credit Borrowing or L/C Advance in respect of the relevant L/C Borrowing, as the case may be. A certificate of the L/C Issuer submitted to any Revolving Credit Lender (through the Administrative Agent) with respect to any amounts owing under this clause (vi) shall be conclusive absent manifest error.

 

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(d)    Repayment of Participations.

 

(i)    At any time after the L/C Issuer has made a payment under any Letter of Credit and has received from any Revolving Credit Lender such Revolving Credit Lender’s L/C Advance in respect of such payment in accordance with Section 2.03(c), if the Administrative Agent receives for the account of the L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Company, any Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent), the Administrative Agent will distribute to such Revolving Credit Lender its Applicable Percentage thereof in the same funds as those received by the Administrative Agent.

 

(ii)    If any payment received by the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.03(c)(i) is required to be returned under any of the circumstances described in Section 10.05 (including pursuant to any settlement entered into by the L/C Issuer in its discretion), each Revolving Credit Lender shall pay to the Administrative Agent for the account of the L/C Issuer its Applicable Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Revolving Credit Lender, at a rate per annum equal to the applicable Overnight Rate from time to time in effect. The obligations of the Revolving Credit Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.

 

(e)    Obligations Absolute. The obligation of the Company and any other Borrower to reimburse the L/C Issuer for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

 

(i)    any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other Loan Document;

 

(ii)    the existence of any claim, counterclaim, setoff, defense or other right that any Borrower or any Subsidiary may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

 

(iii)    any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;

 

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(iv)    waiver by the L/C Issuer of any requirement that exists for the L/C Issuer’s protection and not the protection of the Borrowers or any waiver by the L/C Issuer which does not in fact materially prejudice the Borrowers;

 

(v)    honor of a demand for payment presented electronically even if such Letter of Credit requires that demand be in the form of a draft;

 

(vi)    any payment made by the L/C Issuer in respect of an otherwise complying item presented after the date specified as the expiration date of, or the date by which documents must be received under such Letter of Credit if presentation after such date is authorized by the Uniform Commercial Code as in effect in the State of California or the ISP, as applicable;

 

(vii)    any payment by the L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law;

 

(viii)    any adverse change in the relevant exchange rates or in the availability of the relevant Alternative Currency to any Borrower or any Subsidiary or in the relevant currency markets generally; or

 

(ix)    any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Borrower or any Subsidiary.

 

The Company shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Company’s instructions or other irregularity, the Company will immediately notify the L/C Issuer. The Company shall be conclusively deemed to have waived any such claim against the L/C Issuer and its correspondents unless such notice is given as aforesaid.

 

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(f)    Role of L/C Issuer. Each Revolving Credit Lender and the Company agree that, in paying any drawing under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. None of the L/C Issuer, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable to any Revolving Credit Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Revolving Credit Lenders or the Required Revolving Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Issuer Document. The Company hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Company’s pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. None of the L/C Issuer, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable or responsible for any of the matters described in clauses (i) through (ix) of Section 2.03(e); provided, however, that anything in such clauses to the contrary notwithstanding, the Company may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Company, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Company which the Company proves were caused by the L/C Issuer’s willful misconduct or gross negligence or the L/C Issuer’s willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit.  In furtherance and not in limitation of the foregoing, the L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and the L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason. The L/C Issuer may send a Letter of Credit or conduct any communication to or from the beneficiary via the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) message or overnight courier, or any other commercially reasonable means of communicating with a beneficiary.

 

(g)    Applicability of ISP; Limitation of Liability. Unless otherwise expressly agreed by the L/C Issuer and the Company when a Letter of Credit is issued (including any such agreement applicable to an Existing Letter of Credit), the rules of the ISP shall apply to each standby Letter of Credit. Notwithstanding the foregoing, the L/C Issuer shall not be responsible to any Borrower or any Subsidiary for, and the L/C Issuer’s rights and remedies against any Borrower or any Subsidiary shall not be impaired by, any action or inaction of the L/C Issuer required or permitted under any law, order, or practice that is required or permitted to be applied to any Letter of Credit or this Agreement, including the Law or any order of a jurisdiction where the L/C Issuer or the beneficiary is located, the practice stated in the ISP or in the decisions, opinions, practice statements, or official commentary of the ICC Banking Commission, the Bankers Association for Finance and Trade - International Financial Services Association (BAFT-IFSA), or the Institute of International Banking Law & Practice, whether or not any Letter of Credit chooses such law or practice.

 

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(h)    Letter of Credit Fees. The Company shall pay to the Administrative Agent for the account of each Revolving Credit Lender in accordance, subject to Section 2.16, with its Applicable Percentage, in Dollars, a Letter of Credit fee (the “Letter of Credit Fee”) (i) for each Performance Letter of Credit equal to the Applicable Rate (for Performance Letters of Credit) times the Dollar Equivalent of the daily amount available to be drawn under each such Performance Letter of Credit and (ii) for each Financial Letter of Credit equal to the Applicable Rate (for Financial Letters of Credit) times the Dollar Equivalent of the daily amount available to be drawn under each such Financial Letter of Credit. For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.09. Letter of Credit Fees shall be (i) due and payable on the first Business Day after the end of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand and (ii) computed on a quarterly basis in arrears. If there is any change in the Applicable Rate (or in the characterization of such Letter of Credit as a Performance Letter of Credit or Financial Letter of Credit) during any quarter, the daily amount available to be drawn under each Letter of Credit shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate (or characterization thereof) was in effect. Notwithstanding anything to the contrary contained herein, upon the request of the Required Lenders, while any Event of Default exists, all Letter of Credit Fees shall accrue at the Default Rate.

 

(i)    Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer. The Company shall pay directly to the L/C Issuer for its own account, in Dollars, a fronting fee, with respect to each Letter of Credit, at the rate per annum specified in the Fee Letter, computed on the Dollar Equivalent of the daily amount available to be drawn under such Letter of Credit on a quarterly basis in arrears. Such fronting fee shall be due and payable on the tenth Business Day after the end of each March, June, September and December in respect of the most recently-ended quarterly period (or portion thereof, in the case of the first payment), commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.09. In addition, the Company shall pay directly to the L/C Issuer for its own account, in Dollars, the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the L/C Issuer relating to letters of credit as from time to time in effect. Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable.

 

(j)    Conflict with Issuer Documents. In the event of any conflict between the terms hereof and the terms of any Issuer Document, the terms hereof shall control.

 

(k)    Letters of Credit Issued for Subsidiaries. Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Subsidiary, the Company shall be obligated to reimburse the L/C Issuer hereunder for any and all drawings under such Letter of Credit. The Company hereby acknowledges that the issuance of Letters of Credit for the account of Subsidiaries inures to the benefit of the Company, and that the Company’s business derives substantial benefits from the businesses of such Subsidiaries.

 

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2.04    Swing Line Loans.

 

(a)    The Swing Line. Subject to the terms and conditions set forth herein, the Swing Line Lender, in reliance upon the agreements of the other Revolving Credit Lenders set forth in this Section 2.04, may in its sole discretion make loans in Dollars (each such loan, a “Swing Line Loan”) to the Company from time to time on any Business Day during the Availability Period in an aggregate amount not to exceed at any time outstanding the amount of the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the Applicable Percentage of the Outstanding Amount of Revolving Credit Loans and L/C Obligations of the Revolving Credit Lender acting as Swing Line Lender, may exceed the amount of such Revolving Credit Lender’s Commitment; provided, however, that (x) after giving effect to any Swing Line Loan, (i) the Total Outstandings shall not exceed the Aggregate Commitments, and (ii) the aggregate Outstanding Amount of the Revolving Credit Loans of any Lender, plus such Lender’s Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus such Lender’s Applicable Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender’s Commitment; (y) the Company shall not use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan; and (z) if any Lender is a Defaulting Lender, the Swing Line Lender shall not be under any obligation to make any Swing Line Loan if it shall reasonably determine that, after giving effect to Section 2.16(a)(iv), it has, or by such Credit Extension may have, Fronting Exposure. Within the foregoing limits, and subject to the other terms and conditions hereof, the Company may borrow under this Section 2.04, prepay under Section 2.05, and reborrow under this Section 2.04. Each Swing Line Loan shall be a Base Rate Loan. Immediately upon the making of a Swing Line Loan, each Revolving Credit Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Revolving Credit Lender’s Applicable Revolving Credit Percentage times the amount of such Swing Line Loan.

 

(b)    Borrowing Procedures. Each Swing Line Borrowing shall be made upon the Company’s irrevocable notice to the Swing Line Lender and the Administrative Agent, which may be given by (A) telephone or (B) by a Swing Line Loan Notice; provided that any telephonic notice must be confirmed promptly by delivery to the Swing Line Lender and the Administrative Agent of a Swing Line Loan Notice. Each such notice must be received by the Swing Line Lender and the Administrative Agent not later than 10:00 a.m. on the requested borrowing date, and shall specify (i) the amount to be borrowed, which shall be a minimum of $1,000,000, and (ii) the requested borrowing date, which shall be a Business Day. Promptly after receipt by the Swing Line Lender of any telephonic Swing Line Loan Notice, the Swing Line Lender will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has also received such Swing Line Loan Notice and, if not, the Swing Line Lender will notify the Administrative Agent (by telephone or in writing) of the contents thereof. Unless the Swing Line Lender has received notice (by telephone or in writing) from the Administrative Agent (including at the request of any Revolving Credit Lender) prior to 11:00 a.m. on the date of the proposed Swing Line Borrowing (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the first proviso to the first sentence of Section 2.04(a), or (B) that one or more of the applicable conditions specified in Article IV is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender will, not later than 12:00 noon on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Company at its office by crediting the account of the Company on the books of the Swing Line Lender in immediately available funds.

 

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(c)    Refinancing of Swing Line Loans.

 

(i)    The Swing Line Lender at any time in its sole discretion may request, on behalf of the Company (which hereby irrevocably authorizes the Swing Line Lender to so request on its behalf), that each Revolving Credit Lender make a Base Rate Revolving Loan in an amount equal to such Lender’s Applicable Revolving Credit Percentage of the amount of Swing Line Loans then outstanding. Such request shall be made in writing (which written request shall be deemed to be a Loan Notice for purposes hereof) and in accordance with the requirements of Section 2.02, without regard to the minimum and multiples specified therein for the principal amount of Base Rate Loans, but subject to the unutilized portion of the Revolving Credit Facility and the conditions set forth in Section 4.02. The Swing Line Lender shall furnish the Company with a copy of the applicable Loan Notice promptly after delivering such notice to the Administrative Agent. Each Revolving Credit Lender shall make an amount equal to its Applicable Revolving Credit Percentage of the amount specified in such Loan Notice available to the Administrative Agent in immediately available funds (and the Administrative Agent may apply Cash Collateral available with respect to the applicable Swing Line Loan) for the account of the Swing Line Lender at the Administrative Agent’s Office not later than 1:00 p.m. on the day specified in such Loan Notice, whereupon, subject to Section 2.04(c)(ii), each Revolving Credit Lender that so makes funds available shall be deemed to have made a Base Rate Revolving Loan to the Company in such amount. The Administrative Agent shall remit the funds so received to the Swing Line Lender.

 

(ii)    If for any reason any Swing Line Loan cannot be refinanced by such a Revolving Credit Borrowing in accordance with Section 2.04(c)(i), the request for Base Rate Revolving Loans submitted by the Swing Line Lender as set forth herein shall be deemed to be a request by the Swing Line Lender that each of the Revolving Credit Lenders fund its risk participation in the relevant Swing Line Loan and each Revolving Credit Lender’s payment to the Administrative Agent for the account of the Swing Line Lender pursuant to Section 2.04(c)(i) shall be deemed payment in respect of such participation.

 

(iii)    If any Revolving Credit Lender fails to make available to the Administrative Agent for the account of the Swing Line Lender any amount required to be paid by such Revolving Credit Lender pursuant to the foregoing provisions of this Section 2.04(c) by the time specified in Section 2.04(c)(i), the Swing Line Lender shall be entitled to recover from such Revolving Credit Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the Swing Line Lender at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the Swing Line Lender in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Swing Line Lender in connection with the foregoing. If such Revolving Credit Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lender’s Revolving Credit Loan included in the relevant Revolving Credit Borrowing or funded participation in the relevant Swing Line Loan, as the case may be. A certificate of the Swing Line Lender submitted to any Revolving Credit Lender (through the Administrative Agent) with respect to any amounts owing under this clause (iii) shall be conclusive absent manifest error.

 

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(iv)    Each Revolving Credit Lender’s obligation to make Revolving Credit Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.04(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Revolving Credit Lender may have against the Swing Line Lender, the Company or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Revolving Credit Lender’s obligation to make Revolving Credit Loans pursuant to this Section 2.04(c) is subject to the conditions set forth in Section 4.02. No such funding of risk participations shall relieve or otherwise impair the obligation of the Company to repay Swing Line Loans, together with interest as provided herein.

 

(d)    Repayment of Participations.

 

(i)    At any time after any Revolving Credit Lender has purchased and funded a risk participation in a Swing Line Loan, if the Swing Line Lender receives any payment on account of such Swing Line Loan, the Swing Line Lender will distribute to such Revolving Credit Lender its Applicable Revolving Credit Percentage thereof in the same funds as those received by the Swing Line Lender.

 

(ii)    If any payment received by the Swing Line Lender in respect of principal or interest on any Swing Line Loan is required to be returned by the Swing Line Lender under any of the circumstances described in Section 10.05 (including pursuant to any settlement entered into by the Swing Line Lender in its discretion), each Revolving Credit Lender shall pay to the Swing Line Lender its Applicable Revolving Credit Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per annum equal to the Federal Funds Rate. The Administrative Agent will make such demand upon the request of the Swing Line Lender. The obligations of the Revolving Credit Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.

 

(e)    Interest for Account of Swing Line Lender. The Swing Line Lender shall be responsible for invoicing the Company for interest on the Swing Line Loans. Until each Revolving Credit Lender funds its Base Rate Revolving Loan or risk participation pursuant to this Section 2.04 to refinance such Revolving Credit Lender’s Applicable Revolving Credit Percentage of any Swing Line Loan, interest in respect of such Applicable Revolving Credit Percentage shall be solely for the account of the Swing Line Lender.

 

(f)    Payments Directly to Swing Line Lender. The Company shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.

 

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2.05    Prepayments.

 

(a)    The Borrowers may, upon notice from the Company to the Administrative Agent, at any time or from time to time voluntarily prepay Revolving Credit Loans or Term Loans in whole or in part without premium or penalty; provided that (i) such notice must be in a form reasonably acceptable to the Administrative Agent and be received by the Administrative Agent not later than 9:00 a.m. (A) three Business Days prior to any date of prepayment of Eurodollar Rate Loans and (B) on the date of prepayment of Base Rate Loans; (ii) any prepayment of Eurodollar Rate Loans shall be in a principal amount of $3,000,000 or a whole multiple of $1,000,000 in excess thereof; and (iii) any prepayment of Base Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $100,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid and, if Eurodollar Rate Loans are to be prepaid, the Interest Period(s) of such Loans. The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender’s Applicable Percentage of such prepayment (based on such Lender’s Applicable Percentage in respect of the relevant Facility). If such notice is given by the Company, the Borrowers shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any notice of prepayment given pursuant to this Section 2.05(a) may be conditioned upon the consummation of other financing, and may be rescinded or extended for a reasonable period upon written notice to the Administrative Agent if such other financing is not consummated on the anticipated date. Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05. Subject to Section 2.16, each such prepayment shall be applied to the Loans of the Lenders in accordance with their respective Applicable Percentages. Each prepayment of the outstanding Term Loans pursuant to this Section 2.05(a) shall be applied to the principal repayment installments thereof on a pro rata basis. Subject to Section 2.16, such prepayment shall be applied to the Loans of the Lenders in accordance with their respective Applicable Percentages in respect of each of the relevant Facilities.

 

(b)    The Borrowers may, upon notice from the Company to the Swing Line Lender (with a copy to the Administrative Agent), at any time or from time to time, voluntarily prepay Swing Line Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Swing Line Lender and the Administrative Agent not later than 10:00 a.m. on the date of the prepayment, and (ii) any such partial prepayment shall be in a minimum principal amount of $100,000. Each such notice shall specify the date and amount of such prepayment. If such notice is given by the Company, the Borrowers shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.

 

(c)    If the Administrative Agent notifies the Company at any time that the Total Revolving Credit Outstandings at such time exceed the aggregate Revolving Credit Commitments then in effect, then, within two Business Days after receipt of such notice, the Borrowers shall prepay Loans and/or Cash Collateralize the L/C Obligations in an aggregate amount sufficient to reduce such Outstanding Amount as of such date of payment to an amount not to exceed the difference of 100% of the Aggregate Commitments then in effect less $250,000; provided, however, that the Borrowers shall not be required to Cash Collateralize the L/C Obligations pursuant to this Section 2.05(c) unless after the prepayment in full of the Revolving Credit Loans and Swing Line Loans the Total Revolving Credit Outstandings exceed the aggregate Revolving Credit Commitments then in effect. The Administrative Agent may, at any time and from time to time after the initial deposit of such Cash Collateral, request that additional Cash Collateral be provided in order to reasonably protect against the results of further exchange rate fluctuations.

 

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(d)    If the Administrative Agent notifies the Company at any time that the Outstanding Amount of all Letters of Credit at such time exceeds (as a result of fluctuations in exchange rates or for any other reason) an amount equal to 105% of the Letter of Credit Sublimit then in effect, then, within two Business Days after receipt of such notice, the Borrowers shall Cash Collateralize L/C Obligations in an aggregate amount sufficient to reduce such Outstanding Amount as of such date of payment to an amount not to exceed 100% of the Letter of Credit Sublimit then in effect.

 

2.06    Termination or Reduction of Commitments. 

 

(a)        The Borrowers may, upon notice from the Company to the Administrative Agent, terminate the Aggregate Commitments, the Letter of Credit Sublimit, the Financial Letter of Credit Sublimit or the Swing Line Sublimit, or from time to time permanently reduce the Aggregate Commitments, the Letter of Credit Sublimit, the Financial Letter of Credit Sublimit or the Swing Line Sublimit; provided that (a) any such notice shall be received by the Administrative Agent not later than 9:00 a.m. five Business Days prior to the date of termination or reduction, (b) any such partial reduction shall be in an aggregate amount of $10,000,000 or any whole multiple of $1,000,000 in excess thereof, (c) the Borrowers shall not terminate or reduce (i) the Aggregate Commitments if, after giving effect thereto and to any concurrent prepayments hereunder, the Total Outstandings would exceed the Aggregate Commitments, (ii) the Letter of Credit Sublimit if, after giving effect thereto, the Outstanding Amount of L/C Obligations not fully Cash Collateralized hereunder would exceed the Letter of Credit Sublimit, (iii) the Financial Letter of Credit Sublimit if, after giving effect thereto, the Outstanding Amount of L/C Obligations not fully Cash Collateralized hereunder would exceed the Financial Letter of Credit Sublimit or (iv) the Swing Line Sublimit if, after giving effect thereto and to any concurrent prepayments hereunder, the Outstanding Amount of Swing Line Loans would exceed the Swing Line Sublimit, and (d) if, after giving effect to any termination or reduction of the Aggregate Commitments, the Letter of Credit Sublimit or the Swing Line Sublimit exceeds the amount of the Aggregate Commitments, such sublimit shall be automatically reduced by the amount of such excess. The Administrative Agent will promptly notify the Lenders of any such notice of termination or reduction of the Letter of Credit Sublimit, Financial Letter of Credit Sublimit, Swing Line Sublimit or Aggregate Commitments. Any reduction of the Aggregate Commitments shall be applied to the Commitment of each Lender according to its Applicable Percentage. All fees accrued until the effective date of any termination of the Aggregate Commitments shall be paid on the effective date of such termination. Any notice of termination or reduction given pursuant to this Section 2.06 may be conditioned upon the consummation of other financing, and may be rescinded or extended for a reasonable period upon written notice to the Administrative Agent if such other financing is not consummated on the anticipated date.

 

(b)         On the Amendment No. 3 Effective Date, the Revolving Credit Commitments shall be permanently reduced to $275,000,000. All fees accrued until the Amendment No. 3 Effective Date shall be paid on such date.

 

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2.07    Repayment of Loans.

 

(a)     Revolving Credit Loans. The Borrowers shall repay to the Revolving Credit Lenders on the Maturity Date the aggregate principal amount of Revolving Credit Loans outstanding on such date.

 

(b)     Swing Line Loans. The Borrowers shall repay each Swing Line Loan on the earlier to occur of (i) the date ten Business Days after such Loan is made and (ii) the Maturity Date.

 

(c)    Term Loans. The Borrowers shall repay to the Term Lenders an amount equal to 1.25% of the aggregate initial principal amount of all Term Loans outstanding on the last Business Day of each March, June, September and December, commencing on the last Business Day of September 2018, and a final payment on the Maturity Date in an amount equal to the aggregate principal amount of all Term Loans outstanding on such date (each such day, a “Repayment Date”).

 

2.08    Interest.

 

(a)      Subject to the provisions of subsection (b) below, (i) each Eurodollar Rate Loan under a Facility shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Rate for such Facility; (ii) each Base Rate Loan under a Facility shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate for such Facility; and (iii) each Swing Line Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate for the Revolving Credit Facility.

 

(b)     (i)      If any amount of principal of any Loan is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

 

(ii)    If any amount (other than principal of any Loan) payable by the Borrowers under any Loan Document is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, then upon the request of the Required Lenders, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

 

(iii)   Upon the request of the Required Lenders and after written notice to the Company, while any Event of Default exists (other than as set forth in clauses (b)(i) and (b)(ii) above), the Borrowers shall pay interest on the principal amount of all outstanding Obligations hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

 

(iv)    Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

 

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(c)    Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

 

2.09    Fees. In addition to certain fees described in subsections (h) and (i) of Section 2.03:

 

(a)    Commitment Fee. The Borrowers shall pay to the Administrative Agent for the account of each Lender in accordance with its Applicable Revolving Credit Percentage, a commitment fee in Dollars equal to the Applicable Rate times the actual daily amount by which the Revolving Credit Facility exceeds the sum of (i) the Outstanding Amount of Revolving Credit Loans and (ii) the Outstanding Amount of L/C Obligations, subject to adjustment as provided in Section 2.16. For the avoidance of doubt, the Outstanding Amount of Swing Line Loans shall not be counted towards or considered usage of the Revolving Credit Facility for purposes of determining the commitment fee. The commitment fee shall accrue at all times during the Availability Period, including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the Closing Date, and on the last day of the Availability Period for the Revolving Credit Facility. The commitment fee shall be calculated quarterly in arrears, and if there is any change in the Applicable Rate during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.

 

(b)    Other Fees. 

 

(i)    The Borrowers shall pay to the Arrangers and the Administrative Agent for their own respective accounts, in Dollars, fees in the amounts and at the times specified in their respective Fee Letters. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

 

(ii)    The Borrowers shall pay to the Lenders, in Dollars, such fees as shall have been separately agreed upon in writing in the amounts and at the times so specified. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

 

2.10    Computation of Interest and Fees; Retroactive Adjustments of Applicable Rate.

 

(a)    All computations of interest for Base Rate Loans (including Base Rate Loans determined by reference to the Eurodollar Rate) shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year). Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.12(a), bear interest for one day. Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

 

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(b)    If, as a result of any restatement of or other adjustment to the financial statements of the Company or for any other reason, the Company or the Lenders determine that (i) the Consolidated Leverage Ratio as calculated by the Borrowers as of any applicable date was inaccurate and (ii) a proper calculation of the Consolidated Leverage Ratio would have resulted in higher pricing for such period, the Borrowers shall promptly and retroactively be obligated to pay to the Administrative Agent for the account of the applicable Lenders or the L/C Issuer, as the case may be, promptly on demand by the Administrative Agent (or, after the occurrence of an actual or deemed entry of an order for relief with respect to any Borrower under the Bankruptcy Code of the United States, automatically and without further action by the Administrative Agent, any Lender or the L/C Issuer), an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period. This paragraph shall not limit the rights of the Administrative Agent, any Lender or the L/C Issuer, as the case may be, under Section 2.03(c)(iii), 2.03(h) or 2.08(b) or under Article VIII. The Borrowers’ obligations under this paragraph shall survive the termination of the Aggregate Commitments and the repayment of all other Obligations hereunder for a period of twelve (12) months following the date of such termination and repayment.

 

2.11    Evidence of Debt.

 

(a)    The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrowers and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of any Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, the Borrowers shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall evidence such Lender’s Loans in addition to such accounts or records. Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto.

 

(b)    In addition to the accounts and records referred to in subsection (a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing Line Loans. In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.

 

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2.12    Payments Generally; Administrative Agent’s Clawback.

 

(a)    General. All payments to be made by the Borrowers shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrowers hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent’s Office in Dollars and in immediately available funds not later than 11:00 a.m. on the date specified herein. The Administrative Agent will promptly distribute to each Lender its Applicable Percentage (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office. All payments received by the Administrative Agent after 11:00 a.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by the Borrowers shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.

 

(b)    (i) Funding by Lenders; Presumption by Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing of Eurodollar Rate Loans (or, in the case of any Borrowing of Base Rate Loans, prior to 10:00 a.m. on the date of such Borrowing) that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.02 (or, in the case of a Borrowing of Base Rate Loans, that such Lender has made such share available in accordance with and at the time required by Section 2.02) and may, in reliance upon such assumption, make available to the Borrowers a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrowers severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to the Borrowers to but excluding the date of payment to the Administrative Agent, at (A) in the case of a payment to be made by such Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing, and (B) in the case of a payment to be made by the Borrowers, the interest rate applicable to Base Rate Loans. If the Borrowers and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrowers the amount of such interest paid by the Borrowers for such period. If such Lender pays its share of the applicable Borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Loan included in such Borrowing. Any payment by the Borrowers shall be without prejudice to any claim the Borrowers may have against a Lender that shall have failed to make such payment to the Administrative Agent.

 

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(ii)    Payments by Borrowers; Presumptions by Administrative Agent. Unless the Administrative Agent shall have received notice from the Company prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the L/C Issuer hereunder that the Borrowers will not make such payment, the Administrative Agent may assume that the Borrowers have made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Appropriate Lenders or the L/C Issuer, as the case may be, the amount due. In such event, if the Borrowers have not in fact made such payment, then each of the Appropriate Lenders or the L/C Issuer, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or the L/C Issuer, in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

 

A notice of the Administrative Agent to any Lender or the Company with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error.

 

(c)    Failure to Satisfy Conditions Precedent. If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrowers by the Administrative Agent because the conditions to the applicable Credit Extension set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.

 

(d)    Obligations of Lenders Several. The obligations of the Lenders hereunder to make Term Loans and Revolving Credit Loans, to fund participations in Letters of Credit and Swing Line Loans and to make payments pursuant to Section 10.04(c) are several and not joint. The failure of any Lender to make any Loan, to fund any such participation or to make any payment under Section 10.04(c) on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan, to purchase its participation or to make its payment under Section 10.04(c).

 

(e)    Funding Source. Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.

 

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2.13    Sharing of Payments by Lenders. If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of Obligations due and payable to such Lender hereunder and under the other Loan Documents at such time in excess of its ratable share (according to the proportion of (x) the amount of such Obligations due and payable to such Lender at such time to (b) the aggregate amount of the Obligations due and payable to all Lenders hereunder and under the other Loan Documents at such time) of payments on account of the Obligations due and payable to all Lenders hereunder and under the other Loan Documents at such time obtained by all the Lenders at such time, then the Lender receiving such greater proportion shall (y) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Revolving Credit Loans and subparticipations in L/C Obligations and Swing Line Loans of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Credit Loans and other amounts owing them, provided that:

 

(i)    if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and

 

(ii)    the provisions of this Section shall not be construed to apply to (x) any payment made by or on behalf of the Borrowers pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender), (y) the application of Cash Collateral provided for in Section 2.15, or (z) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Revolving Credit Loans or subparticipations in L/C Obligations or Swing Line Loans to any assignee or participant, other than an assignment to any Borrower or any Subsidiary thereof (as to which the provisions of this Section shall apply).

 

Each Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Borrower in the amount of such participation.

 

2.14    Increase in Commitments.

 

(a)    Borrower Request. The Company may by written notice to the Administrative Agent elect to request (x) prior to the Maturity Date for the Revolving Credit Facility, an increase to the existing Revolving Credit Commitments (each, an “Incremental Revolving Commitment”) and/or (y) the establishment of one or more new term loan commitments (each, an “Incremental Term Commitment”), by an aggregate amount for clauses (x) and (y) together not in excess of $200,000,000. Each such notice shall specify (i) the date (each, an “Increase Effective Date”) on which the Company proposes that the Incremental Commitments shall be effective, which shall be a date not less than 15 Business Days (or such earlier date as the Company and the Administrative Agent may mutually agree) after the date on which such notice is delivered to the Administrative Agent, (ii) at the election of the Company, in consultation with the Administrative Agent, the identity of each Eligible Assignee to whom the Company proposes any portion of such Incremental Commitments be allocated and the amounts of such allocations, if such Eligible Assignees and allocations have been agreed; provided that any existing Lender approached to provide all or a portion of the Incremental Commitments may elect or decline, in its sole discretion, to provide such Incremental Commitment; and (iii) the time period within which each Lender and Proposed New Lender is requested to respond (which shall in no event be less than ten Business Days from the date of delivery of such notice). Each Incremental Commitment shall be in a minimum amount of $20,000,000 or any whole multiple of $5,000,000 in excess thereof, or such lesser amount as reasonably acceptable to the Administrative Agent. The Company may make a maximum of four such requests. The Company may also invite additional Eligible Assignees to become Lenders pursuant to a joinder agreement in form and substance reasonably satisfactory to the Administrative Agent. No Incremental Revolving Commitment shall increase (i) the Letter of Credit Sublimit or the Financial Letter of Credit Sublimit without the consent of the L/C Issuer or (ii) the Swing Line Sublimit without the consent of the Swing Line Lender.

 

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(b)    Lender Elections to Increase. Each Lender and any other Eligible Assignee to whom the Company has provided an opportunity to participate in an Incremental Commitment (a “Proposed New Lender”) shall notify the Administrative Agent within such time period whether or not it agrees to provide such Incremental Commitment and, if so, (i) with respect to a Lender, whether by an amount equal to, greater than, or less than its Applicable Percentage of such requested increase, and (ii) with respect to a Proposed New Lender, the amount committed by such Proposed New Lender (any such notice to the Administrative Agent being herein a “Lender Increase Notice”). Any Lender or Proposed New Lender not responding within such time period shall be deemed to have declined to provide an Incremental Commitment.

 

(c)    Notification by Administrative Agent; Additional Lenders. The Administrative Agent shall notify the Company and each Lender of the Lenders’ and Proposed New Lenders’ responses to each request made hereunder. Any Proposed New Lender shall be reasonably acceptable to the Administrative Agent and the Company and, in the case of an Incremental Revolving Commitment only, the L/C Issuer and the Swing Line Lender (which consent shall not be unreasonably withheld); and any Proposed New Lender shall become a “Lender” party hereto (and shall hereinafter be referred to as a “Lender” in this Section) in connection with such increase. If the Company shall not have arranged any Proposed New Lender(s) to commit to any shortfall from the Lender Increase Notices, then the Company shall be deemed to have reduced the amount of such Incremental Commitment to the aggregate amount set forth in the Lender Increase Notices. In the event that the aggregate Incremental Commitments set forth in the Lender Increase Notices exceed the amount requested by the Company, the Company shall have the right, in consultation with the Administrative Agent, to allocate the amount of increases necessary to meet the Company’s requested increase. The Company shall promptly notify the Administrative Agent, the Lenders and any Proposed New Lenders of the final allocation of such increase and the Increase Effective Date.

 

(d)    Conditions. The Incremental Commitments shall become effective as of the Increase Effective Date; provided that:

 

(i)    the Company shall deliver to the Administrative Agent a certificate of each Loan Party dated as of the Increase Effective Date (in sufficient copies for each Lender) signed by a Responsible Officer of such Loan Party (x) certifying and attaching the resolutions adopted by such Loan Party approving or consenting to such increase, and (y) in the case of each Borrower, certifying that, before and after giving effect to such Incremental Revolving Commitment, (A) the representations and warranties contained in Article V and the other Loan Documents are true and correct in all material respects on and as of the Increase Effective Date, except to the extent that such representations and warranties are qualified by materiality, in which case such representations and warranties and true and correct in all respects, and except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and except that for purposes of this Section 2.14, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b), respectively, of Section 6.01, and (B) no Default or Event of Default exists;

 

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(ii)    on a pro forma basis, the Borrowers shall be in compliance with each of the covenants set forth in Section 7.12 as of the end of the latest fiscal quarter for which internal financial statements are available;

 

(iii)    the Borrowers shall make any breakage payments arising as a result of the circumstances described in Section 3.05 in connection with any adjustment of Revolving Credit Loans pursuant to Section 2.14(f);

 

(iv)    all fees required to be paid by the Borrowers on or before the Increase Effective Date shall have been paid; and

 

(v)    the Company (for itself or on behalf of any Loan Party) shall deliver or cause to be delivered officer’s certificates and legal opinions of the type delivered on the Closing Date pursuant to Section 4.01(a)(v) through (vii) to the extent reasonably requested by, and in form and substance reasonably satisfactory to, the Administrative Agent.

 

(e)    Terms of New Loans and Commitments. The terms and provisions of Loans made pursuant to Incremental Commitments shall be as follows and, in each case, as to other terms and conditions not set forth below, as reasonably acceptable to the Administrative Agent and the relevant Lenders:

 

(i)    terms and provisions of Incremental Term Loans shall be, except as otherwise set forth herein or in the Increase Joinder, identical to the Term Loans (it being understood that Incremental Term Loans may be a part of the Term Loans) and to the extent that the terms and provisions of Incremental Term Loans are not identical to the Term Loans (except to the extent permitted by clause (iii), (iv) or (v) below) they shall be reasonably satisfactory to the Administrative Agent; provided that in any event the Incremental Term Loans must comply with clauses (iii), (iv) and (v) below;

 

(ii)    the terms and provisions of Revolving Credit Loans made pursuant to new Commitments shall be identical to the Revolving Credit Loans;

 

(iii)    the weighted average life to maturity of any Incremental Term Loans shall be no shorter than the remaining weighted average life to maturity of the then existing Term Loans;

 

(iv)    the maturity date of Incremental Term Loans (the “Incremental Term Loan Maturity Date”) shall not be earlier than the then Latest Maturity Date;

 

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(v)    terms as to prepayments and amortization and pricing for Incremental Term Loans shall be reasonably acceptable to the Administrative Agent and the relevant Lenders (it being understood that terms that are no less favorable to the Borrowers than those of any existing Incremental Term Facility shall be acceptable to the Administrative Agent); and

 

(vi)    the Incremental Term Loans shall not contain additional or different covenants or financial covenants which are more restrictive in any material respect than the covenants in the Loan Documents at the time of the incurrence of such Incremental Term Loan unless either (A) such covenants benefit all of the Lenders or are otherwise consented to by the Administrative Agent or (B) such covenants apply only after the Facility Termination Date.

 

The Incremental Commitments shall be effected by a joinder agreement (the “Increase Joinder”) executed by the Borrowers, the Administrative Agent, each Lender and each Proposed New Lender making such Incremental Commitment, in form and substance reasonably satisfactory to each of them. Notwithstanding the provisions of Section 10.01, the Increase Joinder may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent, to effect the provisions and intent of this Section 2.14. In addition, unless otherwise specifically provided herein, all references in the Loan Documents to Revolving Credit Loans or Term Loans shall be deemed, unless the context otherwise requires, to include references to Revolving Credit Loans made pursuant to Incremental Revolving Commitments and Incremental Term Loans that are Term Loans, respectively, made pursuant to this Agreement.

 

(f)    Adjustment of Revolving Credit Loans. To the extent the Commitments being increased on the relevant Increase Effective Date are Incremental Revolving Commitments, then each Revolving Credit Lender that is acquiring an Incremental Revolving Commitment on the Increase Effective Date shall make a Revolving Credit Loan to the Borrowers, the proceeds of which will be used to prepay the Revolving Credit Loans of the other Revolving Credit Lenders immediately prior to such Increase Effective Date, so that, after giving effect thereto, the Revolving Credit Loans outstanding are held by the Revolving Credit Lenders pro rata based on their Revolving Credit Commitments after giving effect to such Increase Effective Date. If there is a new borrowing of Revolving Credit Loans on such Increase Effective Date, the Revolving Credit Lenders after giving effect to such Increase Effective Date shall make such Revolving Credit Loans in accordance with Section 2.01(b).

 

(g)    Making of New Term Loans. On any Increase Effective Date on which new Commitments for Term Loans are effective, subject to the satisfaction of the foregoing terms and conditions, each Lender of such new Commitment shall make a Term Loan to the Borrowers in an amount equal to its new Commitment.

 

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(h)    Equal and Ratable Benefit. The Loans and Commitments established pursuant to this Section shall constitute Loans and Commitments hereunder, and shall be entitled to all the benefits afforded by this Agreement and the other Loan Documents, and shall, without limiting the foregoing, benefit equally and ratably from the Guaranty (including without limitation any Joinder Agreement) and security interests created by the Collateral Documents, except that the new Loans may be subordinated in right of payment or the Liens securing the new Loans may be subordinated, in each case, to the extent set forth in the Increase Joinder. The Loan Parties shall take any actions reasonably required by the Administrative Agent to ensure and/or demonstrate that the Lien and security interests granted by the Collateral Documents continue to be perfected under the Uniform Commercial Code or otherwise after giving effect to the establishment of any such class of Term Loans or any such new Commitments.

 

(i)    Most Favored Lender. If at any time an Increase Joinder includes, or an Incremental Commitment is subject to, any negative or financial covenant which is not contained in this Agreement, then, effective on the date of execution of such Increase Joinder or other document, as the case may be, such covenants and related definitions (collectively, the “Incorporated Covenants”) shall then and thereupon (mutatis mutandis) be deemed to have been incorporated herein; and any breach or event of default in respect of any such Incorporated Covenant shall, subject to the foregoing and the lapse of any grace or cure period provided under the applicable Increase Joinder, be deemed to be an Event of Default hereunder subject to all applicable terms and provisions of this Agreement, including, without limitation, the right of the Required Lenders to waive or not waive any breach thereof (independent of any right of any other creditor of any Borrower or such Subsidiary in respect of any such Incorporated Covenants). Notwithstanding the foregoing, any amendment, elimination or termination of, or waiver or consent with respect to, any such Incorporated Covenant by the parties to such Increase Joinder or other document (including as a result of the termination or repayment in full of the Incremental Commitment with respect to which such Incorporated Covenants have become effective) shall then and thereupon (mutatis mutandis) constitute an amendment, elimination or termination, as the case may be, of, or waiver or consent with respect to, such Incorporated Covenant hereunder.

 

(j)    Conflicting Provisions. This Section shall supersede any provisions in Section 2.13 or 10.01 to the contrary.

 

2.15    Cash Collateral.

 

(a)    Certain Credit Support Events. If (i) the L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Borrowing, (ii) as of the Letter of Credit Expiration Date, any L/C Obligation for any reason remains outstanding, (iii) the Borrowers shall be required to provide Cash Collateral pursuant to Section 8.02(c), or (iv) there shall exist a Defaulting Lender, the Borrowers shall immediately (in the case of clause (iii) above) or within one Business Day (in all other cases) following any request by the Administrative Agent or the L/C Issuer, provide Cash Collateral in an amount not less than the applicable Minimum Collateral Amount (determined in the case of Cash Collateral provided pursuant to clause (iv) above, after giving effect to Section 2.16(a)(iv) and any Cash Collateral provided by the Defaulting Lender).

 

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(b)    Grant of Security Interest. Each Borrower, and to the extent provided by any Defaulting Lender, such Defaulting Lender, hereby grants to (and subjects to the control of) the Administrative Agent, for the benefit of the Administrative Agent, the L/C Issuer and the Lenders, and agrees to maintain, a first priority security interest in all such cash, deposit accounts and all balances therein, and all other property so provided as collateral pursuant hereto, and in all proceeds of the foregoing, all as security for the obligations to which such Cash Collateral may be applied pursuant to Section 2.15(c). If at any time the Administrative Agent determines that Cash Collateral is subject to any right or claim of any Person other than the Administrative Agent or the L/C Issuer as herein provided, or that the total amount of such Cash Collateral is less than the Minimum Collateral Amount, the Borrowers will, promptly upon demand by the Administrative Agent, pay or provide to the Administrative Agent additional Cash Collateral in an amount sufficient to eliminate such deficiency. All Cash Collateral (other than credit support not constituting funds subject to deposit) shall be maintained in blocked deposit accounts at Bank of America. The Borrowers shall pay on demand therefor from time to time all customary account opening, activity and other administrative fees and charges in connection with the maintenance and disbursement of Cash Collateral.

 

(c)    Application. Notwithstanding anything to the contrary contained in this Agreement, Cash Collateral provided under any of this Section 2.15 or Sections 2.03, 2.04, 2.05, 2.16 or 8.02 in respect of Letters of Credit shall be held and applied to the satisfaction of the specific L/C Obligations, obligations to fund participations therein (including, as to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation) and other obligations for which the Cash Collateral was so provided, prior to any other application of such property as may otherwise be provided for herein.

 

(d)    Release. Cash Collateral (or the appropriate portion thereof) provided to reduce Fronting Exposure or to secure other obligations shall be released promptly following (i) the elimination of the applicable Fronting Exposure or other obligations giving rise thereto (including by the termination of Defaulting Lender status of the applicable Lender (or, as appropriate, its assignee following compliance with Section 10.06(b)(vi))) or (ii) the determination by the Administrative Agent and the L/C Issuer that there exists excess Cash Collateral; provided, however, (x) any such release shall be without prejudice to, and any disbursement or other transfer of Cash Collateral shall be and remain subject to, any other Lien conferred under the Loan Documents and the other applicable provisions of the Loan Documents, and (y) the Person providing Cash Collateral and the L/C Issuer may agree that Cash Collateral shall not be released but instead held to support future anticipated Fronting Exposure or other obligations.

 

2.16    Defaulting Lenders.

 

(a)    Adjustments. Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as that Lender is no longer a Defaulting Lender, to the extent permitted by applicable Law:

 

(i)    Waivers and Amendments. Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of “Required Lenders” and Section 10.01.

 

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(ii)    Reallocation of Payments. Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article VIII or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 10.08 shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the L/C Issuer or Swing Line Lender hereunder; third, to Cash Collateralize the L/C Issuer’s Fronting Exposure with respect to such Defaulting Lender in accordance with Section 2.15; fourth, as the Borrowers may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and the Company, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement and (y) Cash Collateralize the L/C Issuer’s future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Agreement, in accordance with Section 2.15; sixth, to the payment of any amounts owing to the Lenders, the L/C Issuer or Swing Line Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, the L/C Issuer or the Swing Line Lender against that Defaulting Lender as a result of that Defaulting Lender’s breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrowers as a result of any judgment of a court of competent jurisdiction obtained by the Borrowers against that Defaulting Lender as a result of that Defaulting Lender's breach of its obligations under this Agreement; and eighth, to that Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans or L/C Borrowings in respect of which that Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made or the related Letters of Credit were issued at a time when the conditions set forth in Section 4.02 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and L/C Obligations owed to, all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or L/C Obligations owed to, that Defaulting Lender until such time as all Loans and funded and unfunded participations in L/C Obligations and Swing Line Loans are held by the Lenders pro rata in accordance with the Commitments hereunder without giving effect to Section 2.16(a)(iv). Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 2.16(a)(ii) shall be deemed paid to and redirected by that Defaulting Lender, and each Lender irrevocably consents hereto.

 

(iii)    Certain Fees. 

 

(A)    No Defaulting Lender shall be entitled to receive any commitment fee pursuant to Section 2.09(a) for any period during which that Lender is a Defaulting Lender (and the Borrowers shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).

 

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(B)    Subject to Section 2.16(a)(ii), each Defaulting Lender shall be entitled to receive Letter of Credit Fees for any period during which that Lender is a Defaulting Lender only to the extent allocable to its Applicable Percentage of the stated amount of Letters of Credit for which it has provided Cash Collateral pursuant to Section 2.15.

 

(C)    With respect to any fee payable pursuant to Section 2.09(a) or any Letter of Credit Fee not required to be paid to any Defaulting Lender pursuant to clause (A) or (B) above, the Borrowers shall (x) pay to each Non-Defaulting Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lender’s participation in L/C Obligations or Swing Line Loans that has been reallocated to such Non-Defaulting Lender pursuant to clause (iv) below, (y) pay to the L/C Issuer and Swing Line Lender, as applicable, the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to the L/C Issuer’s or Swing Line Lender’s Fronting Exposure to such Defaulting Lender, and (z) not be required to pay the remaining amount of any such fee.

 

(iv)    Reallocation of Applicable Percentages to Reduce Fronting Exposure. All or any part of such Defaulting Lender’s participation in L/C Obligations and Swing Line Loans shall be reallocated among the Non-Defaulting Lenders in accordance with their respective Applicable Percentages (calculated without regard to such Defaulting Lender’s Commitment) upon prior notice to the Company and such Non-Defaulting Lenders, but only to the extent that (x) the conditions set forth in Section 4.02 are satisfied at the time of such reallocation (and, unless the Company shall have otherwise notified the Administrative Agent promptly after receipt of notice of such reallocation, the Borrowers shall be deemed to have represented and warranted that such conditions are satisfied at such time), and (y) such reallocation does not cause the aggregate principal amount at such time of any Non-Defaulting Lender’s outstanding Revolving Credit Loans and such Non-Defaulting Lender’s participation in L/C Obligations and Swing Line Loans at such time to exceed such Non-Defaulting Lender’s Commitment. Subject to Section 10.22 no reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation.

 

(v)    Cash Collateral, Repayment of Swing Line Loans. If the reallocation described in clause (a)(iv) above cannot, or can only partially, be effected, the Borrowers shall, without prejudice to any right or remedy available to it hereunder or under applicable Law, (x) first, prepay Swing Line Loans in an amount equal to the Swing Line Lender’s Fronting Exposure and (y) second, Cash Collateralize the L/C Issuers’ Fronting Exposure in accordance with the procedures set forth in Section 2.15. The notice and minimum amount provisions of Section 2.05(b) shall not apply to any prepayments made pursuant to this Section 2.16(a)(v).

 

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(b)    Defaulting Lender Cure. If the Company, the Administrative Agent, Swing Line Lender and the L/C Issuer agree in writing that a Lender is no longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), that Lender will, to the extent applicable, purchase at par that portion of outstanding Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Revolving Credit Loans and funded and unfunded participations in Letters of Credit and Swing Line Loans to be held on a pro rata basis by the Lenders in accordance with their Applicable Percentages (without giving effect to Section 2.16(a)(iv)), whereupon that Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrowers while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.

 

ARTICLE III.  TAXES, YIELD PROTECTION AND ILLEGALITY

 

3.01    Taxes.

 

(a)    Payments Free of Taxes; Obligation to Withhold; Payments on Account of Taxes. (i) Any and all payments by or on account of any obligation of any Loan Party hereunder or under any other Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable Laws. If any applicable Laws (as determined in the good faith discretion of the Administrative Agent) require the deduction or withholding of any Tax from any such payment by the Administrative Agent or a Loan Party, then the Administrative Agent or such Loan Party shall be entitled to make such deduction or withholding, upon the basis of the information and documentation to be delivered pursuant to subsection (e) below.

 

(ii)    If any Loan Party or the Administrative Agent shall be required by the Code to withhold or deduct any Taxes, including both United States Federal backup withholding and withholding taxes, from any payment, then (A) the Administrative Agent shall withhold or make such deductions as are determined by the Administrative Agent to be required based upon the information and documentation it has received pursuant to subsection (e) below, (B) the Administrative Agent shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with the Code, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes, the sum payable by the applicable Loan Party shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section 3.01) the applicable Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made.

 

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(iii)    If any Loan Party or the Administrative Agent shall be required by any applicable Laws other than the Code to withhold or deduct any Taxes from any payment, then (A) such Loan Party or the Administrative Agent, as required by such Laws, shall withhold or make such deductions as are determined by it to be required based upon the information and documentation it has received pursuant to subsection (e) below, (B) such Loan Party or the Administrative Agent, to the extent required by such Laws, shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with such Laws, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes, the sum payable by the applicable Loan Party shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section 3.01) the applicable Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made.

 

(b)    Payment of Other Taxes by the Borrowers. Without limiting the provisions of subsection (a) above, the Borrowers shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.

 

(c)    Tax Indemnifications. (i) Each Borrower shall, and does hereby, jointly and severally, indemnify each Recipient, and shall make payment in respect thereof within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 3.01) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Company by a Lender or the L/C Issuer (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender or the L/C Issuer, shall be conclusive absent manifest error. Each Borrower shall, and does hereby, jointly and severally, indemnify the Administrative Agent, and shall make payment in respect thereof within 10 days after demand therefor, for any amount which a Lender or the L/C Issuer for any reason fails to pay indefeasibly to the Administrative Agent as required pursuant to Section 3.01(c)(ii) below.

 

(ii)    Each Lender and the L/C Issuer shall, and does hereby, severally indemnify, and shall make payment in respect thereof within 10 days after demand therefor, (x) the Administrative Agent against any Indemnified Taxes attributable to such Lender or the L/C Issuer (but only to the extent that the Borrowers have not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Borrowers to do so), (y) the Administrative Agent and the Borrowers, as applicable, against any Taxes attributable to such Lender’s failure to comply with the provisions of Section 10.06(d) relating to the maintenance of a Participant Register and (z) the Administrative Agent and the Borrowers, as applicable, against any Excluded Taxes attributable to such Lender or the L/C Issuer, in each case, that are payable or paid by the Administrative Agent or the Borrowers in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender and the L/C Issuer hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender or the L/C Issuer, as the case may be, under this Agreement or any other Loan Document against any amount due to the Administrative Agent under this clause (ii).

 

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(d)    Evidence of Payments.  Upon request by the Company or the Administrative Agent, as the case may be, after any payment of Taxes by the Borrowers or by the Administrative Agent to a Governmental Authority as provided in this Section 3.01, the Company shall deliver to the Administrative Agent or the Administrative Agent shall deliver to the Company, as the case may be, the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of any return required by Laws to report such payment or other evidence of such payment reasonably satisfactory to the Company or the Administrative Agent, as the case may be.

 

(e)    Status of Lenders; Tax Documentation. (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Company and the Administrative Agent, at the time or times reasonably requested by the Company or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Company or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Company or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Company or the Administrative Agent as will enable the Company or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 3.01(e)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

 

(ii)    Without limiting the generality of the foregoing, in the event that any Borrower is a U.S. Person,

 

(A)    any Lender that is a U.S. Person shall deliver to the Company and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Company or the Administrative Agent), executed copies of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

 

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(B)    any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Company and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Company or the Administrative Agent), whichever of the following is applicable:

 

(I)    in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed copies of IRS Form W-8BEN-E (or W-8BEN, as applicable) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN-E (or W-8BEN, as applicable) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

 

(II)    executed copies of IRS Form W-8ECI;

 

(III)    in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit K-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of any Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed copies of IRS Form W-8BEN-E (or W-8BEN, as applicable); or

 

(IV)    to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN-E (or W-8BEN, as applicable), a U.S. Tax Compliance Certificate substantially in the form of Exhibit K-2 or Exhibit K-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit K-4 on behalf of each such direct and indirect partner;

 

(C)    any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Company and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Company or the Administrative Agent), executed copies of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Company or the Administrative Agent to determine the withholding or deduction required to be made; and

 

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(D)    if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Company and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Company or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Company or the Administrative Agent as may be necessary for the Company and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

 

(iii)    Each Lender agrees that if any form or certification it previously delivered pursuant to this Section 3.01 expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Company and the Administrative Agent in writing of its legal inability to do so.

 

(f)    Treatment of Certain Refunds. Unless required by applicable Laws, at no time shall the Administrative Agent have any obligation to file for or otherwise pursue on behalf of a Lender or the L/C Issuer, or have any obligation to pay to any Lender or the L/C Issuer, any refund of Taxes withheld or deducted from funds paid for the account of such Lender or the L/C Issuer, as the case may be. If any Recipient determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified by the Borrowers or with respect to which the Borrowers have paid additional amounts pursuant to this Section, it shall pay to the Borrowers an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrowers under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) incurred by such Recipient, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that each Borrower, upon the request of the Recipient, agrees to repay the amount paid over to such Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Recipient in the event the Recipient is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this subsection, in no event will the applicable Recipient be required to pay any amount to the Borrowers pursuant to this subsection the payment of which would place the Recipient in a less favorable net after-Tax position than such Recipient would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid. This subsection shall not be construed to require any Recipient to make available its tax returns (or any other information relating to its taxes that it deems confidential) to any Borrower or any other Person.

 

(g)    Survival. Each party’s obligations under this Section 3.01 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender or the L/C Issuer, the termination of the Commitments and the repayment, satisfaction or discharge of all other Obligations.

 

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(h)    FATCA. For purposes of determining withholding Taxes imposed under the Foreign Account Tax Compliance Act (FATCA), from and after the Closing Date, the Borrowers and the Administrative Agent shall treat (and the Lenders hereby authorize the Administrative Agent to treat) this Agreement as not qualifying as a “grandfathered obligation” within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i).

 

3.02    Illegality. If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Loans whose interest is determined by reference to the Eurodollar Rate, or to determine or charge interest rates based upon the Eurodollar Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Company through the Administrative Agent, (i) any obligation of such Lender to make, maintain, fund or continue Eurodollar Rate Loans or to convert Base Rate Loans to Eurodollar Rate Loans shall be suspended, and (ii) if such notice asserts the illegality of such Lender making or maintaining Base Rate Loans the interest rate on which is determined by reference to the Eurodollar Rate component of the Base Rate, the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Eurodollar Rate component of the Base Rate, in each case until such Lender notifies the Administrative Agent and the Company that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, (x) the Borrowers shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurodollar Rate Loans of such Lender to Base Rate Loans (the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Eurodollar Rate component of the Base Rate), either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans and (y) if such notice asserts the illegality of such Lender determining or charging interest rates based upon the Eurodollar Rate, the Administrative Agent shall during the period of such suspension compute the Base Rate applicable to such Lender without reference to the Eurodollar Rate component thereof until the Administrative Agent is advised in writing by such Lender that it is no longer illegal for such Lender to determine or charge interest rates based upon the Eurodollar Rate. Upon any such prepayment or conversion, the Borrowers shall also pay accrued interest on the amount so prepaid or converted.

 

3.03    Inability to Determine Rates.

 

(a)    If in connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof, (i) the Administrative Agent determines that (A) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate Loan, or (B) adequate and reasonable means do not exist for determining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan or in connection with an existing or proposed Base Rate Loan (in each case with respect to this clause (i), “Impacted Loans”), or (ii) the Administrative Agent or the Required Lenders determine that for any reason the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Eurodollar Rate Loan, the Administrative Agent will promptly so notify the Company and each Lender. Thereafter, (x) the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended (to the extent of the affected Eurodollar Rate Loans or Interest Periods), and (y) in the event of a determination described in the preceding sentence with respect to the Eurodollar Rate component of the Base Rate, the utilization of the Eurodollar Rate component in determining the Base Rate shall be suspended, in each case until the Administrative Agent (or, in the case of a determination by the Required Lenders described in clause (ii) of Section 3.03(a), until the Administrative Agent upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrowers may revoke any pending request for a Borrowing of, conversion to or continuation of Eurodollar Rate Loans (to the extent of the affected Eurodollar Rate Loans or Interest Periods) or, failing that, will be deemed to have converted such request into a request for a Borrowing of Base Rate Loans in the amount specified therein.

 

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(b)    Notwithstanding the foregoing, if the Administrative Agent has made the determination described in clause (i) of Section 3.03(a), the Administrative Agent, in consultation with the Company, may establish an alternative interest rate for the Impacted Loans, in which case, such alternative rate of interest shall apply with respect to the Impacted Loans until (1) the Administrative Agent revokes the notice delivered with respect to the Impacted Loans under clause (i) of the first sentence of this Section, (2) the Required Lenders notify the Administrative Agent and the Company that such alternative interest rate does not adequately and fairly reflect the cost to such Lenders of funding the Impacted Loans, or (3) any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for such Lender or its applicable Lending Office to make, maintain or fund Loans whose interest is determined by reference to such alternative rate of interest or to determine or charge interest rates based upon such rate or any Governmental Authority has imposed material restrictions on the authority of such Lender to do any of the foregoing and provides the Administrative Agent and the Company written notice thereof.

 

(c)    Notwithstanding anything to the contrary in this Agreement or any other Loan Documents, if the Administrative Agent determines (which determination shall be conclusive absent manifest error), or the Company or Required Lenders notify the Administrative Agent (with, in the case of the Required Lenders, a copy to the Company) that the Company or Required Lenders (as applicable) have determined that:

 

(i)    adequate and reasonable means do not exist for ascertaining LIBOR for any requested Interest Period, including, without limitation, because the LIBOR Screen Rate is not available or published on a current basis and such circumstances are unlikely to be temporary; or

 

(ii)    the administrator of the LIBOR Screen Rate or a Governmental Authority having jurisdiction over the Administrative Agent has made a public statement identifying a specific date after which LIBOR or the LIBOR Screen Rate shall no longer be made available, or used for determining the interest rate of loans, provided that, at the time of such statement, there is no successor administrator that is satisfactory to the Administrative Agent that will continue to provide LIBOR after such specific date (such specific date, the “Scheduled Unavailability Date”); or

 

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(iii)    syndicated loans currently being executed, or that include language similar to that contained in this Section, are being executed or amended (as applicable) to incorporate or adopt a new benchmark interest rate to replace LIBOR;

 

then, reasonably promptly after such determination by the Administrative Agent or receipt by the Administrative Agent of such notice, as applicable, the Administrative Agent and the Company may amend this Agreement solely for the purpose of replacing LIBOR in accordance with this Section 3.03 with (x) one or more SOFR-Based Rates or (y) another alternate benchmark rate giving due consideration to any evolving or then existing convention for similar U.S. dollar denominated syndicated credit facilities for such alternative benchmarks and, in each case, including any mathematical or other adjustments agreed to by the Administrative Agent and the Company to such benchmark giving due consideration to any evolving or then existing convention for similar U.S. Dollar denominated syndicated credit facilities for such benchmarks, which adjustment or method for calculating such adjustment shall be published on an information service as selected by the Administrative Agent from time to time in its reasonable discretion and may be periodically updated (the “Adjustment;” and any such proposed rate, a “LIBOR Successor Rate”), and any such amendment shall become effective at 5:00 p.m. on the fifth Business Day after the Administrative Agent shall have posted such proposed amendment to all Lenders and the Company unless, prior to such time, Lenders comprising the Required Lenders have delivered to the Administrative Agent written notice that such Required Lenders (A) in the case of an amendment to replace LIBOR with a rate described in clause (x), object to the Adjustment; or (B) in the case of an amendment to replace LIBOR with a rate described in clause (y), object to such amendment; provided that for the avoidance of doubt, in the case of clause (A), the Required Lenders shall not be entitled to object to any SOFR-Based Rate contained in any such amendment. Such LIBOR Successor Rate shall be applied in a manner consistent with market practice; provided that to the extent such market practice is not administratively feasible for the Administrative Agent, such LIBOR Successor Rate shall be applied in a manner as otherwise reasonably determined by the Administrative Agent in consultation with the Company.

 

If no LIBOR Successor Rate has been determined and the circumstances under clause (i) above exist or the Scheduled Unavailability Date has occurred (as applicable), the Administrative Agent will promptly so notify the Company and each Lender. Thereafter, (x) the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended (to the extent of the affected Eurodollar Rate Loans or Interest Periods), and (y) the Eurodollar Rate component shall no longer be utilized in determining the Base Rate. Upon receipt of such notice, the Company may revoke any pending request for a Borrowing of, conversion to or continuation of Eurodollar Rate Loans (to the extent of the affected Eurodollar Rate Loans or Interest Periods) or, failing that, will be deemed to have converted such request into a request for a Borrowing of Base Rate Loans (subject to the foregoing clause (y)) in the amount specified therein.

 

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Notwithstanding anything else herein, any definition of LIBOR Successor Rate shall provide that in no event shall such LIBOR Successor Rate be less than 0.75% for purposes of this Agreement.

 

In connection with the implementation of a LIBOR Successor Rate, the Administrative Agent will have the right to make LIBOR Successor Rate Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such LIBOR Successor Rate Conforming Changes will become effective without any further action or consent of any other party to this Agreement; provided that, with respect to any such amendment effected, the Administrative Agent shall post each such amendment implementing such LIBOR Successor Rate Conforming Changes to the Lenders reasonably promptly after such amendment becomes effective.

 

3.04    Increased Costs; Reserves on Eurodollar Rate Loans.

 

(a)    Increased Costs Generally. If any Change in Law shall:

 

(i)    impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement contemplated by Section 3.04(e)) or the L/C Issuer;

 

(ii)    subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

 

(iii)    impose on any Lender or the L/C Issuer or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Loans made by such Lender or any Letter of Credit or participation therein;

 

and the result of any of the foregoing shall be to increase the cost to such Lender of making, converting to, continuing or maintaining any Loan the interest on which is determined by reference to the Eurodollar Rate (or, in the case of clause (ii) above, any Loan), or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or the L/C Issuer of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the L/C Issuer hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or the L/C Issuer, the Borrowers will pay to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer, as the case may be, for such additional costs incurred or reduction suffered.

 

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(b)    Capital Requirements. If any Lender or the L/C Issuer determines that any Change in Law affecting such Lender or the L/C Issuer or any Lending Office of such Lender or such Lender’s or the L/C Issuer’s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or the L/C Issuer’s capital or on the capital of such Lender’s or the L/C Issuer’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit or Swing Line Loans held by, such Lender, or the Letters of Credit issued by the L/C Issuer, to a level below that which such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the L/C Issuer’s policies and the policies of such Lender’s or the L/C Issuer’s holding company with respect to capital adequacy), then from time to time the Borrowers will pay to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding company for any such reduction suffered.

 

(c)    Certificates for Reimbursement. A certificate of a Lender or the L/C Issuer setting forth the amount or amounts necessary to compensate such Lender or the L/C Issuer or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section containing a certification of a responsible officer of such Lender or the L/C Issuer that such costs have not been imposed on the Borrowers disproportionately with other similarly situated borrowers and delivered to the Company shall be conclusive absent manifest error. The Borrowers shall pay such Lender or the L/C Issuer, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.

 

(d)    Delay in Requests. Failure or delay on the part of any Lender or the L/C Issuer to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of such Lender’s or the L/C Issuer’s right to demand such compensation, provided that the Borrowers shall not be required to compensate a Lender or the L/C Issuer pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender or the L/C Issuer, as the case may be, notifies the Company of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the L/C Issuer’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

 

(e)    Reserves on Eurodollar Rate Loans. The Borrowers shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”), additional interest on the unpaid principal amount of each Eurodollar Rate Loan equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Company shall have received at least 10 days’ prior notice (with a copy to the Administrative Agent) of such additional interest from such Lender. If a Lender fails to give notice 10 days prior to the relevant Interest Payment Date, such additional interest shall be due and payable 10 days from receipt of such notice.

 

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3.05    Compensation for Losses. Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrowers shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:

 

(a)    any continuation, conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);

 

(b)    any failure by the Borrowers (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrowers;

 

(c)    any failure by the Borrowers to make payment of any drawing under any Letter of Credit (or interest due thereon) denominated in an Alternative Currency on its scheduled due date or any payment thereof in a different currency; or

 

(d)    any assignment of a Eurodollar Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Company pursuant to Section 10.13;

 

including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained. The Borrowers shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.

 

For purposes of calculating amounts payable by the Borrowers to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it at the Eurodollar Rate for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded.

 

3.06    Mitigation Obligations; Replacement of Lenders.

 

(a)    Designation of a Different Lending Office. Each Lender may make any Credit Extension to the Borrowers through any Lending Office, provided that the exercise of this option shall not affect the obligation of the Borrowers to repay the Credit Extension in accordance with the terms of this Agreement. If any Lender requests compensation under Section 3.04, or the Borrowers are required to pay any Indemnified Taxes or additional amount to any Lender, the L/C Issuer, or any Governmental Authority for the account of any Lender or the L/C Issuer pursuant to Section 3.01, or if any Lender gives a notice pursuant to Section 3.02, then at the request of the Company such Lender or the L/C Issuer shall, as applicable, use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender or the L/C Issuer, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject such Lender or the L/C Issuer, as the case may be, to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender or the L/C Issuer, as the case may be. Each Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender or the L/C Issuer in connection with any such designation or assignment.

 

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(b)    Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if any Borrower is required to pay Indemnified Taxes or any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01 and, in each case, such Lender has declined or is unable to designate a different lending office in accordance with Section 3.06(a), the Borrowers may replace such Lender in accordance with Section 10.13.

 

3.07    Survival. All of the Borrowers’ obligations under this Article III shall survive termination of the Aggregate Commitments, repayment of all other Obligations hereunder, and resignation of the Administrative Agent.

 

ARTICLE IV.  CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

 

4.01    Conditions to Effectiveness and Initial Credit Extension. The effectiveness of this Agreement as an amendment and restatement of the Existing Credit Agreement and the obligation of the L/C Issuer and each Lender to make its initial Credit Extension hereunder or to continue its Credit Extensions hereunder, as applicable, are subject to satisfaction of the following conditions precedent:

 

(a)    Unless waived by all the Lenders (or by the Administrative Agent with respect to items specified in clause (vi) below with respect to which the Borrowers have given assurances satisfactory to the Administrative Agent that such items shall be delivered promptly following the Closing Date), the Administrative Agent’s receipt of the following, each of which shall be originals or telecopies (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Administrative Agent, the Collateral Agent and each of the Lenders:

 

(i)    executed counterparts of this Agreement and the Guaranty;

 

(ii)    (A) a Revolving Credit Note executed by the Borrowers in favor of each Revolving Credit Lender requesting a Revolving Credit Note and (B) a Term Note executed by the Borrowers in favor of each Term Lender requesting a Term Note;

 

(iii)    executed counterparts of an affirmation to the Security Agreement, Pledge Agreement and the Aircraft Security Agreement, together with (in each case, as applicable, to the extent not on file with the Collateral Agent):

 

(A)    Uniform Commercial Code financing statements (and any amendments thereto, as applicable) suitable in form and substance for filing in all places required by applicable Law to perfect the Liens of the Collateral Agent under the Security Instruments as a first priority Lien as to items of Collateral in which a security interest may be perfected by the filing of financing statements, and such other documents and/or evidence of other actions as may be reasonably necessary under applicable Law to perfect the Liens of the Collateral Agent under such Security Instruments as a first priority Lien in and to such other Collateral as the Collateral Agent may require, including without limitation the delivery by any Borrower or any other Loan Party of all certificates evidencing pledged interests, accompanied in each case by duly executed stock powers (or other appropriate transfer documents) in blank affixed thereto;

 

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(B)    the originals of all promissory notes issued in connection with Indebtedness permitted by Section 7.03(e), together with duly executed undated endorsements in blank affixed thereto;

 

(C)    except with the express prior written consent of the Collateral Agent in each instance, with respect to the Investment Property (as defined in the Security Agreement) listed on Schedule 9(e) of the Security Agreement, Qualifying Control Agreements (as defined in the Security Agreement) from the applicable securities intermediary;

 

(D)    except with the express prior written consent of the Collateral Agent in each instance, with respect to the Deposit Accounts (as defined in the Security Agreement) listed on Schedule 9(f) of the Security Agreement, Qualifying Control Agreements (as defined in the Security Agreement) from the applicable depositary institutions; and

 

(E)    evidence that all insurance required to be maintained pursuant to the Loan Documents has been obtained and is in effect, together with the certificates of insurance and endorsements, naming the Collateral Agent, on behalf of the Secured Parties, as an additional insured or lender’s loss payee, as the case may be, under all insurance policies maintained with respect to the assets and properties of the Loan Parties that constitute Collateral;

 

(iv)    in connection with the Mortgages with respect to each Mortgaged Property listed on Exhibit I, to the extent not previously delivered to the Administrative Agent or the Collateral Agent, or as otherwise reasonably requested by the Administrative Agent or the Collateral Agent, executed counterparts to the applicable Mortgage together with:

 

(A)    to the extent necessary under applicable Law, for filing in the appropriate county land office(s), Uniform Commercial Code financing statements covering fixtures, if required, in each case appropriately completed;

 

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(B)    mortgage policies of title insurance (which, if satisfactory to the Collateral Agent, may be in the form of a mark-up of pro forma mortgage policies which are satisfactory to the Collateral Agent subsequently to be followed by mortgage policies) relating to each Mortgage of the Mortgaged Property referred to above, issued by a title insurer reasonably satisfactory to the Collateral Agent (the “Title Company”), in an insured amount satisfactory to the Collateral Agent and insuring the Collateral Agent that the Mortgage on each such Mortgaged Property is a valid and enforceable first priority mortgage lien on such Mortgaged Property, free and clear of all defects and encumbrances except Liens permitted by Section 7.01, with each such mortgage policy (i) to be in form and substance satisfactory to the Collateral Agent, (ii) to include a reference to the relevant survey with no survey exceptions except those theretofore approved by the Collateral Agent (such approval not to be unreasonably withheld or delayed), (iii) not to include any exception(s) for mechanic’s liens, and (iv) to provide for affirmative insurance and endorsements (to the extent applicable and available in the relevant jurisdiction) as the Collateral Agent may reasonably request;

 

(C)    (i) surveys for each Mortgaged Property sufficient for the Title Company to remove the standard survey exceptions from the title insurance policies and issue the endorsements required in clause (B)(iv) above, or (ii) affidavits delivered to the title insurer sufficient for the Title Company to remove the standard survey exceptions from the title policies and issue the endorsements referenced in clause (B)(iv) above;

 

(D)    evidence (which may be satisfied by appropriate instructions in the funds flow memorandum) of payment to the title insurer of all expenses and premiums of the title insurer in connection with the issuance of such policies and endorsements and payment to the Title Company of an amount equal to any fees or taxes, including recording, mortgage, intangible and stamp taxes payable in connection with recording the Mortgages and Uniform Commercial Code financing statements covering fixtures, if applicable, in the appropriate county or state land office(s);

 

(E)    in connection with any Mortgage and as reasonably requested by the Administrative Agent or the Collateral Agent, customary opinions of counsel in the jurisdiction where each such Mortgaged Property is located; and

 

(F)    a completed “Life-of-Loan” Federal Emergency Management Agency Standard Flood Hazard Determination with respect to each Mortgaged Property (together with a notice about special flood hazard area status and flood disaster assistance duly executed by the Company and each Loan Party relating thereto);

 

(v)    such certificates of resolutions or other action, incumbency certificates and/or other certificates (including specimen signatures) of Responsible Officers of each Loan Party as the Administrative Agent may require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party;

 

(vi)    such documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and that each Loan Party is validly existing, in good standing and qualified to engage in business in the jurisdiction of its organization or formation;

 

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(vii)    a customary opinion, addressed to the Administrative Agent, Collateral Agent and each Lender, of Jones Day, counsel for the Borrowers and the Loan Parties, and the general counsel or assistant general counsel for the Borrowers and the Loan Parties, in each case in form and substance satisfactory to the Administrative Agent concerning the Loan Parties and the Loan Documents (which may include some or all of the Mortgages) and as to such matters and jurisdictions as the Administrative Agent, Collateral Agent may reasonably request;

 

(viii)    a certificate of a Responsible Officer of the Company either (A) attaching copies of all consents, licenses and approvals required by any Governmental Authority or any other Person in connection with the execution, delivery and performance by each Loan Party and the validity against such Loan Party of the Loan Documents to which it is a party, and such consents, licenses and approvals shall be in full force and effect, or (B) stating that no such consents, licenses or approvals are so required (except for (x) the consents, licenses and approvals which have been duly obtained, taken, given or made and (y) the filing of Uniform Commercial Code financing statements and the recording of Mortgages pursuant to the Loan Documents);

 

(ix)    a certificate signed by a Responsible Officer of each Borrower certifying (A) that the conditions specified in Sections 4.02(a) and (b) have been satisfied and (B) that there has been no event or circumstance since the date of the Audited Financial Statements that has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect;

 

(x)    executed counterparts of the Post-Closing Agreement;

 

(xi)    executed counterparts by each Lender to this Agreement as of the Closing Date of a joinder to the Permitted Notes Intercreditor Agreement in accordance with Section 22 thereof, sufficient in number for distribution to the Administrative Agent, the Collateral Agent, the Permitted Noteholders and the Borrowers, and evidence satisfactory to the Administrative Agent that no default or event of default under the Permitted Notes Documents exists, or would result from the effectiveness of this Agreement or any Credit Extension hereunder or from the application of the proceeds thereof on the Closing Date;

 

(xii)    a certificate signed by the chief financial officer of the Company certifying that, after giving effect to this Agreement and the Credit Extensions made or continued on the Closing Date, (A) each Borrower, individually, is Solvent and (B) each Guarantor, together with the other Loan Parties, is Solvent;

 

(xiii)  (A) upon the reasonable request of any Lender made at least five days prior to the Closing Date, the Borrowers shall have provided to such Lender the documentation and other information so requested in connection with applicable “know your customer” and anti-money-laundering rules and regulations, including the Act, in each case at least five days prior to the Closing Date; and

 

(B)    at least three days prior to the Closing Date, any Borrower that qualifies as a “legal entity customer” under the Beneficial Ownership Regulation shall deliver a Beneficial Ownership Certification in relation to such Borrower; and

 

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(xiv)    such other assurances, certificates, documents, consents or opinions as the Administrative Agent, the Collateral Agent, the L/C Issuer, the Swing Line Lender or the Required Lenders reasonably may require.

 

(b)    Any fees required to be paid on or before the Closing Date shall have been paid.

 

(c)    Unless waived by the Administrative Agent, the Borrowers shall have paid all reasonable fees, charges and disbursements of counsel to the Administrative Agent (directly to such counsel if requested by the Administrative Agent) to the extent invoiced at least two Business Days prior to or on the Closing Date, plus such additional amounts of such fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges and disbursements incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrowers and the Administrative Agent).

 

Without limiting the generality of the provisions of the last paragraph of Section 9.03, for purposes of determining compliance with the conditions specified in this Section 4.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto. 

 

4.02    Conditions to all Credit Extensions. The obligation of each Lender to honor any Request for Credit Extension (other than a Loan Notice requesting only a conversion of Loans to the other Type, or a continuation of Eurodollar Rate Loans) is subject to the following conditions precedent:

 

(a)    The representations and warranties of each Borrower and each other Loan Party contained in Article V or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct in all material respects on and as of the date of such Credit Extension, except to the extent that such representations and warranties are qualified by materiality, in which case such representations and warranties shall be true and correct in all respects, and except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and except that for purposes of this Section 4.02, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01, and excluding, after the Closing Date, the representation and warranty set forth in Section 5.26.

 

(b)    No Default shall exist, or would result from such proposed Credit Extension or from the application of the proceeds thereof.

 

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(c)    The Administrative Agent and, if applicable, the L/C Issuer or the Swing Line Lender shall have received a Request for Credit Extension in accordance with the requirements hereof (except in the case of Credit Extensions made or deemed to be made under Sections 2.14(b)(v) and 2.16(a)(iv).

 

(d)    In the case of a Letter of Credit to be denominated in an Alternative Currency, there shall not have occurred any change in national or international financial, political or economic conditions or currency exchange rates or exchange controls which in the reasonable opinion of the Administrative Agent or the L/C Issuer would make it impracticable for such Letter of Credit to be denominated in the relevant Alternative Currency.

 

Each Request for Credit Extension (other than a Loan Notice requesting only a conversion of Loans to the other Type or a continuation of Eurodollar Rate Loans) submitted by the Company shall be deemed to be a representation and warranty that the conditions specified in Sections 4.02(a) and (b) have been satisfied on and as of the date of the applicable Credit Extension.

 

ARTICLE V.  REPRESENTATIONS AND WARRANTIES

 

The Company represents and warrants to the Administrative Agent and the Lenders that:

 

5.01    Existence, Qualification and Power. Each Borrower and each of its Subsidiaries (a) is a corporation, partnership or limited liability company, duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all governmental licenses, authorizations, consents and approvals (i) to own its assets, carry on its business and (ii) to execute, deliver, and perform its obligations under the Loan Documents to which it is a party, (c) is duly qualified and is licensed and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license, and (d) is in compliance with all Laws, except in each case referred to in subsection (b)(i), (c) or (d) of this Section, to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

5.02    Authorization; No Contravention. The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is party, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Person’s Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, (i) any Contractual Obligation to which such Person is a party or (ii) any material order, injunction, writ or decree of any Governmental Authority to which such Person or its property is subject, except to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect; or (c) to the knowledge of any Responsible Officer of any Loan Party, violate any Law. Each Loan Party and each Subsidiary thereof is in compliance with all Contractual Obligations referred to in clause (b)(i), except to the extent that any such conflict, breach, contravention, creation or violation could not reasonably be expected to have a Material Adverse Effect.

 

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5.03    Governmental Authorization; Other Consents. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, except for (a) the authorizations, approvals, actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect or (b) the filing of Uniform Commercial Code financing statements and the recording of Mortgages pursuant to the Loan Documents.

 

5.04    Binding Effect. This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto. This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting the rights of creditors, and subject to equitable principles of general application.

 

5.05    Financial Statements; No Material Adverse Effect.

 

(a)    The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present in all material respects the financial condition of the Company and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all material indebtedness and other liabilities, direct or contingent, of the Company and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness.

 

(b)    The unaudited consolidated financial statements of the Company and its Subsidiaries, dated March 31, 2018, contained in the related quarterly report on Form 10-Q filed with the SEC (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and subject to the absence of footnotes and ordinary, good faith year end audit adjustments; (ii) fairly present in all material respects the financial condition of the Company and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby; and (iii) show all material indebtedness and other liabilities, direct or contingent, of the Company and its consolidated Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness.

 

(c)    Since the date of the Audited Financial Statements, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

 

(d)    As of the Closing Date, there exists no Project Debt, other than as specifically identified on Schedule 5.05(d).

 

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5.06    Litigation. Except as specifically disclosed on Schedule 5.06, there are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of any Borrower after due and diligent investigation, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against any Borrower or any of its Subsidiaries or against any of their properties or revenues that (a) purport to adversely affect this Agreement or any other Loan Document, or any of the transactions contemplated hereby, or (b) if determined adversely, could reasonably be expected to have a Material Adverse Effect.

 

5.07    No Default. Neither any Borrower nor any Subsidiary is in default under or with respect to (a) any Permitted Notes Documents or (b) any Contractual Obligation, in each case that could be reasonably expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.

 

5.08    Ownership of Property; Liens. Each of the Borrowers and their respective Subsidiaries has good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. As of the Closing Date, the property of each Borrower and its Subsidiaries is not subject to any Lien, other than Liens permitted by Section 7.01.

 

5.09    Environmental Compliance.

 

(a)    The on-going operations of each Borrower and each of its Subsidiaries, after the Closing Date, comply in all respects with all Environmental Laws, except such non-compliance that, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.

 

(b)    Except as specifically identified on Schedule 5.09, or except to the extent that noncompliance would not reasonably be expected to result in a Material Adverse Effect, each Borrower and each of its Subsidiaries have obtained all licenses, permits, authorizations and registrations required under any Environmental Law (“Environmental Permits”) necessary for their respective operations, and all such Environmental Permits are in good standing, and each Borrower and each of its Subsidiaries are in compliance with all terms and conditions of such Environmental Permits.

 

(c)    Except as specifically identified on Schedule 5.09, none of any Borrower or any of its Subsidiaries or any of their present property or operations is subject to any (i) outstanding written order from or agreement with any Governmental Authority or other Person, or (ii) judicial or docketed administrative proceeding respecting any Environmental Law, Environmental Claim or Hazardous Material., other than, in the case of clause (i), any such order or agreement the breach or violation of which would not reasonably be expected to result in a Material Adverse Effect and, in the case of clause (ii), any such proceeding that if determined adversely to the Company or any of its Subsidiaries would not reasonably be expected to result in a Material Adverse Effect.

 

(d)    There are no conditions or circumstances relating to any property of any Borrower or its Subsidiaries, or arising from operations of any Borrower or its Subsidiaries conducted prior to the Closing Date that, together with all other such conditions and circumstances relating to all other properties and operations, may give rise to Environmental Claims with a potential liability as to the Company and its Subsidiaries together that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

 

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(e)    Except as specifically identified on Schedule 5.09, as of the Closing Date, no Borrower has knowledge of any oral or written notification of a Release of a Hazardous Material has been filed by or on behalf of such Borrower or any of its Subsidiaries and no site, facility or vessel now or previously owned, operated or leased by such Borrower or any of its Subsidiaries is listed or to the knowledge of such Borrower or any of its Subsidiaries proposed for listing on any federal or state list of sites requiring investigation or clean-up.

 

5.10    Insurance. The properties of each Borrower and its Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of any Borrower, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where such Borrower or the applicable Subsidiary operates (including, but not limited to, flood insurance).

 

5.11    Taxes. Each Borrower and its Subsidiaries have filed (or have obtained appropriate extensions in respect of) all Federal, all material state and other material tax returns and reports required to be filed, and have paid (or have obtained appropriate extensions in respect of) all Federal, all material state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP. To the Borrowers’ knowledge, there is no proposed (in writing) tax assessment against any Borrower or any Subsidiary that would, if made, have a Material Adverse Effect. Neither any Borrower nor any of its Subsidiaries is party to any tax sharing agreement.

 

5.12    ERISA Compliance.

 

(a)    To the Borrowers’ knowledge, each Plan that is maintained or sponsored by the Company or an ERISA Affiliate is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state laws, except where failure to comply could not reasonably be expected to have a Material Adverse Effect. To the Borrowers’ knowledge, each Pension Plan that is maintained or sponsored by the Company or an ERISA Affiliate and that is intended to be a qualified plan under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service to the effect that the form of such Plan is qualified under Section 401(a) of the Code and the trust related thereto has been determined by the Internal Revenue Service to be exempt from federal income tax under Section 501(a) of the Code, or an application for such a letter is either currently being processed by the Internal Revenue Service or is not yet due under the Internal Revenue Service’s determination letter filing program (or, in the case of a Pension Plan maintained pursuant to the adoption of a prototype or volume submitter plan document, the sponsor of the prototype or volume submitter document has obtained from the IRS an opinion or notification letter to the effect that the form of the prototype or volume submitter document is acceptable for the establishment of a qualified retirement plan). To the knowledge of the Borrowers, nothing has occurred that would reasonably be expected to prevent or cause the loss of such tax-qualified status.

 

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(b)    There are no pending or, to the knowledge of the Borrowers, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.

 

(c)    Except as could not reasonably be expected to have a Material Adverse Effect, (i) no ERISA Event has occurred, and neither the Company nor any ERISA Affiliate is aware of any fact, event or circumstance that could reasonably be expected to constitute or result in an ERISA Event with respect to any Pension Plan; (ii) the Company and each ERISA Affiliate has met all applicable requirements under the Pension Funding Rules in respect of each Pension Plan, and no waiver of the minimum funding standards under the Pension Funding Rules has been applied for or obtained; (iii) as of the most recent valuation date for any Pension Plan, the funding target attainment percentage (as defined in Section 430(d)(2) of the Code) is 60% or higher and neither the Company nor any ERISA Affiliate knows of any facts or circumstances that could reasonably be expected to cause the funding target attainment percentage for any such plan to drop below 60% as of the most recent valuation date; (iv) neither the Company nor any ERISA Affiliate has incurred any liability to the PBGC other than for the payment of premiums, and there are no premium payments which have become due that are unpaid; (v) neither the Company nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or Section 4212(c) of ERISA; and (vi) no Pension Plan has been terminated within the preceding five years by the plan administrator thereof nor by the PBGC, and to the knowledge of the Borrowers, no event or circumstance has occurred or exists that could reasonably be expected to cause the PBGC to institute proceedings under Title IV of ERISA to terminate any Pension Plan.

 

(d)    Each Borrower represents and warrants as of the Closing Date that each Borrower is not and will not be using “plan assets” (within the meaning of 29 CFR § 2510.3-101, as modified by Section 3(42) of ERISA) of one or more Benefit Plans in connection with the Loans, the Letters of Credit or the Commitments.

 

5.13    Subsidiaries; Equity Interests.

 

(a)    As of the Closing Date, the Company has no Subsidiaries other than those specifically disclosed in Part (1) of Schedule 5.13(a), and has no equity investments in any other corporation or entity (including GLC Ventures and Construction JVs) other than those specifically disclosed in Part (2) of Schedule 5.13(a) and investments held in securities accounts.

 

(b)    As of the Closing Date, there exist no Permitted Notes Guarantors, other than as listed on Schedule 5.13(b).

 

5.14    Margin Regulations; Investment Company Act.

 

(a)    No Borrower is engaged and no Borrower will engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock.

 

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(b)    None of any Borrower, any Person Controlling any Borrower, or any Subsidiary is or is required to be registered as an “investment company” under the Investment Company Act of 1940, the Federal Power Act, the Interstate Commerce Act, any state public utilities code or any other federal or state statute or regulation limiting its ability to incur Indebtedness.

 

5.15    Disclosure. The documents, certificates and written statements (including the Loan Documents) furnished to the Administrative Agent and the Lenders by any Borrower or any Subsidiary for use in connection with the transactions contemplated by this Agreement, taken as a whole and in light of the circumstances under which they were made, do not contain any untrue statement of a material fact or omit to state a material fact (known to any Borrower in the case of any document not furnished by it) necessary in order to make the statements contained herein or therein not misleading (it being recognized by the Administrative Agent and the Lenders that projections and forecasts provided to them by any Borrower are not to be viewed as facts and that actual results during the period or periods covered by any such projections and forecasts may differ materially from the projected or forecasted results).

 

5.16    Intellectual Property; Licenses, Etc. To the Borrowers’ knowledge, each Borrower and its Subsidiaries own, or possess the right to use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights (collectively, “IP Rights”) that are reasonably necessary for the operation of their respective businesses, taken as a whole, except as could not reasonably be expected to have a Material Adverse Effect. To the best knowledge of the Borrowers, no slogan or other advertising device, product, process, method, substance, part or other material employed or contemplated to be employed by any Borrower or any Subsidiary infringes upon any rights held by any other Person, except as could not reasonably be expected to have a Material Adverse Effect. Except as specifically disclosed in Schedule 5.16, no claim or litigation regarding any of the foregoing is pending or, to the knowledge of the Borrowers, threatened in writing, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the knowledge of the Borrowers, proposed, which, in either case, could reasonably be expected to have a Material Adverse Effect.

 

5.17    Swap Contracts. Each Borrower and its Subsidiaries have each voluntarily entered into each Swap Contract to which it is a party based upon its own independent assessment of its consolidated assets, liabilities and commitments in each case as an appropriate means of mitigating and managing risks associated with such matters.

 

5.18    Labor Relations. There are no strikes, lockouts or other labor disputes against any Borrower or any of its Subsidiaries, or, to the Borrowers’ knowledge, threatened against or affecting any Borrower or any of its Subsidiaries, and no significant unfair labor practice complaint is pending against any Borrower or any of its Subsidiaries or, to the best knowledge of the Borrowers, threatened in writing against any of them before any Governmental Authority, which could reasonably be expected to result in a Material Adverse Effect.

 

5.19    Solvency. Each Borrower and each of the Loan Parties is Solvent.

 

5.20    Taxpayer Identification Number. As of the Closing Date, each Borrower’s true and correct taxpayer identification number is set forth on Schedule 10.02.

 

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5.21    Representations as to Foreign Obligors. Each Borrower and each Foreign Obligor represents and warrants to the Administrative Agent and the Lenders that:

 

(a)    Such Foreign Obligor is subject to civil and commercial Laws with respect to its obligations under this Agreement and the other Loan Documents to which it is a party (collectively as to such Foreign Obligor, the “Applicable Foreign Obligor Documents”), and the execution, delivery and performance by such Foreign Obligor of the Applicable Foreign Obligor Documents constitute and will constitute private and commercial acts and not public or governmental acts. Neither such Foreign Obligor nor any of its property has any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) under the laws of the jurisdiction in which such Foreign Obligor is organized and existing in respect of its obligations under the Applicable Foreign Obligor Documents.

 

(b)    The Applicable Foreign Obligor Documents are in proper legal form under the Laws of the jurisdiction in which such Foreign Obligor is organized and existing for the enforcement thereof against such Foreign Obligor under the Laws of such jurisdiction, and to ensure the legality, validity, enforceability, priority or admissibility in evidence of the Applicable Foreign Obligor Documents. Except as disclosed to the Administrative Agent from time to time, it is not necessary to ensure the legality, validity, enforceability, priority or admissibility in evidence of the Applicable Foreign Obligor Documents that the Applicable Foreign Obligor Documents be filed, registered or recorded with, or executed or notarized before, any court or other authority in the jurisdiction in which such Foreign Obligor is organized and existing or that any registration charge or stamp or similar tax be paid on or in respect of the Applicable Foreign Obligor Documents or any other document, except for (i) any such filing, registration, recording, execution or notarization as has been made or is not required to be made until the Applicable Foreign Obligor Document or any other document is sought to be enforced and (ii) any charge or tax as has been timely paid.

 

(c)    Except as disclosed to the Administrative Agent from time to time, there is no tax, levy, impost, duty, fee, assessment or other governmental charge, or any deduction or withholding, imposed by any Governmental Authority in or of the jurisdiction in which such Foreign Obligor is organized and existing either (i) on or by virtue of the execution or delivery of the Applicable Foreign Obligor Documents or (ii) on any payment to be made by such Foreign Obligor pursuant to the Applicable Foreign Obligor Documents, except as has been disclosed to the Administrative Agent.

 

(d)    Except as disclosed to the Administrative Agent from time to time, the execution, delivery and performance of the Applicable Foreign Obligor Documents executed by such Foreign Obligor are, under applicable foreign exchange control regulations of the jurisdiction in which such Foreign Obligor is organized and existing, not subject to any notification or authorization except (i) such as have been made or obtained or (ii) such as cannot be made or obtained until a later date (provided that any notification or authorization described in clause (ii) shall be made or obtained as soon as is reasonably practicable).

 

5.22    OFAC. Neither the Company nor, to the knowledge of a Responsible Officer of any Loan Party, any Related Party, is an individual or entity that is, or is owned or controlled by any individual or entity that is (a) currently the subject of any Sanctions, (b) included on OFAC’s List of Specially Designated nationals, HMT’s Consolidated List of Financial Sanctions Targets and the Investment Ban List, or any similar list enforced by any other relevant Governmental Authority identified in the definition of “Sanctions” or (c) located, organized or resident in a Designated Jurisdiction.

 

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5.23    Security Instruments. The provisions of the Security Instruments are effective to create in favor of the Collateral Agent for the benefit of the Secured Parties a legal, valid and enforceable first priority Lien (subject to Liens permitted by Section 7.01) on all right, title and interest of the respective Loan Parties in the Collateral described therein. Except for filings and actions contemplated hereby and by the Security Instruments, no filing or other action will be necessary to perfect or protect such Liens.

 

5.24    Anti-Corruption Laws. The Company and its Subsidiaries have conducted their businesses in compliance with the United States Foreign Corrupt Practices Act of 1977, the UK Bribery Act 2010, and other similar anti-corruption legislation in other jurisdictions, in each case, that is applicable to the Company and its Subsidiaries. The Company has instituted and maintained policies and procedures designed to promote and achieve compliance with such laws.

 

5.25    Not an Affected Financial Institution. Neither any Borrower nor any Guarantor is an Affected Financial Institution.

 

5.26    Beneficial Ownership. As of the Closing Date, the information included in the Beneficial Ownership Certification is true and correct in all respects.

 

ARTICLE VI.  AFFIRMATIVE COVENANTS

 

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification obligations and other obligations that purport to survive termination of this Agreement), or any Letter of Credit shall remain outstanding (unless Cash Collateralized to the reasonable satisfaction of the Administrative Agent), the Company shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, 6.03 and 6.14) cause each Subsidiary to:

 

6.01    Financial Statements. Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the Administrative Agent and the Required Lenders:

 

(a)    as soon as available, but in any event (x) for the fiscal year of the Company ending December 31, 2019, on or before June 30, 2020, and (y) at all other times, within 90 days after the end of each fiscal year of the Company (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such fiscal year, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by a report and opinion of an independent certified public accountant of nationally recognized standing reasonably acceptable to the Required Lenders, which report and opinion shall be prepared in accordance with GAAP and shall not be subject to any qualifications or exceptions as to the scope of the audit nor to any qualifications or exceptions not reasonably acceptable to the Required Lenders, or (ii) an SEC Form 10-K for the Company (excluding the exhibits thereto) relating to such fiscal year;

 

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(b)    as soon as available, but in any event (x) for the fiscal quarter of the Company ending March 31, 2020, on or before June 30, 2020, and (y) at all other times, within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Company (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such fiscal quarter, the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal quarter and for the portion of the Company’s fiscal year then ended, setting forth in comparative form, as applicable, the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail and certified by a Responsible Officer of the Company as fairly presenting the financial condition, results of operations, shareholders’ equity and cash flows of the Company and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes, or (ii) an SEC Form 10-Q for the Company (excluding the exhibits thereto) relating to such fiscal quarter;

 

(c)    Company-prepared unaudited financial statements of the Company and its Subsidiaries in form and detail satisfactory to the Administrative Agent and the Required Lenders (i) for the calendar month ending March 31, 2020, on or before April 20, 2020, (ii) for the calendar month ending April 30, 2020, on or before May 20, 2020, (iii) for the calendar month ending May 31, 2020, on or before June 20, 2020, (iv) for the calendar month ending June 30, 2020, on or before July 20, 2020, (v) for the calendar month ending July 31, 2020, on or before August 20, 2020, (vi) for the calendar month ending August 31, 2020, on or before September 20, 2020, (vii) for the calendar month ending September 30, 2020, on or before October 20, 2020, (viii) for the calendar month ending October 31, 2020, on or before November 25, 2020, (ix) for the calendar month ending November 30, 2020, on or before December 25, 2020, (x) for the calendar month ending December 31, 2020, on or before January 25, 2021, (xi) for the calendar month ending January 31, 2021, on or before February 25, 2021 and (xii) for the calendar month ending February 28, 2021, on or before March 25, 2021; and

 

(d)    unaudited financial covenant calculations for the Company and its Subsidiaries in form and detail satisfactory to the Administrative Agent and the Required Lenders (i) for the fiscal quarter ending June 30, 2020, on or before July 20, 2020, (ii) for the fiscal quarter ending September 30, 2020, on or before October 20, 2020 and (iii) for the fiscal quarter ending December 31, 2020, on or before January 25, 2021.

 

6.02    Certificates; Other Information. Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the Administrative Agent and the Required Lenders:

 

(a)    concurrently with the delivery of the financial statements referred to in Section 6.01(a) (unless included in the applicable SEC Form 10-K), a certificate of its independent certified public accountants certifying such financial statements;

 

(b)    concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b), a duly completed Compliance Certificate signed by a Responsible Officer of the Company (which delivery may, unless the Administrative Agent, or a Lender requests executed originals, be by electronic communication including fax or email and shall be deemed to be an original authentic counterpart thereof for all purposes);

 

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(c)    promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of the Company, and copies of all annual, regular, periodic and special reports and registration statements which the Company may file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934, and not otherwise required to be delivered to the Administrative Agent pursuant hereto;

 

(d)    promptly following any request therefor, information and documentation reasonably requested by the Administrative Agent or any Lender for purposes of compliance with applicable “know your customer” requirements under the Act, the Beneficial Ownership Regulation or other applicable anti-money laundering laws; and

 

(e)    promptly, such additional information regarding the business, financial or corporate affairs of the Company or any Subsidiary, or compliance with the terms of the Loan Documents, as the Administrative Agent or any Lender may from time to time reasonably request.

 

Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(c) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Company posts such documents, or provides a link thereto on the Company’s website on the Internet at the website address listed on Schedule 10.02; or (ii) on which such documents are posted on the Company’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (i) the Company shall deliver paper copies of such documents to the Administrative Agent or any Lender upon its request to the Company to deliver such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (ii) the Company shall notify the Administrative Agent (by telecopier or electronic mail) of the posting of any such documents and, upon the Administrative Agent’s request, provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents. The Administrative Agent shall have no obligation to request the delivery of or to maintain paper copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Company with any such request by a Lender for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

 

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Each Borrower hereby acknowledges that (a) the Administrative Agent and/or the Arrangers may, but shall not be obligated to, make available to the Lenders and the L/C Issuer materials and/or information provided by or on behalf of the Borrowers hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on IntraLinks, Syndtrak or another similar electronic system (the “Platform”) and (b) certain of the Lenders (each, a “Public Lender”) may have personnel who do not wish to receive material non-public information with respect to the Borrowers or their Affiliates, or the respective securities of any of the foregoing, and who may be engaged in investment and other market-related activities with respect to such Persons’ securities. Each Borrower hereby agrees that so long as any Borrower is the issuer of any outstanding debt or equity securities that are registered or issued pursuant to a private offering or is actively contemplating issuing any such securities (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC,” such Borrower shall be deemed to have authorized the Administrative Agent, the Arrangers, the L/C Issuer and the Lenders to treat such Borrower Materials as not containing any material non-public information with respect to any Borrower or its securities for purposes of United States Federal and state securities laws (provided, however, that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 10.07); (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Side Information;” and (z) the Administrative Agent and the Arrangers shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Side Information.”

 

6.03    Notices. Promptly notify the Administrative Agent:

 

(a)    of the occurrence of any Default or Event of Default;

 

(b)    of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual Obligation of any Borrower or any Subsidiary; (ii) any dispute, litigation, investigation, proceeding or suspension between any Borrower or any Subsidiary and any Governmental Authority; (iii) the commencement of, or any material development in, any litigation or proceeding affecting any Borrower or any Subsidiary, including pursuant to any applicable Environmental Laws; or (iv) any labor controversy resulting in or reasonably expected to result in, any strike, work stoppage, boycott, shutdown or other labor disruption against or involving any Borrower or any Subsidiary that would materially impact the operations of any Borrower or any Subsidiary;

 

(c)    of the occurrence of any ERISA Event that has resulted or could reasonably be expected to result in a Material Adverse Effect;

 

(d)    of any material change in accounting policies or financial reporting practices by any Borrower or any Subsidiary, including any determination by any Borrower referred to in Section 2.10;

 

(e)    if applicable, upon the request from time to time of the Administrative Agent, of the Swap Termination Values, together with a description of the method by which such values were determined, relating to any Swap Contracts then outstanding to which any Borrower or any of its Subsidiaries is a party;

 

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(f)    upon, but in no event later than ten days after, receiving written notice of (i) any and all enforcement, cleanup, removal or other governmental or regulatory actions involving a potential liability in excess of $25,000,000 in the aggregate instituted, completed or threatened against any Borrower or any Subsidiary or any of their properties pursuant to any applicable Environmental Laws, (ii) all other Environmental Claims involving any Borrower or a Subsidiary with a potential liability in excess of $25,000,000 in the aggregate, and (iii) any environmental or similar condition on any real property adjoining or in the vicinity of the property of any Borrower or any Subsidiary that could reasonably be anticipated to cause such property or any part thereof to be subject to any restrictions on the ownership, occupancy, transferability or use of such property under any Environmental Laws and involving a potential liability in excess of $25,000,000 in the aggregate;

 

(g)    of any change in the information provided in the Beneficial Ownership Certification that would result in a change to the list of beneficial owners identified in such certification; and

 

(h)    of any amendment or other change to any covenant, default or event of default in any Permitted Notes Document (including the addition of any covenant, default or event of default not contained in the Permitted Notes Documents as of the date hereof) that makes such covenant, default or event of default more restrictive as to any Loan Party.

 

Each notice pursuant to this Section 6.03 shall be accompanied by a statement of a Responsible Officer of the Company setting forth details of the occurrence referred to therein and stating what action, if any, the Borrowers have taken and propose to take with respect thereto. Each notice pursuant to Section 6.03(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.

 

6.04    Payment of Obligations. Pay and discharge as the same shall become due and payable (a) all material Federal and state tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by the Company or such Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien (other than a Permitted Lien) upon its property; and (c) all Indebtedness (other than Indebtedness the non-payment of which would not violate Section 8.01(e)), as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness, in the case of each of clauses (a), (b) and (c) where the failure to pay or discharge could reasonably be expected to have a Material Adverse Effect.

 

6.05    Preservation of Existence, Etc. (a) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization except in a transaction permitted by Section 7.04 or 7.05, except to the extent a failure by a Subsidiary that is not a Loan Party to maintain good standing could not reasonably be expected to have a Material Adverse Effect; (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.

 

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6.06    Maintenance of Properties. (a) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted except where the failure by a Subsidiary that is not a Loan Party to do so could not reasonably be expected to have a Material Adverse Effect; (b) make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) use the standard of care typical in the industry in the operation and maintenance of its facilities.

 

6.07    Maintenance of Insurance. (a) Maintain with financially sound and reputable insurance companies not Affiliates of any Borrower, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons; and (b) without limiting the foregoing, (i) if any portion of any Mortgaged Property is at any time located in an area identified by the Federal Emergency Management Agency (or any successor agency) as a Special Flood Hazard Area with respect to which flood insurance has been made available under the National Flood Insurance Act of 1968 (as now or hereafter in effect or successor act thereto), then the Company shall, or shall cause each Loan Party to (i) maintain, or cause to be maintained, to the extent required, with a financially sound and reputable insurer, flood insurance in an amount and otherwise sufficient to comply with all applicable rules and regulations promulgated pursuant to the Flood Insurance Laws and (ii) deliver to the Administrative Agent evidence of such compliance (or, evidence that compliance is not required) in form and substance reasonably acceptable to the Administrative Agent.

 

6.08    Compliance with Laws. Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith or a bona fide dispute exists with respect thereto; or (b) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

 

6.09    Books and Records.

 

(a)    Maintain (i) proper financial records in conformity with GAAP and presented fairly in all material respects, and (ii) properly, all other books and records, in which full, true and correct in all material respects entries in conformity with GAAP consistently applied shall be made of all transactions and matters involving the assets and business of the Company or such Subsidiary, as the case may be; and

 

(b)    Maintain all books of record and accounts in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Company or such Subsidiary, as the case may be.

 

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6.10    Inspection Rights. Permit representatives and independent contractors of the Administrative Agent to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants, all at the expense of the Borrowers and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Company and with representatives of the Company afforded reasonable opportunity to be present; provided, however, that (i) the Loan Parties shall not be obligated to reimburse the expenses associated with more than one (1) visit and inspection per calendar year (subject to clause (ii) below) and (ii) when an Event of Default exists the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrowers at any time during normal business hours and without advance notice.

 

6.11    Environmental Laws.

 

(a)    Each Borrower shall, and shall cause each of its Subsidiaries to, conduct its operations and keep and maintain its property in compliance in all material respects with all Environmental Laws, except to the extent that the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

 

(b)    Upon written request of the Administrative Agent, each Borrower shall submit and cause each of its Subsidiaries to submit, to the Administrative Agent, at the Borrowers’ sole cost and expense and at reasonable intervals, a report providing an update of the status of any environmental, health or safety compliance, hazard or liability issue identified in any notice or report required pursuant to Section 6.03(f) and any other environmental, health or safety compliance obligation, remedial obligation or liability, that could, individually or in the aggregate, result in liability in excess of $25,000,000.

 

6.12    Use of Proceeds. Use the proceeds of the Credit Extensions (a) for working capital, capital expenditures and other general corporate purposes of the Company and its Subsidiaries not in contravention of any Law or of any Loan Document, (b) to finance acquisitions permitted hereunder, and (c) if applicable, to refinance the Indebtedness of the Borrowers under the Existing Credit Agreement.

 

6.13    Anti-Corruption Laws. Conduct its businesses in compliance in all material respects with the United States Foreign Corrupt Practices Act of 1977, the UK Bribery Act 2010, and other similar anti-corruption legislation in other jurisdictions, in each case, that is applicable to the Company and its Subsidiaries, and maintain policies and procedures designed to promote and achieve compliance with such laws.

 

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6.14    New Material Subsidiaries; Additional Guarantors; After-Acquired Real Property; Release of Collateral.

 

(a)    On each Guarantor Assessment Date, the Company shall determine whether there exists any new or additional Material Subsidiaries (whether as a result of a Person becoming a Material Subsidiary or being designated as a Material Subsidiary for purposes of satisfying the 80% Threshold or the Indenture Termination Date having occurred; and including, without limitation, upon the formation of any Subsidiary that is a Division successor), and if so, promptly notify the Administrative Agent of such fact and promptly thereafter (and in any event, with respect to Domestic Subsidiaries, within sixty (60) days, with respect to Foreign Subsidiaries, within seventy-five (75) days, and solely with respect to Section 6.14(a)(iv), within ninety (90) days, or, in any case, such longer period requested by the Company and approved by the Administrative Agent), cause such Person to deliver to the Administrative Agent, as the Administrative Agent shall deem appropriate:

 

(i)    a Guaranty Joinder Agreement duly executed by such Subsidiary;

 

(ii)    documents of the types referred to in clauses (v) and (vi) of Section 4.01(a) and, if requested by the Administrative Agent, customary opinions of counsel to such Person (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to in clause (a)), all in form, content and scope reasonably satisfactory to the Administrative Agent;

 

(iii)    a Security Joinder Agreement of such Subsidiary, together with such Uniform Commercial Code financing statements naming such Subsidiary as “Debtor” and naming the Collateral Agent for the benefit of the Secured Parties as “Secured Party,” in form, substance and number sufficient in the reasonable opinion of the Collateral Agent and its special counsel to be filed in all Uniform Commercial Code filing offices in all jurisdictions in which filing is necessary or advisable to perfect in favor of the Collateral Agent for the benefit of the Secured Parties the Lien on Collateral conferred under such Security Instrument to the extent such Lien may be perfected by Uniform Commercial Code filing;

 

(iv)    Mortgages, title insurance, appraisals and such other real property support documentation with respect to all real property (and related improvements) with a fair market value in excess of $2,000,000 owned by such Subsidiary other than, subject to the Permitted Notes Intercreditor Agreement, any Mortgaged Property (x) that has been released pursuant to subsection (d) below and (y) determined by the Administrative Agent to be located in a special flood hazard zone pursuant to a Standard Flood Hazard Determination;

 

(v)    if the Subsidiary Securities issued by such Subsidiary that are, or are required to become, Pledged Interests are owned by a Subsidiary who has not then executed and delivered to the Collateral Agent a Pledge Agreement granting a Lien to the Collateral Agent, for the benefit of the Secured Parties, in such equity interests, a Pledge Joinder Agreement executed by the Subsidiary that directly owns such Subsidiary Securities (or, as to the Pledged Interests issued by any Direct Foreign Subsidiary, in a form acceptable to the Administrative Agent), and if such Subsidiary Securities shall be owned by any Borrower or a Subsidiary who has previously executed a Pledge Agreement, a Pledge Agreement Supplement in the form required by such Pledge Agreement pertaining to such Subsidiary Securities;

 

(vi)    if the Pledged Interests issued by such Subsidiary constitute securities under Article 8 of the Uniform Commercial Code (a) the certificates representing 100% of such Subsidiary Securities and (b) duly executed, undated stock powers or other appropriate powers of assignment in blank affixed thereto;

 

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(vii)    Uniform Commercial Code financing statements naming the pledgor as “Debtor” and naming the Collateral Agent for the benefit of the Secured Parties as “Secured Party,” in form, substance and number sufficient in the reasonable opinion of the Collateral Agent and its special counsel to be filed in all Uniform Commercial Code filing offices and in all jurisdictions in which filing is necessary or advisable to perfect in favor of the Collateral Agent for the benefit of the Secured Parties the Lien on such Subsidiary Securities;

 

(viii)    a supplement to the appropriate schedule attached to the appropriate Security Instruments listing the additional Collateral, certified as true, correct and complete by the Responsible Officer (provided that the failure to deliver such supplement shall not impair the rights conferred under the Security Instruments in after acquired Collateral); and

 

(ix)    such other assurances, certificates, documents, consents or opinions as the Administrative Agent or Collateral Agent reasonably may require.

 

Notwithstanding anything to the contrary herein, the Company shall at all times (subject to the 60 or 75 day period noted above or such longer period approved by the Administrative Agent) cause such of its Subsidiaries necessary to meet the 80% Threshold to be Guarantors and to be bound by the terms of a Guaranty.

 

(b)    If the Company shall determine on any Guarantor Assessment Date in respect of any Subsidiary that is, at such time, a Guarantor, that such Subsidiary is no longer a Material Subsidiary, is no longer a Permitted Notes Guarantor, or is no longer required to be deemed or designated as a Material Subsidiary for purposes of satisfying the 80% Threshold, the Company may deliver to the Administrative Agent a certificate to such effect, certifying also the absence of any Default or Event of Default, whereupon the Administrative Agent, the Collateral Agent and the Lenders shall execute such documents and instruments of release as shall be reasonably satisfactory to the parties, confirming the release of such Subsidiary from the Guaranty.

 

(c)    The Company shall cause to be delivered to the Collateral Agent upon the Collateral Agent’s reasonable request, as soon as practicable and in any event within forty-five (45) days of the acquisition thereof (or at such other date as the Administrative Agent may reasonably agree to in order to complete applicable flood insurance due diligence and compliance), a Mortgage on any fee owned real property (and related improvements) with a fair market value in excess of $2,000,000 acquired by any Loan Party after the Closing Date (other than fee owned real property located in a special flood hazard zone pursuant to a Standard Flood Hazard Determination) as security for the Secured Obligations, together with the Uniform Commercial Code financing statements covering fixtures, mortgage policies of title insurance, surveys, opinions, evidence of flood insurance coverage and other documents in connection with such Mortgage as the Collateral Agent may reasonably request. Notwithstanding anything contained in this Agreement to the contrary, no Mortgage shall be executed and delivered with respect to any real property unless and until each Lender (1) has received, at least twenty days prior to such execution and delivery (or such lesser period of time as may be permitted by such Lender), the documents as it may reasonably request to complete its flood insurance due diligence and (2) has confirmed to the Administrative Agent that such Lender’s flood insurance due diligence and flood insurance compliance has been completed to its satisfaction; provided, however, that if the Collateral Agent (on behalf of the Lenders) does not request a Mortgage on any real property or the execution and delivery of any Mortgage requested hereunder is delayed or deferred or the request therefor is rescinded, in each case, because applicable flood insurance due diligence and flood insurance compliance has not been completed to the satisfaction of any Lender, the Company shall be permitted to deliver a Mortgage on such real property (and related improvements) to the Collateral Agent on behalf of the Permitted Noteholders securing only obligations under the Permitted Notes Documents and obligations of the Collateral Agent in its capacity as such under such Mortgage (but in no event securing any Obligations).

 

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(d)    [Reserved].

 

(e)    For the purposes of this Section 6.14 the Target and its Subsidiaries will be exempted from compliance with this Section in any and all ways until such time as the Target 8% Indenture has been terminated and all of the Target 8% Notes have been paid in full in cash and/or converted into equity (the date of such termination, payment and/or conversion, the “Indenture Termination Date”). For the avoidance of doubt, all deadlines and time frames contained within this Section 6.14 shall, with respect to the Target and its Subsidiaries, be calculated from the Indenture Termination Date.

 

6.15    Appraisals. The Administrative Agent and the Lenders may obtain from time to time an appraisal of all or any part of any Collateral, prepared in accordance with written instructions from the Administrative Agent and the Lenders, from a third-party appraiser satisfactory to, and engaged directly by, the Administrative Agent and the Lenders. The cost of any appraisal after the occurrence and during the continuance of a Default shall be borne by the Borrowers and such cost shall be part of the Indebtedness, and constitute an Obligation, hereunder and shall be payable by the Borrowers to the Administrative Agent on demand (which obligation the Borrowers hereby promise to pay); provided that the cost of any appraisal obtained by the Administrative Agent or Lenders at any time other than after the occurrence and during the continuance of a Default shall not constitute an Obligation hereunder and shall not be required to be reimbursed by the Borrowers.

 

ARTICLE VII.   NEGATIVE COVENANTS

 

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification obligations and other obligations that purport to survive termination of this Agreement), or any Letter of Credit shall remain outstanding (unless Cash Collateralized to the reasonable satisfaction of the Administrative Agent), the Company shall not, nor shall it permit any Subsidiary to, directly or indirectly:

 

7.01    Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following:

 

(a)    Liens securing the (i) Secured Obligations and (ii) so long as the Permitted Notes Intercreditor Agreement is in effect, Permitted Notes and/or any other obligations under the Permitted Notes Documents;

 

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(b)    Liens existing on the date hereof and listed on Schedule 7.01 and any renewals or extensions thereof; provided that the property covered thereby is not increased (except that assets the purchase or lease of which is financed by a counterparty or its affiliates may be cross-collateralized to secure other assets the purchase or lease of which is financed by the same counterparty or its affiliates) and any renewal or extension of the obligations secured or benefited thereby is permitted by Section 7.03(b);

 

(c)    Liens for taxes not yet past due or which are being contested in good faith and by appropriate proceedings, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;

 

(d)    carriers’, landlords’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the Ordinary Course of Business in respect of the Company and its Subsidiaries, which are not overdue for a period of more than 45 days or which are being contested in good faith and by appropriate proceedings, if adequate reserves with respect thereto are maintained on the books of the applicable Person;

 

(e)    pledges or deposits in the Ordinary Course of Business in connection with obligations of the Company or its Subsidiaries arising under workers’ compensation, unemployment insurance and other social security legislation, other than any Lien imposed by ERISA;

 

(f)    deposits to secure the performance of tenders, bids, trade contracts (other than for borrowed money), leases, statutory obligations, bankers’ acceptances, surety and appeal bonds, government contracts, performance bonds and other obligations of a like nature, in each case, incurred by the Company or its Subsidiaries in the Ordinary Course of Business, provided that all such deposits in the aggregate could not reasonably be expected to result in a Material Adverse Effect;

 

(g)    easements, rights-of-way, restrictions, municipal and zoning ordinances and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person;

 

(h)    Liens securing or arising from judgments, decrees or attachments in respect of the Company and its Subsidiaries, in circumstances not constituting an Event of Default under Section 8.01(h);

 

(i)    (x) Liens securing Indebtedness of the Company or its Subsidiaries permitted under Section 7.03(d), provided that (i) such Liens do not at any time encumber any property other than the property financed by such Indebtedness (and other property financed by the same counterparty or its affiliates), (ii) such Liens attach to the subject property within 30 days after the acquisition thereof and (iii) the Indebtedness secured thereby does not exceed the cost or fair market value as of the time such Indebtedness was incurred, whichever is lower, of the property being acquired on the date of acquisition; and (y) Liens on assets of any Project Debt Entity securing Indebtedness of such entity permitted under Section 7.03(m);

 

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(j)    Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods by the Company or its Subsidiaries;

 

(k)    Liens securing reimbursement obligations of the Company or its Subsidiaries with respect to commercial letters of credit obtained in the Ordinary Course of Business and not prohibited hereby, provided that such Liens shall attach only to documents or other property relating to such letters of credit and products and proceeds thereof;

 

(l)    Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution, provided that (i) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by any Borrower in excess of those set forth by regulations promulgated by the FRB, and (ii) such deposit account is not intended by any Borrower or any Subsidiary to provide collateral to the depository institution;

 

(m)    Liens on insurance policies and proceeds securing the payment of financed insurance premiums not in excess of $25,000,000 at any time;

 

(n)    Liens not otherwise permitted hereunder (other than Subsidiary Securities or the proceeds thereof) securing obligations not in excess of $30,000,000 at any time;

 

(o)    leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Company and its Subsidiaries, taken as a whole;

 

(p)    Liens of lessors in any property subject to any operating lease, including Liens arising from precautionary UCC financing statements or similar filings made in respect of such leases;

 

(q)    Liens on property of a Person (and/or such Person’s Subsidiaries) existing at the time such Person is merged into or consolidated with the Company or any Subsidiary or becomes a Subsidiary of the Company; provided that (i) such Liens were not created in contemplation of such merger, consolidation or Investment and do not extend to any assets other than those of the Person merged into or consolidated with the Company or such Subsidiary or acquired by the Company or such Subsidiary (and/or such Person’s Subsidiaries), and (ii) the applicable Indebtedness secured by such Lien is permitted under Section 7.03(h);

 

(r)    Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Company or any of its Subsidiaries in the ordinary course of business;

 

(s)    any encumbrance or restriction (including put and call arrangements) with respect to capital stock of any Joint Venture or similar arrangement pursuant to any joint venture or similar agreement; provided that such encumbrance or restriction does not prohibit the granting of a Lien by a Loan Party on any Collateral and any entity formed as part of such Joint Venture remains subject to the provisions of this Agreement to the extent provided herein;

 

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(t)    Liens on the assets and capital stock or other equity interests of Foreign Subsidiaries not constituting Collateral securing Indebtedness permitted under Section 7.03(j);

 

(u)    Liens solely on cash earnest money deposits made in connection with any letter of intent or purchase agreement in connection with an Investment permitted hereunder;

 

(v)    Liens, if any, in favor of a surety granted by the Company and/or its Subsidiaries arising by operation of law or under any indemnity agreement or surety agreement entered into in the Ordinary Course of Business in connection with construction-related performance bonds, provided that such Lien does not at any time encumber any property other than the accounts receivable, material and equipment under the applicable bonded contractual obligation;

 

(w)    Liens (including cash collateral), if any, in favor of one or more letter of credit issuing banks (or any agent therefor) securing reimbursement and other obligations in respect of letters of credit issued for the account of the Target or any of its Subsidiaries that remain outstanding at the time of the consummation of the Permitted Lowercase Acquisition;

 

(x)    after the earlier to occur of (i) the date the Permitted Notes Intercreditor Agreement is (A) terminated or (B) amended or modified to permit the Liens described in this Section 7.01(x) as Secured Obligations (as defined therein), and (ii) the date all Permitted Notes Documents have been terminated and all of the Permitted Notes have been paid in full, Liens on Collateral securing up to $50,000,000 of the face amount (as determined in accordance with Section 1.09) of standby letters of credit (performance and financial) and/or trade or commercial letters of credit issued by Lenders or their Affiliates outside of this Agreement (and not as an L/C Issuer hereunder) to the extent such Liens arise under the Security Instruments;

 

(y)    Lien arising from Dispositions permitted under Section 7.05(f) and (g); and

 

(z)    customary Liens granted in favor of a trustee to secure fees and other amounts owing to such trustee under an indenture or other agreement.

 

7.02    Investments. Make any Investments, except:

 

(a)    Investments, other than those permitted by subsections (b) through (n), that are existing on the date hereof and listed on Schedule 7.02(a);

 

(b)    Investments held by the Company or any of its Subsidiaries (i) in the form of cash and cash equivalents, and (ii) Investments permitted under the Company’s investment policy attached hereto as Schedule 7.02(b) (as may be modified from time to time as long as there are no material changes), other than Investments of any type requiring any special or further approval under such policy;

 

(c)    Investments consisting of (i) equity investments or extensions of credit by the Company to any of its wholly-owned Subsidiaries, or by any of its wholly-owned Subsidiaries to the Company or to another of its wholly-owned Subsidiaries, so long as such extensions of credit are, in each case, represented by a written promissory note and pledged to the Administrative Agent pursuant to the Security Instruments and (ii) equity investments and extensions of credit in non-wholly-owned Subsidiaries in an amount not in excess of $15,000,000 at any time outstanding;

 

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(d)    Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the Ordinary Course of Business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;

 

(e)    Guarantee Obligations permitted by Section 7.03;

 

(f)    Investments resulting by virtue of transactions otherwise permitted by Section 7.07;

 

(g)    (x) Investments (including Construction JV Investments) by any GLC Venture, or any Subsidiary thereof, that are existing on the date hereof and listed on Schedule 7.02(g) (“Existing Investments”); and (y) any additional Investments in such Existing Investments and any other Investments in one or more other Subsidiaries of the Company in the business of land or real estate development, in the case of this clause (g)(y), in an aggregate amount not to exceed $50,000,000 at any time outstanding for all such additional Investments;

 

(h)    Investments of a Person or any of its Subsidiaries existing at the time such Person becomes a Subsidiary of the Company or at the time such Person merges or consolidates with the Company or any of its Subsidiaries, in either case, in compliance with this Agreement; provided that such Investments were not made by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Subsidiary of the Company or such merger or consolidation;

 

(i)    Investments deemed to arise under Swap Contracts permitted hereunder;

 

(j)    Guarantee Obligations permitted under Section 7.03;

 

(k)    Construction JV Investments occurring after the date hereof arising in the Ordinary Course of Business and the purchase or other acquisition of all of the equity, common stock in, or all or substantially all of the property of, any Person (or division or other business unit of such Person) that, upon the consummation thereof, will be wholly-owned directly by the Company or one or more of its wholly-owned Subsidiaries (including as a result of a merger or consolidation); provided that, with respect to each Construction JV Investment, purchase or other acquisition made pursuant to this Section 7.02(k): 

 

(i)    in the case of a purchase or other acquisition, the lines of business of the Person to be (or the property of which is to be) so purchased or otherwise acquired shall be similar, complementary, or ancillary to (or a related line of) the lines of business as one or more of the principal businesses of the Company and its Subsidiaries engaged in currently or subsequently in the Ordinary Course of Businesses;

 

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(ii)    in the case of the purchase or other acquisition of common stock of or other equity in another Person, the board of directors (or other comparable governing body) of such other Person shall have duly approved such purchase or acquisition; and

 

(iii)    immediately before and immediately after giving effect to any such Construction JV Investment, purchase or other acquisition, (A) no Default shall have occurred and be continuing and (B) the Consolidated Leverage Ratio shall be less than or equal to (x) 2.75 to 1.00 for any such Construction JV Investment (other than a permitted purchase or acquisition), or (y) 3.25 to 1.00 for any such permitted purchase or acquisition (other than a Construction JV Investment), such calculation to be determined on the basis of the financial information most recently delivered to the Administrative Agent pursuant to Section 6.01(a) or (b) (together with such pro forma expense adjustments as are reasonably supportable by the Company) as though such acquisition had been consummated as of the first day of the four consecutive fiscal-quarter period covered thereby;

 

(l)    to the extent constituting Investments, Indebtedness otherwise permitted under Section 7.03;

 

(m)    to the extent constituting Investments, Contingent Acquisition Obligations in respect of any Acquisition, Investment or Disposition otherwise permitted hereunder;

 

(n)    during the five consecutive fiscal quarters ending March 31, 2020, June 30, 2020, September 30, 2020, December 31, 2020 and March 31, 2021 new cash Investments in the Tappan Zee, I4, AZ-202 and PA500 construction projects in an aggregate amount not to exceed $75,000,000;

 

(o)    Investments consisting of the purchase by the Company of any Permitted Call Spread Transaction and the performance of its obligations thereunder; and

 

(p)    Investments not otherwise permitted under clauses (a) through (o) above in an amount not to exceed $35,000,000 at any time outstanding.

 

Notwithstanding the above, during the Relief Period, the Company shall not, nor shall it permit any Subsidiary to, directly or indirectly, make, effect, enter into or otherwise consummate any Acquisitions.

 

7.03    Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except:

 

(a)    Indebtedness under the (i) Loan Documents and (ii) Permitted Notes and Permitted Notes Documents;

 

(b)    Indebtedness of the Company and its Subsidiaries outstanding on the date hereof and listed on Schedule 7.03 and any refinancings, refundings, renewals or extensions thereof, provided that the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such refinancing and by an amount equal to any existing commitments unutilized thereunder;

 

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(c)    obligations (contingent or otherwise) of any Borrower or any Subsidiary existing or arising under any Swap Contract entered into by such Person (or in respect of any Guarantee Obligation of any such Person to the extent supporting obligations arising under Swap Contracts to which any Borrower or any Subsidiary is party), provided that, except in the case of any Permitted Call Spread Transaction, (i) such Swap Contract obligations are (or were) entered into by such Person in the Ordinary Course of Business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person, or changes in the value of securities issued by such Person and not for purposes of speculation or taking a “market view;” and (ii) such Swap Contract does not contain any provision exonerating the non-defaulting party from its obligation to make payments on outstanding transactions to the defaulting party;

 

(d)    Indebtedness in respect of capital leases, Synthetic Lease Obligations, sale-leaseback transactions and purchase money Indebtedness for fixed or capital assets acquired by any Borrower or any Subsidiary; provided that the aggregate principal amount of (i) all purchase money Indebtedness for fixed or capital assets that may be incurred by the Company or any of its then-existing Subsidiaries in any fiscal year of the Company shall not exceed $50,000,000; (ii) all Indebtedness in respect of capital leases, Synthetic Lease Obligations and sale-leaseback transactions to finance the acquisition of fixed or capital assets incurred by the Company or any of its Subsidiaries in any fiscal year of the Company shall not exceed $50,000,000; and (iii) all Indebtedness in respect of capital leases, Synthetic Lease Obligations, sale-leaseback transactions and purchase money Indebtedness for fixed or capital assets of Persons immediately prior to such Persons becoming Subsidiaries or being merged with or into (or otherwise becoming acquired by) the Company or any of its Subsidiaries following the Closing Date shall not exceed an amount equal to $100,000,000; provided that none of such Indebtedness was incurred in anticipation of any such merger or acquisition;

 

(e)    Indebtedness arising as a consequence of Investments permitted pursuant to Section 7.02(c);

 

(f)    Indebtedness in respect of (i) letters of credit (other than Letters of Credit) issued solely for the account and benefit of any Borrower or any Subsidiary in the Ordinary Course of Business in an aggregate outstanding amount not to exceed at any time an amount equal to $50,000,000; and (ii) the obligation of a subcontractor of any Borrower or its Subsidiaries on a construction project, provided that such Borrower or such Subsidiary determines in good faith that such financial arrangement best serves such Borrower’s or such Subsidiary’s financial interests;

 

(g)    Indebtedness incurred in the Ordinary Course of Business in connection with (i) securing the performance of bids, trade contracts (other than for borrowed money), and statutory obligations, in each case, solely for the account and benefit of any Borrower, its Subsidiaries, any GLC Venture or Construction JV, (ii) obligations on surety and appeal bonds solely for the account and benefit of any Borrower, its Subsidiaries, any GLC Venture or Construction JV (other than in relation to borrowed money debt), and (iii) other obligations of a like nature incurred in the Ordinary Course of Business solely for the account and benefit of any Borrower, its Subsidiaries, any GLC Venture or Construction JV (other than in relation to borrowed money debt), in each of the foregoing cases to the extent not otherwise prohibited by the terms of any Loan Document;

 

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(h)    Indebtedness of a Loan Party and/or, upon and after consummation of the Permitted Lowercase Acquisition, the Target and its Subsidiaries, in each case, comprised solely of (i) the outstanding principal amount of unsecured obligations, whether current or long-term, for borrowed money and all obligations evidenced by bonds (other than performance, surety and appeal bonds), debentures, notes, loan agreements or other similar instruments, (ii) Attributable Indebtedness in respect of capital leases and Synthetic Lease Obligations, (iii) Contingent Acquisition Obligations in respect of any Acquisition or Investment otherwise permitted hereunder, or (iv) without duplication, Guarantee Obligations with respect to Indebtedness of the types specified in the immediately preceding clauses (i) and (iii); provided that, (x) the aggregate principal amount of outstanding Indebtedness of the types permitted by the immediately preceding clauses (i) through (iv) (excluding, for the avoidance of doubt, Indebtedness incurred, assumed or existing pursuant to or as a result of the Permitted Lowercase Acquisition) that is subject to amortization or payment at maturity prior to the Maturity Date shall not exceed $150,000,000; and (y) no such Indebtedness shall be permitted under this clause (h) if such Indebtedness represents Indebtedness of any co-joint venturer in any Joint Venture, to which the Company or any Subsidiary is a party, that is assumed by the Company or any Subsidiary, if such Indebtedness was not originally incurred by such co-joint venturer in connection with (and relate solely to) the subject Joint Venture;

 

(i)    Guarantee Obligations of a Loan Party in respect of Indebtedness otherwise permitted hereunder of the Company or any other Loan Party;

 

(j)    Indebtedness (which may be secured or unsecured) of any Subsidiaries not otherwise permitted under this Section 7.03; provided that the aggregate amount of all such outstanding Indebtedness shall not exceed $30,000,000 at any time;

 

(k)    Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within five Business Days of incurrence;

 

(l)    customer deposits and advance payments received in the ordinary course of business;

 

(m)    (i) Project Debt outstanding on the Closing Date as set forth on Schedule 7.03(m)(i) (“Existing Project Debt”), and (ii) in addition thereto, an additional amount of Project Debt not to exceed $10,000,000 at any time outstanding;

 

(n)    Indebtedness constituting reimbursement and other obligations in respect of letters of credit issued for the account of the Target or any of its Subsidiaries that remain outstanding at the time of the consummation of the Permitted Lowercase Acquisition;

 

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(o)    any Permitted Convertible Indebtedness in an aggregate principal amount not to exceed $230,000,000.

 

7.04    Fundamental Changes. Merge, consolidate with or into, or convey, transfer, lease or otherwise Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person (including, in each case, pursuant to a Division) other than Dispositions permitted under Section 7.05 and, so long as no Default or Event of Default exists at the time or would occur as a result thereof:

 

(a)    any Subsidiary may merge with (i) a Borrower, provided that a Borrower shall be the continuing or surviving Person, (ii) any one or more Subsidiaries, provided that, when any wholly-owned Subsidiary is merging with another Subsidiary, the continuing or surviving Person shall be a wholly-owned Subsidiary, or (iii) any other Person, provided that such Subsidiary shall be the continuing or surviving Person or immediately upon such merger, consolidation or combination, the continuing or surviving Person shall be a wholly-owned Subsidiary;

 

(b)    any Subsidiary may sell all or substantially all of its assets (upon voluntary liquidation or otherwise), to a Borrower or to another Subsidiary; provided that if the seller in such a transaction is a wholly-owned Subsidiary, then the purchaser must either be a Borrower or a wholly-owned Subsidiary; and

 

(c)    any Borrower may merge, consolidate or combine with any entity if a Borrower is the continuing or surviving Person (and, if the Company is a party to such merger, the Company is the surviving Person or the continuing or surviving Person assumes the duties and obligations of the Company hereunder and under the other Loan Documents).

 

7.05    Dispositions. Make any Disposition or enter into any agreement to make any Disposition, except:

 

(a)    Dispositions of obsolete, unneeded, unproductive or worn out property, whether now owned or hereafter acquired, in the Ordinary Course of Business to Persons;

 

(b)    Dispositions of inventory and leases of property, in each case in the Ordinary Course of Business;

 

(c)    Dispositions of equipment or real property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property for use in the Ordinary Course of Business, (ii) the proceeds of such Disposition are reasonably promptly applied to the purchase price of such replacement property for use in the Ordinary Course of Business or (iii) the board of directors or senior management of the Company or such Subsidiary has determined in good faith that the failure to replace such property will not be detrimental to the business of the Company or such Subsidiary;

 

(d)    Dispositions of property by any Subsidiary to the Company or to a wholly-owned Subsidiary of the Company;

 

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(e)    Dispositions comprising transactions expressly permitted by Section 7.04(a) through (c);

 

(f)    non-exclusive licenses or sublicenses of IP Rights in the Ordinary Course of Business and substantially consistent with past practice for terms not exceeding five years and leases and subleases granted to others that do not materially interfere with the Ordinary Course of Business of the Company and its Subsidiaries;

 

(g)    the sale, without recourse and in the Ordinary Course or Business, of accounts receivable due from Federal, state or other Governmental Authority arising in the Ordinary Course of Business (and not as part of any bulk sale or financing of receivables) in an amount not to exceed $25,000,000 in any fiscal year or $50,000,000 in the aggregate after the date of this Agreement;

 

(h)    Dispositions of non-core assets acquired in a permitted Acquisition by the Company or any of its Subsidiaries within 12 months of such Acquisition;

 

(i)    Dispositions of property constituting (i) the making of Investments permitted under Section 7.02, (ii) Indebtedness permitted under Section 7.03 and/or (iii) the making of Restricted Payments permitted by Section 7.07;

 

(j)    the Disposition of equity interests in, or assets of, any GLC Venture or any Project Debt Entity; and

 

(k)    Dispositions after the date of this Agreement not otherwise permitted under clauses (a) through (j) above in an aggregate amount not to exceed 10% of the consolidated total assets of the Company and its Subsidiaries as of the date of such Disposition, determined in accordance with GAAP;

 

provided that any Disposition pursuant to subsections (a) through (k) of this Section 7.05 shall be for fair market value.

 

7.06    Sanctions. Directly or, to the Company’s knowledge, indirectly use the proceeds of any Credit Extension, or lend, contribute or otherwise make available such proceeds to any Person, to fund any activities of or business with any Person, or in any Designated Jurisdiction, that, at the time of such funding, is the subject of Sanctions. 

 

7.07    Restricted Payments. Declare or make, directly or indirectly, any Restricted Payment (including, but not limited to, dividends, redemptions and repurchases of common stock), or incur any obligation (contingent or otherwise) to do so, except that:

 

(a)    each Subsidiary may make Restricted Payments to the Company and to wholly-owned Subsidiaries (and, in the case of a Restricted Payment by a non-wholly-owned Subsidiary, to the Company and any Subsidiary and to each other owner of capital stock of such Subsidiary on a pro rata basis based on their relative ownership interests);

 

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(b)    the Company and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other common equity interests of such Person;

 

(c)    so long as no Default or Event of Default exists or would result by virtue thereof, the Company and each Subsidiary may purchase, redeem or otherwise acquire shares of its common stock or warrants or options to acquire any such shares with the proceeds received from the substantially concurrent issue of new shares of its common stock;

 

(d)    so long as no Default or Event of Default exists or would result by virtue thereof, the Company may purchase, redeem or otherwise acquire shares of common stock for cash in order to contribute such shares to the Company’s employee stock ownership plan, provided the aggregate amount paid by the Company in connection with such transactions does not exceed in any fiscal year an amount equal to 15% of plan compensation (as such term is interpreted for purposes of Section 401(a)(17) of the Code) paid by the Company in such fiscal year, and such shares are promptly so contributed;

 

(e)    so long as no Default or Event of Default exists or would result by virtue thereof, the Company may purchase, redeem or otherwise acquire shares of its capital stock, or warrants, rights or options to acquire any such shares for cash (i) if immediately before and immediately after giving pro forma effect to such purchase, redemption or acquisition, the Consolidated Leverage Ratio is greater than 2.00 to 1.00, in an aggregate amount not to exceed $125,000,000 computed on a cumulative basis during the term of this Agreement, and (ii) if immediately before and immediately after giving pro forma effect to such purchase, redemption or acquisition, the Consolidated Leverage Ratio is less than 2.00 to 1.00, in an unlimited amount;

 

(f)    the Company may make Restricted Payments to pay for the repurchase, retirement or other acquisition or retirement for value of the capital stock or other equity interests of the Company held by any future, present or former director, officer, employee, member of management or consultant of the Company or any of its Subsidiaries and their respective estates, heirs, family members, spouses, former spouses, domestic partners and former domestic partners, and any tax related thereto, in each case, to the extent required under any equity compensation plan; provided that the amount of Restricted Payments made in cash pursuant to this clause (f) plus Restricted Payments made in cash pursuant to Section 7.07(g) and Section 7.07(h) shall not exceed $20,000,000 in the aggregate in any fiscal year;

 

(g)    repurchases of the capital stock or other equity interests deemed to occur upon exercise of stock options or warrants if such capital stock or other equity interests represent a portion of the exercise price of such options or warrants are permitted; provided that the amount of Restricted Payments made in cash pursuant to this clause (g) plus Restricted Payments made in cash pursuant to Section 7.07(f) and Section 7.07(h) shall not exceed $20,000,000 in the aggregate in any fiscal year;

 

(h)    the Company may make cash payments in lieu of issuing fractional shares in connection with the exercise of warrants, options or other securities convertible into or exchangeable for the capital stock or other equity interests of the Company; provided that the amount of Restricted Payments made in cash pursuant to this clause (h) plus Restricted Payments made in cash pursuant to Section 7.07(f) and Section 7.07(g) shall not exceed $20,000,000 in the aggregate in any fiscal year;

 

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(i)    so long as no Default or Event of Default exists or would result by virtue thereof, the Company may declare and make dividend payments in cash;

 

(j)    the Company may make any payments of cash or deliveries in shares of Common Stock (or other securities or property following a merger event, reclassification or other change of the Common Stock) (and cash in lieu of fractional shares) pursuant to the terms of, and otherwise perform its obligations under, any Permitted Convertible Indebtedness (including, without limitation, making payments of interest and principal thereon, making payments due upon required repurchase or redemption thereof and/or making payments and deliveries upon conversion or settlement thereof); and

 

(k)    the Company may pay the premium in respect of, make any payments (of cash or deliveries in shares of Common Stock or other securities or property following a merger event, reclassification or other change of the Common Stock and cash in lieu of fractional shares) required by, and otherwise perform its obligations under, any Permitted Call Spread Transaction, including in connection with any settlement, unwind or termination thereof;

 

provided that, during the Relief Period, (i) neither the Company nor any Subsidiary may, directly or indirectly, purchase, redeem or otherwise acquire shares of its capital stock, or warrants, rights or options to acquire any such shares, and (ii) any dividends otherwise permitted to be made pursuant to this Section 7.07 may not exceed $0.13 per share per fiscal quarter.

 

7.08    Change in Nature of Business.

 

(a)    Engage in any material line of business substantially different from those lines of business conducted by the Company and its Subsidiaries on the date hereof, and other lines of business reasonably similar, related, or incidental thereto (which shall, for the avoidance of doubt, include the lines of business engaged in by the Target and its Subsidiaries as of the effective date of the Permitted Lowercase Acquisition); or

 

(b)    Except as otherwise permitted under Section 7.04, make any change in any Borrower’s capital structure (including in the terms of its outstanding capital stock) or amend its certificate of incorporation or bylaws that could reasonably be expected to result in a Material Adverse Effect.

 

7.09    Transactions with Affiliates. Enter into any transaction of any kind with any Affiliate of a Borrower or the Company (other than between or among Loan Parties, in each case to the extent not prohibited under the Loan Documents), whether or not in the Ordinary Course of Business, other than (a) the transactions contemplated by the Loan Documents; (b) payment of customary directors’ fees and indemnities (including equity compensation arrangements); (c) arm’s length transactions with Affiliates that were consummated prior to the Closing Date and are set forth on Schedule 7.09; (d) transactions with Affiliates upon fair and reasonable terms that are substantially as favorable to such Borrower or Subsidiary than such Borrower or Subsidiary would obtain in a comparable arm’s length transaction with a Person that is not an Affiliate of the Company; (e) any employment agreement entered into by the Company or any of its Subsidiaries in the Ordinary Course of Business and consistent with the past practices of the Company and its Subsidiaries; or (f) transactions otherwise explicitly permitted hereunder.

 

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7.10    Burdensome Agreements.

 

(a)    Restricted Payment Prohibitions. Enter into, assume or suffer to exist any Contractual Obligation that limits the ability of any Subsidiary to make Restricted Payments to any Borrower or to otherwise transfer property to any Borrower other than (i) provisions contained in the terms of any agreement governing Indebtedness permitted under Section 7.03 (and, without limitation, the Indebtedness incurred, assumed or existing pursuant to or as a result of the Permitted Lowercase Acquisition, including, for the avoidance of doubt, the Target 8% Indenture and the Target 4.25% Indenture) and provisions contained in the terms of any agreement governing Liens permitted under Section 7.01 that impose restrictions on the property subject to such Liens; and (ii) agreements restricting assignments, subletting or other transfers contained in leases, licenses, joint venture agreements and similar agreements entered into in the ordinary course of business, in each case relating solely to the assets subject to such lease or license or assets relating solely to such joint venture agreement; or

 

(b)    Other Negative Pledges. Enter into, assume or otherwise become subject to any Contractual Obligation (other than this Agreement or any other Loan Document) that directly or indirectly (i) prohibits any Borrower or any of its Subsidiaries from granting any Lien on property or assets of such Persons or (ii) requires the grant of a Lien to secure an obligation of such Person if a Lien is granted to secure another obligation of such Person, provided that the Company and its Subsidiaries may enter into, assume or otherwise become subject to any such Contractual Obligation solely to the extent (A) incurred pursuant to the acquisition by such Persons of businesses, properties or assets of other Persons otherwise permitted hereunder (and, without limitation, the Permitted Lowercase Acquisition) if such restrictions affect only such businesses, assets and property so acquired, and are not entered into in contemplation of such acquisition, (B) incurred in connection with a transaction creating Liens permitted by Section 7.01(i), provided that such restriction is limited to the assets or properties subject to such Liens, or (C) incurred in connection with the Permitted Notes or any senior secured notes containing negative pledge provisions not materially more restrictive than those in the 2019 Notes Agreement.

 

7.11    Use of Proceeds. Use the proceeds of any Credit Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the FRB), to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose, or to acquire any security in any transaction that is subject to Section 13 or 14 of the Exchange Act if, following the application of the proceeds of such Credit Extension, more than 25% of the value of the assets (either of a Borrower only or of the Company and its Subsidiaries on a consolidated basis) subject to the provisions of Section 7.01 or Section 7.05 or subject to any restriction contained in any agreement or instrument within the scope of Section 8.01(e) will be margin stock.

 

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7.12    Financial Covenants.

 

(a)    Consolidated Interest Coverage Ratio. Permit the Consolidated Interest Coverage Ratio, as of the last day of any fiscal quarter, to be less than 4.00 to 1.00.

 

(b)    Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio as of the last day of any fiscal quarter to be greater than (i) for the fiscal quarters ending June 30, 2019, September 30, 2019, December 31, 2019, March 31, 2020, June 30, 2020, September 30, 2020 and December 31, 2020, 3.25 to 1.00; and (ii) for the fiscal quarter ending March 31, 2021 and each fiscal quarter ending thereafter, 3.00 to 1.00; provided, however, for each of the four consecutive fiscal quarters ending after any Acquisition permitted hereunder with total cash consideration in excess of $100,000,000 occurs (excluding, however, the four consecutive fiscal quarters ending June 30, 2019, September 30, 2019, December 31, 2019, March 31, 2020, June 30, 2020, September 30, 2020, December 30, 2020 and March 31, 2021), the Consolidated Leverage Ratio as of the last day of each such fiscal quarter shall not exceed 3.50 to 1.00.

 

7.13    Anti-Corruption Laws. Directly or indirectly use the proceeds of any Credit Extension for any purpose which would violate the United States Foreign Corrupt Practices Act of 1977, the UK Bribery Act 2010, and other similar anti-corruption legislation in other jurisdictions, in each case, that is applicable to the Company and its Subsidiaries.

 

ARTICLE VIII.  EVENTS OF DEFAULT AND REMEDIES 

 

8.01    Events of Default. Any of the following shall constitute an Event of Default:

 

(a)    Non-Payment. Any Borrower or any other Loan Party fails to pay (i) when and as required to be paid herein, and in the currency required hereunder, any amount of principal of any Loan or any L/C Obligation, or (ii) within three (3) Business Days after the same becomes due, any interest on any Loan or on any L/C Obligation, any commitment fee or other fee due hereunder, or any other amount payable hereunder or under any other Loan Document; or

 

(b)    Specific Covenants. Any Borrower fails to perform or observe any term, covenant or agreement contained in any of Section 6.01, 6.02, 6.03, 6.05, 6.10, 6.12, 6.14, 7.12 or any other Section of Article VII or any term, covenant or agreement contained in the Post-Closing Agreement; or

 

(c)    Other Defaults. Any Loan Party fails to perform or observe any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for 30 days after the earlier of (i) knowledge by any Loan Party or (ii) receipt by the Company of written notice thereof from the Administrative Agent or any Lender; or

 

(d)    Representations and Warranties. Any representation or warranty made or deemed made by any Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith proves to have been incorrect in any material respect when made or deemed made, except to the extent that such representations and warranties are qualified by materiality, in which case such representations and warranties shall be true and correct in all respects; or

 

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(e)    Cross-Default. (i) Any Borrower or any Material Subsidiary (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness (other than Project Debt) or Guarantee Obligation (other than Indebtedness hereunder and Indebtedness under Swap Contracts) having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $25,000,000, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased or redeemed (automatically or otherwise) prior to its stated maturity (excluding prepayments required upon the refinancing of such Indebtedness or the Disposition of an asset), or such Guarantee Obligation to become payable or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract as to which any Borrower or any Material Subsidiary is the Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (as so defined) under such Swap Contract as to which any Borrower or any Material Subsidiary is an Affected Party (as so defined) and, in either event, the Swap Termination Value owed by such Person as a result thereof is greater than $25,000,000; provided, that this clause (e) shall not apply to (x) any repurchase, prepayment, defeasance, redemption, conversion or settlement with respect to any Permitted Convertible Indebtedness pursuant to its terms, or any event that permits such repurchase, prepayment, defeasance, redemption, conversion or settlement, unless such repurchase, prepayment, defeasance, redemption, conversion or settlement, or such relevant event, results from a default thereunder or an event of the type that constitutes an Event of Default, or (y) or any early payment requirement or unwinding or termination with respect to any Permitted Call Spread Transaction; or

 

(f)    Insolvency Proceedings, Etc. Any Borrower or any of Material Subsidiary institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or

 

(g)    Inability to Pay Debts; Attachment. (i) Any Loan Party or any of its Material Subsidiaries becomes unable or admits in writing its inability or fails generally to pay its debts as they become due (other than the failure of any Project Debt Entity to pay any Project Debt), or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 days after its issue or levy; or

 

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(h)    Judgments. There is entered against any Loan Party (i) one or more final judgments or orders for the payment of money in an aggregate amount (as to all such judgments or orders) exceeding $25,000,000 (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage), or (ii) any one or more non-monetary final judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of 30 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or

 

(i)    ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Company under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $25,000,000, or (ii) the Company or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of the $25,000,000; or

 

(j)    Invalidity of Loan Documents. Any Loan Document at any time after its execution and delivery and for any reason other than the agreement of all the Lenders, as permitted hereunder or thereunder, or satisfaction in full of all the Obligations (other than contingent indemnification obligations or other obligations that purport to survive termination of this Agreement), (i) ceases to be in full force and effect, or is declared by a court of competent jurisdiction to be null and void, invalid or unenforceable in any respect; (ii) any Loan Party denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any Loan Document in writing; (iii) ceases to secure or guaranty the Secured Obligations in respect of the Secured Bank Creditors at any time amounts owing to the Permitted Noteholders are secured or guaranteed; or (iv) any Security Instrument after delivery thereof pursuant to Section 4.01 or 6.14 shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected first priority Lien (subject to Liens permitted by Section 7.01) on the Collateral purported to be covered thereby; or

 

(k)    Loss of Material Licenses, Permits or Intellectual Property. There occurs any of the following events the result of which has, or could reasonably be expected to have, a Material Adverse Effect: (i) any Governmental Authority revokes or fails to renew any license, permit or franchise of any Borrower or any of its Subsidiaries, (ii) any Borrower or any of its Subsidiaries for any reason loses any license, permit or franchise, or (iii) any Borrower or any of its Subsidiaries suffers the imposition of any restraining order, escrow, suspension or impound of funds in connection with any proceeding (judicial or administrative) with respect to any license, permit or franchise; or

 

(l)    Additional Guarantee and Collateral. (i) Any Subsidiary that is not a Guarantor provides a guarantee or (ii) the Company or any Subsidiary grants a Lien on any of its assets that are not Collateral, in each case, in favor of the Permitted Noteholders and fails to concurrently provide a guarantee or grant a Lien on such assets, as applicable, in favor the Administrative Agent or the Collateral Agent, as applicable, for the benefit of the other Secured Bank Creditors to secure the Secured Obligations (except as permitted under Section 6.14(c)); or

 

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(m)    Change of Control. There occurs any Change of Control.

 

8.02    Remedies Upon Event of Default. If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders, take any or all of the following actions:

 

(a)    upon written notice to the Borrowers, declare the commitment of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated;

 

(b)    declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by each Borrower;

 

(c)    require that the Borrowers Cash Collateralize the L/C Obligations (in an amount equal to the Minimum Collateral Amount with respect thereto);

 

(d)    exercise on behalf of itself, the Lenders and the L/C Issuer all rights and remedies available to it, the Lenders and the L/C Issuer under the Loan Documents; and

 

(e)    direct the Collateral Agent in accordance with the Permitted Notes Intercreditor Agreement to exercise on behalf of the Secured Bank Creditors all rights and remedies available to the Secured Bank Creditors under the Security Instruments;

 

provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to any Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, the obligation of the Borrowers to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, and all payment obligations under the Guaranty of each Guarantor shall automatically become due and payable, in each case without further act of the Administrative Agent or any Lender.

 

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8.03    Application of Funds. At any time after the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02), any amounts received on account of the Secured Obligations shall, subject to the provisions of Sections 2.15 and 2.16 and the terms of the Permitted Notes Intercreditor Agreement then in effect, be applied by the Administrative Agent in the following order:

 

First, to payment of that portion of the Secured Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent and amounts payable under Article III) payable to the Administrative Agent in its capacity as such;

 

Second, to payment of that portion of the Secured Obligations constituting fees, indemnities and other amounts (other than principal, interest and Letter of Credit Fees and amounts payable in respect of Secured Hedge Agreements, Secured Cash Management Agreements, Secured Card Related Products Agreements and Secured Bilateral Letters of Credit) payable to the Lenders and the L/C Issuer (including fees, charges and disbursements of counsel to the respective Lenders and the L/C Issuer (including fees and time charges for attorneys who may be employees of any Lender or the L/C Issuer) and amounts payable under Article III), ratably among them in proportion to the respective amounts described in this clause Second payable to them;

 

Third, to payment of that portion of the Secured Obligations constituting accrued and unpaid Letter of Credit Fees and interest on the Loans, L/C Borrowings and other Secured Obligations, ratably among the Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Third payable to them;

 

Fourth, to payment of (a) that portion of the Secured Obligations constituting unpaid principal of the Loans, L/C Borrowings, (b) Secured Obligations then owing under Secured Hedge Agreements, Secured Cash Management Agreements and Secured Card Related Products Agreements, and (c) Obligations then owing under Secured Bilateral Letters of Credit, ratably among the Lenders, the L/C Issuer, the Existing L/C Issuers, the Hedge Banks, the Cash Management Banks, the Card Related Products Banks and the LOC Banks in proportion to the respective amounts described in this clause Fourth held by them;

 

Fifth, to the Administrative Agent for the account of the L/C Issuer and the LOC Banks, to Cash Collateralize that portion of L/C Obligations and outstanding Secured Bilateral Letters of Credit comprised of the aggregate undrawn amount of Letters of Credit and Secured Bilateral Letters of Credit to the extent not otherwise Cash Collateralized by the Borrowers pursuant to Sections 2.03 and 2.15 and the terms of such Secured Bilateral Letters of Credit, ratably among the L/C Issuers and the LOC Banks in proportion to the respective amounts described in this clause Fifth held by them; and

 

Last, the balance, if any, after all of the Secured Obligations have been indefeasibly paid in full, to the Borrowers or as otherwise required by Law.

 

Subject to Sections 2.03(c) and 2.15, amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Fifth above shall be applied to satisfy drawings under such Letters of Credit as they occur. If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Secured Obligations, if any, in the order set forth above.

 

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Notwithstanding the foregoing, Secured Obligations arising under Secured Cash Management Agreements, Secured Hedge Agreements, Secured Card Related Products Agreements and, if and only if permitted under Section 7.01(x), Secured Bilateral Letters of Credit shall be excluded from the application described above if the Administrative Agent has not received written notice thereof, together with such supporting documentation as the Administrative Agent may request, from the applicable Cash Management Bank, Hedge Bank, Card Related Products Bank or LOC Bank, as the case may be. Each Cash Management Bank, Hedge Bank, Card Related Products Bank or LOC Bank not a party to this Agreement that has given the notice contemplated by the preceding sentence shall, by such notice, be deemed to have acknowledged and accepted the appointment of the Administrative Agent pursuant to the terms of Article IX for itself and its Affiliates as if a “Lender” party hereto.

 

Excluded Swap Obligations with respect to any Guarantor shall not be paid with amounts received from such Guarantor or its assets, but appropriate adjustments shall be made with respect to payments from other Loan Parties to preserve the allocation to Secured Obligations otherwise set forth above in this Section.

 

ARTICLE IX.  ADMINISTRATIVE AGENT

 

9.01    Appointment and Authority. Each of the Lenders and the L/C Issuer hereby irrevocably appoints Bank of America to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and the L/C Issuer, and no Borrower shall have rights as a third party beneficiary of any of such provisions. It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.

 

9.02    Rights as a Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with any Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.

 

9.03    Exculpatory Provisions. The Administrative Agent or the Arrangers, as applicable, shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the foregoing, the Administrative Agent or the Arrangers, as applicable:

 

(a)    shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;

 

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(b)    shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law; and

 

(c)    shall not have any duty or responsibility to disclose, and shall not be liable for the failure to disclose, to any Lender or the L/C Issuer, any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any of the Loan Parties or any of their Affiliates, that is communicated to, obtained by or in the possession of, the Administrative Agent, Arrangers or any of their Related Parties in any capacity, except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent herein;

 

(d)    shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given in writing to the Administrative Agent by the Company, a Lender or the L/C Issuer; and

 

(e)    shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or the creation, perfection or priority of any Lien purported to be created by the Security Instruments, (v) the value or the sufficiency of any Collateral, or (vi) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

 

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9.04    Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, or the issuance, extension, renewal or increase of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the L/C Issuer, the Administrative Agent may presume that such condition is satisfactory to such Lender or the L/C Issuer unless the Administrative Agent shall have received notice to the contrary from such Lender or the L/C Issuer prior to the making of such Loan or the issuance of such Letter of Credit. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrowers), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

 

9.05    Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub‐agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and non-appealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.

 

9.06    Resignation of Administrative Agent.

 

(a)    The Administrative Agent may at any time give notice of its resignation to the Lenders, the L/C Issuer and the Company. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Company and, so long as no Event of Default has occurred and is continuing, the consent of the Company (not to be unreasonably withheld), to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation (or such earlier day as shall be agreed by the Required Lenders) (the “Resignation Effective Date”), then the retiring Administrative Agent may (but shall not be obligated to) on behalf of the Lenders and the L/C Issuer, appoint a successor Administrative Agent meeting the qualifications set forth above; provided that in no event shall any such successor Administrative Agent be a Defaulting Lender. Whether or not a successor has been appointed, such resignation shall become effective in accordance with such notice on the Resignation Effective Date.

 

(b)    If the Person serving as Administrative Agent is a Defaulting Lender pursuant to clause (d) of the definition thereof, the Required Lenders may, to the extent permitted by applicable law, by notice in writing to the Company and such Person remove such Person as Administrative Agent and, in consultation with the Company, appoint a successor. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days (or such earlier day as shall be agreed by the Required Lenders) (the “Removal Effective Date”), then such removal shall nonetheless become effective in accordance with such notice on the Removal Effective Date.

 

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(c)    With effect from the Resignation Effective Date or the Removal Effective Date (as applicable) (1) the retiring or removed Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders or the L/C Issuer under any of the Loan Documents, the retiring or removed Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (2) except for any indemnity payments or other amounts then owed to the retiring or removed Administrative Agent, all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and the L/C Issuer directly, until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided for above. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or removed) Administrative Agent (other than as provided in Section 3.01(g) and other than any rights to indemnity payments or other amounts owed to the retiring or removed Administrative Agent as of the Resignation Effective Date or the Removal Effective Date, as applicable), and the retiring or removed Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrowers to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrowers and such successor. After the retiring or removed Administrative Agent’s resignation or removal hereunder and under the other Loan Documents, the provisions of this Article and Section 10.04 shall continue in effect for the benefit of such retiring or removed Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Administrative Agent was acting as Administrative Agent.

 

(d)    Any resignation by Bank of America as Administrative Agent pursuant to this Section shall also constitute its resignation as L/C Issuer and Swing Line Lender. If Bank of America resigns as an L/C Issuer, it shall retain all the rights, powers, privileges and duties of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto, including the right to require the Lenders to make Base Rate Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c).  If Bank of America resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.04(c).  Upon the appointment by the Company of a successor L/C Issuer or Swing Line Lender hereunder (which successor shall in all cases be a Lender other than a Defaulting Lender), (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender, as applicable, (b) the retiring L/C Issuer and Swing Line Lender shall be discharged from all of their respective duties and obligations hereunder or under the other Loan Documents, and (c) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to Bank of America to effectively assume the obligations of Bank of America with respect to such Letters of Credit.

 

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9.07    Non-Reliance on the Administrative Agent, the Arrangers and the Other Lenders. Each Lender and the L/C Issuer expressly acknowledges that none of the Administrative Agent nor any Arranger has made any representation or warranty to it, and that no act by the Administrative Agent or any Arranger hereafter taken, including any consent to, and acceptance of any assignment or review of the affairs of any Loan Party of any Affiliate thereof, shall be deemed to constitute any representation or warranty by the Administrative Agent or any Arranger to any Lender or the L/C Issuer as to any matter, including whether the Administrative Agent or any Arranger have disclosed material information in their (or their Related Parties’) possession. Each Lender and the L/C Issuer represents to the Administrative Agent and the Arrangers that it has, independently and without reliance upon the Administrative Agent, the Arrangers, any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis of, appraisal of, and investigation into, the business, prospects, operations, property, financial and other condition and creditworthiness of the Loan Parties and their Subsidiaries, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrowers hereunder. Each Lender and the L/C Issuer also acknowledges that it will, independently and without reliance upon the Administrative Agent, any Arranger, any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Loan Parties. Each Lender and the L/C Issuer represents and warrants that (i) the Loan Documents set forth the terms of a commercial lending facility and (ii) it is engaged in making, acquiring or holding commercial loans in the ordinary course and is entering into this Agreement as a Lender or L/C Issuer for the purpose of making, acquiring or holding commercial loans and providing other facilities set forth herein as may be applicable to such Lender or L/C Issuer, and not for the purpose of purchasing, acquiring or holding any other type of financial instrument, and each Lender and the L/C Issuer agrees not to assert a claim in contravention of the foregoing. Each Lender and the L/C Issuer represents and warrants that it is sophisticated with respect to decisions to make, acquire and/or hold commercial loans and to provide other facilities set forth herein, as may be applicable to such Lender or such L/C Issuer, and either it, or the Person exercising discretion in making its decision to make, acquire and/or hold such commercial loans or to provide such other facilities, is experienced in making, acquiring or holding such commercial loans or providing such other facilities.

 

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9.08    No Other Duties, Etc. Anything herein to the contrary notwithstanding, none of the Bookrunners, Arrangers, Co-Syndication Agents or Co-Documentation Agents listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender or the L/C Issuer hereunder.

 

9.09    Administrative Agent May File Proofs of Claim. In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on any Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:

 

(a)    to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, L/C Obligations and all other Secured Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the L/C Issuer and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the L/C Issuer and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the L/C Issuer and the Administrative Agent under Sections 2.03(h) and (i), 2.09 and 10.04) allowed in such judicial proceeding; and

 

(b)    to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and the L/C Issuer to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders and the L/C Issuer, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.09 and 10.04.

 

Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or the L/C Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Secured Obligations or the rights of any Lender or the L/C Issuer to authorize the Administrative Agent to vote in respect of the claim of any Lender or the L/C Issuer in any such proceeding.

 

9.10    Collateral and Guaranty Matters.

 

(a)    Guaranty Matters. Without limiting the provisions of Section 9.09, each of the Lenders (including in its capacities as a potential Cash Management Bank, a potential Hedge Bank, a potential Card Related Products Bank and a potential LOC Bank), the L/C Issuer and the Swing Line Lender irrevocably authorize the Administrative Agent, at its option and in its discretion to release any Guarantor from its obligations under the Guaranty if such Person ceases to be a Subsidiary as a result of a transaction permitted under the Loan Documents. Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release any Guarantor from its obligations under the Guaranty pursuant to this Section 9.10.

 

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(b)    Collateral Matters.

 

(i)    The Administrative Agent, each of the Lenders (including in its capacities as a potential Cash Management Bank, a potential Hedge Bank, a potential Card Related Products Bank and a potential LOC Bank) and the L/C Issuer hereby irrevocably appoints and authorizes Bank of America to act as the collateral agent (in such capacity, the “Collateral Agent”) under the Loan Documents for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Secured Obligations, together with such powers and discretion as are reasonably incidental thereto. In this connection, the Collateral Agent and any co-agents, sub-agents and attorneys-in-fact appointed by the Collateral Agent for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Security Instruments, or for exercising any rights and remedies thereunder at the direction of the Collateral Agent, shall be entitled to the benefits of all provisions of this Article IX and Article X (including Section 10.04(c), as though such co-agents, sub-agents and attorneys-in-fact were the Collateral Agent under the Loan Documents) as if set forth in full herein with respect thereto.

 

(ii)    Each of the Lenders (including in its capacities as a potential Cash Management Bank, a potential Hedge Bank, a potential Card Related Products Bank and a potential LOC Bank) and the L/C Issuer hereby (A) consent to the terms of the Permitted Notes Intercreditor Agreement, (B) authorize the Administrative Agent to enter into the Permitted Notes Intercreditor Agreement on behalf of the Secured Bank Creditors, and (C) authorize the Collateral Agent to enter into the Permitted Notes Intercreditor Agreement on behalf of the Secured Parties.

 

(iii)    Without limiting the provisions of Section 9.09, the Administrative Agent, each of the Lenders (including in its capacities as a potential Cash Management Bank, a potential Hedge Bank, a potential Card Related Products Bank and a potential LOC Bank), the L/C Issuer and the Swing Line Lender irrevocably authorize the Collateral Agent, at its option and in its discretion:

 

(A)    to release any Pledged Interest and any Lien on any property granted to or held by the Collateral Agent under any Loan Document (i) upon the occurrence of the Facility Termination Date subject to the Permitted Notes Intercreditor Agreement, (ii) that is sold or to be sold or otherwise disposed of as part of or in connection with any sale or disposition permitted hereunder or under any other Loan Document or (iii) subject to Section 10.01, if approved, authorized or ratified in writing by the Required Lenders subject to the Permitted Notes Intercreditor Agreement;

 

(B)    to subordinate any Lien on any property granted to or held by the Collateral Agent under any Loan Document to the holder of any Lien on such property that is permitted by Section 7.01(i);

 

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(C)    subject to the Permitted Notes Intercreditor Agreement, to release any Mortgaged Property from its respective Mortgage if such Mortgaged Property is determined by the Administrative Agent to be located in a special flood hazard zone pursuant to a Standard Flood Hazard Determination; and

 

(D)    to acknowledge in writing, in form and substance satisfactory to the Collateral Agent, the priority of any Lien granted under any indemnity agreement or surety agreement in favor of a surety providing a bond to the Company and/or its Subsidiaries as permitted by Section 7.01(t) of this Agreement; and

 

(E)    subject to the Permitted Notes Intercreditor Agreement, to include obligations in respect of Secured Bilateral Letters of Credit as “Secured Obligations” (under and as defined in the Permitted Notes Intercreditor Agreement) and/or otherwise under the Security Instruments.

 

Upon request by the Collateral Agent at any time, the Required Lenders will confirm in writing the Collateral Agent’s authority to release or subordinate its interest in particular types or items of property pursuant to this Section 9.10.

 

The Administrative Agent shall not be responsible for or have a duty to ascertain or inquire into any representation or warranty regarding the existence, value or collectability of the Collateral, the existence, priority or perfection of the Administrative Agent’s Lien thereon, or any certificate prepared by any Loan Party in connection therewith, nor shall the Administrative Agent be responsible or liable to the Lenders for any failure to monitor or maintain any portion of the Collateral.

 

9.11    Secured Cash Management Agreements, Secured Hedge Agreements, Secured Card Related Products Agreements and Secured Bilateral Letters of Credit. Except as otherwise set forth herein, no Cash Management Bank, Hedge Bank, Card Related Products Bank or LOC Bank who obtains the benefit of the provisions of Section 8.03, the Guaranty or any Collateral by virtue of the provisions hereof or any Security Instrument shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral (including the release or impairment of any Collateral) (or to notice of or to consent to any amendment, waiver or modification of the provisions hereof or of the Guaranty or any Security Instrument) other than in its capacity as a Lender and, in such case, only to the extent expressly provided in the Loan Documents. Notwithstanding any other provision of this Article IX to the contrary, the Administrative Agent shall not be required to verify the payment of, or that other satisfactory arrangements have been made with respect to, Secured Obligations arising under Secured Cash Management Agreements, Secured Hedge Agreements, Secured Card Related Products Agreements and Secured Bilateral Letters of Credit except to the extent expressly provided herein and unless the Administrative Agent has received written notice of such Secured Obligations, together with such supporting documentation as the Administrative Agent may request, from the applicable Cash Management Bank, Hedge Bank, Card Related Products Bank or LOC Bank, as the case may be. The Administrative Agent shall not be required to verify the payment of, or that other satisfactory arrangements have been made with respect to, Secured Obligations arising under Secured Cash Management Agreements, Secured Hedge Agreements, Secured Card Related Products Agreements and Secured Bilateral Letters of Credit in the case of a Facility Termination Date.

 

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9.12    Lender ERISA Status.

 

(a)    Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent, and the Arrangers and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrowers or any other Loan Party, that at least one of the following is and will be true:

 

(i)    such Lender is not using “plan assets” (within the meaning of 29 CFR § 2510.3-101, as modified by Section 3(42) of ERISA) of one or more Benefit Plans in connection with the Loans, the Letters of Credit or the Commitments,

 

(ii)    the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement,

 

(iii)    (A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Loans, the Letters of Credit, the Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement, or

 

(iv)    such other representation, warranty and covenant as may be agreed in writing between the Administrative Agent, in its sole discretion, and such Lender.

 

(b)    In addition, unless either (1) clause (i) in the immediately preceding clause (a) is true with respect to a Lender or (2) a Lender has provided another representation, warranty and covenant in accordance with clause (iv) in the immediately preceding clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent and not, for the avoidance of doubt, to or for the benefit of the Borrowers or any other Loan Party, that the Administrative Agent is not a fiduciary with respect to the assets of such Lender involved in such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement (including in connection with the reservation or exercise of any rights by the Administrative Agent under this Agreement, any Loan Document or any documents related hereto or thereto).

 

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ARTICLE X.  MISCELLANEOUS

 

10.01    Amendments, Etc. Except as provided in Sections 1.07(b) and (c) and Section 2.14(e), and subject to Section 3.03(c), no amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by any Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrowers or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall:

 

(a)    (i) waive any condition set forth in Section 4.01(a) without the written consent of each Lender; and (ii) without limiting the generality of clause (a) above, waive any condition set forth in Section 4.02 as to any Credit Extension under a particular Facility without the written consent of the Required Revolving Lenders or the Required Term Lenders (which waiver shall not also require the vote of Required Lenders), as the case may be;

 

(b)    extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02) without the written consent of such Lender;

 

(c)    postpone any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby;

 

(d)    release any Borrower from its obligations hereunder or reduce the principal of, or the rate of interest specified herein on, any Loan or L/C Borrowing, or (subject to clause (iv) of the second proviso to this Section 10.01) any fees or other amounts payable hereunder or under any other Loan Document, or change the manner of computation of any financial ratio (including any change in any applicable defined term) used in determining the Applicable Rate that would result in a reduction of any interest rate on any Loan or any fee payable hereunder without the written consent of each Lender directly affected thereby; provided, however, that only the consent of the Required Lenders shall be necessary to amend the definition of “Default Rate” or to waive any obligation of the Borrowers to pay interest or Letter of Credit Fees at the Default Rate;

 

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(e)    change (i) Section 8.03 in a manner that would alter the pro rata sharing of payments required thereby or (ii) the order of application of any prepayment of Loans among the Facilities from the application thereof set forth in Section 2.05 or Section 2.06 in any manner that materially and adversely affects the Lenders under a Facility, in each case without the written consent of (x) if such Facility is the Term Facility, the Required Term Lenders, and (y) if such Facility is the Revolving Credit Facility, the Required Revolving Lenders (which amendment, modification or waiver shall not also require the vote of Required Lenders);

 

(f)    amend Section 1.06 or the definition of “Alternative Currency” without the written consent of each Lender;

 

(g)    change (i) any provision of this Section 10.01 or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder (other than the definitions specified in clause (ii) of this Section 10.01(g)), without the written consent of each Lender or (ii) the definition of “Required Revolving Lenders” or “Required Term Lenders” without the written consent of each Lender under the applicable Facility (which amendment, modification or waiver shall not also require the vote of Required Lenders);

 

(h)    release all or substantially all of the value of the Guaranty without the written consent of each Lender, except to the extent the release of any Guarantor is permitted pursuant to Section 9.10 (in which case such release may be made by the Administrative Agent acting alone) or release the Company as a Guarantor of the Obligations of GCC or GILC;

 

(i)    impose any greater restriction on the ability of any Lender under a Facility to assign any of its rights or obligations hereunder without the written consent of (i) if such Facility is the Term Facility, the Required Term Lenders, and (ii) if such Facility is the Revolving Credit Facility, the Required Revolving Lenders, in each case, which amendment, modification or waiver shall not also require the vote of Required Lenders;

 

(j)    release all or substantially all of the Collateral in any transaction or series of related transactions without the written consent of each Lender, except to the extent the release of any Collateral is permitted pursuant to Section 9.10 (in which case such release may be made by the Collateral Agent acting alone); or

 

(k)    amend any provision of this Agreement to require that a Lender fund any portion of any Loan or any Unreimbursed Amount in a currency other than Dollars without the consent of each Lender;

 

and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the L/C Issuer in addition to the Lenders required above, affect the rights or duties of the L/C Issuer under this Agreement or any Issuer Document relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Lender in addition to the Lenders required above, affect the rights or duties of the Swing Line Lender under this Agreement; (iii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; and (iv) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) the Commitment of any Defaulting Lender may not be increased or extended without the consent of such Lender and (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender disproportionately adversely relative to other affected Lenders shall require the consent of such Defaulting Lender.

 

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Notwithstanding any provision herein to the contrary, (x) no amendment or modification of a Loan Document shall add, increase, renew or extend any Loan, Commitment or credit line hereunder until the completion of flood due diligence, documentation and coverage as required by the National Flood Insurance Program, as amended, as shall be requested by the Administrative Agent and as otherwise satisfactory to the Administrative Agent, (y) in addition to any amendment authorized by Section 2.14, this Agreement may be amended with the written consent of the Required Lenders, the Administrative Agent and the Borrowers (i) to add one or more additional revolving credit or term loan facilities to this Agreement and to permit the extensions of credit and all related obligations and liabilities arising in connection therewith from time to time outstanding to share ratably (or on a basis subordinated to the existing facilities hereunder) in the benefits of this Agreement and the other Loan Documents with the obligations and liabilities from time to time outstanding in respect of the existing facilities hereunder, and (ii) in connection with the foregoing, to permit, as deemed appropriate by the Administrative Agent and approved by the Required Lenders, the Lenders providing such additional credit facilities to participate in any required vote or action required to be approved by the Required Lenders or by any other number, percentage or class of Lenders hereunder, and (z) upon the request of the Company, the Collateral Agent shall, without the consent of any Lender, amend the Permitted Notes Intercreditor Agreement and/or any of the Security Instruments to include obligations in respect of Secured Bilateral Letters of Credit as “Secured Obligations” under and as defined in the Permitted Notes Intercreditor Agreement and/or otherwise under the Security Instruments, and each Lender hereby directs that the Collateral Agent enter into such amendments and make such changes necessary or appropriate to carry out the purpose of such amendments, in each case, without further action by or consent of any Lender and to the extent such amendments would not result in a violation of Section 7.01(x).

 

10.02    Notices; Effectiveness; Electronic Communication.

 

(a)    Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

 

(i)    if to any Borrower or any other Loan Party to the address, telecopier number, electronic mail address or telephone number specified for the Company on Schedule 10.02, and if to the Administrative Agent, the Collateral Agent, the L/C Issuer or the Swing Line Lender, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 10.02; and

 

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(ii)    if to any other Lender, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire (including, as appropriate, notices delivered solely to the Person designated by a Lender on its Administrative Questionnaire then in effect for the delivery of notices that may contain material non-public information relating to the Borrowers).

 

Notices and other communications sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices and other communications sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices and other communications delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).

 

(b)    Electronic Communications. Notices and other communications to the Lenders and the L/C Issuer hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or the L/C Issuer pursuant to Article II if such Lender or the L/C Issuer, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent, the Swing Line Lender, the L/C Issuer or the Company may each, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.

 

Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii), if such notice or other communication is not sent during the normal business hours of the recipient, such notice, email or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.

 

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(c)    The Platform. THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to any Borrower, any Lender, the L/C Issuer or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of any Borrower’s, any Loan Party’s or the Administrative Agent’s transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Agent Party; provided, however, that in no event shall any Agent Party have any liability to any Borrower, any Lender, the L/C Issuer or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).

 

(d)    Change of Address, Etc. Each of the Company, the Administrative Agent, the L/C Issuer and the Swing Line Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto. Each other Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the Company, the Administrative Agent, the L/C Issuer and the Swing Line Lender. In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, telecopier number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender. Furthermore, each Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all times have selected the “Private Side Information” or similar designation on the content declaration screen of the Platform in order to enable such Public Lender or its delegate, in accordance with such Public Lender’s compliance procedures and applicable Law, including United States Federal and state securities Laws, to make reference to Borrower Materials that are not made available through the “Public Side Information” portion of the Platform and that may contain material non-public information with respect to a Borrower or its securities for purposes of United States Federal or state securities laws.

 

(e)    Reliance by Administrative Agent, L/C Issuer and Lenders. The Administrative Agent, the L/C Issuer and the Lenders shall be entitled to rely and act upon any notices (including telephonic or electronic Loan Notices, Letter of Credit Applications and Swing Line Loan Notices) purportedly given by or on behalf of the Company or the Borrowers even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. Each Borrower shall indemnify the Administrative Agent, the L/C Issuer, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Company or the Borrowers. All telephonic notices to and other telephonic communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.

 

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10.03    No Waiver; Cumulative Remedies; Enforcement. No failure by any Lender, the L/C Issuer or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided, and provided under each other Loan Document, are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

 

Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Loan Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent in accordance with Section 8.02 for the benefit of all the Lenders and the L/C Issuer; provided, however, that the foregoing shall not prohibit (a) the Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Loan Documents, (b) the L/C Issuer or the Swing Line Lender from exercising the rights and remedies that inure to its benefit (solely in its capacity as L/C Issuer or Swing Line Lender, as the case may be) hereunder and under the other Loan Documents, (c) any Lender from exercising setoff rights in accordance with Section 10.08 (subject to the terms of Section 2.13), or (d) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Loan Party under any Debtor Relief Law; and provided, further, that if at any time there is no Person acting as Administrative Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Administrative Agent pursuant to Section 8.02 and (ii) in addition to the matters set forth in clauses (b), (c) and (d) of the preceding proviso and subject to Section 2.13, any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.

 

10.04    Expenses; Indemnity; Damage Waiver.

 

(a)    Costs and Expenses. The Company shall pay (i) all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees, charges and disbursements of one firm of counsel for the Administrative Agent, the Collateral Agent and Arrangers, taken as a whole, and of such local and special counsel as reasonably required), in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable and documented out-of-pocket expenses incurred by the L/C Issuer in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent, the Collateral Agent, any Lender or the L/C Issuer (including the fees, charges and disbursements of (x) one firm of counsel for the Administrative Agent, the Collateral Agent, the Lenders and the L/C Issuer, taken as a whole, and, in the event of a conflict of interest, one additional firm of counsel to all Persons affected thereby, taken as a whole, and of special and local counsel as reasonably required, and (y) any financial advisor for the Administrative Agent, any Lender or the L/C Issuer), in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loans made or Letters of Credit issued hereunder, including all such reasonable and documented out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

 

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(b)    Indemnification by the Borrowers. Each Borrower shall indemnify the Administrative Agent (and any sub-agent thereof), each Lender and the L/C Issuer, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of one firm of counsel for all Indemnitees, taken as a whole, and, in the event of a conflict of interest, one additional firm of counsel to all persons affected thereby, taken as a whole, and of special and local counsel as reasonably required), incurred by any Indemnitee or asserted against any Indemnitee by any Person (including any Borrower or any other Loan Party) other than such Indemnitee and its Related Parties arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder, the consummation of the transactions contemplated hereby or thereby, or, in the case of the Administrative Agent (and any sub-agent thereof) and its Related Parties only, the administration of this Agreement and the other Loan Documents (including in respect of any matters addressed in Section 3.01), (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by any Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to any Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by any Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence, willful misconduct or breach in bad faith of its obligations hereunder or under any other Loan Document of such Indemnitee or (y) result from a claim of any Indemnitee solely against one or more other Indemnitees (and not by one or more Indemnitees against the Administrative Agent, Collateral Agent or Arrangers in such capacity) that have not resulted from the action, inaction, participation or contribution of the Company or any of its Subsidiaries or any of its or their respective Affiliates, officers, directors, employees, agents, advisors or other representatives. Without limiting the provisions of Section 3.01(c), this Section 10.04(b) shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.

 

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(c)    Reimbursement by Lenders. To the extent that the Borrowers for any reason fail to indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it to the Administrative Agent (or any sub-agent thereof), the L/C Issuer, the Swing Line Lender or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the L/C Issuer, the Swing Line Lender or such Related Party, as the case may be, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought based on each Lender’s share of the unused Commitments, aggregate principal amount of outstanding Revolving Credit Loans and participations in L/C Obligations and Swing Line Loans at such time) of such unpaid amount (including any such unpaid amount in respect of a claim asserted by such Lender), such payment to be made severally among them based on such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought), provided, further that, the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent), the L/C Issuer or the Swing Line Lender in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent), the L/C Issuer or the Swing Line Lender in connection with such capacity. The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.12(d).

 

(d)    Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable law, the Borrowers shall not assert, and hereby waive, and acknowledge that no other Person shall have, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof. No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.

 

(e)    Payments. All amounts due under this Section shall be payable not later than ten Business Days after demand therefor.

 

(f)    Survival. The agreements in this Section and the indemnity provisions of Section 10.02(e) shall survive the resignation of the Administrative Agent, the L/C Issuer and the Swing Line Lender, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.

 

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10.05    Payments Set Aside. To the extent that any payment by or on behalf of the Borrowers is made to the Administrative Agent, the L/C Issuer or any Lender, or the Administrative Agent, the L/C Issuer or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent, the L/C Issuer or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender and the L/C Issuer severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the applicable Overnight Rate from time to time in effect, in the applicable currency of such recovery or payment. The obligations of the Lenders and the L/C Issuer under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.

 

10.06    Successors and Assigns.

 

(a)    Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the L/C Issuer and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

(b)    Assignments by Lenders. Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans (including for purposes of this subsection (b), participations in L/C Obligations and in Swing Line Loans) at the time owing to it); provided that any such assignment shall be subject to the following conditions:

 

(i)    Minimum Amounts.

 

(A)    In the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment under any Facility and/or the Loans at the time owing to it (in each case with respect to any Facility) or contemporaneous assignments to related Approved Funds that equal at least the amount specified in subsection (b)(i)(B) of this Section in the aggregate or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and

 

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(B)    in any case not described in subsection (b)(i)(A) of this Section, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000, in the case of any assignment in respect of the Revolving Credit Facility, or $5,000,000, in the case of any assignment in respect of the Term Facility, unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Company otherwise consents (each such consent not to be unreasonably withheld or delayed); provided, however, that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single assignee (or to an assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met.

 

(ii)    Proportionate Amounts. Each assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s Loans and Commitments under both the Revolving Credit Facility and the Term Facility.

 

(iii)    Required Consents. No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B) of this Section and, in addition:

 

(A)    the consent of the Company (such consent not to be unreasonably withheld or delayed) shall be required (1) if such assignment is to a Person that is engaged in similar lines of business of, or is a competitor to, the Company or any of its Subsidiaries, which Person has been designated by the Company in its reasonable discretion by written notice to the Administrative Agent and the Lenders (including by posting such notice to the Platform) not less than ten Business Days prior to such date of assignment (it being understood and agreed that the Company’s withholding of consent to an assignment to such a Person shall be deemed reasonable); provided that in no event shall such written notice apply retroactively to disqualify any Person that has previously acquired an interest in the Loans and/or the Commitments that is otherwise permitted hereunder; and (2) for all other assignments unless (x) an Event of Default has occurred and is continuing at the time of such assignment or (y) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund; provided that the Company shall be deemed to have consented to any such assignment under this clause (iii)(A)(2) unless it shall object thereto by written notice to the Administrative Agent within five (5) Business Days after having received written notice thereof;

 

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(B)    the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments in respect of (1) any unfunded Term Commitment or any Revolving Credit Commitment if such assignment is to a Person that is not a Lender with a Commitment in respect of the applicable Facility, an Affiliate of such Lender or an Approved Fund with respect to such Lender or (2) any Term Loan to a Person that is not a Lender, an Affiliate of a Lender or an Approved Fund;

 

(C)    the consent of the L/C Issuer (such consent not to be unreasonably withheld or delayed) shall be required for any assignment in respect of the Revolving Credit Facility that increases the obligation of the assignee to participate in exposure under one or more Letters of Credit (whether or not then outstanding); and

 

(D)    the consent of the Swing Line Lender (such consent not to be unreasonably withheld or delayed) shall be required for any assignment in respect of the Revolving Credit Facility.

 

(iv)    Assignment and Assumption. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in the amount of $3,500; provided, however, that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

 

(v)    No Assignment to Certain Persons. No such assignment shall be made (A) to any Borrower or any of any Borrower’s Affiliates or Subsidiaries, or (B) to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (B), or (C) to a natural person.

 

(vi)    Certain Additional Payments. In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Company and the Administrative Agent, the applicable pro rata share of Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent, the L/C Issuer or any Lender hereunder (and interest accrued thereon) and (y) acquire (and fund as appropriate) its full pro rata share of all Loans and participations in Letters of Credit and Swing Line Loans in accordance with its Applicable Percentage. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable Law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.

 

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Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05, and 10.04 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided, that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender. Upon request, the Borrowers (at their expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section.

 

(c)    Register. The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the Borrowers (and such agency being solely for tax purposes), shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it (or the equivalent thereof in electronic form) and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and stated interest) of the Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Borrowers, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. In addition, the Administrative Agent shall maintain on the Register information regarding the designation, and revocation of any designation, of any Lender as a Defaulting Lender. The Register shall be available for inspection by the Borrowers and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

 

(d)    Participations. Any Lender may at any time, without the consent of, or notice to, the Company or the Administrative Agent, sell participations to any Person (other than a natural Person, a Defaulting Lender or any Borrower or any Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (including such Lender’s participations in L/C Obligations and/or Swing Line Loans) owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrowers, the Administrative Agent, the Lenders and the L/C Issuer shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. For the avoidance of doubt, each Lender shall be responsible for the indemnity under Section 10.04(c) without regard to the existence of any participation.

 

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Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that affects such Participant. Each Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section (it being understood that the documentation required under Section 3.01(e) shall be delivered to the Lender who sells the participation) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant (A) agrees to be subject to the provisions of Sections 3.06 and 10.13 as if it were an assignee under paragraph (b) of this Section and (B) shall not be entitled to receive any greater payment under Sections 3.01 or 3.04, with respect to any participation, than the Lender from whom it acquired the applicable participation would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at the Borrowers’ request and expense, to use reasonable efforts to cooperate with the Borrowers to effectuate the provisions of Section 3.06 with respect to any Participant. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.13 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrowers, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant's interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

 

(e)    Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

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(f)    Resignation as L/C Issuer or Swing Line Lender after Assignment. Notwithstanding anything to the contrary contained herein, if at any time Bank of America assigns all of its Commitment and Loans pursuant to subsection (b) above, Bank of America may, (i) upon 30 days’ notice to the Company and the Lenders, resign as L/C Issuer and/or (ii) upon 30 days’ notice to the Company, resign as Swing Line Lender. In the event of any such resignation as L/C Issuer or Swing Line Lender, the Borrowers shall be entitled to appoint from among the Lenders a successor L/C Issuer or Swing Line Lender hereunder; provided, however, that no failure by the Company to appoint any such successor shall affect the resignation of Bank of America as L/C Issuer or Swing Line Lender, as the case may be. If Bank of America resigns as L/C Issuer, it shall retain all the rights, powers, privileges and duties of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Revolving Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)). If Bank of America resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Revolving Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.04(c). Upon the appointment of a successor L/C Issuer and/or Swing Line Lender, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender, as the case may be, and (b) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to Bank of America to effectively assume the obligations of Bank of America with respect to such Letters of Credit.

 

10.07    Treatment of Certain Information; Confidentiality. Each of the Administrative Agent, the Lenders and the L/C Issuer agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its Related Parties (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent required or requested by any regulatory authority purporting to have jurisdiction over such Person or its Related Parties (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights and obligations under this Agreement or any Eligible Assignee invited to be a Lender pursuant to Section 2.14(b)(iii) or 2.14(c)(iii) or (ii) any actual or prospective party (or its Related Parties) to any swap, derivative or other transaction under which payments are to be made by reference to any Borrower and its obligations, this Agreement or payments hereunder, (g) on a confidential basis to (i) any rating agency in connection with rating any Borrower or its Subsidiaries or the credit facilities provided hereunder or (ii) the CUSIP Service Bureau or any similar agency in connection with the issuance and monitoring of CUSIP numbers or other market identifiers with respect to the credit facilities provided hereunder, (h) with the consent of the Borrowers or (i) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent, any Lender, the L/C Issuer or any of their respective Affiliates on a nonconfidential basis from a source other than a Borrower. For purposes of this Section, “Information” means all information received from any Borrower or any Subsidiary relating to any Borrower or any Subsidiary or any of their respective businesses, other than any such information that is available to the Administrative Agent, any Lender or the L/C Issuer on a nonconfidential basis prior to disclosure by any Borrower or any Subsidiary, provided that, in the case of information received from any Borrower or any Subsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

 

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Each of the Administrative Agent, the Lenders and the L/C Issuer acknowledges that (a) the Information may include material non-public information concerning a Borrower or a Subsidiary, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable Law, including United States Federal and state securities Laws.

 

10.08    Right of Setoff.  If an Event of Default shall have occurred and be continuing, each Lender, the L/C Issuer and each of their respective Affiliates is hereby authorized at any time and from time to time, after obtaining the prior written consent of the Administrative Agent, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, the L/C Issuer or any such Affiliate to or for the credit or the account of the Borrowers against any and all of the obligations of the Borrowers now or hereafter existing under this Agreement or any other Loan Document to such Lender or the L/C Issuer or their respective Affiliates, irrespective of whether or not such Lender, the L/C Issuer or Affiliate shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrowers may be contingent or unmatured or are owed to a branch, office or Affiliate of such Lender or the L/C Issuer different from the branch, office or Affiliate holding such deposit or obligated on such indebtedness; provided, that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.16 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent, the L/C Issuer and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Secured Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. The rights of each Lender, the L/C Issuer and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, the L/C Issuer or their respective Affiliates may have. Each Lender and the L/C Issuer agrees to notify the Company and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.

 

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10.09    Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrowers. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

 

10.10    Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Agreement.

 

10.11    Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.

 

10.12    Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without limiting the foregoing provisions of this Section 10.12, if and to the extent that the enforceability of any provisions in this Agreement relating to Defaulting Lenders shall be limited by Debtor Relief Laws, as determined in good faith by the Administrative Agent, the L/C Issuer or the Swing Line Lender, as applicable, then such provisions shall be deemed to be in effect only to the extent not so limited.

 

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10.13    Replacement of Lenders. If the Borrowers are entitled to replace a Lender pursuant to the provisions of Section 3.06, or if any Lender is a Defaulting Lender or a Non-Consenting Lender, then the Company may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.06), all of its interests, rights (other than its existing rights to payments pursuant to Sections 3.01 and 3.04) and obligations under this Agreement and the related Loan Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:

 

(a)    the Borrowers shall have paid to the Administrative Agent the assignment fee (if any) specified in Section 10.06(b);

 

(b)    such Lender shall have received payment of an amount equal to 100% of the outstanding principal of its Loans and L/C Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.05) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrowers (in the case of all other amounts);

 

(c)    in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter;

 

(d)    such assignment does not conflict with applicable Laws; and

 

(e)    in the case of an assignment resulting from a Lender becoming a Non-Consenting Lender, the applicable assignee shall have consented to the applicable amendment, waiver or consent.

 

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrowers to require such assignment and delegation cease to apply.

 

10.14    Governing Law; Jurisdiction; Etc.

 

(a)    GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (EXCEPT, AS TO ANY OTHER LOAN DOCUMENT, AS EXPRESSLY SET FORTH THEREIN) AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA.

 

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(b)    SUBMISSION TO JURISDICTION. EACH BORROWER IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA SITTING IN THE CITY AND COUNTY OF SAN FRANCISCO AND OF THE UNITED STATES DISTRICT COURT OF THE NORTHERN DISTRICT OF CALIFORNIA, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH CALIFORNIA STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER OR THE L/C ISSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

(c)    WAIVER OF VENUE. EACH BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

 

(d)    SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

 

10.15    Arbitration and Waiver of Jury Trial.

 

(a)    This Section concerns the resolution of any controversies or claims between the parties, whether arising in contract, tort or by statute, including but not limited to controversies or claims that arise out of or relate to: (i) this Agreement (including any renewals, extensions or modifications); or (ii) any document related to this Agreement (collectively a “Claim”). For the purposes of this arbitration provision only, the term “parties” shall include any parent corporation, subsidiary or affiliate of the Lender involved in the servicing, management or administration of the Obligations or any other obligation described in this Agreement.

 

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(b)    At the request of any party to this Agreement, any Claim shall be resolved by binding arbitration in accordance with the Federal Arbitration Act (Title 9, U.S. Code) (the “Arbitration Act”). The Arbitration Act will apply even though this Agreement provides that it is governed by the law of a specified state. The arbitration will take place on an individual basis without resort to any form of class action.

 

(c)    Arbitration proceedings will be determined in accordance with the Arbitration Act, the then-current rules and procedures for the arbitration of financial services disputes of the American Arbitration Association or any successor thereof (“AAA”), and the terms of this Section. In the event of any inconsistency, the terms of this Section shall control. If AAA is unwilling or unable to (i) serve as the provider of arbitration or (ii) enforce any provision of this arbitration clause, the Lender may designate another arbitration organization with similar procedures to serve as the provider of arbitration.

 

(d)    The arbitration shall be administered by AAA and conducted, unless otherwise required by law, in the State of California. All Claims shall be determined by one arbitrator; however, if Claims exceed $5,000,000, upon the request of any party, the Claims shall be decided by three arbitrators. All arbitration hearings shall commence within ninety (90) days of the demand for arbitration and close within ninety (90) days of commencement and the award of the arbitrator(s) shall be issued within thirty (30) days of the close of the hearing. However, the arbitrator(s), upon a showing of good cause, may extend the commencement of the hearing for up to an additional sixty (60) days. The arbitrator(s) shall provide a concise written statement of reasons for the award. The arbitration award may be submitted to any court having jurisdiction to be confirmed, judgment entered and enforced.

 

(e)    The arbitrator(s) will give effect to statutes of limitation in determining any Claim and may dismiss the arbitration on the basis that the Claim is barred. For purposes of the application of the statute of limitations, the service on AAA under applicable AAA rules of a notice of Claim is the equivalent of the filing of a lawsuit. Any dispute concerning this arbitration provision or whether a Claim is arbitrable shall be determined by the arbitrator(s). The arbitrator(s) shall have the power to award legal fees pursuant to the terms of this Agreement.

 

(f)    This Section does not limit the right of any party to: (i) exercise self-help remedies, such as but not limited to, setoff; (ii) initiate judicial or non-judicial foreclosure against any real or personal property collateral; (iii) exercise any judicial or power of sale rights; or (iv) act in a court of law to obtain an interim remedy, such as but not limited to, injunctive relief, writ of possession or appointment of a receiver, or additional or supplementary remedies.

 

(g)    The filing of a court action is not intended to constitute a waiver of the right of any party, including the suing party, thereafter to require submittal of the Claim to arbitration.

 

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(h)    BY AGREEING TO BINDING ARBITRATION, THE PARTIES IRREVOCABLY AND VOLUNTARILY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM. FURTHERMORE, WITHOUT INTENDING IN ANY WAY TO LIMIT THIS AGREEMENT TO ARBITRATE, TO THE EXTENT ANY CLAIM IS NOT ARBITRATED, THE PARTIES IRREVOCABLY AND VOLUNTARILY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF SUCH CLAIM. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.

 

10.16    California Judicial Reference. If any action or proceeding is filed in a court of the State of California by or against any party hereto in connection with any of the transactions contemplated by this Agreement or any other Loan Document, (a) the court shall, and is hereby directed to, make a general reference pursuant to California Code of Civil Procedure Section 638 to a referee (who shall be a single active or retired judge) to hear and determine all of the issues in such action or proceeding (whether of fact or of law) and to report a statement of decision; provided that at the option of any party to such proceeding, any such issues pertaining to a “provisional remedy” as defined in California Code of Civil Procedure Section 1281.8 shall be heard and determined by the court, and (b) without limiting the generality of Section 10.04, the Borrowers shall be solely responsible to pay all fees and expenses of any referee appointed in such action or proceeding.

 

10.17    No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), each Borrower acknowledges and agrees, and acknowledges its Affiliates’ understanding, that: (i) (A) the arranging and other services regarding this Agreement provided by the Administrative Agent, the Arrangers and the Lenders are arm’s-length commercial transactions between each Borrower and its Affiliates, on the one hand, and the Administrative Agent, the Arrangers and the Lenders, on the other hand, (B) each Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) each Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (ii) (A) the Administrative Agent, the Arrangers and each Lender is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for any Borrower or any of its Affiliates, or any other Person and (B) neither the Administrative Agent, the Arrangers nor any Lender has any obligation to any Borrower or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (iii) the Administrative Agent, the Arrangers and the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of each Borrower and its Affiliates, and neither the Administrative Agent, the Arrangers nor any Lender has any obligation to disclose any of such interests to any Borrower or its Affiliates. To the fullest extent permitted by law, each Borrower hereby waives and releases any claims that it may have against the Administrative Agent, the Arrangers or any Lender with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby; provided that the foregoing shall not be deemed to release Bank of America from any obligations expressly set forth herein.

 

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10.18    Electronic Execution of Assignments and Certain Other Documents. The words “execution,” “execute”, “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this Agreement and the transactions contemplated hereby (including without limitation Assignment and Assumptions, amendments or other Committed Loan Notices, Swing Line Loan Notices, waivers and consents) shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Administrative Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that notwithstanding anything contained herein to the contrary the Administrative Agent is under no obligation to agree to accept electronic signatures in any form or in any format unless expressly agreed to by the Administrative Agent pursuant to procedures approved by it.

 

10.19    USA PATRIOT Act.  Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies each Borrower that pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies each Borrower, which information includes the name and address of such Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify such Borrower in accordance with the Act. Each Borrower shall, promptly following a request by the Administrative Agent or any Lender, provide all documentation and other information that the Administrative Agent or such Lender requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the Act.

 

10.20    Judgment Currency. If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder or any other Loan Document in one currency into another currency, the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the first currency with such other currency on the Business Day preceding that on which final judgment is given. The obligation of the Borrowers in respect of any such sum due from it to the Administrative Agent or the L/C Issuer hereunder or under the other Loan Documents shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement (the “Agreement Currency”), be discharged only to the extent that on the Business Day following receipt by the Administrative Agent or the L/C Issuer, as the case may be, of any sum adjudged to be so due in the Judgment Currency, the Administrative Agent or the L/C Issuer, as the case may be, may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency. If the amount of the Agreement Currency so purchased is less than the sum originally due to the Administrative Agent or the L/C Issuer from the Borrowers in the Agreement Currency, each Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Administrative Agent or the L/C Issuer, as the case may be, against such loss. If the amount of the Agreement Currency so purchased is greater than the sum originally due to the Administrative Agent or the L/C Issuer in such currency, the Administrative Agent or the L/C Issuer, as the case may be, agrees to return the amount of any excess to the Borrowers (or to any other Person who may be entitled thereto under applicable law).

 

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10.21    Keepwell. The Borrowers at the time the Guaranty or the grant of the security interest under the Loan Documents, in each case, by any Specified Loan Party, becomes effective with respect to any Swap Obligation, hereby jointly and severally, absolutely, unconditionally and irrevocably undertakes to provide such funds or other support to each Specified Loan Party with respect to such Swap Obligation as may be needed by such Specified Loan Party from time to time to honor all of its obligations under its Guaranty and the other Loan Documents in respect of such Swap Obligation (but, in each case, only up to the maximum amount of such liability that can be hereby incurred without rendering the Borrowers’ obligations and undertakings under this Section 10.21 voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations and undertakings of the Borrowers under this Section shall remain in full force and effect until the Obligations have been indefeasibly paid and performed in full. The Borrowers intend this Section to constitute, and this Section shall be deemed to constitute, a guarantee of the obligations of, and a “keepwell, support, or other agreement” for the benefit of, each Specified Loan Party for all purposes of the Commodity Exchange Act.

 

10.22    Acknowledgement and Consent to Bail-In of Affected Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Lender that is an Affected Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

 

(a)    the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any Lender that is an Affected Financial Institution; and

 

(b)    the effects of any Bail-In Action on any such liability, including, if applicable:

 

(i)    a reduction in full or in part or cancellation of any such liability;

 

(ii)    a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

 

(iii)    the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of the applicable Resolution Authority.

 

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10.23    Acknowledgement Regarding Any Supported QFCs. To the extent that the Loan Documents provide support, through a guarantee or otherwise, for any Swap Contract or any other agreement or instrument that is a QFC (such support, “QFC Credit Support”, and each such QFC, a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States):

 

(a)    In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.

 

(b)    As used in this Section 10.23, the following terms have the following meanings:

 

“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.

 

“Covered Entity” means any of the following: (i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); (ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or (iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).

 

“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.

 

“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).

 

 

[Remainder of page intentionally left blank; signature pages follow.]

 

 

158Exhibit 4.1 

 

No securities regulatory authority in Canada or any other jurisdiction has expressed an opinion about, or passed upon the fairness or merits of, the transaction described in this document, the securities offered pursuant to such transaction or the adequacy of the information contained in this document and it is an offense to claim otherwise.

 

BROADWAY GOLD MINING LTD.

 

NOTICE OF MEETING 

 

AND

 

MANAGEMENT INFORMATION CIRCULAR FOR THE 

 

ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS 

 

TO BE HELD ON

 

February 19, 2020

 

The members of the Board of Directors of Broadway Gold Mining Ltd.

 

UNANIMOUSLY recommend that Shareholders vote FOR the Arrangement Resolution

 

and all related matters.

 

	
These materials are important and require your immediate attention. They require shareholders of Broadway Gold Mining Ltd. to make an important decision. If you are in doubt as to how to make such decision, please contact your financial, legal or other professional advisor. If you have any questions or require more information with regard to the procedures for voting, please contact Odyssey Trust Company at 1-587-885-0960.

     

     

    

BROADWAY GOLD MINING LTD.

 

NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS

 

NOTICE IS HEREBY GIVEN that the annual and special meeting (the “Meeting”) of the holders of common shares (the “Broadway Shareholders”) of Broadway Gold Mining Ltd. (“Broadway” or the “Corporation”) will be held at the offices of Wildeboer Dellelce LLP, Suite 800, Wildeboer Dellelce Place, 365 Bay Street, Toronto, Ontario, M5H 2V1, at 10:00 a.m. (Toronto time), on February 19, 2020 for the following purposes:

 

	
1.

	
TO RECEIVE the audited financial statements of Broadway for the fiscal year ended August 31, 2019, together with the report of the auditors thereon;

 

	
2.

	
TO APPOINT the auditors of Broadway for the ensuing fiscal year (or until completion of the Plan of Arrangement, as defined below) and to authorize the directors of Broadway to fix the auditors’ remuneration;

 

	
3.

	
TO FIX the number of directors of Broadway for the ensuing year (or until completion of the Plan of Arrangement, as defined below) at five (5);

 

	
4.

	
TO ELECT the board of directors of Broadway (the “Board”) to hold office until the earlier of the next annual meeting or until the completion of the Plan of Arrangement;

 

	
5.

	
TO CONSIDER and, if thought advisable, approve with or without variation, an ordinary resolution to re- approve Broadway’s stock option plan in accordance with the policies of the TSX Venture Exchange for the ensuing year (or until completion of the Plan of Arrangement);

 

	
6.

	
TO CONSIDER and, if deemed advisable, to approve, with or without variation, a special resolution of the Broadway Shareholders substantially in the form set out in Appendix “B” of the Circular, approving a statutory plan of arrangement (the “Plan of Arrangement”) pursuant to Section 288 of the Business Corporations Act (British Columbia) (the “BCBCA”) among Broadway, Madison Metals Inc., Broadway Delaware Subco Inc. and Mind Medicine, Inc. (the “Arrangement Resolution”), as more fully described in the Circular;

 

	
7.

	
TO CONSIDER and, if deemed advisable, conditional upon and effective as of the completion of the Plan of Arrangement, to approve, with or without variation, a special resolution of the Broadway Shareholders substantially in the form set out in Appendix “B” of the Circular authorizing the consolidation of the issued and outstanding Broadway common shares (the “Broadway Common Shares”) on the basis of each eight (8) Broadway Common Shares into one (1) Broadway Common Share;

 

	
8.

	
TO CONSIDER and, if deemed advisable, conditional upon and effective as of the completion of the Plan of Arrangement, to approve a special resolution substantially in the form set out in Appendix “B” of the accompanying information circular, authorizing an amendment to the articles of Broadway to create a new class of multiple voting shares that will each carry 100 votes per share and change the name of its common shares to “subordinate voting shares”;

 

	
9.

	
TO CONSIDER and if deemed advisable, an ordinary resolution to be conditional on and effective as of the completion of Plan of Arrangement to set the number of directors of the Board at six (6) directors;

 

	
10.

	
TO ELECT, conditional upon and effective as of the completion of the Plan of Arrangement, a new slate of directors to the Board, with such election to be conditional upon and effective immediately following the completion of the Plan of Arrangement;

 

	
11.

	
TO APPOINT, conditional upon and effective as of the completion of the Plan of Arrangement, RSM Canada as the auditor of the Corporation for the ensuing fiscal year and to authorize the directors of the Corporation to fix the remuneration of the auditor so appointed;

     

     -2-

    

	
12.

	
TO CONSIDER and, if deemed advisable, conditional upon and effective as of the completion of the Plan of Arrangement, approve, with or without variation, by ordinary resolution, a new stock option plan of the Corporation, including the approval of all unallocated options, rights and other entitlements thereunder, in accordance with the rules of the Neo Exchange Inc. (the “NEO Exchange”);

 

	
13.

	
TO CONSIDER and, if deemed advisable, conditional upon and effective as of the completion of the Plan of Arrangement, approve, with or without variation, by ordinary resolution, a new performance and restricted share unit plan of the Corporation, including the approval of all unallocated awards, rights and other entitlements thereunder, in accordance with the rules of the NEO Exchange; and

 

	
14.

	
TO CONSIDER and, if deemed advisable, conditional upon and effective as of the completion of the Plan of Arrangement, to authorize the Board of the Corporation, in its discretion, to make an application to the TSX Venture Exchange to de-list the Corporation’s shares from the TSX Venture Exchange; and

 

	
15.

	
TO TRANSACT such further or other business as may properly come before the Meeting and any postponements or adjournments thereof;

 

AND TAKE NOTICE that registered holders of Broadway Common Shares (“Registered Shareholders”) have a right of dissent in respect of the proposed Plan of Arrangement on the terms and subject to the conditions set out in the Plan of Arrangement and to be paid the fair value of their common shares in accordance with the provisions of the Plan of Arrangement governing the Arrangement and sections 237 to 247 of the BCBCA. The dissent rights are described in the accompanying Circular (and specifically Appendix “F”). Failure to strictly comply with required procedure may result in the loss of any right of dissent.

 

Only Broadway Shareholders of record at the close of business on January 14, 2020 will be entitled to receive notice of and vote at the Meeting. Any postponement or adjournment of the Meeting will be held at a time and place to be specified at the Meeting. If you are unable to attend the Meeting in person, please complete, sign and date the enclosed form of proxy and return the same in the enclosed return envelope provided for that purpose within the time and to the location set out in the form of proxy accompanying this notice.

 

It is desirable that as many common shares as possible be represented at the Meeting. Whether or not you expect to attend the Meeting, please exercise your right to vote. Please complete the enclosed instrument of proxy and return it as soon as possible in the envelope provided for that purpose. To be valid, all instruments of proxy must be deposited at the office of the registrar and transfer agent of the Corporation, Odyssey Trust Company, Proxy Department, Victoria Tower, Suite 1717, 25 Adelaide St. East, Toronto, Ontario, M5C 3A1 or online at https://odysseytrust.com/Transfer-Agent/Login, not later than forty-eight (48) hours, excluding Saturdays, Sundays and holidays, prior to the time of the Meeting or any postponement or adjournment thereof. Late instruments of proxy may be accepted or rejected by the Chairman of the Meeting in his discretion and the Chairman is under no obligation to accept or reject any particular late instruments of proxy.

 

The accompanying Circular provides additional information relating to the matters to be dealt with at the Meeting and is deemed to form part of this notice.

 

This notice is accompanied by the Circular and either a form of proxy for Registered Shareholders or a voting instruction form for beneficial Broadway Shareholders.

 

THE SECURITIES DESCRIBED IN THE ACCOMPANYING INFORMATION CIRCULAR HAVE NOT BEEN RECOMMENDED BY THE SECURITIES AND EXCHANGE COMMISION OR BY ANY STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES OR ANY CANADIAN SECURITIES COMMISSION OR REGULATORY AUTHORITY PASSED ON THE ACCURACY OR ADEQUACY OF THIS CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

Accordingly, this Circular has been prepared in accordance with applicable Canadian disclosure requirements. Residents of the United States should be aware that such requirements differ from those of the United States applicable to proxy statements under the U.S. Exchange Act. Likewise, information concerning the properties and operations of Broadway, has been prepared in accordance with Canadian standards under applicable Canadian securities laws, and may not be comparable to similar information for United States companies.

     

     -3-

    

Broadway is a “foreign private issuer”, within the meaning of Rule 3b-4 under the U.S. Exchange Act, and this solicitation of proxies is not subject to the requirements of Section 14(a) of the U.S. Exchange Act. Accordingly, such solicitation is made in the United States in accordance with Canadian corporate and securities laws and this Circular has been prepared solely in accordance with disclosure requirements applicable in Canada. Broadway Shareholders in the United States should be aware that such requirements are different from those of the United States applicable to registration statements under the U.S. Securities Act and proxy statements under the U.S. Exchange Act.

 

Currency Presentation 

Unless otherwise indicated, all references to “$” or “C$” in this Circular refer to Canadian dollars and all references to “US$” in this Circular refer to United States dollars.

 

DATED this 29th day of December, 2019.

 

BY ORDER OF THE BOARD

 

(Signed) “Duane
Parnham” 

Duane Parnham 

Chairman & Chief Executive Officer

 

	
Registered Shareholders unable to attend the Meeting are requested to date, sign and return their form of proxy in the enclosed envelope. If you are a non-registered Broadway Shareholder and receive these materials through your broker or through another intermediary, please complete and return the materials in accordance with the instructions provided to you by your broker or by the other intermediary. Failure to do so may result in your shares not being eligible to be voted by proxy at the Meeting.

     

    - i -

    
 

TABLE OF CONTENTS

 

	
 

	
 

	
 

	
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS

	
1

	
 

	
 

	
GENERAL MATTERS

	
1

	
 

	
 

	
 

	
Defined Terms

	
1

	
 

	
 

	
 

	
 

	
Information Contained in this Circular

	
1

	
 

	
 

	
 

	
 

	
Information Contained in this Circular Regarding MindMed

	
1

	
 

	
 

	
 

	
 

	
Information Contained in this Circular Regarding the Resulting Issuer

	
2

	
 

	
 

	
 

	
 

	
Information Contained in this Circular Regarding Spinco

	
2

	
 

	
 

	
 

	
 

	
Information Contained in this Circular Regarding Delaware Subco

	
2

	
 

	
 

	
 

	
 

	
Financial Information

	
2

	
 

	
 

	
 

	
 

	
Currency

	
2

	
 

	
 

	
 

	
NOTICE TO SECURITYHOLDERS IN THE UNITED STATES

	
2

	
 

	
 

	
 

	
Canadian Circular

	
2

	
 

	
 

	
 

	
 

	
IFRS Accounting Principles

	
2

	
 

	
 

	
 

	
 

	
Tax Matters

	
3

	
 

	
 

	
 

	
 

	
Enforcement of Civil Liabilities

	
3

	
 

	
 

	
 

	
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

	
3

	
 

	
 

	
DOCUMENTS INCORPORATED BY REFERENCE

	
4

	
 

	
 

	
SUMMARY

	
6

	
 

	
 

	
THE MEETING

	
6

	
 

	
 

	
 

	
Time, Date and Place of Meeting

	
6

	
 

	
 

	
 

	
 

	
The Record Date

	
6

	
 

	
 

	
 

	
 

	
Purpose of the Meeting

	
6

	
 

	
 

	
 

	
 

	
Number of Directors

	
6

	
 

	
 

	
 

	
 

	
Election of Directors

	
6

	
 

	
 

	
 

	
 

	
Appointment of the Auditor

	
6

     

    - ii -

    

	
 

	
Plan of Arrangement

	
7

	
 

	
 

	
 

	
 

	
Amendment to Articles of Broadway

	
7

	
 

	
 

	
 

	
 

	
Broadway Stock Option Plan

	
7

	
 

	
 

	
 

	
THE ARRANGEMENT

	
8

	
 

	
 

	
 

	
Purpose and Description of the Arrangement

	
8

	
 

	
 

	
 

	
 

	
Background to the Arrangement

	
8

	
 

	
 

	
 

	
 

	
Recommendation of the Broadway Board

	
8

	
 

	
 

	
 

	
 

	
Reasons for the Arrangement

	
8

	
 

	
 

	
 

	
 

	
Arrangement Mechanics

	
9

	
 

	
 

	
 

	
 

	
Required Shareholder Approval for the Arrangement

	
11

	
 

	
 

	
 

	
 

	
Expenses of the Arrangement

	
11

	
 

	
 

	
 

	
 

	
Court Approval of the Arrangement and Completion of the Arrangement

	
11

	
 

	
 

	
 

	
 

	
Stock Exchange Approval

	
12

	
 

	
 

	
 

	
 

	
The Arrangement Agreement

	
12

	
 

	
 

	
 

	
 

	
Canadian Securities Laws

	
12

	
 

	
 

	
 

	
 

	
U.S. Securities Laws

	
13

	
 

	
 

	
 

	
 

	
Dissenting Shareholders’ Rights

	
13

	
 

	
 

	
 

	
 

	
Risk Factors Relating to the Arrangement

	
13

	
 

	
 

	
 

	
 

	
Procedures for Exchange of Broadway Common Shares

	
13

	
 

	
 

	
 

	
 

	
Income Tax Considerations

	
14

	
 

	
 

	
 

	
 

	
Consolidation Resolution

	
14

	
 

	
 

	
 

	
 

	
Authorized Capital Amendment

	
14

	
 

	
 

	
 

	
 

	
Information Concerning Broadway, MindMed, Spinco and Delaware Subco and the Resulting Issuer

	
14

	
 

	
 

	
 

	
GENERAL PROXY INFORMATION

	
16

	
 

	
 

	
 

	
Solicitation of Proxies

	
16

	
 

	
 

	
 

	
 

	
Appointment of Proxies

	
16

     

    - iii -

    

	
 

	
Revocation of Proxies

	
16

	
 

	
 

	
 

	
 

	
Exercise of Discretion by Proxies

	
17

	
 

	
 

	
 

	
 

	
Signing of Proxy

	
17

	
 

	
 

	
 

	
 

	
Non-Registered Shareholders

	
17

	
 

	
 

	
 

	
 

	
Quorum

	
18

	
 

	
 

	
 

	
ADDITIONAL INFORMATION CONCERNING BROADWAY

	
18

	
 

	
 

	
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

	
19

	
 

	
 

	
 

	
1. RECEIPT OF FINANCIAL STATEMENTS

	
19

	
 

	
 

	
 

	
 

	
Request for Financial Statements

	
19

	
 

	
 

	
 

	
 

	
2. APPOINTMENT OF AUDITOR

	
19

	
 

	
 

	
 

	
 

	
3. NUMBER OF DIRECTORS

	
20

	
 

	
 

	
 

	
 

	
4. ELECTION OF DIRECTORS

	
20

	
 

	
 

	
 

	
 

	
Number of Directors to be Elected at the Meeting

	
20

	
 

	
 

	
 

	
 

	
Term

	
20

	
 

	
 

	
 

	
 

	
Nominees

	
20

	
 

	
 

	
 

	
 

	
Corporate Cease Trade Orders or Bankruptcies

	
21

	
 

	
 

	
 

	
 

	
5. APPROVAL OF BROADWAY STOCK OPTION PLAN

	
22

	
 

	
 

	
 

	
 

	
Annual Approval of Stock Option Plan

	
22

	
 

	
 

	
 

	
 

	
General Description of the Stock Option Plan

	
22

	
 

	
 

	
 

	
 

	
Outstanding Options

	
23

	
 

	
 

	
 

	
 

	
Annual Shareholder Approval of the Broadway Stock Option Plan

	
23

	
 

	
 

	
 

	
6. APPROVAL OF THE PLAN OF ARRANGEMENT

	
23

	
 

	
 

	
 

	
Purpose and Description of the Arrangement

	
24

	
 

	
 

	
 

	
 

	
Background to the Arrangement

	
24

	
 

	
 

	
 

	
 

	
Recommendation of the Broadway Board

	
24

	
 

	
 

	
 

	
 

	
Reasons for the Arrangement

	
25

	
 

	
 

	
 

	
 

	
Arrangement Mechanics

	
26

	
 

	
 

	
 

	
 

	
Required Shareholder Approval

	
28

	
 

	
 

	
 

	
 

	
Interests of Certain Persons in the Arrangement

	
28

     

    - iv -

    

	
 

	
Broadway Common Shares

	
28

	
 

	
 

	
 

	
 

	
Broadway Warrants

	
28

	
 

	
 

	
 

	
 

	
Broadway Options

	
28

	
 

	
 

	
 

	
 

	
Ownership of Broadway Securities

	
29

	
 

	
 

	
 

	
 

	
MI 61-101

	
29

	
 

	
 

	
 

	
 

	
Expenses of the Arrangement

	
30

	
 

	
 

	
 

	
 

	
Court Approval of the Arrangement and Completion of the Arrangement

	
30

	
 

	
 

	
 

	
 

	
Stock Exchange Approval

	
31

	
 

	
 

	
 

	
 

	
Effects of the Arrangement on Shareholders’ Rights

	
31

	
 

	
 

	
 

	
7. APPROVAL OF THE CONSOLIDATION of BROADWAY COMMON SHARES

	
31

	
 

	
 

	
8. AUTHORIZED SHARE CAPITAL AMENDMENT

	
32

	
 

	
 

	
9. SETTING THE NUMBER OF DIRECTORS IF ARRANGEMENT APPROVED

	
32

	
 

	
 

	
10. CONDITIONAL ELECTION OF DIRECTORS

	
33

	
 

	
 

	
11. RESULTING ISSUER AUDITOR RESOLUTION

	
36

	
 

	
 

	
12./13. APPROVAL OF RESULTING ISSUER STOCK OPTION PLAN AND PERFORMANCE AND RESTRICTED SHARE UNIT PLAN

	
36

	
 

	
 

	
14. VOLUNTARY DELISTING FROM TSXV

	
44

	
 

	
 

	
THE ARRANGEMENT AGREEMENT

	
45

	
 

	
 

	
 

	
Representations and Warranties

	
45

	
 

	
 

	
 

	
 

	
Conduct of Business of Broadway

	
46

	
 

	
 

	
 

	
 

	
Bridge Loan

	
46

	
 

	
 

	
 

	
 

	
Regulatory and Stock Exchange Matters

	
47

	
 

	
 

	
 

	
 

	
Regulatory Framework of Pharmaceutical Industry

	
47

	
 

	
 

	
 

	
 

	
Conditions for Completion of the Arrangement

	
48

	
 

	
 

	
 

	
 

	
Conditions in Favour of Broadway, Spinco, MindMed and Delaware Subco

	
48

	
 

	
 

	
 

	
 

	
Conditions in Favour of Broadway, Spinco and Delaware Subco

	
49

	
 

	
 

	
 

	
 

	
Conditions in Favour of MindMed

	
49

	
 

	
 

	
 

	
 

	
Additional Covenants Regarding Non-Solicitation

	
50

	
 

	
 

	
 

	
 

	
Termination of Arrangement Agreement

	
50

     

    - v -

    

	
SECURITIES LAW MATTERS

	
51

	
 

	
 

	
 

	
Exemption from U.S. Registration

	
51

	
 

	
 

	
 

	
 

	
Affiliates – Rule 144

	
53

	
 

	
 

	
 

	
 

	
Affiliates – Regulation S

	
53

	
 

	
 

	
 

	
STOCK EXCHANGE MATTERS

	
54

	
 

	
 

	
DISSENTING SHAREHOLDERS’ RIGHTS

	
54

	
 

	
 

	
 

	
Dissent Rights to the Arrangement Resolution for Registered Shareholders

	
54

	
 

	
 

	
 

	
 

	
Sections 237 to 247 of the BCBCA

	
55

	
 

	
 

	
 

	
 

	
Addresses for Notice

	
56

	
 

	
 

	
 

	
 

	
Strict Compliance with Dissent Provisions Required

	
56

	
 

	
 

	
 

	
RISK FACTORS RELATING TO THE ARRANGEMENT

	
57

	
 

	
 

	
 

	
Risks Related to the Arrangement

	
57

	
 

	
 

	
 

	
PROCEDURES FOR THE EXCHANGE OF BROADWAY COMMON SHARES AND ISSUANCE OF SPINCO CONSIDERATION SHARES

	
59

	
 

	
 

	
 

	
Letter of Transmittal

	
59

	
 

	
 

	
 

	
 

	
Delivery of Replacement Broadway Share Certificates

	
60

	
 

	
 

	
 

	
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

	
61

	
 

	
 

	
 

	
Assumptions Regarding the Return of Capital under the Spin-Out Transaction

	
62

	
 

	
 

	
 

	
 

	
Considerations Applicable to Holders Who Vote in Favour of the Arrangement

	
62

	
 

	
 

	
 

	
 

	
Considerations Relating to the Distribution of the Spinco Distribution Shares

	
62

	
 

	
 

	
 

	
 

	
Considerations Relating to the Arrangement

	
63

	
 

	
 

	
 

	
 

	
Taxation on Dividends Received in Respect of Resulting Issuer Shares or Spinco Distribution Shares

	
63

	
 

	
 

	
 

	
 

	
Taxation on the Disposition of Resulting Issuer Shares or Spinco Distribution Shares

	
63

	
 

	
 

	
 

	
 

	
Eligibility of Resulting Issuer Shares and Spinco Distribution Shares

	
64

	
 

	
 

	
 

	
 

	
Considerations applicable to Holders who exercise their Dissent Rights

	
64

	
 

	
 

	
 

	
 

	
Deemed Dividend

	
64

	
 

	
 

	
 

	
EXPERTS

	
65

	
 

	
 

	
15. OTHER BUSINESS

	
65

	
 

	
 

	
AUDIT COMMITTEE DISCLOSURE

	
65

	
 

	
 

	
 

	
Composition of the Audit Committee

	
65

     

    - vi -

    

	
 

	
Pre-Approval Policies and Procedures

	
66

	
 

	
 

	
 

	
 

	
Audit Committee Oversight

	
66

	
 

	
 

	
 

	
 

	
Reliance on Certain Exemptions

	
67

	
 

	
 

	
 

	
 

	
External Auditor Service Fees

	
67

	
 

	
 

	
 

	
CORPORATE GOVERNANCE

	
67

	
 

	
 

	
 

	
General

	
67

	
 

	
 

	
 

	
 

	
Board of Directors

	
67

	
 

	
 

	
 

	
 

	
Other Board Positions

	
68

	
 

	
 

	
 

	
 

	
Orientation and Continuing Education

	
68

	
 

	
 

	
 

	
 

	
Ethical Business Conduct

	
68

	
 

	
 

	
 

	
 

	
Nomination of Directors

	
68

	
 

	
 

	
 

	
 

	
Compensation of Directors and Officers

	
69

	
 

	
 

	
 

	
 

	
Other Board Committees

	
69

	
 

	
 

	
 

	
 

	
Assessments of Directors, the Board and Board Committees

	
69

	
 

	
 

	
 

	
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

	
69

	
 

	
 

	
 

	
Compensation Discussion and Analysis

	
69

	
 

	
 

	
 

	
 

	
Share Based and Non-Equity Incentive Plan Compensation

	
69

	
 

	
 

	
 

	
 

	
Benefit, Contribution, Pension, Retirement, Deferred Compensation and Actuarial Plans

	
69

	
 

	
 

	
 

	
 

	
Named Executive Officers

	
70

	
 

	
 

	
 

	
 

	
Compensation of Named Executive Officers

	
70

	
 

	
 

	
 

	
INCENTIVE PLAN AWARDS

	
71

	
 

	
 

	
 

	
Termination and Change of Control Benefits

	
71

	
 

	
 

	
 

	
DIRECTOR COMPENSATION

	
71

	
 

	
 

	
MANAGEMENT CONTRACTS

	
72

	
 

	
 

	
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

	
72

	
 

	
 

	
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS

	
73

	
 

	
 

	
INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS

	
73

	
 

	
 

	
INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS

	
74

	
 

	
 

	
AUDITOR

	
74

	
 

	
 

	
REGISTRAR AND TRANSFER AGENT

	
74

	
 

	
 

	
ADDITIONAL INFORMATION

	
74

	
 

	
 

	
APPROVAL

	
74

     

    - vii -

    

	
APPENDIX A GLOSSARY OF TERMS

	
A-1

	
 

	
 

	
APPENDIX B ARRANGEMENT RESOLUTION

	
B-1

	
 

	
 

	
APPENDIX C PLAN OF ARRANGEMENT

	
C-1

	
 

	
 

	
APPENDIX D INTERIM ORDER

	
D-1

	
 

	
 

	
APPENDIX E NOTICE OF HEARING OF PETITION

	
E-1

	
 

	
 

	
APPENDIX F SECTION 237 to 247 OF THE BCBCA

	
F-1

	
 

	
 

	
APPENDIX G AUTHORIZED CAPITAL AMENDMENT MULTIPLE VOTING SHARE TERMS

	
G-1

	
 

	
 

	
APPENDIX H RESULTING ISSUER STOCK OPTION PLAN AND PERFORMANCE AND RESTRICTED SHARE UNIT PLANS

	
H-1

	
 

	
 

	
 

	
STOCK OPTION PLAN

	
H-1

	
 

	
 

	
 

	
 

	
PERFORMANCE AND RESTRICTED SHARE UNIT PLAN

	
H-12

	
 

	
 

	
 

	
APPENDIX I ADDITIONAL INFORMATION CONCERNING MINDMED

	
I-1

	
 

	
 

	
 

	
Corporate Structure

	
I-1

	
 

	
 

	
 

	
 

	
Intercorporate Relationships

	
I-1

	
 

	
 

	
 

	
 

	
Development and Description of the Business

	
I-2

	
 

	
 

	
 

	
 

	
History

	
I-2

	
 

	
 

	
 

	
 

	
Recent Financing

	
I-2

	
 

	
 

	
 

	
 

	
Significant Acquisitions and Dispositions

	
I-2

	
 

	
 

	
 

	
 

	
Narrative Description of the Business

	
I-2

	
 

	
 

	
 

	
 

	
General

	
I-2

	
 

	
 

	
 

	
 

	
Industry Information & Market Trends

	
I-3

	
 

	
 

	
 

	
 

	
Intellectual Property

	
I-8

	
 

	
 

	
 

	
 

	
Product Information and Distribution

	
I-8

	
 

	
 

	
 

	
 

	
Distribution Methods & Principal Markets

	
I-8

	
 

	
 

	
 

	
 

	
Future Research and Development

	
I-8

	
 

	
 

	
 

	
 

	
Operations

	
I-9

	
 

	
 

	
 

	
 

	
Government Regulation

	
I-10

	
 

	
 

	
 

	
 

	
Regulatory Strategy

	
I-11

	
 

	
 

	
 

	
 

	
Selected Financial Information

	
I-11

     

    - viii -

    

	
 

	
Management’s Discussion and Analysis of Financial Condition and Results of Operations

	
I-12

	
 

	
 

	
 

	
 

	
Management’s Responsibility for Financial Statements

	
I-12

	
 

	
 

	
 

	
 

	
Description of Securities

	
I-12

	
 

	
 

	
 

	
 

	
Consolidated Capitalization

	
I-13

	
 

	
 

	
 

	
 

	
Prior Sales

	
I-14

	
 

	
 

	
 

	
 

	
Executive Compensation

	
I-15

	
 

	
 

	
 

	
 

	
Compensation Discussion and Analysis

	
I-15

	
 

	
 

	
 

	
 

	
Elements of Compensation

	
I-15

	
 

	
 

	
 

	
 

	
Non-Arm’s Length Party Transactions

	
I-18

	
 

	
 

	
 

	
 

	
Legal Proceedings and Regulatory Actions

	
I-18

	
 

	
 

	
 

	
 

	
Risk Factors Relating to MindMed and the Resulting Issuer

	
I-19

	
 

	
 

	
 

	
 

	
Business Risks

	
I-19

	
 

	
 

	
 

	
 

	
Financial and Accounting Risks

	
I-26

	
 

	
 

	
 

	
 

	
Risks Related to the Resulting Issuer Shares and Completion of the Arrangement

	
I-27

	
 

	
 

	
 

	
 

	
Conflicts of Interest

	
I-28

	
 

	
 

	
 

	
 

	
Material Contracts

	
I-29

	
 

	
 

	
 

	
SCHEDULE 1 TO APPENDIX I - FINANCIAL STATEMENTS OF MINDMED AND PREDECESSOR COMPANIES

	
I-1-1

	
 

	
 

	
SCHEDULE 2 TO APPENDIX I – MANAGEMENT DISCUSSION AND ANALYSIS

	
I-2-1

	
 

	
 

	
APPENDIX J INFORMATION CONCERNING THE RESULTING ISSUER

	
J-1

	
 

	
 

	
 

	
Corporate Structure

	
J-1

	
 

	
 

	
 

	
 

	
Narrative Description of the Business

	
J-1

	
 

	
 

	
 

	
 

	
General

	
J-1

	
 

	
 

	
 

	
 

	
Description of Securities

	
J-1

	
 

	
 

	
 

	
 

	
Resulting Issuer Shares

	
J-1

	
 

	
 

	
 

	
 

	
Pro Forma Consolidated Capitalization

	
J-2

	
 

	
 

	
 

	
 

	
Fully-Diluted Share Capital

	
J-2

	
 

	
 

	
 

	
 

	
Estimated Available Funds and Principal Purposes

	
J-3

	
 

	
 

	
 

	
 

	
Estimated Available Funds and Principal Purposes

	
J-3

	
 

	
 

	
 

	
 

	
Dividend Record and Policy

	
J-4

     

    - ix -

    

	
 

	
Principal Securityholders

	
J-4

	
 

	
 

	
 

	
 

	
Directors and Executive Officers of the Resulting Issuer

	
J-4

	
 

	
 

	
 

	
 

	
Summary Information on Proposed Directors and Officers

	
J-4

	
 

	
 

	
 

	
 

	
Biographical Information

	
J-8

	
 

	
 

	
 

	
 

	
Corporate Governance of the Resulting Issuer

	
J-10

	
 

	
 

	
 

	
 

	
Board of Directors

	
J-11

	
 

	
 

	
 

	
 

	
Orientation and Continuing Education

	
J-11

	
 

	
 

	
 

	
 

	
Ethical Business Conduct

	
J-11

	
 

	
 

	
 

	
 

	
Nomination and Compensation of Directors

	
J-12

	
 

	
 

	
 

	
 

	
Other Committees

	
J-12

	
 

	
 

	
 

	
 

	
Assessments

	
J-12

	
 

	
 

	
 

	
 

	
Corporate Cease Trade Orders or Bankruptcies

	
J-12

	
 

	
 

	
 

	
 

	
Individual Bankruptcies

	
J-13

	
 

	
 

	
 

	
 

	
Penalties or Sanctions

	
J-13

	
 

	
 

	
 

	
 

	
Conflicts of Interest

	
J-13

	
 

	
 

	
 

	
 

	
Other Reporting Issuer Experience

	
J-13

	
 

	
 

	
 

	
 

	
Proposed Executive Compensation

	
J-14

	
 

	
 

	
 

	
 

	
Indebtedness of Directors and Officers

	
J-15

	
 

	
 

	
 

	
 

	
Investor Relations Arrangements

	
J-15

	
 

	
 

	
 

	
 

	
Options to Purchase Securities

	
J-15

	
 

	
 

	
 

	
 

	
Escrowed Securities

	
J-15

	
 

	
 

	
 

	
 

	
Auditors, Transfer Agent and Registrar

	
J-16

	
 

	
 

	
 

	
SCHEDULE 1 TO APPENDIX J - PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS OF THE RESULTING ISSUER

	
J-1-1

	
 

	
 

	
SCHEDULE 2 TO APPENDIX J - AUDIT COMMITTEE CHARTER OF RESULTING ISSUER

	
J-2-1

	
 

	
 

	
SCHEDULE 3 TO APPENDIX J – COMPENSATION, NOMINATION AND GOVERNANCE COMMITTEE CHARTER OF RESULTING ISSUER

	
J-3-1

	
 

	
 

	
APPENDIX K INFORMATION CONCERNING SPINCO

	
K-1

	
 

	
 

	
 

	
Corporate Structure

	
K-1

	
 

	
 

	
 

	
 

	
Intercorporate Relationships

	
K-1

     

    - x -

    

	
 

	
Narrative Description of the Business

	
K-1

	
 

	
 

	
 

	
 

	
Spinco Selected Financial Information

	
K-2

	
 

	
 

	
 

	
 

	
Significant Acquisitions and Dispositions

	
K-3

	
 

	
 

	
 

	
 

	
Trends

	
K-3

	
 

	
 

	
 

	
 

	
Current Technical Report – Madison Project

	
K-3

	
 

	
 

	
 

	
 

	
2. Property Description, Location and Access

	
K-4

	
 

	
 

	
 

	
 

	
2.1 Area and Location

	
K-4

	
 

	
 

	
 

	
 

	
2.2 Mineral Tenure

	
K-5

	
 

	
 

	
 

	
 

	
2.3 Royalties and Underlying Agreements

	
K-10

	
 

	
 

	
 

	
 

	
2.4 Environmental

	
K-11

	
 

	
 

	
 

	
 

	
3. History

	
K-11

	
 

	
 

	
 

	
 

	
3.1 Previous Mining

	
K-12

	
 

	
 

	
 

	
 

	
3.2 Previous Work

	
K-12

	
 

	
 

	
 

	
 

	
4. Geological Setting, Mineralization and Depository Types

	
K-27

	
 

	
 

	
 

	
 

	
4.1 Regional Geology

	
K-27

	
 

	
 

	
 

	
 

	
4.2 Property Geology

	
K-28

	
 

	
 

	
 

	
 

	
4.3 Radar Creek Pluton

	
K-29

	
 

	
 

	
 

	
 

	
4.4 Alteration and Mineralization

	
K-30

	
 

	
 

	
 

	
 

	
5. Deposit Types

	
K-33

	
 

	
 

	
 

	
 

	
6. Exploration

	
K-36

	
 

	
 

	
 

	
 

	
6.1 Sampling Program

	
K-36

	
 

	
 

	
 

	
 

	
6.2 Rock Sampling

	
K-36

	
 

	
 

	
 

	
 

	
6.3 Induced Polarization Surveys

	
K-44

	
 

	
 

	
 

	
 

	
6.4 Magnetic Survey

	
K-48

	
 

	
 

	
 

	
 

	
6.5 Mise-a-la-Masse

	
K-49

	
 

	
 

	
 

	
 

	
6.6 Exploration Drilling

	
K-49

	
 

	
 

	
 

	
 

	
7. Drilling

	
K-56

	
 

	
 

	
 

	
 

	
7.1 Drilling Statistics

	
K-58

	
 

	
 

	
 

	
 

	
8. Sampling, Analyses and Security

	
K-59

	
 

	
 

	
 

	
 

	
8.1 Sample Preparation and Quality Control

	
K-59

	
 

	
 

	
 

	
 

	
8.2 Blanks

	
K-59

	
 

	
 

	
 

	
 

	
8.3 Certified Reference Materials

	
K-60

     

    - xi -

    

	
 

	
8.4 Assay Techniques

	
K-62

	
 

	
 

	
 

	
 

	
8.5 Laboratory Quality Assurance/Quality Control

	
K-62

	
 

	
 

	
 

	
 

	
9. Data Verification

	
K-62

	
 

	
 

	
 

	
 

	
10. Mineral Processing and Metallurgical Testing

	
K-63

	
 

	
 

	
 

	
 

	
10.1 Bottle Roll Cyanide

	
K-63

	
 

	
 

	
 

	
 

	
10.2 Bond Work Index

	
K-64

	
 

	
 

	
 

	
 

	
10.3 Bulk Sample Tests

	
K-64

	
 

	
 

	
 

	
 

	
10.4 Summary

	
K-67

	
 

	
 

	
 

	
 

	
11.Mineral Resource Estimates

	
K-67

	
 

	
 

	
 

	
 

	
12.Mining Operations

	
K-67

	
 

	
 

	
 

	
 

	
13.Processing and Recovery Operations

	
K-67

	
 

	
 

	
 

	
 

	
14.Infrastructure, Permitting, and Compliance Activities

	
K-67

	
 

	
 

	
 

	
 

	
15.Capital and Operating Costs

	
K-67

	
 

	
 

	
 

	
 

	
16.Exploration, Development and Production

	
K-67

	
 

	
 

	
 

	
 

	
Description of the Spinco Common Shares

	
K-67

	
 

	
 

	
 

	
 

	
Dividend Policy

	
K-68

	
 

	
 

	
 

	
 

	
Voting and Other Rights

	
K-68

	
 

	
 

	
 

	
 

	
Consolidated Capitalization

	
K-68

	
 

	
 

	
 

	
 

	
Options and Other Rights to Purchase Shares

	
K-68

	
 

	
 

	
 

	
 

	
Prior Sales

	
K-68

	
 

	
 

	
 

	
 

	
Escrowed Securities and Securities Subject to Contractual Restriction on Transfer

	
K-68

	
 

	
 

	
 

	
 

	
Resale Restrictions

	
K-68

	
 

	
 

	
 

	
 

	
Principal Shareholders

	
K-68

	
 

	
 

	
 

	
 

	
Directors and Officers

	
K-69

	
 

	
 

	
 

	
 

	
Corporate Cease Trade Orders, Bankruptcies, Penalties or Sanctions or Individual Bankruptcies, Penalties or Sanctions or Individual Bankruptcies

	
K-72

	
 

	
 

	
 

	
 

	
Indebtedness of Directors, Executive Officers and Senior Officers

	
K-73

	
 

	
 

	
 

	
 

	
Statement of Executive Compensation

	
K-73

     

    - xii -

    

	
 

	
Compensation Discussion and Analysis

	
K-73

	
 

	
 

	
 

	
 

	
Summary Compensation

	
K-73

	
 

	
 

	
 

	
 

	
Option-Based Awards

	
K-74

	
 

	
 

	
 

	
 

	
Incentive Plan Awards

	
K-74

	
 

	
 

	
 

	
 

	
Pension Plan Benefits

	
K-74

	
 

	
 

	
 

	
 

	
Termination of Employment, Change in Responsibilities and Employment Contracts

	
K-75

	
 

	
 

	
 

	
 

	
Defined Benefit or Actuarial Plan Disclosure

	
K-75

	
 

	
 

	
 

	
 

	
Director Compensation

	
K-75

	
 

	
 

	
 

	
 

	
Aggregate Options Exercised and Option Values

	
K-75

	
 

	
 

	
 

	
AUDIT COMMITTEE AND CORPORATE GOVERNANCE

	
K-75

	
 

	
 

	
 

	
Audit Committee

	
K-75

	
 

	
 

	
 

	
 

	
Risk Factors

	
K-76

	
 

	
 

	
 

	
 

	
Nature of the Securities and No Assurance of any Listing

	
K-76

	
 

	
 

	
 

	
 

	
Possible Non-Completion of Arrangement

	
K-76

	
 

	
 

	
 

	
 

	
Limited Operating History

	
K-76

	
 

	
 

	
 

	
 

	
Dependence on Management

	
K-76

	
 

	
 

	
 

	
 

	
Spinco’s operations are subject to human error

	
K-76

	
 

	
 

	
 

	
 

	
Financing Risks

	
K-77

	
 

	
 

	
 

	
 

	
Conflicts of Interest

	
K-77

	
 

	
 

	
 

	
 

	
No History of Earnings

	
K-77

	
 

	
 

	
 

	
 

	
Exploration and Development

	
K-77

	
 

	
 

	
 

	
 

	
Environmental Risks and Other Regulatory Requirements

	
K-77

	
 

	
 

	
 

	
 

	
Dilution

	
K-78

	
 

	
 

	
 

	
 

	
Market for securities

	
K-78

	
 

	
 

	
 

	
 

	
Nature of Mineral Exploration and Development

	
K-78

	
 

	
 

	
 

	
 

	
No Operating History

	
K-78

	
 

	
 

	
 

	
 

	
Commodity Prices

	
K-79

	
 

	
 

	
 

	
 

	
Dividend Policy

	
K-79

	
 

	
 

	
 

	
 

	
Permitting

	
K-79

	
 

	
 

	
 

	
 

	
Land Title

	
K-79

	
 

	
 

	
 

	
 

	
Influence of Third Party Stakeholders

	
K-79

	
 

	
 

	
 

	
 

	
Insurance

	
K-80

	
 

	
 

	
 

	
 

	
Significant Competition for Attractive Mineral Properties

	
K-80

	
 

	
 

	
 

	
 

	
Promoter

	
K-80

	
 

	
 

	
 

	
 

	
Legal Proceedings

	
K-80

     

    - xiii -

    

	 

	Interest of Management
and Others in Material Transactions

	K-81

	 

	 

	 

	 

	Auditors

	K-81

	 

	 

	 

	SCHEDULE 1 TO APPENDIX K - FINANCIAL
STATEMENTS OF SPINCO

	K-1-1

	 

	 

	SCHEDULE 2 TO APPENDIX K – SPINCO
MANAGEMENT DISCUSSION AND ANALYSIS

	K-2-1

	 

	 

	SCHEDULE 3 TO
APPENDIX K - STATEMENT OF CORPORATE GOVERNANCE PRACTICES

	K-3-1

	 

	 

	 

	Board of Directors

	K-3-1

	 

	 

	 

	 

	Structure and Compensation

	K-3-1

	 

	 

	 

	 

	Board
Responsibilities

	K-3-1

	 

	 

	 

	 

	Directorships. K-3-2

	K-3-2

	 	 	 
	 	Orientation
and Continuing Education	K-3-2
	 

	 

	 

	 

	Ethical
Business Conduct

	K-3-2

	 

	 

	 

	 

	Nomination of Directors

	K-3-3

	 

	 

	 

	 

	Compensation

	K-3-3

	 

	 

	 

	 

	Other Board Committees

	K-3-3

	 

	 

	 

	 

	Assessments

	K-3-3

	 

	 

	 

	SCHEDULE 4 TO
APPENDIX K - SPINCO AUDIT COMMITTEE CHARTER

	K-4-1

	 

	 

	APPENDIX L INFORMATION CONCERNING DELAWARE
SUBCO

	L-1

	 

	 

	 

	Corporate Structure

	L-1

	 

	 

	 

	 

	General Description
of The Business

	L-1

	 

	 

	 

	 

	Intercorporate Relationships

	L-1

	 

	 

	 

	 

	General Development
of The Business – Three Year History

	L-1

	 

	 

	 

	 

	Significant Acquisitions
and Dispositions

	L-1

	 

	 

	 

	 

	Trends

	L-1

	 

	 

	 

	 

	Delaware Subco Selected Financial Information

	L-2

	 

	 

	 

	 

	Dividend Policy

	L-2

	 

	 

	 

	 

	Voting and Other
Rights

	L-2

	 

	 

	 

	 

	Consolidated Capitalization

	L-2

	 

	 

	 

	 

	Options and Other
Rights to Purchase Shares

	L-2

     

    - xiv -

    

	
 

	
Prior Sales

	
L-2

	
 

	
 

	
 

	
 

	
Escrowed Securities and Securities Subject to Contractual Restriction On Transfer

	
L-2

	
 

	
 

	
 

	
 

	
Resale Restrictions

	
L-2

	
 

	
 

	
 

	
 

	
Principal Shareholders

	
L-2

	
 

	
 

	
 

	
 

	
Directors and Officers

	
L-3

	
 

	
 

	
 

	
 

	
Corporate Cease Trade Orders, Bankruptcies, Penalties or Sanctions or Individual Bankruptcies, Penalties or Sanctions or Individual Bankruptcies

	
L-3

	
 

	
 

	
 

	
 

	
Indebtedness of Directors, Executive Officers and Senior Officers

	
L-3

	
 

	
 

	
 

	
 

	
Statement of Executive Compensation

	
L-4

	
 

	
 

	
 

	
 

	
Compensation Discussion and Analysis

	
L-4

	
 

	
 

	
 

	
 

	
Summary Compensation

	
L-4

	
 

	
 

	
 

	
 

	
Option-Based Awards

	
L-4

	
 

	
 

	
 

	
 

	
Incentive Plan Awards

	
L-4

	
 

	
 

	
 

	
 

	
Pension Plan Benefits

	
L-4

	
 

	
 

	
 

	
 

	
Termination of Employment, Change in Responsibilities and Employment Contracts

	
L-4

	
 

	
 

	
 

	
 

	
Defined Benefit or Actuarial Plan Disclosure

	
L-4

	
 

	
 

	
 

	
 

	
Director Compensation

	
L-4

	
 

	
 

	
 

	
 

	
Aggregate Options Exercised and Option Values

	
L-4

	
 

	
 

	
 

	
 

	
Audit Committee

	
L-5

	
 

	
 

	
 

	
 

	
Promoter

	
L-5

	
 

	
 

	
 

	
 

	
Legal Proceedings

	
L-5

	
 

	
 

	
 

	
 

	
Interest of Management and Others in Material Transactions

	
L-5

	
 

	
 

	
 

	
 

	
Auditors

	
L-5

	
 

	
 

	
 

	
 

	
Registrar and Transfer Agent

	
L-5

	
 

	
 

	
 

	
 

	
Material Contracts

	
L-5

	
 

	
 

	
 

	
SCHEDULE 1 TO APPENDIX L - FINANCIAL STATEMENTS OF DELAWARE SUBCO

	
L-1-1

	
 

	
 

	
SCHEDULE 2 TO APPENDIX L – DELAWARE SUBCO MANAGEMENT DISCUSSION AND ANALYSIS

	
L-2-1

	
 

	
 

	
APPENDIX M BROADWAY AUDIT COMMITTEE CHARTER

	
M-1

     

     

    

(This page has been left blank intentionally.)

     

     

    
 

BROADWAY GOLD MINING LTD.

 

NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS

 

This management information circular (the “Circular”) and accompanying form of proxy are furnished in connection with the solicitation of proxies by the management of Broadway Gold Mining Ltd. (“Broadway” or the “Corporation”) for use at the annual and special meeting (the “Meeting”) of Broadway Shareholders to be held at the offices of Wildeboer Dellelce LLP, Suite 800, Wildeboer Dellelce Place, 365 Bay Street, Toronto, Ontario, M5H 2V1, at 10:00 a.m. (Toronto time), on February 19, 2020, and at any adjournment or postponement thereof, for the purposes set forth in the accompanying notice of annual and special meeting (the “Notice of Meeting”).

 

All summaries of, and references to, the Plan of Arrangement, the Arrangement Resolution and the Arrangement Agreement in this Circular are qualified in their entirety by reference to the complete text of these documents, each of which is either included as an appendix to this Circular or filed under the Corporation’s profile on SEDAR at www.sedar.com.

 

Broadway Shareholders are urged to carefully read the full text of these documents and the Circular.

 

GENERAL MATTERS

 

Defined Terms

 

In this Circular, unless otherwise indicated or the context otherwise requires, terms defined in Appendix “A” – Glossary of Terms shall have the meanings attributed thereto. Words importing the singular include the plural and vice versa and words importing gender include all genders.

 

Information Contained in this Circular

 

The information contained in this Circular, unless otherwise indicated, is given as of December 29, 2019.

 

No person has been authorized by the Corporation to give any information (including any representations) in connection with the matters to be considered at the Meeting other than the information contained in this Circular. This Circular does not constitute an offer to buy, or a solicitation of an offer to acquire, any securities, or a solicitation of a proxy, by any person in any jurisdiction in which such an offer or solicitation is not authorized or is unlawful. Information contained in this Circular should not be construed as legal, tax or financial advice, and Shareholders should consult their own professional advisors concerning the consequences of the Arrangement in their own circumstances. For greater certainty, to the extent that any information provided on Broadway website is inconsistent with this Circular, the information provided in this Circular should be relied on.

 

THIS CIRCULAR AND THE TRANSACTIONS CONTEMPLATED BY THE ARRANGEMENT AGREEMENT AND THE PLAN OF ARRANGEMENT HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY SECURITIES REGULATORY AUTHORITY NOR HAS ANY SECURITIES REGULATORY AUTHORITY PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTIONS OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

 

Information Contained in this Circular Regarding MindMed

 

Certain information included or incorporated by reference in this Circular pertaining to MindMed, including, but not limited to, information pertaining to MindMed in Appendix “I” – Additional Information Concerning MindMed and in Appendix “J” – Information Concerning the Resulting Issuer, has been furnished by MindMed. With respect to this information, the Broadway Board has relied exclusively upon MindMed, without independent verification by the Corporation. Although the Corporation does not have any knowledge that would indicate that such information is untrue or incomplete, neither the Corporation nor any of its directors or officers assumes any responsibility for the accuracy or completeness of such information, or for the failure by MindMed to disclose events or information that may affect the completeness or accuracy of such information.

    

    - 2 - 

    

For further information regarding MindMed, see Appendix “I” – Additional Information Concerning MindMed and Appendix “J” – Information Concerning the Resulting Issuer.

 

Information Contained in this Circular Regarding the Resulting Issuer

 

The information contained in this Circular, including Appendix “J” – Information Concerning the Resulting Issuer, concerning the Resulting Issuer on a post-Arrangement basis contains significant amounts of forward-looking information. Readers are cautioned that actual results may vary. See “Cautionary Statement Regarding Forward- Looking Information”.

 

Information Contained in this Circular Regarding Spinco

 

The information contained in this Circular, including Appendix “K” – Information Concerning Spinco contains significant amounts of forward-looking information. Readers are cautioned that actual results may vary. See “Cautionary Statement Regarding Forward-Looking Information”.

 

Information Contained in this Circular Regarding Delaware Subco

 

The information contained in this Circular, including Appendix “L” – Information Concerning the Delaware Subco, contains significant amounts of forward-looking information. Readers are cautioned that actual results may vary. See “Cautionary Statement Regarding Forward-Looking Information”.

 

Financial Information

 

Unless otherwise indicated, all financial information referred to in this Circular was prepared in accordance with IFRS.

 

Currency

 

Unless otherwise indicated, all references to “$” or “dollars” set forth in this Circular are to Canadian dollars.

 

NOTICE TO SECURITYHOLDERS IN THE UNITED STATES

 

THE ARRANGEMENT AND THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE ARRANGEMENT HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR THE SECURITIES REGULATORY AUTHORITIES OF ANY STATE OF THE UNITED STATES, NOR HAS THE SEC OR THE SECURITIES REGULATORY AUTHORITIES OF ANY STATE OF THE UNITED STATES PASSED UPON THE FAIRNESS OR MERITS OF THE ARRANGEMENT OR UPON THE ADEQUACY OR ACCURACY OF THIS CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.

 

Canadian Circular

 

The solicitation of proxies hereby for the Meeting is not subject to the requirements of Section 14(a) of the U.S. Exchange Act. Accordingly, this Circular has been prepared in accordance with disclosure requirements applicable in Canada, and the solicitations and transactions contemplated in this Circular are made in the United States for securities of a Canadian issuer in accordance with Canadian corporate law and Canadian Securities Laws. Broadway Shareholders in the United States should be aware that such requirements are different from those applicable to registration statements under the U.S. Securities Act and proxy statements under the U.S. Exchange Act. Information included in this Circular or incorporated by reference herein concerning the business of the Corporation, Spinco, Delaware Subco and MindMed has been prepared in accordance with the requirements of Canadian Securities Laws, which differ from the requirements of U.S. Securities Laws.

 

IFRS Accounting Principles

 

Financial statements included or incorporated by reference in this Circular have been prepared in accordance with IFRS as issued by the International Accounting Standards Board, which differs from United States generally accepted accounting principles in certain material respects, and thus they may not be comparable to financial statements of U.S. companies.

    

    - 3 - 

    

Tax Matters

 

This Circular does not address any tax considerations of the Arrangement other than certain Canadian federal income tax considerations to Broadway Shareholders. Broadway Shareholders resident or subject to tax in any jurisdiction outside of Canada (“Foreign Tax Jurisdiction”) should be aware that the Arrangement may have tax consequences to such Broadway Shareholder in one or more Foreign Tax Jurisdictions. No tax advice or opinion whatsoever is provided in this Circular to Broadway Shareholders with respect to tax considerations involving Foreign Tax Jurisdictions. Broadway Shareholders that are resident or subject to tax in any Foreign Tax Jurisdiction are urged to consult their own independent tax advisors with respect to the relevant tax implications of the Arrangement and for advice regarding the specific federal, state, local and foreign tax considerations applicable to them, including, without limitation, any associated filing requirements, in such jurisdictions.

 

Enforcement of Civil Liabilities

 

The enforcement by securityholders of civil liabilities under U.S. federal securities laws may be affected adversely by the fact that Broadway is incorporated and organized outside the United States, that some or all of the Corporation’s and Broadway’s directors and officers and the experts named in this Circular are not residents of the United States and that all or a substantial portion of Broadway’s respective assets and the assets of said persons may be located outside the United States. As a result, securityholders in the United States may be unable to effect service of process within the United States upon the Corporation, their respective officers and directors or the experts named herein, or to realize against them upon judgments of courts of the United States predicated upon civil liabilities under the federal securities laws of the United States or any applicable securities laws of any state of the United States. In addition, securityholders in the United States should not assume that the courts of Canada: (i) would enforce judgments of United States courts obtained in actions against such persons predicated upon civil liabilities under the federal securities laws of the United States or any applicable securities laws of any state of the United States; or (ii) would enforce, in original actions, liabilities against such persons predicated upon civil liabilities under the federal securities laws of the United States or any applicable securities laws of any state of the United States.

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

This Circular and the documents incorporated into this Circular by reference contain “forward-looking statements” and “forward-looking information” within the meaning of Securities Laws (forward-looking statements and forward- looking information being collectively referred to as “forward-looking information”) that are based on expectations, estimates and projections as at the date of this Circular or the dates of the documents incorporated by reference, as applicable. This forward-looking information includes, but is not limited to, statements and information concerning: the Arrangement; the anticipated timing for completion of the Arrangement; the anticipated benefits of the Arrangement; the likelihood of the Arrangement being completed; the principal steps of the Arrangement; statements relating to the business and future activities of the Corporation, MindMed and Spinco after the date of this Circular and prior to the Effective Time and after the Effective Time; Broadway Shareholder and Court approval of the Arrangement and the expected timing thereof; regulatory approval of the Arrangement and the expected timing thereof; and other statements that are not historical facts. To the extent any forward-looking information constitutes future-oriented financial information or financial outlook, as those terms are defined under applicable Canadian Securities Laws, such statements are being provided to describe the current anticipated effect of the Arrangement, and readers are cautioned that these statements may not be appropriate for any other purpose, including investment decisions.

 

Any statements that involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often, but not always, using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements and are intended to identify forward-looking information. This forward-looking information is based on the beliefs of the Corporation’s management, as well as on assumptions and other factors, which management believes to be reasonable based on information available at the time such information was given. Such assumptions include, among other things, the satisfaction of the terms and conditions of the Arrangement, including the approval of the Arrangement and its fairness by the Court, and the receipt of the required governmental and regulatory approvals and consents.

    

    - 4 - 

    

By its nature, forward-looking information, including future-oriented financial information or financial outlook, is based on assumptions and involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements expressed or implied herein to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information, including, without limitation: the Arrangement Agreement may be terminated in certain circumstances; the conditions to the completion of the Arrangement may not be satisfied; Dissent Rights may be exercised with respect to more than 5% of the Broadway Common Shares; general economic conditions; industry conditions; currency fluctuations; competition from other industry participants; and stock market volatility. This list is not exhaustive of the factors that may affect any of the forward-looking information contained herein.

 

Forward-looking information is information about the future and is inherently uncertain. There can be no assurance that the forward-looking information will prove to be accurate. Actual results could differ materially from those reflected in the forward-looking information as a result of, among other things, the matters set out or incorporated by reference in this Circular generally and economic and business factors, some of which may be beyond the control of the Corporation. Some of the more important risks and uncertainties that could affect forward-looking information are described further under the heading “Risk Factors Relating to the Arrangement”. Additional risks are discussed under the heading “Additional Information Concerning MindMed – Risk Factors Relating to MindMed and the Resulting Issuer” in Appendix “I” to this Circular, Broadway’s management discussion and analysis for the year ended August 31, 2019, and in the documents incorporated by reference herein. The Corporation expressly disclaims any intention or obligation to update or revise any information contained in this Circular (including forward-looking information) except as required by applicable Laws, and Broadway Shareholders should not assume that any lack of update to information contained in this Circular means that there has been no change in that information since the date of this Circular and should not place undue reliance on forward-looking information.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Information has been incorporated by reference in this Circular from documents filed by Broadway with the securities commissions or similar authorities in British Columbia and Alberta. Copies of the documents incorporated herein by reference may be obtained on request without charge from Eric Myung, CFO, (416) 361-3557, Marrelli Support Services Inc., 82 Richmond Street East, Toronto, Ontario M5C 1P1. These documents are also available under Broadway’s profile on the SEDAR website at www.SEDAR.com.

 

The following documents are specifically incorporated by reference into, and form an integral part of, this Circular:

 

	
 

	
1.

	
the audited financial statements of Broadway as at, and for the financial years ended August 31, 2019 and 2018, together with the auditors’ report thereon and notes thereto;

 

	
 

	
2.

	
management’s discussion and analysis for the financial years ended August 31, 2019 and 2018;

 

	
 

	
3.

	
the material change report dated October 18, 2019;

 

	
 

	
4.

	
the management information circular dated effective June 11, 2018;

 

	
 

	
5.

	
the NI 43-101 technical report with an effective date of March 4, 2019, prepared by Philip S. Mulholland, C.P.G. and co-authored by Robert S. Middleton, MSc, BSc, P.Eng titled “NI 43-101 Technical Report For The Madison Project, Madison Count, Montana USA” (the “Technical Report”); and

 

	
 

	
6.

	
the Arrangement Agreement effective as of October 15, 2019, as may be amended from time to time, between Broadway, Spinco, Delaware Subco and MindMed.

    

    - 5 - 

    

Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purposes of this Circular to the extent that a statement contained in this Circular or in any subsequently filed document that also is or is deemed to be incorporated by reference herein modifies, replaces or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Circular. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or supersedes. The making of such a modifying or superseding statement shall not be deemed an admission for any purpose that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made.

 

    

    - 6 - 

    

 

SUMMARY

 

The following is a summary of certain information contained in this Circular. This summary is not intended to be complete and is provided for convenience only. It should be read together with the more detailed information contained elsewhere in the Circular, including the appendices hereto. Capitalized terms have the meanings ascribed to such terms in the Glossary of Terms in Appendix “A”. This summary is qualified in its entirety by the more detailed information appearing or referred to elsewhere herein.

 

THE MEETING

 

Time, Date and Place of Meeting

 

The Meeting will be held at the offices of Wildeboer Dellelce LLP, Suite 800, Wildeboer Dellelce Place, 365 Bay Street, Toronto, Ontario, M5H 2V1, at 10:00 a.m. (Toronto time), on February 19, 2020.

 

The Record Date

 

The Broadway Board has fixed the close of business on January 14, 2020 as the record date for the determination of the Broadway Shareholders entitled to receive notice of, and vote at, the Meeting. Only Broadway Shareholders whose names have been entered in the register of shareholders as of the close of business on January 14, 2020 will be entitled to receive notice of, and to vote at, the Meeting.

 

Purpose of the Meeting

 

This Circular is furnished in connection with the solicitation of proxies by management of Broadway for use at the Meeting.

 

Number of Directors

 

The Broadway Shareholders will be asked to fix the number of directors of Broadway for the ensuing year (or until completion of the Plan of Arrangement) at five (5) until the earlier of the completion of the Arrangement or the next annual meeting. See “Annual Meeting Matters – 3. Number of Directors”. The Broadway Shareholders will be asked to fix the number of directors of Broadway at six (6) in the event of the completion of the Arrangment. See “9. Setting the Number of Directors if Arrangement is Approved”.

 

Election of Directors

 

The Broadway Shareholders will be asked to elect the directors of Broadway to serve from immediately following the Meeting until the earlier of the next annual meeting of shareholders, the completion of the Plan of Arrangement or until they are otherwise removed or replaced. See “Annual Meeting Matters – 4. Election of Directors” in this Circular.

 

Broadway Shareholders will be asked to elect the directors of the Broadway to serve from the completion of the Plan of Arrangement (if completed) until the earlier of the next annual meeting of shareholders or until they are otherwise removed or replaced. See “10. Conditional Election of Directors if Arrangement is Approved” in this Circular.

 

Appointment of the Auditor

 

The Broadway Shareholders will be asked to appoint the auditors of Broadway to serve from immediately following the Meeting until the earlier of the next annual meeting of shareholders, the completion of the Plan of Arrangement or until they are otherwise removed or replaced, and to authorize the directors of Broadway to fix the remuneration of the auditors. See “Annual Meeting Matters – 2. Appointment of Auditor” in this Circular.

 

Broadway Shareholders will be asked to appoint the auditors of Broadway to serve from the completion of the Plan of Arrangement (if completed) until the earlier of the next annual meeting of shareholders or until they are otherwise removed or replaced. See “11. Resulting Issuer Auditor Resolution if Arrangement is Approved” in this Circular.

 

    

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Plan of Arrangement

 

The Broadway Shareholders will be asked to approve, by special resolution, a statutory plan of arrangement pursuant to Section 288 of the Business Corporations Act (British Columbia) (the “BCBCA”) among Broadway, Madison Metals Inc., Broadway Delaware Subco Inc. and Mind Medicine, Inc., as more fully described in this Circular. In connection with the Plan of Arrangement, the Board of Directors of Broadway expect to approve a resolution to change the name of the Corporation to “Mind Medicine (MindMed) Inc.” or such other name as is acceptable to the Board of Directors of Broadway and to any regulatory authority having jurisdiction. See “6. Approval of the Plan of Arrangement” in this Circular.

 

Consolidation

 

The Broadway Shareholders will be asked to approve, by special resolution, authorization to consolidate the issued and outstanding Broadway common shares on the basis of each eight (8) Broadway Common Shares into one (1) Broadway Common Share. See “7. Approval of the Consolidation of Broadway Common Shares” in this Circular.

 

Amendment to Articles of Broadway

 

The Broadway Shareholders will be asked to approve, by special resolution, an amendment to the articles of Broadway to create a new class of multiple voting shares that will each carry 100 votes per share and to change the name of the Common Shares to “subordinate voting shares” (with all terms of the common shares otherwise remaining unchanged). See “8. Authorized Share Capital Amendment” in this Circular.

 

Broadway Stock Option Plan

 

The Broadway Shareholders will be asked to approve, by ordinary resolution, the continuing use of the Broadway Stock Option Plan pursuant to applicable TSXV policies. See “Annual Meeting Matters – 5. Approval of Broadway Stock Option Plan” in this Circular. In the event the Plan of Arrangement is completed, the Broadway Stock Option Plan will be null and void and of no further force or effect (but any options granted thereunder that have not expired or been terminated in accordance with their provisions shall continue in force and effect).

 

Resulting Issuer Stock Option Plan

 

The Broadway Shareholders will be asked to approve, by ordinary resolution, the use of the Resulting Issuer Option Plan. See “12./13. Approval of Resulting Issuer Option Plan and Performance and Restricted Share Unit Plan” in this Circular. In the event the Plan of Arrangement is completed, assuming approval thereof the Resulting Issuer Option Plan will become effective as of the completion of the Plan of Arrangement.

 

Resulting Issuer Performance and Restricted Share Unit Plan

 

The Broadway Shareholders will be asked to approve, by ordinary resolution, the use of the Resulting Issuer Performance and Restricted Share Unit Plan. See “12./13. Approval of Resulting Issuer Option Plan and Resulting Issuer Performance and Restricted Share Unit Plan” in this Circular. In the event the Plan of Arrangement is completed, assuming approval thereof the Resulting Issuer Performance and Restricted Share Unit Plan will become effective as of the completion of the Plan of Arrangement.

 

De-List Broadway Common Shares from TSX Venture Exchange

 

The Broadway Shareholders will be asked to approve, by ordinary resolution, to permit the Board of Directors, in its discretion, to make an application to the TSX Venture Exchange to de-list Broadway’s Common Shares from the TSX Venture Exchange. See “14. Voluntary Delisting from TSXV” in this Circular.

 

    

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THE ARRANGEMENT

 

Purpose and Description of the Arrangement

 

The purpose of the Arrangement is for Broadway to indirectly acquire all of the issued and outstanding MindMed Common Shares and certain related matters, including the distribution of Spinco Distribution Shares to the Broadway Shareholders. Pursuant to the Plan of Arrangement, Broadway will transfer the Madison Project to Spinco in exchange for the Spinco Distribution Shares, which will be distributed to the Broadway Shareholders on the basis of one Spinco Distribution Share for each Broadway Common Share held. As a result of the Arrangement, Broadway Shareholders (as determined prior to the completion of the Plan of Arrangement – MindMed shareholders will not receive Spinco Distribution Shares) will continue to hold their Broadway Common Shares (to be renamed “Subordinate Voting Shares”) and will also hold Spinco Distribution Shares. If the Arrangement Resolution is approved by not less than two-thirds of the votes cast by Broadway Shareholders present in person or represented by proxy and entitled to vote at the Meeting, and all of the other conditions to closing of the Arrangement are satisfied or waived (where permitted), the Arrangement will be implemented by way of a court-approved Plan of Arrangement under the BCBCA. Pursuant to the Arrangement and the Plan of Arrangement, holders of the issued and outstanding MindMed Common Shares shall receive either (i) one post-Consolidation Broadway Common Share for each MindMed Common Share held (which shall be re-named “Subordinate Voting Shares”) or (ii) one/hundredth (1/100) of a Multiple Voting Share for each MindMed Common Share held, as determined by Broadway. In connection with the Plan of Arrangement, the Board of Directors of Broadway expect to approve a resolution to change the name of the Corporation to “Mind Medicine (MindMed) Inc.” or such other name as is acceptable to the Board of Directors of Broadway and to any regulatory authority having jurisdiction (the “Name Change”).

 

See “The Arrangement – Purpose and Description of the Arrangement” and “The Arrangement Agreement”.

 

Background to the Arrangement

 

A summary of the material events leading up to the negotiation of the Arrangement Agreement and the material meetings, negotiations and discussions between the Corporation and MindMed that preceded the execution and public announcement of the Arrangement Agreement are included in this Circular under the heading “The Arrangement – Background to the Arrangement”.

 

Recommendation of the Broadway Board

 

After consultation with its financial and legal advisors, the Broadway Board has unanimously determined that the Arrangement is in the best interests of the Corporation and that the Arrangement is fair to the Broadway Shareholders, and has authorized the submission of the Arrangement to the Broadway Shareholders for their approval at the Meeting. Accordingly, the Broadway Board has determined UNANIMOUSLY to recommend to the Broadway Shareholders that they vote FOR the Arrangement Resolution. See “The Arrangement – Recommendation of the Broadway Board”.

 

Reasons for the Arrangement

 

In the course of their evaluation of the Arrangement, the Broadway Board consulted with Broadway’s management team, legal counsel and financial advisors, reviewed a significant amount of information, and considered a number of factors including, among others, the following:

 

	
 

	
•

	
Continued Participation by Broadway Shareholders: The Broadway Shareholders, through their ownership of Resulting Issuer Shares, will have the opportunity to participate in the growth of MindMed and will benefit from the enhanced growth prospects of the Resulting Issuer. The Arrangement will provide substantial infrastructure and operational support to accelerate Broadway’s growth strategy, future product development and innovation, together with the Resulting Issuer and its global partners.

 

	
 

	
•

	
Broadway Shareholders will Continue to Have Exposure to the Madison Project: The Broadway Shareholders, through the distribution of the Spinco Distribution Shares to the Broadway Shareholders on a pro-rata basis, will continue to have exposure to the Madison Project. The current Broadway Shareholders (prior to the completion of the Arrangement) will hold shares in two companies with distinct businesses and projects.

 

    

    - 9 - 

    

	
 

	
•

	
Acceptance by Directors and Senior Officers: The Broadway Board has unanimously approved the Arrangement and recommends that the Broadway Shareholders vote in favour of the Arrangement.

 

	
 

	
•

	
Negotiated Transaction: The Arrangement Agreement is the result of an arm’s length negotiation process and includes terms and conditions that are reasonable in the judgement of the Broadway Board.

 

	
 

	
•

	
Shareholder Approval: The Arrangement must be approved by at least two-thirds of the votes cast on the Arrangement Resolution at the Meeting by Shareholders present in person or represented by proxy and entitled to vote at the Meeting.

 

	
 

	
•

	
Regulatory Approval: The Arrangement must be approved by the Court, which will consider, among other things, the substantive and procedural fairness and reasonableness of the Arrangement to the Broadway Shareholders. The Arrangement Agreement also contains a condition precedent that all regulatory approvals shall be obtained prior to closing.

 

	
 

	
•

	
Dissent Rights: The terms of the Plan of Arrangement provide that any registered Broadway Shareholder who opposes the Arrangement may, upon compliance with certain conditions, exercise Dissent Rights and, if ultimately successful, receive the fair value of the Dissenting Shares in accordance with the Arrangement.

 

The Broadway Board also considered a number of potential risks and potential negative factors relating to the Arrangement. See “The Arrangement – Reasons for the Arrangement” and “Cautionary Statement Regarding Forward-Looking Information”.

 

Arrangement Mechanics

 

The following description is qualified in its entirety by reference to the full text of the Plan of Arrangement, a copy of which is attached hereto as Appendix “C” to this Circular. Each of the events set out below shall occur as part of the Arrangement and shall be deemed to occur in the following sequence or as otherwise provided below or herein, without any further act or formality:

 

	
 

	
(a)

	
effective at twenty (20) minutes prior to the Effective Time, each Broadway Common Share in respect of which a Broadway Dissenting Shareholder has exercised Dissent Rights shall be, and shall be deemed to be, transferred to Broadway free and clear of any Encumbrances for cancellation without any further act or formality, and

 

	
 

	
(i)

	
such Dissenting Broadway Shareholders shall cease to be the holders of such Broadway Common Shares, and to have any rights as holders of Broadway Common Shares, other than the right to be paid fair value for such Broadway Common Shares;

 

	
 

	
(ii)

	
such Dissenting Broadway Shareholders’ names shall be removed as the holders of such Broadway Common Shares from the register of Broadway Common Shares maintained by or on behalf of Broadway; and

 

	
 

	
(iii)

	
Broadway shall be deemed to be the transferee and legal and beneficial holder of such Broadway Common Shares (free and clear of all Encumbrances) and shall be entered as the registered holder of such Broadway Common Shares in the register of Broadway Common Shares maintained by or on behalf of Broadway;

 

	
 

	
(b)

	
effective at fifteen (15) minutes prior to the Effective Time, Broadway shall, in the following order, complete (i) the Consolidation; (ii) the Name Change, and (iii) the Authorized Capital Amendment, and registered Broadway Shareholders will be entitled to receive Broadway Certificates after giving effect to the Consolidation, Name Change and Authorized Capital Amendment;

 

	
 

	
(c)

	
effective at ten (10) minutes prior to the Effective Time, Broadway will transfer the Transferred Assets to Spinco and Spinco will assume the liabilities (the “Assumed Liabilities”) in accordance with the Transfer Agreement in consideration for that number of Spinco Common Shares (the “Spinco Distribution Shares”) as is equal to the number of Broadway Common Shares issued and outstanding immediately prior to the Effective Time (for greater certainty, on a pre-Consolidation basis) on such record date as determined by Broadway less the number of Broadway Common Shares transferred to Broadway pursuant to (a) above (for greater certainty, on a pre-Consolidation basis), and Broadway shall be added to the register of Spinco Common Shares maintained by or on behalf of Spinco, and in connection therewith, in accordance with the BCBCA, Spinco shall add to the stated capital account maintained by Spinco for the Spinco Common Shares an amount that shall equal the fair market value of the Spinco Distribution Shares issued to Broadway;

 

    

    - 10 - 

    

	
 

	
(d)

	
effective at five (5) minutes prior to the Effective Time, the Spinco Distribution Shares will be distributed to the holders of Broadway Common Shares (other than a Dissenting Broadway Shareholder) pursuant to (c) above and the names of the Broadway Shareholders shall be added to (and Broadway removed from) the register of Spinco Common Shares maintained by or on behalf of Spinco, and in connection therewith;

 

	
 

	
(i)

	
the Spinco Incorporation Share issued to Broadway on incorporation shall be cancelled for no consideration and as a result thereof:

 

	
 

	
(A)

	
Broadway shall cease to be, and shall be deemed to have ceased to be, the holder of the Spinco Incorporation Share and to have any rights as a holder of the Spinco Incorporation Share; and

 

	
 

	
(B)

	
Broadway shall be removed as the holder of the Spinco Incorporation Share from the register of Spinco Common Shares maintained by or on behalf of Spinco;

 

	
 

	
(ii)

	
Broadway will be deemed to have reduced the stated capital of the Broadway Common Shares with the same effect as if reduced pursuant to Section 74 of the BCBCA, by an amount equal to the fair market value of the Spinco Distribution Shares, and Broadway will be deemed to have effected the reduction of capital of the Broadway Common Shares by being deemed to have paid and distributed the Spinco Distribution Shares to the Broadway Shareholders, other than the Dissenting Broadway Shareholders, on the basis of one Spinco Distribution Share for every one Broadway Common Share held immediately prior to the Effective Time (for greater certainty, on a pre-Consolidation basis) as a return of capital distribution in-kind; provided that the aggregate reduction in the stated capital for the Broadway Common Shares shall not exceed the aggregate paid-up capital (as that term is used for the purposes of the Tax Act) of the Broadway Common Shares immediately prior to the Effective Time;

 

	
 

	
(e)

	
effective at the Effective Time, Delaware Subco, in accordance with the Delaware General Corporation Law, shall merge with and into MindMed and MindMed shall continue as the surviving corporation under the laws of the State of Delaware in the manner set out in the Plan of Arrangement, and each of the following will occur:

 

	
 

	
(i)

	
in accordance with the constating documents of MindMed, each issued and outstanding MindMed Class B Share, MindMed Class C Share and MindMed Class D Share shall automatically convert into one fully paid, non-assessable MindMed Class A Share;

 

	
 

	
(ii)

	
each issued and outstanding MindMed Class A Share (including all MindMed Class A Shares issued on automatic conversion of the MindMed Class B Shares, MindMed Class C Shares and MindMed Class D Shares set out in (e)(i) above) shall be exchanged for either (A) one (1) Broadway Common Share or (B) one/hundredth (1/100) of a MindMed Multiple Voting Share (as determined by Broadway and MindMed), and thereafter the MindMed Class A Shares shall be cancelled without any repayment in respect thereof;

 

	
 

	
(iii)

	
each issued and outstanding MindMed Warrant shall be exchanged for one Broadway Replacement Warrant;

 

	
 

	
(iv)

	
each share of common stock, par value $0.001 per share, of Delaware Subco, issued and outstanding immediately prior to the Effective Time, shall be converted into and become one validly issued, fully paid and non-assessable MindMed Common Share after the Merger; and

 

    

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(v)

	
in consideration of the Broadway Common Shares, MindMed Multiple Voting Shares (as the case may be) and Broadway Replacement Warrants issued pursuant to section (e)(ii) and (iii) above, respectively, MindMed (as the surviving corporation in connection with the Merger) will issue 1,000 MindMed Common Shares to Broadway and, other than the MindMed Common Shares issued pursuant to (e)(iv) above, such shares shall constitute the only outstanding shares of capital stock of MindMed after the Merger; and

 

	
 

	
(f)

	
all of the foregoing events are intended to be completed, failing any one of which, none of the foregoing will occur and this Plan of Arrangement shall be null and void and of no further force and effect unless otherwise agreed to by the Parties.

 

No fractional Spinco Distribution Shares will be issued. In the event that a Broadway Shareholder would otherwise be entitled to a fractional Spinco Distribution Share hereunder, the number of Spinco Distribution Shares issued to such Broadway Shareholder shall, without any additional compensation, be rounded down to the next lesser whole number of Spinco Distribution Shares. In calculating such fractional interests, all Broadway Common Shares registered in the name of or beneficially held by such Broadway Shareholder or their nominee shall be aggregated.

 

As of the date hereof, Spinco does not intend to apply for a listing on any stock exchange of the SpinCo Distribution Shares, therefore there will be reduced liquidity for SpinCo Distribution Shares. There can be no assurances that any securities of SpinCo will ever be listed for trading on any stock exchange, and Spinco Shareholders should be aware that a market for the Spinco Distribution Shares may never develop.

 

Required Shareholder Approval for the Arrangement

 

Pursuant to the Interim Order, the Arrangement Resolution must be approved by the affirmative vote of not less than 662⁄3% of the votes cast by Shareholders present in person or represented by proxy and entitled to vote at the Meeting. The Arrangement Resolution must receive such Shareholder Approval in order for the Corporation to seek the Final Order and implement the Arrangement on the Effective Date in accordance with the Final Order. See “The Arrangement – Required Shareholder Approval”.

 

Expenses of the Arrangement

 

Except as otherwise provided in the Arrangement Agreement, all out-of-pocket third party transaction expenses incurred in connection with the Arrangement Agreement and the Plan of Arrangement and the transactions contemplated thereunder, shall be paid by the party incurring such fees, costs or expenses, whether or not the Arrangement is consummated.

 

Pursuant to the Arrangement Agreement, MindMed shall pay the legal fees, exclusive of HST and disbursements, of counsel to Broadway to a maximum of $50,000.

 

See “The Arrangement – Expenses of the Arrangement”.

 

Court Approval of the Arrangement and Completion of the Arrangement

 

The Plan of Arrangement requires approval by the Court under Section 288 of the BCBCA. In addition to approval of the Arrangement, the Court will be asked for a declaration following a Court hearing that the Arrangement, including the terms and conditions thereof and the issuance and exchange of securities to be effected thereby, is procedurally and substantively fair and reasonable to all persons entitled to receive securities in the exchange. Prior to the mailing of this Circular, the Corporation obtained the Interim Order, which provides for the calling and holding of the Meeting, the Dissent Rights and other procedural matters. A copy of the Interim Order is attached as Appendix “D” to this Circular.

 

Subject to the terms of the Arrangement Agreement and receipt of Shareholder Approval, Broadway intends to make an application to the Court for the Final Order on or about February 20, 2020 at 10:00 a.m. (Vancouver time), or as soon thereafter as counsel may be heard at the Courthouse located at 800 Smithe Street, Vancouver, British Columbia, or at any other date and time as the Court may direct.

 

    

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Any Broadway Shareholder, Broadway Optionholder and Broadway Warrantholder or other interested party who wishes to appear or be represented and/or to present evidence or arguments at that hearing must file and serve a response to petition no later than 4:00 p.m. (Vancouver time) on February 19, 2020 along with any other documents required, all as set out in the Interim Order and Notice of Hearing of Petition (the text of which are set out in Appendices D and E, respectively, to this Circular), and satisfy any other requirements of the Court. Such persons should consult their legal advisors as to the necessary requirements.

 

The Court may approve the Arrangement either as proposed or as amended in any manner the Court may direct, and subject to compliance with such terms and conditions, if any, as the Court sees fit. If the Arrangement is approved at the Meeting, the Final Order approving the Arrangement is issued by the Court and the applicable conditions to the completion of the Arrangement are satisfied or waived, the Arrangement is expected to take effect at 12:01 a.m. (Vancouver time) on the Effective Date.

 

The Court will be advised, prior to the hearing, that the Court’s approval of the Arrangement (and declaration of fairness thereof), will constitute the basis for reliance on the exemption from the registration requirements of the U.S. Securities Act pursuant to Section 3(a)(10) thereof, with respect to the issuance and distribution of the MindMed Common Shares to be issued by MindMed to Broadway pursuant to the Arrangement.

 

See “The Arrangement – Court Approval of the Arrangement and Completion of the Arrangement”.

 

Stock Exchange Approval

 

Broadway Common Shares currently trade on the TSXV under the symbol “BRD” and on the Frankfurt exchange under the symbol “BGH”. Broadway will use its reasonable best efforts to have the Arrangement accepted for filing by a recognized Canadian stock exchange. MindMed will use its reasonable commercial efforts to assist Broadway in obtaining the acceptance for filing of the Arrangement by a recognized Canadian stock exchange. It is a condition of closing that Broadway will have obtained approval of the necessary Canadian stock exchange of the Arrangement, subject only to compliance with the usual requirements of such stock exchange.

 

SpinCo will not be applying for listing of its Spinco Common Shares on an exchange, therefore there will be reduced liquidity for the SpinCo Common Shares. There can be no assurances that any securities of SpinCo will ever be listed for trading on any stock exchange and Spinco shareholders may not be able to sell their Spinco Common Shares.

 

The Arrangement Agreement

 

A description of certain provisions of the Arrangement Agreement are included in this Circular under the heading “The Arrangement Agreement”. The description is not comprehensive and is qualified in its entirety by the full text of the Arrangement Agreement which has been filed on SEDAR at www.sedar.com under the Corporation’s profile.

 

See “The Arrangement Agreement”.

 

Canadian Securities Laws

 

A general overview of certain requirements of Canadian Securities Laws that may be applicable to Shareholders is included in this Circular under the heading “Securities Law Matters – Canadian Securities Laws”. Each Shareholder is urged to consult such shareholder’s professional advisors to determine the Canadian conditions and restrictions applicable to trade in the Resulting Issuer Shares issuable pursuant to the Arrangement.

 

The issuance of Resulting Issuer Shares pursuant to the Arrangement will constitute a distribution of securities that is exempt from the prospectus requirements of applicable Canadian Securities Laws. Resulting Issuer Shares issued pursuant to the Arrangement will not be legended and may be resold in each province and territory of Canada provided that certain conditions are met.

 

The Resulting Issuer may be subject to certain additional trading restrictions under Securities Laws. All shareholders residing outside Canada and the United States are advised to consult their own legal advisors regarding such resale restrictions.

 

    

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U.S. Securities Laws

 

A general overview of certain requirements of U.S. Securities Laws that may be applicable to Shareholders is described in this Circular under the heading “Securities Law Matters – U.S. Securities Laws”. All Shareholders are urged to obtain legal advice to ensure that their resale of Resulting Issuer Shares complies with applicable U.S. Securities Laws. Further information applicable to the holders of such securities resident in the United States is disclosed in this Circular under the heading “Notice to Securityholders in the United States”.

 

Dissenting Shareholders’ Rights

 

Section 238 of the BCBCA provides registered shareholders of a corporation with the right to dissent from certain resolutions that effect extraordinary corporate transactions or fundamental corporate changes. The Interim Order expressly provides Registered Shareholders with the right to dissent from the Arrangement Resolution pursuant to Section 238 of the BCBCA in the manner set forth in Sections 237 to 247 of the BCBCA, with modifications or supplements to the provisions of Sections 237 to 247 as provided in the Plan of Arrangement and the Interim Order. Any Registered Shareholder who dissents from the Arrangement Resolution in compliance with Section 238 of the BCBCA, as modified or supplemented by the Plan of Arrangement and the Interim Order, will be entitled, if ultimately successful and in the event the Arrangement becomes effective, to be paid the fair value of Broadway Common Shares held by such Dissenting Shareholder determined as of the close of business on the last Business Day before the day on which the Arrangement is approved by Shareholders at the Meeting.

 

A brief summary of the Dissent Rights available to Registered Shareholders is set forth under the heading “Dissenting Shareholders’ Rights” in this Circular. However, such summary is qualified in its entirety by the provisions of Sections 237 to 247 of the BCBCA, the full text of which is set forth in Appendix “F” to this Circular, and by the Plan of Arrangement and the Interim Order. Failure to strictly comply with the requirements with respect to the dissent rights set forth in the BCBCA, the Plan of Arrangement and the Interim Order may result in the loss of any right to dissent.

 

Anyone who is a beneficial owner of Broadway Common Shares registered in the name of an Intermediary and who wishes to dissent should be aware that only Registered Shareholders are entitled to exercise Dissent Rights.

 

Risk Factors Relating to the Arrangement

 

In assessing the Arrangement, Shareholders should carefully consider the risk factors relating to the Arrangement (which are not an exhaustive list of potentially relevant risks factors relating to the Arrangement). Some of these risks include, but are not limited to: risk that the Arrangement does not receive the necessary court and/or regulatory approval; risks that the Corporation may fail to complete the Arrangement or that the Arrangement may be completed on different terms; risks that the Corporation will incur substantial transaction-related costs in connection with the Arrangement, even if the Arrangement is not completed; risk that, while the Arrangement is pending, the Corporation is restricted from taking certain actions; risk that the pending Arrangement may divert the attention of the Corporation’s management; risk that directors and senior officers of the Corporation may have interests in the Arrangement that are different from those of the Shareholders; risk that following the completion of the Arrangement, the Resulting Issuer may issue additional equity securities; risk that potential payments to Shareholders who exercise Dissent Rights could have an adverse effect on the Resulting Issuer’s financial condition or prevent the completion of the Arrangement; and the fact that the Arrangement will affect the rights of the Corporation’s Shareholders.

 

Additional risks and uncertainties, including those currently unknown or considered immaterial by MindMed and the Corporation, may also adversely affect the MindMed Common Shares, the Broadway Common Shares, and the businesses of the Corporation or MindMed following completion of the Arrangement.

 

See “Cautionary Statement Regarding Forward-Looking Information” and “Risk Factors Relating to the Arrangement”.

 

Procedures for Exchange of Broadway Common Shares

 

If the Arrangement Resolution, Consolidation Resolution, Authorized Capital Amendment Resolution and related matters are approved at the Meeting and the Arrangement is implemented, in order to receive the Spinco Distribution Shares as well as certificates evidencing the Consolidation, Name Change and Authorized Capital Amendment, Registered Shareholders must complete and sign the Letter of Transmittal enclosed with this Circular and deliver it (or an originally signed facsimile thereof), together with the certificates representing their Broadway Common Shares and the other relevant documents required by the instructions set out therein, to the Depositary in accordance with the instructions contained in the Letter of Transmittal. The Letter of Transmittal contains procedural information relating to the Arrangement and should be reviewed carefully. The deposit of Broadway Common Shares pursuant to the procedures in the Letter of Transmittal will constitute a binding agreement between the depositing Registered Shareholder and Broadway upon the terms and subject to the conditions of the Arrangement.

 

    

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Pursuant to the terms of the Arrangement, any certificates formerly representing Broadway Common Shares that are not deposited with the Depositary together with a duly completed Letter of Transmittal and any other documents the Depositary reasonably requires, on or before the sixth anniversary of the Effective Date, shall cease to represent a claim by or interest of any former holder of Broadway Common Shares of any kind or nature against or in Broadway or MindMed, and the right of such former holder of Broadway Common Shares to receive Resulting Issuer Shares in exchange for such Broadway Common Shares shall be deemed to be surrendered together with all dividends or distributions thereon held for such holder (less any applicable withholding tax).

 

If you are a Non-Registered Shareholder, you should carefully follow the instructions from the Intermediary that holds Broadway Common Shares on your behalf. Non-Registered Shareholders should contact their Intermediary if they have any questions regarding this process and to arrange for their Intermediary to complete the necessary steps in respect of their Broadway Common Shares as soon as possible following completion of the Arrangement.

 

See “Procedures for the Exchange of Broadway Common Shares”.

 

Income Tax Considerations

 

Holders of Broadway securities should consult their own tax advisors about the applicable Canadian or United States federal, provincial, state and local tax consequences of the Arrangement.

 

A description of certain Canadian federal income tax considerations relating to the Arrangement are included in this Circular under the heading “Certain Canadian Federal Income Tax Considerations”.

 

Completion of the Arrangement may have tax consequences under the laws of the United States, and any such tax consequences are not described in this Circular. United States security holders of Broadway are urged to consult their own tax advisors to determine any particular tax consequences to them of the transactions contemplated in connection with the Arrangement. See “Notice to Securityholders in the United States”.

 

Consolidation Resolution

 

The Broadway Shareholders will be asked to approve, by special resolution, the Consolidation of Broadway Shares. See “Consolidation Ratio” for more information.

 

Authorized Capital Amendment

 

The Broadway Shareholders will be asked to approve, by special resolution, the amendment to the articles of Broadway to create a new class of multiple voting shares that will each carry 100 votes per share, and to change the name of its common shares to “subordinate voting shares”. See “Authorized Capital” for more information.

 

De-Listing from TSXV

 

The Broadway Shareholders will be asked to approve by ordinary resolution, that the Board of the Corporation be authorized to make an application to the TSXV to de-list the Corporation’s shares from the TSXV.

 

Information Concerning Broadway, MindMed, Spinco and Delaware Subco and the Resulting Issuer

 

For information concerning Broadway, see “Additional Information Concerning Broadway”.

 

For information concerning MindMed, see Appendix “I” – Additional Information Concerning MindMed.

 

    

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For information concerning the Resulting Issuer, see Appendix “J” – Information Concerning the Resulting Issuer, Schedule 1 to Appendix “J” – Pro Forma Financial Statements, Schedule 2 to Appendix “J” – Audit Committee Charter and Schedule 3 to Appendix “J” – Compensation, Nomination and Governance Committee Charter of Resulting Issuer.

 

For information concerning Spinco, see Appendix “K” – Information Concerning Spinco and Schedule 1 to Appendix “K” – Financial Statement of Spinco.

 

For information concerning Delaware Subco, see Appendix “L” – Information Concerning Delaware Subco, Schedule 1 to Appendix “L” - Financial Statements of Delaware Subco and Schedule 2 to Appendix “L” – Delaware Subco Management Discussion and Analysis.

 

    

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GENERAL PROXY INFORMATION

 

Solicitation of Proxies

 

This Circular is furnished in connection with the solicitation of proxies by the management and the directors of the Corporation for use at the Meeting of the Shareholders to be held at the offices of Wildeboer Dellelce LLP, Suite 800, Wildeboer Dellelce Place, 365 Bay Street, Toronto, Ontario, M5H 2V1, at 10:00 a.m. (Toronto time), on February 19, 2020 and at any adjournment or postponement thereof for the purposes set forth in the accompanying Notice of Meeting. The solicitation of proxies will be made primarily by mail and may be supplemented by telephone or other personal contact by the directors, officers and employees of the Corporation. Directors, officers and employees of the Corporation will not receive any extra compensation for such activities. The Corporation will bear all costs of this solicitation. We have arranged for intermediaries to forward the meeting materials to beneficial owners of the Broadway Common Shares held of record by those intermediaries and we may reimburse the intermediaries for their reasonable fees and disbursements in that regard. The Record Date is January 14, 2020.

 

No person is authorized to give any information or to make any representation other than those contained in this Circular and, if given or made, such information or representation should not be relied upon as having been authorized by the Corporation. The delivery of this Circular shall not, under any circumstances, create an implication that there has not been any change in the information set forth herein since the date hereof.

 

Appointment of Proxies

 

A Registered Shareholder of the Corporation may vote in person at the Meeting or may appoint another person to represent such Shareholder as proxy and to vote the Broadway Common Shares of such Shareholder at the Meeting. In order to appoint another person as proxy, such Shareholder must complete, execute and deliver the form of proxy accompanying this Circular, or another proper form of proxy in the manner specified in the Notice of Meeting or deposit the completed and executed form of proxy with the Chairman of the Meeting prior to the commencement of the Meeting or any adjournment or postponement thereof.

 

The persons named in the form of proxy accompanying this Circular are directors and/or officers of the Corporation. A Shareholder has the right to appoint a person (who need not be a Shareholder), other than the persons whose names appear in such form of proxy, to attend and act for and on behalf of such Shareholder at the Meeting and at any adjournment or postponement thereof. Such right may be exercised by either striking out the names of the persons specified in the form of proxy and inserting the name of the person to be appointed in the blank space provided in the form of proxy, or by completing another proper form of proxy and, in either case, delivering the completed and executed proxy to Odyssey Trust Company in time for use at the Meeting in the manner specified in the Notice of Meeting or depositing the completed and executed form of proxy with the Chairman of the Meeting prior to the commencement of the Meeting or any adjournment or postponement thereof.

 

Revocation of Proxies

 

A Registered Shareholder of the Corporation who has given a proxy may revoke the proxy at any time prior to use by: (i) attending the Meeting and voting in person if you were a Registered Shareholder as of the Record Date; (ii) depositing an instrument in writing, including another completed form of proxy bearing a later date, executed by such Registered Shareholder or by his or her attorney authorized in writing or by electronic signature, or, if the Registered Shareholder is a corporation, by an authorized officer or attorney thereof, or by transmitting by telephone or electronic means, a revocation signed, subject to the BCBCA, by electronic signature: (i) to Odyssey Trust Company, Proxy Department, Victoria Tower, Suite 1717, 25 Adelaide St. East, Toronto, Ontario, M5C 3A1, Canada or online at https://odysseytrust.com/Transfer-Agent/Login, or at the address of the registered office of the Corporation at #700- 1199 West Hastings Street, Vancouver, BC, V6E 3T5, at any time prior to 5:00 p.m. (Vancouver time) on the last Business Day preceding the day of the Meeting or any adjournment or postponement thereof; (ii) with the Chairman of the Meeting on the day of the Meeting or any adjournment or postponement thereof; or (iii) in any other manner permitted by law.

    

    - 17 - 

    

A revocation of a proxy does not affect any matter on which a vote has been taken prior to the revocation.

 

Exercise of Discretion by Proxies

 

The Broadway Common Shares represented by an appropriate form of proxy will be voted on any ballot or poll that may be conducted at the Meeting, or at any adjournment or postponement thereof, in accordance with the instructions contained on the form of proxy and, if the Shareholder specifies a choice with respect to any matter to be acted on, the Broadway Common Shares will be voted accordingly. In the absence of instructions, such Broadway Common Shares will be voted FOR each of the matters described in the Notice of Meeting by the persons designated in the form of proxy.

 

The enclosed form of proxy, when properly completed and signed, confers discretionary authority upon the persons named therein to vote on any amendments to or variations of the matters described in the Notice of Meeting and on other matters, if any, which may properly be brought before the Meeting or any adjournment or postponement thereof, whether or not any amendments, variations or other matters are routine or contested. As at the date hereof, management of the Corporation knows of no such amendments or variations or other matters to be brought before the Meeting. However, if any other matter which is not now known to management of the Corporation should properly be brought before the Meeting, or any adjournment or postponement thereof, the Broadway Common Shares represented by such proxy will be voted on such matter in accordance with the judgment of the person named as proxy thereon.

 

Signing of Proxy

 

The form of proxy must be signed by the Registered Shareholder or the duly appointed attorney thereof authorized in writing or, if the Registered Shareholder is a corporation, by an authorized officer of such corporation. A form of proxy signed by the person acting as attorney of the Registered Shareholder or in some other representative capacity, including an officer of a corporation which is a Registered Shareholder, should indicate the capacity in which such person is signing. A Registered Shareholder or his or her attorney may sign the form of proxy or a power of attorney authorizing the creation of a proxy by electronic signature provided that the means of electronic signature permits a reliable determination that the document was created or communicated by or on behalf of such Registered Shareholder or by or on behalf of his or her attorney, as the case may be.

 

Non-Registered Shareholders

 

Only Registered Shareholders or duly appointed proxy holders are permitted to vote at the Meeting. Some Shareholders of the Corporation are non-Registered Shareholders because the Broadway Common Shares they own are not registered in their names but are instead registered in the names of a brokerage firm, bank or other intermediary (each an “Intermediary”) or in the name of a clearing agency (“Non-Registered Shareholders”).

 

Non-Registered Shareholders should note that only Registered Shareholders may vote at the Meeting. If Broadway Common Shares are listed in an account statement provided to a Shareholder by an Intermediary, then in almost all cases those Broadway Common Shares will not be registered in such Shareholder’s name on the records of the Corporation. Such Broadway Common Shares will more likely be registered in the name of an Intermediary or an agent or nominee thereof. In Canada, the vast majority of such Broadway Common Shares are registered under the name CDS & Co. (the registration name for The Canadian Depository for Securities Limited, which Corporation acts as nominee for many Intermediaries). Broadway Common Shares held by Intermediaries (or their agents or nominees) on behalf of Non-Registered Shareholders can only be voted (for or against resolutions) at the direction of the applicable Non-Registered Shareholder. Without specific instructions, Intermediaries and their agents or nominees are prohibited from voting Shares on behalf of Non-Registered Shareholders. Therefore, each Non-Registered Shareholder should ensure that voting instructions are communicated to the appropriate person well in advance of the Meeting.

    

    - 18 - 

    

Existing regulatory policy requires Intermediaries to forward all proxy-related materials to and seek voting instructions from Non-Registered Shareholders in advance of shareholder meetings. The various Intermediaries have their own mailing procedures and provide their own return instructions to clients, which should be carefully followed by Non- Registered Shareholders in order to ensure that their Broadway Common Shares are voted at the Meeting. Often the form of proxy supplied to a Non-Registered Shareholder by an Intermediary is identical to the form of proxy provided by the Corporation to registered Shareholders. However, its purpose is limited to instructing the Registered Shareholder (i.e., the Intermediary or agent or nominee thereof) how to vote on behalf of the Non-Registered Shareholder. The majority of Intermediaries now delegate responsibility for obtaining instructions from clients to Broadridge Financial Solutions, Inc. (“Broadridge”). Broadridge typically prepares a machine-readable voting instruction form (a “VIF”), mails those forms to non-registered shareholders and asks non-registered shareholders to return the forms to Broadridge, or otherwise communicate voting instructions to Broadridge (by way of the internet or telephone, for example). Broadridge then tabulates the results of all instructions received and provides appropriate instructions respecting the voting of shares to be represented at a meeting. For the purposes hereof, a Non-Registered Shareholder who receives a Broadridge voting instruction form cannot use that form to vote Broadway Common Shares directly at the Meeting. The voting instruction form must be returned to Broadridge (or instructions respecting the voting of Broadway Common Shares must be communicated to Broadridge) well in advance of the Meeting in order to have the Broadway Common Shares voted.

 

There are two kinds of Non-Registered Shareholders, (a) those who object to their identity being known to the issuers of securities which they own (“Objecting Beneficial Owners”, or “OBOs”) and (b) those who do not object to their identity being made known to the issuers of securities which they own (“Non-Objecting Beneficial Owners”, or “NOBOs”). Subject to the provisions of NI 54-101 issuers may deliver proxy-related materials directly to their NOBOs.

 

The Corporation is not sending proxy-related materials directly to NOBOs and accordingly, NOBOs can expect to receive a scannable VIF from Broadridge. These VIFs are to be completed and returned to Broadridge in the envelope provided or by facsimile. In addition, Broadridge provides both telephone voting and internet voting as described on the VIF itself which contains complete instructions. Broadridge will tabulate the results of the VIFs received from the NOBOs and will provide appropriate instructions to the Transfer Agent with respect to the Broadway Common Shares represented by the VIFs they receive. Please return your voting instructions as specified in the VIF.

 

The Corporation intends to pay for an Intermediary to deliver to objecting Non-Registered Shareholders the proxy- related materials and Form 54-101F7 – Request for Voting Instructions Made by Intermediary of NI 54-101 to the objecting Non-Registered Shareholders and as such, the Corporation’s OBOs can expect to be contacted by Broadridge or their Intermediaries or an agent or nominee thereof as set out above.

 

Although Non-Registered Shareholders may not be recognized directly at the Meeting for the purposes of voting Broadway Common Shares registered in the name of an Intermediary or an agent or nominee thereof, a Non- Registered Shareholder may attend the Meeting as proxy holder for the Registered Shareholder and vote its Broadway Common Shares in that capacity. Should a Non-Registered Shareholder wish to attend the Meeting and indirectly vote its Broadway Common Shares as proxy holder for an applicable Registered Shareholder, such Non-Registered Shareholder should enter its own name in the blank space on the voting instruction form provided to such Non- Registered Shareholder and return same in accordance with the instructions provided thereon.

 

All references to Shareholders in this Circular and the accompanying form of proxy and Notice of Meeting are to Shareholders of record unless specifically stated otherwise.

 

Quorum

 

The quorum for any meeting of Shareholders is two persons present at the meeting each of whom is entitled to vote at the Meeting, and who hold or represent by proxy in the aggregate not less than 5% of the outstanding shares of the Corporation entitled to vote at the Meeting. In the event that a quorum is not present at the time fixed for holding each of whom is entitled to vote at the Meeting, the Meeting shall stand adjourned to such date and to such time and place as may be determined by the Shareholders present.

 

ADDITIONAL INFORMATION CONCERNING BROADWAY

 

Broadway’s head office and registered office is located at 700 – 1199 West Hastings Street. Vancouver, BC V6E 3T5. The Broadway Common Shares trade on the TSXV under the symbol “BRD” and on the Frankfurt exchange under the symbol “BGH”.

    

    - 19 - 

    

Broadway is a reporting issuer in the Provinces of British Columbia and Alberta. Broadway is currently a resource company focused on development-stage projects with advanced exploration potential. In the event the Arrangment is approved at the Meeting and is completed, Broadway will carry on the business of MindMed. Additional information relating to the Corporation may be found under the Corporation’s profile on SEDAR at www.sedar.com. Inquiries, including requests for copies of the Corporation’s financial statements and management’s discussion and analysis, may be directed to Eric Myung, Chief Financial Officer (416) 361-3557. Additional financial information is provided in the Corporation’s comparative financial statements and management’s discussion and analysis for the year ended August 31, 2019, which is also available on SEDAR at www.sedar.com.

 

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

 

The Broadway Board and the Interim Order have fixed January 14, 2020 (the “Record Date”) as the record date for the determination of the Shareholders entitled to receive the Notice of Meeting. Shareholders of record at the close of business on the Record Date will be entitled to vote at the Meeting and at any adjournment or postponement thereof. Each Broadway Common Share will entitle the holder of record thereof to one vote at the Meeting.

 

As at the Record Date, there were 49,860,204 Broadway Common Shares outstanding. As of that date, to the knowledge of the directors and executive officers of Broadway, no persons, firms or corporations beneficially own, directly or indirectly, or exercise control or direction over, 10% or more of the Broadway Common Shares.

 

As of the date of this Circular, the total number of Broadway Common Shares owned or controlled by management and the directors of Broadway and their associates or affiliates is 6,031,167 Broadway Common Shares, representing 12.1% of the total issued and outstanding Broadway Common Shares.

 

ANNUAL MEETING MATTERS

 

1. RECEIPT
OF FINANCIAL STATEMENTS

 

The audited financial
statements of the Corporation for the years ended August 31, 2019 and 2018 (the “Financial Statements”), together
with the auditor’s reports thereon (“Auditor’s Report”), will be presented to Shareholders at the
Meeting but will not be voted upon. The Financial Statements and the Auditor’s Reports thereon together with the management
discussion and analysis are available on SEDAR at www.sedar.com under the Corporation’s
profile.

 

The Notice of Annual General & Special Meeting of Common Shareholders, Information Circular and form of Proxy will be available from the Corporation’s Registrar and Transfer Agent, Odyssey Trust Company, Victoria Tower, Suite 1717, 25 Adelaide St. East, Toronto, Ontario, M5C 3A1, or from the Corporation’s head office located at 507 – 595 Howe Street. Vancouver, BC V6C 2T5.

 

Request for Financial Statements

 

National Instrument 51-102 - Continuous Disclosure Obligations sets out the procedures for a shareholder to receive financial statements. If you wish to receive financial statements, you may use the enclosed form or provide instructions in any other written format. Registered Shareholders must also provide written instructions in order to receive the financial statements.

 

2. APPOINTMENT OF AUDITOR

 

The Shareholders of the Corporation will be asked to vote for the re-appointment of MNP LLP, Chartered Accountants, as auditors of the Corporation. If appointed, MNP LLP, Chartered Accountants will serve until the earlier of (i) the completion of the Plan of Arrangement; (ii) the next annual meeting of shareholders or (iii) their successor is appointed.

 

Unless directed
otherwise by a proxy holder, or such authority is withheld, the management designees, if named as proxy, intend to vote the Broadway
Shares represented by any such proxy FOR the appointment of MNP LLP as auditor of the Corporation, to hold office until
the Arrangement becomes effective or, if the Arrangement does not become effective, until the close of the next annual general
meeting of shareholders or until MNP LLP is removed from office or resigns as provided by the Corporation’s by-laws, and
the management designees also intend to vote the Broadway Shares represented by any such proxy in favour of a resolution authorizing
the Broadway Board to fix the compensation of the auditor. MNP LLP has been the Corporation’s auditor since August 2010.

    

    - 20 - 

    

3. NUMBER OF DIRECTORS

 

At the Meeting, the Broadway Shareholders will be asked to fix the number of directors at five (5) until the earlier of the next annual general meeting or the completion of the Plan of Arrangement.

 

Unless directed
otherwise by a proxy holder, or such authority is withheld, the management designees, if named as proxy, intend to vote the Broadway
Shares represented by any such proxy FOR fixing the number of directors of the Broadway Board at five (5), to hold
office until the Arrangement becomes effective or, if the Arrangement does not become effective, until the close of the next annual
general meeting of shareholders.

 

4. ELECTION OF DIRECTORS

 

Number of Directors to be Elected at the Meeting

 

At the previous annual meeting of shareholders of Broadway, six (6) directors were elected, one of whom has resigned such that the Broadway Board presently consists of five (5) directors. Directors of Broadway are elected annually. All of the current directors of the Corporation will be standing for re-election.

 

Term

 

Each director elected will hold office until the Arrangement becomes effective, or, if the Arrangement does not become effective, until the next annual general meeting of the shareholders or until his successor is duly elected, unless his office is earlier vacated in accordance with the by-laws of Broadway or the provisions of the BCBCA.

 

Nominees

 

The following table and notes thereto sets out the name of each person proposed to be nominated by Management for election as a director (each a “proposed director”), the province and country in which such nominee is ordinarily resident, all offices of Broadway now held by such nominee, his or her principal occupation, the period of time for which he or she has been a director of Broadway, and the number of Broadway Common Shares beneficially owned by him or her, directly or indirectly, or over which he or she exercises control or direction, as at the date hereof.

 

	 

 

Name, Position, Province
and 

Country of Residence(1)

	 

	 

 

Principal Occupation

During Past Five Years
(1)

	 

	 

 

Period as a Director
of Broadway

	 

	 Number
                                            of Broadway

Common Shares

beneficially owned or

controlled or directed,

directly or indirectly(2)

	
Duane Parnham

Nassau, Bahamas

Chief Executive Officer and Chairman

	
 

	
Mr. Duane Parnham
is the Executive Chairman of Giyani Gold Corp., Canoe Mining Ventures Corp. and the Chairman of Nevada Zinc Corporation.

	
 

	
October 19, 2016 to present.

	
 

	
4,848,167

(9.72%)

	
Suzanne Wood

British Columbia, Canada

Director

	
 

	
Suzanne Wood is the founder and CEO of Wood & Associates, a small cap management and corporate finance services firm.

	
 

	
July 26, 2010 to present.

	
 

	
830,000

(1.66%)

	
Shawn Parnham

Ontario, Canada 

Director

	
 

	
Since August 2013, Mr. Parnham has been Vice President Finance & Treasurer of the IMT Group.

	
 

	
April 3, 2017 to present.

	
 

	
Nil

    

    - 21 - 

    

	
 

 

Name, Position,
Province and 

Country of Residence(1)

	
 

	
 

 

Principal Occupation 

During Past Five
Years (1)

	
 

	
 

 

Period as a Director of Broadway

	
 

	
 Number
of Broadway

Common Shares

beneficially owned or

controlled or directed,

directly or indirectly(2)

	
Dr. Roger Laine

France

Director

	
 

	
Retired executive.

	
 

	
July 13, 2017 to present.

	
 

	
133,000

(0.27%)

	
Victoria Donato 

Ontario, Canada

Director

	
 

	
Prior to joining
Broadway Gold, Ms Donato was the Chief Financial Officer for a Toronto hedge fund, Red Sky Capital Management Ltd.

	
 

	
July 13, 2017 to present.

	
 

	
220,000

(0.44%)

 

Notes

	
(1)

	
The information as to the province or state, country of residence and principal occupation, not being within the knowledge of Broadway, has been furnished by the respective directors individually.

	
(2)

	
The information as to Broadway Common Shares beneficially owned or over which a director exercises control or direction, not being within the knowledge of Broadway has been furnished by the respective directors individually.

 

A shareholder can vote for all of the above nominees, vote for some of the above nominees and withhold for other of the above nominees, or withhold for all of the above nominees. Unless otherwise indicated, the named proxyholders will vote FOR the election of each of the proposed nominees set forth above as directors of Broadway. Management does not contemplate that any of such nominees will be unable to serve as a director of Broadway but, if that should occur for any reason prior to the Meeting, the persons named in the enclosed form of proxy reserve the right to vote for another nominee in their discretion.

 

Corporate Cease Trade Orders or Bankruptcies

 

Except as disclosed below, none of the proposed directors (or any of their personal holding companies) of Broadway:

 

	
 

	
(a)

	
is, as at the date of this Circular, or has been, within 10 years before the date of this Circular, a director, chief executive officer or chief financial officer of any Corporation, including Broadway, that:

 

	
 

	
(i)

	
was subject of a cease trade order or similar order or an order that denied the relevant Corporation access to any exemption under securities legislation, for a period of more than 30 consecutive days while that person was acting in the capacity as director, executive officer or chief financial officer; or

 

	
 

	
(ii)

	
was the subject of a cease trade or similar order or an order that denied the issuer access to any exemption under securities legislation in each case for a period of 30 consecutive days, that was issued after the person ceased to be a director, chief executive officer or chief financial officer in the Corporation and which resulted from an event that occurred while that person was acting in the capacity as director, executive officer or chief financial officer; or

 

	
 

	
(b)

	
is as at the date of this Circular, or has been within the 10 years before the date of this Circular, a director or executive officer of any Corporation, including Broadway, that while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or

    

    - 22 - 

    

	
 

	
(c)

	
has, within the 10 years before the date of this Circular, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangements or compromise with creditors, or had a receiver, receiver manager as trustee appointed to hold the assets of that individual.

 

None of the proposed directors (or any of their personal holding companies) has been subject to:

 

	
 

	
(a)

	
any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or

 

	
 

	
(b)

	
any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable security holder in deciding whether to vote for a proposed director.

 

See “Compensation of Directors and Executive Officers”.

 

5. APPROVAL OF BROADWAY STOCK OPTION PLAN 

 

Annual Approval of Stock Option Plan

 

The Corporation presently has in place a “rolling” share option plan whereby the Corporation is authorized to grant stock options of up to 10% of its issued and outstanding shares, from time to time (the “Broadway Stock Option Plan”). The purpose of the Broadway Stock Option Plan is to attract and motivate directors, officers, employees, consultants and others providing services to the Corporation and thereby advance the Corporation’s interests, by affording such persons with an opportunity to acquire an equity interest in the Corporation through the issuance of stock options. As a “rolling” stock option plan, the Broadway Stock Option Plan is required to be approved by the Shareholders each year at the Corporation’s annual general meeting.

 

Accordingly, Shareholders are being asked to approve the Broadway Stock Option Plan, which was initially approved by Shareholders of the Corporation at the meeting of shareholders held on January 12, 2012, until the earlier of the next annual general meeting or the completion of the Plan of Arrangement.

 

General Description of the Stock Option Plan

 

The following information is intended as a brief description of the Broadway Stock Option Plan and is qualified in its entirety by the full text of the Broadway Stock Option Plan, which will be available for review at the Meeting:

 

	
(a)

	
Broadway Common Shares reserved for issuance will not exceed 10% of the issued and outstanding Broadway Common Shares at the date of granting the stock option. At the date of this Circular, the Corporation currently has 2,700,000 outstanding Broadway Options granted to the Corporation’s officers and directors pursuant to the Broadway Stock Option Plan, the number of securities remaining available for future issuance under the Broadway Stock Option Plan is currently 1,466,020 however if any option expires or otherwise terminates for any reason without having been exercised in full, the number of shares in respect of which the option expired or terminated shall again be available for the purposes of the Broadway Stock Option Plan.

 

	
(b)

	
The exercise price per common share for a stock option will be set by the Broadway Board and may not be less than the discounted market price (as calculated pursuant to the policies of the Exchange);

 

	
(c)

	
Broadway options granted under the Broadway Stock Option Plan may be exercisable for a maximum of 10 years from the date of grant for a tier 1 issuer or 5 years from the date of grant for a tier 2 or a NEX Issuer;

 

	
(d)

	
Broadway options granted to directors, officers and all employees and consultants employed or retained by the Corporation will be deemed fully vested and are exercisable immediately, notwithstanding options granted to consultants conducting investor relations activities will vest over a period of not less than 12 months as to 25% on the date that is three months from the date of grant and a further 25% on each successive date that is three months from the date of the previous vesting, or such longer vesting period as the Broadway Board may determine;

    

    - 23 - 

    

	
(e)

	
The number of Broadway Common Shares reserved for issuance under the Broadway Stock Option Plan to any individual director or officer in a 12 month period will not exceed five percent (5%) of the issued and outstanding Broadway Common Shares and the number of Broadway Common Shares reserved for issuance to all consultants and service providers conducting investor relations activities will not exceed two percent (2%) of the issued and outstanding Broadway Common Shares.

 

	
(f)

	
Broadway Options may be exercised no later than 90 days following cessation of the optionee’s position with the Corporation and if the cessation of office, directorship, or consulting arrangement was by reason of death, the option may be exercised within a maximum period of one year after such death, subject to the expiry date of such option.

 

A copy of the Broadway Option Plan is available upon request from the Corporation.

 

Outstanding Options

 

There are currently 3,400,000 incentive stock options outstanding under the Broadway Stock Option Plan, representing 69.19% of the currently available options, and 7.0% of the issued Broadway Common Shares. Accordingly, a total of 4,986,020 Broadway Options (representing 10% of the outstanding common shares as at the current date) are permitted to be granted under the Broadway Stock Option Plan, and therefore an additional 1,586,020 Broadway Options are currently available for grant under the Broadway Stock Option Plan.

 

Annual Shareholder Approval of the Broadway Stock Option Plan

 

Shareholders will be asked at the Meeting to consider and, if thought fit, pass an ordinary resolution in substantially the following form:

 

“RESOLVED, as an ordinary resolution, that the Broadway Stock Option Plan, as described in the Circular dated December 29, 2019 and the grant of options thereunder in accordance therewith, be approved.”

 

The Broadway Board considers that the ability to grant incentive stock options is an important component of its compensation strategy and is necessary to enable the Corporation to attract and retain qualified directors, officers, employees and consultants. The Board therefore recommends that Shareholders vote FOR the resolution approving the Broadway Stock Option Plan. Unless otherwise instructed, the Corporation’s management nominees named in the enclosed form of proxy will vote FOR of the above resolution. If the Broadway Stock Option Plan is not approved by the Shareholders, existing Broadway Options will not be affected, but new Broadway Options granted by the Corporation will be required to be approved by the Shareholders before they can be exercised by the holders thereof.

 

In the event the Plan of Arrangement is completed, the Broadway Stock Option Plan will be null and void and of no further force or effect (but any options granted thereunder that have not expired or been terminated in accordance with their provisions shall continue in force and effect).

 

6. APPROVAL OF THE PLAN OF
ARRANGEMENT

 

At the Meeting, Shareholders will be asked to consider and, if thought advisable, to pass, with or without variation, the Arrangement Resolution to approve, inter alia, the Arrangement pursuant to Section 288 of the BCBCA. The Arrangement, the Plan of Arrangement and the terms of the Arrangement Agreement are summarized below. This summary does not purport to be complete and is qualified in its entirety by reference to the Arrangement Agreement and the Plan of Arrangement attached thereto, each of which have been filed on SEDAR at www.sedar.com under the Corporation’s profile. A copy of the Plan of Arrangement is also attached as Appendix “C” of this Circular.

 

To be effective, the Arrangement Resolution must be approved by not less than two-thirds of the votes cast by Shareholders present in person or represented by proxy and entitled to vote at the Meeting. See “The Arrangement – Required Shareholder Approval”. A copy of the Arrangement Resolution is set out in Appendix “B” of this Circular.

    

    - 24 - 

    

Unless otherwise directed in properly completed forms of proxy, it is the intention of the individuals named in the enclosed form of proxy to vote FOR the Arrangement Resolution. If you do not specify how you want your Broadway Common Shares to be voted at the Meeting, the persons named as proxyholders in the enclosed form of proxy will cast the votes represented by your proxy at the Meeting FOR the Arrangement Resolution.

 

If the Arrangement is approved at the Meeting, the Final Order approving the Arrangement is issued by the Court and the applicable conditions to the completion of the Arrangement are satisfied or waived, the Arrangement is currently expected to take effect at 12:01 a.m. (Vancouver time) on the Effective Date, which is expected to occur on or about February 28, 2020 or such earlier or later date as may be agreed by MindMed and the Corporation.

 

Purpose and Description of the Arrangement

 

The purpose of the Arrangement is for Broadway to indirectly acquire all of the issued and outstanding MindMed Common Shares. If the Arrangement Resolution is approved by not less than two-thirds of the votes cast by Shareholders present in person or represented by proxy and entitled to vote at the Meeting, and all of the other conditions to closing of the Arrangement are satisfied or waived (where permitted), the Arrangement will be implemented by way of a court-approved Plan of Arrangement under the BCBCA. Pursuant to the Arrangement and the Plan of Arrangement, MindMed will issue 1,000 MindMed Common Shares to Broadway.

 

As at the close of business on the Record Date, there were 49,860,204 Broadway Common Shares issued and outstanding, 3,100,500 Broadway Warrants outstanding, and 3,400,000 Broadway Options outstanding.

 

Background to the Arrangement

 

The provisions of the Arrangement Agreement are the result of arm’s length negotiations conducted between representatives of Broadway and MindMed and their respective financial and legal advisors.

 

In early 2019, Stephen Hurst and JR Rahn, two of the founders of MindMed, determined that the development of the 18-MC Program had reached a stage where further financing was required and that it could be best achieved through the use of a public vehicle. In May, 2019, MindMed was established and began the process of raising funds privately, through the MindMed Non-Brokered Offering. At the same time, MindMed began discussions with a number of reporting issuers that had no active business for the purposes of determining an appropriate vehicle for completing a business combination and bringing MindMed public. Among these issuers was Broadway. By late June, 2019, MindMed had identified Broadway as the most suitable vehicle for completing a business combination and after due diligence investigations and negotiations that focused, among other things, on Broadway’s liabilities and the treatment thereof, the exchange ratio for Broadway shareholders and the status of Broadway’s then-existing business, the parties entered into a non-binding letter of intent that was announced on July 26, 2019. The letter of intent outlined the general terms and conditions pursuant to which Broadway and MindMed agreed to complete a transaction that would result in a reverse take-over of Broadway by the current shareholders of MindMed. Immediately thereafter, Broadway and MindMed commenced negotiation of the Arrangement Agreement, the execution of which was announced on October 16, 2019 and which is described in greater detail in “The Arrangement Agreement”.

 

Recommendation of the Broadway Board

 

After careful consideration and consultation with its financial and legal advisors, the Broadway Board has unanimously determined that the Arrangement is, and continues to be, in the best interests of the Corporation and that the Arrangement is fair to the Shareholders, and has authorized the submission of the Arrangement to the Shareholders for their approval at the Meeting. Accordingly, the Broadway Board has determined unanimously to recommend to the Shareholders that they vote FOR the Arrangement Resolution.

    

    - 25 - 

    

Reasons for the Arrangement

 

In the course of their evaluation of the Arrangement, the Broadway Board consulted with Broadway’s management team, legal counsel and financial advisors, reviewed a significant amount of information, and considered a number of factors including, among others, the following:

 

	
 

	
(a)

	
Continued Participation by Broadway Shareholders: The Shareholders, through their ownership of Resulting Issuer Shares, will have the opportunity to participate in the global growth of the Resulting Issuer and will benefit from the enhanced growth prospects of the Resulting Issuer.

 

	
 

	
(b)

	
Acceptance by Directors and Senior Officers: The Broadway Board has unanimously approved the Arrangement and recommends that the Shareholders vote in favour of the Arrangement.

 

	
 

	
(c)

	
Negotiated Transaction: The Arrangement Agreement is the result of an arm’s length negotiation process and includes terms and conditions that are reasonable in the judgement of the Broadway Board.

 

	
 

	
(d)

	
Shareholder Approval: The Arrangement must be approved by at least two-thirds of the votes cast on the Arrangement Resolution at the Meeting by Shareholders present in person or represented by proxy and entitled to vote at the Meeting.

 

	
 

	
(e)

	
Regulatory Approval: The Arrangement must be approved by the Court, which will consider, among other things, the substantive and procedural fairness and reasonableness of the Arrangement to the Shareholders. The Arrangement Agreement also contains a condition precedent that all regulatory approvals shall be obtained prior to closing.

 

	
 

	
(f)

	
Dissent Rights: The terms of the Plan of Arrangement provide that any Shareholder who opposes the Arrangement may, upon compliance with certain conditions, exercise Dissent Rights and, if ultimately successful, receive the fair value of the Dissenting Shares in accordance with the Arrangement.

 

The Broadway Board also considered a number of potential risks and potential negative factors relating to the Arrangement, including the following:

 

	
 

	
(a)

	
Regulatory and Court Approval. The Arrangement is subject to regulatory approval by the TSXV and Court approval;

 

	
 

	
(b)

	
Completion Risk. The risks to Broadway if the Arrangement is not completed, including that Broadway will have incurred significant costs in pursuing the Arrangement and that management of Broadway will have their attention diverted from Broadway’s business in the ordinary course;

 

	
 

	
(c)

	
Termination Rights of MindMed. MindMed has the right to terminate the Arrangement Agreement under certain limited circumstances;

 

	
 

	
(d)

	
Interim Operation Covenants. The restrictions on the conduct of the Corporation’s business prior to the consummation of the Arrangement requiring the Corporation to conduct its business in the ordinary course and preventing the Corporation from taking certain specified actions may delay or prevent the Corporation from undertaking business opportunities pending the consummation of the Arrangement;

 

	
 

	
(e)

	
Non-Solicitation Covenants. There are limitations contained in the Arrangement Agreement on Broadway’s ability to solicit additional interest from third parties; and

 

	
 

	
(f)

	
Integration Risk. Following completion of the Arrangement, the Resulting Issuer may not realize the benefits of its new projects, may be subject to significant operating risks associated with its integrated operations and portfolio of projects, and may not realize the benefits currently anticipated due to potential challenges associated with integrating the operations of the Corporation.

 

The reasons of the Broadway Board for recommending the Arrangement include certain assumptions relating to forward-looking information, and such information and assumptions are subject to various risks. See “Cautionary Statement Regarding Forward-Looking Information” and “Risk Factors Relating to the Arrangement” in this Circular.

    

    - 26 - 

    

The Broadway Board evaluated all the factors summarized above in light of their knowledge of the business and operations of the Corporation and based on the advice of financial and legal advisors to the Broadway Board and in the exercise of their business judgment. The foregoing summary of the information and factors considered by the Broadway Board is not intended to be exhaustive. In view of the variety of factors and the amount of information considered in connection with its evaluation of the Arrangement, the Broadway Board did not find it practicable to, and did not, quantify, rank or otherwise attempt to assign relative weights to the foregoing factors considered in their determinations. In addition, in considering the factors described above, individual members of the Broadway Board may have given different weights to various factors and may have applied different analysis to each of the material factors considered by the Broadway Board.

 

Arrangement Mechanics

 

The following description is qualified in its entirety by reference to the full text of the Plan of Arrangement, a copy of which is attached hereto as Appendix “C” to this Circular. At the Effective Time and pursuant to the Plan of Arrangement, the following transactions, among others, will occur and shall be deemed to occur in the following sequence or as otherwise provided below or herein, without any further act or formality:

 

	
 

	
(a)

	
effective at twenty (20) minutes prior to the Effective Time, each Broadway Common Share in respect of which a Broadway Dissenting Shareholder has exercised Dissent Rights shall be, and shall be deemed to be, transferred to Broadway free and clear of any Encumbrances for cancellation without any further act or formality and

 

	
 

	
(i)

	
such Dissenting Broadway Shareholders shall cease to be the holders of such Broadway Common Shares, and to have any rights as holders of Broadway Common Shares, other than the right to be paid fair value for such Broadway Common Shares;

 

	
 

	
(ii)

	
such Dissenting Broadway Shareholders’ names shall be removed as the holders of such Broadway Common Shares from the register of Broadway Common Shares maintained by or on behalf of Broadway; and

 

	
 

	
(iii)

	
Broadway shall be deemed to be the transferee and legal and beneficial holder of such Broadway Common Shares (free and clear of all Encumbrances) and shall be entered as the registered holder of such Broadway Common Shares in the register of Broadway Common Shares maintained by or on behalf of Broadway;

 

	
 

	
(b)

	
effective at fifteen (15) minutes prior to the Effective Time, Broadway shall, in the following order, complete (i) the Consolidation; (ii) the Name Change, and (iii) the Authorized Capital Amendment, and registered Broadway Shareholders will be entitled to receive Broadway Certificates after giving effect to the Consolidation, Name Change and Authorized Capital Amendment;

 

	
 

	
(c)

	
effective at ten (10) minutes prior to the Effective Time, Broadway will transfer the Transferred Assets to Spinco and Spinco will assume the Assumed Liabilities in accordance with the Transfer Agreement in consideration of the number of Spinco Distribution Shares as is equal to the number of Broadway Common Shares issued and outstanding immediately prior to the Effective Time (for greater certainty, on a pre- Consolidation basis) on such record date as determined by Broadway less the number of Broadway Common Shares transferred to Broadway pursuant to (a) above (for greater certainty, on a pre- Consolidation basis), and Broadway shall be added to the register of Spinco Common Shares maintained by or on behalf of Spinco, and in connection therewith, in accordance with the BCBCA, Spinco shall add to the stated capital account maintained by Spinco for the Spinco Common Shares an amount that shall equal the fair market value of the Spinco Distribution Shares issued to Broadway;

    

    - 27 - 

    

	
 

	
(d)

	
effective at five (5) minutes prior to the Effective Time, the Spinco Distribution Shares will be distributed to the holders of Broadway Common Shares (other than a Dissenting Broadway Shareholder) pursuant to (c)above and the names of the Broadway Shareholders shall be added to (and Broadway removed from) the register of Spinco Common Shares maintained by or on behalf of Spinco, and in connection therewith;

 

	
 

	
(i)

	
the Spinco Incorporation Share issued to Broadway on incorporation shall be cancelled for no consideration and as a result thereof:

 

	
 

	
(A)

	
Broadway shall cease to be, and shall be deemed to have ceased to be, the holder of the Spinco Incorporation Share and to have any rights as a holder of the Spinco Incorporation Share; and

 

	
 

	
(B)

	
Broadway shall be removed as the holder of the Spinco Incorporation Share from the register of Spinco Common Shares maintained by or on behalf of Spinco;

 

	
 

	
(ii)

	
Broadway will be deemed to have reduced the stated capital of the Broadway Common Shares with the same effect as if reduced pursuant to Section 74 of the BCBCA, by an amount equal to the fair market value of the Spinco Distribution Shares, and Broadway will be deemed to have effected the reduction of capital of the Broadway Common Shares by being deemed to have paid and distributed the Spinco Distribution Shares to the Broadway Shareholders, other than the Dissenting Broadway Shareholders, on the basis of one Spinco Distribution Share for every one Broadway Common Share held immediately prior to the Effective Time (for greater certainty, on a pre-Consolidation basis) as a return of capital distribution in-kind; provided that the aggregate reduction in the stated capital for the Broadway Common Shares shall not exceed the aggregate paid-up capital (as that term is used for the purposes of the Tax Act) of the Broadway Common Shares immediately prior to the Effective Time;

 

	
 

	
(e)

	
effective at the Effective Time, Delaware Subco, in accordance with the Delaware General Corporation Law, shall merge with and into MindMed and MindMed shall continue as the surviving corporation under the laws of the State of Delaware in the manner set out in the Plan of Arrangement, and each of the following will occur:

 

	
 

	
(i)

	
in accordance with the constating documents of MindMed, each issued and outstanding MindMed Class B Share, MindMed Class C Share and MindMed Class D Share shall automatically convert into one fully paid, non-assessable MindMed Class A Share;

 

	
 

	
(ii)

	
each issued and outstanding MindMed Class A Share (including all MindMed Class A Shares issued on automatic conversion of the MindMed Class B Shares, MindMed Class C Shares and MindMed Class D Shares set out in (e)(i) above) shall be exchanged for either (A) one (1) Broadway Subordinate Voting Share or (B) one/hundredth (1/100) of a MindMed Multiple Voting Share (as determined by Broadway and MindMed), and thereafter the MindMed Class A Shares shall be cancelled without any repayment in respect thereof;

 

	
 

	
(iii)

	
each issued and outstanding MindMed Warrant shall be exchanged for one Broadway Replacement Warrant;

 

	
 

	
(iv)

	
each share of common stock, par value $0.001 per share, of Delaware Subco, issued and outstanding immediately prior to the Effective Time, shall be converted into and become one validly issued, fully paid and non-assessable MindMed Common Share of MindMed after the Merger; and

 

	
 

	
(v)

	
in
consideration of the Broadway Subordinate Voting Shares, MindMed Multiple Voting Shares (as the case may be) and Broadway
Replacement Warrants issued pursuant to section (e)(ii) and (iii) above, respectively, MindMed (as the surviving corporation in connection with the Merger) will issue 1,000 MindMed Common Shares to Broadway and, other than the MindMed Common Shares issued pursuant to (e)(iv) above, such shares shall constitute the only outstanding shares of capital stock of MindMed after the Merger; and

 

	
 

	
(f)

	
all of the foregoing events are intended to be completed, failing any one of which, none of the foregoing will occur and this Plan of Arrangement shall be null and void and of no further force and effect unless otherwise agreed to by the Parties.

    

    - 28 - 

    

No fractional Spinco Distribution Shares will be issued. In the event that a Broadway Shareholder would otherwise be entitled to a fractional Spinco Distribution Share hereunder, the number of Spinco Distribution Shares issued to such Broadway Shareholder shall, without any additional compensation, be rounded down to the next lesser whole number of Spinco Distribution Shares. In calculating such fractional interests, all Broadway Common Shares registered in the name of or beneficially held by such Broadway Shareholder or their nominee shall be aggregated.

 

Required Shareholder Approval

 

Pursuant to the Interim Order, the Arrangement Resolution must be approved by not less than two-thirds of the votes cast by Shareholders present in person or represented by proxy and entitled to vote at the Meeting. The Arrangement Resolution must receive such Shareholder Approval in order for the Corporation to seek the Final Order and implement the Arrangement on the Effective Date in accordance with the Final Order.

 

Interests of Certain Persons in the Arrangement

 

In considering the Arrangement and the recommendation of the Broadway Board with respect to the Arrangement, Shareholders should be aware that certain directors and certain senior officers of the Corporation have interests in connection with the Arrangement that may present them with actual or potential conflicts of interest in connection with the Arrangement. The Broadway Board is aware of these interests and considered them along with other matters described above under “The Arrangement – Reasons for the Arrangement”. These interests and benefits are described below.

 

Except as otherwise disclosed below or elsewhere in this Circular, all benefits received, or to be received, by directors or executive officers of Broadway as a result of the Arrangement are, and will be, solely in connection with their services as directors or employees of Broadway. No benefit has been, or will be, conferred for the purpose of increasing the value of consideration payable to any such person for Broadway Common Shares, nor is it, or will it be, conditional on the person supporting the Arrangement.

 

Broadway Common Shares

 

Pursuant to the Plan of Arrangement, Broadway will consolidate the Broadway Common Shares on the basis of the Consolidation Ratio. As at the Record Date, there are 49,860,204 Broadway Common Shares outstanding.

 

As at the Record Date, the directors and executive officers of Broadway beneficially owned, or exercised control or direction, directly or indirectly, over 6,031,167 Broadway Common Shares representing in the aggregate approximately 12.10% of all issued and outstanding Broadway Common Shares on a non-diluted basis.

 

See “The Arrangement – Arrangement Mechanics”.

 

Broadway Warrants

 

Pursuant to the Plan of Arrangement, Broadway will consolidate the Broadway Warrants on the basis of the Consolidation Ratio. As at the Record Date, 3,100,500 Broadway Warrants are outstanding.

 

Broadway Options

 

Pursuant to the Plan of Arrangement, Broadway will consolidate the Broadway Options on the basis of the Consolidation Ratio. As at the Record Date, the directors and executive officers of Broadway owned an aggregate of 3,400,000 Broadway Options granted pursuant to the Broadway Option Plan. The outstanding Broadway Options held by such directors and executive officers had exercise prices ranging from $0.05 to $0.25.

    

    - 29 - 

    

Ownership of Broadway Securities

 

None of the directors and executive officers of Broadway nor, to the knowledge of the Corporation after reasonable enquiry: (a) their respective associates and affiliates; (b) any insider of Broadway (other than the directors and executive officers) and their respective associates and affiliates; (c) any associate or affiliate of Broadway; and (d) any person acting jointly or in concert with Broadway, beneficially own, or exercise control or direction over, securities of Broadway except as set forth below and which will be affected by the Arrangement as described under “The Arrangement – Arrangement Mechanics”:

 

	Name and Position	 	# of Broadway Common 

Shares Beneficially Owned

 or Directly or Indirectly

 Controlled or Directed	 	 	# of Broadway Options

 Beneficially Owned or

 Directly or Indirectly

 Controlled or Directed	 	 	# of Broadway

 Warrants Beneficially

 Owned or Directly or

 Indirectly Controlled

 or Directed	 
	Duane Parnham 
 Chairman
    & Chief Executive Officer	 	 	4,848,167	 	 	 	700,000	 	 	 	100,000	 
	Eric Myung
 Chief
    Financial Officer	 	 	Nil	 	 	 	Nil	 	 	 	Nil	 
	Suzanne Wood
 Director	 	 	830,000	 	 	 	650,000	 	 	 	Nil	 
	Shawn Parnham
 Director	 	 	Nil	 	 	 	550,000	(1)	 	 	Nil	 
	Victoria Donato
 Director	 	 	220,000	 	 	 	400,000	 	 	 	Nil	 
	Dr Roger Laine
 Director	 	 	133,000	 	 	 	400,000	 	 	 	Nil	 
	Total	 	 	6,031,167	 	 	 	2,700,000	 	 	 	100,000	 

Note

 

	
 

	
(1)

	
450,000 Broadway Options granted to Mr. Parnham are equivalent to 100,000 Broadway Common Shares.

 

To the knowledge of the Corporation, there are no agreements, commitments or understandings to acquire securities of the Corporation by any of the persons referred to above except for Broadway Common Shares and/or the Resulting Issuer Shares that may be acquired upon the exercise of Broadway Options, respectively, or as otherwise disclosed herein.

 

All Broadway securities held by the directors or senior officers of Broadway will be treated in the same fashion under the Arrangement as those securities held by every other securityholder of Broadway.

 

MI 61-101

 

MI 61-101 regulates certain transactions to ensure equality of treatment among securityholders, generally requiring enhanced disclosure, approval by a majority of securityholders excluding “interested parties” or “related parties”, independent valuations and, in certain instances, approval and oversight of the transaction by a special committee of independent directors. The protections of MI 61-101 generally apply to “business combinations” (as defined in MI 61-101) that terminate the interests of securityholders without their consent (regardless of whether the equity security is replaced with another security). MI 61-101 provides that, in certain circumstances, where a “related party” of an issuer (as defined in MI 61-101) is entitled to receive a “collateral benefit” (as defined in MI 61-101) in connection with an arrangement, such transaction may be considered a “business combination” for the purposes of MI 61-101 and as a result such related party will be an “interested party” (as defined in MI-61-101) and the issuer may be subject to valuation and minority approval requirements. A “related party” includes directors, executive officers and shareholders holding over 10% of the issued and outstanding shares of the issuer.

    

    - 30 - 

    

A “collateral benefit” (as defined in MI 61-101) includes any benefit that a related party of Broadway is entitled to receive as a consequence of the Arrangement, including without limitation, an increase in salary, a lump sum payment, a payment for surrendering securities or other enhancement in benefits related to services as an employee, director or consultant of Broadway. MI 61-101 excludes from the meaning of collateral benefit a payment per security that is identical in amount and form to the entitlement of the general body of holders in Canada of securities of the same class, as well as certain benefits to a related party received solely in connection with the related party’s services as an employee or director of an issuer, of an affiliated entity of such issuer or of a successor to the business of such issuer where (a) the benefit is not conferred for the purpose, in whole or in part, of increasing the value of the consideration paid to the related party for securities relinquished under the transaction; (b) the conferring of the benefit is not, by its terms, conditional on the related party supporting the transaction in any manner; (c) full particulars of the benefit are disclosed in the disclosure document for the transaction; and (d) either (i) at the time of the transaction the related party and his or her associated entities beneficially own, or exercise control or direction over, less than 1% of the outstanding securities of each class of equity securities of the issuer (the “1% Exemption”), or (ii) the related party discloses to an independent committee of the issuer the amount of consideration that he or she expects to be beneficially entitled to receive, under the terms of the transaction, in exchange for the equity securities he or she beneficially owns and the independent committee acting in good faith determines that the value of the benefit, net of any offsetting costs to the related party, is less than 5% of the value of the consideration the related party will receive pursuant to the terms of the transaction for the equity securities it beneficially owns, and the independent committee’s determination is disclosed in the disclosure document for the transaction (the “5% Exemption”).

 

The Arrangement does not constitute an issuer bid, business combination, insider bid or a related party transaction for the purposes of MI 61-101. In assessing whether the Arrangement could be considered to be a “business combination” for the purposes of MI 61-101, the Corporation reviewed all benefits or payments which related parties of the Corporation are entitled to receive, directly or indirectly, as a consequence of the Arrangement to determine whether any constituted a collateral benefit. For these purposes, the only related parties of the Corporation that are entitled to receive a benefit, directly or indirectly, as a consequence of the Arrangement are the directors and executive officers of the Corporation.

 

The only officers or directors who do not qualify for the 1% Exemption, as they held 1% or more of the outstanding equity securities of the Corporation at the time the Arrangement was agreed to and may be entitled to receive certain benefits as a consequence of the Arrangement are Duane Parnham and Suzanne Wood.

 

The Broadway Board has determined that the potential change of control benefits described above under “The Arrangement – Interests of Certain Persons in the Arrangement – Employment Agreements” do not constitute collateral benefits under MI 61-101 and accordingly the Arrangement is not subject to the valuation and minority approval requirements of MI 61-101.

 

Expenses of the Arrangement

 

Except as otherwise provided in the Arrangement Agreement, all out-of-pocket third party transaction expenses incurred in connection with the Arrangement Agreement and the Plan of Arrangement and the transactions contemplated thereunder shall be paid by the party incurring such fees, costs or expenses, whether or not the Arrangement is consummated.

 

Pursuant to the Arrangement Agreement, MindMed shall pay the legal fees, exclusive of HST and disbursements, of counsel to Broadway to a maximum of $50,000.

 

Court Approval of the Arrangement and Completion of the Arrangement

 

The Plan of Arrangement requires approval by the Court under Section 288 of the BCBCA. On January 8, 2020, prior to the mailing of this Circular, the Corporation obtained the Interim Order, which provides for the calling and holding of the Meeting, the Dissent Rights and other procedural matters. A copy of the Interim Order is attached as Appendix “D” to this Circular.

 

Subject to the terms of the Arrangement Agreement and receipt of Shareholder Approval, Broadway intends to make an application to the Court for the Final Order. The application for the Final Order approving the Arrangement is expected to occur on or about February 24, 2020 at 10:00 a.m. (Vancouver time), or as soon thereafter as counsel may be heard, at the Courthouse located at 800 Smithe Street, Vancouver, or at any other date and time as the Court may direct. Any Broadway Shareholder, Broadway Optionholder and Broadway Warrantholder or any other interested party who wishes to appear or be represented and to present evidence or arguments at that hearing of the application for the Final Order must file and serve a response to petition no later than 4:00 p.m. (Vancouver time) on February 19, 2020 along with any other documents required, all as set out in the Interim Order and the Notice of Hearing of Petition (the texts of which are set out at Appendices D and E to this Circular, respectively), and satisfy any other requirements of the Court. Such persons should consult with their legal advisors as to the necessary requirements. In the event that the hearing is adjourned, then, subject to a further order of the Court, only those persons having previously filed and served a response to petition will be given notice of the adjournment.

    

    - 31 - 

    

The Court has broad discretion under the BCBCA when making orders with respect to the Arrangement. The Court will consider, among other things, the substantive and procedural fairness of the Arrangement to the parties affected, including the Broadway Shareholders, Broadway Optionholders and Broadway Warrantholders. The Court may approve the Arrangement in any manner the Court may direct, subject to compliance with any terms and conditions, if any, as the Court deems fit.

 

The Court has been advised that the Court’s approval of the Arrangement (including the fairness thereof), if granted, will form a basis for the exemption from the registration requirements of the U.S. Securities Act provided by Section 3(a)(10) thereof with respect to the issuance. Consequently, if the Final Order is granted, the MindMed Common Shares issuable to Broadway pursuant to the Arrangement will not require registration under the U.S. Securities Act. See “Securities Law Matters – U.S. Securities Laws”.

 

For further information regarding the Court hearing and your rights in connection with the Court hearing, see the form of Notice of Hearing of Petition attached as Appendix “E” to this Circular.

 

Assuming the Final Order is granted and the other conditions to closing contained in the Arrangement Agreement are satisfied or waived to the extent legally permissible, then the Final Order will be entered into the ledger entry for the Corporation with the Registrar of Companies to give effect to the Arrangement.

 

Stock Exchange Approval

 

Broadway Common Shares currently trade on the TSXV under the symbol “BRD” and on the Frankfurt exchange under the symbol “BGH”. Broadway will use its reasonable best efforts to have the Arrangement accepted for filing by a recognized Canadian stock exchange. MindMed will use its reasonable commercial efforts to assist Broadway in obtaining the acceptance for filing of the Arrangement by a recognized Canadian stock exchange. It is a condition of closing that Broadway will have obtained approval of the necessary Canadian stock exchange of the Arrangement, subject only to compliance with the usual requirements of such stock exchange.

 

Effects of the Arrangement on Shareholders’ Rights

 

The rights of Shareholders are currently and will continue to be governed by the BCBCA and by Broadway’s notice of articles and articles.

 

7. APPROVAL OF THE CONSOLIDATION OF BROADWAY
COMMON SHARES

 

At the Meeting, Broadway Shareholders will be asked to consider, and if thought appropriate, approve the consolidation of the Broadway Common Shares on the basis of each eight (8) pre-Consolidation Broadway Common Shares into one (1) post-Consolidation Broadway Common Share, provided that holders of Broadway Common Shares on the date that such consolidation becomes effective shall not be entitled to receive any fractional Broadway Common Share following the Consolidation. The Consolidation Resolution is expected to be implemented prior to the Arrangement; however, it is conditional upon the completion of the Arrangement and the Consolidation will not be completed if the Arrangement is not completed.

 

The text of the Consolidation Resolution to be voted on at the Meeting by the Shareholders is set forth in Appendix “B” hereto.

 

The Consolidation Resolution must be approved by at least two-thirds of votes cast by Shareholders present in person or voting by proxy at the Meeting in order for it to be adopted. The Board and management of the Corporation recommend that Shareholders vote FOR the Consolidation.

 

The persons named in the form of proxy which accompanies this Circular intend to vote FOR the Consolidation unless the shareholder has specified in the form of proxy that the Broadway Common Shares represented by such form of proxy are to be voted against the Consolidation.

 

The Consolidation Resolution will only be effective in the event that all conditions to the Arrangement have been satisfied or waived (other than conditions that may be or are intended to be satisfied only after the Consolidation Resolution is implemented).

    

    - 32 - 

    
	8.

	AUTHORIZED SHARE
                 CAPITAL AMENDMENT

 

Shareholders will be asked to consider, and if thought appropriate, approve, with or without variation, the Authorized Share Capital Amendment resolution set forth below authorizing the articles and Notice of Articles of Broadway be amended to (i) create MindMed Multiple Voting Shares having the terms and conditions set out in the Arrangement Agreement and replicated in Appendix “G” to this Circular and (ii) change the name of the existing Broadway Common Shares to “Subordinate Voting Shares” but otherwise not amending or affecting any of the terms and conditions of the Broadway Common Shares.

 

The text of the Authorized Share Capital Amendment Resolution to be voted on at the Meeting by the Shareholders is set forth below:

 

“BE IT RESOLVED AS A SPECIAL RESOLUTION THAT:

 

	
1.

	
the Notice of Articles of the Corporation shall be altered to create a class of multiple voting shares having the special rights and restrictions set forth in the MindMed Multiple Voting Share Provisions attached as Appendix “G” to this Circular (the “Multiple Voting Shares Alteration”);

 

	
2.

	
the Notice of Articles of the Corporation shall be altered to change the name of the Broadway Common Shares to “Subordinate Voting Shares” (the “Common Share Alteration” and together with the Proportionate Voting Shares Alteration, the “Alterations”);

 

	
3.

	
notwithstanding that this resolution has been duly passed by the shareholders of the Corporation, the directors of the Corporation be, and they are hereby authorized and empowered to revoke this resolution and to determine not to proceed with the Alterations without further approval of the shareholders of the Corporation; and

 

	
7.

	
any director or officer of the Corporation be and he or she is hereby authorized and directed, for and on behalf of the Corporation, to execute and deliver all such documents and to do all such other acts or things as he or she may determine to be necessary or advisable to give effect to this resolution, including, without limitation, the execution and delivery of any such document or the doing of any such other act or thing being conclusive evidence of such determination.

 

The Authorized Share Capital Amendment must be approved by at least two-thirds of votes cast by Shareholders present in person or voting by proxy at the Meeting in order for it to be adopted. The Board and management of the Corporation recommend that Shareholders vote FOR the Authorized Capital Amendment.

 

The persons named in the form of proxy which accompanies this Circular intend to vote FOR the Authorized Capital Amendment unless the shareholder has specified in the form of proxy that the Broadway Common Shares represented by such form of proxy are to be voted against the Authorized Capital Amendment.

 

The Authorized Share Capital Amendment will only be effective in the event that all conditions to the Arrangement have been satisfied or waived (other than conditions that may be or are intended to be satisfied only after the Authorized Share Capital Amendment is implemented).

 

9.
SETTING THE NUMBER OF DIRECTORS IF ARRANGEMENT IS APPROVED

 

Shareholders will be asked to consider and, if thought appropriate approve, with or without variation, the Resulting Issuer Board resolution set forth below. The Resulting Issuer Board Resolution is by its terms conditional and effective only upon the completion of the Arrangement. The Resulting Issuer Board Resolution sets the number of directors of the Resulting Issuer at six (6) directors.

 

At the Meeting, the Broadway Shareholders will be asked to elect, conditional and effective only upon the completion of the Arrangement, Stephen Hurst, Jamon Alexander Rahn, Stanley Glick, Bruce Linton, Perry Dellelce and Brigid Makes (collectively, the “Resulting Issuer Board Nominees”) as directors of the Resulting Issuer. Management of Broadway does not contemplate that any of the Resulting Issuer Board Nominees will be unable to serve as a director upon the completion of the Arrangement.

 

    

    - 33 - 

    

It is a condition precedent to the completion of the Arrangement that the Broadway Shareholders approve the Resulting Issuer Director Election Resolution. If the Resulting Issuer Director Election Resolution does not receive the requisite approval, the Arrangement will not proceed, unless such condition precedent is waived by MindMed.

 

THE RESULTING ISSUER DIRECTOR ELECTION RESOLUTION WILL ONLY BE EFFECTIVE IN THE EVENT THAT THE ARRANGEMENT IS SUCCESSFULLY COMPLETED.

 

Unless otherwise indicated, the persons designated as proxyholders in the accompanying form of Broadway Proxy will vote the Broadway Shares represented by such form of Broadway Proxy FOR the Resulting Issuer Director Election Resolution. If you do not specify how you want your Broadway Shares voted at the Meeting, the persons designated as proxyholders in the accompanying form of Broadway Proxy will cast the votes represented by your proxy at the Meeting FOR the Resulting Issuer Director Election Resolution.

 

The Broadway Board unanimously recommends that Broadway Shareholders vote FOR the Resulting Issuer Director Election Resolution at the Meeting.

 

See below for detailed information concerning the Resulting Issuer Board Nominees.

 

	
10.

	
CONDITIONAL ELECTION OF DIRECTORS IF ARRANGEMENT IS APPROVED

 

Conditional upon and effective immediately following the consummation of the Plan of Arrangement, the Resulting Issuer Board shall be reconstituted to consist of nominees of MindMed and all existing officers of Broadway shall resign and be replaced by nominees of MindMed. It is expected that upon completion of the Arrangement the Resulting Issuer will have a board of six individuals as identified below.

 

The following table and notes thereto sets out the name of each person proposed to be nominated, the province and country in which they are ordinarily resident, all offices of MindMed now held by them, their principal occupation, the period of time for which they have been a director of MindMed and number of MindMed Common Shares beneficially owned by them, directly or indirectly, or over which they exercise control or direction, as at the date hereof.

 

	
Name &

 Municipality

 of Residence

	
 

	
Proposed 

Position 

with 

Resulting 

Issuer

	
 

	
Principal Occupations for the Last Five

 Years

	
 

	
Period as Director or 

Officer of MindMed

	
 

	
Number and

 Percentage of 

Issued MindMed 

Shares

	
 

	
Stephen Hurst

Reno,Nevada, USA

	
 

	
Executive Chair, Co- Chief Executive Officer and Secretary

	
 

	
Prior to co-founding MindMed, Mr. Hurst was Co-founder & CEO of Savant HWP, Inc. (2009-2019) a biopharmaceutical corporation developing new medicines for particularly challenging diseases including drug addiction and neglected infectious diseases

	
 

	
Director May 30, 2019 until present

 

Chief Executive Officer May 30, 2019 until October 7, 2019

 

Secretary December
23, 2019 until present

 

Co-Chief Executive
Officer December 26, 2019 until present

	
 

	
Nil(1)

	
 

    

    - 34 - 

    

	
Jamon Alexander (JR) Rahn

 Boca Raton, Florida, USA

	
 

	
Director and Co- Chief Executive Officer

	
 

	
Before starting MindMed, JR worked in market expansion and operations at Uber. After leaving Uber, he was backed by the Silicon Valley tech accelerator Y Combinator for his company Upgraded. Upgraded is partnered with Apple to provide device financing for Apple customers in Europe.

	
 

	
July 23, 2019 until present Co-Chief Executive Officer December 26, 2019 until present

	
 

	
10,000,000

5.85%

	
 

	
Stanley Glick

New York City, New York, USA

	
 

	
Director

	
 

	
Dr. Glick is the co-inventor of 18-MC. His major research interest focuses on the neurobiology of drug addiction. His research has been funded by the NIDA since 1972. Dr. Glick is the Director Emeritus of the Center for Neuropharmacology and Neuroscience (CNN), Albany Medical College, Albany, NY and was Director of the CNN 2000 until his retirement in 2014.

	
 

	
October 8, 2019 until present

	
 

	
Nil

	
 

	
Bruce Linton

 Ottawa, Ontario, Canada

	
 

	
Director

	
 

	
Mr. Linton is Special Advisor with Better Choice Company, which is an animal health and wellness cannabinoid company that acquired TruPet LLC, an online seller of ultra- premium, all-natural pet food, treats and supplements, with a special focus on freeze dried and dehydrated raw products. Bruce is also an Activist Investor with SLANG Worldwide Inc. (CSE:SLNG), a leading global cannabis consumer packaged goods company with a robust portfolio of renowned brands distributed across 2,600 stores in 12 U.S. states as well as with OG

DNA Genetics Inc. (“DNA”). DNA has built and curated a seasoned genetic library and developed proven standard operating procedures for genetic selection, breeding, and cultivation. Mr. Linton is the Founder and Former Chairman and CEO of Canopy Growth Corporation (CGC/WEED), Co-Chairman and past CEO of Martello Technologies, and co-founder of Ruckify & Better Software.

	
 

	
September 20, 2019 until present

	
 

	
10,000,000(2)

5.85%

	
 

    

    - 35 - 

    

	
Perry Dellelce

 Toronto, Ontario, Canada

	
 

	
Director

	
 

	
Perry Dellelce is a founder and managing partner of Wildeboer Dellelce LLP, one of Canada’s leading corporate finance and transactional law firms. Perry practices in the areas of securities, corporate finance and mergers and acquisitions. Perry serves on the boards of many of Canada’s leading businesses. Perry is chair of the NEO Exchange, Canada’s newest stock exchange. He is also a member of the board of Mount Logan Capital Inc. and Lendified Inc.

	
 

	
October 8, 2019 until present

	
 

	
6,621,041(3)

3.88%

	
 

	
Brigid Makes

 Foster City, California, USA

	
 

	
Director

	
 

	
Ms. Makes has served as an independent consultant for primarily private medical device companies since July 2017. Prior to that, Ms. Makes served as Senior Vice President and Chief Financial Officer of Miramar Labs, a global medical device company dedicated to bringing innovative and clinically proven applications to treat unmet needs in the aesthetic marketplace, which was acquired by Sientra in July 2017. From 2006 to 2011 Ms. Makes served in the same roles for AGA Medical, a medical device company specializing in the treatment of cardiovascular defects, which was acquired by St. Jude Medical, another medical device company, in November 2010.

	
 

	
December 11, 2019 until present

	
 

	
Nil

	
 

Notes 

	
(1)

	
Savant owns 55,000,000 MindMed Class A Shares, and Sunray Asset Management Inc., a family corporation that is wholly-owned by Mr. Hurst and his spouse as community property, owns 38% of Savant.

	
(2)

	
Mr. Linton beneficially owns 5,000,000 MindMed Common Shares through The Linton Family Trust.

	
(3)

	
Mr. Dellelce owns 6,121,041 MindMed Common Shares directly through Perry N. Dellelce Professional Corporation.

 

For more information on the Resulting Issuer Board, see Appendix “J”- Directors and Executive Officers of the Resulting Issuer.

 

THE RESULTING ISSUER AUDITOR RESOLUTION WILL ONLY BE EFFECTIVE IN THE EVENT THAT THE ARRANGEMENT IS SUCCESSFULLY COMPLETED.

 

A shareholder can vote for all of the above nominees, vote for some of the above nominees and withhold for other of the above nominees, or withhold for all of the above nominees. Unless otherwise indicated, the named proxyholders will vote FOR the election of each of the proposed nominees set forth above as directors of the Resulting Issuer. Broadway does not contemplate that any of such nominees will be unable to serve as a director of the Resulting but, if that should occur for any reason prior to the Meeting, the persons named in the enclosed form of proxy reserve the right to vote for another nominee in their discretion.

 

    

    - 36 - 

    

	
11.

	
RESULTING ISSUER AUDITOR RESOLUTION IF ARRANGEMENT IS APPROVED

 

At the Meeting, the Shareholders of the Corporation will be asked to approve the appointment of RSM Canada LLP as auditor of the Resulting Issuer, conditional and effective only upon the completion of the Plan of Arrangement, and to authorize the directors of the Resulting Issuer to fix their remuneration.

 

THE RESULTING ISSUER AUDITOR RESOLUTION WILL ONLY BE EFFECTIVE IN THE EVENT THAT THE ARRANGEMENT IS SUCCESSFULLY COMPLETED.

 

Unless otherwise indicated, the persons designated as proxyholders in the accompanying form of proxy will vote the Broadway Shares represented by such form of proxy FOR the Resulting Issuer Auditor Resolution. If you do not specify how you want your Shares voted at the Meeting, the persons designated as proxyholders in the accompanying form of proxy will cast the votes represented by your proxy at the Meeting FOR the Resulting Issuer Auditor Resolution.

 

The Board unanimously recommends that Shareholders of the Corporation vote FOR the Resulting Issuer Auditor Resolution at the Meeting.

 

	
12.

	
 /13. APPROVAL OF RESULTING ISSUER STOCK OPTION PLAN AND PERFORMANCE AND RESTRICTED SHARE UNIT PLAN IF ARRANGEMENT IS APPROVED

 

Conditional on and effective upon the completion of the Arrangement, the Corporation proposes to implement: (i) a new stock option plan (the “Resulting Issuer Option Plan”); and (ii) a new performance and restricted share unit plan (the “Resulting Issuer PR Plan”), in each case, subject to approval of Broadway Shareholders as described below. Each of the Resulting Issuer Option Plan and the Resulting Issuer PR Plan have been approved by the NEO Exchange, subject to the approval of Broadway Shareholders at the Meeting. If each of the Resulting Issuer Option Plan and the Resulting Issuer PR Plan are approved at the Meeting, each will become effective upon the completion of the Arrangement and the Broadway Stock Option Plan will concurrently be terminated and no further options will be granted thereunder.

 

Each of the Resulting Issuer Option Plan and the Resulting Issuer PR Plan is an “evergreen” plan (or “rolling” plan) since the shares underlying options and other awards which have been: (i) exercised or vested and redeemed, as applicable, or (ii) forfeited, surrendered, cancelled or otherwise terminated or expire without the delivery of shares, as applicable, will be available for subsequent grants and the number of options and other awards available to grant increases as the number of issued and outstanding shares increases.

 

The proposed board of directors of the Resulting Issuer has determined that the Resulting Issuer Option Plan and the Resulting Issuer PR Plan, collectively, contain appropriate provisions to govern awards of medium- to long-term share-based awards that will advance the interests of the Resulting Issuer and its shareholders by providing an incentive to participants for their continued and improving service to the Resulting Issuer and to encourage share ownership. In addition, the ability of the board of directors of the Resulting Issuer to set measurable performance vesting criteria for those executives and key employees who receive performance share units under the Resulting Issuer PR Plan, or other share-based awards with performance vesting criteria, further strengthen alignment with shareholder interests. In the view of the proposed board of directors of the Resulting Issuer, the combination of the Resulting Issuer Option Plan and the Resulting Issuer PR Plan are well suited to the Resulting Issuer as they will give the board of directors of the Resulting Issuer flexibility in determining appropriate share-based compensation awards that are tied to performance as the Resulting Issuer executes on its business strategy.

 

Accordingly, at the Meeting, Broadway Shareholders will be asked to consider and approve, by ordinary resolution, each of the Resulting Issuer Option Plan and the Resulting Issuer PR Plan (together with all unallocated options, awards, rights and other entitlements thereunder, as applicable), which, if approved, will collectively replace the Broadway Stock Option Plan.

 

A summary of the Resulting Issuer Option Plan is set forth below and a full copy thereof is attached as Appendix “H” to this Circular. A summary of the Resulting Issuer PR Plan is set forth below and a full copy thereof is attached as Appendix “H” to this Circular.

 

    

    - 37 - 

    

Resulting Issuer Option Plan Summary

 

Capitalized terms used in this summary that are not otherwise defined in the Circular shall have the same meaning as defined in the Resulting Issuer Option Plan.

 

The Resulting Issuer Option Plan provides that the Administrators may, from time to time, at its discretion, grant to directors, officers, employees and certain other service providers of the Corporation or its subsidiaries (i.e. a Participant), in connection with their employment or position, options to purchase Shares. The purchase price for any optioned Shares is fixed by the Administrators, which purchase price will not be less than the Fair Market Value of a Share on the date the option is granted, being the closing price of the Shares on the NEO Exchange (or, if the Shares are not then listed on the NEO Exchange, on such other stock exchange or automated quotation system on which the Shares are then listed or quoted, as the case may be, as may be selected by the Administrators for such purpose) on the last trading day on which Shares traded prior to the day on which an Option is granted, provided that if no Shares traded on such date, the Fair Market Value shall be the average of the bid and ask prices in respect of the Shares at the close of trading on such date.

 

The aggregate number of Shares that are issuable under the Resulting Issuer Option Plan upon the exercise of Options which have been granted and are outstanding under the Resulting Issuer Option Plan, together with Shares that are issuable pursuant to outstanding awards or grants under any other Share Compensation Arrangement, shall not at any time exceed 10% of the Shares then issued and outstanding, subject to adjustment to give effect to any relevant changes in the capitalization of the Corporation, and provided that for the purpose of such calculation, the number of Shares then issued and outstanding shall include the number of Shares issuable upon conversion of the then issued and outstanding Multiple Voting Shares. Shares in respect of which Options have been granted but which are forfeited, cancelled or otherwise terminated or expire without being exercised shall be available for subsequent Options. As an “evergreen” plan, the NEO Exchange requires that all unallocated options, rights and other entitlements under the Resulting Issuer Option Plan be approved by shareholders on a periodic basis, each approval being effective for a period of three years.

 

The aggregate number of Shares reserved for issuance pursuant to options granted under the Resulting Issuer Option Plan and options or other entitlements granted under any other Share Compensation Arrangement to Insider Participants (as a group) shall not exceed 10% of the aggregate number of Shares outstanding, provided that for the purpose of such calculation, the number of Shares outstanding shall include the number of Shares issuable upon conversion of the then issued and outstanding Multiple Voting Shares. Within any one-year period, the aggregate number of Shares issued to Insider Participants (as a group) pursuant to options granted under the Resulting Issuer Option Plan or options or other entitlements granted under any other Share Compensation Arrangement shall not exceed 10% of the aggregate number of Shares outstanding, provided that for the purpose of such calculation, the number of Shares outstanding shall include the number of Shares issuable upon conversion of the outstanding Multiple Voting Shares.

 

In addition to the foregoing limits, (i) the maximum aggregate grant date fair value using the Black-Scholes-Merton valuation model of option grants to any non-employee director of the Corporation in any fiscal year of the Corporation shall not exceed $100,000; and (ii) no grant of Options under the Resulting Issuer Option Plan may be made to any non-employee director if such grant could result, together with awards or grants then outstanding under the Resulting Issuer Option Plan and any other Share Compensation Arrangement, in the issuance to non-employee directors as a group of a number of Shares exceeding 1% of the number Shares issued and outstanding immediately prior to any such Share issuance, provided that for the purpose of such calculation, the number of Shares issued and outstanding shall include the number of Shares issuable upon conversion of the issued and outstanding Multiple Voting Shares.

 

The Resulting Issuer Option Plan provides that Options granted to a citizen or resident of the United States of America and who, at the time of grant, is an employee of the Corporation or any parent or subsidiary of the Corporation may be an “incentive stock option” within the meaning of the U.S. Internal Revenue Code, if so determined by the Administrators. The Resulting Issuer Option Plan includes various provisions that apply specifically to each such “incentive stock option”.

 

    

    - 38 - 

    

Options granted under the Resulting Issuer Option Plan have a maximum term of 10 years from the date of grant. Options will become available for purchase by a Participant on a date or dates to be determined by the Administrators on the date of grant. Vested options may be exercised in whole or in part at any time by a Participant by payment of the aggregate exercise price therefor in full either: (a) by cash, certified cheque or bank draft or wire transfer; (b) if approved by the Administrators, and except with respect to ISOs, through means of a “net settlement,” whereby no exercise price will be due and where the number of Shares issued upon such exercise will be equal to: (A) the product of (l) the number of Shares as to which the Option is then being exercised, and (2) the difference between (x) the then current Fair Market Value per Share and (y) the exercise price per Share, divided by (B) the then current Fair Market Value per Share. A number of Shares equal to the difference between the number of Shares as to which the Option is then being exercised and the number of Shares actually issued to the Participant upon such net settlement will be deemed to have been received by the Corporation in satisfaction of the exercise price; (c) if approved by the Administrators, through an arrangement with a broker approved by the Corporation (or through an arrangement directly with the Corporation) whereby payment of the exercise price is accomplished with the proceeds of the sale of Shares deliverable upon the exercise of the Option; or (d) by such other method as the Administrators may approve or accept.

 

Subject to the terms of the Resulting Issuer Option Plan with respect to a Participant’s death, no Options may be transferred or assigned. Options may be exercised by the Participant and, upon the Participant’s death, the legal representative of his or her estate or any other person who acquires his or her rights in respect of an Option by bequest or inheritance. A person exercising an Option may subscribe for Shares only in his or her own name or in his or her capacity as a legal representative. All Options exercised during the Participant’s lifetime shall only be exercisable by the Participant or, in the event of his or her disability, by his or her personal representative.

 

Notwithstanding
anything to the contrary set forth in the Resulting Issuer Option Plan, upon or in anticipation of any Change in Control, the
Administrators may, in their sole and absolute discretion and without the need for the consent of any Participant, take one
or more of the following actions contingent upon the occurrence of that Change in Control: (a) cause any or all outstanding
Options to become vested and immediately exercisable, in whole or in part; and/or (b) cause any outstanding Option to become
fully vested and immediately exercisable for a reasonable period in advance of the Change in Control.

 

The Resulting Issuer Option Plan contains additional minimum provisions which apply to Options granted to residents of the State of California including in respect of the treatment of Options upon the termination of employment of a Participant

 

The Board may in its discretion, amend, suspend or terminate the Resulting Issuer Option Plan, or any portion thereof, at any time without obtaining the approval of shareholders of the Corporation, subject to those provisions of applicable law and regulatory requirements (including the rules, regulations and policies of the NEO Exchange), if any, that require the approval of shareholders. Any amendment to any provision of the Resulting Issuer Option Plan will be subject to any required regulatory or governmental approvals. Notwithstanding the foregoing, the Corporation will be required to obtain the approval of the shareholders of the Corporation for any amendment related to:

 

	
 

	
(a)

	
providing for an increase to the maximum number Shares which may be issued under the Resulting Issuer Option Plan, except pursuant to the provisions of the Resulting Issuer Option Plan which permit the Administrators to make equitable adjustments in the event of certain transactions affecting the Corporation or its capital;

 

	
 

	
(b)

	
providing for an increase in, or the removal of, the limits on the number of Shares Reserved for Issuance to Insider Participants;

 

	
 

	
(c)

	
providing for an increase in, or the removal of, the limits on participation in the Resulting Issuer Option Plan by non-employee directors;

 

	
 

	
(d)

	
providing for a reduction in the exercise price per Share for Options (for this purpose, a cancellation or termination of an Option prior to its expiry date for the purpose of re-issuing an Option to the same Participant with a lower exercise price shall be treated as an amendment to reduce the exercise price of an Option), except pursuant to the provisions of the Resulting Issuer Option Plan which permit the Administrators to make equitable adjustments in the event of transactions affecting the Corporation or its capital;

 

    

    - 39 - 

    

	
 

	
(e)

	
providing for an extension to the term of Options beyond the original expiry date, except in respect of blackout periods and other trading restrictions;

 

	
 

	
(f)

	
providing that an Option may be transferred or assigned other than for normal estate settlement purposes;

 

	
 

	
(g)

	
providing for the addition of additional categories of Participants that may permit the introduction or re- introduction of non-employee directors on a discretionary basis;

 

	
 

	
(h)

	
anything that required the approval of shareholders pursuant to Section 10.12(7) of the Listing Manual of the NEO Exchange; or

 

	
 

	
(i)

	
the deletion or reduction of the range of amendments which require the approval of shareholders of the Corporation.

 

The Corporation shall not provide financial assistance to Participants in connection with the Resulting Issuer Option Plan. Any granting of Options under the Resulting Issuer Option Plan, the exercise of Options and the issuance of Shares are subject to the Compensation Recoupment Policy of the Corporation.

 

Resulting Issuer PR Plan Summary

 

Capitalized terms used in this summary that are not otherwise defined in this Circular shall have the same meaning as defined in the Resulting Issuer PR Plan.

 

The purposes of the Resulting Issuer PR Plan are to (i) promote a significant alignment between employees and directors of the Corporation and the growth objectives of the Corporation, (ii) associate a portion of participating employees’ and directors’ compensation with the performance of the Corporation over the long term, and (iii) to attract and retain critical personnel to drive the business success of the Corporation. Grants may be made under the Resulting Issuer PR Plan to directors, officers and employees of the Corporation or of any subsidiary of the Corporation, provided PSUs shall not be awarded to non-employee directors of the Corporation. PSU and RSU awards that vest in accordance with their terms will be paid in either (a) Shares issued from treasury; or (b) cash.

 

The aggregate number of Shares that are issuable under the Resulting Issuer PR Plan to pay awards which have been granted and are outstanding under the Resulting Issuer PR Plan, together with Shares that are issuable pursuant to outstanding awards or grants under any other Share Compensation Arrangement, shall not at any time exceed 10% of the Shares then issued and outstanding, subject to adjustment to give effect to any relevant changes in capitalization of the Corporation, and provided that for the purpose of such calculation, the number of Shares then issued and outstanding shall include the number of Shares issuable upon conversion of the then issued and outstanding Multiple Voting Shares. Shares in respect of which Awards have been granted but which are (i) vested and redeemed or (ii) forfeited, surrendered, cancelled or otherwise terminated or expire without the delivery of Shares shall be available for subsequent Awards. In addition, the number of Shares subject to an Award (or portion thereof) that the Corporation permits to be settled in cash in lieu of settlement in Shares shall be available for subsequent Awards. Within any one- year period, the aggregate number of Shares issued to Insiders (as a group) pursuant to the Resulting Issuer PR Plan and any other Share Compensation Arrangement shall not exceed 10% of the issued and outstanding Shares (on a non- diluted basis). As an “evergreen” plan, the NEO Exchange will require that all unallocated awards, rights and other entitlements under the Resulting Issuer PR Plan be approved by shareholders on a periodic basis, each approval being effective for a period of three years.

 

Awards under the Resulting Issuer PR Plan shall be limited as follows:

 

	
 

	
(a)

	
the total number of Shares reserved for issuance to Insiders (as a group) under the Resulting Issuer PR Plan, together with Shares reserved for issuance to Insiders under any other Share Compensation Arrangement, shall not at any time exceed 10% of the issued and outstanding Shares, provided that for the purpose of such calculation, the number of Shares issued and outstanding shall include the number of Shares issuable upon conversion of the issued and outstanding Multiple Voting Shares;

 

    

    - 40 - 

    

	
 

	
(b)

	
within any one-year period the aggregate number of Shares issued to Insiders (as a group) pursuant to the Resulting Issuer PR Plan and any other Share Compensation Arrangement shall not exceed 10% of the issued and outstanding Shares, provided that for the purpose of such calculation, the number of Shares issued and outstanding shall include the number of Shares issuable upon conversion of the issued and outstanding Multiple Voting Shares;

 

	
 

	
(c)

	
the maximum aggregate grant date fair value using the Black-Scholes-Merton valuation model of awards under the Resulting Issuer PR Plan, together with awards or grants under any other Share Compensation Arrangement, to any non-employee director of the Corporation in any fiscal year of the Corporation shall not exceed $150,000; and

 

	
 

	
(d)

	
no award under the Resulting Issuer PR Plan may be made to any non-employee director if such award could result, together with awards or grants then outstanding under the Resulting Issuer PR Plan and any other Share Compensation Arrangement, in the issuance to non-employee directors as a group of a number of Shares exceeding 1% of the Shares issued and outstanding immediately prior to any such Share issuance, provided that for the purpose of such calculation, the number of Shares issued and outstanding shall include the number of Shares issuable upon conversion of the issued and outstanding Multiple Voting Shares.

 

All issuances of Shares from treasury to pay awards shall be deemed to be issued at a price per Share equal to the Market Value on the date of issuance.

 

Awards granted under the Resulting Issuer PR Plan will be made with a specified dollar value (i.e. the Award Value) as of the date of grant, as determined by the Board or by the grant of specific amounts of PSUs or RSUs. In the case of PSUs, the Board may determine any performance criteria applicable to the PSU.

 

Unless the Board determines to grant a Participant a specific number of PSUs without specifying an Award Value, the PSUs granted to a Participant for a Performance Period shall be determined by dividing the Award Value determined for the Participant for such Performance Period by the Market Value (with currency conversion if necessary) as at the end of the calendar quarter immediately preceding the Award Date, rounded down to the next whole number.

 

Unless the Board determines to grant a Participant a specific number of RSUs without specifying an Award Value, the RSUs granted to a Participant shall be determined by dividing the Award Value of an award to be provided to the Participant in the form of RSUs by the Market Value (with currency conversion if necessary) as at the end of the calendar quarter immediately preceding the Award Date, rounded down to the next whole number.

 

Each whole PSU and RSU will give a Participant the right to receive either a Share or a cash payment, as determined by the Board, in an amount determined in accordance with the terms of the Resulting Issuer PR Plan and the applicable Award Agreement. For greater certainty, a Participant shall have no right to receive Shares or a cash payment with respect to any PSUs or RSUs that do not become Vested PSUs or Vested RSUs.

 

When and if cash dividends are paid on the Shares during the period from the Award Date under the Award Agreement to the date of settlement of the PSUs or RSUs granted thereunder, additional PSUs or RSUs, as applicable, will be credited to the Participant’s Account (i.e. Dividend Equivalent Units) in accordance with the terms of the Resulting Issuer PR Plan. Dividend Equivalent Units shall be subject to the same Vesting conditions and shall Vest and be paid at the same time as the PSUs or RSUs, as applicable, to which they relate.

 

Upon the first day immediately following the end of the Performance Period, PSUs represented by the PSU Balance as at such date shall Vest subject to the terms of the Resulting Issuer PR Plan, with the number of Vested PSUs being equal to the PSU Balance as at such date multiplied by the Performance Adjustment Factor as determined by the Board in accordance with the Award Agreement. For certainty, in the event the Performance Adjustment Factor is equal to zero, no PSUs will vest. PSUs which do not become Vested PSUs shall be forfeited by the Participant and the Participant will have no further right, title or interest in such PSUs.

 

    

    - 41 - 

    

Upon the Vesting Date(s) specified in the applicable Award Agreement the RSUs comprising a Participant’s RSU Balance shall Vest in such proportion as may be determined in accordance with the Award Agreement. RSUs which do not become Vested RSUs shall be forfeited by the Participant and the Participant will have no further right, title or interest in such RSUs.

 

In the event that a Participant’s Vested PSUs or Vested RSUs have been designated by the Board for settlement in Shares issued from treasury, the Participant or his legal representative, as applicable, shall receive a number of Shares equal to the number of Vested PSUs or Vested RSUs, as the case may be, credited to the Participant’s Account (rounded down to the nearest whole number of Shares). In such event, such Shares shall be distributed to the Participant or his legal representative, as applicable, as soon as practicable following the applicable Vesting Date but in no event shall the payment be made later than December 31 of the third calendar year following the year in which the services giving rise to the award of PSUs or RSUs were rendered.

 

In the event that a Participant’s Vested PSUs or Vested RSUs have not been designated by the Board for settlement in Shares issued from treasury, the Participant or his legal representative, as applicable, shall receive a cash payment equal to: (i) in the case of PSUs, the Market Value determined as of the last day of the Performance Period multiplied by the number of Vested PSUs credited to his PSU Account as of the last day of such Performance Period, (rounded down to the nearest whole number of PSUs); and (ii) in the case of RSUs, the Market Value determined as of the Vesting Date of such RSUs multiplied by the number of Vested RSUs credited to his Account as of the Vesting Date (rounded down to the nearest whole number of RSUs). The cash payment shall be made to the Participant or his legal representative, as applicable, in a single lump sum as soon as practicable following the applicable Vesting Date but in no event shall the payment be made later than December 31 of the third calendar year following the year in which the services giving rise to the award of PSUs or RSUs were rendered.

 

Except as otherwise provided in the Award Agreement governing the grant of PSUs or RSUs to a Participant or a written employment or other agreement between the Participant and the Corporation or any Subsidiary, in the event that, during a Performance Period with respect to PSUs or prior to a Vesting Date with respect to RSUs, (i) the Participant’s employment or service as a director is terminated by the Corporation or a Subsidiary of the Corporation for any reason, or (ii) a Participant voluntarily terminates his employment with the Corporation or a Subsidiary of the Corporation or service as a director, including due to retirement, no portion of the PSUs subject to such Performance Period or RSUs that would otherwise Vest on such Vesting Date shall Vest and the Participant shall receive no payment or other compensation in respect of such PSUs or RSUs or loss thereof, on account of damages or otherwise; provided that any Vested PSUs and Vested RSUs will be settled in accordance with the payment of cash or Shares sections of the Resulting Issuer PR Plan.

 

The Resulting Issuer PR Plan contains additional minimum provisions which apply to PSUs and RSUs granted to residents of the State of California.

 

The Resulting Issuer PR Plan may be amended or terminated at any time by the Board in whole or in part, provided that:

 

	
 

	
(a)

	
no amendment of the Resulting Issuer PR Plan shall, without the consent of the Participants affected by the amendment, or unless required by Applicable Law, adversely affect the rights accrued to such Participants with respect to PSUs or RSUs granted prior to the date of the amendment;

 

	
 

	
(b)

	
no amendment of the Resulting Issuer PR Plan shall be effective unless such amendment is approved by the NEO Exchange; and

 

	
 

	
(c)

	
the approval of shareholders of the Corporation shall be obtained for any:

 

	
 

	
(i)

	
amendment for which, under the requirements of the Stock Exchange or any applicable law, shareholder approval is required;

 

	
 

	
(ii)

	
a reduction in pricing of an award under the Resulting Issuer PR Plan (other than an adjustment pursuant to Section 5.3 of the Resulting Issuer PR Plan in respect of certain transactions of the Corporation or its capital) or the cancellation and reissuance of awards under the Resulting Issuer PR Plan;

 

    

    - 42 - 

    

	
 

	
(iii)

	
extension of the term of an award under the Resulting Issuer PR Plan;

 

	
 

	
(iv)

	
any amendment to remove or exceed the Insider participation limits under the Resulting Issuer PR Plan;

 

	
 

	
(v)

	
any amendment to remove or exceed the limits on participation in the Resulting Issuer PR Plan by non-employee directors;

 

	
 

	
(vi)

	
an increase to the maximum number of Shares which may be issuable under the Resulting Issuer PR Plan, other than an adjustment pursuant to Section 5.3 of the Resulting Issuer PR Plan in respect of certain transactions of the Corporation or its capital;

 

	
 

	
(vii)

	
the addition of additional categories of Participants that may permit the introduction or re- introduction of non-employee directors on a discretionary basis;

 

	
 

	
(viii)

	
allowance of awards granted under the Resulting Issuer PR Plan to be transferable or assignable other than for normal estate settlement purposes; or

 

	
 

	
(ix)

	
amendment to the amendment section of the Resulting Issuer PR Plan.

 

Subject to the terms of the relevant Award Agreement, in the event of a Change in Control, the PSUs and RSUs credited to the account of the Participant as at the date of the Change in Control, will become vested PSUs and RSUs on a one-for-one basis on the date of Change in Control, unless otherwise determined by the Board. As soon as practical following the Change in Control, the Participant, at the discretion of the Board, will receive a payment in cash or in Shares equal to the number of vested RSUs or PSUs, as applicable, multiplied by the price at which the Shares are valued for the purposes of the transactions giving rise to the Change in Control.

 

The assignment or transfer of the PSUs or RSUs, or any other benefits under the Resulting Issuer PR Plan, shall not be permitted, other than by operation of law. The Corporation shall not provide financial assistance to Participants in connection with the Resulting Issuer PR Plan. Any awarding of PSUs or RSUs under the Resulting Issuer PR Plan, the Vesting thereof and the settlement of Awards pursuant thereto are subject to the Compensation Recoupment Policy of the Corporation.

 

Approval of the Resulting Issuer Option Plan

 

At the Meeting, Broadway Shareholders will be asked to consider and, if though appropriate, pass, with or without variation, the following ordinary resolution to approve the Resulting Issuer Option Plan (the “Resulting Issuer Option Plan Resolution”):

 

“BE IT HEREBY RESOLVED as an ordinary resolution of the Corporation that:

 

	
1.

	
conditional on and effective upon the completion of the Arrangement (as defined in the Circular (as defined below)) the stock option plan (the “Resulting Issuer Option Plan”) of Broadway Gold Mining Ltd. (the “Corporation”) substantially in the form attached as Appendix “H” to the management information circular of the Corporation, dated December 29, 2019 (the “Circular”), be and is hereby approved and adopted as the stock option plan of the Corporation;

 

	
2.

	
all unallocated options, rights and other entitlements under the Resulting Issuer Option Plan are hereby approved;

 

    

    - 43 - 

    

	
3.

	
the Corporation shall have the ability to grant options, rights and other entitlements under the Resulting Issuer Option Plan until February 19, 2023, being the date that is three years from the date of the meeting of shareholders at which shareholder approval is being sought for the institution of the Resulting Issuer Option Plan (or such later meeting date at which the Resulting Issuer Option Plan is approved if such initial meeting is adjourned or postponed);

 

	
4.

	
the form of the Resulting Issuer Option Plan may be amended in order to satisfy the requirements or requests of any regulatory authorities without requiring further approval of the shareholders of the Corporation; and

 

	
5.

	
any one director or officer of the Corporation is authorized and directed, on behalf of the Corporation, to take all necessary steps and proceedings and to execute, deliver and file any and all declarations, agreements, documents and other instruments and do all such other acts and things (whether under seal of the Corporation or otherwise) that may be necessary or desirable to give effect to these resolutions.”

 

The Broadway Board unanimously recommends that Broadway Shareholders vote FOR the Resulting Issuer Option Plan Resolution at the Meeting.

 

Unless otherwise directed, the persons designated as proxyholders in the accompanying form of proxy will vote the Broadway Common Shares represented by such form of proxy FOR the Resulting Issuer Option Plan Resolution.

 

If you do not specify how you want your Broadway Common Shares voted at the Meeting, the persons designated as proxyholders in the accompanying form of proxy will cast the votes represented by your proxy at the Meeting FOR the Resulting Issuer Option Plan Resolution. The Resulting Issuer Option Plan Resolution will only be effective in the event that the Arrangement is successfully completed.

 

Approval of the Resulting Issuer PR Plan

 

At the Meeting, Broadway Shareholders will be asked to consider and, if though appropriate, pass, with or without variation, the following ordinary resolution to approve the Resulting Issuer PR Plan (the “Resulting Issuer PR Plan Resolution”):

 

“BE IT HEREBY RESOLVED as an ordinary resolution of the Corporation that:

 

	
1.

	
conditional on and effective upon the completion of the Arrangement (as defined in the Circular (as defined below)) the performance and restricted share unit plan (the “Resulting Issuer PR Plan”) of Broadway Gold Mining Ltd. (the “Corporation”) substantially in the form attached as Appendix “H” to the management information circular of the Corporation, December 29, 2019, (the “Circular”) be and is hereby approved and adopted as performance and restricted share unit plan of the Corporation;

 

	
2.

	
all unallocated awards, rights and other entitlements under the Resulting Issuer PR Plan are hereby approved;

 

	
3.

	
the Corporation shall have the ability to grant awards, rights and other entitlements under the Resulting Issuer PR Plan until February 19, 2023, being the date that is three years from the date of the meeting of shareholders at which shareholder approval is being sought for the institution of the Resulting Issuer PR Plan (or such later meeting date at which the Resulting Issuer PR Plan is approved if such initial meeting is adjourned or postponed);

 

	
4.

	
the form of the Resulting Issuer PR Plan may be amended in order to satisfy the requirements or requests of any regulatory authorities without requiring further approval of the shareholders of the Corporation; and

 

	
5.

	
any one director or officer of the Corporation is authorized and directed, on behalf of the Corporation, to take all necessary steps and proceedings and to execute, deliver and file any and all declarations, agreements, documents and other instruments and do all such other acts and things (whether under seal of the Corporation or otherwise) that may be necessary or desirable to give effect to these resolutions.”

 

    

    - 44 - 

    

The Broadway Board unanimously recommends that Broadway Shareholders vote FOR the Resulting Issuer PR Plan Resolution at the Meeting.

 

Unless otherwise directed, the persons designated as proxyholders in the accompanying form of proxy will vote the Broadway Common Shares represented by such form of proxy FOR the Resulting Issuer PR Plan Resolution.

 

If you do not specify how you want your Broadway Common Shares voted at the Meeting, the persons designated as proxyholders in the accompanying form of proxy will cast the votes represented by your proxy at the Meeting FOR the Resulting Issuer PR Plan Resolution. The Resulting Issuer PR Plan Resolution will only be effective in the event that the Arrangement is successfully completed.

 

Under the policies of the NEO Exchange, all unallocated options, awards, rights or other entitlements under a security based compensation arrangement which does not have a fixed maximum aggregate number of securities issuable (such as each of the Resulting Issuer Option Plan and the Resulting Issuer PR Plan) must be specifically approved by shareholders every three years after institution. Subject to adjustment in certain circumstances, the Resulting Issuer Option Plan and the Resulting Issuer PR Plan, collectively, authorizes the issuance of up to 10% of the issued and outstanding shares of the Resulting Issuer from time to time pursuant to their terms. Accordingly, if Shareholder approval of the resolutions in respect of either the Resulting Issuer Option Plan and/or the Resulting Issuer PR Plan is obtained at the Meeting, the Resulting Issuer will not be required to seek further approval for the grant of options, awards, rights or other entitlements under the Resulting Issuer Option Plan and/or the Resulting Issuer PR Plan, as applicable, until the Resulting Issuer’s 2023 annual and special meeting of Shareholders (provided that such meeting is held on or prior to the date that is three years following the date the Resulting Issuer Option Plan and/or Resulting Issuer PR Plan, as applicable, is approved by shareholders as contemplated in the Circular).

 

14. VOLUNTARY DELISTING FROM TSXV

 

The Resulting Issuer received conditional approval of the Arrangement from the NEO Exchange on December 24, 2019. As a result, the Corporation intends to apply to voluntarily delist the Broadway Common Shares from the TSXV and at the Meeting, Broadway Shareholders will be asked to consider, and if thought fit, to pass, with or without variation, an ordinary resolution (the “Delisting Resolution”) authorizing the Corporation to make an application to voluntarily delist the common shares from the TSXV (the “Delisting”).

 

Broadway proposes to complete the Delisting conditional on the completion of the Arrangement.

 

It is intended that Broadway complete the delisting from the TSXV before the completion of the business combination. Completion of the delisting is subject to the acceptance of the TSXV and there is no guarantee that the TSXV will approve the delisting. In order to pass the delisting resolution, a majority of the minority of votes cast at the meeting in person or by proxy must be voted in favour of the delisting resolution. The “majority of the minority” for the foregoing purposes means that only the votes of those shareholders represented at the meeting, excluding insiders and their respective associates and affiliates in accordance with the requirements of the TSXV. To the knowledge of management, no shareholder other than the directors and officers of the Corporation is ineligible to vote on the delisting resolution.

 

The text of the delisting resolution to be voted on at the meeting by the shareholders is set forth below:

 

“BE IT RESOLVED THAT:

 

	
1.

	
Broadway is hereby authorized to apply to voluntarily delist its securities from the TSX Venture Exchange (the “TSXV”);

 

	
2.

	
Broadway is further hereby authorized to seek approval of another qualified stock exchange, to list its securities for public trading;

 

	
3.

	
Notwithstanding that this resolution has been duly passed by the shareholders of Broadway, the directors of the corporation be, and they are hereby authorized and empowered to revoke this resolution and to determine not to proceed with the delisting of Broadway’s common shares from the TSXV without further approval of the shareholders of the corporation; and

 

    

    - 45 - 

    

	
4.

	
Any director or officer of the corporation be and he or she is hereby authorized and directed, for and on behalf of the corporation, to execute and deliver all such documents and to do all such other acts or things as he or she may determine to be necessary or advisable to give effect to this resolution, including, without limitation, the execution and delivery of any such document or the doing of any such other act or thing being conclusive evidence of such determination.”

 

The Board unanimously recommends that shareholders vote FOR the Delisting Resolution at the meeting. It is a condition precedent to the completion of the business combination that the shareholders approve the delisting for purposes of the completion of the business combination. If the delisting resolution does not receive the requisite approval, the business combination will not proceed, unless such condition precedent is waived by Broadway.

 

Unless otherwise directed, the persons designated as proxyholders in the accompanying form of proxy will vote the common shares represented by such form of proxy for the delisting resolution. If you do not specify how you want your Broadway Common Shares voted at the meeting, the persons designated as proxyholders in the accompanying form of proxy will cast the votes represented by your proxy at the meeting for the delisting resolution.

 

The Delisting Resolution will only be effective in the event that all conditions to the Arrangement have been satisfied or waived (other than conditions that may be or are intended to be satisfied only after the Delisting Resolution is implemented).

 

THE ARRANGEMENT AGREEMENT

 

The following description of certain provisions of the Arrangement Agreement is not comprehensive and is qualified in its entirety by reference to the full text of the Arrangement Agreement. Please refer to the Arrangement Agreement, which is incorporated by reference herein, for a full description of the terms and conditions thereof. Capitalized terms used herein but not defined have the meanings ascribed thereto in the Arrangement Agreement. The Arrangement Agreement has been filed on SEDAR at www.sedar.com under the Corporation’s profile.

 

On October 15, 2019 MindMed entered into the Arrangement Agreement with the Corporation.

 

Representations and Warranties

 

The Arrangement Agreement contains certain customary representations and warranties provided between Broadway, Spinco, Delaware Subco and MindMed. The assertions embodied in those representations and warranties are solely for the purposes of the Arrangement Agreement. Certain representations and warranties may not be accurate and complete as of any specified date because they are qualified by certain disclosure provided by the Parties. Therefore, the Broadway Shareholders should not rely on the representations and warranties as statements of factual information.

 

The representations and warranties provided by Broadway in favour of MindMed in the Arrangement Agreement relate to, among other things, organization and qualification, capitalization, authority relative to the Arrangement Agreement, reporting issuer status and securities laws matters, outstanding commitments, financial statements, no material change, property and assets, taxes, minute books, litigation, dividends, compliance with laws, material contracts, conflict, environmental matters, insurance, third party rights, Broadway’s filings, no deficient taxes, fair market value, disclosure and related parties.

 

The representations and warranties provided by Broadway and Spinco jointly in favour of MindMed and Delaware Subco in the Arrangement Agreement relate to, among other things, organization and qualification, capitalization, authority relative to the Arrangement Agreement, outstanding commitments, no subsidiaries or assets, taxes, litigation, dividends, compliance with laws, no contracts or agreements and no commissions.

 

The representations and warranties provided by Broadway and Delaware Subco jointly in favour of MindMed, in the Arrangement Agreement relate to, among other things, organization and qualification, capitalization, authority relative to the Arrangement Agreement, outstanding commitments, no subsidiaries or assets, taxes, litigation, dividends, compliance with laws, no contracts or agreements and no commission.

 

    

    - 46 - 

    

The representations and warranties provided by MindMed in favour of Broadway, Spinco and Delaware Subco in the Arrangement Agreement relate to, among other things, organization and qualification, capitalization, authority relative to the Arrangement Agreement, outstanding commitments, financial statements, no material change, liabilities, litigation, dividends, compliance with laws, material contracts, minute books, environmental matters, insurance, Broadway’s filings, no deficient taxes, fair market value and redemption.

 

Conduct of Business of Broadway

 

The Arrangement Agreement includes a general covenant by the Corporation in favour of each of Spinco, MindMed and Delaware Subco that, except as required by the Arrangement Agreement, it will carry on business in the ordinary course and will not enter into any transaction or incur any obligation or liability out of the ordinary course of business and shall maintain its status as a reporting issuer not in default in each of the jurisdictions in which it is currently a reporting issuer.

 

The Corporation has particularly covenanted and agreed that, except as expressly required or permitted by the Arrangement Agreement, it will not directly or indirectly:

 

	
 

	
(a)

	
merge into or with, or amalgamate or consolidate with, or enter into any other corporate reorganization with, any other Person or perform any act or enter into any transaction or negotiation which interferes or is inconsistent with the completion of the transactions contemplated hereby or would render inaccurate in any material way any of the representations and warranties set forth in the Arrangement Agreement if such representations and warranties were made at a date subsequent to such act, negotiation or transaction and all references to the date of this Agreement were deemed to be such later date, except as contemplated in this Agreement, and, without limiting the generality of the foregoing, Broadway will not:

 

	
 

	
(i)

	
make any distribution by way of dividend, return of capital or otherwise to or for the benefit of its shareholders other than as set out herein and in the Plan of Arrangement,

 

	
 

	
(ii)

	
issue any shares or other securities convertible into or exchangeable for shares, other than the issuance of Broadway Common Shares in accordance with the convertible securities set out in the Arrangement Agreement, or enter into any commitment or agreement therefore;

 

	
 

	
(iii)

	
make any payment to any director, officer or employee except pursuant to existing arrangements; or

 

	
 

	
(iv)

	
increase or decrease its paid-up capital;

 

	
 

	
(b)

	
alter or amend its Charter Documents as the same exist at the date of the Arrangement Agreement, except as contemplated in this Circular; or

 

	
 

	
(c)

	
engage in any business, enterprise or activity materially different from that carried on by it at the date of this Agreement or enter into any transaction or incur any obligation if the same would have a material adverse effect on Broadway or the Arrangement, other than in the ordinary course of business.

 

Bridge Loan

 

The Arrangement Agreement provides that MindMed would make available as a bridge loan to Broadway $15,000 on execution and will make available (i) a maximum of $30,000 per month, starting on October 15, 2019 and ending on the earlier of the Effective Date or January 1, 2020, to cover the costs and expenses necessary to maintain Broadway’s and the Madison Subsidiary’s business, and (ii) no more than $170,000 to pay down the aggregate accounts payable currently owed by Broadway and the Madison Subsidiary, which amounts will be forgiven or assumed by MindMed upon completion of the Arrangement.

 

    

    - 47 - 

    

Broadway agreed to use commercially reasonable efforts to reduce the aggregate payables it and the Madison Subsidiary currently owe to third parties to no more than $170,000, and that any accounts payable existing or paid pursuant to this clause in excess of $170,000 (but excluding the $30,000 per month in ongoing expenses agreed to by MindMed), shall be assumed or repaid by Spinco pursuant to a promissory note entered into by it at closing (i.e., the amount in excess of $170,000). Broadway also agreed that it would cause Spinco to agree to pay to MindMed the amount of US$50,000 post-closing pursuant to a promissory note entered into by it at closing, equal to the liabilities the Madison Subsidiary owed at the date of execution of the Arrangement Agreement.

 

MindMed agreed that if the Arrangement was not completed, other than by reason of default of Broadway under the Arrangement Agreement or a failure of the Exchange to approve the transaction through no fault of MindMed, then the full indebtedness of Broadway to MindMed under the bridge loan (if any) shall be extinguished and shall not survive the termination of the Arrangement Agreement.

 

Regulatory and Stock Exchange Matters

 

Each Party shall have obtained all necessary consents, orders, regulations and approvals, required or necessary for the completion of the Arrangement.

 

Broadway will use its reasonable commercial efforts to have the Arrangement accepted for filing by the Exchange. The parties acknowledge that the Exchange will not accept the Arrangement for filing unless all of the terms of the Arrangement comply with the policies of the Exchange. MindMed will use its reasonable commercial efforts to assist Broadway in obtaining the acceptance for filing of the Arrangement by the Exchange.

 

Spinco will not apply to list its Spinco Common Shares on an exchange, therefore there will be reduced liquidity for the SpinCo Common Shares. There can be no assurances that any securities of SpinCo will ever be listed for trading on any stock exchange and Spinco shareholders may not be able to sell their Spinco Common Shares.

 

Regulatory Framework of Pharmaceutical Industry

 

As a neuro-pharmaceutical company, MindMed will be subject to various regulatory authorities. The primary regulatory agency in the United States is the FDA and in Canada is Health Canada. These agencies regulate, among other things, research and development activities and the testing, approval, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, advertising and promotion of any product candidates or commercial products. The regulatory approval process is generally lengthy and expensive, with no guarantee of a positive result. Moreover, failure to comply with applicable regulatory authorities or other requirements may result in civil or criminal penalties, recall or seizure of products, injunctive relief including partial or total suspension of production, or withdrawal of a product from the market.

 

Drugs are authorized for sale in Canada once they have successfully gone through the drug review process. This process is the means by which a drug application is reviewed by scientists in the Health Products and Food Branch (“HPFB”) of Health Canada, and on occasion, outside experts, to assess the safety, efficacy and quality of a drug. The federal Food and Drugs Act governs, among other things, testing, manufacturing, safety, effectiveness, labeling, packaging, storage, record keeping, approval, import, sale, distribution, advertising, promotion and post-approval monitoring of products. All drugs granted marketing authorization must meet the requirements of the Food and Drugs Act. After approval of a drug, HPFB continues to monitor the drug and the distributor has certain reporting duties. HPFB will deny market authorization if there is insufficient evidence to support the safety, efficacy or qualify claims of a drug.

 

In the U.S., the FDA and other federal, state, local and foreign regulatory agencies impose substantial requirements upon the clinical development, approval, labeling, manufacture, marketing and distribution of drug products. Before a drug candidate is marketed in the U.S., the FDA will review and approve a new drug application.

 

For more information on the pharmaceutical regulatory framework, see Appendix “I” – Narrative Description of the Business – Government Regulation.

 

    

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Conditions for Completion of the Arrangement

 

Conditions in Favour of Broadway, Spinco, MindMed and Delaware Subco

 

The Parties are not required to complete the Arrangement unless each of the following conditions is satisfied, which conditions may only be waived, in whole or in part, by the mutual consent of each of the Parties:

 

	
 

	
(a)

	
The Arrangement Resolution, with or without amendment, has been approved and adopted by the Shareholders at the Meeting in accordance with the Interim Order and applicable Law.

 

	
 

	
(b)

	
Each of the Interim Order and the Final Order has been obtained on terms consistent with the Arrangement Agreement and has not been set aside or modified in a manner unacceptable to Broadway, Spinco, MindMed and Delaware Subco, each acting reasonably, on appeal or otherwise.

 

	
 

	
(c)

	
The Merger, with or without amendment, has been approved at the MindMed Meeting and the matters prescribing the Arrangement shall have otherwise been approved by the requisite majorities of the shares entitled or required to vote thereon.

 

	
 

	
(d)

	
The Merger has been approved by Broadway and Delaware Subco.

 

	
 

	
(e)

	
The Spin-Out Transaction has been approved by Broadway and Spinco.

 

	
 

	
(f)

	
Any securities to be issued in the United States pursuant to the Arrangement have been issued in accordance with and exempt from registration requirements under applicable exemptions from registration under the U.S. Securities Act.

 

	
 

	
(g)

	
The necessary conditional approvals or equivalent approvals, as the case may be, of TSXV have been obtained.

 

	
 

	
(h)

	
The Final Order has been accepted for filing by the Registrar.

 

	
 

	
(i)

	
The earn-in with option to joint venture agreement effective April 30, 2019 between Kennecott Exploration Company (“Kennecott”), Madison Subsidiary and Broadway (the “Option and JV Agreement”) has been amended to, among other things, remove Broadway as guarantor (as such term is defined in the Option and JV Agreement), or Kennecott has otherwise released Broadway as guarantor, all to the satisfaction of MindMed;

 

	
 

	
(j)

	
Each of Broadway and MindMed being satisfied, in their respective sole discretion, with their due diligence investigations of the other party, and in MindMed’s case, of Spinco and Delaware Subco, on or before 5:00 p.m. Toronto time on (A) the date of completion of the MindMed December Offering; or (B) November 15, 2019 in the event the MindMed December Offering has not commenced by that date.

 

	
 

	
(k)

	
The receipt of a mutual release between Broadway and its current officers and directors in such form as mutually acceptable between the parties, acting reasonably.

 

	
 

	
(l)

	
All other consents, orders, regulations and approvals, including regulatory and judicial approvals and orders, required or necessary or desirable for the completion of the transactions provided for the Arrangement Agreement and the Arrangement have been obtained or received from the persons, authorities or bodies having jurisdiction in the circumstances, and all other applicable regulatory requirements and conditions have been complied with.

 

	
 

	
(m)

	
There shall not be in force any order or decree restraining or enjoining the consummation of the transactions contemplated under the Arrangement Agreement or under the Plan of Arrangement and there are no proceeding, whether of a judicial or administrative nature or otherwise, in progress or threatened that relates to or results from the transactions contemplated under the Arrangement Agreement that would, if successful, result in an order or ruling that would preclude completion of the transactions contemplated under the Arrangement Agreement or under the Plan of Arrangement in accordance with the terms and conditions in the Arrangement Agreement.

 

    

    - 49 - 

    

	
 

	
(n)

	
There does not exist any prohibition at law against the completion of the Arrangement.

 

	
 

	
(o)

	
None of the consents, orders, regulations or approvals contemplated in the Arrangement Agreement contain terms or conditions or require undertakings or security deemed unsatisfactory or unacceptable by any of the Parties acting reasonably.

 

	
 

	
(p)

	
The Arrangement Agreement has not been terminated in accordance with its terms.

 

Conditions in Favour of Broadway, Spinco and Delaware Subco

 

Broadway, Spinco and Delaware Subco is not required to complete the Arrangement unless each of the following conditions is satisfied, which may only be waived by Broadway and Spinco:

 

	
 

	
(a)

	
No material adverse change in the business, operations or assets of MindMed, taken as a whole, nor any change of law has occurred which, in the reasonable judgment of Broadway, Spinco and Delaware Subco, has or will have a material adverse effect on the business, assets, financial condition or results of operations of MindMed and its subsidiaries, taken as a whole.

 

	
 

	
(b)

	
All consents and approvals under any agreements or licences to which MindMed or any subsidiary thereof may be a party or bound which are required or necessary or desirable for the completion of the transactions contemplated under the Arrangement Agreement or under the Arrangement have been obtained or received.

 

	
 

	
(c)

	
Dissent rights have not been exercised prior to the Effective Date by holders of Broadway Common Shares representing in the aggregate 5% or more of the Broadway Common Shares outstanding at such time.

 

	
 

	
(d)

	
Broadway has received a certificate, on and dated the Effective Date, of a senior officer of MindMed confirming the above conditions have been satisfied.

 

Conditions in Favour of MindMed

 

MindMed is not required to complete the Arrangement unless each of the following conditions is satisfied, which conditions are for the exclusive benefit of MindMed and may only be waived, by MindMed in its sole discretion:

 

	
 

	
(a)

	
No material adverse change in the business, operations or assets of Broadway or its subsidiaries (including Delaware Subco), nor has there been any change of law which, in the reasonable judgment of MindMed, has or will have a material adverse effect on the business, assets, financial condition or results of operations of Broadway or its subsidiaries (including Delaware Subco).

 

	
 

	
(b)

	
All consents and approvals under any agreements to which MindMed may be a party or bound which are required or necessary or desirable for the completion of the transactions contemplated under the Arrangement Agreement or under the Merger or the Arrangement have been obtained or received.

 

	
 

	
(c)

	
Dissent rights have not been exercised prior to the Effective Date by holders of Broadway Common Shares representing in the aggregate 5% or more of the Broadway Common Shares outstanding at such time.

 

	
 

	
(d)

	
Resignations shall have been received at the Effective Time from all directors of Broadway and officers of Broadway and its subsidiaries, requested by MindMed.

 

    

    - 50 - 

    

	
 

	
(e)

	
Upon execution of the Arrangement Agreement, waives and release of any “change of control”, termination, severance or other similar payments to any person acceptable to MindMed in its sole direction in connection with any of the transactions completed in the Arrangement Agreement, the Plan of Arrangement or the Transfer Agreement or any related documents have been received.

 

	
 

	
(f)

	
MindMed has received a certificate, on and dated the Effective Date, of a senior officer of Broadway confirming the above conditions have been satisfied.

 

Additional Covenants Regarding Non-Solicitation

 

Each of Broadway, Spinco, MindMed and Delaware Subco agrees that it will not, directly or indirectly, through any officer, director, employee, advisor, representative, agent or otherwise, take any direct or indirect action to:

 

	
 

	
(a)

	
solicit, initiate, encourage, engage in or respond to any inquiries, submissions, proposals or offers regarding any merger, amalgamation, share exchange, business combination, take-over bid, sale or other disposition of material assets, recapitalization, reorganization, liquidation, sale or issuance of a material number of treasury securities or rights or interests therein or thereto or rights or options to acquire any material number of treasury securities or any type of similar transaction involving such party or any of its subsidiaries other than with the other party hereto (each an “Acquisition Proposal”),

 

	
 

	
(b)

	
encourage or participate in any discussions or negotiations regarding any Acquisition Proposal,

 

	
 

	
(c)

	
agree to, approve or recommend an Acquisition Proposal, or

 

	
 

	
(d)

	
enter into any agreement related to an Acquisition Proposal.

 

Each Party represents and warrants that it is not in any discussions or negotiations with any Person (other than with the other Parties) with respect to any potential Acquisition Proposal. Each Party shall promptly notify the other Party of any future Acquisition Proposal which any director, senior officer or agent of a Party is or becomes aware of, any amendment to any of the foregoing or any request for non-public information received by a Party. Such notice shall include a description of the material terms and conditions of any such proposal, the identity of the Person making such proposal, inquiry, request or contact and any written materials provided in connection with such proposal.

 

On January 8, 2020, Spinco, the Madison Subsidiary and Broadway signed an exclusivity agreement with American Pacific Mining Ltd. (“APM”) whereby APM was granted the exclusive right to negotiate a definitive agreement with Spinco to acquire all of the shares of the Madison Subsidiary. The negotiation and completion of the definitive agreement is subject to a number of conditions, including the parties agreeing to terms, the execution of a definitive agreement, the receipt of all required regulatory, corporate and stock exchange approvals, the completion of the Arrangement and approval by the shareholders of Spinco, which can only be sought after the Arrangement is completed, assuming it is completed. The exclusivity agreement automatically terminates if the Arrangement does not close. The Resulting Issuer will not be a party to any definitive agreement that may be executed. There can be no assurances that APM and Spinco will be able to complete such a transaction.

 

Termination of Arrangement Agreement

 

The Arrangement Agreement may be terminated prior to the Effective Time by:

 

	
 

	
(a)

	
any Party by way of notice if the conditions contained in the Arrangement Agreement are not fulfilled or performed on or before the Effective Date by any of the Parties, or

 

	
 

	
(b)

	
the mutual consent of the Broadway Board or MindMed Board without further action on the part of the shareholders of Broadway or MindMed.

 

If the Effective Date does not occur on or before the earlier of (i) January 31, 2020, and (ii) 60 days after the date that MindMed provides to Broadway all information necessary or advisable for Broadway, acting reasonably, to obtain the Interim Order, Broadway or MindMed may unilaterally terminate the Arrangement Agreement without further action on the part of its shareholders, which termination will be effective upon a resolution to that effect being passed by the applicable board of directors and notice thereof being given to the other parties.

 

    

    - 51 - 

    

The Party desiring to terminate the Arrangement Agreement because of any unfulfilled or unperformed condition precedent contained in the Arrangement Agreement shall notify the other Parties who will have the right and opportunity to take steps, at their own expense, to fulfill or perform the condition precedent within a reasonable period of time, but no later than the earlier of (i) January 31, 2020, and (ii) 60 days after the date that MindMed provides to Broadway all information necessary or advisable for Broadway, acting reasonably, to obtain the Interim Order.

 

SECURITIES LAW MATTERS

 

The following is a brief summary of the Canadian and United States securities law considerations applying to the transactions contemplated herein not discussed elsewhere in this Circular.

 

Canadian Securities Laws

 

The following is only a general overview of certain requirements of Canadian Securities Laws relating to the Arrangement that may be applicable to Broadway Shareholders, Broadway Optionholders and Broadway Warrantholders. Each securityholder is urged to consult its professional advisors to determine the Canadian conditions and restrictions applicable to trades in the Resulting Issuer Shares issuable pursuant to the Arrangement.

 

The issuance of Resulting Issuer Shares and SpinCo Consideration Shares pursuant to the Arrangement will constitute a distribution of securities that is exempt from the prospectus requirement of applicable Canadian Securities Laws. Resulting Issuer Shares issued pursuant to the Arrangement will not be legended and may be resold in each province and territory of Canada, provided: (i) the trade is not a “control distribution” as defined in NI 45-102; (ii) no unusual effort is made to prepare the market or create a demand for the Resulting Issuer Shares; (iii) no extraordinary commission or consideration is paid in respect of such trade; and (iv) if the selling securityholder is an “insider” or “officer” of the Resulting Issuer (as such terms are defined by applicable Canadian Securities Laws), the insider or officer has no reasonable grounds to believe that the Resulting Issuer is in default of applicable Canadian Securities Laws.

 

All Shareholders residing outside Canada are advised to consult their own legal advisors regarding such resale restrictions.

 

U.S. Securities Laws

 

The following
discussion is only a general overview of certain requirements of U.S. Securities Laws that may be applicable to Shareholders,
Broadway Optionholders and Broadway Warrantholders. All holders of such securities are urged to obtain legal advice to ensure
that the resale of such securities complies with applicable U.S. Securities Laws and to determine the U.S. conditions and
restrictions applicable to trades in the Resulting Issuer Shares issuable pursuant to the Arrangement. Further information
applicable to the holders of such securities resident in the United States is disclosed in this Circular under the heading
 “Notice to Securityholders in the United States”.

 

Exemption from U.S. Registration

 

The Spinco
Distribution Shares to be issued by Spinco to holders of Broadway Common Shares and the Broadway Subordinate Voting Shares,
MindMed Multiple Voting Shares and Broadway Replacement Warrants to be issued by Broadway to Broadway Shareholders, Broadway
Warrantholders, MindMed Shareholders and holders of MindMed Warrants, as applicable, and Resulting Issuer Options to be
issued by Broadway to Broadway Optionholders pursuant to the Arrangement have not been and will not be registered under the
U.S. Securities Act or the securities laws of any state of the United States and will be issued in reliance upon Section
3(a)(10) of the U.S. Securities Act and similar exemptions provided in respect of the securities laws of states of the U.S.
in which U.S. securityholders reside. Section 3(a)(10) of the U.S. Securities Act exempts from registration a security that
is issued in exchange for one or more bona fide outstanding securities, or partly in such exchange and partly for cash, where
the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and
conditions at which all persons to whom it is proposed to issue securities in such exchange have the right to appear, by a
court of competent jurisdiction or by a Governmental Entity expressly authorized by law to grant such approval. The Court is
authorized to conduct a hearing at which the substantive and procedural fairness of the terms and conditions of the
Arrangement will be considered. The Court issued the Interim Order on or about January 20, 2020, and, subject to the approval
of the Arrangement by the Shareholders, a hearing for a Final Order approving the Arrangement is currently anticipated to
take place on or about February 24, 2020 at 10:00 a.m. (Vancouver time) in Vancouver, British Columbia. All Broadway
Shareholders, Broadway Optionholders, Broadway Warrantholders, MindMed Shareholders and holders of MindMed Warrants are
entitled to appear and be heard at this hearing, provided that they satisfy the applicable conditions set forth in the
Interim Order. The Final Order of the Court will, if granted, constitute the basis for the Section 3(a)(10) Exemption with
respect to the securities to be issued under the Arrangement.

 

    

    - 52 - 

    

The Section
3(a)(10) Exemption will not be available for the issuance of any Resulting Issuer Shares that are issuable upon exercise of
the Replacement Options and Resulting Issuer Shares issuable upon exercise of the Broadway Replacement Warrants (and the
applicable underlying securities, if any). Therefore, the Resulting Issuer Shares issuable upon the exercise of the
Replacement Options and the exercise of the Broadway Replacement Warrants (and the applicable underlying securities, if any),
will be “restricted securities” within the meaning of Rule 144 under the U.S. Securities Act, and may be issued
only pursuant to an exemption from the registration requirements of the U.S. Securities Act and applicable state securities
laws or following registration under such laws. The Resulting Issuer has no present intention to file a registration
statement relating to the issuance of the Resulting Issuer Shares issuable upon exercise of the Replacement Options and the
Resulting Issuer Shares issuable upon exercise of the Broadway Replacement Warrants (and the applicable underlying
securities, if any) and no assurance can be made that the Resulting Issuer will file, or have taken effective steps to file,
such registration statements in the future. Prior to the issuance of Resulting Issuer Shares pursuant to any such exercise or
conversion, the Resulting Issuer may require the delivery of an opinion of counsel or other evidence reasonably satisfactory
to the Resulting Issuer to the effect that the issuance of such Resulting Issuer Shares does not require registration under
the U.S. Securities Act or applicable state securities laws.

 

The Broadway Subordinate Voting Shares, MindMed Multiple Voting Shares and Broadway Replacement Warrants to be issued under the Arrangement will be freely transferable under United States federal securities laws, except that the U.S. Securities Act imposes restrictions on the resale of such securities received pursuant to the Arrangement by Persons who are, or within 90 days immediately before such resale were, “affiliates” of the Resulting Issuer.

 

The Spinco
Distribution Shares will be freely transferable under United States federal securities laws, except that the U.S. Securities
Act imposes restrictions on the resale of such securities received pursuant to the Arrangement by Persons who are, or within
90 days immediately before such resale were, “affiliates” of Spinco.

 

As defined in Rule 144 under the U.S. Securities Act, an “affiliate” of an issuer is a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, such issuer and may include certain officers and directors of such issuer as well as principal shareholders of such issuer. “Control” means the possession, direct or indirect, of the power to direct or cause direction of the management and policies of an issuer, whether through the ownership of voting securities, by contract or otherwise.

 

An “affiliate” of the Resulting Issuer (or Spinco, as applicable) is a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Resulting Issuer (or Spinco, as applicable) and may include certain executive officers and directors of the Resulting Issuer (or Spinco, as applicable), as well as principal shareholders of the Resulting Issuer (or Spinco, as applicable), directors or executive officers of Broadway who become directors or executive officers of the Resulting Issuer (or Spinco, as applicable) after the Arrangement, and any person deemed to be an affiliate of the Resulting Issuer (or Spinco, as applicable) within 90 days before the closing of the Arrangement.

 

Any Broadway
Shareholder who, after consummation of the Arrangement is an “affiliate” (as defined in Rule 144 under the U.S.
Securities Act) of the Resulting Issuer or was, at any time during the 90 days immediately before the resale of any Broadway
Subordinate Voting Shares, MindMed Multiple Voting Shares and Broadway Replacement Warrants received under the Arrangement,
an “affiliate” of the Resulting Issuer, may not resell any of the Broadway Subordinate Voting Shares, MindMed
Multiple Voting Shares and Broadway Replacement Warrants to be issued by Broadway to Broadway Shareholders, Broadway
Warrantholders, MindMed Shareholders and holders of MindMed Warrants, as applicable, pursuant to the Arrangement unless such
securities are registered under the U.S. Securities Act or an exemption from registration, such as the exemptions contained
in Rule 144 and Rule 904 of Regulation S under the U.S. Securities Act, is available.

 

    

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Any Broadway Shareholder who, after consummation of the Arrangement is an “affiliate” (as defined in Rule 144 under the U.S. Securities Act) of Spinco or was, at any time during the 90 days immediately before the resale of any Spinco Distribution Shares received under the Arrangement, an “affiliate” of Spinco, may not resell any of the Spinco Distribution Shares to be issued by Spinco to Broadway Shareholders pursuant to the Arrangement unless such securities are registered under the U.S. Securities Act or an exemption from registration, such as the exemptions contained in Rule 144 and Rule 904 of Regulation S under the U.S. Securities Act, is available.

 

This Circular does not cover resales of any Spinco Distribution Shares, Broadway Subordinate Voting Shares, MindMed Multiple Voting Shares and Broadway Replacement Warrants received by any person upon completion of the Arrangement, and no person is authorized to make any use of this Circular in connection with any resale.

 

Affiliates – Rule 144

 

In general, under Rule 144, persons that are affiliates of the Resulting Issuer (or Spinco, as applicable) after consummation of the Arrangement or were affiliates of the Resulting Issuer (or Spinco, as applicable) within the 90 days immediately before the resale of the Broadway Subordinate Voting Shares, MindMed Multiple Voting Shares and Broadway Replacement Warrants (or Spinco Distribution Shares, as applicable) received under the Arrangement will be entitled to sell such securities that they receive under the Arrangement in the United States, provided that the number of such securities sold, together with all other securities of the same class sold for their account during any three-month period, does not exceed the greater of one percent of the then outstanding securities of such class or, if such shares are listed on a U.S. securities exchange and/or reported through the automated quotation system of a U.S. registered securities association, the average weekly trading volume of such securities during the four calendar week period preceding the date of sale, subject to aggregation rules, specified restrictions on manner of sale, reporting requirements, and the availability of current public information about the relevant issuer. Persons that are affiliates of the Resulting Issuer (or Spinco, as applicable) after the Arrangement will continue to be subject to the resale restrictions described in this paragraph for so long as they continue to be affiliates of the Resulting Issuer (or Spinco, as applicable), and for 90 days thereafter. Unless certain conditions are satisfied, Rule 144 is not available for resales of securities of issuers that have ever had (i) no or nominal operations and (ii) no or nominal assets other than cash and cash equivalents. If the Resulting Issuer (or Spinco, as applicable) were to be deemed to have ever been such an issuer, Rule 144 under the U.S. Securities Act may be unavailable for resales of the Broadway Subordinate Voting Shares, MindMed Multiple Voting Shares and Broadway Replacement Warrants (or Spinco Distribution Shares, as applicable) unless and until the Resulting Issuer (or Spinco, as applicable) has satisfied the applicable conditions.

 

Affiliates – Regulation S

 

In general, under Regulation S, persons who are affiliates of Resulting Issuer (or Spinco, as applicable) solely by virtue of their status as an officer or director of Resulting Issuer (or Spinco, as applicable), respectively, may sell their Broadway Subordinate Voting Shares, MindMed Multiple Voting Shares and Broadway Replacement Warrants (or Spinco Distribution Shares, as applicable) outside the United States in an “offshore transaction” (which would include a sale through the physical trading floor of an established non-U.S. stock exchange or through the facilities of certain specified non-U.S. stock exchanges as long as neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States) if neither the seller nor any person acting on its behalf engages in “directed selling efforts” in the United States and no selling commission, fee or other remuneration is paid in connection with such sale other than a usual and customary broker’s commission. For purposes of Regulation S, “directed selling efforts” means “any activity undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for any of the securities being offered” in the sale transaction.

 

    

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The foregoing discussion is only a general overview of certain requirements of U.S. federal securities laws applicable to the securities received upon completion of the Arrangement. All holders of such securities are urged to consult with counsel to ensure that the resale of their securities complies with applicable U.S. federal securities laws and state securities laws.

 

STOCK EXCHANGE MATTERS

 

Broadway Common Shares currently trade on the TSXV under the symbol “BRD” and on the Frankfurt exchange under the symbol “BGH”. The NEO Exchange has conditionally approved the listing of the Broadway Common Shares. Listing is subject to the Resulting Issuer fulfilling all of the requirements of the NEO Exchange.

 

DISSENTING SHAREHOLDERS’ RIGHTS

 

Registered Shareholders may exercise Dissent Rights with respect to the Arrangement Resolution pursuant to and in the manner set forth under Sections 237 to 247 of the BCBCA, as modified by the Plan of Arrangement and the Interim Order, provided that, notwithstanding Section 242 of the BCBCA, the written objection to the Arrangement Resolution must be sent to the Corporation by holders who wish to dissent and be received by the Corporation not later than 5:00 p.m. (Vancouver time) on the date that is two Business Days immediately prior to the Meeting or any date to which the Meeting may be postponed or adjourned.

 

Registered Shareholders who wish to dissent should take note that the procedures for dissenting to the Arrangement Resolution require strict compliance with the applicable dissent procedures.

 

Dissent Rights to the Arrangement Resolution for Registered Shareholders

 

As indicated in the Notice of Meeting, any Registered Shareholder is entitled to be paid the fair value of the Broadway Common Shares held by such holder in accordance with Section 245 of the BCBCA, as modified by the Plan of Arrangement and the Interim Order, if such holder exercises Dissent Rights and the Arrangement becomes effective.

 

Anyone who is a beneficial owner of Broadway Common Shares registered in the name of an Intermediary and who wishes to dissent should be aware that only Registered Shareholders are entitled to exercise Dissent Rights. A Registered Shareholder who holds Broadway Common Shares as an Intermediary for one or more beneficial owners, one or more of whom wish to exercise Dissent Rights, must exercise such Dissent Rights on behalf of such holder(s). In such case, the notice should specify the number of Broadway Common Shares held by the Intermediary for such beneficial owner. A Dissenting Shareholder may dissent only with respect to all the Broadway Common Shares held on behalf of any one beneficial owner and registered in the name of the Dissenting Shareholder.

 

The following description of the dissent procedures is not a comprehensive statement of the procedures to be followed by a Dissenting Shareholder who seeks payment of the fair value of its Broadway Common Shares and is qualified in its entirety by reference to the full text of the Plan of Arrangement, the Interim Order and Sections 237 to 247 of the BCBCA, which are attached to this Circular as Appendices C, D and F, respectively. A Registered Shareholder who intends to exercise the Dissent Rights should carefully consider and comply with the provisions of Sections 237 to 247 of the BCBCA, as modified by the Interim Order and the Plan of Arrangement, and seek independent legal advice. Failure to comply strictly with the provisions of the BCBCA, as modified by the Interim Order and the Plan of Arrangement, and to adhere to the procedures established therein, may result in the loss of all rights thereunder.

 

The Court hearing the application for the Final Order has the discretion to alter the Dissent Rights described herein.

 

If, as of the Effective Date, the aggregate number of Broadway Common Shares in respect of which Registered Shareholders have duly and validly exercised Dissent Rights, or have instituted proceedings to exercise Dissent Rights, exceeds 5% of the Broadway Common Shares then outstanding, MindMed is entitled, in its discretion, not to complete the Arrangement. See “The Arrangement Agreement – Conditions for Completion of the Arrangement – Conditions in Favour of MindMed”.

 

    

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Pursuant to the Interim Order, Registered Shareholders may exercise Dissent Rights under Section 238 of the BCBCA, and in the manner as set forth under Sections 242 to 247 of the BCBCA, all as modified by Article 5 of the Plan of Arrangement, the Interim Order and the Final Order, with respect to Broadway Common Shares in connection with the Arrangement, provided that, notwithstanding Section 242(1)(a) of the BCBCA, the written notice setting forth the objection of such Registered Shareholders to the Arrangement and exercise of Dissent Rights must be received by Broadway not later than 5:00 p.m. (Vancouver time) on the Business Day that is two Business Days before the Broadway Meeting or any date to which the Broadway Meeting may be postponed or adjourned and provided further that Registered Shareholders who duly exercise such Dissent Rights and who:

 

	
 

	
(a)

	
are ultimately entitled to be paid fair value for their Dissent Shares, which fair value, notwithstanding anything to the contrary contained in the BCBCA, shall be determined immediately prior to the approval of the Arrangement Resolution, shall be deemed to have transferred their Dissent Shares to Broadway as of the Effective Time in consideration for a debt claim against Broadway to be paid the fair value of such Dissent Shares and will not be entitled to any other payment or consideration, including any payment that would be payable under the Arrangement had such holders not exercised their Dissent Rights; or

 

	
 

	
(b)

	
are ultimately not entitled, for any reason, to be paid fair value for their Broadway Common Shares shall be deemed to have participated in the Arrangement, as of the Effective Time, on the same basis as a non-dissenting Registered Shareholder,

 

but in no case shall MindMed, the Corporation or any other person be required to recognize Shareholders who exercise Dissent Rights as Shareholders after the Effective Time, and the names of such Shareholders who exercise Dissent Rights shall be removed from the applicable register of shareholders as at the Effective Time. There can be no assurance that a Dissenting Shareholder will receive consideration for its Broadway Common Shares of equal or greater value to the consideration that such Dissenting Shareholder would have received under the Arrangement.

 

Sections 237 to 247 of the BCBCA

 

Section 238 of the BCBCA, as modified by the Plan of Arrangement and the Interim Order, provides that Shareholders who dissent to the Arrangement in compliance with Sections 237 to 247 of the BCBCA may exercise a right of dissent and require the Corporation to purchase the Broadway Common Shares held by such Shareholders at the fair value of such Broadway Common Shares.

 

The exercise of Dissent Rights does not deprive a Registered Shareholder of the right to vote at the Meeting. However, a Shareholder is not entitled to exercise Dissent Rights in respect of the Arrangement Resolution if such holder votes any of the Broadway Common Shares beneficially held by such holder FOR the Arrangement Resolution. The execution or exercise of a proxy against the Arrangement Resolution does not constitute a written objection for purposes of the right to dissent under Section 238 of the BCBCA.

 

A Dissenting Shareholder must dissent with respect to all Broadway Common Shares in which the holder owns a beneficial interest. A Registered Shareholder who wishes to dissent must deliver written notice of dissent (a “Notice of Dissent”) to Broadway on the date that is two Business Days immediately prior to the Meeting, or any date to which the Meeting may be postponed or adjourned, and such Notice of Dissent must strictly comply with the requirements of Section 242 of the BCBCA. Any failure by a Shareholder to fully comply may result in the loss of that holder’s Dissent Rights. Non-Registered Shareholders who wish to exercise Dissent Rights must arrange for the Registered Shareholder holding their Broadway Common Shares to deliver the Notice of Dissent.

 

A vote against the Arrangement Resolution, whether in person or by proxy, or not voting on the Arrangement Resolution does not constitute a Notice of Dissent. Promptly after the Arrangement Resolution is approved by the Shareholders, the Corporation must send to each Dissenting Shareholder a notice that the Arrangement Resolution has been adopted, stating that the Corporation intends to act, or has acted, on the authority of the Arrangement Resolution and advise the Dissenting Shareholder of the manner in which dissent is to be completed under Section 244 of the BCBCA.

 

If the
Arrangement Resolution is approved by the Shareholders as required at the Meeting, and if Broadway notifies the Dissenting
Shareholders of its intention to act upon the Arrangement Resolution, pursuant to Section 244 of the BCBCA, the Dissenting
Shareholder is then required, within 30 days after receipt of such notice, to send to the Corporation or its Transfer Agent a
signed written notice setting out the Dissenting Shareholder’s name, the number and class of Broadway Common Shares in
respect of which the Dissenting Shareholder dissents and that the Dissent Right is being exercised in respect of all of the
Dissenting Shareholder’s Broadway Common Shares. The written notice should contain any share certificate or
certificates representing the Broadway Common Shares in respect of which the Dissenting Shareholder has exercised Dissent
Rights (if any) and a demand for payment of the fair value of such Broadway Common Shares. A Dissenting Shareholder who fails
to send to the Corporation or the Transfer Agent within the required periods of time the required notices or the certificates
representing the Broadway Common Shares in respect of which the Dissenting Shareholder has dissented may forfeit its Dissent
Rights. Upon delivery of these documents, the Dissenting Shareholder is deemed to have sold its Broadway Common Shares and
Broadway is deemed to have purchased the Broadway Common Shares and must comply with Section 245 of the BCBCA.

 

    

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The Dissenting Shareholder and Broadway may agree on the payout value of the Dissent Shares; otherwise, either party may apply to the Court to determine the fair value of the Dissent Shares or apply for an order that value be established by arbitration or by reference to the registrar or a referee of the Court. If the matters provided for in the Arrangement Resolution become effective and the Dissenting Shareholder has complied with Section 244 of the BCBCA, after a determination of the payout value of the Dissent Shares, Broadway must then promptly pay that amount to the Dissenting Shareholder.

 

Addresses for Notice

 

All notices to the Corporation of dissent to the Arrangement Resolution pursuant to Section 242 of the BCBCA should be addressed to the attention of the Chief Financial Officer of the Corporation and be sent not later than 5:00 p.m. (Vancouver time) on the date that is two Business Days immediately prior to the Meeting, or any date to which the Meeting may be postponed or adjourned, to:

 

	
700-1199 West Hasting Street

	
 

	
Vancouver, BC

	
 

	
V6E 3T5

	
 

 

	
Attention:

	
Eric Myung

	
Email:

	
emyung@marrellisupport.ca

 

	
with a copy to:

	
 

 

	
Max Pinsky Personal Law Corp.

	
 

	
700 – 1199 West Hastings Street

Vancouver, B.C.

	
 

	
V6E 3T5

	
 

 

	
Attention:

	
Max Pinsky

	
Email:

	
max@strategiclaw.ca

 

Strict Compliance with Dissent Provisions Required

 

The foregoing summary does not purport to provide comprehensive statements of the procedures to be followed by a Dissenting Shareholder under Part 8, Division 2 the BCBCA, as modified by the Plan of Arrangement and the Interim Order, and reference should be made to the specific provisions of Sections 237 to 247 of the BCBCA, the Plan of Arrangement and the Interim Order. The BCBCA requires strict adherence to the procedures regarding the exercise of rights established therein. The failure to adhere to such procedures may result in the loss of all rights of dissent. Accordingly, each Shareholder who wishes to exercise Dissent Rights should carefully consider and comply with the provisions of Sections 237 to 247 of the BCBCA, the Plan of Arrangement and the Interim Order and consult a legal advisor. A copy of Sections 237 to 247 of the BCBCA is set out in Appendix “F” to this Circular and a copy of the Plan of Arrangement and the Interim Order are set out in Appendix “C” and Appendix “D”, respectively, to this Circular.

 

Broadway strongly recommends that any Shareholder wishing to avail himself or herself of the Dissent Rights seek his or her own legal advice, as failure to comply strictly with the applicable provisions of the BCBCA and the Interim Order, Final Order and Plan of Arrangement may prejudice the availability of such Dissent Rights. Dissenting Shareholders should note that the exercise of Dissent Rights can be a complex, time-consuming and expensive process.

 

    

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RISK FACTORS RELATING TO THE ARRANGEMENT

 

Shareholders should carefully consider the following risk factors relating to the Arrangement before deciding to vote or instruct their vote to be cast to approve the matters relating to the Arrangement. In addition to the risk factors relating to the Arrangement set out below, Shareholders should also carefully consider the risk factors applicable to MindMed referred to in Appendix “I” to this Circular and the risk factors applicable to the Corporation contained in the Corporation’s management’s discussion and analysis for the fiscal year ended August 31, 2019, which is available under the Corporation’s profile on SEDAR at www.sedar.com.

 

The following risk factors are not an exhaustive list of all of the risk factors associated with the Arrangement. Additional risks and uncertainties, including those currently unknown or considered immaterial by MindMed and the Corporation, may also adversely affect the MindMed Common Shares, the Broadway Common Shares, and the businesses of the Corporation or MindMed following completion of the Arrangement. All of the risk factors described in this Circular and incorporated by reference in this Circular should be considered by Shareholders in conjunction with the other information included in this Circular, including the appendices hereto.

 

Risks Related to the Arrangement

 

The Corporation could fail to receive the necessary court and/or regulatory approval

 

The Arrangement is not required to be completed unless the Arrangement receives the necessary Court approvals, and Exchange approval, including the approval of the listing of the Resulting Issuer Shares to be issued pursuant to the Arrangement on the NEO Exchange.

 

The Corporation could fail to complete the Arrangement, or the Arrangement may be completed on different terms

 

There can be no assurance that the Arrangement will be completed, or if completed, that it will be completed on the same or similar terms to those set out in the Arrangement Agreement. The completion of the Arrangement is subject to the satisfaction of a number of conditions which include, among others, (i) obtaining necessary approvals and (ii) performance by the Corporation and MindMed of their respective obligations and covenants in the Arrangement Agreement. There can be no assurance that these conditions will be satisfied or, if satisfied, when they will be satisfied. If these conditions are not met or the Arrangement is not completed for any other reason, Shareholders will not receive the Spinco Consideration Shares.

 

In addition, each of the Corporation, Spinco, Delaware Subco and MindMed has the right to terminate the Arrangement Agreement in certain circumstances. Accordingly, there is no certainty, nor can the Corporation provide any assurance, that the Arrangement Agreement will not be terminated by either the Corporation, Spinco, Delaware Subco or MindMed before the completion of the Arrangement. For example, MindMed has the right, in certain circumstances, to terminate the Arrangement Agreement if changes occur that, in the aggregate, have a Broadway Material Adverse Effect. Although a Broadway Material Adverse Effect excludes certain events that are beyond the control of the Corporation and MindMed, there is no assurance that a change having a Broadway Material Adverse Effect will not occur before the Effective Date, in which case MindMed could elect to terminate the Arrangement Agreement and the Arrangement would not proceed.

 

If the Arrangement is not completed, the ongoing business of the Corporation may be adversely affected as a result of the costs (including opportunity costs) incurred in respect of pursuing the Arrangement, and the Corporation could experience negative reactions from the financial markets, which could cause a decrease in the market price of the Broadway Common Shares, particularly if the market price reflects market assumptions that the Arrangement will be completed or completed on certain terms. Failure to complete the Arrangement or a change in the terms of the Arrangement could each have a material adverse effect on the Corporation’s business, financial condition and results of operations.

 

If the Arrangement is not completed and the Broadway Board decides to seek another merger or business combination, there can be no assurance that it will be able to find a party willing to pay consideration for the Broadway Common Shares that is equivalent to, or more attractive than, the consideration payable pursuant to the Arrangement.

 

    

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The Corporation will incur substantial transaction-related costs in connection with the Arrangement even if the Arrangement is not completed

 

Certain costs related to the Arrangement, such as legal, accounting and certain financial advisor fees, must be paid by the Corporation even if the Arrangement is not completed. Such costs may offset any expected cost savings and other synergies from the Arrangement.

 

While the Arrangement is pending, the Corporation is restricted from taking certain actions

 

The Arrangement Agreement restricts the Corporation from taking specified actions until the Arrangement is completed without the consent of MindMed which may adversely affect the ability of the Corporation to execute certain business strategies including, but not limited to, the ability in certain cases to enter into or amend contracts, acquire or dispose of assets, incur indebtedness or incur capital expenditures. These restrictions may prevent the Corporation from pursuing attractive business opportunities that may arise prior to the completion of the Arrangement.

 

The pending Arrangement may divert the attention of the Corporation’s management

 

The pending Arrangement could cause the attention of the Corporation’s management to be diverted from the day-to- day operations. These disruptions could be exacerbated by a delay in the completion of the Arrangement and could have an adverse effect on the business, operating results or prospects of the Corporation regardless of whether the Arrangement is ultimately completed.

 

Directors and senior officers of the Corporation may have interests in the Arrangement that are different from those of the Shareholders

 

In considering the recommendation of the Broadway Board to vote FOR the Arrangement Resolution, Shareholders should be aware that certain directors and certain senior officers of the Corporation have interests in connection with the Arrangement that may present them with actual or potential conflicts of interest in connection with the Arrangement. See “The Arrangement — Interests of Certain Persons in the Arrangement”.

 

Following the completion of the Arrangement, the Resulting Issuer may issue additional equity securities

 

Following the completion of the Arrangement, the Resulting Issuer may issue equity securities to finance its activities, including in order to finance acquisitions. If the Resulting Issuer were to issue additional equity securities, the ownership interest of existing Shareholders may be diluted and some or all of the Resulting Issuer’s financial measures on a per share basis could be reduced. Moreover, as the Resulting Issuer’s intention to issue additional equity securities becomes publicly known, the Resulting Issuer’s share price may be materially adversely affected.

 

Potential payments to Shareholders who exercise Dissent Rights could have an adverse effect on the Resulting Issuer’s financial condition or prevent the completion of the Arrangement

 

The Shareholders have the right to exercise Dissent Rights and demand payment equal to the fair value of their Broadway Common Shares in cash. If Dissent Rights are exercised in respect of a significant number of Broadway Common Shares, a substantial cash payment may be required to be made to such Shareholders, which could have an adverse effect on the Resulting Issuer’s financial condition and cash resources. Further, the Corporation’s, MindMed’s, Delaware Subco’s and Spinco’s obligation to complete the Arrangement is conditional upon Shareholders holding no more than 5% of the outstanding Broadway Common Shares having exercised Dissent Rights. Accordingly, the Arrangement may not be completed if the Shareholders exercise Dissent Rights in respect of more than 5% of the outstanding Broadway Common Shares.

 

Risks Related to the Corporation

 

If the Arrangement is not completed, the Corporation will continue to face the risks that it currently faces with respect to its affairs, business and operations and future prospects. Such risk factors are set forth and described in Broadway’s amended and restated management’s discussion and analysis for the fiscal year ended August 31, 2019, which is available under the Corporation’s profile on SEDAR at www.sedar.com.

 

    

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PROCEDURES FOR THE EXCHANGE OF BROADWAY COMMON SHARES AND ISSUANCE OF SPINCO CONSIDERATION SHARES

 

Letter of Transmittal

 

If you are a Registered Shareholder, you should have received along with this Circular, a form of proxy and a Letter of Transmittal. If the Arrangement Resolution is passed and the Arrangement is implemented, in order to receive the replacement Broadway share certificates after the implementation of the Consolidation, Name Change and Authorized Capital Amendment (the “Replacement Broadway Share Certificates”), Registered Shareholders must complete and sign the Letter of Transmittal enclosed with this Circular and deliver it (or an originally signed facsimile thereof), together with the certificates representing their Broadway Common Shares and the other relevant documents required by the instructions set out therein, to the Depositary in accordance with the instructions contained in the Letter of Transmittal. You can request additional copies of the Letter of Transmittal by contacting the Depositary. The Letter of Transmittal is also available under the Corporation’s profile on SEDAR at www.sedar.com.

 

The Letter of Transmittal contains procedural information relating to the Arrangement and should be reviewed carefully. The deposit of Broadway Common Shares pursuant to the procedures in the Letter of Transmittal will constitute a binding agreement between the depositing Registered Shareholder and Broadway upon the terms and subject to the conditions of the Arrangement.

 

In all cases, delivery of the Replacement Broadway Share Certificates will be made only after timely receipt by the Depositary of certificates representing such Broadway Common Shares, together with a properly completed and duly executed Letter of Transmittal in the form accompanying this Circular relating to such Broadway Common Shares, with signatures guaranteed if so required in accordance with the instructions in the Letter of Transmittal, and any other required documents. All questions as to validity, form, eligibility (including timely receipt) and acceptance of any Broadway Common Shares deposited pursuant to the Arrangement will be determined by the Resulting Issuer in its sole discretion. Depositing Registered Shareholders agree that such determination shall be final and binding. The Resulting Issuer reserves the right if it so elects in its absolute discretion to instruct the Depositary to waive any defect or irregularity contained in any Letter of Transmittal and/or accompanying documents received by it.

 

Where a certificate for Broadway Common Shares has been destroyed, lost or stolen, the Registered Shareholder of that certificate should complete the Letter of Transmittal as fully as possible and forward it, together with a letter describing the loss, to the Depositary at its office specified in the Letter of Transmittal. The Depositary and/or the registrar and Transfer Agent for the Broadway Common Shares will respond with replacement requirements (which may include a bonding requirement) that must be satisfied in order for the undersigned to receive the Resulting Issuer Shares and SpinCo Consideration Shares in exchange for their Broadway Common Shares in accordance with the Arrangement.

 

If a Letter of Transmittal is executed by a person other than the Registered Shareholder of the certificate(s) deposited therewith, the certificate(s) must be endorsed or be accompanied by an appropriate share transfer power of attorney properly completed by the Registered Shareholder, and the signature on such endorsement or share transfer power of attorney must correspond exactly to the name of the Registered Shareholder as registered or as appearing on the certificates(s) and must be guaranteed by an Eligible Institution.

 

The method of delivery of certificates representing Broadway Common Shares, the Letter of Transmittal and all other required documents is at the option and risk of the person depositing the same, and delivery will be deemed effective only when such documents are actually received by the Depositary. Broadway recommends that such documents be delivered by hand to the Depositary and a receipt obtained. However, if documents are mailed, Broadway recommends that registered mail be used with return receipt requested and that appropriate insurance be obtained.

 

If you are a Non-Registered Shareholder, you should carefully follow the instructions from the Intermediary that holds Broadway Common Shares on your behalf. Non-Registered Shareholders should contact their Intermediary if they have any questions regarding this process and to arrange for their Intermediary to complete the necessary steps to ensure that they receive the Replacement Broadway Share Certificates.

 

    

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Delivery of Replacement Broadway Share Certificates

 

Upon surrender to the Depositary for cancellation of a certificate(s) which immediately prior to the Effective Time represented one or more Broadway Common Shares, together with the Letter of Transmittal and such additional documents and instruments duly executed and completed as the Depositary may reasonably require, the Shareholder of such surrendered certificate(s) shall be entitled to receive in exchange therefor, and the Depositary shall deliver to such Shareholder as soon as practicable after the Effective Time, a DRS Advice(s) representing Resulting Issuer Shares and a DRS Advice(s) representing the SpinCo Consideration Shares which such Shareholder is entitled to receive in accordance with the Plan of Arrangement, less any amounts withheld pursuant to the Plan of Arrangement, and the certificate(s) representing the Broadway Common Shares so surrendered shall forthwith be cancelled. Until surrendered, each certificate which immediately prior to the Effective Time represented a Broadway Common Share shall be deemed after the Effective Time to represent only the right to receive upon the surrender of such certificate the consideration to which they are entitled under the Arrangement, less any amounts withheld pursuant to the Plan of Arrangement, or in the case of Shareholders who properly exercise Dissent Rights, the right to receive fair value for their Broadway Common Shares in accordance with the Dissent Procedures. See “Dissenting Shareholders’ Rights”.

 

Unless otherwise directed in the Letter of Transmittal, a DRS Advice(s) representing Resulting Issuer Shares and a DRS Advice(s) representing the SpinCo Consideration Shares will be issued in the name of the registered holder of Broadway Common Shares so deposited. Unless the person who deposits Broadway Common Shares instructs the Depositary to hold a DRS Advice(s) representing Resulting Issuer Shares and/or SpinCo Consideration Shares for pick-up by checking the appropriate box in the Letter of Transmittal, such certificate will be forwarded by mail to the address provided in the Letter of Transmittal. If no address is provided, such DRS Advice(s) will be forwarded to the address of the person as shown on the applicable register of Broadway.

 

Notwithstanding the provisions of the Arrangement and the Letter of Transmittal, DRS Advices representing Resulting Issuer Shares and SpinCo Consideration Shares to be issued in exchange for Broadway Common Shares deposited pursuant to Arrangement will not be mailed if the Resulting Issuer determines that delivery thereof by mail may be delayed. Persons entitled to DRS Advices and other relevant documents which are not mailed for the foregoing reason may take delivery thereof at the office of the Depositary at which the certificates representing Broadway Common Shares were originally deposited upon application to the Depositary, until such time as the Resulting Issuer has determined that delivery by mail will no longer be delayed.

 

To the extent that an exchange of securities of Broadway in accordance with the Arrangement above would result in a right to a fraction of a Resulting Issuer Share and/or SpinCo Consideration Share, such right shall be exercisable in respect of such fraction only in combination with other fractions which in the aggregate entitle the holder to acquire a whole Resulting Issuer Share or SpinCo Consideration Share, as the case may be, and thereafter any remaining fraction shall be rounded to the nearest whole number with any fraction of one-half or greater being rounded to the next higher whole number and any fraction of less than one-half being rounded to the next lower whole number; and no fraction of a Resulting Issuer Share or SpinCo Consideration Share shall be issued.

 

In accordance with the Arrangement, MindMed, the Corporation, and the Depositary will be entitled to deduct and withhold from any consideration otherwise payable to a Shareholder, such amounts as MindMed, the Corporation, or the Depositary is required to deduct and withhold from such consideration under any provision of applicable laws.

 

The Depositary will receive reasonable and customary compensation for its services in connection with the Arrangement, will be reimbursed for certain out of pocket expenses and will be indemnified by the Corporation against certain liabilities under applicable securities laws and expenses in connection therewith.

 

Pursuant to the terms of the Arrangement, any certificates formerly representing Broadway Common Shares that are not deposited with the Depositary together with a duly completed Letter of Transmittal and any other documents the Depositary reasonably requires, on or before the sixth anniversary of the Effective Date, shall cease to represent a claim by or interest of any former holder of Broadway Common Shares of any kind or nature against or in Broadway or MindMed, and the right of such former holder of Broadway Common Shares to receive Resulting Issuer Shares and SpinCo Consideration Shares in exchange for such Broadway Common Shares shall be deemed to be surrendered together with all dividends or distributions thereon held for such holder (less any applicable withholding tax).

 

    

    - 61 - 

    

CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

 

The following
is, as of the date hereof, a summary of the principal Canadian federal income tax considerations that will be generally
applicable to a holder of Broadway Common Shares: (i) who elects to retain their Broadway Common Shares by voting in favour
of the Arrangement; (ii) who elects to redeem their Broadway Common Shares by validly exercising their Dissent Right in
connection with the Arrangement; and/or (iii) who, as beneficial owner, receives Spinco Distribution Shares under the
Spin-Out Transaction (each, a “Holder”). This summary is applicable to a Holder who, for the purposes of
the Tax Act and at all relevant times: (i) deals at arm’s length with Broadway and Spinco, (ii) is not affiliated with
Broadway and Spinco, (iii) holds Broadway Common Shares and/or Spinco Distribution Shares (the “Relevant
Securities”) as capital property and (iv) is resident or is deemed to be resident in Canada. Generally, the
Relevant Securities will be considered to be capital property to a Holder provided the Holder does not hold the Relevant
Securities in the course of carrying on a business of trading or dealing in securities and has not acquired them in one or
more transactions considered to be an adventure or concern in the nature of trade.

 

Holders whose Relevant Securities might not otherwise qualify as capital property may be entitled to make the irrevocable election provided by subsection 39(4) of the Tax Act to have the Relevant Securities and every “Canadian security”, as defined for the purposes of the Tax Act, owned by such Holder in the taxation year of the election and in all subsequent taxation years deemed to be capital property. Holders should consult their own tax advisors for advice with respect to whether an election under subsection 39(4) of the Tax Act is available or advisable in their particular circumstances.

 

This summary assumes that the Broadway Common Shares, and, after the completion of the Arrangement, the Resulting Issuer Shares, will at all material times be listed on a “designated stock exchange”, as defined for the purposes of the Tax Act (a “designated stock exchange”), which currently includes the TSXV and the NEO Exchange.

 

This summary is based on the provisions of the Tax Act in force on the date hereof and our understanding of the current administrative policies and assessing practices of the CRA published in writing prior to the date hereof. This summary takes into account all specific proposals to amend the Tax Act announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “Proposed Amendments”) and assumes that all such Proposed Amendments will be enacted in their present form. No assurance can be given that any Proposed Amendments will be enacted in the form proposed, or at all. This summary does not otherwise take into account or anticipate any changes in law, whether by judicial, governmental or legislative decision or action, or changes in the administrative policies and assessing practices of the CRA, nor does it take into account provincial, territorial or foreign income tax legislation or considerations, which may differ materially from those described in this summary.

 

This summary is not applicable to: (i) a Holder that is a “specified financial institution”; (ii) a Holder an interest in which is a “tax shelter investment”; (iii) a Holder that is for purposes of certain rules in the Tax Act (referred to as the mark-to-market rules) a “financial institution”; (iv) a Holder that reports its “Canadian tax results” in a currency other than Canadian currency; or (v) a Holder that has entered into or will enter into a “derivative forward agreement” with respect to the Relevant Securities, in each case as such terms are defined for the purposes of the Tax Act. This summary is also not applicable to any other Holder of special status or in special circumstances. All such foregoing Holders should consult their own tax advisors.

 

Additional considerations, not discussed herein, may be applicable to a Holder that is a corporation resident in Canada, and is, or becomes, controlled by a non-resident person, or, if not controlled by a single non-resident person, a group of non-resident persons not dealing with each other at arm’s-length, for purposes of the “foreign affiliate dumping” rules in section 212.3 of the Tax Act. Such Holders should also consult their own tax advisors.

 

This summary is of a general nature only and is not exhaustive of all possible Canadian federal income tax considerations. It does not take into account or consider the tax laws of any province or territory or of any jurisdiction outside Canada. This summary is not intended to be, nor should it be construed to be, legal or tax advice to any particular holder (including a Holder as defined above), and no representations concerning the tax consequences to any particular Holder are made. Holders should consult their own tax advisors regarding the income tax considerations applicable to them having regard to their own particular circumstances.

 

    

    - 62 - 

    

The Spin-Out Transaction is a taxable event to Broadway, the tax effect to Broadway of which depends on the fair market value of the Spinco Distribution Shares at the time the Spin-Out Transaction is effected, Broadway’s adjusted cost base of the constituent components of such Spinco Distribution Shares, relevant tax shelter available to Broadway, if any, and other relevant factors. There can be no guarantee that the Spin-Out Transaction will not result in a net cash tax liability to Broadway, and the potential tax consequences to Broadway are not further discussed in this summary.

 

Assumptions Regarding the Return of Capital under the Spin-Out Transaction

 

The achievement of the intended tax treatment of the Spin-Out Transaction depends on the fair market value of the Spinco Distribution Shares, the “paid-up capital”, as defined for the purposes of the Tax Act (the “PUC”), of Broadway Common Shares, and on a number of other important assumptions, including those referenced below. No third-party determination of such fair market value or PUC has been sought or obtained, and no legal opinion or advance tax ruling has been sought or obtained with respect to the various assumptions or the tax treatment of the Spin-Out Transaction. Accordingly, there is a risk that the actual tax treatment under the Tax Act could be different from the intended tax treatment. All Holders are advised to consult with their own tax advisors in this regard in light of their particular circumstances.

 

Distributions made by corporations that are “public corporations” for purposes of the Tax Act, such as Broadway, are generally characterized as taxable dividends for the purposes of the Tax Act, unless a specific exemption applies. Subsection 84(2) of the Tax Act provides, in effect, that a distribution made to shareholders on a “winding up, discontinuance or reorganization of [Broadway’s] business”, will not be taxed as a dividend so long as the amount or value of the funds or property distributed does not exceed the amount by which the PUC of the relevant shares is reduced on the distribution. It is noted that the Spin-Out Transaction is being undertaken by Broadway as part of the Arrangement, which contemplates numerous other transactions intended to facilitate the indirect acquisition by Broadway of all of the issued and outstanding securities of MindMed. Management of Broadway believes that the Spin-Out Transaction is effectively being made on the reorganization of Broadway’s business, although this determination is not free from doubt under the Tax Act or CRA policy, and no legal opinion or advance tax ruling has been sought or obtained in this regard.

 

Management believes that the aggregate fair market value of the Spinco Distribution Shares will be less than the aggregate PUC of the Broadway Common Shares immediately before the distribution of the Spinco Distribution Shares. Provided that management’s assessment of the fair market value of the Spinco Distribution Shares is correct, no deemed dividend should arise upon the distribution of Spinco Distribution Shares through the Arrangement.

 

If the Spin-Out Transaction is treated as a dividend (including a deemed dividend) or taxable shareholder benefit under the Tax Act, the tax results to Holders would be materially different, and likely materially adverse, compared to those set out in the summary of tax consequences below. Such potentially different and adverse tax treatment is not further referenced or discussed in this summary, and Holders should consult their own tax advisors in this regard.

 

Considerations Applicable to Holders Who Vote in Favour of the Arrangement

 

Considerations Relating to the Distribution of the Spinco Distribution Shares

 

The distribution of the Spinco Distribution Shares as a return of PUC will reduce the adjusted cost base of a Holder’s Broadway Common Shares by an amount equal to the fair market value, on the date the Spin-Out Transaction is effected, of the Spinco Distribution Shares that are issued to or for the benefit of such Holder. For this purpose, the CRA is not bound by any determination of fair market value made by Broadway. If the amount so required to be deducted from the adjusted cost base of the Broadway Common Shares to a particular Holder exceeds the Holder’s adjusted cost base of such Broadway Common Shares for purposes of the Tax Act, the excess will be deemed to be a capital gain realized by such Holder from a disposition of Broadway Common Shares. Generally, a Holder is required to include in computing income for a taxation year one-half of the amount of any capital gain (a “taxable capital gain”). A Holder that is, throughout the relevant taxation year, a “Canadian-controlled private corporation”, as defined for the purposes of the Tax Act (a “CCPC”), may be liable to pay an additional tax (refundable in certain circumstances) on certain investment income, including taxable capital gains. Capital gains realized by an individual or certain trusts may give rise to a liability for alternative minimum tax.

 

    

    - 63 - 

    

Spinco Distribution Shares received by a Holder should have a cost to the Holder for tax purposes equal to their respective fair market values at the time of such receipt. In computing the adjusted cost base of the Spinco Distribution Shares at any time, the adjusted cost base of a Holder’s Spinco Distribution Shares will be averaged with the respective adjusted cost base of all of the Broadway Common Shares held by the Holder as capital property at that particular time.

 

Broadway does not intend to conduct a third-party determination of the fair market value of the Spinco Distribution Shares prior to undertaking the Spin-Out Transaction. Accordingly, there is a risk that the actual tax treatment under the Tax Act could be different from the intended tax treatment. All Holders are advised to consult with their own tax advisors in this regard in light of their particular circumstances.

 

Considerations Relating to the Arrangement

 

Neither the Name Change, the Consolidation nor the Authorized Capital Amendment should constitute a disposition of property for purposes of the Tax Act and, accordingly, should not give rise to a capital gain or capital loss to a Holder.

 

Taxation on Dividends Received in Respect of Resulting Issuer Shares or Spinco Distribution Shares

 

Dividends received or deemed to be received on Resulting Issuer Shares or Spinco Distribution Shares by a Holder who is an individual (including a trust) will be included in computing the individual’s income for tax purposes and will be subject to the gross-up and dividend tax credit rules applicable to taxable dividends received from “taxable Canadian corporations”, as defined for the purposes of the Tax Act. Such dividends will be eligible for the enhanced gross-up and dividend tax credit for “eligible dividends”, as defined for the purposes of the Tax Act, paid by taxable Canadian corporations, to the extent that such dividends are properly designated by the applicable corporation as eligible dividends. Moreover, taxable dividends received by an individual or trust, other than certain specified trusts, may give rise to minimum tax under the Tax Act.

 

A Holder that is a corporation will include dividends received or deemed to be received on Resulting Issuer Shares or Spinco Distribution Shares in computing its income for tax purposes and generally will be entitled to deduct the amount of such dividends in computing its taxable income. In certain circumstances, subsection 55(2) of the Tax Act will treat a taxable dividend received by a Holder that is a corporation as proceeds of disposition or a capital gain. Certain corporations, including a “private corporation” or a “subject corporation”, as such terms are defined for the purposes of the Tax Act, may be liable to pay a refundable tax under Part IV of the Tax Act on the dividends received or deemed to be received on Resulting Issuer Common Shares or Spinco Distribution Shares to the extent that such dividends are deductible in computing taxable income. Holders that are corporations should consult their own tax advisors having regard to their own circumstances.

 

Taxation on the Disposition of Resulting Issuer Shares or Spinco Distribution Shares

 

On a disposition or deemed disposition of a Resulting Issuer Share or a Spinco Distribution Share, a Holder will realize a capital gain (or capital loss) equal to the amount by which the proceeds of disposition for the relevant share exceed (or are less than) the aggregate of any reasonable costs of disposition and the adjusted cost base to the Holder of such share immediately before the disposition or deemed disposition.

 

A Holder of a Resulting Issuer Share or a Spinco Distribution Share who disposes or is deemed to dispose of such share will generally be required to include in such Holder’s income the amount of any taxable capital gain and must deduct one-half of the amount of any capital loss (an “allowable capital loss”) against taxable capital gains realized by the Holder in the year of the disposition. Allowable capital losses in excess of taxable capital gains may be carried back and deducted in any of the three preceding years or carried forward and deducted in any following year against taxable capital gains realized in such years, to the extent and under the circumstances described in the Tax Act.

 

In the case
of a Holder that is a corporation, the amount of any capital loss otherwise determined resulting from the disposition of a
Resulting Issuer Share or a Spinco Distribution Share may be reduced by the amount of dividends previously received or deemed
to have been received by it on the relevant share, to the extent and under the circumstances prescribed by the Tax Act.
Similar rules may apply where a Resulting Issuer Share or a Spinco Distribution Share is owned by a partnership or trust of
which a corporation, trust or partnership is a member or beneficiary. Affected Holders should consult their own tax
advisors.

 

    

    - 64 - 

    

A Holder that is throughout the relevant taxation year a CCPC may be liable to pay an additional tax (refundable in certain circumstances) on any taxable capital gains.

 

Eligibility of Resulting Issuer Shares and Spinco Distribution Shares

 

The Resulting Issuer Shares should, on the date the Arrangement is completed, be qualified investments for a trust governed by a registered retirement savings plan (“RRSP”), a registered retirement income fund (“RRIF”), a registered education savings plan (“RESP”), a registered disability savings plan (“RDSP”) or a tax-free savings account (“TFSA”) (collectively, “Registered Plans”), or a deferred profit sharing plan (“DPSP”), in each case as such terms are defined for the purposes of the Tax Act, provided that the Resulting Issuer Shares are listed on a designated stock exchange.

 

Notwithstanding that Resulting Issuer Shares may be qualified investments for a trust governed by a Registered Plan, the annuitant, holder or subscriber of the particular Registered Plan will be subject to a penalty tax on such shares if such shares are a “prohibited investment”, as defined for the purposes of the Tax Act. The Resulting Issuer Shares will generally not be a prohibited investment for a trust governed by a Registered Plan provided that (i) the holder, subscriber or the annuitant of the particular Registered Plan, as the case may be, deals at arm’s length with Resulting Issuer for purposes of the Tax Act and does not have a “significant interest”, as defined for the purposes of the Tax Act, in the Resulting Issuer or (ii) the Resulting Issuer Shares are “excluded property”, as defined in subsection 207.01(1) of the Tax Act, for a Registered Plan. Annuitants, holders or subscribers of a Registered Plan, as the case may be, should consult their own tax advisors to ensure that the Resulting Issuer Shares would not be a prohibited investment for a Registered Plan in their particular circumstances.

 

Based on the Current Provisions of the Tax Act, the Spinco Distribution Shares will not be qualified investments for a trust governed by a RRSP, a RRIF, a RESP, a RDSP or a TFSA. Spinco Distribution Shares should not be acquired or held in Registered Plans or a DPSP, as adverse tax consequences will arise, including penalty taxes and deregistration of the Registered Plan and DPSP.

 

Annuitants, holders or subscribers of a Registered Plan should consult their own tax advisors in this regard.

 

Considerations applicable to Holders who exercise their Dissent Rights

 

Deemed Dividend

 

Holders who dissent from the Arrangement will have their Broadway Common Shares redeemed by Broadway for fair value. As a result, Holders who dissent from the Arrangement will be deemed to have received a dividend equal to the amount, if any, by which the aggregate Broadway Common Share redemption price paid to such Holder exceeds the aggregate of the PUC of such Holder’s Broadway Common Shares that are redeemed by Broadway. The amount of any deemed dividend will not be included in computing the Holder’s proceeds of disposition for purposes of computing the capital gain or capital loss arising on the disposition of such Broadway Common Shares. In the case of a corporate Holder, a deemed dividend will be included in income and generally will be deductible in computing taxable income although it is possible that in certain circumstances all or part of any such deemed dividend may be treated as proceeds of disposition and not as a dividend.

 

A Holder that is a private corporation or a subject corporation will generally be liable to pay a refundable tax under Part IV of the Tax Act on any dividend deemed to be received on the Broadway Common Shares to the extent such dividend is deductible in computing the Holder’s taxable income for the year.

 

A Holder will
be considered to have disposed of such Broadway Common Shares for proceeds of disposition equal to the aggregate Broadway
Common Share redemption price paid to such Holder, less the amount of any deemed dividend (as discussed above). Such a Holder
will realize a capital gain (or capital loss) equal to the amount by which such proceeds of disposition exceed (or are less
than) the aggregate adjusted cost base to the Holder of its Broadway Common Shares immediately before such disposition and
any reasonable costs of disposition.

 

    

    - 65 - 

    

A Holder of a Broadway Common Share who disposes or is deemed to dispose of such shares will generally be required to include in such Holder’s income the amount of any taxable capital gain and must deduct any allowable capital loss against taxable capital gains realized by the Holder in the year of the disposition. Allowable capital losses in excess of taxable capital gains may be carried back and deducted in any of the three preceding years or carried forward and deducted in any following year against taxable capital gains realized in such years, to the extent and under the circumstances described in the Tax Act.

 

In the case of a Holder that is a corporation, the amount of any capital loss otherwise determined resulting from the disposition of a Broadway Common Share may be reduced by the amount of dividends previously received or deemed to have been received by it on the relevant share, to the extent and under the circumstances prescribed by the Tax Act. Similar rules may apply where a Broadway Common Share is owned by a partnership or trust of which a corporation, trust or partnership is a member or beneficiary. Affected Holders should consult their own tax advisors.

 

A Holder that is throughout the relevant taxation year a CCPC may be liable to pay an additional tax (refundable in certain circumstances) on any taxable capital gains.

 

EXPERTS

 

Certain legal matters in connection with the Arrangement will be reviewed and passed upon by Max Pinsky Personal Law Corp. and Farris LLP on behalf of Broadway. Max Pinsky Personal Law Corp., Farris LLP and the partners and associates thereof beneficially own, directly or indirectly, no outstanding securities of the Corporation.

 

MNP LLP became the auditors of Broadway on in August 2010 and is independent of Broadway in accordance with the rules of professional conduct of the Chartered Professional Accountants of Ontario.

 

RSM Canada are the auditors of MindMed and are independent of MindMed within the meaning of the Rules of Professional Conduct of the Chartered Professional Accountants of Ontario.

 

15. OTHER BUSINESS

 

Management of the Corporation is not aware of any matters to come before the Meeting other than those set forth in the Notice of Meeting. If any other matter properly comes before the Meeting, it is the intention of the persons named in the form of proxy to vote the Broadway Common Shares represented thereby in accordance with their best judgment on such matter.

 

AUDIT COMMITTEE DISCLOSURE

 

The text of the audit committee charter is as disclosed in Appendix “M”.

 

Composition of the Audit Committee

 

The following provides the members of the Audit Committee and certain information regarding these members:

 

	
Name

	
 

	
Independent/Not Independent

	
 

	
Financially Literate/

Not Financially

Literate(1)

	
 

	
Relevant Education and Experience

	
Shawn Parnham Chair

	
 

	
Independent

	
 

	
Financially Literate

	
 

	
Shawn Parnham is
a graduate of McMaster University and holds a Bachelor of Commerce and is also a Chartered Professional Accountant (CPA,
CMA). He has extensive senior level finance experience working in several international public and private companies in the
areas of corporate finance, internal and external financial reporting, treasury, internal audit, corporate governance,
acquisitions, debt financing and restructuring. Mr. Parnham is currently the Vice President Finance & Treasurer of the
IMT Group, a diversified group of industrial companies with operations in Canada, United States and the People’s Republic of China. He leads the Corporation finance function and is responsible for creating and monitoring the internal control environment and corporate governance. In previous roles he has been involved in developing Corporation compliance with Sarbanes Oxley and performed IFRS conversions. Additional previous roles include Chief Financial Officer for Green for Life Environmental (GFL), Chief Financial Officer for Turtle Island Recycling Corporation and Corporate Controller for Waste Services Inc. a public Corporation. Mr. Parnham also held senior internal audit positions with Laidlaw Inc. and Stelco Inc. 

	
Victoria Donato

	
 

	
Independent

	
 

	
Financially Literate

	
 

	
Victoria Donato has experience in Finance, Internal Audit, Compliance and Risk Management. Prior to joining Broadway Gold, she was the Chief Financial Officer for a Toronto hedge fund, Red Sky Capital Management Ltd. She was responsible for overseeing controls, compliance, financial reporting and offshore tax structures for five companies. She has extensive experience establishing structure, developing controls and improving efficiencies. Previously, Victoria headed the Risk Management department at CI Investments. Within one year of her role as Senior Risk Manager she organized and implemented a successful new risk management framework. She joined CI in 2007 as a Senior Internal Auditor and helped establish the Internal Audit department. She was responsible for implementing process and control improvements throughout the organization. She participated in multiple projects including fiscal year end audits, fund fact audits, fraud investigations and multiple system conversion projects. She was also responsible for assessing anti-money laundering programs for all business units. Her experience includes writing various reports to multiple audiences including the Board of Directors of CI Financial. Prior to CI, Victoria completed her Chartered Accountant (CPA, CA) designation at Stern Cohen LLP, servicing private companies in a wide range of industries, predominantly in an assurance capacity. Victoria graduated from Western University with a Bachelor’s degree in Business.

	
Suzanne Wood

	
 

	
Not Independent

	
 

	
Financially Literate

	
 

	
Ms. Wood has over 25 years’ experience in the financial and corporate management of private and public companies. In 1986, Ms. Wood founded Wood & Associates through which Ms. Wood has been providing consulting services including the preparation of financial reports, registration statements, and other statutory reports and filings. Ms. Wood obtained a Bachelor of Arts from the University of British Columbia and after graduating from University, she spent several years with Revenue Canada Taxation. She has also completed an MBA (Masters in Business Administration) and CGA (Certified General Accounting) programs as well as the CSC (Canadian Securities Course). From February 2013 to present, she is the CFO and a Director of Sante Veritas Therapeutics Inc., an emerging North American cannabis platform Corporation with a pending license to become a Licensed Producer under Canada’s Access to Cannabis for Medical Purposes Regulations. From October 2011 to August 2014 she was the President, CEO, CFO, Secretary, Treasurer and Director of Alexandra Capital Corp., a TSX-V Tier 2 Mining Issuer.

 

(1) As defined by National Instrument 52-110 – Audit Committees (“NI 52-110”).

    

    - 66 - 

    

 

Pre-Approval Policies and Procedures

 

The Audit Committee has not adopted specific policies and procedures for the engagement of non-audit services.

 

Audit Committee Oversight

 

At no time since the commencement of the Corporation’s most recently completed financial year was a recommendation of the Audit Committee to nominate or compensate an external auditor not adopted by the Broadway Board.

 

    

    - 67 - 

    

Reliance on Certain Exemptions

 

Since the commencement of the Corporation’s most recently completed financial year, the Corporation has not relied on the exemptions contained in Sections 2.4 (De Minimis Non-audit Services), Subsection 6.1.1(4) (Circumstance Affecting the Business or Operations of the Venture Issuer), Subsection 6.1.1(5) (Events Outside Control of Member), Subsection 6.1.1(6) (Death, Incapacity or Resignation) or Part 8 (Exemptions) of NI 52-110.

 

The Corporation is relying on the exemption provided by Section 6.1 of NI 52-110, which provides that the Corporation, as a venture issuer, is not required to comply with Part 3 (Composition of the Audit Committee) and Part 5 (Reporting Obligations) of NI 52-110.

 

External Auditor Service Fees

 

The following table discloses the fees billed to the Corporation by its external auditor during the two most recently completed financial years.

 

	
Financial Year Ending

	
 

	
Audit Fees(1)

	
 

	
 

	
Audit Related Fees(2)

	
 

	
 

	
Tax Fees(3)

	
 

	
 

	
All Other Fees(4)

	
 

	
August 31, 2019

	
 

	
$

	
29,960

	
 

	
 

	
$

	
5,530

	
 

	
 

	
$

	
5,136

	
 

	
 

	
 

	
Nil

	
 

	
August 31, 2018

	
 

	
$

	
22,470

	
 

	
 

	
 

	
Nil

	
 

	
 

	
$

	
4,708

	
 

	
 

	
 

	
Nil

	
 

 

Notes 

	
(1)

	
“Audit Fees” include fees necessary to perform the annual audit and quarterly reviews of Broadway’s financial statements. Audit Fees include fees for review of tax provisions and for accounting consultations on matters reflected in the financial statements. Audit Fees also include audit or other attest services required by legislation or regulation, such as comfort letters, consents, reviews of securities filings and statutory audits.

	
(2)

	
“Audit-Related Fees” include fees for services that are traditionally performed by the auditor. These audit-related services include employee benefit audits, due diligence assistance, accounting consultations on proposed transactions, internal control reviews and audit or attest services not required by legislation or regulation.

	
(3)

	
“Tax Fees” include fees for all tax services other than those included in “Audit Fees” and “Audit-Related Fees”. This category includes fees for tax compliance, tax planning and tax advice. Tax planning and tax advice includes assistance with tax audits and appeals, tax advice related to mergers and acquisitions, and requests for rulings or technical advice from tax authorities.

	
(4)

	
“All Other Fees” include all other non-audit services.

 

CORPORATE GOVERNANCE

 

General

 

The Broadway Board views effective corporate governance as an essential element for the effective and efficient operation of the Corporation. The Corporation believes that effective corporate governance improves corporate performance and benefits all of its Shareholders. The following statement of corporate governance practices sets out the Broadway Board’s review of the Corporation’s governance practices relative to National Instrument 58-101 - Disclosure of Corporate Governance Practices and National Policy 58-201 - Corporate Governance Guidelines.

 

Board of Directors

 

An “independent director” generally is one who has no direct or indirect material relationship with the Corporation. A “material relationship” is a relationship which could, in the view of the Board, be reasonably expected to interfere with the exercise of a director’s independent judgment.

 

The Board, which is responsible for supervising the management of the business and affairs of the Corporation, is currently comprised of five directors of which three are independent as such term is defined in NI 52-110. The independent directors are Shawn Parnham, Victoria Donato and Dr. Roger Laine. Duane Parnham and Suzanne Wood are not considered independent as Mr. Parnham is the current Chief Executive Officer and Ms Wood is the former Chief Financial Officer.

 

    

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Other Board Positions

 

The following table sets out the directors, officers and Promoter(s) of the Corporation that are, or have been within the last five years, directors, officers or Promoters of other issuers that are or were reporting issuers in any Canadian jurisdiction:

 

	
Name of Director, 
Officer or 
Promoter

	
 

	
Name of Reporting
  Issuer

	
 

	
Name of Exchange
  or Market

	
 

	
Position

	
 

	
Term

	
 

	
Duane Parnham

	
 

	
Giyani Gold Corp.

	
 

	
TSXV

	
 

	
Executive Chairman

	
 

	
November 2010 to present

	
 

	
 

	
 

	
Canoe Mining Ventures Corp.

	
 

	
TSXV

	
 

	
Director, President and CEO

	
 

	
December 2013 to present

	
 

	
 

	
 

	
Nevada Zinc Corp.

	
 

	
TSXV

	
 

	
Chairman

	
 

	
December 2015 to present

	
 

	
 

	
 

	
Trigon Metals Inc. (formerly Kombat Copper Inc.)

	
 

	
TSXV

	
 

	
Director

	
 

	
October 2013 to
February 2015

	
 

	
 

	
 

	
Security Devices International Inc.

	
 

	
TSXV

	
 

	
Director

	
 

	
November 2011 to
April 2014

	
 

	
Suzanne Wood

	
 

	
Alexandra Capital Corp.

	
 

	
TSXV

	
 

	
President, CEO, CFO, Secretary, Treasurer and
Director

	
 

	
October 2011 to
August 2014

	
 

	
 

	
 

	
Sante Veritas Therapeutics Inc. (wholly owned subsidiary of Sante

Veritas Holdings Ltd.)

	
 

	
CSE

	
 

	
CFO, Secretary, Treasurer and Director of wholly owned subsidiary of the Issuer.

	
 

	
May 10, 2018
(Initial listing date of Issuer) to present

	
 

	
Dr. Roger Laine

	
 

	
Giyani Gold Corp.

	
 

	
TSXV

	
 

	
Director

	
 

	
June 2010 to
September 2016

	
 

Orientation and Continuing Education

 

Given the current size of the Corporation and the Broadway Board, the Corporation provides only a limited orientation and education program for new directors. This process includes discussions with management and the Broadway Board, with respect to the business and operations of the Corporation. Each new Broadway Board member is also entitled to review all previous minutes of the Broadway Board and the Shareholders.

 

Ethical Business Conduct

 

The Broadway Board has found that the fiduciary duties placed on individual directors pursuant to corporate legislation and the common law, and the conflict of interest provisions under corporate legislation which restricts an individual director’s participation in decisions of the Broadway Board in which the director has an interest, have been sufficient to ensure that the Broadway Board operates independently of management and in the best interests of the Corporation.

 

Nomination of Directors

 

All members of the Broadway Board are encouraged to identify prospective additions to the Broadway Board. Any recommendations would be approved by the entire Broadway Board and elected annually by the Shareholders of the Corporation.

 

    

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Compensation of Directors and Officers

 

For a discussion on the process by which the Broadway Board determines compensation for the directors and executive officers, see “Compensation of Directors and Executive Officers – Compensation Discussion and Analysis”.

 

Other Board Committees

 

The Broadway Board has the following standing committees: Audit Committee, compensation committee and technical committee.

 

Assessments of Directors, the Board and Board Committees

 

The Broadway Board monitors the adequacy of information given to directors, the communications between the Broadway Board and management and the strategic direction and processes of the Broadway Board and its audit committee, to satisfy itself that the Broadway Board, its audit committee and its individual directors are performing effectively.

 

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

 

Compensation Discussion and Analysis

 

The objective of the Corporation’s compensation strategy is to attract, retain and motivate directors, officers, employees and other service providers by providing them with the opportunity, through share options, to acquire a proprietary interest in the Corporation and benefit from its growth.

 

During the financial year ended August 31, 2019 the Corporation granted an aggregate of 500,000 incentive Broadway Options to its directors, officers, employees, and consultants under the Broadway Stock Option, which provides that the Broadway Board may from time to time, in its discretion, and in accordance with the Exchange requirements, grant to directors, officers, employees, and consultants to the Corporation, non-transferable Broadway Options to purchase Broadway Common Shares, provided that the number of Broadway Common Shares reserved for issuance will not exceed 10% of the issued and outstanding Broadway Common Shares at the date of granting the Broadway Option. No Broadway Options were exercised during the year ended August 31, 2019 and during the subsequent period. At the date of this Circular, the Corporation currently has 3,400,000 Broadway Options outstanding.

 

With respect to the grant of Broadway Options, the Chief Executive Officer recommends to the Broadway Board the individual equity incentive awards for each executive officer and director. The Broadway Board then takes these recommendations into consideration when making final decisions on compensation for those executive officers/directors. The Broadway Board does not use formulas for each grant, but is restricted by the policies of the Exchange and the Broadway Stock Option Plan in how many Broadway Options it may grant. Broadway Options granted under the Broadway Stock Option Plan are awarded to executive officers and directors by the Broadway Board based upon the level of responsibility and contribution of the individuals towards the Corporation’s goals and objectives. Previous grants of Broadway Options to a particular individual will be taken into account when considering future grants of Broadway Options to that particular individual.

 

The Corporation has no equity compensation plans other than the Broadway Stock Option Plan.

 

Share Based and Non-Equity Incentive Plan Compensation

 

The Corporation has not at any time granted any share-based awards nor has it provided any awards pursuant to a non- equity incentive plan.

 

Benefit, Contribution, Pension, Retirement, Deferred Compensation and Actuarial Plans

 

The Corporation currently has no defined benefit, defined contribution, pension, retirement, deferred compensation or actuarial plans for its Named Executive Officer or directors of the Corporation.

 

    

    - 70 - 

    
 

Named Executive Officers

 

Set out below are particulars of compensation paid to the Named Executive Officer:

 

	
(a)

	
the Corporation’s chief executive officer (CEO);

 

	
(b)

	
the Corporation’s chief financial officer (CFO);

 

	
(c)

	
each of the Corporation’s three most highly compensated executive officers, or the three most highly compensated individuals acting in a similar capacity, other than the CEO and CFO, at the end of the most recently completed financial year whose total compensation was, individually, more than $150,000 as determined in accordance with subsection 1.3(6) of Form 51-102F6 - Statement of Executive Compensation, for that financial year; and

 

	
(d)

	
each individual who would be a Named Executive Officer under paragraph (c) but for the fact that the individual was neither an executive officer of the Corporation, nor acting in a similar capacity, at the end of that financial year.

 

During the financial year ended August 31, 2019, the Corporation had three Named Executive Officers, being Duane Parnham, Chairman and CEO, Suzanne Wood, Former CFO and Eric Myung, CFO.

 

Compensation of Named Executive Officers

 

The following table provides compensation information for the financial year ended August 31, 2019 in respect of the Named Executive Officers.

 

Summary Compensation Table

 

		 

	 	 

	 

	 	 

	 

	 	 

	 

	 	 

	 

	Non-Equity
                                         Incentive
Plan
                                         Compensation ($)

	 

	 

	 	 

	 

	 	 

	 

	 	 

	Name
                                         and Position

	 

	 Year
                                         Ended

August
31,

	 

	 

	 Salary

($)

	 

	 

	Share-

Based 

Awards

($)

	 

	 

	Option-

                                         based 

Awards

($)

	 

	 

	Annual

Incentive

Plans

	 

	 

	Long-

                                         Term

Incentive

Plans

	 

	 

	Pension  

Value

($)

	 

	 

	All
                                         other

 compensation ($)

	 

	 

	Total

compensation

($)

	 

	Duane
                                         Parnham,

	 

	2019

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	10,000

	(1)

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	100,000

	(2)

	 

	 

	110,000

	 

	Chairman
                                    & Chief

	 

	2018

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	60,000

	 

	 

	 

	60,000

	 

	Executive
                                    Officer

	 

	2017

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	25,000

	 

	 

	 

	25,000

	 

	Suzanne
Wood, 

Former Chief 

Executive Officer 

 & Director(3)

	 

	2019

2018

2017

	 

	 

	 

	N/A

N/A

N/A

	 

	 

	 

	N/A

N/A

N/A

	 

	 

	 

	10,000

N/A

N/A

	(1) 

	 

	 

	N/A

N/A

N/A

	 

	 

	 

	N/A

N/A

N/A

	 

	 

	 

	N/A

N/A

N/A

	 

	 

	 

	10,000

90,000

64,700

	(4)

	 

	 

	10,000

90,000

64,700

	 

	Eric
                                    Myung,

	 

	2019

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	31,180

	(6)

	 

	 

	31,180

	 

	Chief
                                    Financial

	 

	2018

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	Officer(5)

	 

	2017

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

 

Notes

	 

	(1)

	100,000
                 Broadway Options exercisable at a price of $0.10 per Broadway Option.

	 

	(2)

	Mr.
                 Parnham provides his services as Chief Executive Officer to Broadway on a contract basis. The disclosed amounts are
                 the total of all invoices during the relevant fiscal year

	 

	(3)

	Ms.
                 Wood resigned as Chief Financial Officer of Broadway on September 1, 2018.

	 

	(4)

	Ms.
                 Wood’s compensation was paid to Wood & Associates, which provided Ms Wood’s services as CFO and Corporate
                 Secretary to Broadway.

	 

	(5)

	Mr.
                 Myung was appointed Chief Financial Officer of Broadway on September 1, 2018.

	 

	(6)

	Mr.
                 Myung’s compensation was paid to Marrelli Support Services Inc., which provides Mr. Myung’s services as
                 CFO to Broadway.

    

    - 71 - 

    

INCENTIVE
PLAN AWARDS

 

The
following table sets forth information in respect of option-based awards outstanding at the end of the financial year ended August
31, 2019 held by the Named Executive Officers.

 

		 

	Option-Based
                                         Awards

	 

	 

	Share-Based
                                         Awards

	 

	 Name
                                         and Position

	 

	 No.
                                         of 

securities

 underlying

 unexercised

 Options

(#)

	 

	 

	 Option

                                         Exercise

                                                                                 Price (#)

	 

	 

	Option

                                         Expiration

                                                                                                              Date

	 

	 

	 Value
                                         of

 Unexercised

 In-The-

Money

 Options ($)(1)

	 

	 

	 No.
                                         of Shares

 or Units of

 Shares That

 Have Not

 Vested

(#)

	 

	 

	 Market
                                         or

 Payout Value

 of Shares-

Based Awards

 that Have Not

 Vested

	 

	 

	Market
                                         or

 Payout Value of

 Vested Share-

Based Awards

 Not Paid or

 Distributed
($)

	 

	Duane Parnham,

	 

	 

	500,000

	 

	 

	$

	0.25

	 

	 

	October
                                      18, 2021

	 

	 

	$

	110,000

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	Chairman
                                    &

	 

	 

	100,000

	 

	 

	$

	0.20

	 

	 

	August
                                      31, 2023

	 

	 

	 

	Nil

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	Chief
                                    Executive Officer

	 

	 

	100,000

	 

	 

	$

	0.10

	 

	 

	March
                                      19, 2024

	 

	 

	 

	Nil

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	Suzanne
                                    Wood,

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	Former
                                    Chief

	 

	 

	200,000

	 

	 

	$

	0.05

	 

	 

	February
                                      15, 2021

	 

	 

	$

	84,000

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	Executive

	 

	 

	350,000

	 

	 

	$

	0.25

	 

	 

	October
                                      18, 2021

	 

	 

	$

	77,000

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	Officer
                                    and

	 

	 

	100,000

	 

	 

	$

	0.10

	 

	 

	March
                                      19, 2024

	 

	 

	 

	Nil

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	Director(2)

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	Eric
                                    Myung, 

Chief Financial Officer

	 

	 

	 Nil

	 

	 

	 

	 N/A

	 

	 

	 N/A

	 

	 

	 

	 N/A

	 

	 

	 

	 N/A

	 

	 

	 

	 N/A

	 

	 

	 

	 N/A

	 

 

Notes

	 

	(1)

	This
                 value was determined by calculating the difference between the market price of the underlying common shares and the
                 exercise price of the options on January 14, 2020. Broadway Shares were halted on July 5, 2019 at a price of $0.075.

	 

	(2)

	Ms.
                 Wood resigned as Chief Financial Officer of Broadway on September 1, 2018.

 

Termination
and Change of Control Benefits

 

Other
than as provided for at common law, there is no contract, agreement, plan or arrangement that provides for payments to the Named
Executive Officers at, following or in connection with any termination (whether voluntary, involuntary or constructive), resignation,
retirement, a change in control of the Corporation or a change in the Named Executive Officer’s responsibilities.

 

DIRECTOR
COMPENSATION

 

During
the financial year ended August 31, 2019 the Corporation did not have any standard arrangements pursuant to which Directors were
compensated for services in their capacity as Directors, other than the granting of stock options.

 

The
following table summarizes the compensation paid to directors of the Corporation who were not Named Executive Officers during
the year ended August 31, 2019.

    

    - 72 - 

    

Director
Compensation Table

 

	 Name

	 

	

Fees
Earned

	 

	 

	 Share-

Based 

Awards ($)

	 

	 

	 Option-

based

 Awards ($)

	 

	 

	 Non-Equity

Incentive Plan Compensation ($)

	 

	 

	 Pension

Value ($)

	 

	 

	 All
other

                                                                                                 compensation

($)

	 

	 

	 Total

compensation ($)

	 

	Shawn
Parnham(1)

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	10,000

	(2)

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	Nil

	 

	 

	 

	10,000

	 

	Victoria
Donato(3)

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	10,000

	(2)

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	Nil

	 

	 

	 

	10,000

	 

	Dr
Roger Laine(4)

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	10,000

	(2)

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	Nil

	 

	 

	 

	10,000

	 

 

Notes 

	 

	(1)

	Shawn
Parnham was appointed a director of the Corporation on April 3, 2017.

	 

	(2)

	100,000
Broadway Options exercisable at a price of $0.10 per Broadway Option.

	 

	(3)

	Victoria
Donato was appointed a director of the Corporation on July 13, 2017.

	 

	(4)

	Dr. Roger
Laine was appointed a director of the Corporation on July 13, 2017

 

The following
table sets forth information in respect of option-based awards outstanding at the end of the financial year ended August 31, 2019
held by the directors who were not Named Executive Officers.

 

Outstanding
Option Based Awards and Share Based Awards

 

		 

	Option-Based
                                         Awards

	 

	 

	Share-Based
                                         Awards               

	 

	 Name(1)

	 

	 No.
                                         of securities

                                                                                                               underlying

                                                                                                     unexercised

                                                                                                     Options
                                         (#)

	 

	 

	 Option
                                         Exercise

                                                                                                     Price
                                         (#)

	 

	 

	 Option

                                                                                                               Expiration

                                                                                                               Date

	 

	 

	 Value
                                         of

                                                                                                     Unexercised

                                                                                                     In-The-Money

                                                                                                     Options

($)

	 

	 

	 No.
                                         of Shares

 or Units of 

Shares That

 Have Not

 Vested

(#)

	 

	 

	Market
                                         or

 Payout Value

 of Shares-

 Based Awards

 that Have Not

Vested

	 

	 

	 Market
                                         or Payout

 Value of Vested

 Share-Based

 Awards Not Paid

 or Distributed

($)

	 

	 

	 

	 

	350,000

	 

	 

	$

	0.20

	 

	 

	April
                                       3, 2022

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	100,000

	 

	 

	$

	0.20

	 

	 

	August
                                       31, 2023

	 

	 

	 

	Nil

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	Shawn
                                   Parnham

	 

	 

	100,000

	 

	 

	$

	0.10

	 

	 

	March
                                       19, 2024

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	200,000

	 

	 

	$

	0.20

	 

	 

	July
                                       13, 2022

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	100,000

	 

	 

	$

	0.20

	 

	 

	August
                                       31, 2023

	 

	 

	 

	Nil

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	Victoria
                                   Donato

	 

	 

	100,000

	 

	 

	$

	0.10

	 

	 

	March
                                       19, 2024

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	200,000

	 

	 

	$

	0.20

	 

	 

	July
                                       13, 2022

	 

	 

	 

	 

	 

	 

	 

	Nil

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	100,000

	 

	 

	$

	0.20

	 

	 

	August
                                       31, 2023

	 

	 

	 

	Nil

	 

	 

	 

	 

	 

	 

	 

	N/A

	 

	 

	 

	N/A

	 

	Dr
                                   Roger Laine

	 

	 

	100,000

	 

	 

	$

	0.10

	 

	 

	March
                                       19, 2024

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

 

MANAGEMENT
CONTRACTS

 

Management
functions of the Corporation were not to any substantive degree performed other than by directors or executive officers of the
Corporation during the financial year ended August 31, 2019.

 

SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

 

The following
table sets forth the Corporation’s compensation plans under which equity securities are authorized for issuance as at August
31, 2019.

    

    - 73 - 

    

Equity
Compensation Plan Information

 

	 Plan
Category

	 

	 Number
of common

                                                                         shares to be issued upon

                                                                         exercise of outstanding options

	 

	 

	 Weighted-average

                                                                         exercise price of

                                                                         outstanding options

	 

	 

	Number
of securities

                                                                      remaining available for

                                                                      future issuance under

                                                                      equity
compensation plans

	 

	Equity compensation
plans approved by security holders

	 

	 

	3,400,000

	 

	 

	$

	0.19

	 

	 

	 

	1,466,020

	 

	Equity compensation
plans not approved by security holders

	 

	 

	Nil

	 

	 

	 

	Nil

	 

	 

	 

	N/A

	 

	Total

	 

	 

	3,400,000

	 

	 

	$

	0.19

	 

	 

	 

	1,466,020

	 

 

For
further information on the Plan, refer to the heading “Annual Meeting Matters - 4. Approval of Broadway Stock
Option Plan - Annual Approval of Stock Option Plan”.

 

INDEBTEDNESS
OF DIRECTORS AND EXECUTIVE OFFICERS

 

No
director, executive officer or proposed director of the Corporation or any associate of the foregoing is, or at any time since
the beginning of the Corporation’s most recently completed financial year has been, indebted to the Corporation, nor were
any of these individuals indebted to any other entity which indebtedness was the subject of a guarantee, support agreement, letter
of credit or similar arrangement or understanding provided by the Corporation, including under any securities purchase or other
program.

 

No
director, executive officer or proposed director of the Corporation or any associate of the foregoing is, or at any time since
the beginning of the Corporation’s most recently completed financial year has been, indebted to the Corporation, nor were
any of these individuals indebted to any other entity which indebtedness was the subject of a guarantee, support agreement, letter
of credit or similar arrangement or understanding provided by the Corporation, including under any securities purchase or other
program.

 

INTEREST
OF INFORMED PERSONS IN MATERIAL TRANSACTIONS

 

Other
than as set forth in this Circular, the Corporation is not aware of any material transaction involving any informed person of
the Corporation, any proposed director of the Corporation, or any associate or affiliate of any of informed person or proposed
director.

 

There
are potential conflicts of interest to which the directors and officers of the Corporation may be subject in connection with the
operations of the Corporation. Some of the directors and officers of the Corporation are engaged and will continue to be engaged
in other business opportunities on their own behalf and on behalf of other corporations and situations may arise where such directors
and officers will be in competition with the Corporation. Individuals concerned shall be governed in any conflicts or potential
conflicts by applicable law and internal policies of the Corporation.

 

FOR
THE PURPOSES OF THE ABOVE, “INFORMED PERSON” MEANS: (A) A DIRECTOR OR EXECUTIVE OFFICER OF THE CORPORATION; (B) A
DIRECTOR OR EXECUTIVE OFFICER OF A CORPORATION THAT IS ITSELF AN INFORMED PERSON OR SUBSIDIARY OF THE CORPORATION; (C) ANY PERSON
OR CORPORATION WHO BENEFICIALLY OWNS, DIRECTLY OR INDIRECTLY, VOTING SECURITIES OF THE CORPORATION OR WHO EXERCISES CONTROL OR
DIRECTION OVER VOTING SECURITIES OF THE CORPORATION OR A COMBINATION OF BOTH CARRYING MORE THAN 10% OF THE VOTING RIGHTS ATTACHED
TO ALL OUTSTANDING VOTING SECURITIES OF THE CORPORATION OTHER THAN VOTING SECURITIES HELD BY THE PERSON OR CORPORATION AS UNDERWRITER
IN THE COURSE OF A DISTRIBUTION; AND (D) THE CORPORATION AFTER HAVING PURCHASED, REDEEMED OR OTHERWISE ACQUIRED ANY OF ITS SECURITIES,
FOR SO LONG AS IT HOLDS ANY OF ITS SECURITIES.INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON.

    

    - 74 - 

    

Other
than as set forth herein, management of the Corporation is not aware of any material interest, direct or indirect, by way of beneficial
ownership of securities or otherwise, of any person who has been a director or executive officer of the Corporation at any time
since the beginning of the Corporation’s last financial year or of any associate or affiliate of any such persons, in any
matter to be acted upon at the Meeting.

 

See
 “The Arrangement – Interests of Certain Persons in the Arrangement”.

 

INTEREST OF INFORMED
PERSONS IN MATERIAL TRANSACTIONS

 

Except
as otherwise disclosed in this Circular and within Broadway’s financial statements, no director or executive officer of
Broadway and, to the knowledge of the directors and executive officers of Broadway, none of their respective Associates or Affiliates,
nor any person who beneficially owns or exercises control or direction, directly or indirectly, over more than 10% of Broadway’s
outstanding Broadway Common Shares, nor their respective Associates or Affiliates, has had any material interest, direct or indirect,
in any transaction within Broadway’s three most recently completed financial years or in any proposed transaction which
has materially affected or is reasonably expected to materially affect Broadway or any of its subsidiaries on a consolidated basis.

 

There
are potential conflicts of interest to which the directors and officers of the Broadway may be subject in connection with the
operations of the Broadway. Some of the directors and officers of the Broadway are engaged and will continue to be engaged in
other business opportunities on their own behalf and on behalf of other corporations and situations may arise where such directors
and officers will be in competition with the Broadway. Individuals concerned shall be governed in any conflicts or potential conflicts
by applicable law and internal policies of the Broadway.

 

AUDITOR

 

The
auditor of Broadway is MNP LLP, which became the auditor of Broadway in August 2010.

 

REGISTRAR
AND TRANSFER AGENT

 

The
transfer agent and registrar of Broadway is Odyssey Trust Company, at its office located at Victoria Tower, Suite 1717, 25 Adelaide
St. East, Toronto, Ontario, M5C 3A1.

 

ADDITIONAL
INFORMATION

 

Additional
information relating to Broadway can be found on SEDAR at www.sedar.com.
Financial and other information is provided in Broadway’s audited consolidated financial statements for the years ended,
August 31, 2019 and 2018 and management’s discussion and analysis for the year ended August 31, 2019 which can be found
under its profile on SEDAR at www.sedar.com
and will be sent without charge to any securityholder upon request to the Chief
Financial Officer of Broadway at 700-1199 West Hasting Street, Vancouver, BC V6E 3T5 (emyung@marrellisupport.ca).

 

APPROVAL

 

The
contents of this Circular and the sending thereof to the Shareholders of the Corporation have been approved by the Broadway Board.
A copy of this Circular has been sent to each director of Broadway, each Shareholder entitled to receive notice of the Meeting
and the auditors of Broadway.

 

DATED
this 29th day of December, 2019.

 

BY
ORDER OF THE BOARD

 

(Signed)
 “Duane Parnham”

Duane
Parnham

Chairman
 & Chief Executive Officer

    

    - A-1 - 

    

APPENDIX
A

GLOSSARY OF TERMS

 

In
this Circular, unless the subject matter or context is inconsistent therewith, the following terms have the meanings set forth
below and grammatical variations thereof shall have the corresponding meanings.

 

“18-MC”
means 18-methoxycoronaridine;

 

“18-MC
Program” has the meaning ascribed thereto in Appendix “I” - Narrative Description of the Business –
General;

 

“45%
Threshold” has the meaning ascribed to in Appendix “G”;

 

“Acquisition
Proposal” has the meaning ascribed thereto in “The Arrangement Agreement – Additional Covenants Regarding
Non-Solicitation”;

 

“affiliate”
has the meaning ascribed thereto in NI 45-106;

 

“Affiliate”
has the meaning ascribed thereto in Rule 12b-2 under the U.S. Exchange Act;

 

“Agents”
means Canaccord Genuity Corp. and Canaccord Genuity LLC, the agents of the MindMed December Offering;

 

“allowable
capital loss” has the meaning ascribed to in “Certain Canadian Federal Income Tax Considerations”;

 

“Anti-Bribery
and Anti-Corruption Policy” has the meaning ascribed to in Appendix “J” – Corporate Governance of
the Resulting Issuer – Ethical Business Conduct;

 

“APM”
means American Pacific Ltd.;

 

“Arrangement”
means the arrangement under Section 288 of the BCBCA on the terms and subject to the conditions set out in the Plan of Arrangement,
subject to any amendments or variations thereto made in accordance with this Agreement or the Plan of Arrangement or made at the
direction of the Court in the Final Order;

 

“Arrangement
Agreement” means the arrangement agreement dated as of October 15, 2019 between MindMed and the Corporation, including
the schedules thereto, providing for, among other things, the Arrangement, as the same may be amended, supplemented or restated
in accordance therewith, prior to the Effective Time;

 

“Arrangement
Resolution” means the special resolution approving the Plan of Arrangement to be considered by Shareholders at the Meeting,
substantially in the form set out in Appendix “B”;

 

“Assumed
Liabilities” means the liabilities assumed by Spinco pursuant to the Transfer Agreement;

 

“associate”
has the meaning ascribed to such term in the Securities Act (Ontario);

 

“Audit
Committee” means the audit committee of Broadway;

 

“Auditor’s
Reports” has the meaning ascribed thereto under the heading “Annual Meeting Matters – 1. Financial Statements”;

 

“Authorized
Capital Amendment” means the creation of the MindMed Multiple Voting Shares and the change of designation of the Broadway
Common Shares to Broadway Subordinate Voting Shares, by way of amendment to the articles of Broadway;

 

“BCBCA”
means the Business Corporations Act (British Columbia) and the regulations thereunder, as amended from time to time;

 

“Beneficial
Ownership Limitation” has the meaning ascribed to in Appendix “G”;

 

“BLM”
means the United States Bureau of Land Management;

    

    - A-2 - 

    

“Broadridge”
has the meaning ascribed thereto under the heading “General Proxy Information – Non-Registered Shareholders”;

 

“Broadway”
or the “Corporation” means Broadway Gold Mining Ltd., a corporation existing under the BCBCA;

 

“Broadway
Board” or the “Board” means the board of directors of Broadway as the same is constituted from time
to time;

 

“Broadway
Board Recommendation” means a statement by the Broadway Board that: (a) the Arrangement is fair to the Shareholders;
(b) the Arrangement and the entering into of the Arrangement Agreement is in the best interests of the Corporation; and (c) that
the Broadway Board recommends that the Shareholders vote in favour of the Arrangement Resolution;

 

“Broadway
Certificates” means certificates representing Broadway Subordinate Voting Shares or MindMed Multiple Voting Shares (as
the case may be);

 

“Broadway
Common Shares” means common shares without par value in the capital of Broadway and post- Arrangement will be called
Subordinate Voting Shares;

 

“Broadway
Optionholder” means a registered holder of Broadway Options;

 

“Broadway
Options” means the stock options of Broadway issued pursuant to the Broadway Stock Option Plan;

 

“Broadway
Replacement Warrant” means Broadway share purchase warrants to be issued to holders of MindMed Warrants in connection
with the Arrangement;

 

“Broadway
Shareholders” or “Shareholder” means a registered or beneficial holder of Broadway Common Shares
as the context requires;

 

“Broadway
Stock Option Plan” has the meaning ascribed thereto under “Annual Meeting Matters – 4. Approval of Broadway
Stock Option Plan”;

 

“Broadway
Subordinate Voting Shares” means the Broadway Common Shares after giving effect to the change of designation of “common
shares” to “Subordinate Voting Shares” pursuant to the Broadway Authorized Capital Amendment, but which shall
otherwise continue to carry the existing terms in all other respects;

 

“Broadway
Warrantholders” means the registered or beneficial holders of Broadway Warrants;

 

“Broadway
Warrants” means the 3,100,500 issued share purchase warrants of Broadway exercisable at prices ranging from $0.10 to
$0.15;

 

“Bruce
Linton Letter Agreement” has the meaning ascribed thereto under Appendix “I” – Non-Arm’s
Length Party Transactions;

 

“Bruce
Linton Promissory Note” has the meaning ascribed thereto under Appendix “I” – Non-Arm’s Length
Party Transactions;

 

“Business
Day” means a day which is not a Saturday, Sunday or statutory holiday or a day on which banks in Toronto or Vancouver
are not open for business;

 

“Canadian
Securities Laws” means applicable Canadian provincial and territorial securities laws;

 

“CBCA”
means the Canada Business Corporations Act (Canada) and the regulations thereunder, as amended from time to time;

 

“CCPC”
has the meaning ascribed to in “Certain Canadian Federal Income Tax Considerations”;

 

“CDC”
means the U.S. Centers for Disease Control and Prevention;

 

“CGMP”
means the FDA’s Good Manufacturing Practice;

    

    - A-3 - 

    

“Circular”
means the notice of the Meeting and accompanying management information circular, including all schedules, appendices and exhibits
to, and information incorporated by reference in, such management information circular, to be sent to the Broadway Shareholders
in connection with the Meeting, as amended, supplemented or otherwise modified from time to time in accordance with the terms
of the Arrangement Agreement;

 

“CMOs”
means contract manufacturing organizations;

 

“Completion
Deadline” means January 31, 2020, or such other date as the parties agree;

 

“Consolidation”
means the consolidation of all of the issued and outstanding securities of Broadway on the basis of the Consolidation Ratio;

 

“Consolidation
Ratio” means one post-consolidated Broadway Common Share for every eight (8) pre-consolidated Broadway Common Shares;

 

“Consolidation
Resolution” means the special resolution approving the Consolidation Ratio to be considered by Shareholders at the Meeting,
substantially in the form set out in Appendix “B”;

 

“Conversion
Notice” has the meaning ascribed to in Appendix “G”;

 

“Conversion
Rights” has the meaning ascribed to in Appendix “G”;

 

“Conversion
Time” has the meaning ascribed to in Appendix “G”;

 

“Court”
means the Supreme Court of British Columbia;

 

“CRA”
means the Canada Revenue Agency;

 

“CROs”
means prospective contract research organizations;

 

“Delaware
General Corporation Law” or “DGCL” means Title 8 of the State of Delaware statutory code;

 

“Delaware
Subco” means Broadway Delaware Subco Inc., a wholly-owned subsidiary of Broadway existing under the laws of the State
of    Delaware;

 

“Delaware
Subco Common Shares” means common shares in the capital of Delaware Subco;

 

“Delisting”
has the meaning ascribed to in “13. Voluntary Delisting from TSXV”;

 

“Delisting
Resolution” has the meaning ascribed to in “13. Voluntary Delisting from TSXV”;

 

“Depositary”
means Odyssey Trust Company, or any other depositary or trust Corporation, bank or financial institution as Broadway may appoint
to act as depositary, for the purpose of, among other things, exchanging certificates representing the Broadway Common Shares
for the Consideration in connection with the Arrangement;

 

“designated
stock exchange” has the meaning ascribed to in “Certain Canadian Federal Income Tax Considerations”;

 

“Determination
Date” has the meaning ascribed to in Appendix “G”;

 

“Dissent
Rights” means each registered Broadway Shareholder’s right to dissent under Section 238 of the BCBCA;

 

“Dissenting
Shares” means the Broadway Common Shares in respect of which a Dissenting Shareholder has exercised Dissent Rights;

 

“Dissenting
Shareholder” means a registered Broadway Shareholder who has validly exercised Dissent Rights and has not withdrawn
or been deemed to have withdrawn such exercise of Dissent Rights, but only in respect of the Broadway Common Shares in respect
of which Dissent Rights are validly exercised by such registered Broadway Shareholder;

    

    - A-4 - 

    

“Distribution”
has the meaning ascribed to in Appendix “G”;

 

“DPSP”
means a deferred profit-sharing plan;

 

“DSMB” means the data safety monitoring board;

 

“e-cigarette”
means electronic cigarette;

 

“Effective
Date” means the date upon which all of the conditions to completion of the Arrangement as set forth in the Arrangement
Agreement have been satisfied or waived and all documents agreed to be delivered thereunder have been delivered to the satisfaction
of the Parties, acting reasonably;

 

“Effective
Time” means 12:01 a.m. (Vancouver time) on the Effective Date;

 

“Eligible
Institution” means a Canadian Schedule I chartered bank, a major trust Corporation in Canada, a commercial bank or trust
Corporation in the United States, a member of the Securities Transfer Association Medallion Program (STAMP), a member of the Stock
Exchange Medallion Program (SEMP) or a member of the New York Stock Exchange Inc. (MSP);

 

“Encumbrances”
means any mortgage, charge, pledge, lien, hypothec, prior claim, assignment for security interest, guarantee, right of third parties
or other charge, encumbrance, or any collateral securing the payment obligation of any person, as well as any other agreement
or arrangement with any similar effect whatsoever;

 

“Exchange”
or “TSXV” means the TSX Venture Exchange;

 

“Exchange
Act” has the meaning ascribed to in Appendix “G”;

 

“E.U.” means the European Union;

 

“FDA”
has the meaning ascribed thereto under Appendix “I” “Narrative Description of the Business – Industry
Information & Market Trends: Nicotine Addiction and Smoking Cessation”;

 

“FFDCA”
means the U.S. Federal Food, Drug, and Cosmetic Act;

 

“Final
Order” means the final order of the Court pursuant to Section 291(4) of the BCBCA, after a hearing upon, among other
things, the procedural and substantial fairness of the terms and conditions of the Arrangement, in a form acceptable to Broadway
and MindMed approving the Arrangement as such order may be amended, modified, supplemented or varied by the Court at any time
prior to the Effective Date or, if appealed, then, unless such appeal is withdrawn, abandoned or denied, as affirmed or as amended
on appeal, and after notice and a hearing at which all Broadway Shareholders have the right to appear;

 

“Financial
Statements” has the meaning ascribed thereto under “Annual Meeting Matters – 1. Financial Statements”;

 

“First
Group Locked-Up Persons” has the meaning ascribed to under Appendix “J” “Escrowed Securities”;

 

“Foundational
Agreement” means the foundational agreement entered into by Savant, Liquidity Holdings LLC, LDL Corp. and MindMed on
July 23, 2019;

 

“Foreign
Tax Jurisdiction” has the meaning ascribed thereto under the heading “Notice to Securityholders in the United
States – Tax Matters”;

 

“forward-looking
information” has the meaning ascribed thereto under the heading “Cautionary Statement Regarding Forward-Looking
Information”;

    

    - A-5 - 

    

“FPI
Protective Restriction” has the meaning ascribed to in Appendix “G”;

 

“Governmental
Entity” means (i) any international, multinational, national, federal, provincial, state, regional, municipal, local
or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, commissioner,
board, bureau, ministry, agency or instrumentality, domestic or foreign, (ii) any subdivision or authority of any of the above,
(iii) any quasi- governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account
of any of the foregoing or (iv) any stock exchange;

 

“HC”
means Health Canada;

 

“Holder”
has the meaning ascribed hereto under the heading “Certain Canadian Federal Income Tax Considerations”;

 

“HPFB”
means the Health Products and Food Branch of Health Canada;

 

“IFRS”
means International Financial Reporting Standards as issued by the International Accounting Standards Board, as incorporated in
the CPA Canada Handbook at the relevant time applied on a consistent basis;

 

“including”
means including without limitation, and “include” and “includes” each have a
corresponding meaning;

 

“IND”
means an investigational new drug application;

 

“Insiders”
has the meaning ascribed to it under the applicable Canadian Securities Laws;

 

“Interim
Order” means the interim order of the Court dated anticipated to be obtained on or about January 20, 2020 providing
for, among other things, the calling and holding of the Meeting, as such order may be amended by the Court with the consent of
the Corporation and MindMed, each acting reasonably;

 

“Intermediary”
has the meaning ascribed thereto under the heading “General Proxy Information – Non-Registered Shareholders”;

 

“Intellectual
Property” means domestic and foreign: (i) patents, applications for patents and reissues, divisions, continuations,
renewals, extensions and continuations-in-part of patents or patent applications; (ii) proprietary and non- public business information,
including inventions (whether patentable or not), invention disclosures, improvements, discoveries, trade secrets, confidential
information, know-how, methods, processes, designs, technology, technical data, schematics, formulae and customer lists, and documentation
relating to any of the foregoing; (iii) copyrights, copyright registrations and applications for copyright registration; (iv)
mask works, mask work registrations and applications for mask work registrations; (v) designs, design registrations, design registration
applications and integrated circuit topographies; (vi) trade names, business names, corporate names, domain names, website names
and world wide web addresses, common law trade-marks, trade-mark registrations, trade mark applications, trade dress and logos,
and the goodwill associated with any of the foregoing; (vii) Software; and (viii) any other intellectual property and industrial
property;

 

“IRBs”
means institutional review boards;

 

“Kennecott”
has the meaning ascribed thereto under “The Arrangement Agreement – Conditions in Favour of Broadway, Spinco, MindMed
and Delaware Subco”;

 

“Kennecott
Agreement” has the meaning ascribed to in Appendix “K” “Narrative Description of the Business”;

 

“Law”
or “Laws” means, with respect to any Person, any and all applicable law (statutory, common or otherwise), constitution,
treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement,
whether domestic or foreign, enacted, adopted, promulgated or applied by a Governmental Entity that is binding upon or applicable
to such Person or its business, undertaking, property or securities, and to the extent that they have the force of law, policies,
guidelines, notices and protocols of any Governmental Entity, as amended;

 

“Lien”
means any mortgage, charge, pledge, hypothec, security interest, prior claim, encroachments, option, right of first refusal or
first offer, occupancy right, covenant, assignment, lien (statutory or otherwise), defect of title, or restriction or adverse
right or claim, or other third party interest or encumbrance of any kind, in each case, whether contingent or absolute;

    

    - A-6 - 

    

“Letter
of Transmittal” means the letter of transmittal to be sent by Broadway to Shareholders in connection with the Arrangement;

 

“MAD”
means multiple ascending dose;

 

“Madison
Project” means the Broadway and Madison mine project in the Butte-Anaconda region of Montana, a porphyry-based mining
district, comprised of 450 acres of land, a 192 acre ranch, buildings, mine equipment and fixtures, 6 patented, 35 unpatented
mineral claims, and mineral rights to a four-square-mile property;

 

“Madison
Shares” means all of the issued and outstanding securities of the Madison Subsidiary;

 

“Madison
Subsidiary” means Broadway Gold Corp., a wholly owned subsidiary of Broadway existing under the laws of the State of
Montana;

 

“Mandatory
Conversion” has the meaning ascribed to in Appendix “G”;

 

“Meeting”
means the annual and special meeting of the Broadway Shareholders including any adjournment or postponement of such annual and
special meeting in accordance with the terms of the Arrangement Agreement, to be called and held to secure Shareholder Approval
and for any other purpose as may be set out in this Circular;

 

“Meeting
Materials” has the meaning ascribed thereto under the heading “General Proxy Information – Non- Registered
Shareholders”;

 

“Merger”
means the merger of Delaware Subco, in accordance with the Delaware General Corporation Law, with and into MindMed in connection
with the Arrangement, with MindMed as the surviving corporation;

 

“MI
61-101” means Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions;

 

“MindMed”
means Mind Medicine, Inc., a corporation existing under the laws of the State of Delaware;

 

“MindMed
Board” means the board of directors of MindMed as the same is constituted from time to time;

 

“MindMed
Class A Shares” means the existing Class A common shares in the capital of MindMed;

 

“MindMed
Class B Shares” means the existing Class B common shares in the capital of MindMed;

 

“MindMed
Class C Shares” means the existing Class C common shares in the capital of MindMed;

 

“MindMed
Class D Shares” means the existing Class D common shares in the capital of MindMed;

 

“MindMed
Common Shares” means common shares in the capital of MindMed to be created in connection with the Arrangement;

 

“MindMed
Compensation Committee” means the Compensation, Nomination and Governance Committee of the MindMed Board;

 

“MindMed
Compensation Options” means the broker warrants and advisory warrants issued to the agents in the MindMed December Offering
entitling them to acquire Resulting Issuer Shares at a price of $0.33 for a period of 12 months from the Effective Date;

 

“MindMed
December Offering” means the private placement by MindMed, to be completed in tranches by way of (i) a commercially
reasonable efforts brokered private placement and (ii) a non-brokered private placement, consisting of the sale of up to an
aggregate of 45,454,546 MindMed Class D Shares at a price of $0.33 per share for gross proceeds of up to
$15,000,000;

    

    - A-7 - 

    

“MindMed
Meeting” means the special meeting of the shareholders of MindMed (including any adjournments thereof) to be held, for
among other purposes, to consider and, if deemed advisable, to approve the Merger;

 

“MindMed
Multiple Voting Shares” means the multiple voting shares in the capital of Broadway to be adopted upon implementation
of the Arrangement in the form set forth in Appendix “G” by way of amendment of the articles of Broadway and which
in Appendix J to this Circular are also referred to as “Multiple Voting Shares”;

 

“MindMed
Named Executive Officers” has the meaning ascribed thereto in Appendix “I” – Executive Compensation
 – Elements of Compensation;

 

“MindMed
Non-Brokered Offering” has the meaning ascribed thereto in Appendix “I” - Recent Financing;

 

“MindMed
Shareholders” means the holders of MindMed Class A Shares, MindMed Class B Shares, MindMed Class C Shares, MindMed Class
D Shares and MindMed Common Shares, as the case may be;

 

“Misrepresentation”
means an untrue statement of a material fact or an omission to state a material fact required or necessary to make the statements
contained therein not misleading in light of the circumstances in which they are made;

 

“Named
Executive Officers” or “NEOs” means: (a) each CEO; (b) each CFO; (c) the three other most highly
compensated executive officers of a company at the end of the most recently completed financial year whose total compensation,
individually, was greater than $150,000; and (d) each individual who would be a Named Executive Officer but for the fact that
the individual was neither an executive officer of a company or its subsidiaries, nor serving in a similar capacity, at the end
of the most recently completed financial year;

 

“Name
Change” means the change of name of Broadway to “Mind Medicine (MindMed) Inc.” or such other name as the
Board of Directors of Broadway may determine;

 

“NDA”
means a new drug application;

 

“NEO
Exchange” means the NEO Exchange Inc.;

 

“NEX
Issuer” means a TSVX company that has fallen below the TSXV’s ongoing listing standards, as defined by the TSXV;

 

“NI
43-101” means National Instrument 43-101 -Standards of Disclosure for Mineral Projects;

 

“NI
45-106” means National Instrument 45-106 – Prospectus Exemptions;

 

“NI
51-102” means National Instrument 52-102 – Continuous Disclose Obligations;

 

“NI
52-110” means National Instrument 52-110 – Audit Committees;

 

“NI
54-101” means National Instrument 54-101 – Communication with Beneficial Owners of Securities of a Reporting
Issuer;

 

“NIDA”
means the U.S. National Institute on Drug Abuse;

 

“Non-Objecting
Beneficial Owners” or “NOBOs” has the meaning ascribed thereto under the heading “General
Proxy Information – Non-Registered Shareholders”;

 

“Non-Registered
Shareholder” has the meaning ascribed thereto under the heading “General Proxy Information – Non-Registered
Shareholders”;

 

“Notice
of Dissent” has the meaning ascribed thereto under the heading “Dissenting Shareholders’ Rights –
Sections 237 to 247 of the BCBCA”;

    

    - A-8 - 

    

“Notice
of Meeting” has the meaning ascribed thereto under the heading “Notice of Annual and Special Meeting of Shareholders”;

 

“NSR”
has the meaning ascribed to in Appendix “K” “2.3 Royalties and Underlying Agreements”;

 

“NYSE”
means the New York Stock Exchange;

 

“Objecting
Beneficial Owners” or “OBOs” has the meaning ascribed thereto under the heading “General
Proxy Information – Non-Registered Shareholders”;

 

“Option
and JV Agreement” has the meaning ascribed thereto under “The Arrangement Agreement – Conditions in Favour
of Broadway, Spinco, MindMed and Delaware Subco”;

 

“OTP”
means an opioid treatment program;

 

“Parties”
means Broadway, Spinco, Delaware Subco and MindMed and “Party” means any one of them;

 

“Person”
means and includes an individual, sole proprietorship, partnership, unincorporated association, unincorporated syndicate, unincorporated
organization, trust, body corporate, a trustee, executor, administrator or other legal representative and the Crown or any agency
or instrumentality thereof;

 

“Plan
of Arrangement” means the plan of arrangement in substantially the form of the plan of arrangement which is attached
as Appendix “C” of this Circular and any amendments or variations thereto made in accordance with this Agreement,
the Plan of Arrangement or upon the direction of the Court in the Final Order;

 

“proposed
director” has the meaning ascribed thereto under the heading “Annual Meeting Matters – 2. Election of
Directors: Nominees”;

 

“Proposed
Amendments” has the meaning ascribed to in “Certain Canadian Federal Income Tax Considerations”;

 

“PUC”
has the meaning ascribed to in “Certain Canadian Federal Income Tax Considerations”;

 

“RDSP”
means a registered disability savings plan;

 

“Recapitalization”
has the meaning ascribed to in Appendix “G”;

 

“Record
Date” means January 14, 2020;

 

“Registered
Plans” has the meaning ascribed to in “Certain Canadian Federal Income Tax Considerations”;

 

“Registered
Shareholders” means registered holders of Broadway Common Shares who is in possession of a physical share certificate
or who is entitled to receive a physical share certificate and whose name and address are recorded in the Corporation’s
shareholders’ register maintained by the Transfer Agent;

 

“Regulation
S” means Regulation S adopted by the United States Securities and Exchange Commission pursuant to the U.S. Securities
Act;

 

“Regulatory
Approval” means any consent, waiver, permit, exemption, review, order, decision or approval of, or any registration
and filing with, any Governmental Entity, or the expiry, waiver or termination of any waiting period imposed by Law or a Governmental
Entity, in each case in connection with the Arrangement, including but not limited to, the approval of the TSXV in respect of
the Arrangement and the grant of the Interim Order and the Final Order;

 

“REMS”
means a risk evaluation and mitigation strategy;

 

“Relevant
Securities” has the meaning ascribed to in “Certain Canadian Federal Income Tax Considerations”;

 

“Representatives”
means the officers, directors, employees, representative (including any financial or other adviser) or agent of a Party or any
of its Subsidiaries;

 

“RESP”
means a registered education savings plan;

    

    - A-9 - 

    

“Resulting
Issuer” means the issuer resulting from the Arrangement of Broadway, SpinCo, Delaware SubCo and MindMed;

 

“Resulting
Issuer Board” means the expected board of directors of the Resulting Issuer;

 

“Resulting
Issuer Option Plan” has the meaning ascribed thereto under “Annual Meeting Matters – 12. Approval Of
Resulting Issuer Stock Option Plan And Performance And Restricted Share Unit Plan”;

 

“Resulting
Issuer PR Plan” has the meaning ascribed thereto under “Annual Meeting Matters – 12. Approval Of Resulting
Issuer Stock Option Plan And Performance And Restricted Share Unit Plan”;

 

“Resulting
Issuer Shares” means common shares in the capital of the Resulting Issuer;

 

“RRIF”
means a registered retirement income fund;

 

“RRSP”
means a registered retirement savings plan;

 

“SAMHSA”
has the meaning ascribed thereto under Appendix “I” - Narrative Description of the Business – Industry Information;

 

“Savant”
means Savant Addiction Medicine, LLC, a Delaware limited liability company;

 

“Savant
Affiliate” means Savant HWP, Inc., a Delaware company;

 

“SEC”
means the United States Securities and Exchange Commission;

 

“Second
Group Locked-Up Persons” has the meaning ascribed to under Appendix “J” - Escrowed Securities;

 

“Securities
Act” means the Securities Act (Ontario) and the rules, regulations and published policies made thereunder, as
now in effect and as they may be promulgated or amended from time to time;

 

“Securities
Laws” means, collectively, Canadian Securities Laws and U.S. Securities Laws and all applicable stock exchange rules
and listing standards of the stock exchanges;

 

“SEDAR”
means the System for Electronic Document Analysis and Retrieval;

 

“Shareholder
Approval” means at least two-thirds of the votes cast on the Arrangement Resolution by Shareholders present in person
or represented by proxy and entitled to vote at the Meeting, with each Broadway Share entitling the holder thereof to one vote
on the Arrangement Resolution;

 

“Spinco”
means Madison Metals Inc., a corporation existing under the BCBCA, which is a wholly-owned subsidiary of Broadway;

 

“Spinco
Common Shares” means common shares in the capital of Spinco;

 

“Spinco
Distribution Shares” has the meaning as ascribed to in “Summary – Arrangement Mechanics”;

 

“Spinco
Incorporation Share” means the one Spinco Common Share held by Broadway that was issued to Broadway on the incorporation
of Spinco;

 

“Special
Resolution” means a resolution passed by a majority of not less than two-thirds of the votes cast by Broadway Shareholders
in respect of such resolution at the Broadway Meeting;

 

“Spin-Out
Transaction” means the spin-out by Broadway of the Transferred Assets and the Assumed Liabilities to Spinco in exchange
for Spinco Common Shares;

 

“Subsidiary”
has the meaning specified in NI 45-106 as in effect on the date of the Arrangement Agreement;

    

    - A-10 - 

    

“SUDs”
or “addictions” has the meaning ascribed to in Appendix “I” - Narrative Description of the Business
 – Industry Information;

 

“Tax
Act” means the Income Tax Act (Canada) and the regulations thereunder, as amended from time to time;

 

“Tax
Returns” means any and all returns, reports, declarations, elections, notices, forms, designations, filings, and statements
(including estimated tax returns and reports, withholding tax returns and reports, and information returns and reports) filed
or required to be filed in respect of Taxes;

 

“taxable
capital gain” has the meaning ascribed to in “Certain Canadian Federal Income Tax Considerations”;

 

“Taxes”
means (i) any and all taxes, duties, fees, excises, premiums, assessments, imposts, levies and other charges or assessments of
any kind whatsoever imposed by any Governmental Entity, whether computed on a separate, consolidated, unitary, combined or other
basis, including those levied on, or measured by, or described with respect to, income, gross receipts, profits, gains, windfalls,
capital, capital stock, production, recapture, transfer, land transfer, license, gift, occupation, wealth, environment, net worth,
indebtedness, surplus, sales, goods and services, harmonized sales, use, value-added, excise, special assessment, stamp, withholding,
business, franchising, real or personal property, health, employee health, payroll, workers’ compensation, employment or
unemployment, severance, social services, social security, education, utility, surtaxes, customs, import or export, and including
all license and registration fees and all employment insurance, health insurance and government pension plan premiums or contributions;
(ii) all interest, penalties, fines, additions to tax or other additional amounts imposed by any Governmental Entity on or in
respect of amounts of the type described in clause (i) above or this clause (ii); (iii) any liability for the payment of any amounts
of the type described in clauses (i) or (ii) as a result of being a member of an affiliated, consolidated, combined or unitary
group for any period; and (iv) any liability for the payment of any amounts of the type described in clauses (i) or (ii) as a
result of any express or implied obligation to indemnify any other Person or as a result of being a transferee or successor in
interest to any party;

 

“Technical
Report” means the NI 43-101 technical report with an effective date of March 4, 2019, prepared by Philip S.
Mulholland, C.P.G. and co-authored by Robert S. Middleton, MSc, BSc, P.Eng titled “NI 43-101 Technical Report For The
Madison Project, Madison County, Montana USA;

 

“TFSA”
means a tax-free savings account;

 

“Transfer
Agent” means Odyssey Trust Company;

 

“Transfer
Agreement” means the transfer agreement providing for, among other things, the transfer of the Transferred Assets to
Spinco in exchange for the issuance by Spinco of the Spinco Distribution Shares substantially in the form attached hereto in Appendix
 “C”.

 

“Transferred
Assets” means all of Broadway’s right, title and interest in the Madison Shares and all related assets as set
out in greater detail in the form attached hereto in Appendix “C”;

 

“TSX”
means the Toronto Stock Exchange;

 

“U.S.
Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
from time to time thereunder;

 

“U.S.
Residents” has the meaning ascribed to in Appendix “G”;

 

“U.S.
Securities Act” means the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated from time
to time thereunder;

 

“U.S.
Securities Laws” means all applicable securities legislation in the U.S., including the U.S. Securities Act, the

 

U.S. Exchange
Act, and the rules and regulations promulgated thereunder, including judicial and administrative interpretations thereof, and
the securities laws of the states of the U.S.;

 

“United
States” or “U.S.” means the United States of America, its territories and possessions, any State
of the United States and the District of Columbia;

    

    - A-11 - 

    

“VIF”
means a voting instruction form; and

 

“Voting
Class A Shares” has the meaning ascribed to in Appendix “I” - Description of Securities.

    

    - B-1 - 

    

APPENDIX
B 

ARRANGEMENT
RESOLUTION

 

BE
IT RESOLVED AS A SPECIAL RESOLUTION OF THE BROADWAY SHAREHOLDERS THAT:

 

	 

	1. 

	the
issued and outstanding common shares of Broadway Gold Mining Ltd. (“Broadway”) be consolidated on the basis
of each eight (8) of the issued and outstanding common shares of Broadway (the “Broadway Common Shares”) into
one (1) Broadway Common Share (the “Consolidation”), provided that holders of Broadway Common Shares on the
date that such consolidation becomes effective shall not be entitled to receive any fractional common share following the Consolidation;

 

	 

	2. 

	the
articles and Notice of Articles of Broadway be amended to change the name of Broadway to “Mind Medicine (MindMed) Inc.”,
or such other name as the Board of Directors may determine (the “Name Change”);

 

	 

	3. 

	the
articles and Notice of Articles of Broadway be amended to (i) create a class of multiple voting shares (the “Broadway
Multiple Voting Shares”) having the terms and conditions set out in Schedule “E” to the Arrangement Agreement
(as defined below) and (ii) change the name of the existing Broadway Common Shares to “subordinate voting shares”
(the “Broadway Subordinate Voting Shares”) but otherwise not amending or affecting any of the terms and conditions
of the Broadway Common Shares (the “Authorized Capital Amendment”);

 

	 

	4. 

	The
arrangement (the “Arrangement”) under section 288 of the Business Corporations Act (British Columbia)
(the “BCBCA”) involving Broadway, Madison Metals Inc. (“Spinco”), Broadway Delaware Subco
Inc. (“Delaware Subco”) and Mind Medicine, Inc. (“MindMed”), all as more particularly described
and set forth in the management information circular (the “Circular”) of Broadway dated December 29, 2019 accompanying
the notice of meeting (as the Arrangement may be, or may have been, modified or amended in accordance with its terms), is hereby
authorized, approved and adopted.

 

	 

	5. 

	The
                                    plan of arrangement (the “Plan of Arrangement”), implementing the Arrangement, the full text of which is
                                    appended to the Circular (as the Plan of Arrangement may be, or may have been, modified or amended in accordance with its
                                    terms), is hereby authorized, approved andadopted.

 

	 

	6. 

	The
arrangement agreement (the “Arrangement Agreement”) between Broadway, Spinco, Delaware Subco and MindMed dated
October 15, 2019 and all the transactions contemplated therein, the actions of the directors of Broadway in approving the Arrangement
and the actions of the directors and officers of Broadway in executing and delivering the Arrangement Agreement and any amendments
thereto are hereby confirmed, ratified, authorized and approved.

 

	 

	7. 

	Notwithstanding
that this resolution has been passed (and the Consolidation, Name Change, Authorized Capital Amendment and Arrangement approved
and agreed to) by the shareholders of Broadway or that the Arrangement has been approved by the Supreme Court of British Columbia,
the directors of Broadway are hereby authorized and empowered, without further notice to, or approval of, the shareholders of
Broadway:

 

	 

	(a)

	to
amend the Arrangement Agreement or the Plan of Arrangement to the extent permitted by the Arrangement Agreement or the Plan of
Arrangement; or

 

	 

	(b)

	subject
to the terms of the Arrangement Agreement, not to proceed with the Consolidation, the Name Change, the Authorized Capital Amendment
or the Arrangement at any time prior to the Effective Time (as defined in the Arrangement Agreement).

 

	 

	8. 

	If
any holder of Broadway Common Shares in connection with the Consolidation or any recipient of Broadway Multiple Voting Shares
or Broadway Subordinate Voting Shares (as the case may be) in connection with the Arrangement would otherwise be entitled to receive
a fractional common share upon giving effect to the Consolidation, the Authorized Capital Amendment and/or the Arrangement, such fractional
interest shall be rounded up to the nearest whole common share if the fractional interest is equal to or greater than 0.5 of a
Broadway Common Share and rounded down to the nearest whole common share if the fractional interest is less than 0.5 of a Broadway
Common Share;

    

    - B-2 - 

    

	 

	9. 

	Any
one director or officer of Broadway is hereby authorized and directed, for and on behalf and in the name of Broadway, to execute
and deliver, whether under the corporate seal of Broadway or otherwise, all such deeds, instruments, assurances, agreements, forms,
waivers, notices, certificates, confirmations and other documents and to do or cause to be done all such other acts and things
as in the opinion of such director or officer may be necessary, desirable or useful for the purpose of giving effect to these
resolutions (including, without limitation, the delivery of articles of arrangement or articles of amendment in the prescribed
form), the Consolidation, the Name Change, the Authorized Capital Amendment, the Arrangement Agreement and the completion of the
Plan of Arrangement in accordance with the terms of the Arrangement Agreement, including:

 

	 

	(a)

	all
actions required to be taken by or on behalf of Broadway, and all necessary filings and obtaining the necessary approvals, consents
and acceptances of appropriate regulatory authorities; and

 

	 

	(b)

	the
signing of the certificates, consents and other documents or declarations required under the Arrangement Agreement or otherwise
to be entered into by Broadway;

 

such
determination to be conclusively evidenced by the execution and delivery of such document, agreement or instrument or the doing
of any such act or thing.

    

    - C-1 - 

    

APPENDIX C

PLAN OF ARRANGEMENT

 

(begins on following page)

    

    - C-2 - 

    

PLAN OF ARRANGEMENT

UNDER THE PROVISIONS OF SECTION 288

OF THE BUSINESS CORPORATIONS ACT (BRITISH COLUMBIA)

 

ARTICLE 1 

INTERPRETATION

 

	
1.1

	
Definitions

 

In this Plan of Arrangement, unless there is something in the subject matter or context inconsistent therewith, the following terms shall have the respective meanings set out below and grammatical variations of such terms shall have corresponding meanings:

 

“Arrangement” means the arrangement under Part 9, Division 5 of the BCBCA on the terms and subject to the conditions set out in the Arrangement Agreement and this Plan of Arrangement, subject to any amendments or variations thereto made in accordance with this Agreement or the Plan of Arrangement or made at the direction of the Court in the Final Order;

 

“Arrangement Agreement” means the arrangement agreement dated as of October 11, 2019 between Broadway, Spinco, Delaware Subco and MindMed, including the Schedules and Appendices attached hereto, as may be supplemented or amended from time to time, of which this Plan of Arrangement is Schedule “A”;

 

“Arrangement Resolution” means the Special Resolution of the Broadway Shareholders in respect of the Arrangement to be considered at the Broadway Meeting, the full text of which is attached as Appendix “I” hereto;

 

“Assumed Liabilities” has the meaning given to such term in the Transfer Agreement;

 

“Authorized Capital Amendment” means the creation of the Broadway Multiple Voting Shares and the change of designation of the Broadway Common Shares to Broadway Subordinate Voting Shares, by way of amendment to the articles of Broadway;

 

“BCBCA” means the Business Corporations Act (British Columbia), S.B.C. 2002, c. 57, as amended, together with all rules and regulations promulgated thereunder or with respect thereto;

 

“Broadway” means Broadway Gold Mining Ltd., a corporation incorporated pursuant to the laws of the Province of British Columbia;

 

“Broadway Certificates” means certificates representing Broadway Subordinate Voting Shares or Broadway Broadway Multiple Voting Shares (as the case may be);

 

“Broadway Common Shares” means the common shares in the capital of Broadway as currently constituted;

 

“Broadway Letter of Transmittal” means the letter of acceptance and transmittal to be forwarded by Broadway to Broadway Shareholders and others together with the Circular or such other equivalent form of letter of acceptance and transmittal;

 

“Broadway Meeting” means the special meeting of Broadway Shareholders and any adjournment(s) or postponement(s) thereof, to be called and held in accordance with the Interim Order to consider and to vote on the Arrangement Resolution and any other matters set out in the Notice of Meeting;

 

“Broadway Multiple Voting Shares” means the multiple voting shares in the capital of Broadway to be adopted in the form set forth in Schedule “E” to the Arrangement Agreement by way of amendment of the articles of Broadway;

 

“Broadway Replacement Warrants” means Broadway share purchase warrants to be issued to holders of MindMed Warrants in connection with the Arrangement;

    

    - C-3 - 

    

“Broadway Shareholders” means the holders of Broadway Common Shares at the applicable time;

 

“Broadway Subordinate Voting Shares” means the Broadway Common Shares after giving effect to the change of designation of “common shares” to “Subordinate Voting Shares” pursuant to the Broadway Authorized Capital Amendment, but which shall otherwise continue to carry the existing terms in all other respects;

 

“Board of Directors” means the duly appointed board of directors of the applicable company;

 

“Business Day” means a day, other than a Saturday, Sunday or statutory holiday, when banks are generally open in the City of Toronto, Ontario or Vancouver, British Columbia for the transaction of banking business;

 

“Canadian MindMed Shareholder” means a beneficial holder of MindMed Share, who is (i) a resident of Canada for purposes of the Tax Act or (ii) a partnership at least of partner of which isa resident of Canada for purposes of the Tax Act;

 

“Circular” means the management information circular of Broadway to be prepared and sent to the Broadway Shareholders along with the Notice of Meeting in connection with the Broadway Meeting;

 

“Consolidation” means the consolidation of all of the issued and outstanding securities of Broadway on the basis of the Consolidation Ratio;

 

“Consolidation Ratio” means one post-consolidated Broadway Common Share for every eight (8) pre- consolidated Broadway Common Shares;

 

“Court” means the Supreme Court of British Columbia;

 

“Delaware Subco” means Broadway Delaware Subco Inc., a wholly-owned subsidiary of Broadway existing under the laws of the State of Delaware;

 

“Dissent Rights” has the meaning set forth in section 5.1 hereto;

 

“Dissenting Broadway Shareholder” means a Broadway Shareholder who has duly exercised the Dissent Rights in accordance with section 5.1 hereto, and has not withdrawn or have been deemed to have withdrawn such exercise as at the Effective Time;

 

“Dissent Shares” means Broadway Common Shares held by a Dissenting Broadway Shareholder who has demanded and perfected Dissent Rights in respect of the Broadway Common Shares in accordance with the Interim Order and who, as of the Effective Time, has not effectively withdrawn or lost such Dissent Rights;

 

“Effective Date” means the date the Arrangement becomes effective as agreed to by the Parties;

 

“Effective Time” means 12:01 a.m. (Vancouver time) on the Effective Date or such other time as the Parties may agree in writing as at the Effective Date;

 

“Encumbrances” means any mortgage, charge, pledge, lien, hypothec, prior claim, assignment for security interest, guarantee, right of third parties or other charge, encumbrance, or any collateral securing the payment obligation of any person, as well as any other agreement or arrangement with any similar effect whatsoever;

 

“Final Order” means the final order of the Court pursuant to Section 291(4) of the BCBCA, after a hearing upon, among other things, the procedural and substantial fairness of the terms and conditions of the Arrangement, in a form acceptable to Broadway approving the Arrangement as such order may be amended, modified, supplemented or varied by the Court at any time prior to the Effective Date or, if appealed, then, unless such appeal is withdrawn, abandoned or denied, as affirmed or as amended on appeal, and after notice and a hearing at which all Broadway Shareholders have the right to appear;

    

    - C-4 - 

    

“Interim
Order” means the interim order of the Court under Section 291(2) of the BCBCA containing declarations and
directions with respect to the Arrangement and providing for, among other things, the calling and holding of the Broadway
Meeting and the requisite majority for the approval of the Arrangement by the Broadway Shareholders;

 

“Madison Shares” means all of the issued and outstanding securities of the Madison Subsidiary;

 

“Madison Subsidiary” means Broadway Gold Corp., a wholly-owned subsidiary of Broadway existing under the laws of the State of Montana;

 

“Merger” means the merger of Delaware Subco and MindMed in connection with the Arrangement;

 

“MindMed” means Mind Medicine, Inc., a corporation existing under the laws of the State of Delaware;

 

“MindMed Class A Shares” means the existing Class A common shares in the capital of MindMed;

 

“MindMed Class B Shares” means the existing Class B common shares in the capital of MindMed;

 

“MindMed Class C Shares” means the existing Class C common shares in the capital of MindMed;

 

“MindMed Class D Shares” means the existing Class D common shares in the capital of MindMed;

 

“MindMed Common Shares” means the common shares in the capital of MindMed to be created in connection with the Arrangement;

 

“MindMed Financing” has the meaning given to such term in the Arrangement Agreement;

 

“MindMed Letter of Transmittal” means the letter of transmittal to be used by MindMed Shareholders Broadway to in order to request Broadway Certificates in connection with the Merger;

 

“MindMed Shares” means MindMed Class A Shares, MindMed Class B Shares, MindMed Class C Shares, and/or MindMed Class D Shares, as the case may be;

 

“MindMed Shareholders” means holders of MindMed Class A Shares, MindMed Class B Shares, MindMed Class C Shares, MindMed Class D Shares and/or MindMed Common Shares;

 

“MindMed Warrants” means MindMed share purchase warrants to be issued in connection with the MindMed Financing;

 

“Notice of Meeting” means the notice of the Meeting to be sent to the Broadway Shareholders, which notice will accompany the Circular;

 

“Parties” means Broadway, Spinco, Delaware Subco, and MindMed and “Party” means any one of them;

 

“Person” or “person” means and includes an individual, sole proprietorship, partnership, unincorporated association, unincorporated syndicate, unincorporated organization, trust, body corporate, trustee, executor, administrator or other legal representative and the Crown or any agency or instrumentality thereof;

 

“Plan of Arrangement” means this plan of arrangement and any amendments or variations thereto made in accordance with the Arrangement Agreement, this Plan of Arrangement or upon the direction of the Court in the Final Order with the consent of Broadway;

 

“Securities Act” means the Securities Act, R.S.B.C 1996, c. 418, as amended or replaced from time to time, together with all rules and regulations promulgated thereunder or with respect thereto;

 

“Special Resolution” means a resolution passed by a majority of not less than two-thirds of the votes cast by Broadway Shareholders in respect of such resolution at the Broadway Meeting;

    

    - C-5 - 

    

“Spinco” means Madison Metals Inc., a corporation incorporated pursuant to the laws of the Province of British Columbia;

 

“Spinco Common Shares” means the common shares of Spinco;

 

“Spinco Distribution Shares” has the meaning set forth in section 2.1(b) hereto;

 

“Spinco Incorporation Share” means the one Spinco Common Share held by Broadway that was issued to Broadway on the incorporation of Spinco;

 

“Spinout Transaction” means the transactions in connection with the transfer of the Transferred Assets to Spinco and the distribution to the Broadway Shareholders of the Spinco Distribution Shares, all pursuant to the Transfer Agreement;

 

“Tax Act” means the Income Tax Act (Canada) and the regulations made thereunder, as promulgated or amended from time to time;

 

“Transfer Agreement” means the transfer agreement providing for, among other things, the transfer of the Transferred Assets to Spinco in exchange for the issuance by Spinco of the Spinco Distribution Shares substantially in the form attached to this Plan of Arrangement as Schedule “A”;

 

“Transferred Assets” means all of Broadway’s right, title and interest in the Madison Shares and all related assets as set out in greater detail in Schedule “A” of the Transfer Agreement;

 

“Transfer Agent” means Computershare Investor Services Inc. or such other trust company or transfer agent as may be designated by Broadway; and

 

“TSXV” means the TSX Venture Exchange.

 

In addition, words and phrases used herein and defined in the BCBCA and not otherwise defined herein or in the Arrangement Agreement shall have the same meaning herein as in the BCBCA unless the context otherwise requires.

 

	
1.2

	
Sections and Headings

 

The division of this Plan of Arrangement into articles and sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Plan of Arrangement. Unless reference is specifically made to some other document or instrument, all references herein to articles and sections are to articles and sections of this Plan of Arrangement.

 

	
1.3

	
Number, Gender and Persons

 

In this Plan of Arrangement, unless otherwise expressly stated or the context otherwise requires, words importing the singular number shall include the plural and vice versa, and words importing gender shall include all genders.

 

	
1.4

	
Statutory References

 

Any reference in this Plan of Arrangement to a statute includes all regulations made thereunder, all amendments to such statute or regulation in force from time to time and any statute or regulation that supplements or supersedes such statute or regulation.

 

	
1.5

	
Currency

 

Unless otherwise stated all references in this Plan of Arrangement to sums of money are expressed in lawful money of Canada.

    

    - C-6 - 

    

	
1.6

	
Business Day

 

In the event that the date on which any action is required to be taken hereunder by either of the Parties is not a Business Day in the place where the action is required to be taken, such action shall be required to be taken on the next succeeding day which is a Business Day in such place.

 

	
1.7

	
Governing Law

 

This Plan of Arrangement shall be governed by and construed in accordance with the laws of the Province of British Columbia and the federal laws of Canada applicable therein.

 

	
1.8

	
Binding Effect

 

This Plan of Arrangement will become effective at, and be binding at and after, the Effective Time on: Broadway and all registered and beneficial Broadway Shareholders and all Dissenting Broadway Shareholders. This Plan of Arrangement may be withdrawn prior to the occurrence of any of the events in Section 2.1 in accordance with the terms of the Arrangement Agreement.

 

ARTICLE 2

 ARRANGEMENT

 

	
2.1

	
 Arrangement

 

Each of the events set out below shall occur as part of the Arrangement and shall be deemed to occur in the following sequence or as otherwise provided below or herein, without any further act or formality:

 

	
(a)

	
effective at twenty (20) minutes prior to the Effective Time, each Broadway Common Share in respect of which a Broadway Dissenting Shareholder has exercised Dissent Rights shall be, and shall be deemed to be, transferred to Broadway free and clear of any Encumbrances for cancellation without any further act or formality and

 

	
 

	
(i)

	
such Dissenting Broadway Shareholders shall cease to be the holders of such Broadway Common Shares, and to have any rights as holders of Broadway Common Shares, other than the right to be paid fair value for such Broadway Common Shares as set out in Article 5 hereof;

 

	
 

	
(ii)

	
such Dissenting Broadway Shareholders’ names shall be removed as the holders of such Broadway Common Shares from the register of Broadway Common Shares maintained by or on behalf of Broadway; and

 

	
 

	
(iii)

	
Broadway shall be deemed to be the transferee and legal and beneficial holder of such Broadway Common Share (free and clear of all Encumbrances) shall be entered as the registered holder of such Broadway Common Share in the register of Broadway Common Shares maintained by or on behalf of Broadway;

 

	
(b)

	
effective at fifteen (15) minutes prior to the Effective Time, Broadway shall, in the following order, complete (i) the Consolidation; (ii) the Name Change, and (iii) the Authorized Capital Amendment, and registered Broadway Shareholders will be entitled to receive Broadway Certificates after giving effect to the Consolidation, Name Change and Authorized Capital Amendment;

 

	
(c)

	
effective at ten (10) minutes prior to the Effective Time, Broadway will transfer the Transferred Assets to Spinco and Spinco will assume the Assumed Liabilities in accordance with the Transfer Agreement in consideration for that number of Spinco Common Shares (the “Spinco Distribution Shares”) as is equal to the number of Broadway Common Shares issued and outstanding immediately prior to the Effective Time (for greater certainty, on a pre-Consolidation basis) on such record date as determined by Broadway less the number of Broadway Common Shares transferred to Broadway pursuant to Section 2.1(a) above (for greater certainty, on a pre-Consolidation basis), and Broadway shall be added to the register of Spinco Common Shares maintained by or on behalf of Spinco, and in connection therewith, in accordance with the BCBCA, Spinco shall add to the stated capital account maintained by Spinco for the Spinco Common Shares an amount that shall equal the fair market value of the Spinco Distribution Shares issued to Broadway;

    

    - C-7 - 

    

	
(d)

	
effective at five (5) minutes prior to the Effective Time, the Spinco Distribution Shares will be distributed to the holders of Broadway Common Shares (other than a Dissenting Broadway Shareholder) pursuant to section 2.1(c) above and the names of the Broadway Shareholders shall be added to (and Broadway removed from) the register of Spinco Common Shares maintained by or on behalf of Spinco, and in connection therewith;

 

	
 

	
(i)

	
the Spinco Incorporation Share issued to Broadway on incorporation shall be cancelled for no consideration and as a result thereof:

 

	
 

	
(A)

	
Broadway shall cease to be, and shall be deemed to have ceased to be, the holder of the Spinco Incorporation Share and to have any rights as a holder of the Spinco Incorporation Share; and

 

	
 

	
(B)

	
Broadway shall be removed as the holder of the Spinco Incorporation Share from the register of Spinco Common Shares maintained by or on behalf of Spinco;

 

	
 

	
(ii)

	
Broadway will be deemed to have reduced the stated capital of the Broadway Common Shares with the same effect as if reduced pursuant to Section 74 of the BCBCA, by an amount equal to the fair market value of the Spinco Distribution Shares, and Broadway will be deemed to have effected the reduction of capital of the Broadway Common Shares by being deemed to have paid and distributed the Spinco Distribution Shares to the Broadway Shareholders, other than the Dissenting Broadway Shareholders, on the basis of one Spinco Distribution Share for every one Broadway Common Share one held immediately prior to the Effective Time (for greater certainty, on a pre-Consolidation basis) as a return of capital distribution in-kind; provided that the aggregate reduction in the stated capital for the Broadway Common Shares shall not exceed the aggregate paid-up capital (as that term is used for the purposes of the Tax Act) of the Broadway Common Shares immediately prior to the Effective Time;

 

	
(e)

	
effective at the Effective Time, Delaware Subco, in accordance with the Delaware General Corporation Law, shall merge with and into MindMed and MindMed shall continue as the surviving corporation under the laws of the State of Delaware in the manner set out in Appendix “II” attached to this Plan of Arrangement, and each of the following will occur:

 

	
 

	
(i)

	
in accordance with the constating documents of MindMed, each issued and outstanding MindMed Class B Share, MindMed Class C Share and MindMed Class D Share shall automatically convert into one fully-paid, non-assessable share of MindMed Class A Share;

 

	
 

	
(ii)

	
each issued and outstanding MindMed Class A Share (including all MindMed Class A Shares issued on automatic conversion of the MindMed Class B Shares, MindMed Class C Shares and MindMed Class D Shares set out in subsection 2.1(e)(i) above) shall be exchanged for either (A) one (1) Broadway Common Share or (B) one/hundredth (1/100) of a Broadway Multiple Voting Share (as determined by Broadway and MindMed), and thereafter the MindMed Class A Shares shall be cancelled without any repayment in respect thereof;

 

	
 

	
(iii)

	
each issued and outstanding MindMed Warrant shall be exchanged for one Broadway Replacement Warrant;

 

	
 

	
(iv)

	
each share of common stock, par value $0.001 per share, of Delaware Subco, issued and outstanding immediately prior to the Effective Time, shall be converted into and become one validly issued, fully paid and non-assessable MindMed Common Share of MindMed after the Merger; and

    

    - C-8 - 

    

	
 

	
(v)

	
in consideration of the Broadway Common Shares, Broadway Multiple Voting Shares (as the case may be) and Broadway Replacement Warrants issued pursuant to section 2.1(e)(ii) and (iii) above, respectively, MindMed (as the surviving corporation in connection with the Merger) will issue 1,000 MindMed Common Shares to Broadway and, other than the MindMed Common Shares issued pursuant to Section 2.1(e)(iv) above, such shares shall constitute the only outstanding shares of capital stock of MindMed after the Merger.

 

	
(f)

	
All of the foregoing events are intended to be completed, failing any one of which, none of the foregoing will occur and this Plan of Arrangement shall be null and void and of no further force and effect unless otherwise agreed to by the Parties.

 

ARTICLE 3

CERTIFICATES AND FRACTIONAL SHARES

 

	
3.1

	
Delivery of Securities

 

	
(1)

	
In connection with the delivery of Spinco Distribution Shares pursuant to the Spinout Transaction, as soon as practicable following the Effective Date, Broadway will forward or cause to be forwarded by the Transfer Agent or otherwise, by registered mail (postage prepaid) or hand delivery to Broadway Shareholders determined in accordance with section 2.1(c) as of the Effective Date at the address specified in the register of Broadway Shareholders, certificates and/or direct registration or other electronic book-entry system statements representing the number of Spinco Distribution Shares to be issued to such Broadway Shareholders pursuant to theArrangement.

 

	
(2)

	
In connection with the delivery of Broadway Certificates pursuant to the Name Change, Consolidation and Authorized Capital Amendment:

 

	
 

	
(a)

	
as soon as reasonably practicable following the Effective Date where a registered Broadway Shareholder has delivered to the Transfer Agent a duly completed Letter of Transmittal and the certificates (if any) representing such Broadway Shareholder’s Broadway Common Shares, Broadway shall cause the Transfer Agent:

 

	
 

	
(i)

	
to forward or cause to be forwarded by first class insured mail to the Broadway Shareholders at the address specified in the Letter of Transmittal;

 

	
 

	
(ii)

	
if requested by the Broadway Shareholder in the Letter of Transmittal, to make available at the offices of the Transfer Agent for pick-up by the Broadway Shareholder; or

 

	
 

	
(iii)

	
if the Letter of Transmittal neither specifies an address nor contains a request as described in (ii) above, to forward or cause to be forwarded to the Broadway Shareholder at the address of such Broadway Shareholder as shown on the share register maintained by Broadway immediately prior to the occurrence of the events described in subsection 2.1(b) and (e),

 

the Broadway Certificates required to be delivered to a Broadway Shareholder pursuant to the provisions hereof, and the name of such Broadway Shareholder, shall be entered upon the register of shareholders of Broadway.

 

	
 

	
(b)

	
As soon as reasonably practicable following the Effective Date, where a Broadway Shareholder has not delivered the Broadway Letter of Transmittal and certificates (if any) contemplated by subsection 3.1(1)(a) and has not exercised Dissent Rights in connection with the Arrangement in accordance with Article 5, Broadway shall cause the Transfer Agent to make available at the principal office of the Transfer Agent in Vancouver the Broadway Certificates required to be delivered to such Broadway Shareholder upon presentation of a duly completed Broadway Letter of Transmittal and the certificates (if any) evidencing such Broadway Subordinate Voting Shares or Broadway Multiple Voting Shares, as applicable, and confirmation that such Broadway Shareholder is waiving all rights of dissent in connection with the Arrangement.

    

    - C-9 - 

    

	
(3)

	
In connection with delivery of Broadway Certificates pursuant to the Merger:

 

	
 

	
(a)

	
as soon as reasonably practicable following the Effective Date, where a former registered MindMed Shareholder has delivered to the Transfer Agent a duly completed MindMed Letter of Transmittal and the certificates (if any) representing such former MindMed Shareholder’s MindMed Shares, Broadway shall cause the Transfer Agent:

 

	
 

	
(i)

	
to forward or cause to be forwarded by first class insured mail to the former MindMed Shareholder at the address specified in the Letter of Transmittal;

 

	
 

	
(ii)

	
if requested by the former MindMed Shareholder in the Letter of Transmittal, to make available at the offices of the Transfer Agent for pick-up by the former MindMed Shareholder; or

 

	
 

	
(iii)

	
if the Letter of Transmittal neither specifies an address nor contains a request as described in (ii) above, to forward or cause to be forwarded to the former MindMed Shareholder at the address of such former MindMed Shareholder as shown on the share register maintained by MindMed immediately prior to the occurrence of the events described in subsection 2.1(f),

 

the certificates evidencing the Broadway securities required to be delivered to such former MindMed Shareholder pursuant to the provisions hereof, and the name of such former MindMed Shareholder shall be entered upon the register of shareholders of Broadway.

 

	
 

	
(b)

	
As soon as reasonably practicable following the Effective Date, where a former MindMed Shareholder has not delivered the MindMed Letter of Transmittal and certificates (if any) contemplated by subsection 3.1(3)(a), Broadway shall cause the Transfer Agent to make available at the principal office of the Transfer Agent in Toronto the certificates evidencing the Broadway Subordinate Voting Shares or Broadway Multiple Voting Shares (as applicable) required to be delivered to such Holder upon presentation of a duly completed Letter of Transmittal and the certificates (if any) evidencing such MindMed Shares and confirmation that such former MindMed Shareholder is waiving any rights of dissent in connection with the Arrangement.

 

	
(4)

	
At and after the Effective Date, any certificate formerly representing pre-Consolidation, pre-Name Change and pre-Authorized Capital Amendment Broadway Common Shares, MindMed Class A Shares, MindMed Class B Shares, MindMed Class C Shares, or MindMed Class D Shares shall represent only the right to receive the applicable Broadway Certificate as set out in Section 2.1(b) and the consideration provided in subsection 2.1(d), 2.1(e)(ii) and (iii), as applicable, in accordance with this Plan of Arrangement. If any Broadway Shareholder (in connection with the Consolidation, Name Change and Authorized Capital Amendment) or former MindMed Shareholder (in connection with the Merger) fails for any reason to deliver to the Transfer Agent for cancellation the certificates formerly representing the pre-Consolidation, pre-Name Change or pre-Authorized Capital Amendment Broadway Certificates, MindMed Shares or MindMed Warrants, as the case may be, together with all other required documents in accordance with subsection 3.1(1)(a) or 3.1(3)(a), as the case may be, on or before the fifth anniversary of the Effective Date, such certificates shall, on the fifth anniversary of the Effective Date, cease to represent a claim of any nature whatsoever, shall be deemed to have been surrendered to Broadway and shall be cancelled.

 

	
(5)

	
Broadway may, at its discretion, in connection with the MindMed Financing, cause the Transfer Agent to deliver Broadway Certificates and/or Broadway Replacement Warrants, as applicable, to the Persons specified by Broadway entitled to receive such Broadway Certificates and/or Broadway Replacement Warrants to the addresses provided by such Persons in connection with the MindMed Financing.

    

    - C-10 - 

    

	
(6)

	
To the extent that a conversion or exchange of pre-Consolidation, pre-Name Change or pre-Authorized Amendment Broadway securities or MindMed Shares in accordance with subsection 2.1(b), (d) or (e) would result in a right to a fraction of a Broadway Common Share (or other security, such as stock options, warrants, or other convertible or exercisable security) such right shall be exercisable in respect of such fraction only in combination with other fractions which in the aggregate entitle the holder to acquire a whole Broadway Subordinate Voting Share or Broadway Multiple Voting Share, as applicabe, and thereafter any remaining fraction shall be rounded to the nearest whole number with any fraction of one-half or greater being rounded to the next higher whole number and any fraction of less than one-half being rounded to the next lower whole number; and no fraction of a Broadway Common Share shall be issued.

 

	
3.2

	
Withholding Rights

 

Broadway and the Transfer Agent shall be entitled to deduct and withhold from any amount otherwise payable to any Broadway Shareholder such amounts as Broadway or the Transfer Agent is required or permitted to deduct and withhold with respect to such payment under the Tax Act, the United States Internal Revenue Code of 1986 or any provision of any applicable federal, provincial, state, local or foreign tax law or treaty, in each case, as amended. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes hereof as having been paid to the Broadway Shareholder in respect of which such deduction and withholding was made, provided that such withheld amounts are actually remitted to the appropriate taxing authority.

 

	
3.3

	
No Fractional Shares

 

No fractional Spinco Distribution Shares will be issued. In the event that a Broadway Shareholder would otherwise be entitled to a fractional Spinco Distribution Share hereunder, the number of Spinco Distribution Shares issued to such Broadway Shareholder shall, without any additional compensation, be rounded down to the next lesser whole number of Spinco Distribution Shares. In calculating such fractional interests, all Broadway Common Shares registered in the name of or beneficially held by such Broadway Shareholder or their nominee shall be aggregated.

 

	
3.4

	
No Encumbrances

 

Any distribution of securities pursuant to this Plan of Arrangement shall be free and clear of any Encumbrances.

 

	
3.5

	
Paramountcy

 

From and after the Effective Time (i) this Plan of Arrangement shall take precedence and priority over any and all Broadway Common Shares issued prior to the Effective Time; (ii) the rights and obligations of the registered holders of Broadway Common Shares and Broadway, Spinco, the Transfer Agent and or other depositary therefor in relation thereto, shall be solely as provided for in this Plan of Arrangement; and (iii) all actions, causes of action, claims or proceedings (actual or contingent and whether or not previously asserted) based on or in any way relating to any Broadway Common Shares shall be deemed to have been settled, compromised, released and determined without liability to Broadway or Spinco except as set forth herein.

 

	
3.6

	
Tax Election

 

Broadway
agrees to execute joint elections under subsection 85(1) or 85(2) of the Tax Act or any equivalent provincial legislation
with any Canadian MindMed Shareholder with respect to the exchange by the Canadian MindMed Shareholder of MindMed Shares to
Broadway if such Canadian MindMed Shareholder delivers to Broadway a duly completed election form to make the joint election
pursuant to subsection 85(1) or 85(2) of the Tax Act. Broadway will not be required to execute any election that is received
by Broadway more than 60 days after the Closing Date. If Broadway receives a properly completed election within 60 days of
the Closing Date, Broadway will sign and return such election to the Canadian MindMed Shareholder. Broadway will not be
responsible for the proper completion of any election, except for the obligation of Broadway to sign and return to the
Canadian MindMed Shareholder a duly completed election that is received by Broadway within 60 days of the Closing Date. Each
Canadian MindMed Shareholder shall be solely responsible for filing any such election form with the Canada Revenue Agency and
any applicable provincial governmental entity. Broadway will not be responsible or liable for taxes, interest, penalties,
damages or expenses resulting from the failure by anyone to properly complete or file any election.

    

    - C-11 - 

    

ARTICLE 4 

AMENDMENTS

 

	
4.1

	
 Right to Amend

 

Broadway reserves the right to amend, modify or supplement (or do all of the foregoing) this Plan of Arrangement from time to time and at any time prior to the Effective Date provided that any such amendment, modification and/or supplement must be contained in a written document that is:

 

	
 

	
(a)

	
filed with the Court and, if made following the Broadway Meeting, approved by the Court; and

 

	
 

	
(b)

	
communicated to Broadway Shareholders in the manner required by the Court (if so required).

 

	
4.2

	
Amendment Before the Broadway Meeting

 

Any amendment, modification or supplement to this Plan of Arrangement may be proposed by Broadway at any time prior to or at the Broadway Meeting, with or without any other prior notice or communication, and if so proposed and accepted by the persons voting at the Broadway Meeting (other than as may be required under the Interim Order), shall become part of this Plan of Arrangement for all purposes.

 

	
4.3

	
Amendment After the Broadway Meeting

 

Any amendment, modification or supplement to this Plan of Arrangement which is approved by the Court following the Broadway Meeting shall be effective only:

 

	
 

	
(a)

	
if it is consented to by Broadway; and

 

	
 

	
(b)

	
if required by the Court or applicable law, it is consented to by the Broadway Shareholders voting in the manner directed by the Court.

 

	
4.4

	
Amendment After the Effective Date

 

Any amendment, modification or supplement to this Plan of Arrangement may be made following the Effective Date unilaterally by Broadway, provided that it concerns a matter which, in the reasonable opinion of Broadway, is of an administrative nature required to better give effect to the implementation of this Plan of Arrangement and is not adverse to the financial or economic interest of any holder of Broadway Common Shares or Spinco Common Shares.

    

    - C-12 - 

    

ARTICLE 5

 RIGHTS OF DISSENT

 

	
5.1

	
 Rights of Dissent

 

Pursuant to the Interim Order, registered holders of Broadway Common Shares may exercise rights of dissent (the “Dissent Rights”) under section 238 of the BCBCA, and in the manner as set forth under sections 242 to 247 of the BCBCA, all as modified by this Article 5, the Interim Order and the Final Order, with respect to Broadway Common Shares in connection with the Arrangement, provided that, notwithstanding section 242(1)(a) of the BCBCA, the written notice setting forth the objection of such registered Broadway Shareholders to the Arrangement and exercise of Dissent Rights must be received by Broadway not later than 5:00 p.m. (Vancouver time) on the Business Day that is two Business Days before the Broadway Meeting or any date to which the Broadway Meeting may be postponed or adjourned and provided further that holders who exercise such rights of dissent and who:

 

	
 

	
(a)

	
are ultimately entitled to be paid fair value for their Dissent Shares, which fair value, notwithstanding anything to the contrary contained in the BCBCA, shall be determined immediately prior to the approval of the Arrangement Resolution, shall be deemed to have transferred their Dissent Shares to Broadway as of the Effective Time in consideration for a debt claim against Broadway to be paid the fair value of such Dissent Shares and will not be entitled to any other payment or consideration, including any payment that would be payable under the Arrangement had such holders not exercised their Dissent Rights; and

 

	
 

	
(b)

	
are ultimately not entitled, for any reason, to be paid fair value for their Broadway Common Shares shall be deemed to have participated in the Arrangement, as of the Effective Time, on the same basis as a non-dissenting holder of Broadway Common Shares.

 

	
5.2

	
Recognition of Dissenting Broadway Shareholders

 

In no circumstances shall Broadway or any other Person be required to recognize a Person exercising Dissent Rights unless such Person is a registered holder of those Broadway Common Shares in respect of which such rights are sought to be exercised. From and after the Effective Time, neither Broadway nor any other Person shall be required to recognize a Dissenting Broadway Shareholder as a shareholder of Broadway and the names of the Dissenting Broadway Shareholders shall be deleted from the register of holders of Broadway Common Shares previously maintained or caused to be maintained by Broadway.

 

	
5.3

	
General Dissent Rights

 

For greater certainty, in addition to any other restrictions in the BCBCA, no Broadway Shareholders who vote in favour, or instruct a proxyholder to vote in favor, of the Arrangement Resolution shall be entitled to exercise Dissent Rights.

 

	
5.4

	
Deduction against Stated Capital Account

 

The aggregate of all amounts paid to Broadway Shareholders by Broadway in respect of the Broadway Common Shares for which Dissent Rights are exercised in accordance with Article 5 hereof shall be deducted from the stated capital account maintained by Broadway for the Broadway Common Shares.

 

ARTICLE 6 

FURTHER ASSURANCES

 

		6.1	Further Assurances

 

Notwithstanding that the transactions and events set out herein shall occur and be deemed to occur at the time and in the manner set out in this Plan of Arrangement without any further act or formality, Broadway and Spinco shall make, do and execute, or cause to be made, done or executed, all such further acts, deeds, agreements, transfers, assurances, instruments or documents as may reasonably be required by any of them in order to further document or evidence any of the transactions or events set out herein.

 

ARTICLE 7 

TERMINATION

 

		7.1	Termination

 

Notwithstanding
any prior approvals by the Court or by the Broadway Shareholders, the Board of Directors of Broadway may decide not to
proceed with the Arrangement and to revoke the Arrangement Resolution adopted at the Broadway Meeting without further
approval of the Court or the Broadway Shareholders.

    

    - C-13 - 

    

	
7.1

	
Automatic Termination

 

This Plan of Arrangement shall automatically terminate and be of no further force and effect upon the termination of the Arrangement Agreement in accordance with its terms.

    

    - C-14 - 

    

SCHEDULE “A”

 

TRANSFER AGREEMENT

    

    - C-15 - 

    

TRANSFER AGREEMENT

 

THIS AGREEMENT is made on the Effective Date to be effective as of ten (10) minutes prior to the Effective Time (the “Transfer Agreement Effective Time”).

 

BETWEEN:

 

BROADWAY GOLD MINING LTD.

 

(“Broadway”)

 

AND:

 

MADISON METALS INC.

 

(“Subco”)

 

BACKGROUND:

 

A.        Broadway, Subco (a wholly owned subsidiary of Broadway), Broadway Delaware Subco Inc. and Mind Medicine, Inc. (“MindMed”) have entered into an Arrangement Agreement effective as of October 11, 2019 (the “Arrangement Agreement”) in connection with the terms of which, among other things, Broadway and Subco are proposing to carry out certain transactions under the arrangement provisions of section 288 of the Business Corporations Act (British Columbia) (the “Plan of Arrangement”) pursuant to which Broadway has agreed to sell and assign, and Subco has agreed to purchase, all of Broadway’s right, title, interest and obligations in and to the Transferred Assets as of the Effective Date, on the terms and conditions contained in this Agreement.

 

B.         As partial consideration for the purchase of the Transferred Assets, Subco has agreed to assume, and Broadway has agreed to transfer and assign, as of the Transfer Agreement Effective Time, all of Broadway’s obligations and liabilities under the Assumed Liabilities, on the terms and conditions contained in this Transfer Agreement.

 

C.         In consideration of the transfer of the Transferred Assets, Subco will issue common shares in its capital to Broadway, which common shares will be distributed on a pro-rata basis to Broadway’s shareholders in connection with the Plan of Arrangement.

 

NOW THEREFORE in consideration of the premises, mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged) Broadway and Subco covenant and agree as follows:

 

	
1.

	
DEFINED TERMS

 

	
1.1

	
Any capitalized terms used herein but not defined herein will have the meaning ascribed to such term in the Arrangement Agreement. Where used herein or in any schedule or amendment hereto, the following terms shall have the following meanings respectively:

 

	
 

	
(a)

	
“Agreed Amount” has the meaning ascribed thereto in the Arrangement Agreement;

 

	
 

	
(b)

	
“Arrangement” has the meaning ascribed thereto in the Arrangement Agreement;

 

	
 

	
(c)

	
“Arrangement Agreement” has the meaning ascribed thereto in the Recitals;

    

    - C-16 - 

    

	
 

	
(d)

	
“Assessment”means an assessment, reassessment or any other formal claim in respect of Reorganization Taxes made by any Taxation Authority;

 

	
 

	
(e)

	
“Assumed Liabilities” means all obligations and liabilities of Broadway relating to the Transferred Assets including, without limitation, those obligations and liabilities of Broadway relating to the Transferred Assets set out in Schedule “B”;

 

	
 

	
(f)

	
“Broadway Common Shares” has the meaning ascribed thereto in the Arrangement Agreement;

 

	
 

	
(g)

	
“Broadway Shareholders” has the meaning ascribed thereto in the Arrangement Agreement;

 

	
 

	
(h)

	
“Business Day” has the meaning ascribed thereto in the Arrangement Agreement;

 

	
 

	
(i)

	
“Contract” means any agreement, contract, indenture, lease, deed of trust, licence, option, undertaking, promise or any other commitment or obligation, whether oral or written, express or implied;

 

	
 

	
(j)

	
“Effective Date” has the meaning ascribed thereto in the Arrangement Agreement;

 

	
 

	
(k)

	
“Effective Time” has the meaning ascribed thereto in the Arrangement Agreement;

 

	
 

	
(l)

	
“Employees” means employees and independent contractors of Broadway;

 

	
 

	
(m)

	
“Expenses” means all reasonable out-of-pocket costs, outlays and expenses incurred by Broadway to a third party in respect of a Tax Proceeding or an Assessment including related contests;

 

	
 

	
(n)

	
“Final
Determination” in respect of an Assessment means (i) negotiated compromise or settlement of such Assessment with
the relevant Taxation Authority, or (ii) a final judgment of a court of competent jurisdiction in respect of such Assessment
from which no appeal is taken within the time limit therefor

 

	
 

	
(o)

	
“Madison Project” has the meaning ascribed thereto in the Arrangement Agreement;

 

	
 

	
(p)

	
“Montana Subsidiary” has the meaning ascribed thereto in the Arrangement Agreement;

 

	
 

	
(q)

	
“Montana Subsidiary Shares” means all of the issued and outstanding securities in the capital of the Montana Subsidiary;

 

	
 

	
(r)

	
“Reorganization” means the transactions described in Section 2.1 of the Arrangement Agreement, and the transfer of the Transferred Assets to Subco and the distribution of Subco Consideration Shares to Broadway Shareholders pursuant to the Arrangement;

 

	
 

	
(s)

	
“Reorganization Taxes” means all the Taxes payable by Broadway in respect of, arising from or as a result of the Reorganization, net of all tax credits permitted under

 

	
 

	
(i)

	
the Tax Act; and

 

	
 

	
(ii)

	
applicable provincial tax laws;

 

in respect of Taxes imposed by any country other than Canada and any governmental subdivision within such country;

    

    - C-17 - 

    

	
 

	
(t)

	
“Subco Consideration Shares” has the meaning ascribed thereto in subsection 2.3(b);

 

	
 

	
(u)

	
“Non-Assignable Rights” has the meaning ascribed thereto in subsection 2.6;

 

	
 

	
(v)

	
“notice” has the meaning ascribed thereto in subsection 8.1;

 

	
 

	
(w)

	
“Purchase Price” has the meaning ascribed thereto in subsection 2.2;

 

	
 

	
(x)

	
“Tax Act” has the meaning ascribed thereto in the Arrangement Agreement;

 

	
 

	
(y)

	
“Taxation Authority” means any government, agency or authority which is entitled to impose or collect Taxes and shall, for greater certainty, include but not be limited to, the federal government of Canada and of any country other than Canada and any provincial, state, or other governmental subdivision within Canada or within any country other than Canada;

 

	
 

	
(z)

	
“Tax Proceeding” means any audit, examination, investigation or similar proceeding by a Taxation Authority related to the Reorganization;

 

(aa) “Taxes” has the meaning ascribed thereto in the Arrangement Agreement;

 

(bb)
 “Transfer Agreement Effective Time” has the meaning set out on the face page hereof;

 

(cc) “Transferred
Assets” has the meaning more particularly set out in Schedule “A” hereto;

 

(dd)
 “Transmission” has the meaning ascribed thereto in subsection 8.1(c).

 

	
2.

	
 TRANSFER AND ASSUMPTION OF ASSETS AND LIABILITIES

 

	
2.1

	
Transferred Assets: Broadway hereby transfers, sells and assigns to Subco and Subco hereby purchases from Broadway, as of the Effective Date, all of Broadway’s right, title and interest in and to the Transferred Assets, effective as of the Transfer Agreement Effective Time.

 

	
2.2

	
Purchase Price Allocation: The aggregate purchase price payable by Subco to Broadway for the Transferred Assets shall be the fair market value of such Transferred Assets which the parties have agreed to be C$3,750,000 (the “Purchase Price”).

 

	
2.3

	
 Payment of Purchase Price: Subco hereby pays the Purchase Price to Broadway in full by issuing to Broadway, as fully paid and non-assessable shares, such number of Subco Common Shares as are required to be issued so that, after such issuance, the number of outstanding Subco Common Shares is equal to the number of Broadway Common Shares outstanding at the Effective Date (excluding Broadway Common Shares held by shareholders dissenting to the Arrangement) (the “Subco Consideration Shares”).

 

	
2.4

	
No Assumption of Obligations or Liabilities of Broadway: Except for the Assumed Liabilities, Subco will not assume any obligations or liabilities of Broadway.

    

    - C-18 - 

    

	
2.5

	
Indemnity with respect to Assumed Liabilities: In connection with Subco’s assumption of the Assumed Liabilities, Subco shall:

 

	
 

	
(a)

	
indemnify and save Broadway and MindMed harmless from all and any costs, damages, or expenses that may be paid or incurred because of failure of Subco to perform, discharge, observe and fulfill, all or any of the obligations, covenants, agreements, and obligations forming part of the Assumed Liabilities; and

 

	
 

	
(b)

	
if any suit or action is commenced against Broadway and/or MindMed in connection with any of the Assumed Liabilities or in respect of any covenant, condition, agreement, or obligation assumed hereby, assume the conduct of such case and provide Broadway and MindMed such further indemnification from all and any costs, damages, or expenses as Broadway and/or MindMed may reasonably require.

 

	
2.6

	
Assignment of Contracts: Nothing in this Agreement will be construed as an assignment of, or an attempt to assign to Subco, any Contract which as a matter of law or by its terms is (i) not assignable, or (ii) not assignable without the approval or consent of the issuer thereof or the other party or parties thereto, without first obtaining such approval or consent (collectively “Non- Assignable Rights”). In connection with such Non-Assignable Rights, Broadway will, at the expense of Subco,

 

	
 

	
(a)

	
maintain the existence of the Non-Assignable Rights in trust for Subco, to the extent lawful;

 

	
 

	
(b)

	
comply with the terms and provisions of the Non-Assignable Rights as agent for Subco, to the extent lawful;

 

	
 

	
(c)

	
apply for and use all reasonable commercial efforts to obtain consents or approvals contemplated by the Contracts for the Non-Assignable Rights, in a form satisfactory to Subco, acting reasonably;

 

	
 

	
(d)

	
co-operate with Subco in any reasonable and lawful arrangements designed to provide the benefits of such Non-Assignable Rights to Subco;

 

	
 

	
(e)

	
enforce any rights of Broadway arising from such Non-Assignable Rights against the issuer thereof or the party or parties thereto;

 

	
 

	
(f)

	
take all such actions and do, or cause to be done, all such things at the request of Subco as will reasonably be necessary and proper in order that the value of the Non-Assignable Rights will be preserved and will enure to the benefit of Subco; and

 

	
 

	
(g)

	
pay over to Subco all monies collected by or paid to Broadway in request of such Non- Assignable Rights.

 

	
2.7

	
Sales Tax: Subco will be responsible for and will pay all stamp duties or other transfer taxes in respect of the transactions contemplated under this Agreement.

    

    - C-19 - 

    

	
3.

	
 REPRESENTATIONS AND WARRANTIES

 

	
3.1

	
Broadway: Broadway hereby represents and warrants to Subco and acknowledges and confirms that Subco is relying upon Broadway’s representations and warranties in entering into this Agreement, that:

 

	
 

	
(a)

	
Incorporation - Broadway is duly incorporated and validly existing under the laws of Province of British Columbia;

 

	
 

	
(b)

	
Enforceability - This Agreement constitutes a legal, valid and binding obligation of Broadway enforceable against Broadway in accordance with its terms except as may be limited by laws of general application affecting the rights of creditors, and subject to the availability of any equitable remedy in any particular instance;

 

	
 

	
(c)

	
Authority - Broadway has sufficient right, authority and capacity to enter into this Agreement and to carry out the transactions contemplated in this Agreement in accordance with the terms of this Agreement; and

 

	
 

	
(d)

	
Residency - Broadway is not a non-resident of Canada within the meaning of the Income Tax Act (Canada).

 

	
3.2

	
Subco: Subco represents and warrants to Broadway and acknowledges and confirms that Broadway is relying upon Subco’s representations and warranties in entering into this Agreement, that:

 

	
 

	
(a)

	
Incorporation - Subco is duly incorporated and validly existing under the laws of Province of British Columbia;

 

	
 

	
(b)

	
Enforceability - This Agreement constitutes a legal, valid and binding obligation of Subco enforceable against Subco in accordance with its terms except as may be limited by laws of general application affecting the rights of creditors, and subject to the availability of any equitable remedy in any particular instance;

 

	
 

	
(c)

	
Authority - Subco has sufficient right, authority and capacity to enter into this Agreement and to carry out the transactions contemplated in this Agreement in accordance with the terms of this Agreement.

 

	
3.3

	
Survival: All of the representations and warranties in Sections 3.1 and 3.2 of this Agreement will survive the Effective Time and, notwithstanding the closing of the transactions provided for in this Agreement, will continue in full force and effect.

 

	
4.

	
 TRANSFER OF EMPLOYEES

 

Subco shall be entitled to offer employment to any Employees of Broadway and Subco will, after the Effective Date, be responsible for all of Broadway’s and Subco’s obligations to such Employees who become employees of Subco after the Effective Date.

 

	
5.

	
 COVENANTS

 

	
5.1

	
Addition to Capital Account: With respect to the issuance of the Subco Consideration Shares, Subco will add to the stated capital for the outstanding Subco Common Shares the amount of the Purchase Price.

    

    - C-20 - 

    

	
6.

	
 INDEMNIFICATION

 

	
6.1

	
 Indemnity:

 

	
 

	
(a)

	
Subco shall indemnify Broadway and MindMed from and against, and pay to Broadway, in accordance with the terms of this Agreement, all Reorganization Taxes and Expenses. Expenses shall be paid by Subco to Broadway and/or MindMed, as applicable, as soon as Subco is advised of the amount thereof with reasonable supporting evidence. If any Taxation Authority should issue an Assessment claiming an amount of Reorganization Taxes, Subco shall pay such amount directly to the relevant Taxation Authority on behalf of Broadway (to the extent not previously paid by Subco), which payment shall be made at such time as such amount is required by applicable law to be paid, provided that Subco may at any time pay to the relevant Taxation Authority, on behalf of Broadway, the full amount of Reorganization Taxes claimed pursuant to an Assessment prior to the Final Determination of the Assessment, and Subco shall not be responsible for interest or penalties incurred after Subco has made such payment.

 

	
 

	
(b)

	
In addition to any amount due to Broadway on account of Reorganization Taxes pursuant to Section 6.1(a), Subco shall pay to Broadway within ten (10) Business Days after receipt from Broadway of a written request for payment, accompanied by supporting calculations, such additional amount as may be necessary to provide to Broadway the full amount payable by Broadway on account of the Reorganization Taxes after providing for any applicable Taxes payable on the amount payable to Broadway pursuant to Section 6.1(a) or this Section 6.1(b). For greater certainty, for purposes of determining the quantum of indemnification required hereunder on an after-tax basis, Reorganization Taxes and amounts payable under this Section 6.1(b) shall be determined as if Broadway had no deductions available to it with which to reduce or offset its income, taxable income or Taxes payable, if any, attributable to the indemnification required hereunder, other than any amounts actually deducted by Broadway in computing taxable income for its taxation year ending immediately prior to the Transfer Agreement Effective Time in respect of non-capital losses of a subsequent taxation year.

 

	
7.

	
 CLOSING

 

	
7.1

	
Closing: The transfer of the Transferred Assets and the payment of the Purchase Price will be closed as of the Effective Date at such place as determined by the parties hereto.

 

	
7.2

	
Deliveries by Broadway: Broadway will deliver or cause to be delivered to Subco:

 

	
 

	
(a)

	
Bills of Sale, Consents, etc.: all certificates representing the Montana Subsidiary Shares, any additional deeds, bills of sale, transfers and assignments, consents and instruments that are necessary to effectively transfer all of Broadway’s right, title and interest in and to the Transferred Assets to Subco, including, without limitation, a bill of sale in respect of the assets set out under the heading “Transferred Assets” in Schedule “A”; and

 

	
 

	
(c)

	
Other Documents: all other documents, agreements or certificates as may be reasonably requested by Subco to give effect to the terms of this Agreement.

    

    - C-21 - 

    

	
7.3

	
Deliveries by Subco: Subco will deliver to cause to be delivered to Broadway:

 

	
 

	
(a)

	
Subco Consideration Shares: a share certificate representing the Subco Consideration Shares registered in the name of Broadway; and

 

	
 

	
(b)

	
Other Documents: all other documents, agreements or certificates as may be reasonably requested by Broadway to give effect to the terms of this Agreement.

 

	
8.

	
 PASSING OF PROPERTY

 

This Agreement will, without any further act or formality, operate as a transfer and assignment of the Transferred Assets to Subco with effect as of ten (10) minutes prior to Effective Time on the Effective Date. If any of the Transferred Assets come into the possession of Broadway after the Effective Date, are not effectively transferred or assigned to Subco or require the consent of a third party to such transfer, then Broadway will hold any such Transferred Assets as bare trustee in trust for and at the sole cost of Subco in accordance with Section 2.5 until possession thereof has been delivered by Broadway, they have been effectively transferred to Subco or until such third party consent has been obtained. For greater certainty, this Agreement will have force and effect only if all of the transactions set out in the Arrangement Agreement are completed or waived by the party entitled to waiver thereof.

 

	
9.

	
 NOTICE

 

	
9.1

	
Any notice, demand or other communication (in this Section 8, a “notice”) to be given or made under this Agreement must be in writing and is sufficiently given or made if:

 

	
 

	
(a)

	
delivered in person and left with a receptionist or other responsible employee of the relevant party at the applicable address set forth below;

 

	
 

	
(b)

	
sent by prepaid courier service or (except in the case of actual or apprehended disruption of postal services) mail; or

 

	
 

	
(c)

	
sent by facsimile transmission, with confirmation of transmission by the transmitting equipment (a “Transmission”);

 

in the case of notice to Broadway

 

277 Lakeshore Road East, Suite 403

Oakville, ON 

L6J 1H9

 

Attention:       
Duane Parnham 

Email:              duane.parnham@gmail.com

 

in the case of notice to Subco

 

277 Lakeshore Road East, Suite 403

Oakville, ON 

L6J 1H9

 

Attention:       
Duane Parnham 

Email:              duane.parnham@gmail.com

    

    - C-22 - 

    

	
9.2

	
Any notice sent in accordance with this Section 8 shall be deemed to have been received:

 

	
 

	
(a)

	
if delivered during normal business hours on a Business Day in the place where the notice is received, on the date of delivery;

 

	
 

	
(b)

	
if sent by mail, on the fifth Business Day in the place where the notice is received after mailing, or, in the case of disruption of postal service, on the fifth Business Day after cessation of that disruption;

 

	
 

	
(c)

	
if sent by facsimile during normal business hours on a Business Day in the place where the Transmission is received, on the same day that it was received by Transmission, on production of a Transmission report from the machine from which the facsimile was sent which indicates that the facsimile was sent in its entirety to the relevant facsimile number of the recipient; or

 

	
 

	
(d)

	
if sent in any other manner, on the date of actual receipt;

 

except that any notice delivered in person or sent by Transmission not on a Business Day or after normal business hours on a Business Day, in each case in the place where the notice is received, shall be deemed to have been received on the next succeeding Business Day in the place where the notice is received.

 

	
9.3

	
Any party may change its address for notice by giving notice to the other parties in accordance with this Section 8.

 

	
10.

	
 MISCELLANEOUS

 

	
10.1

	
Currency: Unless otherwise indicated, all dollar amounts referred to in this Agreement are in lawful money of Canada.

 

	
10.2

	
Further Assurances: Each party promptly do, execute, deliver or cause to be done, executed or delivered all further acts, documents and matters in connection with this Agreement (including, without limitation, carrying out each party’s obligations under section 2.6), that the other parties may reasonably require, for the purposes of giving effect to this Agreement.

 

	
10.3

	
Governing Law: This Agreement will be governed by and interpreted in accordance with the laws of the Province of British Columbia and the laws of Canada applicable in British Columbia.

 

	
10.4

	
Enurement: This Agreement will be binding upon and enure to the benefit of the parties to this Agreement and their respective successors and permitted assigns; provided that no party may assign this Agreement without the prior written consent of the other parties (such consent not to be unreasonably withheld).

 

	
10.5

	
Time of the Essence: Time is of the essence of this Agreement.

 

	
10.6

	
Severability: If, in any jurisdiction, any provision of this Agreement or its application to any party or circumstance is restricted, prohibited or unenforceable, that provision shall, as to that jurisdiction, be ineffective only to the extent of that restriction, prohibition or unenforceability without invalidating the remaining provisions of this Agreement, without affecting the validity or enforceability of that provision in any other jurisdiction and, if applicable, without affecting its application to the other party or circumstances. The parties shall engage in good faith negotiations to replace any provision which is so restricted, prohibited or unenforceable with an unrestricted and enforceable provision, the economic effect of which comes as close as possible to that of the restricted, prohibited or unenforceable provision which it replaces.

    

    - C-23 - 

    

	
10.7

	
Entire Agreement: This Agreement, together with the Arrangement Agreement, constitutes the entire agreement between the parties and supersedes all previous communications, representations and agreements, whether verbal or written, between the parties with respect to the subject matter of this Agreement.

 

	
10.8

	
Counterparts: This Agreement may be executed in any number of counterparts, each of which when executed and delivered (by facsimile or otherwise) will be deemed to be an original, and all of which together will constitute one and the same document.

 

[The remainder of this page has deliberately been left blank.]

    

    - C-24 - 

    

IN WITNESS WHEREOF the parties hereto have entered into this Agreement with effect as of ten (10) minutes prior the Effective Time, but executed as of this 11th day of October, 2019.

 

	
 

	
BROADWAY GOLD MINING LTD.

	
 

	
 

	
 

	
 

	
Per:

	
 

	
 

	
 

	
 

	
 

	
 

	
(signed) “Broadway Gold Mining Ltd.”)

	
 

	
 

	
 

	
 

	
MADISON METALS INC.

	
 

	
 

	
 

	
 

	
Per:

	
(signed) “Madison Metals Inc.”

	
 

	
 

	
 

	
 

	
 

	
 

    

    - C-25 - 

    

SCHEDULE “A” 

 

TRANSFERRED ASSETS

 

The Transferred Assets consist of all of Broadway’s right, title and interest in and to:

 

	
(1)

	
the Madison Subsidiary and the Madison Project;

 

	
(2)

	
all factual, non-proprietary, non-interpretive data directly derived from the Madison Project, including, but not limited to, technical, economic, geological, and any studies, reports, mining models, assays, drill core, drill-hole data, geochemical reports, recovery reports and any other information directly derived from the Madison Project.”

    

    - C-26 - 

    

SCHEDULE “B” 

 

ASSUMED LIABILITIES

 

The Assumed Liabilities consist of:

 

	
(1)

	
all obligations and liabilities of Broadway in connection with the Madison Project, including, for greater certainty, pursuant to the Earn-In with Option to Joint Venture Agreement effective April 30, 2019 between Kennecott Exploration Company, Montana Subsidiary and Broadway;

 

	
(2)

	
all liabilities of Broadway in connection with or related to the Montana Subsidiary existing as of the Effective Time;

 

	
(3)

	
all liabilities associated with Broadway’s mineral exploration and development business as conducted prior to the completion of the Arrangement, including, for greater certainty, any liabilities associated with the terminated acquisition of an 85% interest in a land package in Namibia, Africa as publicly announced on June 3, 2019;

 

	
(4)

	
any liabilities or obligations of Broadway in excess of the Agreed Amount pursuant to subsection 4.9(a)(iii) of the Arrangement Agreement; and

 

	
(5)

	
the amount of US$50,000 to be paid to MindMed pursuant to subsection 4.9(a)(iv) of the Arrangement Agreement.

    

    - C-27 - 

    

APPENDIX “I” 

 

ARRANGEMENT RESOLUTION

 

BE IT RESOLVED AS A SPECIAL RESOLUTION OF THE BROADWAY SHAREHOLDERS THAT:

 

	
 

	
1.

	
the issued and outstanding common shares of Broadway Gold Mining Ltd. (“Broadway”) be consolidated on the basis of each eight (8) of the issued and outstanding common shares of Broadway (the “Broadway Common Shares”) into one (1) Broadway Common Share (the “Consolidation”), provided that holders of Broadway Common Shares on the date that such consolidation becomes effective shall not be entitled to receive any fractional common share following the Consolidation;

 

	
 

	
2.

	
the articles and Notice of Articles of Broadway be amended to change the name of Broadway to “Mind Medicine Inc.”, or such other name as the Board of Directors may determine (the “Name Change”);

 

	
 

	
3.

	
the articles and Notice of
Articles of Broadway be amended to (i) create a class of multiple voting shares (the “Broadway Multiple
Voting Shares”) having the terms and conditions set out in Schedule “E” to the Arrangement Agreement
(as defined below) and (ii) change the name of the existing Broadway Common Shares to “subordinate voting shares”
(the “Broadway Subordinate Voting Shares”) but otherwise not amending or affecting any of the terms and
conditions of the Broadway Common Shares (the “Authorized Capital Amendment”);

 

	
 

	
4.

	
The arrangement (the “Arrangement”) under section 288 of the Business Corporations Act (British Columbia) (the “BCBCA”) involving Broadway, Madison Metals Inc. (“Spinco”), Broadway Delaware Subco Inc. (“Delaware Subco”) and Mind Medicine, Inc. (“MindMed”), all as more particularly described and set forth in the management information circular (the “Circular”) of Broadway dated                                , 2019 accompanying the notice of meeting (as the Arrangement may be, or may have been, modified or amended in accordance with its terms), is hereby authorized, approved and adopted.

 

	
 

	
5.

	
The plan of arrangement (the “Plan of Arrangement”), implementing the Arrangement, the full text of which is appended to the Circular (as the Plan of Arrangement may be, or may have been, modified or amended in accordance with its terms), is hereby authorized, approved and adopted.

 

	
 

	
6.

	
The arrangement agreement (the “Arrangement Agreement”) between Broadway, Spinco, Delaware Subco and MindMed dated October 11, 2019 and all the transactions contemplated therein, the actions of the directors of Broadway in approving the Arrangement and the actions of the directors and officers of Broadway in executing and delivering the Arrangement Agreement and any amendments thereto are hereby confirmed, ratified, authorized and approved.

 

	
 

	
7.

	
Notwithstanding that this resolution has been passed (and the Consolidation, Name Change, Authorized Capital Amendment and Arrangement approved and agreed to) by the shareholders of Broadway or that the Arrangement has been approved by the Supreme Court of British Columbia, the directors of Broadway are hereby authorized and empowered, without further notice to, or approval of, the shareholders of Broadway:

 

	
 

	
(a)

	
to amend the Arrangement Agreement or the Plan of Arrangement to the extent permitted by the Arrangement Agreement or the Plan of Arrangement; or

 

	
 

	
(b)

	
subject to the terms of the Arrangement Agreement, not to proceed with the Consolidation, the Name Change, the Authorized Capital Amendment or the Arrangement at any time prior to the Effective Time (as defined in the Arrangement Agreement).

 

	
 

	
8.

	
If any holder of Broadway Common Shares in connection with the Consolidation or any recipient of Broadway Multiple Voting Shares or Broadway Subordinate Voting Shares (as the case may be) in connection with the Arrangement would otherwise be entitled to receive a fractional common share upon giving effect to the Consolidation, the Authorized Capital Amendment and/or the Arrangement, such fractional interest shall be rounded up to the nearest whole common share if the fractional interest is equal to or greater than 0.5 of a Broadway Common Share and rounded down to the nearest whole common share if the fractional interest is less than 0.5 of a Broadway Common Share;

    

    - C-28 - 

    

	
 

	
9.

	
Any one director or officer of Broadway is hereby authorized and directed, for and on behalf and in the name of Broadway, to execute and deliver, whether under the corporate seal of Broadway or otherwise, all such deeds, instruments, assurances, agreements, forms, waivers, notices, certificates, confirmations and other documents and to do or cause to be done all such other acts and things as in the opinion of such director or officer may be necessary, desirable or useful for the purpose of giving effect to these resolutions (including, without limitation, the delivery of articles of arrangement or articles of amendment in the prescribed form), the Consolidation, the Name Change, the Authorized Capital Amendment, the Arrangement Agreement and the completion of the Plan of Arrangement in accordance with the terms of the Arrangement Agreement, including:

 

	
 

	
(a)

	
all actions required to be taken by or on behalf of Broadway, and all necessary filings and obtaining the necessary approvals, consents and acceptances of appropriate regulatory authorities; and

 

	
 

	
(b)

	
the signing of the certificates, consents and other documents or declarations required under the Arrangement Agreement or otherwise to be entered into by Broadway;

 

such determination to be conclusively evidenced by the execution and delivery of such document, agreement or instrument or the doing of any such act or thing.

    

    - C-29 - 

    

APPENDIX “II”

 

MERGER OF MIND MEDICINE, 
INC. AND BROADWAY DELAWARE SUBCO INC.

 

	
1.

	
The Articles and By-Laws for MindMed after the Merger shall be in the forms of the Articles and By- Laws attached hereto.

 

	
2.

	
The registered and records office of MindMed after the Merger, until changed in accordance with the Delaware General Corporation Law, shall be located at c/o Cogency Global Inc., 850 New Burton Rd., Suite 201, Dover County of Kent, Delaware 19904.

 

	
3.

	
 The minimum and maximum number of directors of MindMed after the Merger, until changed in accordance with the articles of MindMed after the Merger, shall be one and fifteen, respectively, and shall hereby be fixed at three.

 

	
4.

	
The full names, addresses and occupations of the first directors of MindMed after the Merger are set out in Exhibit A attached hereto and each such director shall hold office until he ceases to hold office as specified in the Delaware General Corporation Law or the By-Laws of MindMed.

 

	
5.

	
The full names and offices of the officers of MindMed after the Merger are set out in Exhibit A attached hereto and the said officers shall hold office at the pleasure of the directors of MindMed after the Merger.

 

	
6.

	
The first annual meeting of MindMed after the Merger shall be held within 18 months after the Merger in accordance with the Delaware General Corporation Law.

 

	
7.

	
The financial year of MindMed after the Merger shall end on December 31 of each year, until changed by the directors of MindMed after the Merger.

 

	
8.

	
The rights of creditors against the property, rights and assets of Broadway Delaware Subco Inc. and all liens on its respective property, rights and assets shall be unimpaired by the Merger and all debts, contracts, liabilities and duties of Broadway Delaware Subco Inc. immediately prior to the Merger shall attach to MindMed and may be enforced against it.

 

	
9.

	
No action or proceeding by or against Broadway Delaware Subco Inc. shall abate or be affected by the Merger, but for all purposes of any such action or proceeding Broadway Delaware Subco Inc. shall be deemed still to exist or MindMed may be substituted in such action or proceeding in place hereof.

 

	
10.

	
MindMed shall be seized of and shall hold and possess all the property, rights and interests and shall be subject to all the debts, liabilities and obligations of Broadway Delaware Subco Inc..

 

	
11.

	
The directors of MindMed shall have full power to carry the Merger into effect and to perform such acts as are necessary or proper for such purposes.

 

	
12.

	
The auditors of MindMed after the Merger, until the first annual general meeting of the Holders of MindMed after the Merger, shall be Ernst & Young, LLP, unless such Chartered Accountants resign or are removed in accordance with the provisions of the Delaware General Corporation Law.

    

    - D-1 - 

    

 APPENDIX D 

INTERIM ORDER

 

(begins on following page)

     

     

    

No. S-200617
Vancouver Registry

 

IN THE SUPREME COURT OF BRITISH COLUMBIA

 

IN THE MATTER OF SECTION 288 OF THE

BUSINESS CORPORATIONSACTS.B.C. 2002, c. 57, AS AMENDED

 

IN THE MATTER OF A PROPOSED ARRANGEMENT AMONG

BROADWAY GOLD MINING LTD. AND ITS SHAREHOLDERS,

 MADISON METALS INC., BROADWAY DELAWARE SUBCO INC.

AND MIND MEDICINE, INC.

 

BROADWAY GOLD MINING LTD.

 

PETITIONER

 

ORDER MADE AFTER APPLICATION

 

	
BEFORE

	
)

	
The 20th day of January, 2020

	
[Illegible]

	
)

	
 

	
 

	
)

	
 

 

ON THE APPLICATION of the Petitioner, Broadway Gold Mining Ltd. (“Broadway” or the “Petitioner”), dated January 16, 2020 without notice, coming on for hearing at 800 Smithe Street, Vancouver, British Columbia on January 20, 2020 and on hearing Teresa M. Tomehak, counsel for the Petitioner.

 

THIS COURT ORDERS that:

 

Definitions

 

	
1.

	
All definitions used in this Interim Order, unless otherwise defined herein, shall have the meaning ascribed thereto in the Petition.

 

The Meeting

 

	
2.

	
The Petitioner be permitted to convene, hold and conduct the annual and special meeting (the “Meeting”) of the Broadway Shareholders on or about February 19, 2020, to inter alia, consider and, if deemed advisable, pass with or without amendment, a special resolution (the “Arrangement Resolution”), authorizing, approving and agreeing to adopt a plan of arrangement (the “Arrangement”) among Broadway, the Broadway Shareholders, Madison Metals Inc. (“Spinco”), Broadway Delaware Subco Inc.

     

    - 2 -

    

	
 

	
(“Delaware
Subco”) and Mind Medicine, Inc. (“MindMed”) as described in the Plan of Arrangement attached
as Appendix C to the draft management information circular (the “Circular”) which is attached as Exhibit “A”
to the Affidavit #1 of Roger Laine sworn on January 14, 2020 (the “Laine Affidavit #1 ”), and to transact
such other business as may properly come before the Meeting. 

	
 

	
 

	
3.

	
The
Meeting shall be called, held and conducted in accordance with the provisions of the Business Corporations Act (British
Columbia), S.B.C. 2002, c. 57 (the “BCBCA”), applicable
securities legislation, the articles of the Petitioner, and the Circular, all subject to the terms of this Order, and any
further order of this Court, and the rulings and directions of the Chair of the Meeting, such rulings and directions not to
be inconsistent with this Interim Order.

 

	
4.

	
The
record date (the “Record
Date”) for
determination of the Broadway Shareholders entitled to notice of, and to vote at, the Meeting shall be January 14,
2020. The Record Date will not change in respect of
any adjournment
of post poncment of the Meeting.

 

 Notice of Meeting

 

	
5.

	
The following information (the “Meeting Materials”):

	
 

	
 

	
 

	
(a)

	
the Circular;

	
 

	
 

	
 

	
 

	
(b)

	
the Form of Proxy or Voting
Instruction Form; and

	
 

	
 

	
 

	
 

	
(c)

	
the Letter of Transmittal;

	
 

	
 

	
 

	
 

	
in substantially
the same form referred to in the Laine Affidavit #1, with such amendments and inclusions thereto as counsel for the
Petitioner may advise are necessary or desirable, provided that such amendments and inclusions are not inconsistent with the
terms of this Interim Order, shall be sent to the following:

 

	
 

	
(i)

	
the Registered Shareholders at the close of
business on the Record Date, at
least twenty-one (21) days prior to the date of the Meeting, excluding the date of sending and the date of the Meeting, by
one or more of the following methods:

 

	
 

	
(A)

	
by pre-paid ordinary or first class mail at the addresses of
the Broadway Shareholders as they appear on the central securities register of Broadway, or its registrar and transfer
agent, at the close of business on the Record Date;

 

	
 

	
(B)

	
by delivery, in person or by recognized courier service, to the address specified in (A) above; or

 

	
 

	
(C)

	
by
facsimile or electronic transmission to any Broadway Shareholder, who is identified to the satisfaction of the
Petitioner, who requests such transmission in writing and, if required by the Petitioner, who
1s prepared to pay the charges for
such transmission;

     

    - 3 -

    

	
 

	
(ii)

	
non-registered holders of Broadway Common Shares by providing sufficient copies of the Meeting Materials, as applicable, to intermediaries and registered nominees in a timely manner, in accordance with National Instrument 54-101 - Communication with Beneficial Owners of Securities of a Reporting Issuer; and

 

	
 

	
(iii)

	
the respective directors and auditors of the Petitioner by delivery in person, by recognized courier service, by pre-paid ordinary or first class mail or, with the consent of the person, by facsimile or electronic transmission, at least twenty-one (21) days prior to the date of the Meeting, excluding the date of sending and the date of the Meeting.

 

	
6.

	
Concurrently with the sending of the Meeting Materials described in paragraph 5 of this Interim Order, the Petitioner shall send a copy of the Circular and any other communications or documents determined by the Petitioner to be necessary or desirable to the holders of Broadway Warrants and Broadway Options by any method permitted for notice to Broadway Shareholders as set forth in paragraphs 5(i) or 5(ii), above, to the addresses as they appear on the books and records of the Petitioner or its registrar and transfer agent at the close of business on the Record Date.

 

	
7.

	
In
the event of an interruption in or cessation of postal services due to strike or otherwise, the
Petitioner shall be authorized, in addition to or as an alternative to the
methods of delivery specified in
paragraphs 5 or 6
above to communicate notice of the Meeting to the
Broadway Shareholders, Broadway Warrant
holders or Broadway Option holders by publishing notice of the Meeting in
one of the following newspapers:

 

	
 

	
(i)

	
The Globe and Mail (National edition); and

	
 

	
 

	
 

	
 

	
(ii)

	
The National Post

 

	
 

	
which publication shall include specific reference to locations (including www.sedar.com) at which copies of the Meeting Materials will be available.

 

	
8.

	
Good
and sufficient notice of the Meeting for all purposes will
be given by the Petitioner by the sending of the Meeting Materials in accordance
with paragraph 5, 6 or 7 of this Order. The
Circular is hereby deemed to represent sufficient and
adequate disclosure, including for the purpose of
section 290(1)(a) of the BCBCA, and the Petitioner shall not be required to send to the Broadway Shareholders, Broadway Warrant
holders or Broadway Option
holders any other or additional statement pursuant to
section 290(1)(a) of the BCBCA.

     

    - 4 -

    

	
9.

	
The sending of the Meeting Materials, which includes the Notice of Hearing of Petition and the Interim Order (collectively the “Court Materials”),in accordance with paragraphs 5, 6 or 7 of this Order shall constitute good and sufficient service of the Court Materials and the within proceedings and such service shall be effective on the business day after the said Court Materials are mailed, whether those persons reside within the jurisdiction of British Columbia or within another jurisdiction, and no other fom1 of service need be made and no other material, including the Petition and supporting Affidavits, need be served on such persons in respect of these proceedings except upon written request to the solicitors for the Petitioner at their address for delivery set out in the Petition.

	
 

	
 

	
10.

	
Accidental
failure or omission by the Petitioner to give notice of the Meeting or to distribute the Meeting Materials or the Court Materials
to any person entitled by this Interim Order to receive notice, or any failure or omission to give such notice as a result of
events beyond the reasonable control of the Petitioner, or the non-receipt of such notice shall, subject to further order of this
Honourable Court, not constitute a breach of this Interim Order nor shall it invalidate any resolution passed or proceedings taken
at the Meeting. If any such failure or omission is brought to the attention of the Petitioner, it shall use its best efforts to
rectify it by the method and in the time most reasonably practicable in the circumstances. 

 

Amemlmcnis io the Arrangement and Plan of Arrangement

 

	
11.

	
 Subject
to the terms and conditions of the Plan of Arrangement, nfter the dnte of this Interim Order and prior to the time of the
Meeting, the Petitioner is authorized to make such amendments, revisions or supplements to the Plan of Arrangement as it may
determine, without any additional notice to the Broadway Shareholders, Broadway Warrant holders or Broadway Option holders,
and the Plan of Arrangement as so amended, revised and supplemented shall be the Plan of Arrangement submitted to the
Meeting, and the subject of the Arrangement Resolution.

 

	
12.

	
 If any amendments, revisions or supplements to the Arrangement or Plan of Arrangement as referred to in paragraph 11 above, would, if disclosed, reasonably be expected to affect a Broadway Shareholder’s decision to vote for or against the Arrangement Resolution, notice of such amendment, revision or supplement shall be distributed, subject to further order of this Court, by news release, newspaper advertisement, or by notice sent to Broadway Shareholders by one of the methods specified in paragraph 5 of this Interim Order.

 

Chair of the Meeting

 

	
13.

	
 The Chair of the Meeting shall be an officer or director of the Petitioner or such other person as may be appointed by the Shareholders for that purpose.

 

	
14.

	
The
Chair of the Meeting is at liberty to call on the assistance of legal counsel at any time and from time to time, as the Chair
of the Meeting may deem necessary or appropriate, during the Meeting, and such legal counsel is entitled to attend the
Meeting for this purpose.

     

    - 5 -

    

	
15.

	
The
only people entitled to attend the Meeting are the Broadway Shareholders, directors of Broadway,
auditors of Broadway, Broadway’s legal and financial advisors, or other such persons
as may be approved by the Chair of the Meeting.

 

	
16.

	
 The Chair of the Meeting shall be permitted to ask questions of, and demand the production of evidence, from Broadway Shareholders or such other persons in attendance or represented at the Meeting, as he or she considers appropriate having regard to the orderly conduct of the Meeting, the authority of any person to vote at the Meeting, and the validity and propriety of the votes cast and the proxies submitted in respect of the Arrangement Resolution.

 

	
17.

	
 The Chair of the Meeting may, in the Chair’s sole discretion, waive the deadline specified in the Form of Proxy for the deposit of proxies, provided that if the Chair waives the deadline, the Chair must accept all proxies deposited after this deadline.

 

	
18.

	
 The Chair or another representative of the Petitioner present at the Meeting, shall, in due course, file with the Court an affidavit verifying the actions taken and the decisions reached at the Meeting with respect to the Arrangement.

 

Adjournments and Postponements

 

	
19.

	
 The Petitioner, if it deems advisable, is specifically authorized to adjourn or postpone the Meeting for any reason on one or more occasions, subject to the terms of the Arrangement Agreement, without the necessity of first convening the Meeting, or first obtaining any vote of the Broadway Shareholders respecting the adjournment or postponement. Notice of any such adjournments or postponements shall be given by such method and in the time that is reasonable in the circumstances, as the Petitioner may determine appropriate. This provision shall not limit the authority of the Chair of the Meeting in respect of adjournments and postpon ments.

 

Quorum

 

	
20.

	
 The quorum required at the Meeting shall be individuals representing not less than two in number and being Broadway Shareholders or representing by proxy Broadway Shareholders who hold in aggregate not less than 5% of the total number of outstanding Broadway Common Shares.

 

	
21.

	
 In the event that a quorum is not present, the Meeting shall stand adjourned to such date and to such time and place as may be determined by the Broadway Shareholders present.

     

    - 6 -

    

Voting

 

	
22.

	
 The vote required to pass the Arrangement Resolution shall be at least 66 2/3% of the votes cast on such resolution by the Broadway Shareholders present in person or represented by proxy at the Meeting.

 

	
23.

	
 The only persons entitled to vote in person or by proxy on the Arrangement Resolution, or such other business as may be properly brought before the Meeting, shall be the registered Shareholders who hold Broadway Common Shares as of the close of business on the Record Date. Illegible votes, spoiled votes, defective votes and abstentions shall be deemed to be votes not cast. Proxies that are properly signed and dated but which do not contain voting instructions shall be voted in favour of the Arrangement Resolution.

 

Solicitation of Proxies

 

	
24.

	
 The Petitioner is authorized to use the fo1m of proxy (the “Form of Proxy”), substantially in the form of the draft attached to Laine Affidavit #1, with such amendments, revisions or supplemental infom1ation as the Petitioner may determine arc necessary or desirable. The Petitioner is autl1orized at its expense to solicit proxies, directly or through its officers, directors or employees, and through such agents or representatives, inch.1ding proxy advisory firms, as they may retain for the purpose, by mail or such other fom1s of personal or electronic communication as it may determine. The Petitioner may waive generally, in its discretion, the time limits set for the deposit or revocation of proxies, if the Petitioner considers it advisable to do so.

 

Dissent Rights

 

	
25.

	
 Registered holders of Broadway Common Shares may exercise rights of dissent (the “Dissent Rights”) under section 238 of the BCBCA, and in the manner as set forth under sections 242 to 247 of the BCBCA, all as modified by Article 5 of the Plan of Arrangement, this Interim Order and the Final Order, with respect to Broadway Common Shares in connection with the Arrangement, provided that, notwithstanding section 242(1)(a) of the BCBCA, the written notice setting forth the objection of such registered Broadway Shareholders to the Arrangement and exercise of Dissent Rights must be received by Broadway not later than 5:00 p.m. (Vancouver time) on the Business Day that is two Business Days before the Broadway Meeting or any date to which the Broadway Meeting may be postponed or adjourned and provided further that holders who exercise such rights of dissent and who:

 

	
 

	
(a)

	
are ultimately entitled to be paid fair value for their Dissent Shares, which fair value, notwithstanding anything to the contrary contained in the BCBCA, shall be determined immediately prior to the approval of the Arrangement Resolution, shall be deemed to have transferred their Dissent Shares to Broadway as of the Effective Time in consideration for a debt claim against Broadway to be paid the fair value of such Dissent Shares and will not be entitled to any other payment or consideration, including any payment that would be payable under the Arrangement had such holders not exercised their Dissent Rights; and

     

    - 7 -

    

	
 

	
(b)

	
are ultimately not entitled, for any reason, to be paid fair value for their Broadway Common Shares shall be deemed to have participated in the Arrangement, as of the Effective Time, on the same basis as a non-dissenting holder of Broadway Common Shares.

 

	
26.

	
 In no circumstances shall Broadway or any other Person be required to recognize a Person exercising Dissent Rights unless such Person is a registered holder of those Broadway Common Shares in respect of which such rights are sought to be exercised. From and after the Effective Time, neither Broadway nor any other Person shall be required to recognize a Dissenting Broadway Shareholder as a shareholder of Broadway and the names of the Dissenting Broadway Shareholders shall be deleted from the register of holders of Broadway Common Shares previously maintained or caused to be maintained by Broadway.

 

	
27.

	
 In addition to any other restrictions in the BCBCA, no Broadway Shareholders who vote in favour, or instruct a proxyholder to vote in favor, of the Arrangement Resolution shall be entitled to exercise Dissent Rights.

 

	
28.

	
 The aggregate of all amounts paid to Broadway Shareholders by Broadway in respect of the Broadway Common Shares for which Dissent Rights are exercised in accordance with Article 5 of the Plan of Arrangement shall be deducted from the stated capital account maintained by Broadway for the Broadway Common Shares.

 

Application for Final Order

 

	
29.

	
 Upon obtaining, in the manner set forth in this Interim Order, the approval of the Arrangement required by this Interim Order, the Petitioner may apply to this Court for a final order approving the Arrangement contemplated by the Plan of Arrangement (the “Final Order”), which includes a finding of fairness of the terms and conditions of the Arrangement, and the hearing shall be set down for hearing before the presiding Judge in Chambers at the Courthouse at 800 Smithe Street, Vancouver, British Columbia, on February 24, 2020 at 9:45 a.m. (Vancouver time), or as soon thereafter as the hearing of the Final Order can be heard, or at such other date and time as this Court may direct.

 

	
30.

	
 Any Broadway Shareholder, Broadway Optionholder or Broadway Warrantholder may appear and make submissions at the application for the Final Order provided that such person shall file a Response to Petition, in the form prescribed by the Rules of Court of the Supreme Court of British Columbia, with this Court and deliver a copy of the filed Response to Petition, together with a copy of all material on which such person intends to rely at the application for the Final Order to the solicitors for the Petitioner at their address for delivery as set out in the Petition, on or before 4:00 p.m. (Vancouver time) on February 20, 2020, or as the Court may otherwise direct.

 

	
31.

	
 If the application for the Final Order is adjourned, only those persons who have filed and delivered a Response to Petition in accordance with this Interim Order need to be served and provided with notice of the adjourned date.

     

    - 8 -

    

Precedence

 

	
32.

	
 To the extent of any inconsistency or discrepancy between this Interim Order and the Articles of the Petitioner, the Circular, the BCBCA or applicable securities laws, this Interim Order shall govern.

 

Variance and Direction

 

	
33.

	
 The Petitioner, Broadway Shareholders, Broadway Option
holders, Broadway Warrant holders, the directors of
the Petitioner and auditors of the Petitioner shall, and hereby do, have liberty to seek
leave to vary this Interim Order or apply for such further order or orders or to seek such directions
as may be appropriate.

 

Extra-Territorial Assistance

 

	
34.

	
This
Court seeks and requests the aid and recognition of any court or any judicial, regulatory or administrative body in any province
of Canada and any judicial, regulatory or administrative tribunal or other court constituted pursuant to the Parliament of Canada
or the legislature of any province and any comi. or any judicial, regulatory or administrative body of the United States or other
country to act in aid of and to assist this Collli in carrying out the tem1s of this Interim Order.

 

THE
FOLLOWING PARTIES APPROVE THE FORM OF THIS ORDER AND CONSENT TO EACH OF THE ORDERS, IF ANY, THAT ARE INDICATED ABOVE AS BEING
BY CONS§DJjf:

 

	
/s/ Teresa M. Tomehak

	
 

	
Signature

	
 

	
 0 Party [gl Lawyer
for the Petitioner

	
 

	Teresa
M. Tomehak	 

 

	 	By the Court
	 	
	 	Registrar

 

 

 

     

     

    
	
 

	
No. S-200617

	
 

	
Vancouver Registry

 

IN THE SUPREME 
COURT OF BRITISH COLUMBIA

 

 

 

IN THE MATTER OF SECTION 288 OF THE
 BUSINESS CORPORATIONS ACT S.B.C. 2002, c. 57, AS AMENDED

 

IN THE MATTER OF A PROPOSED ARRANGEMENT AMONG
BROADWAY GOLD MINING LTD. AND ITS SHAREHOLDERS, MADISON METALS
JNC., BROADWAY DELAWARE SUBCO INC. AND MIND MEDICINE, INC.

 

BROADWAY GOLD MINING LTD.

 

PETITIONER

 

 

 

ORDER MADE AFTER APPLICATION

 

 

 

	
TMT/cn

	
File no.: 43987-0001-0000

 

FARRIS LLP
Barristers & Solicitors 
2500 - 700 West Georgia Street

Vancouver, B.C. V7Y 1B3 

 

Telephone: (604) 684-9151

 

    

    - E-1 -

    

APPENDIX E
NOTICE OF HEARING OF PETITION

 

(begins on following page)

    

     

    

	
 

	
No. S-200617

	
 

	
Vancouver Registry

 

TN THE SUPREME COURT OF BRITISH COLUMBIA 

 

IN THE MATTER OF SECTION 288 OF THE

BUSINESS CORPORATIONS ACT S.B.C. 2002, c. 57, AS AMENDED

 

IN THE MATTER OF A PROPOSED ARRANGEMENT AMONG 
BROADWAY GOLD MINING LTD. AND ITS SHAREHOLDERS, 
MADISON METALS INC., BROADWAY DELAWARE SUBCO INC.
AND MIND MEDICINE, INC.

 

BROADWAY GOLD MINING LTD.

 

PETITIONER

 

NOTICE OF HEARING OF PETITION

 

	
TO:

	
The holders of common shares (“Broadway Shareholders”), options (“Broadway Optionholders”), warrants (“Broadway Warrantholders”) of Broadway Gold Mining Ltd (“Broadway”) and the directors and auditors of Broadway

 

 

NOTICE IS HEREBY GIVEN that a Petition has been filed by Broadway in the Supreme Court of British Columbia for approval of an arrangement (the “Arrangement”) pursuant to Section 288 of the Business CorporationsAct S.B.C. 2002, c. 57, as amended, between Broadway, Madison Metals Inc. (“Spinco”), Broadway Delaware Subco Inc. (“Delaware Subco”) and Mind Medicine, Inc. (“MindMed”).

 

AND NOTICE IS FURTHER GIVEN that by an Interim Order of the Supreme Court of British Columbia pronounced on January 20, 2020, the Court has given directions as to the calling of a meeting of the Broadway Gold Mining Ltd. shareholders for the purpose of considering and voting on the Arrangement.

 

AND NOTICE IS FURTHER GIVEN that if the Arrangement is approved at the meeting, the Petitioner intends to apply for an order approving the Arrangement and declaring it to be fair and reasonable (the “Final Order”) at a hearing before a Judge of the Supreme Court of British Columbia at the Courthouse, at 800 Smithe Street, in the City of Vancouver, in the Province of British Columbia, on or about February 24, 2020 at 9:45 a.m. (PT), or so soon thereafter as counsel may be heard, or at such later date as the Court may direct.

 

IF
YOU WISH TO BE HEARD AT THE HEARING OF THE PETITION OR WISH TO BE NOTIFIED OF ANY FURTHER PROCEEDINGS, YOU MUST GIVE NOTICE OF YOUR INTENTION
by filing a form entitled “Response to Petition”,
in the form prescribed by the Rules of Court of the Supreme
Court of British Columbia, along with any evidence or materials which you intend to present to the Court, at the Vancouver Registry of
the Court and YOU MUST ALSO DELIVER a
copy of the filed Response to Petition, together with a copy of all evidence or materials on which you intend to rely at the application
for the Final Order, to the solicitors for the Petitioner at their address for delivery, which is set out below, on or before 4:00 p.m.
(PT) on February20, 2020, or as the Court may otherwise direct.

    

    - 2
                                                                                 - 

    

YOU OR YOUR SOLICITOR may file the Response to Petition. You may obtain a form of “Response to Petition” at the Registry. The address of the Registry is: 800 Smithe Street, Vancouver, British Columbia, V6Z 2E1.

 

IF YOU DO NOT FILE A RESPONSE TO PETITION and do not attend either in person or by counsel at the time of such hearing, the Court may approve the Arrangement, as presented at that time, or may approve it subject to such terms and conditions as the Court deems fit, all without further notice to you. If the Arrangement is approved, it will significantly affect the rights of the Broadway Shareholders, Broadway Optionholders and Broadway Warrantholders.

 

A copy of the said Petition and other documents in the proceedings will be furnished to any Broadway Shareholder, Broadway Optionholder or Broadway Warrantholder upon request in writing addressed to the solicitors of the Petitioner at their address for delivery set out below.

 

	
 

	
The Petitioner’s address for delivery is:

	
 

	
 

	
 

	
Farris LLP

	
 

	
Barristers & Solicitors

	
 

	
2500 - 700 West Georgia Street 
Vancouver, British Columbia 
V7Y 1B3

	
 

	
Attention: Teresa M. Tomehak

 

	
DATED this 20th day of January, 2020.

	
 

	
 

	
 

	
 

	
 

	
Signature

	
 

	
D Party Lawyer for the Petitioner

	
 

	
Teresa M. Tomehak

	
 

 

    

    - F-1 - 

    

APPENDIX F

SECTION 237 to 247 OF THE BCBCA

 

Definitions and application

 

237 (1) In this Division:

 

“dissenter” means a shareholder who, being entitled to do so, sends written notice of dissent when and as required by Section 242;

 

“notice shares” means, in relation to a notice of dissent, the shares in respect of which dissent is being exercised under the notice of dissent;

 

“payout value” means,

 

(a) in the case of a dissent in respect of a resolution, the fair value that the notice shares had immediately before the passing of the resolution,

 

(b) in the case of a dissent in respect of an arrangement approved by a court order made under section 291 (2)

 

(c) that permits dissent, the fair value that the notice shares had immediately before the passing of the resolution adopting the arrangement,

 

(c) in the case of a dissent in respect of a matter approved or authorized by any other court order that permits dissent, the fair value that the notice shares had at the time specified by the court order, or

 

(d) in the case of a dissent in respect of a community contribution Corporation, the value of the notice shares set out in the regulations,

 

excluding any appreciation or depreciation in anticipation of the corporate action approved or authorized by the resolution or court order unless exclusion would be inequitable.

 

(2) This Division applies to any right of dissent exercisable by a shareholder except to the extent that

 

(a) the court orders otherwise, or

 

(b) in the case of a right of dissent authorized by a resolution referred to in section 238 (1) (g), the court orders otherwise or the resolution provides otherwise.

 

Right to dissent

 

238 (1) A shareholder of a Corporation, whether or not the shareholder’s shares carry the right to vote, is entitled to dissent as follows:

 

(a) under section 260, in respect of a resolution to alter the articles

 

(i) to alter restrictions on the powers of the Corporation or on the business the Corporation is permitted to carry on, or

 

(ii) without limiting subparagraph (i), in the case of a community contribution Corporation, to alter any of the Corporation’s community purposes within the meaning of section 51.91;

 

(b) under section 272, in respect of a resolution to adopt an amalgamation agreement;

 

(c) under section 287, in respect of a resolution to approve an amalgamation under Division 4 of Part 9;

 

(d) in respect of a resolution to approve an arrangement, the terms of which arrangement permit dissent;

 

(e) under section 301 (5), in respect of a resolution to authorize or ratify the sale, lease or other disposition of all or substantially all of the Corporation’s undertaking;

 

(f) under section 309, in respect of a resolution to authorize the continuation of the Corporation into a jurisdiction other than British Columbia;

    

    - F-2 - 

    

(g) in
respect of any other resolution, if dissent is authorized by the resolution;

 

(h) in respect of any court order that permits dissent.

 

(2) A shareholder wishing to dissent must

 

(a) prepare a separate notice of dissent under section 242 for

 

(i) the shareholder, if the shareholder is dissenting on the shareholder’s own behalf, and

 

(ii) each other person who beneficially owns shares registered in the shareholder’s name and on whose behalf the shareholder is dissenting,

 

(b) identify in each notice of dissent, in accordance with section 242 (4), the person on whose behalf dissent is being exercised in that notice of dissent, and

 

(c) dissent with respect to all of the shares, registered in the shareholder’s name, of which the person identified under paragraph (b) of this subsection is the beneficial owner.

 

(3) Without limiting subsection (2), a person who wishes to have dissent exercised with respect to shares of which the person is the beneficial owner must

 

(a) dissent with respect to all of the shares, if any, of which the person is both the registered owner and the beneficial owner, and

 

(b) cause each shareholder who is a registered owner of any other shares of which the person is the beneficial owner to dissent with respect to all of those shares.

 

Waiver of right to dissent

 

239 (1) A shareholder may not waive generally a right to dissent but may, in writing, waive the right to dissent with respect to a particular corporate action.

 

(2) A shareholder wishing to waive a right of dissent with respect to a particular corporate action must

 

(a) provide to the Corporation a separate waiver for

 

(i) the shareholder, if the shareholder is providing a waiver on the shareholder’s own behalf, and

 

(ii) each other person who beneficially owns shares registered in the shareholder’s name and on whose behalf the shareholder is providing a waiver, and

 

(b) identify in each waiver the person on whose behalf the waiver is made.

 

(3) If a shareholder waives a right of dissent with respect to a particular corporate action and indicates in the waiver that the right to dissent is being waived on the shareholder’s own behalf, the shareholder’s right to dissent with respect to the particular corporate action terminates in respect of the shares of which the shareholder is both the registered owner and the beneficial owner, and this Division ceases to apply to

 

(a) the shareholder in respect of the shares of which the shareholder is both the registered owner and the beneficial owner, and

 

(b) any other shareholders, who are registered owners of shares beneficially owned by the first mentioned shareholder, in respect of the shares that are beneficially owned by the first mentioned shareholder.

 

(4) If a shareholder waives a right of dissent with respect to a particular corporate action and indicates in the waiver that the right to dissent is being waived on behalf of a specified person who beneficially owns shares registered in the name of the shareholder, the right of shareholders who are registered owners of shares beneficially owned by that specified person to dissent on behalf of that specified person with respect to the particular corporate action terminates and this Division ceases to apply to those shareholders in respect of the shares that are beneficially owned by that specified person.

 

    

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Notice of resolution

 

240 (1) If a resolution in respect of which a shareholder is entitled to dissent is to be considered at a meeting of shareholders, the Corporation must, at least the prescribed number of days before the date of the proposed meeting, send to each of its shareholders, whether or not their shares carry the right to vote,

 

(a) a copy of the proposed resolution, and

 

(b) a notice of the meeting that specifies the date of the meeting, and contains a statement advising of the right to send a notice of dissent.

 

(2) If a resolution in respect of which a shareholder is entitled to dissent is to be passed as a consent resolution of shareholders or as a resolution of directors and the earliest date on which that resolution can be passed is specified in the resolution or in the statement referred to in paragraph (b), the Corporation may, at least 21 days before that specified date, send to each of its shareholders, whether or not their shares carry the right to vote,

 

(a) a copy of the proposed resolution, and

 

(b) a statement advising of the right to send a notice of dissent.

 

(3) If a resolution in respect of which a shareholder is entitled to dissent was or is to be passed as a resolution of shareholders without the company complying with subsection (1) or (2), or was or is to be passed as a directors’ resolution without the company complying with subsection (2), the company must, before or within 14 days after the passing of the resolution, send to each of its shareholders who has not, on behalf of every person who beneficially owns shares registered in the name of the shareholder, consented to the resolution or voted in favour of the resolution, whether or not their shares carry the right to vote,

 

(a) a copy of the resolution,

 

(b) a statement advising of the right to send a notice of dissent, and

 

(c) if the resolution has passed, notification of that fact and the date on which it was passed.

 

(4) Nothing in subsection (1), (2) or (3) gives a shareholder a right to vote in a meeting at which, or on a resolution on which, the shareholder would not otherwise be entitled to vote.

 

Notice of court orders

 

241 If a court order provides for a right of dissent, the Corporation must, not later than 14 days after the date on which the Corporation receives a copy of the entered order, send to each shareholder who is entitled to exercise that right of dissent

 

(a) a copy of the entered order, and

 

(b) a statement advising of the right to send a notice of dissent.

 

    

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Notice of dissent

 

242 (1) A shareholder intending to dissent in respect of a resolution referred to in section 238 (1) (a), (b), (c), (d), (e) or (f) must,

 

(a) if the Corporation has complied with section 240 (1) or (2), send written notice of dissent to the Corporation at least 2 days before the date on which the resolution is to be passed or can be passed, as the case may be,

 

(b) if the Corporation has complied with section 240 (3), send written notice of dissent to the Corporation not more than 14 days after receiving the records referred to in that section, or

 

(c) if the Corporation has not complied with section 240 (1), (2) or (3), send written notice of dissent to the Corporation not more than 14 days after the later of

 

(i) the date on which the shareholder learns that the resolution was passed, and

 

(ii) the date on which the shareholder learns that the shareholder is entitled to dissent.

 

(2) A shareholder intending to dissent in respect of a resolution referred to in section 238 (1) (g) must send written notice of dissent to the Corporation

 

(a) on or before the date specified by the resolution or in the statement referred to in section 240 (2) (b) or (3)

 

(b) as the last date by which notice of dissent must be sent, or

 

(b) if the resolution or statement does not specify a date, in accordance with subsection (1) of this section.

 

(3) A shareholder intending to dissent under section 238 (1) (h) in respect of a court order that permits dissent must send written notice of dissent to the Corporation

 

(a) within the number of days, specified by the court order, after the shareholder receives the records referred to in section 241, or

 

(b) if the court order does not specify the number of days referred to in paragraph (a) of this subsection, within 14 days after the shareholder receives the records referred to in section 241.

 

(4) A notice of dissent sent under this section must set out the number, and the class and series, if applicable, of the notice shares, and must set out whichever of the following is applicable:

 

(a) if the notice shares constitute all of the shares of which the shareholder is both the registered owner and beneficial owner and the shareholder owns no other shares of the Corporation as beneficial owner, a statement to that effect;

 

(b) if the notice shares constitute all of the shares of which the shareholder is both the registered owner and beneficial owner but the shareholder owns other shares of the Corporation as beneficial owner, a statement to that effect and

 

(i) the names of the registered owners of those other shares,

 

(ii) the number, and the class and series, if applicable, of those other shares that are held by each of those registered owners, and

 

(iii) a statement that notices of dissent are being, or have been, sent in respect of all of those other shares;

 

(c) if dissent is being exercised by the shareholder on behalf of a beneficial owner who is not the dissenting shareholder, a statement to that effect and

 

(i) the name and address of the beneficial owner, and

 

(ii) a statement that the shareholder is dissenting in relation to all of the shares beneficially owned by the beneficial owner that are registered in the shareholder’s name.

 

(5) The right of a shareholder to dissent on behalf of a beneficial owner of shares, including the shareholder, terminates and this Division ceases to apply to the shareholder in respect of that beneficial owner if subsections (1) to (4) of this section, as those subsections pertain to that beneficial owner, are not complied with.

 

    

    - F-5 - 

    

Notice of intention to proceed

 

243 (1) A Corporation that receives a notice of dissent under section 242 from a dissenter must,

 

(a) if the Corporation intends to act on the authority of the resolution or court order in respect of which the notice of dissent was sent, send a notice to the dissenter promptly after the later of

 

(i) the date on which the Corporation forms the intention to proceed, and

 

(ii) the date on which the notice of dissent was received, or

 

(b) if the Corporation has acted on the authority of that resolution or court order, promptly send a notice to the dissenter.

 

(2) A notice sent under subsection (1) (a) or (b) of this section must

 

(a) be dated not earlier than the date on which the notice is sent,

 

(b) state that the Corporation intends to act, or has acted, as the case may be, on the authority of the resolution or court order, and

 

(c) advise the dissenter of the manner in which dissent is to be completed under section 244.

 

Completion of dissent

 

244 (1) A dissenter who receives a notice under section 243 must, if the dissenter wishes to proceed with the dissent, send to the Corporation or its transfer agent for the notice shares, within one month after the date of the notice,

 

(a) a written statement that the dissenter requires the Corporation to purchase all of the notice shares,

 

(b) the certificates, if any, representing the notice shares, and

 

(c) if section 242 (4) (c) applies, a written statement that complies with subsection (2) of this section.

 

(2) The written statement referred to in subsection (1) (c) must

 

(a) be signed by the beneficial owner on whose behalf dissent is being exercised, and

 

(b) set out whether or not the beneficial owner is the beneficial owner of other shares of the Corporation and, if so, set out

 

(i) the names of the registered owners of those other shares,

 

(ii) the number, and the class and series, if applicable, of those other shares that are held by each of those registered owners, and

 

(iii) that dissent is being exercised in respect of all of those other shares.

 

(3) After the dissenter has complied with subsection (1),

 

(a) the dissenter is deemed to have sold to the Corporation the notice shares, and

 

(b) the Corporation is deemed to have purchased those shares, and must comply with section 245, whether or not it is authorized to do so by, and despite any restriction in, its memorandum or articles.

 

(4) Unless the court orders otherwise, if the dissenter fails to comply with subsection (1) of this section in relation to notice shares, the right of the dissenter to dissent with respect to those notice shares terminates and this Division, other than section 247, ceases to apply to the dissenter with respect to those notice shares.

 

(5) Unless the court orders otherwise, if a person on whose behalf dissent is being exercised in relation to a particular corporate action fails to ensure that every shareholder who is a registered owner of any of the shares beneficially owned by that person complies with subsection (1) of this section, the right of shareholders who are registered owners of shares beneficially owned by that person to dissent on behalf of that person with respect to that corporate action terminates and this Division, other than section 247, ceases to apply to those shareholders in respect of the shares that are beneficially owned by that person.

 

    

    - F-6 - 

    

(6) A dissenter who has complied with subsection (1) of this section may not vote, or exercise or assert any rights of a shareholder, in respect of the notice shares, other than under this Division.

 

Payment for notice shares

 

245 (1) A Corporation and a dissenter who has complied with section 244 (1) may agree on the amount of the payout value of the notice shares and, in that event, the Corporation must

 

(a) promptly pay that amount to the dissenter, or

 

(b) if subsection (5) of this section applies, promptly send a notice to the dissenter that the Corporation is unable lawfully to pay dissenters for their shares.

 

(2) A dissenter who has not entered into an agreement with the Corporation under subsection (1) or the Corporation may apply to the court and the court may

 

(a) determine the payout value of the notice shares of those dissenters who have not entered into an agreement with the Corporation under subsection (1), or order that the payout value of those notice shares be established by arbitration or by reference to the registrar, or a referee, of the court,

 

(b) join in the application each dissenter, other than a dissenter who has entered into an agreement with the Corporation under subsection (1), who has complied with section 244 (1), and

 

(c) make consequential orders and give directions it considers appropriate.

 

(3) Promptly after a determination of the payout value for notice shares has been made under subsection (2) (a) of this section, the Corporation must

 

(a) pay to each dissenter who has complied with section 244 (1) in relation to those notice shares, other than a dissenter who has entered into an agreement with the Corporation under subsection (1) of this section, the payout value applicable to that dissenter’s notice shares, or

 

(b) if subsection (5) applies, promptly send a notice to the dissenter that the Corporation is unable lawfully to pay dissenters for their shares.

 

(4) If a dissenter receives a notice under subsection (1) (b) or (3) (b),

 

(a) the dissenter may, within 30 days after receipt, withdraw the dissenter’s notice of dissent, in which case the Corporation is deemed to consent to the withdrawal and this Division, other than section 247, ceases to apply to the dissenter with respect to the notice shares, or

 

(b) if the dissenter does not withdraw the notice of dissent in accordance with paragraph (a) of this subsection, the dissenter retains a status as a claimant against the Corporation, to be paid as soon as the Corporation is lawfully able to do so or, in a liquidation, to be ranked subordinate to the rights of creditors of the Corporation but in priority to its shareholders.

 

(5) A Corporation must not make a payment to a dissenter under this section if there are reasonable grounds for believing that

 

(a) the Corporation is insolvent, or

 

(b) the payment would render the Corporation insolvent.

 

Loss of right to dissent

 

246 The right of a dissenter to dissent with respect to notice shares terminates and this Division, other than section 247, ceases to apply to the dissenter with respect to those notice shares, if, before payment is made to the dissenter of the full amount of money to which the dissenter is entitled under section 245 in relation to those notice shares, any of the following events occur:

 

(a) the corporate action approved or authorized, or to be approved or authorized, by the resolution or court order in respect of which the notice of dissent was sent is abandoned;

    

    - F-7 - 

    

(b) the resolution in respect of which the notice of dissent was sent does not pass;

 

(c) the resolution in respect of which the notice of dissent was sent is revoked before the corporate action approved or authorized by that resolution is taken;

 

(d) the notice of dissent was sent in respect of a resolution adopting an amalgamation agreement and the amalgamation is abandoned or, by the terms of the agreement, will not proceed;

 

(e) the arrangement in respect of which the notice of dissent was sent is abandoned or by its terms will not proceed;

 

(f) a court permanently enjoins or sets aside the corporate action approved or authorized by the resolution or court order in respect of which the notice of dissent was sent;

 

(g) with respect to the notice shares, the dissenter consents to, or votes in favour of, the resolution in respect of which the notice of dissent was sent;

 

(h) the notice of dissent is withdrawn with the written consent of the Corporation;

 

(i) the court determines that the dissenter is not entitled to dissent under this Division or that the dissenter is not entitled to dissent with respect to the notice shares under this Division.

 

Shareholders entitled to return of shares and rights

 

247 If, under section 244 (4) or (5), 245 (4) (a) or 246, this Division, other than this section, ceases to apply to a dissenter with respect to notice shares,

 

(a) the Corporation must return to the dissenter each of the applicable share certificates, if any, sent under section 244 (1) (b) or, if those share certificates are unavailable, replacements for those share certificates,

 

(b) the dissenter regains any ability lost under section 244 (6) to vote, or exercise or assert any rights of a shareholder, in respect of the notice shares, and

 

(c) the dissenter must return any money that the Corporation paid to the dissenter in respect of the notice shares under, or in purported compliance with, this Division.

 

    

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APPENDIX G

AUTHORIZED CAPITAL AMENDMENT – MULTIPLE VOTING SHARE TERMS

 

The following will form the text of the articles of amendment of Broadway upon implementation of the Arrangement:

 

“An unlimited number of Multiple Voting Shares, without nominal or par value, having attached thereto the special rights and restrictions as set forth below:

 

	
 

	
(a)

	
Voting Rights. Holders of Multiple Voting Shares shall be entitled to notice of and to attend at any meeting of the shareholders of the Corporation, except a meeting of which only holders of another particular class or series of shares of the Corporation shall have the right to vote. At each such meeting, holders of Multiple Voting Shares will be entitled to one vote in respect of each Subordinate Voting Share into which such Multiple Voting Share could ultimately then be converted, which for greater certainty, shall initially equal one hundred (100) votes per Multiple Voting Share.

	
 

	
 

	
 

	
 

	
(b)

	
Alteration to Rights of Multiple Voting Shares. As long as any Multiple Voting Shares remain outstanding, the Corporation will not, without the consent of the holders of the Multiple Voting Shares by separate special resolution, prejudice or interfere with any right or special right attached to the Multiple Voting Shares. Consent of the holders of a majority of the outstanding Multiple Voting Shares shall be required for any action that authorizes or creates shares of any class having preferences superior to or on a parity with the Multiple Voting Shares. In connection with the exercise of the voting rights contained in this paragraph, each holder of Multiple Voting Shares will have one vote in respect of each Multiple Voting Share held.

	
 

	
 

	
 

	
 

	
(c)

	
Dividends. The holder of Multiple Voting Shares shall have the right to receive dividends, out of any cash or other assets legally available therefor, pari passu (on an as converted basis, assuming conversion of all Multiple Voting Shares into Subordinate Voting Shares at the Conversion Ratio) as to dividends and any declaration or payment of any dividend on the Subordinate Voting Shares. No dividend will be declared or paid on the Multiple Voting Shares unless the Corporation simultaneously declares or pays, as applicable, equivalent dividends (on an as-converted to Subordinate Voting Share basis) on the Subordinate Voting Shares.

	
 

	
 

	
 

	
 

	
(d)

	
Liquidation, Dissolution or Winding-Up. In the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or in the event of any other distribution of assets of the Corporation among its shareholders for the purpose of winding up its affairs, the holders of Multiple Voting Shares will, subject to the prior rights of the holders of any shares of the Corporation ranking in priority to the Multiple Voting Shares, be entitled to participate rateably along with all other holders of Multiple Voting Shares (on an as-converted to Subordinate Voting Share basis) and Subordinate Voting Shares.

	
 

	
 

	
 

	
 

	
(e)

	
Rights to Subscribe; Pre-Emptive Rights. The holders of Multiple Voting Shares are not entitled to a right of first refusal to subscribe for, purchase or receive any part of any issue of Subordinate Voting Shares, or bonds, debentures or other securities of the Corporation now or in the future.

    

    - G-2 - 

    

	
 

	
(f)

	
Conversion. Subject to the Conversion Restrictions set forth in this Section (f), holders of Multiple Voting Shares Holders shall have conversion rights as follows (the “Conversion Rights”):

  

	
 

	
(i)

	
Right to Convert. Each Multiple Voting Share shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share at the office of the Corporation or any transfer agent for such shares, into fully paid and nonassessable Subordinate Voting Shares as is determined by multiplying the number of Multiple Voting Shares by the Conversion Ratio applicable to such share, determined as hereafter provided, in effect on the date the Multiple Voting Share is surrendered for conversion. The initial “Conversion Ratio” for shares of Multiple Voting Shares shall be 100 Subordinate Voting Shares for each Multiple Voting Share; provided, however, that the Conversion Ratio shall be subject to adjustment as set forth in subsections (viii) and (ix).

	
 

	
 

	
 

	
 

	
(ii)

	
Conversion Limitations. Before any holder of Multiple Voting Shares shall be entitled to convert the same into Subordinate Voting Shares, the Board of Directors (or a committee thereof) shall designate an officer of the Corporation to determine if any Conversion Limitation set forth in Section (f)(iii) or (v) shall apply to the conversion of Multiple Voting Shares.

	
 

	
 

	
 

	
 

	
(iii)

	
Foreign Private Issuer Protection Limitation: The Corporation will use commercially reasonable efforts to maintain its status as a “foreign private issuer” (as determined in accordance with Rule 3b-4 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, the Corporation shall not effect any conversion of Multiple Voting Shares, and the holders of Multiple Voting Shares shall not have the right to convert any portion of the Multiple Voting Shares, pursuant to Section (g) or otherwise, to the extent that after giving effect to all permitted issuances after such conversions of Multiple Voting Shares, the aggregate number of Subordinate Voting Shares and Multiple Voting Shares held of record, directly or indirectly, by residents of the United States (as determined in accordance with Rules 3b-4 and 12g3-2(a) under the Exchange Act (“U.S. Residents”)) would exceed forty-five percent (45%) (the “45% Threshold”) of the aggregate number of Subordinate Voting Shares and Multiple Voting Shares issued and outstanding after giving effect to such conversions (the “FPI Protective Restriction”). The Board may by resolution increase the 45% Threshold to an amount not to exceed 50% and in the event of any such increase all references to the 45% Threshold herein shall refer instead to the amended threshold set by such resolution.

	
 

	
 

	
 

	
 

	
(iv)

	
Conversion Limitations. In order to effect the FPI Protection Restriction, each holder of Multiple Voting Shares will be subject to the 45% Threshold based on the number of Multiple Voting Shares held by such holder as of the date of the initial issuance of the Multiple Voting Shares and thereafter at the end of each of the Corporation’s subsequent fiscal quarters (each, a “Determination Date”), calculated as follows:

	
 

	
 

	
 

	
 

	
 

	
X = [(A x 0.45) - B] x (C/D)

 

Where on the Determination Date:

 

X = Maximum Number of Subordinate Voting Shares Available For Issue upon Conversion of Multiple Voting Shares by a holder.

 

A = The Number of Subordinate Voting Shares and Multiple Voting Shares issued and outstanding on the Determination Date.

 

B = Aggregate number of Subordinate Voting Shares and Multiple Voting Shares held of record, directly or indirectly, by U.S. Residents on the Determination Date.

    

    - G-3 - 

    

	
 

	
 

	
C = Aggregate number of Multiple Voting Shares held by holder on the Determination Date.

	
 

	
 

	
 

	
 

	
 

	
D = Aggregate number of all Multiple Voting Shares on the Determination Date.

	
 

	
 

	
 

	
 

	
 

	
For purposes of this subsection (f)(iii), the Board of Directors (or a committee thereof) shall designate an officer of the Corporation to determine as of each Determination Date: (A) the 45% Threshold and (B) the FPI Protective Restriction. Within thirty (30) days of the end of each Determination Date (a “Notice of Conversion Limitation”), the Corporation will provide each holder of record a notice of the FPI Protection Restriction and the impact the FPI Protective Provision has on the ability of each holder to exercise the right to convert Multiple Voting Shares held by the holder. To the extent that requests for conversion of Multiple Voting Shares subject to the FPI Protection Restriction would result in the 45% Threshold being exceeded, the number of such Multiple Voting Shares eligible for conversion held by a particular holder shall be prorated relative to the number of Multiple Voting Shares submitted for conversion. To the extent that the FPI Protective Restriction contained in this Section (f) applies, the determination of whether Multiple Voting Shares are convertible shall be in the sole discretion of the Corporation.

 

	
 

	
(v)

	
Mandatory Conversion. Notwithstanding subsection (f)(iv), the Corporation may require each holder of Multiple Voting Shares to convert all, and not less than all, the Multiple Voting Shares at the applicable Conversion Ratio (a “Mandatory Conversion”) if at any time all the following conditions are satisfied (or otherwise waived by special resolution of holders of Multiple Voting Shares):

 

	
 

	
(A)

	
the Subordinate Voting Shares issuable upon conversion of all the Multiple Voting Shares are registered for resale and may be sold by the holder thereof pursuant to an effective registration statement and/or prospectus covering the Subordinate Voting Shares under the U.S. Securities Act; and

	 	 	 
	
 

	
(B)

	
the Corporation is subject to the reporting requirements of Section 13 or 15(d) of the U.S. Exchange Act.

	
 

	
 

	
 

	
 

	The Corporation will issue or cause its transfer agent to issue each holder of Multiple Voting Shares of record a Mandatory Conversion Notice at least 20 days prior to the record date of the Mandatory Conversion, which shall specify therein, (i) the number of Subordinate Voting Shares into which the Multiple Voting Shares are convertible and (ii) the address of record for such holder. On the record date of a Mandatory Conversion, the Corporation will issue or cause its transfer agent to issue each holder of record on the Mandatory Conversion Date certificates representing the number of Subordinate Voting Shares into which the Multiple Voting Shares are so converted and each certificate representing the Multiple Voting Shares shall be null and void.

 

	
 

	
(vi)

	
Beneficial Ownership Restriction: The Corporation shall not effect any conversion of Multiple Voting Shares, and a holder thereof shall not have the right to convert any portion of its Multiple Voting Shares, pursuant to Section (f) or otherwise, to the extent that after giving effect to such issuance after conversion as set forth on the applicable Conversion Notice, the holder (together with the holder’s Affiliates (each, an “Affiliate” as defined in Rule 12b-2 under the U.S. Exchange Act), and any other persons acting as a group together with the holder or any of the holder’s Affiliates), would beneficially own in excess of 9.99% of the number of the Subordinate Voting Shares outstanding immediately after giving effect to the issuance of Subordinate Voting Shares issuable upon conversion of the Multiple Voting Shares subject to the Conversion Notice (the “Beneficial Ownership Limitation”).

 

    

    - G-4 - 

    

	
 

	
For the purposes of the foregoing sentence, the number of Subordinate Voting Shares beneficially owned by the holder and its Affiliates, shall include the number of Subordinate Voting Shares issuable upon conversion of Multiple Voting Shares with respect to which such determination is being made, but shall exclude the number of Subordinate Voting Shares which would be issuable upon: (i) conversion of the remaining, non-converted portion of Multiple Voting Shares beneficially owned by the holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or non-converted portion of any other securities of the Corporation subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the holder or any of its Affiliates. In any case, the number of outstanding Subordinate Voting Shares shall be determined after giving effect to the conversion or exercise of securities of the Corporation, including Multiple Voting Shares subject to the Conversion Notice, by the holder or its Affiliates since the date as of which such number of outstanding Subordinate Voting Shares was reported. Except as set forth in the preceding sentence, for purposes of this subsection (f)(vi), beneficial ownership shall be calculated in accordance with Section 13(d) of the U.S. Exchange Act and the rules and regulations promulgated thereunder based on information provided by the Class A Shareholder to the Corporation in the Conversion Notice.

	
 

	
 

	
 

	
To the extent that the limitation contained in this subsection (f)(vi) applies and the Corporation can convert some, but not all, of such Multiple Voting Shares submitted for conversion, the Corporation shall convert Multiple Voting Shares up to the Beneficial Ownership Limitation in effect, based on the number of Multiple Voting Shares submitted for conversion on such date.

	
 

	
 

	
 

	
The number Multiple Voting Shares that are convertible (in relation to other securities owned by the holder together with any Affiliates) and of which Multiple Voting Shares are convertible shall be in the sole discretion of the Corporation, and the submission of a Conversion Notice shall be deemed to be the holder’s certification as to the holder’s beneficial ownership of Subordinate Voting Shares of the Corporation, and the Corporation shall have the right, but not the obligation, to verify or confirm the accuracy of such beneficial ownership.

	
 

	
 

	
 

	
The holder, upon notice to the Corporation, may increase or decrease the Beneficial Ownership Limitation provisions of this subsection (f)(vi), provided that the Beneficial Ownership Limitation in no event exceeds 19.99% of the number of the Subordinate Voting Shares outstanding immediately after giving effect to the issuance of Subordinate Voting Shares upon conversion of Multiple Voting Shares subject to the Conversion Notice and the provisions of this subsection (f)(vi) 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 Corporation. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this subsection (f)(vi) 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 Multiple Voting Shares.

    

    - G-5 - 

    

	
 

	
(vii)

	
Disputes. In the event of a dispute as to the number of Subordinate Voting Shares issuable to a Holder in connection with a conversion of Multiple Voting Shares, the Corporation shall issue to the Holder the number of Subordinate Voting Shares not in dispute and resolve such dispute in accordance with subsection (f)(xiv).

	
 

	
 

	
 

	
 

	
(viii)

	
Mechanics of Conversion. Before any holder of Multiple Voting Shares shall be entitled to convert Multiple Voting Shares into Subordinate Voting Shares, the holder thereof shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for Subordinate Voting Shares, and shall give written notice to the Corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for Subordinate Voting Shares are to be issued (each, a “Conversion Notice”). The Corporation shall (or shall cause its transfer agent to), as soon as practicable thereafter, issue and deliver at such office to such holder, or to the nominee or nominees of such holder, a certificate or certificates for the number of Subordinate Voting Shares to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the Multiple Voting Shares to be converted, and the person or persons entitled to receive the Subordinate Voting Shares issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Subordinate Voting Shares as of such date.

	
 

	
 

	
 

	
 

	
(ix)

	
Adjustments for Distributions. In the event the Corporation shall declare a distribution to holders of Subordinate Voting Shares payable in securities of other persons, evidences of indebtedness issued by the Corporation or other persons, assets (excluding cash dividends) or options or rights not otherwise causing adjustment to the Conversion Ratio (a “Distribution”), then, in each such case for the purpose of this subsection (f) (ix), the holders of Multiple Voting Shares shall be entitled to a proportionate share of any such Distribution as though they were the holders of the number of Subordinate Voting Shares into which their Multiple Voting Shares are convertible as of the record date fixed for the determination of the holders of Subordinate Voting Shares entitled to receive such Distribution.

	
 

	
 

	
 

	
 

	
(x)

	
Recapitalizations; Stock Splits. If at any time or from time-to-time, the Corporation shall (A) effect a recapitalization of the Subordinate Voting Shares; (B) issue Subordinate Voting Shares as a dividend or other distribution on outstanding Subordinate Voting Shares; (C) subdivide the outstanding Subordinate Voting Shares into a greater number of Subordinate Voting Shares; (D) consolidate the outstanding Subordinate Voting Shares into a smaller number of Subordinate Voting Shares; or (E) effect any similar transaction or action (each, a “Recapitalization”), provision shall be made so that the holders of Multiple Voting Shares shall thereafter be entitled to receive, upon conversion of Multiple Voting Shares, the number of Subordinate Voting Shares or other securities or property of the Corporation or otherwise, to which a holder of Subordinate Voting Shares deliverable upon conversion would have been entitled on such Recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section (f) with respect to the rights of the holders of Multiple Voting Shares after the Recapitalization to the end that the provisions of this Section (f) (including adjustment of the Conversion Ratio then in effect and the number of Multiple Voting Shares issuable upon conversion of Multiple Voting Shares) shall be applicable after that event as nearly equivalent as may be practicable.

    

    - G-6 - 

    

	
 

	
(xi)

	
No Fractional Shares and Certificate as to Adjustments. No fractional Subordinate Voting Shares shall be issued upon the conversion of any Multiple Voting Shares and the number of Subordinate Voting Shares to be issued shall be rounded up to the nearest whole Subordinate Voting Share. Whether or not fractional Subordinate Voting Shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Multiple Voting Shares the holder is at the time converting into Subordinate Voting Shares and the number of Subordinate Voting Shares issuable upon such aggregate conversion.

	
 

	
 

	
 

	
 

	
(xii)

	
Adjustment Notice. Upon the occurrence of each adjustment or readjustment of the Conversion Ratio pursuant to this Section (f), the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Multiple Voting Shares a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Multiple Voting Shares, furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment and readjustment, (B) the Conversion Ratio for Multiple Voting Shares at the time in effect, and (C) the number of Subordinate Voting Shares and the amount, if any, of other property which at the time would be received upon the conversion of a Multiple Voting Share.

	
 

	
 

	
 

	
 

	
(xiii)

	
Effect of Conversion. All Multiple Voting Shares which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the time of conversion (the “Conversion Time”), except only the right of the holders thereof to receive Subordinate Voting Shares in exchange therefor and to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion.

	 	 	 
	
 

	
(xiv)

	
Disputes. Any holder of Multiple Voting Shares that beneficially owns more than 5% of the issued and outstanding Multiple Voting Shares may submit a written dispute as to the determination of the Conversion Ratio or the arithmetic calculation of the Conversion Ratio of Multiple Voting Shares to Subordinate Voting Shares, the Conversion Ratio, 45% Threshold, FPI Protective Restriction or the Beneficial Ownership Limitation by the Corporation to the Board of Directors with the basis for the disputed determinations or arithmetic calculations. The Corporation shall respond to the holder within five (5) Business Days of receipt, or deemed receipt, of the dispute notice with a written calculation of the Conversion Ratio, 45% Threshold, FPI Protective Restriction or the Beneficial Ownership Limitation, as applicable. If the holder and the Corporation are unable to agree upon such determination or calculation of the Conversion Ratio, FPI Protective Restriction or the Beneficial Ownership Limitation, as applicable, within five (5) Business Days of such response, then the Corporation and the holder shall, within one (1) Business Day thereafter submit the disputed arithmetic calculation of the Conversion Ratio, FPI Protective Restriction or the Beneficial Ownership Limitation to the Corporation’s independent, outside accountant. The Corporation, at the Corporation’s expense, shall cause the accountant to perform the determinations or calculations and notify the Corporation and the holder of the results no later than five (5) Business Days from the time it receives the disputed determinations or calculations. Such accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

	
 

	
 

	
 

	
 

	
(xv)

	
Notices of Record Date. Except as otherwise provided under applicable law, in the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of any class or any other securities or property, or to receive any other right, the Corporation shall mail to each holder of Multiple Voting Shares, at least 20 days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

 

    

    - G-7 - 

    

	
 

	
(g)

	
Conversion of Subordinate Voting Shares Upon an Offer. In the event that an offer is made to purchase Multiple Voting Shares, and the offer is one which is required, pursuant to applicable securities legislation or the rules of a stock exchange, if any, on which the Multiple Voting Shares are then listed, to be made to all or substantially all the holders of Multiple Voting Shares in a province or territory of Canada to which the requirement applies, each Subordinate Voting Share shall become convertible at the option of the holder into Multiple Voting Shares at the inverse of the Conversion Ratio then in effect, at any time while the offer is in effect until one day after the time prescribed by applicable securities legislation for the offeror to take up and pay for such shares as are to be acquired pursuant to the offer. The conversion right may only be exercised in respect of Subordinate Voting Shares for the purpose of depositing the resulting Multiple Voting Shares under the offer, and for no other reason. In such event, the transfer agent for the Subordinated Voting Shares shall deposit under the offer the resulting Multiple Voting Shares, on behalf of the holder. To exercise such conversion right, the holder or his or its attorney duly authorized in writing shall:

 

	
 

	
(i)

	
give written notice to the transfer agent of the exercise of such right, and of the number of Subordinate Voting Shares in respect of which the right is being exercised;

	
 

	
 

	
 

	
 

	
(ii)

	
deliver to the transfer agent the share certificate or certificates representing the Subordinate Voting Shares in respect of which the right is being exercised, if applicable; and

	
 

	
 

	
 

	
 

	
(iii)

	
pay any applicable stamp tax or similar duty on or in respect of such conversion.

 

	
 

	
No share certificates representing the Multiple Voting Shares, resulting from the conversion of the Subordinate Voting Shares will be delivered to the holders on whose behalf such deposit is being made. If Multiple Voting Shares, resulting from the conversion and deposited pursuant to the offer, are withdrawn by the holder or are not taken up by the offeror, or the offer is abandoned, withdrawn or terminated by the offeror or the offer otherwise expires without such Multiple Voting Shares being taken up and paid for, the Multiple Voting Shares resulting from the conversion will be re- converted into Subordinate Voting Shares at the then Conversion Ratio and a share certificate representing the Subordinate Voting Shares will be sent to the holder by the transfer agent. In the event that the offeror takes up and pays for the Multiple Voting Shares resulting from conversion, the transfer agent shall deliver to the holders thereof the consideration paid for such shares by the offeror.”

 

    

    - H-1 - 

    

APPENDIX H

RESULTING ISSUER STOCK OPTION PLAN AND PERFORMANCE AND RESTRICTED SHARE 

UNIT PLANS

 

 

 

MIND MEDICINE (MINDMED) INC.

 

(formerly Broadway Gold Mining Ltd.)

 

STOCK OPTION PLAN

 

	
1.

	
Interpretation

 

In this Plan, the following terms shall have the following meanings:

 

“Administrators” means the Board or, if so designated by the Board to administer the Plan, the Compensation Committee of the Board or any other designated members of the Board;

 

“Associate” has the meaning assigned by the Securities Act (Ontario); “Board” means the Board of Directors of the Corporation;

 

“Cause” means, in respect of a Participant:

 

	
 

	
(a)

	
conviction of, or the entry of a plea of guilty or no contest to, any criminal or quasi-criminal offence that causes the Corporation or its Subsidiaries public disgrace or disrepute, or adversely affects the Corporation’s or its Subsidiaries’ operations or financial performance;

	
 

	
 

	
 

	
 

	
(b)

	
gross negligence or wilful misconduct with respect to the Corporation or any of its Subsidiaries in the course of his or her service to the Corporation of any of its Subsidiaries;

	
 

	
 

	
 

	
 

	
(c)

	
refusal, failure or inability to perform any material obligation or fulfil any duty (other than any duty or obligation of the type described in clause (e) below) to the Corporation or any of its Subsidiaries (other than due to disability), which failure, refusal or inability is not cured within 10 days after delivery of notice thereof;

	
 

	
 

	
 

	
 

	
(d)

	
material breach of any agreement with or duty owed to the Corporation or any of its Subsidiaries;

	
 

	
 

	
 

	
 

	
(e)

	
any breach of any obligation or duty to the Corporation or any of its Subsidiaries (whether arising by statute, common law, contract or otherwise) relating to confidentiality, non-competition, non- solicitation or proprietary rights; or

	
 

	
 

	
 

	
 

	
(f)

	
any other conduct that constitutes “cause” at common law.

	
 

	
 

	
 

	
 

	
(g)

	
Notwithstanding the foregoing, if a Participant and the Corporation (or any of its Subsidiaries) have entered into an employment agreement, consulting agreement or other similar agreement that specifically defines “cause”, then, with respect to such Participant, “Cause” shall have the meaning defined in that employment agreement, consulting agreement or other agreement.

    

    - H-2 - 

    

“Change in Control” means, the occurrence of any of the following, in one transaction or a series of related transactions:

 

	
 

	
(a)

	
the acquisition by any person or persons acting jointly or in concert (as determined by the Securities Act (Ontario)), whether directly or indirectly, of voting securities of the Corporation that, together with all other voting securities of the Corporation held by such person or persons, constitute in the aggregate more than 50% of the voting power attached to all outstanding voting securities of the Corporation;

	
 

	
 

	
 

	
 

	
(b)

	
an amalgamation, arrangement, consolidation, share exchange or other form of business combination of the Corporation with another entity that results in the holders of voting securities of that other entity holding, in the aggregate, more than 50% of the voting power attached to all outstanding voting securities of the entity resulting from the business combination;

	
 

	
 

	
 

	
 

	
(c)

	
the sale, lease or exchange of all or substantially all of the property of the Corporation or any of its Subsidiaries to another person, other than in the ordinary course of business of the Corporation and other than such sale, lease or exchange to a wholly-owned subsidiary of the Corporation;

	
 

	
 

	
 

	
 

	
(d)

	
the liquidation or dissolution of the Corporation; or

	
 

	
 

	
 

	
 

	
(e)

	
any other transaction that is deemed by the Administrators in their sole discretion to be a “Change in Control” for the purposes of the Plan;

 

“Code” means the United States Internal Revenue Code of 1986 as amended;

 

“Corporation” means Mind Medicine (MindMed) Inc. (formerly Broadway Gold Mining Ltd.);

 

“Event of Termination” means the voluntary or involuntary termination of employment or service, retirement, or leaving of employment or service because of disability or death of a Participant;

 

“Fair Market Value” means the closing price of the Shares on the NEO Exchange (or, if the Shares are not then listed on the NEO Exchange, on such other stock exchange or automated quotation system on which the Shares are then listed or quoted, as the case may be, as may be selected by the Administrators for such purpose) on the last trading day on which Shares traded prior to the day on which an Option is granted (in the case of an Option grant) or on the last trading day on which Shares traded prior to the day on which Shares are to be valued for the purpose of the Plan, as applicable, provided that if no Shares traded on such date, the Fair Market Value shall be the average of the independent bid and ask prices in respect of the Shares at the close of trading on such date;

 

“Insider
Participant” means a Participant who is (a) an insider of the Corporation as defined in the Securities Act (Ontario),
and (b) an Associate of any person who is an insider by virtue of (a);

 

“ISO” means a stock option that is intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Code;

 

“Multiple Voting Shares” means the multiple voting shares of the Corporation, each of which carries 100 votes and is convertible, in certain limited circumstances, into 100 Subordinate Voting Shares;

 

“NEO Exchange” means the Neo Exchange Inc.;

 

“Option Agreement” means the written agreement between a Participant and the Corporation, in the form approved by the Administrators, evidencing the terms and conditions on which an Option has been granted under the Plan and which need not be identical to any other such agreements;

 

“Options” means options granted under the Plan to purchase Shares;

    

    - H-3 - 

    

“Participant” means such directors, officers and employees of the Corporation or its Subsidiaries and such Service Providers as are designated by the Administrators to participate in the Plan;

 

“Plan” means this Stock Option Plan;

 

“Reserved for Issuance” refers to Shares which may be issued in the future, upon the exercise of Options which have been granted;

 

“Service Provider” means any person or company engaged to provide ongoing management or consulting services for the Corporation or for any entity controlled by the Corporation;

 

“Share Compensation Arrangement” means, in respect of the Corporation, a stock option, stock option plan, employee stock purchase plan, performance share unit plan, restricted share unit plan or any other compensation or incentive mechanism involving the issuance or potential issuance of Shares to directors, officers or employees of the Corporation or its Subsidiaries or to Service Providers;

 

“Shares” means the subordinate voting shares of the Corporation;

 

“Subsidiary” has the meaning assigned thereto in the Securities Act (Ontario) and “Subsidiaries” shall have a corresponding meaning but including unincorporated entities;

 

“United States” or “U.S.” means the United States of America, its territories and possessions, any state of the United States and the District of Columbia; and

 

“U.S. Securities Act” means the United States Securities Act of 1933, as amended and the rules and regulations promulgated thereunder.

 

	
2.

	
Purpose

 

The purpose of the Plan is to advance the interests of the Corporation and its Subsidiaries and its shareholders by providing to the directors, officers and employees of the Corporation and its Subsidiaries and Service Providers a performance incentive for continued and improved service with the Corporation and its Subsidiaries and by enhancing such persons’ contribution to increased profits by encouraging capital accumulation and share ownership.

 

	
3.

	
Shares Subject to the Plan

 

The securities subject to the Plan shall be Shares. The Shares for which Options are granted shall be authorized but unissued Shares. The aggregate number of Shares that are issuable under the Plan upon the exercise of Options which have been granted and are outstanding under the Plan, together with Shares that are issuable pursuant to outstanding awards or grants under any other Share Compensation Arrangement, shall not at any time exceed 10% of the Shares then issued and outstanding, subject to adjustment as provided in Section 14 to give effect to any relevant changes in the capitalization of the Corporation, and provided that for the purpose of such calculation, the number of Shares then issued and outstanding shall include the number of Shares issuable upon conversion of the then issued and outstanding Multiple Voting Shares. Shares in respect of which Options have been granted but which are forfeited, surrendered, cancelled or otherwise terminated or expire without being exercised shall be available for subsequent Options.

 

	
4.

	
Administration of the Plan

 

The Plan shall be administered by the Administrators. Subject to the provisions of the Plan, the Administrators shall have the power and authority to:

 

	
 

	
(a)

	
adopt rules and regulations for implementing the Plan;

    

    - H-4 - 

    

	
 

	
(b)

	
determine the eligibility of persons to participate in the Plan, when Options to eligible persons shall be granted, the number of Shares subject to each Option and, pursuant to Section 12, the vesting period for each Option;

	
 

	
 

	
 

	
 

	
(c)

	
interpret and construe the provisions of the Plan;

	
 

	
 

	
 

	
 

	
(d)

	
establish the form or forms of Option Agreement(s);

	
 

	
 

	
 

	
 

	
(e)

	
determine whether each Option is to be an ISO, in which case such Option shall be subject to the limitations in Sections 8 and 11;

	
 

	
 

	
 

	
 

	
(f)

	
in the event there is any question as to whether a Change in Control has occurred in any circumstances, determine whether a Change in Control has occurred; and

	
 

	
 

	
 

	
 

	
(g)

	
take such other steps as they determine to be necessary or desirable to give effect to the Plan.

 

All decisions made by the Administrators pursuant to the provisions of the Plan will be final and binding on the Corporation, the affected Participant(s), their legal and personal representatives and all other persons.

 

	
5.

	
Eligible Persons

 

Such directors, officers and employees of the Corporation and its Subsidiaries and such Service Providers as are designated by the Administrators shall be entitled to participate in the Plan.

 

	
6.

	
Agreement

 

All Options granted hereunder shall be evidenced by an Option Agreement. Each Option Agreement will be subject to the applicable provisions of the Plan and will contain such provisions as are required by the Plan any other provisions that the Administrators may direct.

 

	
7.

	
Grant of Options

 

Subject to Sections 3 and 8, the Administrators may, from time to time, grant Options to Participants to purchase that number of Shares that the Administrators, in their absolute discretion, determine. Options that may be granted under the Plan include ISOs and non-qualified stock options. No Option will be granted during a blackout period or other trading restriction imposed by the Corporation or at any other time when the Board or the Corporation has any undisclosed material information.

 

The Administrator shall not grant Options to residents of the United States unless such Options and the Shares issuable upon exercise thereof are registered under the U.S. Securities Act or are issued in compliance with an available exemption from the registration requirements of the U.S. Securities Act.

 

	
8.

	
Limit on Issuance of Shares

 

The aggregate number of Shares Reserved for Issuance pursuant to Options granted under the Plan and options or other entitlements granted under any other Share Compensation Arrangement to Insider Participants (as a group), shall not exceed 10% of the aggregate number of Shares outstanding; provided that: (i) for the purpose of such calculation, the number of Shares outstanding shall include the number of Shares issuable upon conversion of the then issued and outstanding Multiple Voting Shares; and (ii) no more than 20,478,098 Shares under the Plan may be granted as ISOs. Within any 1-year period, the aggregate number of Shares issued to Insider Participants (as a group) pursuant to Options granted under the Plan or options or other entitlements granted under any other Share Compensation Arrangement shall not exceed 10% of the aggregate number of Shares outstanding, provided that for the purpose of such calculation, the number of Shares outstanding shall include the number of Shares issuable upon conversion of the outstanding Multiple Voting Shares.

    

    - H-5 - 

    

In addition to the foregoing limits, (i) the maximum aggregate grant date fair value using the Black-Scholes- Merton valuation model of option grants to any non-employee director of the Corporation in any fiscal year of the Corporation shall not exceed $100,000; and (ii) no grant of Options under the Plan may be made to any non-employee director if such grant could result, together with awards or grants then outstanding under the Plan and any other Share Compensation Arrangement, in the issuance to non-employee directors as a group of a number of Shares exceeding 1% of the number Shares issued and outstanding immediately prior to any such Share issuance, provided that for the purpose of such calculation, the number of Shares issued and outstanding shall include the number of Shares issuable upon conversion of the issued and outstanding Multiple Voting Shares.

 

	
9.

	
Exercise Price

 

The exercise price per Share shall be not less than the Fair Market Value of the Shares on the date the Option is granted.

 

	
10.

	
Term of Option

 

The term of each Option shall be determined by the Administrators, provided that no Option shall be exercisable after ten years from the date on which it is granted. If the expiry date of a particular Option after which it can no longer be exercised falls on, or within nine trading days immediately following, a date upon which the Participant granted the Option is prohibited from trading in securities of the Corporation due to a blackout period or other trading restriction imposed by the Corporation, then, except with respect to ISOs, the expiry date of such Option shall be automatically extended to the tenth trading day following the date the relevant blackout period or other trading restriction imposed by the Corporation is lifted, terminated or removed.

 

	
11.

	
ISOs

 

The following provisions shall apply, in addition to the other provisions of this Plan which are not inconsistent therewith, to ISOs, which are intended to qualify as “incentive stock options” under Section 422 of the Code:

 

	
 

	
(a)

	
Options may be granted as ISOs only to individuals who are employees of the Corporation or any present or future “subsidiary corporation” or “parent corporation” as those terms are defined in Section 424 of the Code (collectively, for purposes of this Section 11, “Related Entities”) and Options shall not be granted as ISOs to non-employee directors or independent contractors;

	
 

	
 

	
 

	
 

	
(b)

	
“Disability” in respect of an ISO shall mean “permanent and total disability” as defined in sub- section 22(e)(3) of the Code;

	
 

	
 

	
 

	
 

	
(c)

	
if a Participant ceases to be employed by the Corporation and/or all Related Entities other than by reason of death or Disability, Options shall be eligible for treatment as ISOs only if exercised no later than three (3) months following such termination of employment;

	
 

	
 

	
 

	
 

	
(d)

	
the exercise price in respect of Options granted as ISOs to employees who own more than 10% of the combined voting power of all classes of shares of the Corporation or a Related Entity (for purposes of this Section 11, a “10% Shareholder”) shall be not less than 110% of the Fair Market Value per Share on the Option grant date and the term of any ISO granted to a 10% Shareholder shall not exceed five (5) years measured from the Option grant date;

	
 

	
 

	
 

	
 

	
(e)

	
Options held by a Participant shall be eligible for treatment as ISOs only if the Fair Market Value (determined at the Option grant date) of the Shares with respect to which such Options and all other options intended to qualify as “incentive stock options” under Section 422 of the Code held by such Participant and granted under this Plan or any other plan of the Corporation or a Related Entity and which are exercisable for the first time by such Participant during any one calendar year does not exceed US$100,000 at such time;

    

    - H-6 - 

    

	
 

	
(f)

	
by accepting an Option granted as an ISO under this Plan, a Participant agrees to notify the Corporation in writing immediately after such Participant makes a “Disqualifying Disposition” of any Shares acquired pursuant to the exercise of such ISO; for this purpose, a “Disqualifying Disposition” is any disposition occurring on or before the later of (i) the date two years following the date that such ISO was granted or (ii) the date one year following the date that such ISO was exercised;

	
 

	
 

	
 

	
 

	
(g)

	
no ISO granted under this Plan may be exercised until this Plan is approved by the Corporation’s shareholders; furthermore, the maximum number of Shares that may be issued as ISOs shall not be increased without additional shareholder approval; and

	
 

	
 

	
 

	
 

	
(h)

	
no modification of an outstanding Option that would provide an additional benefit to a Participant, including a reduction of the exercise price or extension of the period in which the Option can be exercised, in either case, if approved by shareholders of the Corporation in accordance with Section 22, shall be made without consideration and disclosure of the likely United States federal income tax consequences to the Participants affected thereby.

 

	
12.

	
Shares Available for Purchase

 

Subject to Sections 15 and 16, the Shares subject to each Option shall vest and become available for purchase by the Participant on the date or dates determined by the Administrators when the Option is granted.

 

	
13.

	
Exercise of Option

 

Subject to Section 12, an Option may be exercised in whole or in part at any time, or from time to time during the term of the Option. A Participant electing to exercise an Option shall give written notice of the election to the Administrators. Such notice will be accompanied by payment in full of the aggregate purchase price for the Shares issuable pursuant to the exercise of the Option, either:

 

	
 

	
(a)

	
by cash, certified cheque or bank draft or wire transfer;

	
 

	
 

	
 

	
 

	
(b)

	
if approved by the Administrators, and except with respect to ISOs, through means of a “net settlement,” whereby no exercise price will be due and where the number of Shares issued upon such exercise will be equal to: (A) the product of (l) the number of Shares as to which the Option is then being exercised, and (2) the difference between (x) the then current Fair Market Value per Share and (y) the exercise price per Share, divided by (B) the then current Fair Market Value per Share. A number of Shares equal to the difference between the number of Shares as to which the Option is then being exercised and the number of Shares actually issued to the Participant upon such net settlement will be deemed to have been received by the Corporation in satisfaction of the exercise price;

	
 

	
 

	
 

	
 

	
(c)

	
if approved by the Administrators, through an arrangement with a broker approved by the Corporation (or through an arrangement directly with the Corporation) whereby payment of the exercise price is accomplished with the proceeds of the sale of Shares deliverable upon the exercise of the Option; or

	
 

	
 

	
 

	
 

	
(d)

	
by such other method as the Administrators may approve or accept.

 

No Shares will be issued upon exercise of an Option until full payment therefor has been made. No person shall enjoy any part of the rights or privileges of a holder of Shares subject to Options until that person becomes the holder of record of those Shares.

 

No Option holder who is resident in the United States may exercise Options unless the Shares to be issued upon exercise are registered under the U.S. Securities Act or are issued in compliance with an available exemption from the registration requirements of the U.S. Securities Act.

    

    - H-7 - 

    

	
14.

	
Certain Adjustments

 

Equitable adjustments as to Options granted or to be granted, as to the number of Shares which are available for purchase and as to the purchase price for such Shares under the Plan shall be made by the Administrators in the event of any stock dividend, stock split, combination or exchange of shares, capital reorganization, consolidation, spin-off or other distribution (other than normal cash dividends) of the Corporation’s assets to shareholders, or any other similar changes affecting the Shares.

 

	
15.

	
Termination of Employment

 

Unless otherwise determined by the Administrators and set forth in the Option Agreement, upon the occurrence of an Event of Termination, the Options granted to the affected Participant may be exercised in accordance with the following:

 

	
 

	
(a)

	
if a Participant’s service with the Corporation or, if applicable, a Subsidiary, terminates by reason of the death of the Participant, all outstanding Options shall become vested and immediately exercisable and any Option held by such Participant may thereafter be exercised by the legal representative of the estate or by the legatee of the Participant under the will of the Participant, for a period ending 12 months following the date of death (or, if sooner, on the last day of the stated term of such Option);

	
 

	
 

	
 

	
 

	
(b)

	
if a Participant’s service with the Corporation or, if applicable, a Subsidiary, is terminated for Cause: (i) any Option held by the Participant will immediately and automatically expire as of the date of such termination, and (ii) any Shares for which the Corporation has not yet delivered share certificates or other evidence of ownership will be immediately and automatically forfeited and the Corporation will refund to the Participant the Option exercise price paid for such Shares, if any; or

 

	
 

	
(c)

	
if a Participant’s service with the Corporation or, if applicable, a Subsidiary, terminates for any reason other than death or Cause, any Option held by such Participant may thereafter be exercised by the Participant, to the extent it was exercisable at the time of such termination, for a period ending 90 days following the date of such termination (or, if sooner, on the last day of the stated term of such Option);

 

provided that any exercise of an Option pursuant to (c) above shall only be in respect of Shares which were available for purchase at the date of the Event of Termination in accordance with Section 12 hereof. Other than as provided in Section 15(a) above, the right to purchase Shares which have not yet become available for purchase pursuant to Section 12 shall cease immediately on the date of the Event of Termination.

 

For greater certainty, if the employment or service of a Participant is terminated by the Corporation or, if applicable, a Subsidiary, the date of such Event of Termination shall be the date specified by the Corporation or the Subsidiary, as the case may be, in the notice of termination to such Participant as the date on which such Participant’s employment or service shall cease. Neither any period of notice, if any, or any payment in lieu thereof, upon such termination of employment or service shall be considered as extending the period of employment for the purposes of the Plan.

 

	
16.

	
Transferability

 

Subject to the terms of this Section 16 with respect to a Participant’s death, no Options may be transferred or assigned. Options may be exercised by the Participant and, upon the Participant’s death, the legal representative of his or her estate or any other person who acquires his or her rights in respect of an Option by bequest or inheritance. A person exercising an Option may subscribe for Shares only in his or her own name or in his or her capacity as a legal representative. All Options exercised during the Participant’s lifetime shall only be exercisable by the Participant or, in the event of his or her disability, by his or her personal representative.

 

    

    - H-8 - 

    

	
17.

	
Change in Control

 

Notwithstanding anything to the contrary set forth in the Plan, upon or in anticipation of any Change in Control, the Administrators may, in their sole and absolute discretion and without the need for the consent of any Participant, take one or more of the following actions contingent upon the occurrence of that Change in Control:

 

	
 

	
(a)

	
cause any or all outstanding Options to become vested and immediately exercisable, in whole or in part; and/or

	
 

	
 

	
 

	
 

	
(b)

	
cause any outstanding Option to become fully vested and immediately exercisable for a reasonable period in advance of the Change in Control and, to the extent not exercised prior to that Change in Control, cancel that Option upon closing of the Change in Control.

 

	
18.

	
Termination of Plan

 

The Board may terminate the Plan at any time in its absolute discretion. If the Plan is so terminated, no further Options shall be granted but the Options then outstanding shall continue in full force and effect in accordance with the provisions of the Plan.

 

	
19.

	
Compliance with Statutes and Regulations

 

The granting of Options and the sale and delivery of Shares under the Plan shall be carried out in compliance with applicable statutes and with the regulations of governmental authorities and applicable stock exchanges. If the Administrators determine in their discretion that, in order to comply with any such statutes or regulations, certain action is necessary or desirable as a condition of or in connection with the granting of an Option or the issue or purchase of Shares under an Option, that Option may not be exercised in whole or in part unless that action shall have been completed in a manner satisfactory to the Administrators.

 

In the event that the disposition of Shares acquired pursuant to the Plan is not covered by a then-current registration statement under the U.S. Securities Act, such Shares shall be restricted against transfer to the extent required by the U.S. Securities Act or regulations thereunder, and the Administrators may require a person receiving Shares pursuant to the Plan, as a condition precedent to receipt of such Shares, to represent to the Corporation in writing that the Shares acquired by such person are acquired for investment only and not with a view to distribution and that such person will not dispose of the Shares so acquired in violation of U.S. federal, state or other applicable securities laws, and furnish such information as may, in the opinion of legal counsel to the Corporation, be appropriate to permit the Corporation to issue the Shares in compliance with applicable U.S. federal, state, and other securities laws. If applicable, all certificates representing such Shares shall bear applicable legends as required by federal, state and other securities laws and the policies of the NEO Exchange.

 

	
20.

	
Withholding Taxes

 

A Participant shall be solely responsible for all federal, provincial, state and local taxes resulting from his or her receipt of an Option, Share or other property pursuant to the Plan, except to the extent that the Corporation has, directly or indirectly, withheld cash for remittance to the statutory authorities. In this regard, the Corporation shall be able to deduct from any payments hereunder in the form of securities or from any other remuneration otherwise payable to a Participant, or any other person pursuant to the exercise of an Option, any taxes that are required to be withheld and remitted. Each Participant or other person receiving securities hereunder agrees to indemnify and save the Corporation harmless from any and all amounts payable or incurred by the Corporation if it is subsequently determined that any greater amount should have been withheld in respect of taxes or any other statutory withholding.

 

	
21.

	
Right to Employment

 

Nothing contained in the Plan or in any Option granted under the Plan shall confer upon any person any rights to continued employment with the Corporation or interfere in any way with the rights of the Corporation in connection with the employment or termination of employment of any such person.

    

    - H-9 - 

    

	
22.

	
Amendments to the Plan

 

The Board reserves the right, in its absolute discretion, to amend, suspend or terminate the Plan, or any portion thereof, at any time without obtaining the approval of shareholders of the Corporation, subject to those provisions of applicable law and regulatory requirements (including the rules, regulations and policies of the NEO Exchange), if any, that require the approval of shareholders. Any amendment to any provision of the Plan will be subject to any required regulatory or governmental approvals. Notwithstanding the foregoing, the Corporation will be required to obtain the approval of the shareholders of the Corporation for any amendment:

 

	
 

	
(a)

	
providing for an increase to the maximum number Shares which may be issued under the Plan, except pursuant to the provisions of the Plan which permit the Administrators to make equitable adjustments in the event of transactions affecting the Corporation or its capital as set out in Section 14;

	
 

	
 

	
 

	
 

	
(b)

	
providing for an increase in, or the removal of, the limits on the number of Shares Reserved for Issuance to Insider Participants as set out in Section 8;

	
 

	
 

	
 

	
 

	
(c)

	
providing for an increase in, or the removal of, the limits on participation in the Plan by non-employee directors as set out in Section 8;

	
 

	
 

	
 

	
 

	
(d)

	
providing for a reduction in the exercise price per Share for Options (for this purpose, a cancellation or termination of an Option prior to its expiry date for the purpose of re-issuing an Option to the same Participant with a lower exercise price shall be treated as an amendment to reduce the exercise price of an Option), except pursuant to the provisions of the Plan which permit the Administrators to make equitable adjustments in the event of transactions affecting the Corporation or its capital as set out in Section 14;

	
 

	
 

	
 

	
 

	
(e)

	
providing for an extension to the term of Options beyond the original expiry date, except in accordance with Section 10 in respect of blackout periods and other trading restrictions;

	
 

	
 

	
 

	
 

	
(f)

	
providing that an Option may be transferred or assigned other than for normal estate settlement purposes;

	
 

	
 

	
 

	
 

	
(g)

	
providing for the addition of additional categories of Participants that may permit the introduction or re-introduction of non-employee directors on a discretionary basis;

	
 

	
 

	
 

	
 

	
(h)

	
that requires the approval of shareholders pursuant to Section 10.12(7) of the NEO Exchange Listing Manual; or

	
 

	
 

	
 

	
 

	
(i)

	
providing for the deletion or reduction of the range of amendments which require the approval of shareholders of the Corporation as set out in this Section 22.

 

	
(j)

	
No Financial Assistance

 

The Corporation shall not provide financial assistance to Participants in connection with the Plan.

 

	
(k)

	
Currency

 

All references in the Plan to currency refer to Canadian dollars.

 

	
(l)

	
Governing Law

 

The Plan, and any and all determinations made and actions taken in connection with the Plan, shall be governed by and construed in accordance with the laws of the province of Ontario and the laws of Canada applicable therein.

 

    

    - H-10 - 

    

	
(m)

	
California Provisions

 

Notwithstanding any provisions contained in the Plan to the contrary and to the extent required by applicable U.S. state corporate laws, U.S. federal and state securities laws, the Code, and the applicable laws of any jurisdiction in which Options are granted under the Plan, the following terms shall apply to all such Options granted to residents of the State of California, until such time as the Board amends this Section 26 or the Board otherwise provides:

 

	
 

	
i.

	
Unless otherwise determined by the Board, Options may not be sold, pledged, assigned, hypothecated, or otherwise transferred in any manner other than as permitted by Rule 701 of the U.S. Securities Act or as otherwise provided in the Plan.

	
 

	
 

	
 

	
 

	
ii.

	
If a Participant ceases to be an eligible person entitled to participate in the Plan as a result of the Participant’s disability, as such term is defined in Code Section 22(e)(3), the Participant may exercise his or her Option within such period of time as specified in the Option Agreement, which shall not be less than six months following the date of the Participant’s termination, to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement).

	
 

	
 

	
 

	
 

	
iii.

	
If a Participant dies while an eligible person entitled to participate in the Plan, the Option may be exercised within such period of time as specified in the Option Agreement, which shall not be less than six months following the date of the Participant’s death, to the extent the Option is vested on the date of death (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement) by the Participant’s designated beneficiary, personal representative, or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution.

	
 

	
 

	
 

	
 

	
iv.

	
If a Participant ceases to be an eligible person entitled to participate in the Plan by reason other than death, disability, termination for Cause, pursuant to the terms of the Plan, pursuant to the terms of a contract of employment or pursuant to the terms of the Option Agreement, such Participant may exercise his or her Option within such period of time as specified in the Option Agreement, which shall not be less than 30 days following the date of the Participant’s termination, to the extent that the Option is vested on the date of such termination (but in no event later than the expiration of the term of the Option as set forth in the Option Agreement).

	
 

	
 

	
 

	
 

	
v.

	
All Options must be granted within ten years from the date of adoption of the Plan or the date the Plan is approved by the shareholders of the Corporation, whichever is earlier.

	
 

	
 

	
 

	
 

	
vi.

	
In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split- up, spinoff, combination, repurchase, or exchange of Shares or other securities of the Corporation, or other change in the corporate structure of the Corporation affecting the Shares occurs, the Board, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, will adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Option.

	
 

	
 

	
 

	
 

	
vii.

	
The Corporation shall furnish summary financial information (audited or unaudited) of the Corporation’s financial condition and results of operations, consistent with the requirements of applicable law, at least annually to each Participant in California during the period such Participant has one or more Options outstanding, and in the case of an individual who acquired Shares pursuant to the Plan, during the period such Participant owns such Shares; provided, however, the Corporation shall not be required to provide such information if (i) the issuance is limited to key persons whose duties in connection with the Corporation assure their access to equivalent information or (ii) the Plan or any agreement complies with all conditions of Rule 701 of the U.S. Securities Act; provided that for purposes of determining such compliance, any registered domestic partner shall be considered a “family member” as that term is defined in Rule 701 of the U.S. Securities Act.

    

    - H-11 - 

    

	
 

	
viii.

	
The Plan or any increase in the maximum aggregate number of Shares issuable thereunder as provided in Section 3 (the “Authorized Shares”) shall be approved by a majority of the outstanding securities of the Corporation entitled to vote by the later of (i) within twelve (12) months before or after the date of adoption of the Plan by the Board or (ii) prior to or within 12 months of the first issuance of any security pursuant to the Plan in the State of California. Shares issued prior to security holder approval of the Plan or in excess of the Authorized Shares previously approved by the security holders shall become exercisable no earlier than the date of shareholder approval of the Plan or such increase in the Authorized Shares, as the case may be, and such issuance of the Shares shall be rescinded if such security holder approval is not received in the manner described in the preceding sentence. Notwithstanding the foregoing, a “foreign private issuer”, as defined by Rule 3b-4 of the United States Securities Exchange Act of 1934, as amended shall not be required to comply with this paragraph provided that the aggregate number of persons in California granted options under all Share Compensation Arrangements and issued securities under all purchase and bonus plans and agreements does not exceed 35.

 

	
(n)

	
Subject to Approval

 

The Plan is adopted subject to the approval of the NEO Exchange, any other required regulatory approval and the approval of the shareholders of the Corporation in accordance with the polices of the NEO Exchange. To the extent a provision of the Plan requires regulatory approval which is not received, such provision shall be severed from the remainder of the Plan until the approval is received and the remainder of the Plan shall remain in effect. The Plan shall become effective upon the later of the date of acceptance for filing of the Plan by the NEO Exchange and the date of approval of the Plan by the shareholders of the Corporation.

 

	
(o)

	
Compensation Recoupment Policy

 

Any granting of Options under the Plan, the exercise of Options and the issuance of Shares are subject to the Compensation Recoupment Policy of the Corporation.

 

    

    - H-12 - 

    

MIND MEDICINE (MINDMED) INC.

(formerly Broadway Gold Mining Ltd.)

 

PERFORMANCE AND RESTRICTED SHARE UNIT PLAN

 

(begins on following page)

    

    - H-13 - 

    

MIND MEDICINE (MINDMED) INC.

(formerly Broadway Gold Mining Ltd.) 

 

PERFORMANCE AND RESTRICTED SHARE UNIT PLAN

 

	
1.

	
PREAMBLE AND DEFINITIONS

 

	
 

	
1.1

	
Title and Conflict.

 

The Plan described in this document shall be called the “Performance and Restricted Share Unit Plan”.

 

In the event of any conflict or inconsistency between the Plan described in this document and the Award Agreement (as defined below), the terms and conditions of the Award Agreement shall prevail.

 

The Plan shall be governed and interpreted in accordance with the laws of the Province of Ontario.

 

	
 

	
1.2

	
Purpose of the Plan.

 

The purposes of the Plan are:

 

	
 

	
(i)

	
to promote a significant alignment between employees and directors of the Corporation and its Subsidiaries and the growth objectives of the Corporation and its Subsidiaries;

	
 

	
 

	
 

	
 

	
(ii)

	
to associate a portion of participating employees’ and directors’ compensation with the performance of the Corporation and its Subsidiaries over the long term; and

	
 

	
 

	
 

	
 

	
(iii)

	
to attract and retain critical personnel to drive the business success of the Corporation and its participating Subsidiaries.

 

	
 

	
1.3

	
Definitions.

 

	
 

	
1.3.1

	
“Account” has the meaning set out in Section 5.1.

	
 

	
 

	
 

	
 

	
1.3.2

	
“Applicable Law” means any applicable provision of law, domestic or foreign, including, without limitation, applicable securities and tax legislation, together with all regulations, rules, policy statements, rulings, notices, orders or other instruments promulgated thereunder, and Stock Exchange Rules.

	
 

	
 

	
 

	
 

	
1.3.3

	
“Award Agreement” means the written or electronic agreement between the Corporation and a Participant under which the terms of an award are established, as contemplated by Section 4.1, together with such schedules, amendments, deletions or changes thereto as are permitted under the Plan.

	
 

	
 

	
 

	
 

	
1.3.4

	
“Award Date” means the effective date of a grant of PSUs or RSUs, as applicable, to a Participant as stated in the applicable Award Agreement.

 

    

    - H-14 - 

    

	
 

	
1.3.5

	
“Award PSUs” means the number of PSUs awarded to a Participant in respect of a Performance Period and as stated in the applicable Award Agreement.

	
 

	
 

	
 

	
 

	
1.3.6

	
“Award RSUs” means the number of RSUs awarded to a Participant as stated in the applicable Award Agreement.

	
 

	
 

	
 

	
 

	
1.3.7

	
“Award Value” means the value, in dollars, of an award made to a Participant and as stated in the applicable Award Agreement, which is provided under the Plan in the form of PSUs or RSUs, as the case may be.

	
 

	
 

	
 

	
 

	
1.3.8

	
“Board” means the Board of Directors of the Corporation.

	
 

	
 

	
 

	
 

	
1.3.9

	
“Change in Control” means, the occurrence of any of the following, in one transaction or a series of related transactions:

 

	
 

	
(i)

	
the acquisition by any person or persons acting jointly or in concert (as determined by the Securities Act (Ontario)), whether directly or indirectly, of voting securities of the Corporation that, together with all other voting securities of the Corporation held by such person or persons, constitute in the aggregate more than 50% of the voting power attached to all outstanding voting securities of the Corporation;

	
 

	
 

	
 

	
 

	
(ii)

	
an amalgamation, arrangement, consolidation, share exchange or other form of business combination of the Corporation with another entity that results in the holders of voting securities of that other entity holding, in the aggregate, more than 50% of the voting power attached to all outstanding voting securities of the entity resulting from the business combination;

	
 

	
 

	
 

	
 

	
(iii)

	
the sale, lease or exchange of all or substantially all of the property of the Corporation or any of its Subsidiaries to another person, other than in the ordinary course of business of the Corporation and other than such sale, lease or exchange to a wholly-owned subsidiary of the Corporation;

	
 

	
 

	
 

	
 

	
(iv)

	
the liquidation or dissolution of the Corporation; or

	
 

	
 

	
 

	
 

	
(v)

	
any other transaction that is deemed by the Board in its sole discretion to be a “Change in Control” for the purposes of the Plan.

 

	
 

	
1.3.10

	
“Corporation” means Mind Medicine (MindMed) Inc. (formerly Broadway Gold Mining Ltd.) and any successor corporation whether by amalgamation, merger or otherwise.

	
 

	
 

	
 

	
 

	
1.3.11

	
“Disability” means a physical or mental incapacity of the Participant that has prevented the Participant from performing the duties customarily assigned to the Participant for 180 calendar days, whether or not consecutive, out of any 12 consecutive months and that in the opinion of the Corporation, acting on the basis of advice from a duly qualified medical practitioner, is likely to continue to a similar degree.

	
 

	
 

	
 

	
 

	
1.3.12

	
“Dividend Equivalent Units” has the meaning set out in Section 5.2.

    

    - H-15 - 

    

	
 

	
1.3.13

	
“Insider” means a Participant who is (a) an insider of the Corporation as defined in the Securities Act (Ontario) and (b) an associate (as defined in the Securities Act (Ontario)) of any person who is an insider by virtue of (a).

	
 

	
 

	
 

	
 

	
1.3.14

	
“Market Value” at any date in respect of the Shares means the volume weighted average trading price of such Shares on the NEO Exchange (or, if such Shares are not then listed and posted for trading on the NEO Exchange, on such stock exchange on which such Shares are listed and posted for trading as may be selected for such purpose by the Board) for the five consecutive trading days immediately preceding such date, provided that in the event that such Shares did not trade on any of such trading days, the Market Value shall be the average of the bid and ask prices in respect of such Shares at the close of trading on all of such trading days on which Shares did not trade and provided that in the event that such Shares are not listed and posted for trading on any stock exchange, the Market Value shall be the fair market value of such Shares as determined by the Board in its sole discretion.

	
 

	
 

	
 

	
 

	
1.3.15

	
“Multiple Voting Shares” means the multiple voting shares of the Corporation, each of which carries 100 votes and is convertible, in certain limited circumstances, into 100 Subordinate Voting Shares;

	
 

	
 

	
 

	
 

	
1.3.16

	
“NEO Exchange” means Neo Exchange Inc.

	
 

	
 

	
 

	
 

	
1.3.17

	
“Participant” means such directors, officers and employees of the Corporation or any Subsidiary as the Board may designate to receive a grant of PSUs or RSUs under the Plan pursuant to an Award Agreement.

	
 

	
 

	
 

	
 

	
1.3.18

	
“Performance Adjustment Factor” means the performance adjustment factor (either upwards or downwards) calculated following the end of the Performance Period in accordance with the Award Agreement.

	
 

	
 

	
 

	
 

	
1.3.19

	
“Performance Criteria” means, in respect of a grant of a PSU, such financial and/or personal performance criteria as may be determined by the Board in respect of a grant of PSUs to any Participant and set out in an Award Agreement. Performance Criteria may apply to the Corporation, a Subsidiary, the Corporation and its Subsidiaries as a whole, a business unit of the Corporation or group comprised of the Corporation and one or more Subsidiaries, either individually, alternatively or in any combination, and measured either in total, incrementally or cumulatively over a specified Performance Period, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparator group.

	
 

	
 

	
 

	
 

	
1.3.20

	
“Performance Period” means, in respect of a grant of a PSU, the particular designated time period(s) in respect of which the Performance Criteria are assessed and determined to be satisfied by the Board in order for such PSU to become a Vested PSU as set forth in the Award Agreement applicable to such grant.

	
 

	
 

	
 

	
 

	
1.3.21

	
“Period of Absence” means, with respect to a Participant, a period of time that lasts for at least 90 days throughout which the Participant is: (i) on a leave of absence from the Corporation or a Subsidiary that has been approved by the Corporation or Subsidiary, as applicable; (ii) on a Statutory Leave; or (ii) experiencing a Disability.

 

    

    - H-16 - 

    

	
 

	
1.3.22

	
“Plan” means this Performance and Restricted Share Unit Plan, including any schedules or appendices hereto, as such may be amended from time to time and as attached to an Award Agreement.

	
 

	
 

	
 

	
 

	
1.3.23

	
“PSU Balance” in respect of any particular date means the number of PSUs recorded in a Participant’s Account in respect of a particular Performance Period, which shall include the PSU Award plus all Dividend Equivalent Units in respect of such PSUs.

	
 

	
 

	
 

	
 

	
1.3.24

	
“PSU” means a Performance Share Unit granted to a Participant that is represented by a bookkeeping entry on the books of the Corporation, the value of which on any particular date shall be equal to the Market Value and which generally becomes Vested, if at all, subject to the attainment of certain Performance Criteria and satisfaction of such other conditions to Vesting, if any, as may be determined by the Board.

	
 

	
 

	
 

	
 

	
1.3.25

	
“RSU” means a Restricted Share Unit granted to a Participant that is represented by a bookkeeping entry on the books of the Corporation, the value of which on any particular date shall be equal to the Market Value and which generally becomes Vested, if at all, following a period of continuous employment of the Participant with the Corporation or a Subsidiary or service as a director.

	
 

	
 

	
 

	
 

	
1.3.26

	
“RSU Balance” in respect of any particular date means the number of RSUs recorded in a Participant’s Account in respect of a particular Vesting Period, which shall include the RSU Award plus all Dividend Equivalent Units in respect of such RSUs.

	
 

	
 

	
 

	
 

	
1.3.27

	
“Service Provider” means a person or company engaged to provide ongoing management or consulting services for the Corporation or for any entity controlled by the Corporation.

	
 

	
 

	
 

	
 

	
1.3.28

	
“Share” means the subordinate voting shares of the Corporation.

	
 

	
 

	
 

	
 

	
1.3.29

	
“Share Compensation Arrangement” means, in respect of the Corporation, a stock option, stock option plan, employee stock purchase plan, performance share unit plan, restricted share unit plan or any other compensation or incentive mechanism involving the issuance or potential issuance of Shares to directors, officers or employees of the Corporation or its Subsidiaries or to Service Providers.

	
 

	
 

	
 

	
 

	
1.3.30

	
“Statutory Leave” means, with respect to a Participant, a period of time throughout which the Participant is on a leave of absence to which he or she is entitled under applicable legislation and following which he or she has the right, pursuant to such legislation, to return to active employment with the Corporation or a Subsidiary.

	
 

	
 

	
 

	
 

	
1.3.31

	
“Stock Exchange” means the NEO Exchange, or if the Shares are not listed on the NEO Exchange, such other stock exchange on which the Shares are listed, or if the Shares are not listed on any stock exchange, then on the over-the-counter market.

	
 

	
 

	
 

	
 

	
1.3.32

	
“Stock Exchange Rules” means the applicable rules of the Stock Exchange.

    

    - H-17 - 

    

	
 

	
1.3.33

	
“Subsidiary” has the meaning assigned therein in the Securities Act (Ontario) and “Subsidiaries” has a corresponding meaning but including unincorporated entities.

	
 

	
 

	
 

	
 

	
1.3.34

	
“United States” or “U.S.” means the United States of America, its territories and possessions, any state of the United States and the District of Columbia.

	
 

	
 

	
 

	
 

	
1.3.35

	
“U.S. Award Holder” shall mean any holder of Award PSUs or Award RSUs who is a “U.S. person” (as defined in Rule 902(k) of Regulation S under the U.S. Securities Act) or who is holding or exercising Award PSUs or Award RSUs in the United States.

	
 

	
 

	
 

	
 

	
1.3.36

	
“U.S. Securities Act” means the United States Securities Act of 1933, as amended and the rules and regulations promulgated thereunder.

	
 

	
 

	
 

	
 

	
1.3.37

	
“Vested” means the applicable conditions for payment or other settlement in relation to a whole number, or a percentage (which may be more or less than 100%) of the number of Award PSUs or Award RSUs determined by the Board, which (i) have been met; or (ii) have been waived or deemed to be met pursuant to the terms of the Plan or the applicable Award Agreement, and “Vest” or “Vesting” have a corresponding meaning

	
 

	
 

	
 

	
 

	
1.3.38

	
“Vesting Date” means, with respect to a PSU or RSU, the date, as set forth in the Award Agreement, on which the applicable conditions for payment or other settlement of such PSU or RSU are met, deemed to have been met or waived as contemplated in Section 1.3.37.

 

	
2.

	
CONSTRUCTION AND INTERPRETATION

 

	
 

	
2.1

	
Gender, Singular, Plural. In the Plan, references to the masculine include the feminine; and references to the-singular shall include the plural and vice versa, as the context shall require.

	
 

	
 

	
 

	
 

	
2.2

	
Governing Law. The Plan shall be governed and interpreted in accordance with the laws of the Province of Ontario and any actions, proceedings or claims in any way pertaining to the Plan shall be commenced in the courts of the Province of Ontario.

	
 

	
 

	
 

	
 

	
2.3

	
Severability. If any provision or part of the Plan is determined to be void or unenforceable in whole or in part, such determination shall not affect the validity or enforcement of any other provision or part thereof.

	
 

	
 

	
 

	
 

	
2.4

	
Headings, Sections. Headings wherever used herein are for reference purposes only and do not limit or extend the meaning of the provisions herein contained. A reference to a section or schedule shall, except where expressly stated otherwise, mean a section or schedule of the Plan, as applicable.

 

	
3.

	
EFFECTIVE DATE AND EMPLOYMENT RIGHTS

 

	
 

	
3.1

	
Effective Date. The Plan is adopted subject to the approval of the NEO Exchange, any other required regulatory approval and the approval of the shareholders of the Corporation in accordance with the polices of the NEO Exchange. To the extent a provision of the Plan requires regulatory approval which is not received, such provision shall be severed from the remainder of the Plan until the approval is received and the remainder of the Plan shall remain in effect. The Plan shall become effective upon the later of the date of acceptance for filing of the Plan by the NEO Exchange and the date of approval of the Plan by the shareholders of the Corporation.

 

    

    - H-18 - 

    

	
 

	
3.2

	
No Employment Rights. Nothing contained in the Plan shall be deemed to give any person the right to be retained as an employee of the Corporation or of a Subsidiary. For greater certainty, a period of notice, if any, or payment in lieu thereof, upon termination of employment, wrongful or otherwise, shall not be considered as extending the period of employment for the purposes of the Plan.

 

	
4.

	
PSU AND RSU GRANTS AND PERFORMANCE PERIODS

 

	
 

	
4.1

	
Awards of PSUs and RSUs. The Plan shall be administered by the Board. The Board shall have the authority in its sole and absolute discretion to administer the Plan and to exercise all the powers and authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan, subject to and not inconsistent with the express provisions of this Plan, including, without limitation, the authority to:

 

	
 

	
4.1.1

	
determine the Award Value and/or the number of PSUs or RSUs to be awarded for each award under an Award Agreement;

	
 

	
 

	
 

	
 

	
4.1.2

	
make grants of PSUs and RSUs in respect of any award under an Award Agreement, provided that: (i) no Award will be granted during a blackout period or other trading restriction imposed by the Corporation or at any other time when the Board or the Corporation has any undisclosed material information; and (ii) PSUs shall not be awarded to non-employee directors of the Corporation.

	
 

	
 

	
 

	
 

	
4.1.3

	
determine the Award Date for grants of PSUs and RSUs, if not the date on which the Board determines to make such grants under an Award Agreement;

	
 

	
 

	
 

	
 

	
4.1.4

	
determine the Participants to whom, and the time or times at which, awards shall be made and PSUs and RSUs shall be granted under an Award Agreement;

	
 

	
 

	
 

	
 

	
4.1.5

	
approve or authorize the applicable form and terms of the related Award Agreements;

	
 

	
 

	
 

	
 

	
4.1.6

	
determine the terms and conditions of awards, and grants of PSUs and RSUs in respect thereof, to any Participant, including, without limitation the following, (A) the number of PSUs and RSUs to be granted; (B) the Performance Period(s) applicable to PSUs; (C) the Performance Criteria applicable to PSUs and any other conditions to the Vesting of any PSUs and RSUs granted hereunder; (D) the conditions, if any, upon which Vesting of any PSUs or RSUs will be waived or accelerated without any further action by the Board; (E) the extent to which the Performance Criteria must be achieved in order for any PSUs to become Vested PSUs and the Performance Adjustment Factor or other multiplier, if any, that will be applied to determine the number of PSUs that become Vested PSUs having regard to the achievement of the Performance Criteria; (F) the circumstances in which a PSU or RSU shall be forfeited, cancelled or expire; (G) the consequences of a termination of employment or service with respect to a PSU or RSU; (H) the manner of settlement of Vested PSUs and Vested RSUs, including whether particular Vested PSUs or Vested RSUs will be settled in cash or Shares issued from treasury; and (I) whether and the terms upon which any Shares delivered upon settlement of a PSU or RSU must continue to be held by a Participant for any specified period;

    

    - H-19 - 

    

	
 

	
4.1.7

	
determine whether, and the extent to which, any Performance Criteria applicable to the Vesting of a PSU or other conditions applicable to the Vesting of a PSU or RSU have been satisfied or shall be waived or modified;

	
 

	
 

	
 

	
 

	
4.1.8

	
amend the terms of any outstanding Award Agreement provided, however, that no such amendment, shall be made at any time to the extent such action would materially adversely affect the existing rights of a Participant with respect to any then outstanding PSU or RSU related to such Award Agreement without his or her consent in writing and provided further, however, that the Board may amend the terms of an Award Agreement without the consent of the Participant if complying with Applicable Law;

	
 

	
 

	
 

	
 

	
4.1.9

	
determine whether, and the extent to which, adjustments shall be made pursuant to Section 5.3 and the terms of any such adjustments;

	
 

	
 

	
 

	
 

	
4.1.10

	
interpret the Plan and Award Agreements;

	
 

	
 

	
 

	
 

	
4.1.11

	
prescribe, amend and rescind such rules and regulations and make all determinations necessary or desirable for the administration and interpretation of the Plan and Award Agreements;

	
 

	
 

	
 

	
 

	
4.1.12

	
determine the terms and provisions of Award Agreements (which need not be identical) entered into in respect of awards hereunder;

	
 

	
 

	
 

	
 

	
4.1.13

	
in the event there is any question as to whether a Change in Control has occurred in any circumstances, determine whether a Change in Control has occurred; and

	
 

	
 

	
 

	
 

	
4.1.14

	
make all other determinations deemed necessary or advisable for the administration of the Plan.

 

	
 

	
4.2

	
Eligibility and Award Determination.

 

	
 

	
4.2.1

	
In determining the Participants to whom awards may be made and the Award Value (and accordingly the number of PSUs and RSUs to be granted) for each award, or the specific number of PSUs or RSUs to be awarded (subject, in the case of PSUs, to adjustment based on achievement of Performance Criteria), the Board may take into account such factors as it shall determine in its sole and absolute discretion.

	
 

	
 

	
 

	
 

	
4.2.2

	
Unless the Board determines to grant a Participant a specific number of PSUs without specifying an Award Value, the PSUs granted to a Participant for a Performance Period shall be determined by dividing the Award Value determined for the Participant for such Performance Period by the Market Value (with currency conversion if necessary) as at the end of the calendar quarter immediately preceding the Award Date, rounded down to the next whole number.

 

    

    - H-20 - 

    

	
 

	
4.2.3

	
Unless the Board determines to grant a Participant a specific number of RSUs without specifying an Award Value, the RSUs granted to a Participant shall be determined by dividing the Award Value of an award to be provided to the Participant in the form of RSUs by the Market Value (with currency conversion if necessary) as at the end of the calendar quarter immediately preceding the Award Date, rounded down to the next whole number.

	
 

	
 

	
 

	
 

	
4.2.4

	
For greater certainty and without limiting the discretion conferred on the Board pursuant to this Section, the Board’s decision to approve a grant of PSUs in any Performance Period, or any grant of RSUs, shall not entitle any Participant to an award of PSUs in respect of any other Performance Period or any future grant of RSUs; nor shall the Board’s decision with respect to the size or terms and conditions of an award require it to approve an award of the same or similar size or with the same or similar terms and conditions to any Participant at any other time. No Participant has any claim or right to receive an award or any PSUs or RSUs.

	
 

	
 

	
 

	
 

	
4.2.5

	
An Award Agreement shall set forth, among other things, the following: the Award Date of the award evidenced thereby; the number of PSUs or RSUs, as applicable, granted in respect of such award; the Performance Criteria and the Performance Adjustment Factor applicable to PSUs and any other conditions to the Vesting of the PSUs or RSUs, as applicable; in the case of PSUs, the applicable Performance Period; and may specify such other terms and conditions as the Board shall determine or as shall be required under any other provision of the Plan. The Board may include in an Award Agreement terms or conditions pertaining to confidentiality of information relating to the Corporation’s operations or businesses which must be complied with by a Participant including as a condition of the grant or Vesting of PSUs or RSUs, provided that failure to include such confidentiality provision in an Award Agreement shall not excuse a Participant’s confidentiality obligations pursuant to any employment contract, corporate policy or statutory obligation applicable to such Participant.

	
 

	
 

	
 

	
 

	
4.2.6

	
The Board shall not grant Award PSUs and Award RSUs to residents of the United States unless such awards and the Shares issuable upon settlement thereof are registered under the U.S. Securities Act or are issued in compliance with an available exemption from the registration requirements of the U.S. Securities Act.

 

	
 

	
4.3

	
PSUs and RSUs. Each whole PSU and RSU will give a Participant the right to receive either a Share or a cash payment, as determined by the Board, in an amount determined in accordance with the terms of the Plan and the applicable Award Agreement. For greater certainty, a Participant shall have no right to receive Shares or a cash payment with respect to any PSUs or RSUs that do not become Vested PSUs or Vested RSUs, as the case may be, under Article 7.

 

	
5.

	
ACCOUNTS, DIVIDEND EQUIVALENTS AND REORGANIZATION

 

	
 

	
5.1

	
Account. An account (“Account”) shall be maintained by the Corporation for each award made to each Participant pursuant to an Award Agreement and which will be credited with an opening balance equal to the Award PSUs and/or Award RSUs granted pursuant to such Award Agreement. PSUs or RSUs that fail to vest pursuant to Article 7, or that are paid out to the Participant or his legal representative, shall be cancelled and shall cease to be recorded in the Participant’s Account as of the date on which such PSUs or RSUs, as applicable, are forfeited or cancelled under the Plan or are paid out, as the case may be.

    

    - H-21 - 

    

	
 

	
5.2

	
Dividend Equivalent Units. When and if cash dividends are paid on the Shares during the period from the Award Date under the Award Agreement to the date of settlement of the PSUs or RSUs granted thereunder, additional PSUs or RSUs, as applicable, will be credited to the Participant’s Account in accordance with this Section 5.2 (“Dividend Equivalent Units”). The number of such additional PSUs or RSUs to be credited to the Participant’s Account in respect of any particular dividend paid on the Shares will be calculated by dividing (i) the amount of the cash dividend that would have been paid to the Participant if each of the PSUs and RSUs recorded in the Participant’s Account (but for greater certainty not including any previous Dividend Equivalent Units received and recorded) as at the record date for the cash dividend had been Shares by (ii) the Market Value (with currency conversion if necessary) on the date on which the dividend is paid on the Shares, rounded down to the next whole number. Dividend Equivalent Units shall be subject to the same Vesting conditions and shall Vest and be paid at the same time as the PSUs or RSUs, as applicable, to which they relate.

	
 

	
 

	
 

	
 

	
5.3

	
Adjustments. In the event of any stock dividend, stock split, combination or exchange of shares, capital reorganization, consolidation, spin-off or other distribution (other than normal cash dividends) of the Corporation’s assets to shareholders, or any other similar changes affecting the Shares, proportionate adjustments to reflect such change or changes shall be made with respect to the number of PSUs and RSUs outstanding under the Plan, or securities into which the Shares are changed or are convertible or exchangeable and as may be substituted for Shares under this Plan, on a basis proportionate to the number of PSUs and RSUs in the Participant’s Account or some other appropriate basis, all as determined by the Board in its sole discretion.

	 	 	 

	
6.

	
PAYMENT OF AWARDS BY TREASURY ISSUANCES

 

	
 

	
6.1

	
Maximum Number of Shares Issuable from Treasury.
The aggregate number of Shares that are issuable under the Plan to pay awards which have been granted and are outstanding under the
Plan, together with Shares that are issuable pursuant to outstanding awards or grants under any other Share Compensation
Arrangement, shall not at any time exceed 10% of the Shares then issued and outstanding, subject to adjustment as provided in
Section 5.3 above to give effect to any relevant changes in the capitalization of the Corporation, and provided that for the purpose
of such calculation, the number of Shares then issued and outstanding shall include the number of Shares issuable upon conversion of
the then issued and outstanding Multiple Voting Shares. Shares in respect of which Awards have been granted but which are: (i)
vested and redeemed; or (ii) forfeited, surrendered, cancelled or otherwise terminated or expire without the delivery of Shares
shall be available for subsequent Awards. In addition, the number of Shares subject to an Award (or portion thereof) that the
Corporation permits to be settled in cash in lieu of settlement in Shares shall be available for subsequent Awards.

	
 

	
 

	
 

	
 

	
6.2

	
Issuances of Shares from Treasury. All issuances of Shares from treasury to pay awards as contemplated by Section 7.4 shall be deemed to be issued at a price per Share equal to the Market Value on the date of issuance.

	
 

	
 

	
 

	
 

	
6.3

	
Participation Limits. Awards under the Plan shall be limited as follows:

 

	
 

	
6.3.1

	
the total number of Shares reserved for issuance to Insiders (as a group) under the Plan, together with Shares reserved for issuance to Insiders under any other Share Compensation Arrangement, shall not at any time exceed 10% of the issued and outstanding Shares, provided that for the purpose of such calculation, the number of Shares issued and outstanding shall include the number of Shares issuable upon conversion of the issued and outstanding Multiple Voting Shares;

    

    - H-22 - 

    

	
 

	
6.3.2

	
within any one-year period the aggregate number of Shares issued to Insiders (as a group) pursuant to the Plan and any other Share Compensation Arrangement shall not exceed 10% of the issued and outstanding Shares, provided that for the purpose of such calculation, the number of Shares issued and outstanding shall include the number of Shares issuable upon conversion of the issued and outstanding Multiple Voting Shares;

	
 

	
 

	
 

	
 

	
6.3.3

	
the maximum aggregate grant date fair value using the Black-Scholes-Merton valuation model of awards under the Plan, together with awards or grants under any other Share Compensation Arrangement, to any non-employee director of the Corporation in any fiscal year of the Corporation shall not exceed $150,000; and

	
 

	
 

	
 

	
 

	
6.3.4

	
no award under the Plan may be made to any non-employee director if such award could result, together with awards or grants then outstanding under the Plan and any other Share Compensation Arrangement, in the issuance to non-employee directors as a group of a number of Shares exceeding 1% of the Shares issued and outstanding immediately prior to any such Share issuance, provided that for the purpose of such calculation, the number of Shares issued and outstanding shall include the number of Shares issuable upon conversion of the issued and outstanding Multiple Voting Shares.

 

	
7.

	
VESTING AND PAYMENT OF AWARDS

 

	
 

	
7.1

	
Vesting of PSUs. Upon the first day immediately following the end of the Performance Period, PSUs represented by the PSU Balance as at such date shall Vest subject to the terms hereof, with the number of Vested PSUs being equal to the PSU Balance as at such date multiplied by the Performance Adjustment Factor as determined by the Board in accordance with the Award Agreement. For certainty, in the event the Performance Adjustment Factor is equal to zero, no PSUs will vest. Except where the context requires otherwise, each PSU which vests pursuant to Article 7 and each Dividend Equivalent Unit credited in respect of such PSUs after the Performance Period and prior to the date of settlement shall be referred to herein as a Vested PSU. PSUs which do not become Vested PSUs in accordance with this Article 7 shall be forfeited by the Participant and the Participant will have no further right, title or interest in such PSUs. The Participant waives any and all right to compensation or damages in consequence of the termination of employment (whether lawfully or unlawfully) or otherwise for any reason whatsoever insofar as those rights arise or may arise from the Participant ceasing to have rights or be entitled to receive any Shares or cash payment under the Plan pursuant to this Section 7.1.

	
 

	
 

	
 

	
 

	
7.2

	
Performance Criteria. The PSUs granted to a Participant under an Award Agreement and Section 4.1 (and the related Dividend Equivalent Units credited in respect of such PSUs) shall become Vested PSUs only upon the Board’s determination with respect to the Performance Adjustment Factor in accordance with the Award Agreement applicable to such PSUs or have been waived in accordance with Section 4.1.7.

 

    

    - H-23 - 

    

	
 

	
7.3

	
Vesting of RSUs. Upon the Vesting Date(s) specified in the applicable Award Agreement the RSUs comprising a Participant’s RSU Balance shall Vest in such proportion as may be determined in accordance with such Award Agreement. Except where the context requires otherwise, each RSU which vests pursuant to Article 7 and each Dividend Equivalent Unit credited in respect of such RSU after its Vesting Date and prior to the date of settlement shall be referred to herein as a Vested RSU. RSUs which do not become Vested RSUs in accordance with this Article 7 shall be forfeited by the Participant and the Participant will have no further right, title or interest in such RSUs. The Participant waives any and all right to compensation or damages in consequence of the termination of employment (whether lawfully or unlawfully) or otherwise for any reason whatsoever insofar as those rights arise or may arise from the Participant ceasing to have rights or be entitled to receive any Shares or cash payment under the Plan pursuant to this Section 7.3.

	
 

	
 

	
 

	
 

	
7.4

	
Payment in Shares. In the event that a Participant’s Vested PSUs or Vested RSUs have been designated by the Board for settlement in Shares issued from treasury, the Participant or his legal representative, as applicable, shall receive a number of Shares equal to the number of Vested PSUs or Vested RSUs, as the case may be, credited to the Participant’s Account (rounded down to the nearest whole number of Shares). In such event, such Shares shall be distributed to the Participant or his legal representative, as applicable, as soon as practicable following the applicable Vesting Date. For purposes of clarity of the intent to comply with certain Canadian tax rules, in no event shall the payment be made later than December 31 of the third calendar year following the year in which the services giving rise to the award of PSUs or RSUs were rendered. No Participant who is resident in the United States may receive Shares upon settlement of Vested PSUs or Vested RSUs unless the Shares to be issued upon such settlement are registered under the U.S. Securities Act or are issued in compliance with an available exemption from the registration requirements of the U.S. Securities Act.

	
 

	
 

	
 

	
 

	
7.5

	
Payment in Cash. In the event that a Participant’s Vested PSUs or Vested RSUs have not been designated by the Board for settlement in Shares issued from treasury, the Participant or his legal representative, as applicable, shall receive a cash payment equal to: (i) in the case of PSUs, the Market Value determined as of the last day of the Performance Period multiplied by the number of Vested PSUs credited to his PSU Account as determined in accordance with Section 7.1 (rounded down to the nearest whole number of PSUs); and (ii) in the case of RSUs, the Market Value determined as of the Vesting Date of such RSUs multiplied by the number of Vested RSUs credited to his RSU Account as determined in accordance with Section 7.3 (rounded down to the nearest whole number of RSUs). Subject to Section 10.9, the cash payment shall be made to the Participant or his legal representative, as applicable, in a single lump sum as soon as practicable following the applicable Vesting Date. For purposes of clarity of the intent to comply with certain Canadian tax rules, in no event shall the payment be made later than December 31 of the third calendar year following the year in which the services giving rise to the award of PSUs or RSUs were rendered.

 

	
 

	
7.6

	
Death. Period of Absence.

 

	
 

	
7.6.1

	
Death. Where the employment or service as a director of a Participant terminates during a Performance Period in the case of PSUs or prior to a Vesting Date in the case of RSUs by reason of the Participant’s death: (i) the PSUs credited to the Participant’s Account as at December 31 of the year immediately preceding the Participant’s date of death shall continue to be eligible to become Vested PSUs in accordance with Sections 7.1 and 7.2; and (ii) the RSUs credited to the Participant’s Account as at December 31 of the year immediately preceding the Participant’s date of death shall Vest as of the Participant’s date of death. The estate of the Participant shall be entitled to receive cash or Shares (or a combination thereof) as specified by the Board determined in accordance with Sections 7.4 or 7.5. For greater clarity, the number of Vested PSUs used to calculate the value of the payment shall equal the number of Vested PSUs determined in accordance with Sections 7.1 and 7.2 as at December 31 of the year immediately preceding the Participant’s date of death.

    

    - H-24 - 

    

	
 

	
7.6.2

	
Period of Absence. In the event of a Participant’s Period of Absence during a Performance Period for PSUs or prior to a Vesting Date for RSUs and subject to this Section 7.6.2 and Section 7.6.4, PSUs and RSUs credited to the Participant’s Account immediately prior to the commencement of such Period of Absence (and any related Dividend Equivalent PSUs and RSUs) shall continue to be eligible to become Vested in accordance with the provisions of Sections 7.1 and 7.3 and the Participant shall be entitled to receive cash or Shares (or a combination thereof) as specified by the Board in respect of such Vested PSUs and Vested RSUs determined in accordance with Sections 7.4 or 7.5, as applicable, except that the number of Vested PSUs and Vested RSUs used to calculate the value of the payment shall equal the number of Vested PSUs or Vested RSUs, as applicable determined in accordance with Section 7.1 and 7.3 multiplied by a fraction, (i) in the case of PSUs, the numerator of which equals the number of whole and partial months in the Performance Period for which the Participant actively performed services for the Corporation or a Subsidiary and the denominator of which equals the number of whole and partial months in the Performance Period; and (ii) in the case of RSUs, the numerator of which equals the number of whole and partial months in the period from the Award Date to the Vesting Date of such RSUs for which the Participant actively performed services for the Corporation or a Subsidiary and the denominator of which equals the number of whole and partial months in the period from the Award Date to the Vesting Date of such RSUs.

	
 

	
 

	
 

	
 

	
7.6.3

	
No Additional Grants. For greater clarity, no additional PSUs or RSUs (whether pursuant to Section 4.1 or in the form of Dividend Equivalent Units) shall be granted to a Participant following his or her date of death or during his or her Period of Absence, including following his or her date of Disability.

	
 

	
 

	
 

	
 

	
7.6.4

	
Failure to Return. Notwithstanding Section 7.6.2, where a Participant experiences a Period of Absence that extends beyond the end of a Performance Period for PSUs or a Vesting Date for RSUs and fails to return to active full-time employment with the Corporation or a Subsidiary within 180 days following the end of such Performance Period or such Vesting Date, no portion of the PSUs subject to such Performance Period or RSUs that would otherwise Vest on such Vesting Date shall Vest and the Participant shall receive no payment or other compensation in respect of such PSUs or RSUs or loss thereof, on account of damages or otherwise.

 

	
 

	
7.7

	
Other Terminations of Employment. Except as otherwise provided in the Award Agreement governing the grant of PSUs or RSUs to a Participant or a written employment or other agreement between the Participant and the Corporation or any Subsidiary, in the event that, during a Performance Period with respect to PSUs or prior to a Vesting Date with respect to RSUs, (i) the Participant’s employment or service as a director is terminated by the Corporation or a Subsidiary of the Corporation for any reason, or (ii) a Participant voluntarily terminates his employment with the Corporation or a Subsidiary of the Corporation or service as a director, including due to retirement, no portion of the PSUs subject to such Performance Period or RSUs that would otherwise Vest on such Vesting Date shall Vest and the Participant shall receive no payment or other compensation in respect of such PSUs or RSUs or loss thereof, on account of damages or otherwise; provided that any Vested PSUs and Vested RSUs will be settled in accordance with Sections 7.4 and 7.5.

 

    

    - H-25 - 

    

	
 

	
7.8

	
Change in Control. Notwithstanding any other provision of the Plan, but subject to the terms of any Award Agreement or any employment agreement between the Participant and the Corporation or any Subsidiary, in the event of a Change in Control, all PSUs and RSUs credited to each Account (including for greater certainty Dividend Equivalent Units) which have not become Vested PSUs or Vested RSUs, shall become Vested PSUs and Vested RSUs on the basis of one PSU becoming one Vested PSU and one RSU becoming one Vested RSU, as at the time of Change in Control (unless otherwise determined by the Board). As soon as practicable following a Change in Control each Participant shall, at the discretion of the Board, receive in cash or in Shares (or a combination thereof) a payment equal to the number of such Vested PSUs and Vested RSUs (as determined pursuant to this Section 7.8) credited to the Participant’s Account at the time of the Change in Control (rounded down to the nearest whole number of Vested PSUs and Vested RSUs) multiplied by the price at which the Shares are valued for the purpose of the transaction or series of transactions giving rise to the Change in Control, or if there is no such transaction or transactions at the Market Value on the date of the Change in Control, less any statutory withholdings or deductions. Notwithstanding the foregoing, where a Change in Control occurs and no Shares are distributed and no cash payments are made to a Participant within 30 days following the Change in Control, the Corporation shall cease to have the discretion to provide the Participant with Shares and shall be required to pay (or cause a Subsidiary to pay) to the Participant in respect of his Vested PSUs and Vested RSUs and Dividend Equivalent Units in cash the amount determined in accordance with the payment formula set out above.

 

	
8.

	
COMPLIANCE WITH U.S. LAWS

 

	
 

	
8.1

	
Neither the awards granted hereunder nor the securities which may be acquired pursuant to the settlement of such awards have been registered under the U.S. Securities Act or under any securities law of any state of the United States and are considered “restricted securities” (as such term is defined in Rule 144(a)(3) under the U.S. Securities Act) and any Shares issued to U.S. Award Holder shall be affixed with an applicable restrictive legend as set forth in the Award Agreement. The awards may not be offered, sold pledged or otherwise transferred, directly or indirectly, in the United States except pursuant to registration under the U.S. Securities Act and the securities laws of all applicable states or pursuant to available exemptions therefrom, and the Corporation has no obligation or present intention of filing a registration statement under the U.S. Securities Act in respect of any of the awards granted hereunder or the securities underlying such awards, which could result in such U.S. Award Holder not being able to dispose of any Shares issued upon settlement of Awards for a considerable length of time. Each U.S. Award Holder or anyone who becomes a U.S. Award Holder, who is granted an award pursuant to this Plan in the United States, who is a resident of the United States or who is otherwise subject to the U.S. Securities Act or the securities laws of any state of the United States will be required to complete an Award Agreement which sets out the applicable United States restrictions.

    

    - H-26 - 

    

	
 

	
8.2

	
Notwithstanding any provisions contained in the Plan to the contrary and to the extent required by applicable U.S. state corporate laws, U.S. federal and state securities laws, the Internal Revenue Code of 1986, as amended (the “Code”), and the applicable laws of any jurisdiction in which awards are granted under the Plan, the following terms shall apply to all such awards granted to residents of the State of California, until such time as the Board amends this Section 8.2 or the Board otherwise provides:

 

	
 

	
(A)

	
Unless determined otherwise by the Board, awards may not be sold, pledged, assigned, hypothecated, or otherwise transferred in any manner other than by will or by the laws of descent and distribution. If the Board makes an award transferable, such award may only be transferred (i) by will, (ii) by the laws of descent and distribution, (iii) to a revocable trust, or (iv) as permitted by Rule 701 of the U.S. Securities Act.

	
 

	
 

	
 

	
 

	
(B)

	
All Shares issuable under the Plan must be issued within ten years from the date of adoption of the Plan or the date the Plan is approved by the shareholders of the Corporation, whichever is earlier.

	
 

	
 

	
 

	
 

	
(C)

	
In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spinoff, combination, repurchase, or exchange of Shares or other securities of the Corporation, or other change in the corporate structure of the Corporation affecting the Shares occurs, the Board, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, will adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Vested award.

	
 

	
 

	
 

	
 

	
(D)

	
The Corporation shall furnish summary financial information (audited or unaudited) of the Corporation’s financial condition and results of operations, consistent with the requirements of applicable law, at least annually to each Participant in California during the period such Participant has one or more award outstanding, and in the case of an individual who acquired Shares pursuant to the Plan, during the period such Participant owns such Shares; provided, however, the Corporation shall not be required to provide such information if (i) the issuance is limited to key persons whose duties in connection with the Corporation assure their access to equivalent information or (ii) the Plan or any agreement complies with all conditions of Rule 701 of the U.S. Securities Act; provided that for purposes of determining such compliance, any registered domestic partner shall be considered a “family member” as that term is defined in Rule 701 of the U.S. Securities Act.

	
 

	
 

	
 

	
 

	
(E)

	
The Plan or any increase in the maximum aggregate number of Shares issuable thereunder as provided in Section 6.1 (the “Authorized Shares”) shall be approved by a majority of the outstanding securities of the Corporation entitled to vote by the later of (i) within twelve (12) months before or after the date of adoption of the Plan by the Board or (ii) prior to or within 12 months of the first issuance of any security pursuant to the Plan in the State of California. Any Shares issued pursuant to this Plan prior to shareholder approval of the Plan or in excess of the Authorized Shares previously approved by the shareholders shall be rescinded if such shareholder approval is not received in the manner described in the preceding sentence. Notwithstanding the foregoing, a “foreign private issuer”, as defined by Rule 3b-4 of the United States Securities Exchange Act of 1934, as amended shall not be required to comply with this paragraph provided that the aggregate number of persons in California granted options under all Share Compensation Arrangements and issued securities under all purchase and bonus plans and agreements does not exceed 35.

 

    

    - H-27 - 

    

	
9.

	
CURRENCY

 

	
 

	
9.1

	
Currency. All references in the Plan to currency refer to Canadian dollars.

 

	
10.

	
SHAREHOLDER RIGHTS

 

	
 

	
10.1

	
No Rights to Shares. PSUs and RSUs are not Shares and neither the grant of PSUs or RSUs nor the fact that Shares may be acquired by, or provided from, the Corporation in satisfaction of Vested PSUs or Vested RSUs will entitle a Participant to any shareholder rights, including, without limitation, voting rights, dividend entitlement or rights on liquidation.

 

	
11.

	
ADMINISTRATION

 

	
 

	
11.1

	
Delegation and Administration. The Board may, in its discretion, delegate such of its powers, rights and duties under the Plan, in whole or in part, to any committee of the Board or any one or more directors, officers or employees of the Corporation and/or its Subsidiaries as it may determine from time to time, on terms and conditions as it may determine, except the Board shall not, and shall not be permitted to, delegate any such powers, rights or duties to the extent such delegation is not consistent with Applicable Law.

	
 

	
 

	
 

	
 

	
11.2

	
Effects of Board’s Decision. Any interpretation, rule, regulation, determination or other act of the Board hereunder shall be made in its sole discretion and shall be conclusively binding upon all persons.

	
 

	
 

	
 

	
 

	
11.3

	
Liability Limitation. No member of the Board or any officer, director or employee of the Corporation or any Subsidiary shall be liable for any action or determination made in good faith pursuant to the Plan or any Award Agreement under the Plan. To the fullest extent permitted by law, the Corporation and its Subsidiaries shall indemnify and save harmless each person made, or threatened to be made, a party to any action or proceeding in respect of the Plan by reason of the fact that such person is or was a member of the Board or is or was an officer, director or employee of the Corporation or a Subsidiary.

	
 

	
 

	
 

	
 

	
11.4

	
Compliance with Laws and Policies. The Corporation’s issuance of any PSUs and RSUs and its obligation to make any payments or discretion to provide any Shares hereunder is subject to compliance with Applicable Law. Each Participant shall acknowledge and agree (and shall be conclusively deemed to have so acknowledged and agreed by participating in the Plan) that the Participant will, at all times, act in strict compliance with Applicable Law and all other laws and any policies of the Corporation applicable to the Participant in connection with the Plan including, without limitation, furnishing to the Corporation all information and undertakings as may be required to permit compliance with Applicable Law. Such laws, regulations, rules and policies shall include, without limitation, those governing “insiders” or “reporting issuers” as those terms are construed for the purposes of Applicable Laws.

    

    - H-28 - 

    

	
 

	
11.5

	
Withholdings. So as to ensure that the Corporation or a Subsidiary, as applicable, will be able to comply with the applicable provisions of any federal, provincial, state or local law relating to the withholding of tax or other required deductions, the Corporation, or a Subsidiary may withhold or cause to be withheld from any amount payable to a Participant, either under this Plan, or otherwise, such amount, or may require the sale of such number of Shares, as may be necessary to permit the Corporation or the Subsidiary, as applicable, to so comply.

	
 

	
 

	
 

	
 

	
11.6

	
No Additional Rights. Neither designation of an employee as a Participant nor the establishment of an Award Value for or grant of any PSUs or RSUs to any Participant entitles any person to the establishment of an Award Value, grant, or any additional grant, as the case may be, of any PSUs or RSUs under the Plan.

 

	
 

	
11.7

	
Amendment, Termination. The Plan may be amended or terminated at any time by the Board in whole or in part, provided that:

 

	
 

	
11.7.1

	
no amendment of the Plan shall, without the consent of the Participants affected by the amendment, or unless required by Applicable Law, adversely affect the rights accrued to such Participants with respect to PSUs or RSUs granted prior to the date of the amendment;

	
 

	
 

	
 

	
 

	
11.7.2

	
no amendment of the Plan shall be effective unless such amendment is approved by the Stock Exchange whose approval is required under Stock Exchange Rules; and

	
 

	
 

	
 

	
 

	
11.7.3

	
approval by a majority of the votes cast by shareholders present and voting in person or by proxy at a meeting of shareholders of the Corporation shall be obtained for any:

 

	
 

	
11.7.3.1

	
amendment for which, under the requirements of the Stock Exchange or any applicable law, shareholder approval is required;

	
 

	
 

	
 

	
 

	
11.7.3.2

	
a reduction in pricing of an award under the Plan (other than an adjustment pursuant to Section 5.3) or the cancellation and reissuance of awards under the Plan;

	
 

	
 

	
 

	
 

	
11.7.3.3

	
extension of the term of an award under the Plan beyond the original expiry date of the award;

	
 

	
 

	
 

	
 

	
11.7.3.4

	
any amendment to remove or exceed the Insider participation limits set out in Sections 6.3.1 or 6.3.2;

	
 

	
 

	
 

	
 

	
11.7.3.5

	
any amendment to remove or exceed the limits on participation in the Plan by non-employee directors as set out in Sections 6.3.3 or 6.3.4;

	
 

	
 

	
 

	
 

	
11.7.3.6

	
an increase to the maximum number of Shares which may be issuable under the Plan, other than an adjustment pursuant to Section 5.3;

	
 

	
 

	
 

	
 

	
11.7.3.7

	
the addition of additional categories of Participants that may permit the introduction or re-introduction of non-employee directors on a discretionary basis;

 

    

    - H-29 - 

    

	
 

	
11.7.3.8

	
allowance of awards granted under the Plan to be transferable or assignable other than for normal estate settlement purposes; or

	
 

	
 

	
 

	
 

	
11.7.3.9

	
amendment to this Section 11.7.

 

	
 

	
11.8

	
Administration Costs. The Corporation will be responsible for all costs relating to the administration of the Plan. For greater certainty and unless otherwise determined by the Board, a Participant shall be responsible for brokerage fees and other administration or transaction costs relating to the transfer, sale or other disposition of Shares on behalf of the Participant that have been previously distributed to or provided to the Participant pursuant to the Plan.

	
 

	
 

	
 

	
 

	
11.9

	
Compliance with Section 409A of the U.S. Internal Revenue Code. Notwithstanding any provision in this Plan or an Award Agreement to the contrary, to the extent a Participant is subject to taxation under the U.S. Internal Revenue Code of 1986, as amended (the “U.S. Tax Code”), then any PSUs and RSUs awarded to such Participant shall be interpreted and administered so that any amount payable with respect to such awards shall be paid in a manner that is either exempt from or compliant with the requirements of Section 409A of the U.S. Tax Code and the applicable regulatory and other guidance issued thereunder (“Section 409A”). In furtherance of the foregoing, the Addendum attached hereto shall apply to U.S. Participants (as defined therein).

	
 

	
 

	
 

	
 

	
11.10

	
Compensation Recoupment Policy. Any awarding of PSUs or RSUs under the Plan, the Vesting thereof and the settlement of Awards pursuant thereto are subject to the Compensation Recoupment Policy of the Corporation.

 

	
12.

	
NO FINANCIAL ASSISTANCE

 

	
 

	
12.1

	
No Financial Assistance. The Corporation shall not provide financial assistance to Participants in connection with the Plan.

 

	
13.

	
ASSIGNMENT

 

	
 

	
13.1

	
Assignment. The assignment or transfer of the PSUs or RSUs, or any other benefits under this Plan, shall not be permitted, other than by operation of law.

 

    

    - H-30 - 

    

ADDENDUM

 

TO
THE

 

MIND
MEDICINE (MINDMED) INC. 

(formerly
Broadway Gold Mining Ltd.)

 

PERFORMANCE AND RESTRICTED SHARE UNIT PLAN

 

SPECIAL
PROVISIONS FOR U.S. PARTICIPANTS

 

The
provisions of this Addendum apply only to U.S. citizens, U.S. permanent residents or any other persons whose Award PSUs or RSUs
are subject to U.S. Federal Income Tax (“U.S. Participants”) at the relevant time.

 

This
Addendum modifies the Plan for U.S. Participants and where there is any conflict between the Plan and the terms of this Addendum,
the terms of this Addendum shall prevail.

 

	1.	Title and Conflict 	All
                                                                                                                                                                                                                                          Award PSUs and RSUs issued under the Plan to U.S. Participants
are intended to be exempt from and avoid the penalties imposed by Section 409A, or any successor thereto, and all provisions hereunder
shall be read, interpreted, and applied with that purpose in mind. The Award Agreement applicable to any U.S. Participant may
be revised to address this intention.

 

	2.	Definitions

 

	 	“Change in Control”	“Change in Control” means a transaction
described in Section 1.3.9 of the Plan, but only to the extent that such a transaction constitutes a change in the ownership of
effective control of the Corporation or in the ownership of a substantial portion of the assets of the Corporation, as defined
in regulation 1.409A-3(i)(5) under Section 409A.

 

	 	“Market Value”	“Market Value” shall have the meaning
as to U.S. Participants as specified in Section 1.3.14 of the Plan.

 

	 	“Section 409A”	“Section 409A” means section 409A
of the U.S. Tax Code. “Separation from Service” “Separation from Service” means a “separation
from service” for purposes of Section 409A(a)(2)(A)(i) of the U.S. Tax Code.

 

	 	“Specified Employee”	“Specified Employee” means a “specified
employee” as determined in a manner that complies with Section 409A(2)(B)(i) of the U.S. Tax Code.

 

	 	“U.S. Tax Code”	“U.S. Tax Code” means the United
States Internal Revenue Code of 1986, as amended, and the regulations and guidance issued under it from time to time.

    

    - H-31 - 

    

	3.	Payment 	The Award Agreement shall state the Vesting Date. It
is intended that the vesting conditions for the Award shall constitute a “substantial risk of forfeiture” within the
meaning of Section 409A and that PSUs and RSUs will be exempt from Section 409A under Treasury Regulation 1.409A-1(b)(4). Sections
7.4 and 7.5 and all other provision of the Plan shall be interpreted and administered such that RSUs and PSUs will be settled
and paid out by March 15th of the year following the year in which such RSUs and PSUs are not, or are no longer, subject
to a substantial risk of forfeiture. Further, for greater certainty, where a Participant experiences a Period of Absence as described
in Section 7.6.4 of the Plan, PSUs and RSUs will be subject to forfeiture until the date that the Participant returns to active
full-time employment within 180 days following the end of the Performance Period, or the Vesting Date for RSUs, as applicable.
However, to the extent that any PSU or RSU awarded would constitute “non- qualified deferred compensation” that is
subject to Section 409A, then the following terms shall apply to such award:

 

Notwithstanding
Sections 7.4 or 7.5 to the contrary, payment shall be made to the Participant or his legal representative, as applicable, in
a single lump sum, less any applicable statutory withholdings or deductions, either (1) between January 1 and March 15, if
the last day of the Performance Period or the Vesting Date, as applicable, is December 31, or (2) if (1) does not apply, no
later than 75 days following the last day of the Performance Period or Vesting Date, as applicable (or, in the event of the
Participant’s death, no later than 75 days following the date of the Participant’s death), provided that the
Participant does not have a right to designate the year of the payment. Neither the Board, the Corporation nor its directors,
officers or employees make any representations or warranties regarding the tax treatment of any payments under the Plan and
none of them shall be held liable for any taxes, interest, penalties or other monetary amounts owed by a Participant as a
result of the application of Section 409A. Notwithstanding any contrary provision set forth in the Plan (and, in particular,
in Section 7 of the Plan) , the payment of any amounts due under the Plan subject to Section 409A shall be made in compliance
with Section 409A and shall not be accelerated except as otherwise permitted under Section 409A. Where applicable to avoid
violation of Section 409A, any reference to or requirement relating to the termination or cessation of a U.S.
Participant’s employment may instead refer to or require such U.S. Participant’s Separation from Service. If
required for Award PSUs or Award RSUs subject to Section 409A, if any Award Agreement requires payment upon Separation from
Service, then a Specified Employee’s payment shall be delayed until a date that is six months following the date of the
U.S. Participant’s Separation from service (or, if earlier, the date of death of the U.S. Participant).

    

    - H-32 - 

    

	4.	Change in Control 	Section 7.8 of the Plan (“Change in Control”)
shall apply to Award
PSUs and Award RSUs that constitute deferred compensation under Section 409A held by a U.S. Participant only if the Change in
Control constitutes a Change in Control of the Corporation as defined in this Addendum. With respect to a transaction that constitutes
a Change in Control under Section 7.8 of the Plan but does not constitute a Change in Control as defined in this Addendum, to
the extent so provided by the Plan, unless otherwise determined not to become vested by the Board, all unvested PSUs and RSUs
shall become fully vested (shall become Vested PSUs and Vested RSUs), but the payment of such rights shall be in the Award Agreement.

 

    

    - I-1 - 

    

APPENDIX
I

ADDITIONAL
INFORMATION CONCERNING MINDMED

 

The
following information concerning MindMed should be read in conjunction with the documents incorporated by reference into this
Appendix “I”.

 

Corporate
Structure

 

Mind
Medicine, Inc. was incorporated pursuant to the laws of the State of Delaware on May 30, 2019. The principal address of MindMed
is 1325 Airmotive Way, Suite 175A, Reno, Nevada 89502 and the registered head office is 1209 Orange Street, Wilmington, Delaware.

 

Intercorporate
Relationships

 

The
following chart illustrates MindMed’s intercorporate relationships as of the date of this Circular:

 

 

 

MindMed
has one subsidiary, MindMed Pty Ltd, which was incorporated in Australia on December 5, 2019 and which is currently inactive.

 

As
of the date of the Circular, MindMed’s issued share capital is as follows. See “Capitalization of MindMed”
below for further details.

 

	Class
    of Shares	 	Outstanding
    Number of Shares
	Class
    A	 	55,000,000
	Class
    B	 	35,000,000
	Class
    C	 	46,993,671
	Class
    D	 	33,771,897
	Total
    Shares Issued and Outstanding	 	170,765,568

    

    - I-2 - 

    

Development
and Description of the Business

 

History

 

MindMed’s
program in addiction medicine received its initial funding in late 2012 in the form of a non-dilutive, multi- million-dollar grant
from the National Institute on Drug Abuse (“NIDA”) to the previous owner of the 18-MC Program, to support the
filing of an investigational new drug application for what is now MindMed’s lead program. Having successfully completed
first-in-human safety studies with 18-MC, MindMed is now focused on conducting human efficacy studies in opioid use disorder and
nicotine dependence, where MindMed sees a well-defined regulatory path to approval and robust global markets. Given the potentially
broad applicability of 18-MC and the ever-growing prevalence of addiction, MindMed believes it has the opportunity to become the
leader in the treatment of addiction and other destructive human behaviors mediated by the brain’s reward/pleasure centers.

 

Recent
Financing

 

On
September 24, 2019, MindMed completed a non-brokered offering of 45,972,630 MindMed Class C Shares and 15,000,000 MindMed Class
D Shares at a price of US$0.10 per share (the “MindMed Non-Brokered Offering”).

 

On
November 4, 2019, MindMed entered into an engagement letter with Canaccord Genuity Corp. to complete the MindMed December Offering.
On December 19, 2019, MindMed entered into an agency agreement with Canaccord Genuity Corp. and completed the first tranche of
the MindMed December Offering, issuing a total of 18,771,897 MindMed Class D Shares at a price of $0.33 per share for gross proceeds
of $6,194,726. On closing of the first tranche, MindMed paid Canaccord Genuity Corp., as agent, commission of $281,741 and issued
1,314,033 MindMed Compensation Options. MindMed anticipates completing a second tranche of the MindMed December Offering on or
about February 11, 2020; MindMed anticipates raising gross proceeds of up to $15 million total in the MindMed December Offering.

 

Significant
Acquisitions and Dispositions

 

Pursuant
to the Foundational Agreement, Savant and the Savant Affiliate transferred their right, title and interest in 18-MC to MindMed
effective July 23, 2019.

 

MindMed
has made no dispositions since its inception.

 

Narrative
Description of the Business

 

General

 

MindMed’s
mission is to discover, develop and deploy psychedelic inspired medicines to alleviate suffering and improve health. In furtherance
of our mission, MindMed is assembling a compelling drug development pipeline of psychedelic inspired medicines planning or undertaking
human clinical trials under the supervision and guidance of the U.S.
Food and Drug Administration (the “FDA”) and regulatory authorities outside of the U.S. MindMed
plans to grow its pipeline of psychedelic inspired medicines through its internal proprietary discovery program, acquisitions,
joint ventures and collaborative development agreements.

 

MindMed
is developing a transformational treatment for opioid addiction to address the growing U.S. opioid crisis. MindMed holds 100%
of the right, title and assets connected with the drug development project for 18-MC (the “18- MC Program”),
a synthetic congener of the naturally-occurring psychedelic compound ibogaine.

    

    - I-3 - 

    

Ibogaine
is a Schedule 1 psychedelic and psychoactive substance that is extracted from the West Africa iboga shrub. Historically,
ibogaine has been used to treat opioid and other forms of substance addiction. While ibogaine is a mild stimulant in small
doses, in larger doses it induces a profound psychedelic state. Inspired by ibogaine’s apparent medicinal properties to
treat addiction, MindMed’s scientific co-founder, Stanley Glick, PhD, MD, invented synthetic molecules that are related
to ibogaine known as 18-MC. 18-MC is designed to be non-hallucinogenic but still maintain anti-addictive
properties.

 

The
18-MC program previously received US$6.8 million in grant support from the NIDA for the study of 18-MC as an anti-addictive treatment.
Following successful first-in-human studies, MindMed is currently preparing 18-MC for clinical trials for the treatment of opioid
addiction, continuing clinical development in support of studies in opioid addicted patients and in other addictions, including
nicotine dependence.

 

MindMed
will continue to adapt and improve its strategy in the future as it continues to learn, but MindMed’s objective will not
change. Developing medicines that treat the cause of the brain disease that is addiction - dopamine dysregulation in the reward/pleasure
centers of the midbrain - rather than merely substituting one addictive substance for another less harmful one, will transform
the field of addiction medicine by alleviating the human suffering currently experienced by millions of addicts, their families
and friends. Such medicines will benefit all society by disrupting the enormous economic loss in the United States and elsewhere
due to this ubiquitous disease.

 

Industry
Information & Market Trends

 

Addictions
and Substance Abuse

 

Substance
use disorders (“SUDs”), more commonly known as addictions, comprise one of the largest unmet medical needs
worldwide. The widespread use and abuse of pain medications, such as OxyContin®, is a very high-profile example of addiction.
Addictions to opioid-based pain medications often begin from proper post-surgical use but progress to addiction. In fact, the
per capita rate of opioid use in the U.S. has quadrupled since 1999, an increase that far outstrips the increase in reported pain
incidence. Alcohol abuse is another – there are more than 17 million heavy drinkers in the U.S. and 140 million worldwide
by World Health Organization estimates.

 

In
November 2016, the U.S. Surgeon General issued “Facing Addiction in America – The Surgeon General’s Report on
Alcohol, Drugs, and Health”, which is their first report on addiction since their report on smoking in 1964. In this report,
the U.S. Secretary of Health and Human Services, Sylvia Mathews Burwell, noted:

 

All
across the United States, individuals, families, communities, and health care systems are struggling to cope with substance use,
misuse, and substance use disorders. Substance misuse and substance use disorders have devastating effects, disrupt the future
plans of too many young people, and all too often, end lives prematurely and tragically. Substance misuse is a major public health
challenge and a priority for our nation to address.

 

For
2015, the U.S. Substance Abuse and Mental Health Services Administration (“SAMHSA”), estimated that over 21.7
million Americans 12 years and older had a chemical substance dependence or abuse problem other than tobacco needing treatment.
The total social and healthcare cost to society of dealing with alcohol and illegal drug abuse is estimated to exceed US$193 billion
annually. Fewer than one-in-ten patients receive treatment for their addiction in the U.S., at a cost of one in every four deaths.
The combined annual cost of substance use disorders in the U.S. is estimated to exceed US$600 billion – an enormous economic
impact.

    

    - I-4 - 

    

 

 

Additionally,
in 2018 the White House Council of Economic Advisors calculated the negative impact of the US opioid crisis alone at more than
US$500 billion in annual costs to the economy.

 

The
overall potential U.S. market for safe, effective, and convenient drug therapy in addiction is extensive and growing. The vast
majority of global and U.S. sales of medicines for addiction are concentrated in smoking cessation (≈US$2.5 billion), opioids
(≈US$1.4 billion) and alcohol (≈US$100 million). This is a dynamic market globally, with approximately 10% compound
annual growth over the last five years. The overall market for drug therapy in addiction is currently undergoing significant remodeling
due to various trends, including:

 

		·	Nicotine.
                                         The introduction and prevalence of e-cigarettes has increased nicotine use. Between
                                         2011 and 2015, e-cigarette use rose 900% among high school students. These products are
                                         now the most commonly used form of nicotine among youth in the United States.1
                                         The Surgeon General of the U.S.
has concluded that e-cigarette use among youths and young adults is of public health concern; exposure to nicotine during adolescence
can cause addiction and can harm the developing adolescent brain.2

 

		·	Opioids.
                                         Generic competition for Suboxone, a treatment for opioid dependence, contributed
                                         to a decline in the Suboxone market from US$1.4 billion in 2012 to US$1.26 billion in
                                         2013.

 

		·	Alcohol.
                                         Considering that in 2012 there were an estimated 60 million binge drinkers and another
                                         17 million heavy drinkers in the U.S. alone, market revenues from medicines for the treatment
                                         of alcohol related disorders are thus far surprisingly modest, with an annual global
                                         market of around US$100 million in 2013. Efforts to understand these numbers have produced
                                         as many reasons as there are studies, including the acceptance of alcohol use by society,
                                         the ineffectiveness of current medications, and the wide range of recovery programs that
                                         do not use medications. It is also significant, however, that 31% of heavy alcohol uses
                                         are illicit drug users as well.

 

		·	Cocaine
                                         or methamphetamine. There are no approved pharmaceutical treatments for either cocaine
                                         or methamphetamine addiction. A recent analysis by NIDA estimates the market size for
                                         a first-in- class treatment for cocaine addiction at US$1.2 billion in annual revenue.
                                         In the U.S., NIDA estimates approximately 5.3 million people use cocaine annually and
                                         1.6 million are regular uses of cocaine.

 

 

 

1 U.S.
Department of Health and Human Services. E-cigarette use among youth and young adults: a report of the Surgeon General. Atlanta, GA:
U.S. Department of Health and Human Services, CDC, National Center for Chronic Disease Prevention and Health Promotion, Office on
Smoking and Health; 2016. https://e-cigarettes.surgeongeneral.gov/documents/2016_SGR_Full_Report_non-508.pdfpdf
icon

2
Cullen KA, Ambrose BK, Gentzke AS, Apelberg BJ, Jamal A, King BA. Notes from the Field: Use of Electronic Cigarettes and
Any Tobacco Product Among Middle and High School Students — United States, 2011–2018. MMWR Morb Mortal Wkly Rep 2018;67:1276–1277.

    

    - I-5 - 

    

 

While
addictions are often viewed as separate medical conditions, segregated by the class of substance (alcohol, opiates, stimulants,
tobacco, and the like), all addictions are driven by a single and central disease process, the dysregulation of dopamine, a potent
neurotransmitter, in the brain’s reward/pleasure center (Path 3, below) originating in the midbrain.

 

 

 

Addiction
is a Brain Disease

 

Current
pharmacological approaches to treatment fall into two classes of therapy, substitution and aversion, with the former constituting
the majority of pharmaceutical-based treatments. Substitution therapies for tobacco cessation include nicotine replacement, and
the use of bupropion and varenicline – compounds that produce pleasurable sensations and gratification similar to tobacco
but with fewer health risks. Substitution therapies for opiate addiction include Suboxone and methadone, which do provide a viable
substitute for the addictive cravings of opiates, but are themselves addictive in nature and have proven difficult for some patients
to discontinue. An example of aversion therapy is the use of disulfiram which causes unpleasant side effects with the consumption
of alcohol.

 

Unlike
18-MC, these medications do not target the dysregulation of dopamine in the midbrain, the primary cause of the brain disease that
is addiction and the driving force behind drug craving. The sensation of craving is regulated by dopamine release and reuptake
by neurons originating in the midbrain’s reward/pleasure centers. Craving is triggered by many factors, but environmental
cues are particularly powerful. Seeing a pack of cigarettes can trigger irresistible craving for the nicotine addict. The sight
and sound of beer being opened and poured can do the same for the alcoholic patient. Clearly, there is a compelling need for medicines
that alleviate substance craving on a long-term basis. No currently approved drug significantly affects drug craving associated
with any type of addiction. An effective drug would be first-in-class and capture a significant portion of what is currently a
multi-billion-dollar market.

 

Nicotine
Addiction and Smoking Cessation

 

There
are more than 40 million daily tobacco users in the United States and nearly 10 times that number in China. It has been estimated
that more than 100 million people worldwide lost their lives due to tobacco-related illness in the last century. The projected
loss of life for the 21st century is a staggering one billion people globally. More than 42 million Americans use tobacco
products with two-thirds having attempted to quit without success. In 2014, the Centers for Disease Control and Prevention (“CDC”)
estimated that smokers cost the United States of America US$170 billion a year in direct health care costs and an additional US$156
billion a year in lost productivity.

 

Current
smoking cessation products approved by the FDA are substitution approaches that do not treat the cause of the disease, replacing
tobacco with substances of lower health liability, such as nicotine products and nicotinic receptor agonists, in the hope that
patients will eventually quit. The best of these products has a one-year abstinence rate of only about 20% as compared to 10%
for placebo. Even with this performance, these nicotine substitute products constitute a well-established global market exceeding
US$3 billion annually.

    

    - I-6 - 

    

Limitation
of Available Treatment Options for Smoking Cessation

 

Current
approved smoking cessation treatments segment into several approaches, nicotine replacement in the form of skin patches, chewing
gum, etc., neurotransmitter reuptake inhibitors in the form of bupropion (Zyban® - GlaxoSmithKline), a relatively weak inhibitor
of the neuronal reuptake of norepinephrine and dopamine, and nicotinic receptor agonists in the form of varenicline (Chantix®/Champix®
- Pfizer), an α4β2 nicotinic cholinergic receptor partial agonist. At best, these therapies are about 20% effective
at 12-months post treatment compared to placebo.

 

Even
with no more than one in five patients benefiting from treatment with Chantix at 12 months, Pfizer reported 37% sales growth in
the U.S. for the third quarter of 2016 compared to the same period in 2015 (US$142 million vs. $103 million respectively). With
the removal of the boxed warning from the Chantix label in December 2016, Pfizer has aggressively promoted Chantix. Prior to the
FDA’s boxed warning for suicidal ideation in 2009, Chantix/Champix annual worldwide sales reached US$848 million. In 2009,
Pfizer reported worldwide sales of US$700 million. The majority of patients who try Chantix are not successful in curbing their
nicotine addiction for reasons ranging from ineffectiveness to severe side effects. Some patients have reported smoking even more
while on Chantix. While the boxed warning has been removed from the label, patients are still warned of the potential for serious
psychiatric side effects. Chantix will likely face generic competition as well with expiration of patent coverage in 2020 and
2022.

 

Medications
for the treatment of drug addiction other than nicotine are either limited (treatments for opioids, nicotine, alcohol) or are
not available (treatments for stimulants like cocaine or methamphetamine). See Table I-1, below.

 

MindMed’s
novel approach to addiction targets the dopamine “reward” pathway in the brain that drives pleasure- seeking behaviors
associated with addiction and obesity. Targeting the brain’s central reward pathway enables us to develop drug candidates
potentially effective against all forms of smoking, substance abuse, and other negative behaviours reinforced by the dopamine
reward pathway. The results of MindMed’s work with 18-MC suggest that nicotinic α3β4 receptor antagonists, by
interfering with neuronal activity in the dorsal diencephalic conduction system, represent a truly novel class of anti-addictive
agents.

 

Table
I-1. Pharmacological Therapies Used to Treat Alcohol and Opioid Use Disorders

  

	Medication	 	Manufacturer	 	Use	 	Application
	Buprenorphine-
    Naloxone	 	-BIODELIVERY
SCIENCES INTERNATIONAL, INC.

        -AKORN,
INC.

        -AMNEAL
PHARMACEUTICALS LLC

        -AVKARE,
INC.

        -MALLINCKRODT
INC.

        -TEVA
PHARMACEUTICALS USA

        -WEST-WARD
PHARMACEUTICAL CORP.

        -INDIVIOR,
INC.

        (Suboxone☐)

        -OREXO
US, INC.

        (Zubsolv☐)
	 	Opioid
    use disorder	 	Used
    for detoxification or maintenance of abstinence for individuals aged 16 or older. Physicians who wish to prescribe buprenorphine,
    must obtain a waiver from SAMHSA and be issued an additional registration number by the U.S. Drug Enforcement Administration.
	 	 	 	 	 	 	 
	Buprenorphine-
    Hydrochloride	 	-ACTAVIS
(sublingual)

        -RECKITT
BENCKISER HEALTHCARE (UK)

        LTD.
(Subutex☐)
	 	Opioid
    use disorder	 	This
formulation is indicated for treatment of opioid dependence and is preferred for induction. However, it is considered the preferred
formulation for pregnant patients, patients with hepatic impairment, and patients with sensitivity to naloxone. It is also used
for initiating treatment in patients transferring from methadone, in preference to products containing naloxone, because of the
risk of precipitating withdrawal in these patients. For those already stable on low to moderate dose buprenorphine. The administration
of the implant dosage form requires specific training and must be surgically inserted and removed.

	 	 	 	 	 	 	 
	Methadone	 	-ROXANE
LABORATORIES, INC.

        -MALLINCKRODT

        -AUROLIFE
PHARMA LLC

        -COREPHARMA

        -SANDOZ

        -THE
PHARMANETWORK
	 	Opioid
    use disorder	 	Methadone
    used for the treatment of opioid addiction in detoxification or maintenance program is dispensed only by OTPs certified by
    SAMHSA and approved by the designated state authority. Under federal regulations it can be used in persons under age 18 at
    the discretion of an OTP physician.
	 	 	 	 	 	 	 
	Naltrexone	 	-ALKERMES

        -DURAMED
PHARMACEUTICALS
	 	Opioid
    use disorder; Alcohol use disorder	 	Provided
by prescription; naltrexone blocks opioid receptors, reduces cravings, and diminishes the rewarding effects of alcohol and opioids.
Extended- release injectable naltrexone is recommended to prevent relapse to opioids or alcohol. The prescriber need not be a
physician, but must be licensed and authorized to prescribe by the state.

	 	 	 	 	 	 	 
	Acamprosate	 	-MERCK
SANTÉ S.A.S.

        -TEVA
        PHARMACEUTICALS USA

         
	 	Alcohol
    use disorder	 	Provided
by prescription; acamprosate is used in the maintenance of alcohol abstinence. The prescriber need not be a physician, but must
be licensed and authorized to prescribe by the state.

	 	 	 	 	 	 	 
	Disulfiram	 	-PLIVA
KRAKOW PHARMACEUTICAL CORPORATION S.A., KRAKOW, POLAND for DURAMED PHARMACEUTICALS, INC.

         
	 	Alcohol
    use disorder	 	When
    taken in combination with alcohol, disulfiram causes severe physical reactions, including nausea, flushing, and heart palpitations.
    The knowledge that such a reaction is likely if alcohol is consumed acts as a deterrent to drinking.

    

    - I-7 - 

    

Rise
in Youth E-cigarette Use

 

Between
2011 and 2015, e-cigarette use rose 900% among high school students. These products are now the most commonly used form of tobacco
among youth in the United States.3 Sylvia Burwell, Secretary, U.S. Department of Health and Human Services said, “as
cigarette smoking among those under 18 has fallen, the use of other nicotine products, including e-cigarettes, has taken a drastic
leap. All of this is creating a new generation of Americans who are at risk of nicotine addiction.”4 The Surgeon
General has concluded that e-cigarette use among youths and young adults is of public health concern; exposure to nicotine during
adolescence can cause addiction and can harm the developing
adolescent brain.5,6 E-cigarettes are now the most commonly used tobacco product among youth in the United States.7

 

 

 

3
U.S. Department of Health and Human Services. E-cigarette use among youth and young adults: a report of the Surgeon General.
Atlanta, GA:

U.S.
Department of Health and Human Services, CDC, National Center for Chronic Disease Prevention and Health Promotion, Office on Smoking
and Health; 2016. https://e-cigarettes.surgeongeneral.gov/documents/2016_SGR_Full_Report_non-508.pdfpdf icon 

4
Ibid.

5 Ibid.

6
Cullen KA, Ambrose BK, Gentzke AS, Apelberg BJ, Jamal A, King BA. Notes from the Field: Use of Electronic Cigarettes and
Any Tobacco Product Among Middle and High School Students — United States, 2011–2018. MMWR Morb Mortal Wkly Rep 2018;67:1276–1277.

7
Supra note 3.

 

    

    - I-8 - 

    

From
2017 to 2018, current e-cigarette use - defined by use on at least one day in the past 30 days - by high school students increased
78%, from 11.7% to 20.8%, accounting for 3.05 million American high school students using e- cigarettes in 2018. 8
One in 20 middle school kids now use e-cigarettes; an increase by 48%.9

 

Intellectual
Property

 

Prior
to the acquisition of the 18-MC Program by MindMed, Savant maintained intellectual property as trade secrets. Following the acquisition,
MindMed filed a United States Provisional Patent Application entitled “18-MC FOR TREATMENT OF SUBSTANCE USE DISORDERS”
(No. 62/908,754, filed October 1, 2019), encompassing the intellectual property previously held as trade secrets. This application
covers extensive data on 18-MC in humans, including surprising results related to absorption and metabolism in humans and human
pharmacokinetic activity.

 

As
MindMed generates new data it will continue to expand patent coverage throughout the development program.

 

Product
Information and Distribution

 

MindMed
does not currently market or distribute any products, and will formulate product information and distribution plans as products
are developed.

 

Distribution
Methods & Principal Markets

 

MindMed
does not currently have nor does it plan to acquire the infrastructure or capability internally to manufacture its clinical drug
supplies for use in MindMed’s clinical trials, and it lacks the resources and the capability to manufacture any of its drug
candidates on a clinical or commercial scale. Instead, MindMed will rely on contract manufacturers for the production of 18-MC
and its other drug candidates. The facilities used by MindMed’s contract manufacturers must be approved by the applicable
regulatory authorities, including the FDA, pursuant to inspections that will be conducted after a new drug application (“NDA”)
is submitted to the FDA or the non-US equivalent thereof. Other than through “Quality Agreements” to be entered into
with its suppliers, MindMed will not control the manufacturing process of 18-MC and will be dependent on its contract manufacturing
partners for compliance with the FDA’s requirements for manufacture of both the active drug substances and finished drug
products.

 

Future
Research and Development

 

MindMed’s
mission to discover, develop and deploy psychedelic inspired medicines to alleviate suffering and improve health encompasses the
research and development of new and improved psychedelic inspired medicines ranging from proprietary psychedelic compounds to
non-psychedelic analogs with medicinal properties. While our clinical development programs are MindMed’s first priority,
our proprietary research and development programs are essential to advancing our product portfolio position as the leader in psychedelic
inspired medicines. For the time being, MindMed maintains intellectual property generated by its R&D programs as trade secrets.
We anticipate that as these programs mature patent applications will be filed and more details about these programs will be disclosed
at such time.

 

 

 

8
Supra note 6.

9 Ibid. 

    

    - I-9 - 

    

Operations

 

While
MindMed’s compound, 18-MC, may have broad application across nearly all addictions, MindMed has embarked on a clinical program
that addresses each category of substance abuse separately. MindMed has elected to focus its efforts on opioid use disorder and
nicotine dependence, the categories MindMed believes to be most compelling for the following reasons:

 

		•	the
                                         opioid crisis in the United States is now a national emergency;

		•	the
                                         regulatory path to approval is well established by current approved drugs;

		•	current
                                         treatments are marginally effective with only approximately one in five patients continuing
                                         to show benefit 12-months post treatment;

		•	the
                                         unmet need is tremendous with more than 150 opioid overdose deaths per day in the U.S.
                                         and more than 30 million nicotine users who have unsuccessfully attempted to quit smoking;
                                         and

		•	MindMed
                                         can expect an efficacy signal in humans within months of initiating proof-of-concept
                                         and proof-of-principle studies; obtaining signals with other addictive substances would
                                         likely take longer.

 

MindMed
designed its clinical studies in opiate withdrawal in consultation with addiction specialists at New York University, including
Drs. John Rotrosen, Stephen Ross, Ken Alper and Michael Bogenschutz and in nicotine dependence in consultation with Dr. Jed Rose
of Duke University, one of the leading authorities on smoking cessation in the world. If MindMed obtains an efficacy signal in
humans in opioid and nicotine addiction and the drug continues to be well tolerated by patients as demonstrated in the Phase 1
clinical trial, MindMed will have an opportunity to utilize its extensive partnering expertise and seek a strong development and
commercialization partner to maximize shareholder value by providing:

 

		•	non-dilutive
                                         capital necessary to expand and/or complete clinical development and regulatory approval;

		•	regulatory
                                         and commercialization expertise to achieve and expand a strong product label;

		•	development
                                         expertise to complete product development as efficiently as possible; and

		•	sales
                                         and marketing resources for a successful market launch following regulatory approval.

 

Specifically,
MindMed’s plans call for the initiation of additional normal, healthy volunteer studies in support of its opioid use disorder
and nicotine dependence studies in the second quarter of 2020, initially employing a multiple ascending dose (“MAD”)
study design before proceeding to so-called drug-drug interaction studies ahead of Phase 1b/2a studies in patients. Once the dose-ranging
and drug-drug interaction data are available, MindMed plans to conduct follow-up studies.

 

While
a target date for a U.S. NDA is uncertain, filing could occur as early as 2022.

 

	18-MC
	 	Ex-US

        Investigational

        New
Drug

 Application
	 	US

        Investigational

        New
Drug Application
	 	First-in-

Human
	 	First-in

Patients
	 	Earliest

NDA*

	Opiates	 	2013	 	2014	 	2015	 	2020	 	2022
	Nicotine	 	2013	 	2014	 	2015	 	2020	 	2023

*U.S.
or foreign equivalent

 

The
opioid crisis in the United States is now a national health emergency and grown to near epidemic proportions in parts of the
U.S. There is currently nearly daily news flow on the problems associated with opioid addiction resulting from heroin use and
the abuse of prescription drugs such as OxyContin®, Vicodin®, Percocet®, and Fentanyl®. The states with the
highest drug overdose death rates included Kentucky, Massachusetts, New Hampshire, New Mexico, Oklahoma, Ohio, Pennsylvania,
Tennessee, Utah, West Virginia, and Wyoming - all with death rates between 19 and 35.5 per 100,000 population. To give this
context, according to the CDC, in 2011 the death rate from accidents, including traffic-related, was 42.7 per 100,000
population in the United States. Today, more than 150 people die from an opiate overdose every day in the United
States.

    

    - I-10 - 

    

MindMed’s
clinical program in opioids is already in the planning stages with world renowned opinion leaders in addiction medicine at New
York University. This program will focus on improving medication-assisted treatments for both opioid withdrawal and chronic use.

 

Government
Regulation

 

The
FDA and other federal, state, local and foreign regulatory agencies impose substantial requirements upon the clinical development,
approval, labeling, manufacture, marketing and distribution of drug products. These agencies regulate, among other things, research
and development activities and the testing, approval, manufacture, quality control, safety, effectiveness, labeling, storage,
record keeping, advertising and promotion of any product candidates or commercial products. The regulatory approval process is
generally lengthy and expensive, with no guarantee of a positive result. Moreover, failure to comply with applicable FDA or other
requirements may result in civil or criminal penalties, recall or seizure of products, injunctive relief including partial or
total suspension of production, or withdrawal of a product from the market.

 

Various
regulatory authorities regulate, among other things, the research, manufacture, promotion and distribution of drugs in the United
States under the Federal Food, Drug, and Cosmetic Act (“FFDCA”) and other statutes and implementing regulations.
The process required by the FDA before prescription drug product candidates may be marketed in the United States generally involves
the following:

 

		•	completion
                                         of extensive nonclinical laboratory tests, animal studies and formulation studies, all
                                         performed in accordance with the FDA’s Good Laboratory and/or Manufacturing Practice
                                         regulations;

		•	submission
                                         to the FDA of an investigational new drug application (“IND”), which
                                         must become effective before human clinical trials may begin;

		•	for
                                         some products, performance of adequate and well-controlled human clinical trials in accordance
                                         with the FDA’s regulations, including Good Clinical Practices, to establish the
                                         safety and efficacy of the product candidate for each proposed indication;

		•	submission
                                         to the FDA of an NDA; and

		•	FDA
                                         review and approval of the NDA prior to any commercial marketing, sale or shipment of
                                         the drug.

 

The
testing and approval process requires substantial time, effort and financial resources, and MindMed cannot be certain that any
approvals for its product candidates will be granted on a timely basis, if at all.

 

Nonclinical
tests include laboratory evaluations of product chemistry, formulation and stability, as well as studies to evaluate toxicity
in animals and other animal studies. The results of nonclinical tests, together with manufacturing information and analytical
data, are submitted as part of an IND to the FDA. Some nonclinical testing may continue even after an IND is submitted. The IND
also includes one or more protocols for the initial clinical trial or trials and an investigator’s brochure. An IND automatically
becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions
relating to the proposed clinical trials as outlined in the IND and places the clinical trial on a clinical hold. In such cases,
the IND sponsor and the FDA must resolve any outstanding concerns or questions before any clinical trials can begin. Clinical
trial holds also may be imposed at any time before or during studies due to safety concerns or non-compliance with regulatory
requirements. An independent institutional review board (“IRB”), at each of the clinical centers proposing
to conduct the clinical trial must review and approve the plan for any clinical trial before it commences at that center. An IRB
considers, among other things, whether the risks to individuals participating in the trials are minimized and are reasonable in
relation to anticipated benefits. The IRB also approves the consent form signed by the trial participants and must monitor the
study until completed.

    

    - I-11 - 

    

The
FDA offers a number of regulatory mechanisms that provide expedited or accelerated approval procedures for selected drugs in the
indications on which MindMed is focusing its efforts. These include accelerated approval under Subpart H of the agency’s
NDA approval regulations, fast track drug development procedures and priority review.

 

MindMed
plans to seek orphan drug designation for any indications qualified for such designation. The U.S., E.U. and other jurisdictions
may grant orphan drug designation to drugs intended to treat a “rare disease or condition,” which, in the U.S., is
generally a disease or condition that affects no more than 200,000 individuals. In the E.U., orphan drug designation can be granted
if: the disease is life threatening or chronically debilitating and affects no more than 50 in 100,000 persons in the E.U.; without
incentive it is unlikely that the drug would generate sufficient return to justify the necessary investment; and no satisfactory
method of treatment for the condition exists or, if it does, the new drug will provide a significant benefit to those affected
by the condition. If a product that has an orphan drug designation subsequently receives the first regulatory approval for the
indication for which it has such designation, the product is entitled to orphan exclusivity, meaning that the applicable regulatory
authority may not approve any other applications to market the same drug for the same indication, except in very limited circumstances,
for a period of seven years in the U.S. and 10 years in the E.U. Orphan drug designation does not prevent competitors from developing
or marketing different drugs for the same indication or the same drug for different indications. Orphan drug designation must
be requested before submitting an NDA. After orphan drug designation is granted, the identity of the therapeutic agent and its
potential orphan use are publicly disclosed. Orphan drug designation does not convey an advantage in, or shorten the duration
of, the development, review and approval process. However, this designation provides an exemption from marketing and authorization
(NDA) fees.

 

Regulatory
Strategy

 

18-MC
is extraordinary in that it is active in animal models against all forms of substance abuse and certain compulsive behaviours
including compulsive eating. The regulatory path to NDA approval for substance abuse disorders in the

 

U.S.
is through the FDA. The U.S. IND for 18-MC (IND 118783) was filed February 9, 2014 and became effective July 9, 2014.

 

Once
the safety profile of 18-MC is better understood through MindMed’s studies to take place outside of the United States, U.S.
clinical studies under the U.S. IND will be initiated with a significant human safety database already in place.

 

Selected
Financial Information

 

The
financial statements of MindMed are prepared in accordance with IFRS. The following table sets out selected financial data of
MindMed derived from its audited financial statements for the period ended September 30, 2019.

 

	 	 	As
at September 30, 2019 

(audited)

        ($)

	Total
    Operating Revenues	 	Nil
	Current
    Assets	 	6,435,789
	Total
    Assets	 	13,537,348
	Current
    Liabilities	 	1,063,325
	Total
    Liabilities	 	1,063,325
	Loss	 	2,259,999
	Comprehensive
    Loss	 	2,259,999
	Basic
    and Diluted Loss per share	 	0.04

    

    - I-12 - 

    

Management’s
Discussion and Analysis of Financial Condition and Results of Operations

 

Management’s
Responsibility for Financial Statements

 

The
information provided in this Circular, including the financial statements, is the responsibility of management. In the preparation
of these statements, estimates are sometimes necessary to make a determination of future values for certain assets or liabilities.
Management believes such estimates have been based on careful judgments and have been properly reflected in the financial statements.
Management maintains a system of internal controls to provide reasonable assurance that MindMed’s assets are safeguarded
and to facilitate the preparation of relevant and timely information.

 

Risks
and Uncertainties

 

MindMed
is subject to a number of risks and uncertainties that could significantly affect its financial condition and performance. As
MindMed grows and enters into new markets, these risks can increase. These risk factors are not a definitive list of all risk
factors associated with an investment in MindMed or in connection with MindMed’s operations. Such risk factors are more
particularly described in this Circular under the heading “Risk Factors Relating to MindMed and the Resulting Issuer”.

 

MindMed’s
Management’s Discussion and Analysis of Financial Condition and Results of Operations is attached as Schedule 2 to this
Appendix “I”.

 

Description
of Securities

 

Share
Capital

 

MindMed
is authorized to issue a total of 655,000,000 shares of common stock, divided into four classes (A, B, C and D), each having a
par value of US$0.0001 per share, with all holders of common stock entitled to vote having to vote together as a single class
and not as separate classes (other than as provided in the articles or by law). Any adjustment in MindMed’s authorized capital
must be approved by a majority of the MindMed Class A and MindMed Class B Shareholders, voting together as a class. Upon completion
of an “RTO” (as defined in MindMed’s articles of incorporation) or on December 31, 2020, if an RTO is not completed,
each outstanding MindMed Class B Share, MindMed Class C Share and MindMed Class D Share shall be converted into one fully-paid,
nonassessable non- voting MindMed Class A Share.

 

The
additional provisions applicable to each class of shares are described below.

 

MindMed
Class A Shares

 

MindMed
is authorized to issue 355,000,000 MindMed Class A Shares.

 

The
MindMed Class A Shares issued to Savant are entitled to one vote per share (the “Voting Class A Shares”) and
all other Class A Shares otherwise issued are not entitled to a vote. So long as the Voting Class A Shares remain outstanding,
the holders of a majority of such shares, voting as a separate class, shall be entitled to elect two members of the MindMed Board
and, together with MindMed Class B Shareholders, voting together as a class, elect one additional member of the MindMed Board.

 

As
per the Foundational Agreement, MindMed issued 55,000,000 MindMed Class A Shares to Savant, as consideration for the transfer
by Savant to MindMed of the 18-MC Program.

 

MindMed
Class B Shares

 

MindMed
is authorized to issue 50,000,000 MindMed Class B Shares.

 

Holders
of MindMed Class B Shares are entitled to 0.3929 of a vote per share, with fractional votes not permitted. So long as the
MindMed Class B Shares remain outstanding, the holders of a majority of such shares, voting as a separate class, shall be
entitled to elect two members of the MindMed Board and, together with MindMed Class A Shareholders, voting together as a
class, elect one additional member of the MindMed Board.

    

    - I-13 - 

    

MindMed
issued 35,000,000 MindMed Class B Shares at a price of US$0.0001 per MindMed Class B Share.

 

MindMed
Class C Shares

 

MindMed
is authorized to issue a maximum of 50,000,000 MindMed Class C Shares. The MindMed Class C Shares are non-voting, except as required
by law.

 

MindMed
has issued 46,993,671 MindMed Class C Shares. MindMed completed its Non-Brokered Offering of

 

45,972,630
non-voting MindMed Class C Shares at a price of US$0.10 per MindMed Class C Share. Additionally, MindMed settled an outstanding
loan of US$100,000 and interest owing of US$2,104.11 through the issuance of 1,021,041 MindMed Class C Shares.

 

MindMed
Class D Shares

 

MindMed
is authorized to issue a maximum of 200,000,000 MindMed Class D Shares.

 

MindMed
issued 15,000,000 MindMed Class D Shares. Pursuant to a letter agreement with Bruce Linton, director of MindMed, MindMed issued
Mr. Linton 10,000,000 Class D Shares. See “Non-Arm’s Length Party Transactions” below for more details.

 

On
November 4, 2019, MindMed entered into an engagement letter with Canaccord Genuity Corp. to complete the MindMed December Offering.
On December 19, 2019, MindMed executed an agency agreement with Canaccord Genuity Corp. and completed the first tranche of the
MindMed December Offering, issuing a total of 18,771,897 MindMed Class D Shares at a price of $0.33 per share for gross proceeds
of $6,194,726. On closing of the first tranche, MindMed paid Canaccord Genuity Corp., as agent, commission of $281,741 and issued
1,314,033 MindMed Compensation Options. MindMed anticipates completing a second tranche of the MindMed December Offering on or
about February 11, 2020; MindMed anticipates raising gross proceeds of up to $15 million total in the MindMed December Offering.

 

Consolidated
Capitalization

 

The
following table sets forth the consolidated capitalization of MindMed as at September 30, 2019 and December 29, 2019:

 

	Designation
    of

 Security	 	Amount
    

Authorized	 	Outstanding
    as at

 September 30, 2019	 	Outstanding
    as at

 December 29, 2019
	MindMed
    Class A Shares	 	355,000,000	 	55,000,000	 	55,000,000
	MindMed
    Class B Shares	 	50,000,000	 	35,000,000	 	35,000,000
	MindMed
    Class C Shares	 	50,000,000	 	46,993,671	 	46,993,671
	MindMed
    Class D Shares	 	200,000,000	 	15,000,000	 	33,771,897
	Total	 	 	 	151,993,671	 	170,765,568

    

    - I-14 - 

    

As
at September 30, 2019 the deficit is $2,259,999.

 

Prior
Sales

 

The
following table contains details of the prior sales of securities by MindMed from incorporation to the date hereof:

 

	Date Issued	 	Number of 

Shares	 	 	Class of 

Share	 	Issue Price

 per Share	 	 	Aggregate

 Issue Price	 
	July 22, 2019	 	 	35,000,000	 	 	Class B	 	$	0.00013	(1)(2)	 	$	4,633.65	(1)
	July 26, 2019	 	 	55,000,000	(3)	 	Class A	 	$	0.13239	(1)(4)	 	$	7,281,450.00	(1)
	August 14, 2019	 	 	40,000,000	 	 	Class C	 	$	0.13239	(1)(4)	 	$	5,295,600.00	(1)
	September 16, 2019	 	 	5,750,000	 	 	Class C	 	$	0.13239	(1)(4)	 	$	621,242.50	(1)
	September 24, 2019	 	 	1,021,041	(5)	 	Class C	 	$	0.13239	(1)(4)	 	$	135,175.62	(1)
	September 24, 2019	 	 	222,630	 	 	Class C	 	$	0.13239	(1)(4)	 	$	29,473.99	(1)
	September 24, 2019	 	 	15,000,000	 	 	Class D	 	$	0.13239	(1)(4)	 	$	1,985,850.00	(1)
	December 19, 2019	 	 	18,771,897	 	 	Class D	 	$	0.33	 	 	$	6,195,235.94	 

 

Notes

	(1)	An
                                         exchange rate of US$1.00 to CAD$1.3239 was applied in accordance with the Bank of Canada’s
                                         monthly average exchange rate for November 2019.

	(2)	Shares
                                         issued at US$0.0001.

	(3)	Issued
                                         pursuant to the Foundational Agreement in consideration for the transfer of the 18-MC
                                         Program to MindMed.

	(4)	Shares
                                         issued at US$0.10.

	(5)	Settled
                                         principal and interest on a loan of US$100,000 through the issuance of MindMed Class
                                         C Shares.

 

There
is currently no public market for the MindMed Common Shares.

 

The
following table shows, as of the date of this Circular, each person who is known to MindMed, or its directors and officers, to
beneficially own, directly or indirectly, or to exercise control or direction over securities carrying more than 10% of the voting
rights attached to any class of outstanding voting securities of MindMed.

    

    - I-15 - 

    

	Name of Shareholder & Municipality of Residence	 	Number of Shares Owned (Percentage of Class and Type of Ownership)
	 	MindMed Common Shares	 	Percentage of Voting Rights(1)
	Savant Addiction Medicine, LLC Wilmington Delaware	 	55,000,000 Class A	 	80.00%

Note: 

	 	(1)	Class
                                         A shares are entitled to one vote per share while Class B shares are entitled to approximately
                                         0.393 of a vote per share.

 

Executive
Compensation

 

Compensation
Discussion and Analysis

 

The
general objectives of MindMed’s compensation strategy are to: (a) compensate management in a manner that encourages and
rewards a high level of performance and outstanding results with a view to increasing long-term shareholder value; (b) align management’s
interests with the long-term interests of shareholders; and (c) attract and retain highly qualified executive officers.

 

As
of the date of this Circular, MindMed pays all of its executives as consultants and intends over the course of 2020 to convert
most, if not all, of such arrangements to a direct compensation basis, as described below. Therefore, the following discussion
is prospective as actual compensation and the plans underlying it are undergoing an approval and implementation process.

 

Elements
of Compensation

 

MindMed
strives to align its executive compensation program with returns to our investors, as MindMed wants all its employees to share
in the financial risks and rewards tied to delivering business results. As a result, executive plans are designed to secure, retain
and provide incentive to our executives to achieve critical value catalysts that increase the value of our enterprise and create
economic benefit for investors. Additionally, incentive plans for all employees below the executive level align to these consistent
principles and provide rewards for achievement of specific objectives tied to value catalysts.

 

MindMed
will pay a base salary to executive officers and anticipates that in 2020 incentive pay for executive officers will be comprised
of an annual performance plan with two reward components – cash and equity.

 

Base
Salary

 

Base
salary represents a key component of an executive officer’s compensation package as it is the first step in ensuring a competitive
compensation structure and is typically the foundation on which the other features of the package are determined. MindMed expects
that base salaries will be reviewed and adjusted, as appropriate, once yearly by the MindMed Compensation Committee, and be determined
according to the particular executive officer’s personal performance, seniority, contribution to the company’s business
performance and the size and stage of MindMed’s development.

 

Annual
Incentive Plan (Short- and Long-Term)

 

The
annual performance plan will, regardless of whether looking at the cash or equity component, evaluate the executive’s contribution
to business performance, with an annual reward target (for each reward component) established in each executive’s employment
agreement. These targets will be measured against annual “Enterprise Objectives” determined by the MindMed Compensation
Committee and approved by the MindMed Board, with performance assessed on achieving the stated enterprise objectives and individual
results.

    

    - I-16 - 

    

The
short-term component of the annual incentive plan is anticipated to consist of a target cash bonus that can equal anywhere from
25% to 60% of an executive’s base salary, depending on level.

 

Equity
awards are considered to have a longer time horizon than cash awards, and for equity awards, MindMed has instituted the Resulting
Issuer Option Plan and the Resulting Issuer PR Plan (as described in more detail in “Item 12

 

–
Approval of Resulting Issuer Stock Option Plan And Performance And Restricted Share Unit Plan”) and expects that 80%
of each equity award will be in the form of Options (as defined in the Resulting Issuer Option Plan and the remaining 20% in the
form of RSUs (as defined in the Resulting Issuer PR Plan). Equity award targets are anticipated to range from 50% to 125% of an
executive’s base salary, depending on level. Vesting will be imposed, which MindMed expects will see 20% vested immediately
upon grant and, beginning on the first anniversary date, 20% vested in each of the next four years on a monthly basis (i.e., one-twelfth
of each year’s amount to be vested will vest each month).

 

For
2020, the MindMed Board is anticipated to approve (and the Resulting Issuer Board will be asked to approve) the following Enterprise
Objectives, which establish the targets for each executive’s short- and long-term incentive awards:

 

		1.	Close
                                         the financial audit and complete the Arrangement and achieve an Exchange listing by the
                                         end of the first quarter of 2020.

 

		2.	Complete
                                         both tranches of the MindMed December Offering and establish and execute a near term
                                         capital strategy to deliver funding for the financial year 2020 operations and achieve
                                         certain predetermined value inflections and milestones.

 

		3.	Continue
                                         development and clinical trials of 18-MC and accelerate MindMed’s development plan
                                         in addiction medicine, specifically focusing on opioid withdrawal symptoms and opioid
                                         use disorder.

 

		4.	Fully
                                         integrate collaboration on trials for other substances, including examining micro-dosing
                                         LSD for adult ADHD.

 

		5.	Position
                                         MindMed to external stakeholders as an early leader at the forefront of clinical development
                                         that will transform psychedelic agents into FDA-approved drugs.

 

		6.	Refine
and execute portfolio assembly strategies to broaden our development pipeline.

 

Compensation
of Directors

 

MindMed
does not currently compensate its directors in their roles as members of the MindMed Board. The Resulting Issuer Board will determine
the fees it intends to pay to independent directors upon completion of the Arrangement.

 

Compensation
Governance

 

Compensation
is guided by the following principles:

 

		•	Compensation
                                         should be heavily tied to enterprise performance,

 

		•	Compensation
                                         plans must be simple, meaningful and provide differential rewards across a range of performance
                                         outcomes, and

 

		•	Annual
                                         grants are based on the degree of achievement of specific business objectives or program
                                         milestones in the previous year.

 

MindMed
intends to review its compensation practices and to establish a peer group against which to measure its compensation levels
and practices, with a review of the appropriateness of the peer group every two to three years, or at such other times as
circumstances dictate. Due to the long lead time to market, complex regulatory framework and risk profile, the fundamental
characteristics of the pharmaceutical industry are highly important in determining appropriate companies to be included in
the peer group. In determining appropriate levels and types of compensation, MindMed envisions hiring subject matter experts
as needed. MindMed hires qualified management from around the world and therefore looks to compensation paid by not just
Canadian and U.S. competitors, but worldwide.

    

    - I-17 - 

    

MindMed’s
principal executive structure was established shortly after execution of the Foundational Agreement and the transfer of the 18-MC
program in July 2019. At that time, given MindMed’s need for financing, all executives were engaged as consultants to carry
out their executive duties and advance MindMed’s development programs. This decision was spurred by two factors: (a) the
stage of development of MindMed’s business, and (b) the fact that because of the management team’s extensive experience,
with an average of over 25 years in the pharmaceutical industry, some have established thriving consulting practices whereby a
transition to full-time employment was not feasible or practical at the time.

 

In
order to deal with this, MindMed has built an “Executive Grade and Compensation Structure” which establishes multiple
levels to differentiate the contributions, liability risks and responsibilities across executive roles. This provides MindMed
a framework to align compensation variables across its executive team, and recognizes the flexibility needed for effective staffing
in determining whether an executive should be a direct employee or an executive consultant.

 

MindMed
has formed an executive committee consisting of Stephen Hurst (Executive Chair of the Board of Directors and Co-Chief Executive
Officer), JR Rahn (Director and Co-Chief Executive Officer) and Scott Freeman (President and Chief Medical Officer) to handle
and agree on the coordination of the various aspects of the business and to oversee the implementation of the company's business
plan, including the hiring of a full-time Chief Executive Officer. MindMed is now engaged in negotiating employment contracts
with other key executives, including Mr. Hurst, Dr. Freeman and Mr. Rahn.

 

With
regard to remaining executives and staff, MindMed anticipates maintaining all consulting arrangements through the first half of
2020, using that time to assess the business case for direct employment versus the consultant model, with the transitioning of
staff, as necessary, to be initiated and completed in the second half of 2020.

 

On
December 11, 2019, the MindMed Board constituted the MindMed Compensation Committee, consisting of Bruce Linton (Chair), Brigid
Makes and Perry Dellelce, which has as its mandate, among other things, to: (i) discharge the MindMed Board’s responsibilities
relating to the compensation of its executive officers, (ii) administer MindMed’s incentive compensation and equity-based
plans, and (iii) assist the MindMed Board with respect to management succession and development. The MindMed Compensation Committee
shall review and make recommendations to the MindMed Board on an annual basis regarding (A) company-wide compensation programs
and practices, (B) all aspects of the remuneration of MindMed’s executive officers and directors, and (C) equity-based plans
and any material amendments thereto (including increases in the number of securities available for grant as options or otherwise
thereunder).

 

Executive
Compensation-Related Fees

 

Summary
Compensation Table – MindMed Named Executive Officers

 

The
following table sets forth the compensation payable to the following officers of MindMed (i) Stephen Hurst, Executive Chairman,
Co-Chief Executive Officer and Secretary; (ii) JR Rahn, Director and Co-Chief Executive Officer (iii) Paul Van Damme, Chief Financial
Officer; (iv) Scott Freeman, President and Chief Medical Officer; and (v) Don Gehlert, Chief Scientific Officer (collectively,
the “MindMed Named Executive Officers”) for the period from May 30, 2019 to September 30, 2019. The Corporation
has five (5) “executive officers” as such term is defined in National Instrument 51-102 – Continuous Disclosure
Obligations (“NI 51-102”) whose compensation must be disclosed for such period.

    

    - I-18 - 

    

	Name
and Principal Position
	 	Year(1)
	 	Salary,
    Consulting Fees, retainer or commission ($)(2)	 	Total
    Compensation ($)
	Stephen
    L. Hurst Executive Chairman, Co-Chief Executive Officer(3) and Secretary	 	2019	 	132,040.00	 	132,040.00
    (4)
	Jamon
Alexander (JR) Rahn

        Director
and Co-Chief Executive Officer(3)
	 	2019	 	98,436.00	 	98,436.00
	Paul
Van Damme

        Chief
Financial Officer
	 	2019	 	22,743.89	 	22,743.89
    (5)
	Scott
    Freeman President and Chief Medical Officer	 	2019	 	67,604.48	 	67,604.48
    (6)
	Don
Gehlert

        Chief
Scientific Officer
	 	2019	 	85,132.79	 	85,132.79
    (7)

Notes

	(1)	For
                                         the period May 31, 2019 to September 30, 2019.

	(2)	Compensation
                                         is paid in US$ and for the purposes of this Circular, has been converted on the basis
                                         of US$1 to CAD$1.3204.

	(3)	Mr.
                                         Tessarolo ceased to act as President and CEO on December 26, 2019. Mr. Tessarolo received
                                         consulting fees of $33,010 (US$25,000) per month for a total of $90,777.50 (US$68,750)
                                         for the period of October 8, 2019 to December 31, 2019. Mr. Hurst and Mr. Rahn were appointed
                                         Co-CEOs effective December 26, 2019.

	(4)	Mr.
                                         Hurst is compensated through his consulting company Sunray Asset Management, Inc.; he
                                         served as President and CEO from incorporation to October 8, 2019 and as Executive Chair
                                         thereafter.

	(5)	Mr.
                                         Van Damme is compensated through his consulting company PJ Van Damme Associates Inc.
                                         He was appointed as CFO on October 8, 2019.

	(6)	Mr.
                                         Freeman is compensated through his consulting company Scott Freeman Consultant LLC.

	(7)	Mr.
                                         Gehlert is compensated through his consulting company Matrix Pharma Consulting, LLC.

 

Non-Arm’s
Length Party Transactions

 

On
September 16, 2019, MindMed and Bruce Linton, director of MindMed, entered into a letter agreement (the “Bruce Linton
Letter Agreement”) pursuant to which Mr. Linton agreed to: (i) join the MindMed Board, (ii) receive a loan of US$500,000
solely to acquire 5,000,000 MindMed Class D Shares and (iii) purchase an additional 5,000,000 MindMed Class D Shares.

 

Pursuant
to the Bruce Linton Letter Agreement, MindMed and Mr. Linton entered into a promissory note for a principal sum of US$500,000
on September 16, 2019 (the “Bruce Linton Promissory Note”). The Bruce Linton Promissory Note was used for the
sole purpose of purchasing 5,000,000 MindMed Class D Shares and one-quarter of the principal sum, US$125,000, is automatically
deemed to be repaid and satisfied every six months. If Mr. Linton ceases to be a director of MindMed or the Resulting Issuer after
two years of service, the Bruce Linton Promissory Note shall be deemed to be fully repaid and satisfied in full.

 

Legal
Proceedings and Regulatory Actions

 

MindMed
is not a party to and none of its property is the subject of any legal proceedings as at the date of this Circular or from the
date of incorporation, and MindMed knows of no such legal proceedings currently contemplated.

 

MindMed
is not the subject of any penalties or sanctions imposed against it by a court relating to provincial and territorial
securities legislation or by a securities regulatory authority as at the date of this Circular or from the date of
incorporation. MindMed is not the subject of any other penalties or sanctions imposed by a court or regulatory body against
it necessary for the Circular to contain full, true and plain disclosure of all material facts relating to the securities to
be distributed. MindMed has not entered into any settlement agreements before a court relating to provincial and territorial
securities legislation or with a securities regulatory authority as at the date of this Circular or from the date of
incorporation.

    

    - I-19 - 

    

Risk
Factors Relating to MindMed and the Resulting Issuer

 

The
current business of MindMed will be the business of the Resulting Issuer upon completion of the Plan of Arrangement. Accordingly,
risk factors relating to MindMed’s current business will be risk factors relating to the Resulting Issuer’s business
and references to MindMed in these risk factors should, where the context requires, be read to include the risks of the Resulting
Issuer. MindMed is in the early stages of its development and has never generated sales or profits. MindMed’s compounds
may prove to be ineffective in the clinic and therefore have very little, or no value. Even if MindMed’s compounds are shown
to work in the clinic, they may not enjoy robust sales or profits, if any. Problems may arise from outside of the MindMed, such
as competitive forces, or may be the result of mistakes, and or, errors or omissions on the part of its management and or its
employees. Due to the nature of MindMed’s business and the legal climate in which it operates and its present stage of development,
MindMed is subject to significant risks. The risks presented below should not be considered to be exhaustive and may not be all
of the risks that the Resulting Issuer and MindMed may face.

 

Business
Risks

 

MindMed
prospects depend on the success of MindMed’s product candidates which are at early stages of development, and MindMed may
not generate revenue for several years from these products

 

Given
the early stage of MindMed’s product development, MindMed cannot make any assurances that MindMed’s research and development
programs will result in regulatory approval or commercially viable products. To achieve profitable operations, MindMed, alone
or with others, must successfully develop, gain regulatory approval, and market MindMed’s future products. MindMed currently
has no products that have been approved by the FDA, Health Canada (“HC”), or any similar regulatory authority.
To obtain regulatory approvals for MindMed’s product candidates being developed and to achieve commercial success, clinical
trials must demonstrate that the product candidates are safe for human use and that they demonstrate efficacy. While MindMed has
commenced clinical trials for 18-MC, it has not yet completed later stage clinical trials for any of its product candidates.

 

Many
product candidates never reach the stage of clinical testing and even those that do have only a small chance of successfully completing
clinical development and gaining regulatory approval. Product candidates may fail for a number of reasons, including, but not
limited to, being unsafe for human use or due to the failure to provide therapeutic benefits equal to or better than the standard
of treatment at the time of testing. Unsatisfactory results obtained from a particular study relating to a research and development
program may cause MindMed or its collaborators to abandon commitments to that program. Positive results of early preclinical research
may not be indicative of the results that will be obtained in later stages of preclinical or clinical research. Similarly, positive
results from early-stage clinical trials may not be indicative of favourable outcomes in later-stage clinical trials, MindMed
can make no assurance that any future studies, if undertaken, will yield favourable results.

 

The
early stage of MindMed’s product development makes it particularly uncertain whether any of its product development efforts
will prove to be successful and meet applicable regulatory requirements, and whether any of MindMed’s product candidates
will receive the requisite regulatory approvals, be capable of being manufactured at a reasonable cost or be successfully marketed.
If MindMed is successful in developing its current and future product candidates into approved products, MindMed will still experience
many potential obstacles such as the need to develop or obtain manufacturing, marketing and distribution capabilities. If MindMed
is unable to successfully commercialize any of its products, MindMed’s financial condition and results of operations may
be materially and adversely affected.

 

MindMed
cannot make any assurances that any future studies, if undertaken, will yield favorable results. Many companies in the
pharmaceutical and biotechnology industries have suffered significant setbacks in later-stage clinical trials after achieving
positive results in early-stage development, and MindMed cannot be certain that it will not face similar setbacks. These
setbacks have been caused by, among other things, preclinical findings made while clinical trials were underway or safety or
efficacy observations made in clinical trials, including previously unreported adverse events. Moreover, preclinical and
clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product
candidates performed satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain FDA approval. If
MindMed fails to produce positive results in its future clinical trials of 18-MC, the development timeline and regulatory
approval and commercialization prospects for MindMed’s leading product candidates and, correspondingly, MindMed’s
business and financial prospects, would be materially adversely affected.

    

    - I-20 - 

    

MindMed
relies and will continue to rely on third parties to plan, conduct and monitor MindMed’s preclinical studies and clinical
trials and their failure to perform as required could cause substantial harm to MindMed business

 

MindMed
relies and will continue to rely on third parties to conduct a significant portion of MindMed’s preclinical and clinical
development activities. Preclinical activities include in vivo studies providing access to specific disease models, pharmacology
and toxicology studies and assay development. Clinical development activities include trial design, regulatory submissions, clinical
patient recruitment, clinical trial monitoring, clinical data management and analysis, safety monitoring and project management.
If there is any dispute or disruption in MindMed’s relationship with third parties, or if they are unable to provide quality
services in a timely manner and at a feasible cost, MindMed’s active development programs will face delays. Further, if
any of these third parties fails to perform as MindMed expects or if their work fails to meet regulatory requirements, MindMed’s
testing could be delayed, cancelled or rendered ineffective.

 

MindMed
relies on contract manufacturers over whom MindMed has limited control

 

MindMed
has limited manufacturing experience and will rely on contract manufacturing organizations (“CMOs”) to manufacture
MindMed’s product candidates for larger preclinical studies and clinical trials. MindMed will rely on CMOs for manufacturing,
filling, packaging, storing and shipping of drug product in compliance with the FDA’s Current Good Manufacturing Practice
(“CGMP”) regulations applicable to MindMed products. The FDA ensures the quality of drug products by carefully
monitoring drug manufacturers’ compliance with CGMP regulations. The CGMP regulations for drugs contain minimum requirements
for the methods, facilities and controls used in manufacturing, processing and packing of a drug product.

 

MindMed
contracted with Sterling Industries to manufacture the 18-MC congener to supply drug substance for MindMed’s phase 2 clinical
trials. MindMed believes that Sterling has the capacity, the systems, and the experience to supply 18-MC for MindMed’s clinical
trials and it may consider using them for manufacturing in later clinical trials. Any manufacturing failures, delays or compliance
issues could cause delays in the conduct of preclinical studies and clinical trials.

 

There
can be no assurances that CMOs will be able to meet MindMed’s timetable and requirements. MindMed has not contracted with
alternate suppliers for 18-MC drug substance production in the event Sterling is unable to scale up production, or if it otherwise
experiences any other significant problems. If MindMed is unable to arrange for alternative third-party manufacturing sources
on commercially reasonable terms or in a timely manner, MindMed may be delayed in the development of its product candidates. Further,
CMOs must operate in compliance with CGMP and failure to do so could result in, among other things, the disruption of product
supplies. MindMed’s dependence upon third parties for the manufacturing of MindMed products may adversely affect MindMed’s
profit margins and MindMed’s ability to develop and deliver products on a timely and competitive basis.

 

MindMed
requires commercial scale and quality manufactured product to be available for pivotal or registration clinical trials

 

To
date, MindMed’s products have been manufactured in small quantities for pre-clinical studies and clinical trials by
CMOs. In order to commercialize its product, MindMed needs to manufacture commercial quality drug supply for use in
registration clinical trials. Most, if not all, of the clinical material used in phase 3/pivotal/registration studies must be
derived from the defined commercial process including scale, manufacturing site, process controls and batch size. If MindMed
has not scaled up and validated the commercial production of MindMed’s product prior to the commencement of pivotal
clinical trials, MindMed may have to employ a bridging strategy during the trial to demonstrate equivalency of early stage
material to commercial drug product, or potentially delay the initiation or completion of the trial until drug supply is
available. The manufacturing of commercial quality drug product requires significant efforts including, scale-up of
production to anticipated commercial scale, process characterization and validation, analytical method validation,
identification of critical process parameters and product quality attributes, multiple process performance and validation
runs. If MindMed does not have commercial drug supply available when needed for pivotal clinical trials, MindMed’s
regulatory and commercial progress may be delayed and MindMed may incur increased product development cost. This may have a
material adverse effect on its business, financial condition and prospects and may delay marketing of the product.

    

    - I-21 - 

    

Failure
to demonstrate safety and efficacy could cause additional costs and/or delays

 

Before
obtaining marketing approval from regulatory authorities for the sale of MindMed’s product candidates, MindMed must conduct
preclinical studies in animals and extensive clinical trials in humans to demonstrate the safety and efficacy of the product candidates.
Clinical testing is expensive and difficult to design and implement, can take many years to complete and has uncertain outcomes.
The outcome of preclinical studies and early clinical trials may not predict the success of later clinical trials, and interim
results of a clinical trial do not necessarily predict final results. A number of companies in the pharmaceutical and biotechnology
industries have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety profiles,
notwithstanding promising results in earlier trials. MindMed does not know whether the clinical trials it conducts will demonstrate
adequate efficacy and safety to result in regulatory approval to market any of MindMed’s product candidates in any jurisdiction.
A product candidate may fail for safety or efficacy reasons at any stage of the testing process. A major risk MindMed faces is
the possibility that none of MindMed’s product candidates under development will successfully gain market approval from
the FDA or other regulatory authorities, resulting in us being unable to derive any commercial revenue from them after investing
significant amounts of capital in their development.

 

If
MindMed experiences delays in clinical testing, MindMed will be delayed in commercializing its product candidates, and its business
may be substantially harmed

 

MindMed
cannot predict whether any clinical trials will begin as planned, will need to be restructured, or will be completed on schedule,
or at all. MindMed’s product development costs will increase if MindMed experiences delays in clinical testing. Significant
clinical trial delays could shorten any periods during which MindMed may have the exclusive right to commercialize its product
candidates or allow MindMed’s competitors to bring products to market before it is able to, which would impair MindMed’s
ability to successfully commercialize its product candidates and may harm MindMed’s financial condition, results of operations
and prospects. The commencement and completion of clinical trials for MindMed’s products may be delayed for a number of
reasons, including delays related, but not limited, to:

 

		•	failure
                                         by regulatory authorities to grant permission to proceed or placing the clinical trial
                                         on hold;

		•	patients
                                         failing to enroll or remain in MindMed’s trials at the rate MindMed expects;

		•	suspension
                                         or termination of clinical trials by regulators for many reasons, including concerns
                                         about patient safety or failure of MindMed’s CMOs to comply with CGMP requirements;

		•	any
                                         changes to MindMed’s manufacturing process that may be necessary or desired;

		•	delays
                                         or failure to obtain clinical supply from CMOs of MindMed’s products necessary
                                         to conduct clinical trials;

		•	product
                                         candidates demonstrating a lack of safety or efficacy during clinical trials;

		•	patients
                                         choosing an alternative treatment for the indications for which MindMed is developing
                                         any of its product candidates or participating in competing clinical trials;

		•	patients
                                         failing to complete clinical trials due to dissatisfaction with the treatment, side effects
                                         or other reasons;

		•	reports
                                         of clinical testing on similar technologies and products raising safety or efficacy concerns;

		•	competing
                                         clinical trials and scheduling conflicts with participating clinicians;

		•	clinical
                                         investigators not performing MindMed’s clinical trials on their anticipated schedule,
                                         dropping out of a trial, or employing methods not consistent with the clinical trial
                                         protocol, regulatory requirements or other third parties not performing data collection
                                         and analysis in a timely or accurate manner;

		•	failure
                                         of MindMed’s contract research organizations to satisfy their contractual duties
                                         or meet expected deadlines;

		•	inspections
                                         of clinical trial sites by regulatory authorities or IRBs, or ethics committees finding
                                         regulatory violations that require us to undertake corrective action, resulting in suspension
                                         or termination of one or more sites or the imposition of a clinical hold on the entire
                                         study;

		•	one
                                         or more IRBs or ethics committees rejecting, suspending or terminating the study at an
                                         investigational site, precluding enrollment of additional subjects, or withdrawing its
                                         approval of the trial; or

		•	failure
                                         to reach agreement on acceptable terms with prospective clinical trial sites.

    

    - I-22 - 

    

MindMed’s
product development costs will increase if MindMed experiences delays in testing or approval or if MindMed needs to perform more
or larger clinical trials than planned. Additionally, changes in regulatory requirements and policies may occur, and MindMed may
need to amend study protocols to reflect these changes. Amendments may require MindMed to resubmit its study protocols to regulatory
authorities, IRBs or ethics committees for re-examination, which may impact the cost, timing or successful completion of that
trial. Delays or increased product development costs may have a material adverse effect on MindMed’s business, financial
condition and prospects.

 

MindMed
may not be able to file INDs to commence additional clinical trials on the timelines MindMed expects

 

Prior
to commencing clinical trials in the United States for any of MindMed’s product candidates, MindMed may be required to have
an allowed IND for each product candidate and to file additional INDs prior to initiating any additional clinical trials for 18-MC.
MindMed believes that the data from previous studies will support the filing of additional INDs, to enable it to undertake additional
clinical studies as MindMed has planned. However, submission of an IND may not result in the FDA allowing further clinical trials
to begin and, once begun, issues may arise that will require MindMed to suspend or terminate such clinical trials. Additionally,
even if relevant regulatory authorities agree with the design and implementation of the clinical trials set forth in an IND, these
regulatory authorities may change their requirements in the future. Failure to submit or have effective INDs and commence or continue
clinical programs will significantly limit MindMed’s opportunity to generate revenue.

 

If
MindMed has difficulty enrolling patients in clinical trials, the completion of the trials may be delayed or cancelled

 

As
MindMed’s product candidates advance from preclinical testing to clinical testing, and then through progressively larger
and more complex clinical trials, MindMed will need to enroll an increasing number of patients that meet its eligibility criteria.
There is significant competition for recruiting patients in clinical trials, and MindMed may be unable to enroll the patients
MindMed needs to complete clinical trials on a timely basis or at all. The factors that affect MindMed’s ability to enroll
patients is largely uncontrollable and include, but are not limited to, the following:

 

		•	size
                                         and nature of the patient population;

		•	eligibility
                                         and exclusion criteria for the trial;

		•	design
                                         of the study protocol;

		•	competition
                                         with other companies for clinical sites or patients;

		•	the
                                         perceived risks and benefits of the product candidate under study;

		•	the
                                         patient referral practices of physicians; and

		•	the
                                         number, availability, location and accessibility of clinical trial sites.

 

Regulatory
approval processes are lengthy, expensive and inherently unpredictable

 

MindMed’s
development and commercialization activities and product candidates are significantly regulated by a number of governmental entities,
including the FDA, HC and comparable authorities in other countries. Regulatory approvals are required prior to each clinical
trial and MindMed may fail to obtain the necessary approvals to commence or continue clinical testing. MindMed must comply with
regulations concerning the manufacture, testing, safety, effectiveness, labeling, documentation, advertising, and sale of products
and product candidates and ultimately must obtain regulatory approval before MindMed can commercialize a product candidate. The
time required to obtain approval by such regulatory authorities is unpredictable but typically takes many years following the
commencement of preclinical studies and clinical trials. Any analysis of data from clinical activities MindMed performs is subject
to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. Even if
MindMed believes results from its clinical trials are favorable to support the marketing of MindMed’s product candidates,
the FDA or other regulatory authorities may disagree. In addition, approval policies, regulations, or the type and amount of clinical
data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary
among jurisdictions. MindMed has not obtained regulatory approval for any product candidate and it is possible that none of MindMed’s
existing product candidates or any future product candidates will ever obtain regulatory approval.

    

    - I-23 - 

    

MindMed
could fail to receive regulatory approval for its product candidates for many reasons, including, but not limited to:

 

		•	disagreement
                                         with the design or implementation of MindMed clinical trials;

		•	failure
                                         to demonstrate that a product candidate is safe and effective for its proposed indication;

		•	failure
                                         of clinical trials to meet the level of statistical significance required for approval;

		•	failure
                                         to demonstrate that a product candidate’s clinical and other benefits outweigh
                                         its safety risks;

		•	disagreement
                                         with MindMed’s interpretation of data from preclinical studies or clinical trials;

		•	the
                                         insufficiency of data collected from clinical trials of MindMed product candidates to
                                         support the submission and filing of a biologic license application or other submission
                                         to obtain regulatory approval;

		•	deficiencies
                                         in the manufacturing processes or the failure of facilities of CMOs with which MindMed
                                         contracts for clinical and commercial supplies to pass a pre-approval inspection; or

		•	changes
                                         in the approval policies or regulations that render MindMed’s preclinical and clinical
                                         data insufficient for approval.

 

A
regulatory authority may require more information, including additional preclinical or clinical data to support approval, which
may delay or prevent approval and MindMed’s commercialization plans or MindMed may decide to abandon the development program.
If MindMed were to obtain approval, regulatory authorities may approve any of MindMed’s product candidates for fewer or
more limited indications than MindMed requests, may grant approval contingent on the performance of costly post-marketing clinical
trials or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the
successful commercialization of that product candidate. Moreover, depending on any safety issues associated with MindMed’s
product candidates that garner approval, the FDA may impose a risk evaluation and mitigation strategy, thereby imposing certain
restrictions on the sale and marketability of such products.

 

MindMed
may not achieve its publicly announced milestones according to schedule

 

From
time to time, MindMed may announce the timing of certain events that it expects to occur, such as the anticipated timing of results
from its clinical trials. These statements are forward-looking and are based on the best estimates of management at the time relating
to the occurrence of such events. However, the actual timing of such events may differ from what has been publicly disclosed.
The timing of events such as initiation or completion of a clinical trial, filing of an application to obtain regulatory approval
or announcement of additional clinical trials for a product candidate may ultimately vary from what is publicly disclosed. These
variations in timing may occur as a result of different events, including the nature of the results obtained during a clinical
trial or during a research phase, timing of the completion of clinical trials, problems with a CMO or a CRO or any other event
having the effect of delaying the publicly announced timeline. MindMed undertakes no obligation to update or revise any forward-looking
information, whether as a result of new information, future events or otherwise, except as otherwise required by law. Any variation
in the timing of previously announced milestones could have a material adverse effect on MindMed’s business plan, financial
condition or operating results and the trading price of common shares.

 

MindMed
faces competition from other biotechnology and pharmaceutical companies and MindMed’s financial condition and operations
will suffer if MindMed fails to effectively compete

 

The
biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change.
MindMed’s competitors include large, well-established pharmaceutical companies, biotechnology companies and academic and
research institutions developing cancer therapeutics for the same indications MindMed is targeting as well as competitors with
existing marketed therapies. Many other companies are developing or commercializing therapies to treat the same diseases or indications
for which MindMed product candidates may be useful. Although there are no approved therapies that specifically target the CD47
receptor pathway, some competitors use therapeutic approaches that may compete directly with MindMed’s product candidates.

 

Many
of its competitors have substantially greater financial, technical and human resources than MindMed does and have significantly
greater experience than MindMed in conducting preclinical testing and human clinical trials of product candidates, scaling up
manufacturing operations and obtaining regulatory approvals of products. Accordingly, MindMed’s competitors may succeed
in obtaining regulatory approval for products more rapidly than MindMed does. MindMed’s ability to compete successfully
will largely depend on:

 

		•	the
                                         efficacy and safety profile of MindMed’s product candidates relative to marketed
                                         products and other product candidates in development;

    

    - I-24 - 

    

		•	MindMed’s
                                         ability to develop and maintain a competitive position in the product categories and
                                         technologies on which MindMed focuses;

		•	the
                                         time it takes for MindMed’s product candidates to complete clinical development
                                         and receive marketing approval;

		•	MindMed’s
                                         ability to obtain required regulatory approvals;

		•	MindMed’s
                                         ability to commercialize any of its product candidates that receive regulatory approval;

		•	MindMed’s
                                         ability to establish, maintain and protect intellectual property rights related to its
                                         product candidates; and

		•	acceptance
                                         of any of its product candidates that receive regulatory approval by physicians and other
                                         healthcare providers and payers.

 

Competitors
have developed and may develop technologies that could be the basis for products that challenge the discovery research capabilities
of 18-MC. Some of those products may have an entirely different approach or means of accomplishing the desired therapeutic effect
than MindMed’s product candidates and may be more effective or less costly than its product candidates. The success of MindMed’s
competitors and their products and technologies relative to MindMed’s technological capabilities and competitiveness could
have a material adverse effect on the future preclinical studies and clinical trials of its product candidates, including MindMed’s
ability to obtain the necessary regulatory approvals for the conduct of such clinical trials. This may further negatively impact
MindMed’s ability to generate future product development programs using 18-MC.

 

If
MindMed is not able to compete effectively against MindMed’s current and future competitors, its business will not grow
and its financial condition and operations will substantially suffer.

 

MindMed
heavily relies on the capabilities and experience of its key executives and scientists

 

The
loss of Stephen Hurst, Executive Chairman, Co-Chief Executive Officer and Secretary of MindMed, or other key members of MindMed’s
executive team and staff could harm the company. MindMed is negotiating employment agreements with Mr. Hurst and other key members
of MindMed’s staff, although such employment agreements do not guarantee their retention. MindMed also depends on its scientific
and clinical collaborators and advisors, all of whom have outside commitments that may limit their availability to MindMed. In
addition, MindMed believes that its future success will depend in large part upon MindMed’s ability to attract and retain
highly skilled scientific, managerial, medical, manufacturing, clinical and regulatory personnel, particularly as MindMed expands
its activities and seeks regulatory approvals for clinical trials. MindMed cannot predict its success in hiring or retaining the
personnel it requires for continued growth. The loss of the services of any of MindMed’s executive officers or other key
personnel could potentially harm MindMed business, operating results or financial condition.

 

Negative
results from clinical trials or studies of others and adverse safety events involving the targets of MindMed’s products
may have an adverse impact on its future commercialization efforts

 

From
time to time, studies or clinical trials on various aspects of biopharmaceutical products are conducted by academic researchers,
competitors or others. The results of these studies or trials, when published, may have a significant effect on the market for
the biopharmaceutical product that is the subject of the study. The publication of negative results of studies or clinical trials
or adverse safety events related to MindMed’s product candidates, or the therapeutic areas in which its product candidates
compete, could adversely affect MindMed’s share price and its ability to finance future development of MindMed’s product
candidates and MindMed’s business and financial results could be materially and adversely affected.

 

MindMed’s
reliance on third parties requires it to share MindMed’s trade secrets, which increases the possibility that a competitor
will discover them

 

MindMed
relies on third parties to develop its products and as a result, must share trade secrets with them. MindMed seeks to
protect its proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer
agreements, collaborative research agreements, consulting agreements or other similar agreements with its collaborators,
advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreements
typically restrict the ability of MindMed’s collaborators, advisors, employees and consultants to publish data
potentially relating to MindMed’s trade secrets. Its academic and clinical collaborators typically have rights to
publish data, provided that MindMed is notified in advance and may delay publication for a specified time in order to secure
MindMed’s intellectual property rights arising from the collaboration. In other cases, publication rights are
controlled exclusively by MindMed, although in some cases MindMed may share these rights with other parties. MindMed may also
conduct joint research and development programs which may require it to share trade secrets under the terms of research and
development collaboration or similar agreements. Despite MindMed’s efforts to protect its trade secrets,
MindMed’s competitors may discover its trade secrets, either through breach of these agreements, independent
development or publication of information. A competitor’s discovery of MindMed’s trade secrets may impair its
competitive position and could have a material adverse effect on its business and financial condition.

    

    - I-25 - 

    

Patent
law reform and litigation regarding patents and other proprietary right could impair MindMed’s products

 

As
is the case with other biotechnology and pharmaceutical companies, MindMed’s success is heavily dependent on intellectual
property rights, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involves technological
and legal complexity, and obtaining and enforcing biopharmaceutical patents is costly, time consuming and inherently uncertain.
Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of MindMed’s and
its licensors’ or collaborators’ patent applications and the enforcement or defense of MindMed or its licensors’
or collaborators’ issued patents.

 

Additionally,
the pharmaceutical industry is characterized by extensive patent litigation. Other parties may have, or obtain in the future,
patents and allege that the use of MindMed’s technologies infringes these patent claims or that MindMed is employing their
proprietary technology without authorization.

 

Third
parties may challenge or infringe upon MindMed’s existing or future patents. Proceedings involving MindMed patents or patent
applications or those of others could result in adverse decisions regarding:

 

		•	the
                                         patentability of MindMed’s inventions relating to its key products; and

		•	the
                                         enforceability, validity, or scope of protection offered by MindMed’s patents relating
                                         to its key products.

 

If
MindMed is unable to avoid infringing the patent rights of others, MindMed may be required to seek a license, defend an infringement
action or challenge the validity of the patents in court. Regardless of the outcome, patent litigation is costly and time consuming.

 

If
MindMed is unable to protect and enforce its intellectual property, MindMed’s competitors may take advantage of its development
efforts or acquired technology and compromise MindMed’s prospects of marketing and selling its key products

 

MindMed’s
success will depend in part upon MindMed’s ability to protect its intellectual property and proprietary technologies and
upon the nature and scope of the intellectual property protection MindMed receives. For example, some of MindMed’s patent
portfolio covers primarily methods of medical use but not compositions of matter. The ability to compete effectively and to achieve
partnerships will depend on MindMed’s ability to develop and maintain proprietary aspects of MindMed’s technology
and to operate without infringing on the proprietary rights of others. The presence of such proprietary rights of others could
severely limit MindMed’s ability to develop and commercialize its products, to conduct MindMed’s existing research
and could require financial resources to defend litigation, which may be in excess of its ability to raise such funds. There is
no assurance that MindMed’s pending patent applications or those that MindMed intends to acquire will be approved in a form
that will be sufficient to protect MindMed’s proprietary technology and gain or keep any competitive advantage that MindMed
may have or, once approved, will be upheld in any post-grant proceedings brought by any third parties.

 

The
patent positions of pharmaceutical companies can be highly uncertain and involve complex legal, scientific and factual questions
for which important legal principles remain unresolved. Patents issued to MindMed or its respective licensors may be challenged,
invalidated or circumvented. To the extent MindMed’s intellectual property, including licensed intellectual property, offers
inadequate protection, or is found to be invalid or unenforceable, MindMed is exposed to a greater risk of direct competition.
If MindMed’s intellectual property does not provide adequate protection against its competitors’ products, MindMed’s
competitive position could be adversely affected, as could its business, financial condition and results of operations. Both the
patent application process and the process of managing patent disputes can be time consuming and expensive, and the laws of some
foreign countries may not protect MindMed’s intellectual property rights to the same extent as do the laws of Canada and
the U.S.

    

    - I-26 - 

    

MindMed
will be able to protect its intellectual property from unauthorized use by third parties only to the extent that MindMed’s
proprietary technologies, key products and any future products are covered by valid and enforceable intellectual property rights
including patents or are effectively maintained as trade secrets and provided MindMed has the funds to enforce its rights, if
necessary.

 

MindMed
may require additional third-party licenses to effectively develop and manufacture MindMed key products and is unable to predict
the availability or cost of such licenses

 

A
substantial number of patents have already been issued to other biotechnology and pharmaceutical companies. To the extent that
valid third-party patent rights cover MindMed’s products or services, MindMed or its strategic collaborators would be required
to seek licenses from the holders of these patents in order to manufacture, use or sell these products and services and payments
under them would reduce MindMed’s profits from these products and services. MindMed is currently unable to predict the extent
to which MindMed may wish or be required to acquire rights under such patents, the availability and cost of acquiring such rights
and whether a license to such patents will be available on acceptable terms or at all. There may be patents in the U.S. or in
foreign countries or patents issued in the future that are unavailable to license on acceptable terms. MindMed’s inability
to obtain such licenses may hinder or eliminate its ability to manufacture and market MindMed’s products.

 

Financial
and Accounting Risks

 

MindMed
expects to incur future losses and MindMed may never become profitable

 

MindMed
has incurred a loss of $2,259,999 for the period from May 31, 2019, date of incorporation, to September 30, 2019, and expects
to incur an operating loss for the period ending December 31, 2019. MindMed has an accumulated deficit since inception through
September 30, 2019 of $2,259,999. MindMed believes that operating losses will continue as it is planning to incur significant
costs associated with the clinical development of 18-MC. MindMed’s net losses have had and will continue to have an adverse
effect on, among other things, MindMed’s shareholders’ equity, total assets and working capital. MindMed expects that
losses will fluctuate from quarter to quarter and year to year, and that such fluctuations may be substantial. MindMed cannot
predict when we will become profitable, if at all.

 

Additional
capital requirements

 

As
a research and development company, MindMed expects to spend substantial funds to continue the research, development and testing
of its product candidates and to prepare to commercialize products subject to approval of the FDA in the U.S. and similar approvals
in other jurisdictions. MindMed will also require significant additional funds if it expands the scope of its current clinical
plans or if it were to acquire any new assets and advance their development. Therefore, for the foreseeable future, MindMed will
have to fund all of its operations and development expenditures from cash on hand, equity financings, through collaborations with
other biotechnology or pharmaceutical companies or through financings from other sources. MindMed expects that its existing cash,
cash equivalents and funds held in trust by its lawyers on its behalf as at September 30, 2019 of $6,385,906 will enable it to
fund its current operating plan requirements for at least the next three months. Additional financing will be required to meet
its longer- term liquidity needs. If MindMed does not succeed in raising additional funds on acceptable terms, it might not be
able to complete planned preclinical studies and clinical trials or pursue and obtain approval of any product candidates from
the FDA and other regulatory authorities. It is possible that future financing will not be available or, if available, may not
be on favorable terms. The availability of financing will be affected by the achievement of MindMed’s corporate goals, the
results of scientific and clinical research, the ability to obtain regulatory approvals, the state of the capital markets generally
and with particular reference to drug development companies, the status of strategic alliance agreements and other relevant commercial
considerations. If adequate funding is not available, MindMed may be required to delay, reduce or eliminate one or more of its
product development programs or obtain funds through corporate partners or others who may require MindMed to relinquish significant
rights to product candidates or obtain funds on less favourable terms than it would otherwise accept. To the extent that external
sources of capital become limited or unavailable or available on onerous terms, MindMed’s intangible assets and its ability
to continue its clinical development plans may become impaired, and its assets, liabilities, business, financial condition and
results of operations may be materially or adversely affected.

    

    - I-27 - 

    

No
product revenue

 

To
date, MindMed has not generated product revenue and cannot predict when and if it will generate product revenue. MindMed’s
ability to generate product revenue and ultimately become profitable depends upon its ability, alone or with partners, to successfully
develop its product candidates, obtain regulatory approval and commercialize products, including any of its current product candidates
or other product candidates that it may develop, in-license or acquire in the future. MindMed does not anticipate generating revenue
from the sale of products for the foreseeable future. MindMed expects its research and development expenses to increase in connection
with its ongoing activities, particularly as it advances its product candidates through clinical trials.

 

Fluctuation
of foreign exchange rates

 

MindMed
may be adversely affected by foreign currency fluctuations. To date, MindMed has been primarily funded through issuances of equity
and from interest income on funds available for investment, which are denominated in

 

U.S.
dollars. Also, a significant portion of its expenditures are in other currencies, thus MindMed is subject to foreign currency
fluctuations which may, from time to time, impact its financial position and results of operations.

 

Risks
Related to the Resulting Issuer Shares and Completion of the Arrangement

 

Completion
of the Arrangement is subject to conditions precedent

 

The
completion of the Arrangement is subject to a number of conditions precedent, including the approval by the TSXV and NEO Exchange,
approval by the Court and Broadway Shareholder approval. Certain of such conditions precedent are outside the control of either
or all of Broadway, Spinco, Delaware Subco and MindMed, and there can be no assurance that these conditions will be satisfied.

 

Termination
of the Arrangement Agreement

 

The
Arrangement Agreement specifies that the parties’ obligation to effect the Arrangement is conditional upon the satisfaction
of a number of conditions, including receipt of all required regulatory approvals and Court approval. If any of these conditions
are not satisfied or waived, the Arrangement may not be completed. Accordingly, Broadway, Spinco, Delaware Subco or MindMed cannot
provide any assurance that the Arrangement Agreement will not be terminated by Broadway, Spinco, Delaware Subco or MindMed prior
to the completion of the Arrangement Agreement.

 

The
market prices for securities of biopharmaceutical companies have historically been volatile

 

A
number of factors could influence the volatility in the trading price of the Resulting Issuer Shares, including changes in the
economy or in the financial markets, industry related developments, the results of product development and commercialization,
changes in government regulations, and developments concerning proprietary rights, litigation and cash flow. The Resulting Issuer’s
quarterly losses may vary because of the timing of costs for manufacturing, preclinical studies and clinical trials. Also, the
reporting of adverse safety events involving its products and public rumors about such events could cause the price of the Resulting
Issuer Shares to decline or experience periods of volatility. Each of these factors could lead to increased volatility in the
market price of the Resulting Issuer Shares. In addition, changes in the market prices of the securities of the Resulting Issuer’s
competitors may also lead to fluctuations in the trading price of the Resulting Issuer Shares.

 

Foreign
Private Issuer Status

 

The
Arrangement is being structured so that the Resulting Issuer will be a Foreign Private Issuer (as defined in Rule 405 under the
U.S. Securities Act and Rule 3b-4 under the U.S. Exchange Act) following the closing of the Arrangement. The term ''Foreign Private
Issuer'' is defined as any non-U.S. corporation, other than a foreign government, except any issuer meeting the following conditions:

 

	1.	more
than 50 percent of the outstanding voting securities of such issuer are, directly or indirectly, held of record by residents of
the United States; and

    

    - I-28 - 

    

	2.	any
                                         one of the following:

 

		a.	the
majority of the executive officers or directors are United States citizens or residents, or

		b.	more
than 50 percent of the assets of the issuer are located in the United States, or

		c.	the
business of the issuer is administered principally in the United States.

 

For
purposes of determining whether more than 50% of its outstanding voting securities are held "of record" by U.S. residents,
the Resulting Issuer must "look through" the record ownership of brokers, dealers, banks, or nominees holding securities
for the accounts of their customers, and also consider any beneficial ownership reports or other information available to the
Resulting Issuer. It must conduct this "look through" in three jurisdictions: the United States, the Resulting Issuer's
home jurisdiction, and the primary trading market for the Resulting Issuer's voting securities, if different from the Resulting
Issuer's home jurisdiction. Additionally, if the Resulting Issuer is not able to obtain information about the record holders'
accounts after reasonable inquiry, the Resulting Issuer may rely on the presumption that such accounts are held in the broker's,
dealer's, bank's, or nominee's principal place of business.

 

In
December 2016, the SEC issued a Compliance and Disclosure Interpretation to clarify that issuers with multiple classes of voting
stock carrying different voting rights may, for the purposes of calculating compliance with this threshold, examine either (i)
the combined voting power of its share classes, or (ii) the number of voting securities, in each case held of record by U.S. residents.
Based on this interpretation, each issued and outstanding Resulting Issuer Multiple Voting Share is counted as one voting security,
and each issued and outstanding Subordinate Voting Share is counted as one voting security for the purposes of determining the
50% U.S. resident threshold. Accordingly, upon completion of the Business Combination, the Resulting Issuer is expected to be
treated as a Foreign Private Issuer. However, should the SEC's guidance and interpretation change, the Resulting Issuer may lose
its Foreign Private Issuer status.

 

Loss
of Foreign Private Issuer Status

 

The
Resulting Issuer may lose its expected status as a Foreign Private Issuer if, as of the last business day of the Resulting Issuer's
second fiscal quarter for any year, more than 50% of the Resulting Issuer's outstanding voting securities (as determined under
Rule 405 of the U.S. Securities Act) are directly or indirectly held of record by residents of the United States. Loss of Foreign
Private Issuer status may have adverse consequences on the Resulting Issuer's ability to raise capital in private placements or
Canadian prospectus offerings. In addition, loss of the Resulting Issuer's Foreign Private Issuer status would likely result in
increased reporting requirements and increased audit, legal and administration costs. Further, should the Resulting Issuer seek
to list on a securities exchange in the United States, loss of Foreign Private Issuer status may increase the cost and time required
for such a listing. These increased costs may have a material adverse effect on the business, financial condition or results of
operations of the Resulting Issuer.

 

The
Resulting Issuer could lose its status as a Foreign Private Issuer if all or a portion of the Resulting Issuer Multiple Voting
Shares directly or indirectly held of record by U.S. residents are converted into Subordinate Voting Shares. The conversion rights
attached to the Resulting Issuer Multiple Voting Shares contain restrictions on conversion that are intended to avoid such a result;
however there can be no guarantee that such restrictions on conversion will be effective to prevent the Resulting Issuer from
potentially losing Foreign Private Issuer status if a sufficient number of Resulting Issuer Multiple Voting Shares are converted
into Subordinate Voting Shares and such Subordinate Voting Shares are acquired, either upon conversion or pursuant to a subsequent
transaction, by U.S. residents. In addition, the Resulting Issuer could potentially lose its Foreign Private Issuer status as
a result of future issuances of Resulting Issuer Shares from treasury to the extent such shares are acquired by U.S. residents.

 

Conflicts
of Interest

 

Certain
directors and officers of MindMed may serve from time to time as directors, officers, promoters and members of management of other
public companies and therefore it is possible that a conflict may arise between their duties as a director or officer of MindMed
and their duties as a director, officer, promoter or member of management of such other companies.

    

    - I-29 - 

    

Material
Contracts

 

The
only material contracts entered into by MindMed, other than in the ordinary course of business, since the date of incorporation
are as follows:

 

		(a)	Foundational
Agreement;

 

		(b)	Bruce
Linton Letter of Agreement;

 

		(c)	Bruce
Linton Promissory Note; and

 

		(d)	a
                                         consulting agreement entered into by MindMed and Primoris Group Inc. (“Primoris”)
                                         on September 18, 2019, pursuant to which Primoris provides MindMed consulting services
                                         with regard to media relations and investor relations until March 17, 2020.

 

Copies
of all material contracts may be inspected at the office of the legal counsel of MindMed at Wildeboer Dellelce LLP, 365 Bay St.
Suite 800 Toronto, ON, M5H 2V1 Attn: Peter Volk during normal business hours and for 30 days after the closing of the Arrangement
contemplated herein.

     

    - I-1-1 - 

    

SCHEDULE
1 TO APPENDIX I - FINANCIAL STATEMENTS OF MINDMED AND PREDECESSOR COMPANIES

 

This
Schedule contains the following:

 

		1.	Audited
financial statements of MindMed from the date of incorporation to September 30, 2019, composed of:

 

		•	statement
                                         of comprehensive income;

		•	statement
                                         of changes in equity;

		•	statement
                                         of cash flows; and

		•	statement
                                         of financial position,

 

		2.	Audited
 “divisional” or “carve-out” financial statements of certain predecessor entities (Savant Addiction Medicine
LLC and Savant HWP, Inc.) of MindMed that carried on the business currently conducted by MindMed prior to it being acquired by
MindMed composed of:

 

		•	a
                                         statement of comprehensive income;

		•	a
                                         statement of changes in equity; and

		•	a
                                         statement of cash flows,

for
the annual (12 month) periods ended December 31, 2017 and 2018 and the nine-month period ended September 30, 2019; and

		•	statement
                                         of financial position as at the end of the three most recently completed periods described
                                         above.

 

(begins
on following page)

     

    - I-1-2 - 

    

Mind
Medicine, Inc.

 

Financial
Statements

 

(Expressed
in United States Dollars)

 

For
the Period May 30, 2019 (date of incorporation) to September 30, 2019

     

    - I-1-3 - 

    

 

 

INDEPENDENT
AUDITOR'S REPORT

 

To
the Shareholders of Mind Medicine, Inc.

 

Opinion

 

We
have audited the financial statements of Mind Medicine, Inc. (the “Company”) which comprise the statement of financial
position as at September 30, 2019 and the statements of operations and comprehensive loss, changes in shareholders’ equity
and cash flows for the period from May 30, 2019 (date of incorporation) to September 30, 2019, and notes to the financial statements,
including a summary of significant accounting policies.

 

In
our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company
as at September 30, 2019, and its financial performance and its cash flows for the period ended September 30, 2019 in accordance
with International Financial Reporting Standards.

 

Basis
for Opinion

 

We
conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards
are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report.
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Material
Uncertainty Related to Going Concern

 

We
draw attention to Note 1 in the financial statements, which describes circumstances or conditions that indicate a material uncertainty
exists that may cast significant doubt about the Company’s ability to continue as a going concern. Our opinion is not modified
in respect of this matter.

 

Responsibilities
of Management and Those Charged with Governance for the Financial Statements

 

Management
is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial
Reporting Standards and for such internal control as management determines is necessary to enable the preparation of the financial
statements that are free from material misstatement, whether due to fraud or error.

 

In
preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management
either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

 

Those
charged with governance are responsible for overseeing the Company's financial reporting process.

 

Auditor's
Responsibilities for the Audit of the Financial Statements

 

Our
objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level
of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.

 

THE
POWER OF BEING UNDERSTOOD

AUDIT
| TAX | CONSULTING

 

RSM
Canada LLP is a limited liability partnership that provides public accounting services and is the Canada member firm of RSM International,
a global network of independent audit, tax, and consulting firms. Visit rsmcanada.com/aboutus for more information regarding RSM
Canada LLP and RSM International.

     

    - I-1-4 - 

    

As
part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:

 

	o	Identify
                                         and assess the risks of material misstatement of the financial statements, whether due
                                         to fraud or error, design and perform audit procedures responsive to those risks, and
                                         obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
                                         The risk of not detecting a material misstatement resulting from fraud is higher than
                                         for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
                                         misrepresentations, or the override of internal control.

 

	o	Obtain
                                         an understanding of internal control relevant to the audit in order to design audit procedures
                                         that are appropriate in the circumstances, but not for the purpose of expressing an opinion
                                         on the effectiveness of the Company's internal control.

 

	o	Evaluate
                                         the appropriateness of accounting policies used and the reasonableness of accounting
                                         estimates and related disclosures made by management.

 

	o	Conclude
                                         on the appropriateness of management's use of the going concern basis of accounting and,
                                         based on the audit evidence obtained, whether a material uncertainty exists related to
                                         events or conditions that may cast significant doubt on the Company's ability to continue
                                         as a going concern. If we conclude that a material uncertainty exists, we are required
                                         to draw attention in our auditor's report to the related disclosures in the financial
                                         statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
                                         are based on the audit evidence obtained up to the date of our auditor's report. However,
                                         future events or conditions may cause the Company to cease to continue as a going concern.

 

	o	Evaluate
                                         the overall presentation, structure and content of the financial statements, including
                                         the disclosures, and whether the financial statements represent the underlying transactions
                                         and events in a manner that achieves fair presentation.

 

We
communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.

 

 

Chartered
Professional Accountants

Licensed Public Accountants

December
19, 2019

Toronto,
Ontario

     

    - I-1-5 - 

    

	Mind
    Medicine, Inc.
	Statement
    of Financial Position
	(Expressed
    in United States Dollars)
	As
    at September 30, 2019

	 

                                                          
	 	September 30,	 
	 	 	2019	 
	Assets	 	 	 	 
	 	 	 	 	 
	Current	 	 	 	 
	Cash	 	$	3,093,048	 
	Funds held in trust (Note 4)	 	 	1,729,051	 
	Prepaid expenses	 	 	37,668	 
	 	 	 	4,859,767	 
	Non-current assets	 	 	 	 
	Intangible assets, net (Note 5)	 	 	5,362,500	 
	Total assets 	 	$	10,222,267	 
	 	 	 	 	 
	Liabilities	 	 	 	 
	 	 	 	 	 
	Current	 	 	 	 
	Accounts payable and accrued liabilities	 	$	802,934	 
	Total liabilities	 	 	802,934	 
	 	 	 	 	 
	Shareholders’ equity	 	 	 	 
	Share capital (Note 6)	 	 	11,127,442	 
	Deficit	 	 	(1,708,109	)
	 	 	 	 	 
	Total shareholders’ equity	 	 	9,419,333	 
	Total liabilities and shareholders’ equity	 	$	10,222,267	 

 

Nature
of Operations and Going Concern (Note 1) Subsequent Events (Note 15)

 

	/s/
    “Stephen L Hurst”	 	/s/
    “Robert Tessarolo”
	Director	 	Director

 

The
accompanying notes are an integral part of these financial statements

 

1 

     

    - I-1-6 - 

    

	Mind
Medicine, Inc.

        Statement
of Operations and Comprehensive Loss 

(Expressed in United States Dollars)

 

	 	 	For
    the period	 
	 	 	May
    30, 2019	 
	 	 	(date
    of incorporation)	 
	 	 	to
    September 30, 2019	 
	Expenses	 	 	 	 
	Research
    and development (Note 9)	 	$	451,385	 
	General
    and administrative (Note 10)	 	 	1,109,806	 
	Amortization
    (Note 5)	 	 	137,500	 
	 	 	 	 	 
	 	 	 	1,698,691	 
	 	 	 	 	 
	Loss
    before the undernoted items	 	 	(1,698,691	)
	Share-based
    payments (Note 6)	 	 	(9,575	)
	Interest
    income	 	 	2,261	 
	Interest
    expense	 	 	(2,104	)
	Loss
    before income taxes	 	 	(1,708,109	)
	Income
    taxes (Note 8)	 	 	-	 
	 	 	 	 	 
	Net
    loss and comprehensive loss for the period	 	$	(1,708,109	)
	 	 	 	 	 
	Basic
    and diluted loss per common share	 	$	(0.03	)
	 	 	 	 	 
	Weighted
    average number of common shares outstanding	 	 	 	 
	Basic
    and diluted (Note 7)	 	 	65,918,390	 

 

The
accompanying notes are an integral part of these financial statements

 

2 

     

    - I-1-7 - 

    

Mind
Medicine, Inc.

Statement
of Changes in Shareholders’ Equity

(Expressed
in United States Dollars)

For
the period May 30, 2019 (date of incorporation) to September 30, 2019

 

 

	 	 	Share Capital	 	 	 	 	 	 	 
	 	 	Shares	 	 	Amount	 	 	Deficit	 	 	Total	 
	Balance, May 30, 2019	 	 	-	 	 	$	-	 	 	$	-	 	 	$	-	 
	Issuance of share capital net of share issuance costs (Note 6)	 	 	147,089,421	 	 	 	11,127,442	 	 	 	-	 	 	 	11,127,442	 
	Net loss	 	 	-	 	 	 	-	 	 	 	(1,708,109	)	 	 	(1,708,109	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance, September 30, 2019	 	 	147,089,421	 	 	$	11,127,442	 	 	$	(1,708,109	)	 	$	9,419,333	 

 

The
accompanying notes are an integral part of these financial statements

 

3 

     

    - I-1-8 - 

    
Mind
Medicine, Inc.

Statements
of Cash Flows 

(Expressed in United States Dollars)

 

 

	 	 	For the period	 
	 	 	May 30, 2019	 
	 	 	(date of incorporation)	 
	 	 	to September 30, 2019	 
	Cash provided by (used in):	 	 	 	 
	 	 	 	 	 
	Operating activities	 	 	 	 
	Net loss	 	$	(1,708,109	)
	Items not affecting cash	 	 	 	 
	Share-based payments	 	 	9,575	 
	Amortization of intangible assets	 	 	137,500	 
	Changes in non-cash operating assets and liabilities	 	 	 	 
	Prepaid expenses	 	 	(36,745	)
	Accounts payable and accrued liabilities	 	 	802,934	 
	 	 	 	 	 
	Net cash used in operating activities	 	 	(794,845	)
	 	 	 	 	 
	Financing activities	 	 	 	 
	Proceeds from issuance of common shares, net of issuance costs (Note 6)	 	 	5,616,944	 
	 	 	 	 	 
	Net cash provided by financing activities	 	 	5,616,944	 
	 	 	 	 	 
	Increase in cash	 	 	4,822,099	 
	Cash, beginning of period	 	 	-	 
	 	 	 	 	 
	Cash, end of period	 	$	3,093,048	 
	 	 	 	 	 
	 	 	 	 	 
	Supplemental cash flow Information	 	 	 	 
	Cash	 	$	3,093,048	 
	Funds held in trust (Note 4)	 	 	1,729,051	 
	 	 	 	 	 
	 	 	$	4,822,099	 
	 	 	 	 	 
	Transfer of intangible assets in exchange for issuance
    of 55,000,000 Class A common shares	 	$	5,500,000	 

 

The
accompanying notes are an integral part of these financial statements

 

4 

     

    - I-1-9 - 

    

Mind
Medicine, Inc.

Notes
to Financial Statements

(Expressed in United States Dollars)

For
the period May 30, 2019 (date of incorporation) to September 30, 2019

 

 

		1.	NATURE
                                         OF OPERATIONS AND GOING CONCERN

 

Mind
Medicine, Inc. (the “Company” or “MindMed”) was incorporated under the laws of the state of Delaware,
USA on May 30, 2019.

 

The
Company’s head office, principal address and address of its registered and records office is 175A, 1325 Airmotive Way,
Reno, Nevada, 89502, USA.

 

The
Company is a neuro-pharmaceutical company, dedicated to innovation, discovery, development and commercialization of therapies
that will improve patient health throughout the world. The Company is founded on patents and patent applications that include
U.S. and worldwide rights for the development of a neuro-transformational molecule known as 18-methoxycoronaridine, or 18-MC,
a molecule based on the psychedelic ibogaine. MindMed is now preparing its next-generation medicine for a Phase II FDA clinical
trial targeting opioid addiction.

 

The
Company is subject to several risks associated with the successful development of new products and their marketing and the conduct
of its clinical studies and their results. It is likely that the products developed by the Company will require approval from
the U.S. Food and Drug Administration and equivalent organizations in other countries before sales can be authorized. The Company’s
future operations are dependent upon its ability to secure additional funds to finance its research and development activities
and its clinical studies. If the Company is unsuccessful in obtaining adequate financing in the future the Company will have to
consider postponing research activities until market conditions improve. It is not possible to predict whether the company will
be successful in securing new financing or acquire approval from the U.S. Food and Drug Administration and equivalent organization
in other countries. These circumstances and conditions may cast significant doubt about the Company’s ability to continue
as a going concern.

 

		2.	BASIS
                                         OF PRESENTATION

 

Statement
of compliance

 

The
financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as
issued by the International Accounting Standards Board (“IASB”), and the interpretations of the IFRS Interpretations
Committee “IFRIC”, effective for the Company’s reporting for the period ended September 30, 2019.

 

These
financial statements were approved for issue by the Board of Directors on December 19, 2019.

 

Basis
of measurement

 

These
financial statements have been prepared on the historical cost basis, except for certain financial assets and liabilities measured
at fair value.

 

Functional
and presentation currency

 

These
financial statements are presented in United States dollars, which is the Company’s functional currency.

 

5 

     

    - I-1-10 - 

    

Mind
Medicine, Inc.

Notes
to Financial Statements

(Expressed in United States Dollars)

For
the period May 30, 2019 (date of incorporation) to September 30, 2019

 

 

		2.	BASIS
                                         OF PRESENTATION (continued)

 

Use
of significant estimates and assumptions

 

The
preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets and liabilities, revenue and expenses, related disclosures
of contingent assets and liabilities. Actual results could differ materially from these estimates and assumptions. The Company
reviews its estimates and underlying assumptions on an ongoing basis. Revisions are recognized in the period in which the estimates
are revised and may impact future periods.

 

Management
has applied significant estimates and assumptions to the following:

 

Useful
life of intangible assets

 

The
Company estimates the useful lives of intangible assets from the date they are available for use in the manner intended by management
and periodically reviews the useful lives to reflect management’s intent about developing and commercializing the assets.

 

Impairment
of long-lived assets

 

Long-lived
assets are reviewed for impairment upon the occurrence of events or changes in circumstances indicating that the carrying value
of the asset may not be recoverable. For the purpose of measuring recoverable amounts, assets are grouped at the lowest levels
for which there are separately identifiable cash flows (cash-generating units). The recoverable amount is the higher of an asset’s
fair value less costs to sell and value in use (being the present value of the expected future cash flows of the relevant asset
or cash-generating unit). An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its
recoverable amount. Management evaluates impairment losses for potential reversals when events or circumstances warrant such consideration.

 

Valuation
of share-based compensation and warrants

 

Management
measures the costs for share-based compensation and warrants using market-based option valuation techniques. Assumptions are made
and estimates are used in applying the valuation techniques. These include estimating the future volatility of the share price,
expected dividend yield, expected risk-free interest rate, future employee turnover rates, future exercise behaviours and corporate
performance. Such estimates and assumptions are inherently uncertain. Changes in these assumptions affect the fair value estimates
of share-based compensation and warrants.

 

		3.	SIGNIFICANT
                                         ACCOUNTING POLICIES

 

The
accounting policies set out below have been applied consistently in these financial statements.

 

Foreign
currency

 

Transactions
in foreign currencies are translated to the functional currency at the rate on the date of the transactions. Monetary assets and
liabilities denominated in foreign currencies are retranslated at the spot rate of exchange as at the reporting date. All differences
are taken to profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated
using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rate at the date when the fair value was determined.

 

6

     

    - I-1-11 - 

    

Mind
Medicine, Inc.

Notes
to Financial Statements

(Expressed in United States Dollars)

For
the period May 30, 2019 (date of incorporation) to September 30, 2019

 

 

		3.	SIGNIFICANT
ACCOUNTING POLICIES (continued)

 

Cash

 

Cash
is deposited with a financial institution. The Company has classified its cash as amortized cost.

 

Research
and development

 

Expenditures
on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are recognized
in profit or loss as incurred.

 

Development
activities involve a plan or design for the production of new or substantially improved products and processes.

 

Development
expenditures are capitalized only if development costs can be measured reliably, the product or process is technically and commercially
feasible, future economic benefits are probable, and the Company intends to complete development and has sufficient resources
to complete development and to use or sell the asset. Other development expenditures are expensed as incurred. No internal development
costs have been capitalized to date.

 

Research
and development expenses include all direct and indirect operating expenses supporting the products in development, including
inventory of drug substance.

 

The
costs incurred in establishing and maintaining patents are expensed as incurred.

 

Intangible
assets

 

Externally
acquired intangible assets are measured at cost less accumulated amortization and any accumulated impairment losses. The cost
of intangible assets acquired through asset acquisitions is their fair value at the acquisition date. These intangible assets
are amortized on a straight-line basis over their estimated useful lives and are tested for impairment whenever events or changes
indicate that their carrying amount may not be recoverable. Useful lives, residual values and amortization methods for these intangible
assets with finite useful lives are reviewed at least annually.

 

Expenditures
are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate. All
other expenditures are recognized in profit or loss as incurred.

 

The
significant intangibles recognized by the Company and their useful economic lives are as follows:

 

	Intangible assets	 	Useful life
	18-MC program	 	10 years

 

7

     

    - I-1-12 - 

    

Mind
Medicine, Inc.

Notes
to Financial Statements

 (Expressed in United States Dollars)

For
the period May 30, 2019 (date of incorporation) to September 30, 2019

 

 

		3.	SIGNIFICANT
ACCOUNTING POLICIES (continued)

 

Impairment
of non-financial assets

 

The
carrying amounts of the Company's non-financial assets are reviewed at each reporting date to determine whether there is any indication
of impairment. If such an indication exists, the recoverable amount is estimated. The recoverable amount of an asset or a cash-generating
unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset or cash-generating unit. For the purpose of impairment testing, assets
that cannot be tested individually are grouped together into the smallest group of assets that generate cash inflows from continuing
use that are largely independent of cash inflows of other assets or cash-generating units. An impairment loss is recognized if
the carrying amount of an asset or its related cash-generating unit exceeds its estimated recoverable amount. Impairment losses
for intangible assets are recognized in research and development expenses.

 

Impairment
losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer
exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An
impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

 

Share
Issuance Costs

 

Professional,
consulting, regulatory fees and other costs that are directly attributable to the issuance of shares are charged to capital stock
when the related shares are issued, net of any tax effects. Transaction costs of abandoned equity transactions are recognized
in the statement of operations.

 

Share-based
payments

 

Equity-settled
share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received,
except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments
granted, measured at the date the entity obtains the goods or the counterparty renders the service.

 

Government
assistance

 

Government
assistance relating to research and development is recorded as a reduction of expenses when the related expenditures are incurred.

 

Income
taxes

 

Income
tax on the profit or loss for the periods presented comprises current and deferred tax. Income tax is recognized in profit or
loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

 

Current
tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at
period end, adjusted for amendments to tax payable with regards to previous years.

 

8

     

    - I-1-13 - 

    

Mind
Medicine, Inc.

Notes
to Financial Statements

 (Expressed in United States Dollars)

For
the period May 30, 2019 (date of incorporation) to September 30, 2019

 

 

		3.	SIGNIFICANT
ACCOUNTING POLICIES (continued)

 

Income
taxes (continued)

 

Deferred
tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax is not recognized for temporary differences on the initial recognition
of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable income
or loss.

 

Deferred
tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities, and
they relate to income taxes levied by the same tax authority on the same taxable entity.

 

Deferred
tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws
that have been enacted or substantively enacted at the reporting date. A deferred tax asset is recognized for unused tax losses,
tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available
against which they can be utilized.

 

Investment
tax credits earned from scientific research and development expenditures are recorded when collectability is reasonably assured.

 

Loss
per share

 

Basic
loss per share is computed by dividing the net loss available to common shareholders by the weighted average number of shares
outstanding during the reporting period. Diluted loss per share is computed similar to basic loss per share except that the weighted
average number of shares outstanding is increased to include additional shares for the assumed exercise of stock options, warrants,
and conversion of preferred shares, if dilutive. The number of additional shares is calculated by assuming that outstanding preferred
shares would convert to common shares and that outstanding stock options and warrants were exercised and the proceeds from such
exercises were used to acquire common stock at the average market price during the reporting period.

 

Business
combinations

 

At
the time of acquisition, the Company determines whether what is acquired meets the definition of business, in which case if it
does, the transaction is considered a business combination, and otherwise it is recorded as an asset acquisition.

 

For
an asset acquisition, the net identifiable assets acquired and liabilities assumed are measured at the fair value of the consideration
paid, based on their relative fair values at the acquisition date. Acquisition related costs are included in the consideration
paid and capitalized. No goodwill is recorded and no deferred tax asset or liability arising from the assets acquired or liabilities
assumed are recognized upon the acquisition of the assets.

 

Business
combinations are accounted for using the acquisition method. Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent
of any non-controlling interest. The excess of the fair value of the consideration transferred including the recognized amount
of any non-controlling interest in the acquiree, over the fair value of the Company’s share of the identifiable net assets
acquired is recorded as goodwill. Any contingent consideration to be transferred by the acquirer will be recognized at fair value
at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or
liability will be recognized in accordance with IFRS 9 either in income or as a change to other comprehensive income. If the contingent
consideration is classified as equity, it shall not be remeasured.

 

9

     

    - I-1-14 - 

    

Mind
Medicine, Inc.

Notes
to Financial Statements

(Expressed in United States Dollars)

For
the period May 30, 2019 (date of incorporation) to September 30, 2019

 

 

		3.	SIGNIFICANT
ACCOUNTING POLICIES (continued)

 

Business
combinations (continued)

 

Goodwill
is initially measured at cost, being the excess of the aggregate of the consideration transferred and the fair value of the net
identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognized immediately
in profit or loss.

 

Acquisition
costs are expensed as incurred, unless they qualify to be treated as debt issue costs, or as cost of issuing equity securities.
The measurement period is the period from the date of acquisition to the date the Company obtains complete information about facts
and circumstances that existed as of the acquisition date – and is subject to a maximum of one year.

 

The
Company elects on a transaction-by-transaction basis whether to measure non-controlling interest at its fair value, or at its
proportionate share of the recognized amount of the identifiable net assets, at the acquisition date.

 

IFRS
9 Financial instruments

 

Financial
assets and liabilities, including derivatives, are recorded on the statement of financial position when the Company becomes a
party to the financial instrument or derivative contract.

 

Classification
and measurement of financial instruments

 

The
Company measures a financial instrument at its fair value plus, in the case of a financial instrument not at fair value through
profit (loss) (“FVTPL”), transaction costs that are directly attributable to the acquisition of the financial instrument.
Transaction costs of financial instruments carried at fair value through FVTPL are expensed in profit (loss).

 

Subsequent
measurement of financial assets depends on the Company’s business model for managing the asset and the cash flow characteristics
of the asset. There are three measurement categories in which the Company classifies its financial instruments:

 

Amortized
cost: Financial assets that are held for collection of contractual cash flows where those cash flows represent solely payments
of principal and interest are measured at amortized cost. Finance income from these financial instruments is recorded in net income
(loss) using the effective interest rate method.

 

Fair
value through other comprehensive income (“FVOCI”): Financial instruments that are held for collection of contractual
cash flows and for selling the financial instruments, where the financial instruments’ cash flows represent solely payments
of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition
of impairment gains or losses, interest income and foreign exchange gains and losses, which are recognized in net income (loss).
When the financial instrument is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity
to net income (loss).

 

FVTPL:
Financial instruments that do not meet the criteria for amortized cost or FVOCI are measured at FVTPL. A gain or loss on a financial
instrument that is subsequently measured at FVTPL and is not part of a hedging relationship is recognized in net income (loss)
and presented net in comprehensive income (loss) in the period in which it arises.

 

Financial
liabilities are subsequently measured at amortized cost using the effective interest method or at FVTPL. Financial liabilities
are subsequently measured as FVTPL when the financial liability is (i) contingent consideration of an acquirer in a business combination,
(ii) held for trading, or (iii) it is designated as FVTPL if eligible.

 

10

     

    - I-1-15 - 

    

Mind
Medicine, Inc.

Notes
to Financial Statements

 (Expressed in United States Dollars)

For
the period May 30, 2019 (date of incorporation) to September 30, 2019 

 

 

		3.	SIGNIFICANT
ACCOUNTING POLICIES (continued)

 

IFRS
9 financial instruments (continued)

 

On
September 30, 2019 the financial instruments of the Company were as follows:

 

	 	 	Basis
	Financial Assets	 	 
	Cash	 	Amortized cost
	Funds held in trust	 	Amortized cost
	 	 	 
	Financial Liabilities	 	 
	Accounts payable and accrued liabilities	 	Amortized cost

 

Impairment
of financial assets

 

For
the impairment of financial assets under IFRS 9, the Company is required to apply an expected credit loss (“ECL”)
model to all debt financial assets not held at FVTPL, where credit losses that are expected to transpire in future years are provided
for, irrespective of whether a loss event has occurred or not as at the date of Statement of Financial Position. The Company recognizes
a loss allowance for expected credit losses on loan receivables which are measured at amortized cost. The measurement of the loss
allowance depends upon the Company’s assessment at the end of each reporting period as to whether the financial instrument's
credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available,
without undue cost or effort to obtain.

 

Where
there has not been a significant increase in exposure to credit risk since initial recognition, a 12- month expected credit loss
allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default
event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined
that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The
amount of expected credit loss recognized is measured on the basis of the probability weighted present value of anticipated cash
shortfalls over the life of the instrument discounted at the original effective interest rate.

 

The
carrying amount of financial assets is reduced by any impairment loss directly for all financial assets with the exception of
loan receivable, where the carrying amount is reduced through the use of an allowance account. When an account receivable is considered
uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited
against the allowance account. Changes in the carrying amount of the allowance account are recognized in the Statement of operations.

 

If,
in a subsequent period, the amount of the impairment loss decreases, and the decrease can be related objectively to an event occurring
after the impairment was recognized, the previously recognized impairment loss is reversed through the consolidated statement
of loss and comprehensive loss for the period to the extent that the carrying amount of the asset at the date the impairment is
reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

 

11

     

    - I-1-16 - 

    

Mind
Medicine, Inc.

Notes
to Financial Statements

(Expressed in United States Dollars)

For
the period May 30, 2019 (date of incorporation) to September 30, 2019

 

		3.	SIGNIFICANT
                                         ACCOUNTING POLICIES (continued)

 

IFRS
16 Leases

 

IFRS
16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account
for all leases under a single on-balance sheet model, with certain exemptions. The standard includes two recognition exemptions
for lessees – leases of “low-value” assets and short-term leases with a lease term of 12 months or less. The
Company has adopted a monthly rental amount of $2,000 for the low-value asset exemption. At the commencement date of lease, a
lessee will recognize a liability to make lease payments and an asset representing the right to use the underlying asset during
the lease term. Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation
expense on the right-of-use asset. Lessees are also required to remeasure the lease liability upon the occurrence of certain events
such as a change in lease term. The lessee will generally recognize the amount of the remeasurement of the lease liability as
an adjustment to the right-of- use asset.

 

The
Company has no leases at the present time.

 

		4.	FUNDS
                                         HELD IN TRUST

 

Cash
held in trust of $1,729,051 represents unrestricted funds held at a Canadian chartered bank by the Company’s corporate counsel,
representing proceeds from closed private placements less disbursements directed by the Company.

 

		5.	INTANGIBLE
                                         ASSETS

 

	 	 	September
    30,	 
	 	 	2019	 
	Cost	 	 	 	 
	Balance,
    May 30, 2019	 	$	-	 
	Acquisition
    of 18-MC program	 	 	5,500,000	 
	 	 	 	 	 
	Balance,
    September 30, 2019	 	$	5,500,000	 
	 	 	 	 	 
	Accumulated
    amortization	 	 	 	 
	Balance,
    May 30, 2019	 	 	-	 
	Amortization	 	 	137,500	 
	 	 	 	 	 
	Balance,
    September 30, 2019	 	 	137,500	 
	 	 	 	 	 
	Net
    carrying amount	 	 	 	 
	September
    30, 2019	 	$	5,362,500	 

 

In
July 2019, the Company acquired the assets of the 18-methyloxycoronaridine (“18-MC”) program from Savant Addiction
Medicine, LLC in exchange for the issuance by the Company of 55,000,000 class A common shares. The shares were valued using third
party arm’s-length purchases of the Company’s class C shares at the time of acquisition of 18-MC which were issued
at $0.10 per share.

 

12

     

    - I-1-17 - 

    

 

Mind
Medicine, Inc. 

Notes
to Financial Statements

(Expressed
in United States Dollars) 

For
the period May 30, 2019 (date of incorporation) to September 30, 2019

 

 

		6.	SHARE
                                         CAPITAL

 

Authorized

 

The
authorized share capital of the Company consists of 655,000,000 shares of common stock, consisting of four series of stock within
such class of common stock:

 

		(a)	355,000,000
                                         Class A voting common stock, $0.0001 par value per share (the "Class A Common Stock"),

 

		(b)	50,000,000
                                         Class B voting common stock, $0.0001 par value per share (the "Class B Common Stock"),

 

		(c)	50,000,000
                                         Class C non-voting common stock, $0.0001 par value per share (the "Class C Shares"),
                                         and

 

		(d)	200,000,000
                                         Class D non-voting common stock, $0.0001 par value per share (the "Class D Shares").

 

The
holder of Class A Common Stock is entitled to one vote for each share of Class A Common Stock held. The holders of Class B Common
Stock are entitled to a number of votes for each share of Class B.

 

Common
Stock equal to the quotient of (i) 13,750,000 divided by (ii) the number of shares of Class B Common Stock issued and outstanding
at the close of business on the applicable record date.

 

Election
of directors

 

The
holders of a majority of the outstanding shares of Class A Common Stock, voting as a separate class, shall be entitled to elect
two members of the Company's board of directors at each meeting or pursuant to each consent of the Company's shareholders for
the election of directors. The holders of a majority of the outstanding shares of Class B Common Stock, voting as a separate class,
shall be entitled to elect two members of the Company's board of directors at each meeting or pursuant to each consent of the
Company's shareholders for the election of directors. The holders of a majority of the outstanding shares of Class A Common Stock
and Class B Common Stock, voting together as a single class, shall be entitled to elect one member of the Company's board of directors
at each meeting or pursuant to each consent of the Company's shareholders for the election of directors.

 

Automatic
conversion

 

Concurrent
with the completion of a reverse takeover transaction between the Company and an entity listed on a Canadian securities exchange
("RTO"), each Class C Share, each Class D Share and each share of Class B Common Stock shall automatically convert into
one fully-paid, nonassessable share of Voting Class A Common Stock. If an RTO is not completed by December 31, 2020, each Class
C Share, each Class D Share and each share of Class B Common Stock shall automatically convert into one fully-paid, nonassessable
share of Voting Class A Common Stock.

 

13

     

    - I-1-18 - 

    

Mind
Medicine, Inc.

Notes
to Financial Statements 

(Expressed in United States Dollars)

For
the period May 30, 2019 (date of incorporation) to September 30, 2019

 

 

		6.	SHARE
                                         CAPITAL (continued)

 

Share
capital issued

 

	 	 	Number of	 	 	 	 
	Class of shares	 	shares issued	 	 	Amount	 
	A (i)	 	 	55,000,000	 	 	$	5,500,000	 
	B (ii)	 	 	35,000,000	 	 	 	3,500	 
	C (iii)	 	 	46,993,671	 	 	 	4,614,367	 
	D (iv)	 	 	10,000,000	 	 	 	1,000,000	 
	D (v)	 	 	95,750	 	 	 	9,575	 
	 	 	 	 	 	 	 	 	 
	 	 	 	147,089,421	 	 	$	11,127,442	 

 

		(i)	In
                                         July 2019, the Company issued 55,000,000 Class A shares to Savant Addiction Medicine,
                                         LLC for the acquisition of its 18-MC program. The shares were valued using third party
                                         arm’s-length purchases of the Company’s class C shares at the time of acquisition
                                         of 18-MC which were issued at $0.10 per share.

 

		(ii)	In
                                         July 2019, the Company issued 35,000,000 Class B shares at a price of $0.0001 per share
                                         yielding gross proceeds of $3,500.

 

		(iii)	In
                                         September 2019, the Company completed a non-brokered private placement financing and
                                         sold 46,993,671 Class C shares at a price of $0.10 per share yielding gross proceeds
                                         of $4,699,367 before deducting share issuance cost of $85,000.

 

		(iv)	In
                                         September 2019, the Company sold 10,000,000 Class D shares, at a price of $0.10 per share
                                         yielding gross proceeds of $1,000,000 to two members of the Board of Directors of the
                                         Company.

 

		(v)	On
                                         September 16, 2019, the Company entered into an agreement with a director of the Company
                                         pursuant to which the director agreed to: (i) join the MindMed board of directors, (ii)
                                         receive a loan (the “Loan”) of $500,000 for the sole purpose of acquiring
                                         5,000,000 MindMed Class D shares, and (iii) purchase 5,000,000 MindMed Class D shares
                                         for $500,000.

 

		☐	The
Loan is secured by the MindMed Class D shares, which is the sole security and recourse against the director. One-quarter of the
Loan ($125,000) shall be automatically deemed to be repaid and satisfied on each six-month anniversary of the date of the Loan
(the “Repayment Date”).

 

		☐	If
the director ceases to be a member of the board of directors of the Company, the relevant portion of the Loan shall be automatically
deemed to be repaid and satisfied on the date immediately prior to the date on with the director ceased to be a member of the
board of directors of the Company.

 

		☐	If
the Borrower ceases to be a member of the board of directors of the Company, other than as a result of his disqualification under
applicable corporate law or his resignation, the Loan shall be automatically deemed to be repaid and satisfied in full and the
director shall be fully and finally released from his obligations under the Loan.

 

14

     

    - I-1-19 - 

    

Mind
Medicine, Inc.

Notes
to Financial Statements (Expressed in United States Dollars)

For
the period May 30, 2019 (date of incorporation) to September 30, 2019

 

 

		6.	SHARE
                                         CAPITAL (continued)

 

Share
capital issued (continued)

 

		(vi)	(continued)

 

		☐	The
principal remaining from time to time unpaid and outstanding shall bear interest, before and after an event of default at 2% per
annum calculated monthly, not in advance. Accrued and unpaid interest shall be payable on each Repayment Date. The director has
the right and privilege of prepaying the whole or any portion of the principal amount of the Loan at any time or times prior to
maturity or an event of default has occurred, whichever comes first, without notice, bonus or penalty. All such prepayments shall
be applied first in satisfaction of any accrued but unpaid interest and thereafter to the outstanding principal amount of the
Loan.

 

The
Loan has been accounted for as an option plan since the Company does not have full recourse to the outstanding loan balance.
In the event the director ceases to be a member of the board of directors of the Company, the Class D shares would be
tendered back to the Company without any payment being made. As a result, the Company has not recognized a loan receivable or
the corresponding Class D common shares as outstanding. The Company has estimated a grant-date fair value, which is recorded
as share-based compensation expense over a two-year vesting period with a corresponding amount to share capital. The fair
value has been estimated using the Black-Scholes option pricing model with the following assumptions: (i) expected dividend
yield of 0%, (ii) expected volatility of 151%, (iii) risk-free rate of 1.74%, (iv) share price of $0.10, (v) forfeiture rate
of 0%, and (vi) expected life of 24 months. The total grant-date fair value is $500,000. The resulting share-based
compensation for the period from September 16, 2019 to September 30, 2019 is $9,575.

 

Although
the 5,000,000 Class D shares were issued to the director, only the portion that has vested, represented by the cumulative amount
of share-based compensation recognized (95,750 shares), is reflected in the number of Class D shares issued and related share
capital balance.

 

		7.	LOSS
                                         PER SHARE

 

The
weighted average number of common shares outstanding for the period from May 30, 2019 (date of incorporation) to September 30,
2019 was 65,918,390. The Company has not adjusted its weighted average number of common shares outstanding in the calculation
of diluted loss per share, as there are no warrants or options outstanding that would give rise to dilution.

 

		8.	INCOME
                                         TAXES

 

Income
taxes recoverable have not been recognized in the statements of operations, as the Company has been incurring losses since inception,
and it is not probable that future taxable profits will be available against which the accumulated tax losses can be utilized.

 

15

     

    - I-1-20 - 

    

Mind
Medicine, Inc.

Notes
to Financial Statements 

(Expressed in United States Dollars)

For
the period May 30, 2019 (date of incorporation) to September 30, 2019

 

 

		8.	INCOME
                                         TAXES (continued)

 

Unrecognized
deferred tax assets

 

As
at September 30, 2019, deferred tax assets have not been recognized with respect to the following items:

 

	 	 	September 30,

                                                                                2019
	 
	Non-capital losses carried forward 	 	$	1,097,316	 
	Accounting basis of intangible assets in excess of tax basis	 	 	45,833	 
	Scientific research and experimental development expenditures	 	 	451,385	 
	Accrued professional fees	 	 	100,000	 
	Stock-based compensation	 	 	9,575	 
	 	 	 	 	 
	 	 	$	1,704,109	 

 

As
at September 30, 2019, the Company had available research   and development expenditures of approximately $451,385, for income
tax purposes, which may be carried forward indefinitely to reduce future years’ taxable income.

 

The
reconciliation of the United States statutory income tax rate applied to the net loss for the period to the income tax expense
is as follows:

 

	 	 	September 30,

                                                                                2019
	 
	Loss before income taxes	 	$	(1,708,109	)
	 	 	 	 	 
	Statutory income tax rate	 	 	27.87	%
	Income tax recovery based on statutory income tax rate	 	 	(476,101	)
	Non-deductible meal expenses	 	 	1,116	 
	Deferred tax asset not recognized	 	 	474,985	 
	 	 	 	 	 
	 	 	$	-	 

 

		9.	RESEARCH
                                         AND DEVELOPMENT

 

Components
of research and development expenses for the period ended September 30, 2019 were as follows:

 

	 	 	September 30,

                                                                                2019
	 
	Research and development expenses, excluding the below items	 	$	22,909	 
	 	 	 	 	 
	Consulting fees and short-term benefits	 	 	347,624	 
	Clinical research expenses and manufacturing expenses	 	 	80,852	 
	 	 	 	 	 
	 	 	$	451,385	 

 

16

     

    - I-1-21 - 

    

Mind
Medicine, Inc.

Notes
to Financial Statements

(Expressed in United States Dollars)

For
the period May 30, 2019 (date of incorporation) to September 30, 2019

 

 

		10.	GENERAL
                                         AND ADMINISTRATIVE

 

Components of general and administrative expenses for the period ended September 30, 2019 were as follows:

 

	 	 	September 30, 
2019	 
	General and administrative expenses, excluding the below items	 	$	226,828	 
	Legal fees	 	 	393,252	 
	Accounting and audit	 	 	153,191	 
	Consulting fees and short-term benefits	 	 	336,535	 
	 	 	 	 	 
	 	 	$	1,109,806	 

 

		11.	COMMITMENTS
                                         AND CONTINGENCIES

 

As
at September 30, 2019, the Company had obligations to make future payments, representing significant research and development
contracts and other commitments that are known and committed in the amount of approximately $127,095. Most of these agreements
are cancelable by the Company with notice. These commitments include agreements related to the conduct of the phase 1 clinical
trials, sponsored research, manufacturing and preclinical studies. The Company also has minimum lease payments for operating lease
commitments, primarily for its office lease, in the amount of $7,460 over the next 12 months, $10,950 from 12 to 36 months, and
nothing thereafter. The facility lease contains options for lease extension. As these are considered “low-value” assets
by the Company, they have not been capitalized.

 

The
Company enters into research, development and license agreements in the ordinary course of business where the Company receives
research services and rights to proprietary technologies. Milestone and royalty payments that may become due under various agreements
are dependent on, among other factors, clinical trials, regulatory approvals and ultimately the successful development of a new
drug, the outcome and timing of which are uncertain.

 

The
Company periodically enters into research and license agreements with third parties that include indemnification provisions customary
in the industry. These guarantees generally require the Company to compensate the other party for certain damages and costs incurred
as a result of claims arising from research and development activities undertaken by or on behalf of the Company. In some cases,
the maximum potential amount of future payments that could be required under these indemnification provisions could be unlimited.
These indemnification provisions generally survive termination of the underlying agreement. The nature of the indemnification
obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay.
Historically, the Company has not made any indemnification payments under such agreements and no amount has been accrued in the
financial statements with respect to these indemnification obligations.

 

17

     

    - I-1-22 - 

    

Mind
Medicine, Inc.

Notes
to Financial Statements

(Expressed in United States Dollars)

For
the period May 30, 2019 (date of incorporation) to September 30, 2019

 

 

		12.	RELATED
                                         PARTY TRANSACTIONS

 

For
the period from May 30, 2019 (date of incorporation) to September 30, 2019, the key management personnel of the Company were the
board of directors, Executive Chair, Chief Executive Officer, Chief Medical Officer, Chief Scientific Officer and Chief Financial
Officer.

 

Compensation
for key management personnel of the Company for the period ended September 30, 2019 was as follows:

 

	 	 	September 30,	 
	 	 	2019	 
	Consulting fees and short-term benefits	 	$	252,900	 

 

The
Company paid fees of $353,910 to companies controlled by directors of the Company. The Company paid consulting fees of $74,550
to a director of the Company.

 

As
at September 30, 2019 the Company had accounts payables and accrued liabilities outstanding of $235,553 to companies
controlled by directors.

 

As
at September 30, 2019 the Company had accounts payables and accrued liabilities outstanding of $19,965 to
directors.

 

The
Directors do not receive fees for their services.

 

Outstanding
balances with related parties at period-end are secured and bear interest at 2% per annum.

 

		13.	MANAGEMENT
                                         OF CAPITAL

 

The
Company defines its capital as share capital and deficit. The Company’s objectives when managing capital are to ensure there
are sufficient funds available to carry out its research and development programs. To date, these programs have been funded through
the sale of equity securities.

 

The
Company also intends to source non-dilutive funding by accessing grants, government assistance and tax incentives, and through
partnerships with corporations and research institutions. The Company uses budgets and purchasing controls to manage its costs.
The Company is not exposed to any externally imposed capital requirements.

 

18

     

    - I-1-23 - 

    

Mind
Medicine, Inc. 

Notes
to Financial Statements

(Expressed in United States Dollars) 

For
the period May 30, 2019 (date of incorporation) to September 30, 2019

 

 

		14.	FINANCIAL
                                         INSTRUMENTS

 

Fair
value

 

Fair
Value Measurement provides a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable
or unobservable. Observable inputs are those that reflect market data obtained from independent sources, while unobservable inputs
reflect the Company’s assumptions with respect to how market participants would price an asset or liability. These two inputs
used to measure fair value fall into the following three different levels of the fair value hierarchy:

 

Level
1 Quoted prices in active markets for identical instruments that are observable.

 

Level
2 Quoted prices in active markets for similar instruments; inputs other than quoted prices that are observable and derived from
or corroborated by observable market data.

 

Level
3 Valuations derived from valuation techniques in which one or more significant inputs are unobservable.

 

The
hierarchy requires the use of observable market data when available.

 

Cash
and accounts payable and accrued liabilities are all short-term in nature and, as such, their carrying values approximate fair
values.

 

Risks

 

The
Company has exposure to credit risk, liquidity risk, interest rate risk and currency risk. The Company’s board of directors
has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Audit Committee
of the board of directors is responsible for reviewing the Company’s risk management policies.

 

		(a)	Credit
                                         risk

 

Credit
risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations,
and arises principally from the Company’s cash. The carrying amount of these financial assets represents the maximum credit
exposure. The Company follows an investment policy to mitigate against the deterioration of principal and to enhance the Company’s
ability to meet its liquidity needs. Cash and funds held in trust are on deposit with major American and Canadian chartered banks
and the Company invests in high-grade short-term instruments.

 

		(b)	Liquidity
                                         risk

 

Liquidity
risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company is a development
stage company and is reliant on external fundraising to support its operations. Once funds have been raised, the Company manages
its liquidity risk by investing in cash and short-term instruments to provide regular cash flow for current operations. It also
manages liquidity risk by continuously monitoring actual and projected cash flows. The board of directors reviews and approves
the Company’s operating and capital budgets, as well as any material transactions not in the ordinary course of business.

 

19

     

    - I-1-24 - 

    

Mind
Medicine, Inc.

Notes
to Financial Statements

 (Expressed in United States Dollars) 

For
the period May 30, 2019 (date of incorporation) to September 30, 2019

 

 

		14.	FINANCIAL
                                         INSTRUMENTS (continued)

 

Risks
(continued)

 

		(c)	Interest
                                         rate risk

 

Interest
rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market interest rates. The Company holds its cash in bank accounts or high- interest money market accounts that have a variable
rate of interest. The Company manages its interest rate risk by holding highly liquid short-term instruments and by holding its
investments to maturity, where possible. The Company earned interest income for the period ended September 30, 2019 of $2,261.
Therefore, a 100 basis point change in the average interest rate for the period ended September 30, 2019 would have a net impact
on finance income of $1,500.

 

		(d)	Currency
                                         risk

 

The
Company is exposed to currency risk related to the fluctuation of foreign exchange rates and the degree of volatility of those
rates. Currency risk is limited to the portion of the Company’s business transactions denominated in currencies other than
the United States dollar, which are primarily expenses in Canadian dollars. As at September 30, 2019, the Company held no non-U.S.
dollar cash and cash equivalents and had CAD dollar denominated accounts payable and accrued liabilities in the amount of CAD
$133,000. Therefore, a 1% change in the foreign exchange rate would have a net impact on finance costs as at September 30, 2019
of $1,330.

 

CAD
dollar expenses for the period ended September 30, 2019 were approximately CAD $450,000. Varying the CAD exchange rate for the
period ended September 30, 2019 to reflect a 1% strengthening of the U.S. dollar would have decreased the net loss by approximately
$3,400 assuming that all other variables remained constant.

 

		15.	SUBSEQUENT
                                         EVENTS

 

On
November 2, 2019, the Company entered into a brokered private placement to raise up to CAD $15,000,000 at a price of CAD $0.33
per Class D common share. The net proceeds from any completed private placement will be used for investment in the clinical development
of 18- MC and LSD microdosing and for general working capital purposes.

 

On
December 19, 2019 the Company completed the first tranche of its brokered private placement whereby it issued 18,771,897 Class
D common shares for gross cash proceeds of $6,194,726 CAD, and incurred issuance costs of $430,171 CAD.

 

The
Company has applied to list its common shares on the Neo Exchange Inc. after its reverse takeover (“RTO”) of
Broadway Gold Mining Ltd. (“Broadway”) is completed. The Company has signed an Arrangement Agreement whereby
Broadway will acquire all of the issued and outstanding shares of the Company in exchange for the issuance of its own shares
to the MindMed shareholders. Once the RTO closes, Broadway will change its name to Mind Medicine Corp.

 

20

     

    - I-1-25 - 

    

 

Combined
                                        financial statements of

 

Savant
Addiction Medicine, LLC and Carve-out Financial

Statements of
Savant HWP, Inc.

 

(Expressed in
United States Dollars)

 

For
the Nine Month Period Ended September 30, 2019 and Years Ended December 31, 2018 and 2017

 

     

    - I-1-26 - 

    

 

INDEPENDENT AUDITOR’S REPORT

 

To the Board of Directors of Savant Addiction Medicine, LLC and Savant HWP, Inc.

 

Opinion

 

We have audited the combined financial statements of Savant Addiction Medicine, LLC and carve-out financial statements of the 18-MC Division of Savant HWP, Inc., (the “Group”), which comprise the combined statements of financial position as at September 30, 2019, December 31, 2018, December 31, 2017, and January 1, 2017, and the combined statements of operations and comprehensive loss, changes in equity and cash flows for the nine month period ended September 30, 2019 and the years ended December 31, 2018 and December 31, 2017, and notes to the combined financial statements, including a summary of significant accounting policies.

 

In our opinion, the accompanying combined financial statements present fairly, in all material respects, the combined financial position of the Group as at September 30, 2019, December 31, 2018, December 31, 2017, and January 1, 2017, and its combined financial performance and its combined cash flows for the nine month period ended September 30, 2019 and the years ended December 31, 2018 and December 31, 2017 in accordance with International Financial Reporting Standards.

 

Basis for Opinion

 

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Combined Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the combined financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Emphasis of Matter – Basis of Accounting

 

We draw attention to Note 1 to the combined financial statements, which describes the purpose of these combined financial statements and carve-out financial statements. The 18-MC Division of Savant HWP, Inc. did not operate as a separate entity during the periods presented. These carve-out financial statements are, therefore, not necessarily indicative of results that would have occurred if the 18-MC Division of Savant HWP, Inc. had been a separate stand-alone entity during the periods presented or of the future results of the 18-MC Division assets.

 

Material Uncertainty Related to Going Concern

 

We draw attention to Note 1 in the combined financial statements, which describes circumstances or conditions that indicate a material uncertainty exists that may cast significant doubt about the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

 

Responsibilities of Management and Those Charged with Governance for the Combined Financial Statements

 

Management is responsible for the preparation and fair presentation of the combined financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of combined financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the combined financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

 

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

 

THE POWER OF BEING UNDERSTOOD

AUDIT | TAX | CONSULTING

 

RSM Canada LLP is a limited liability partnership that provides public accounting services and is the Canadian member firm of RSM International, a global network of independent audit, tax, and consulting firms. Visit rsmcanada.com/aboutus for more information regarding RSM Canada LLP and RSM International.

 

     

    - I-1-27 - 

    

 

Auditor’s Responsibilities for the Audit of the Combined Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the combined financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these combined financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

 

	
•

	
Identify and assess the risks of material misstatement of the combined financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

 

	
•

	
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

 

	
•

	
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

 

	
•

	
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the combined financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

 

	
•

	
Evaluate the overall presentation, structure and content of the combined financial statements, including the disclosures, and whether the combined financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

 

Chartered
Professional Accountants

Licensed Public Accountants

December 19, 2019

Toronto, Ontario

 

     

    - I-1-28 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Combined Statements of Financial Position 
(Expressed in United States Dollars)

As at September 30, 2019

 

		 

	September
                                         30,

	 

	 

	December
                                         31,

	 

	 

	December
                                         31,

	 

	 

	January
                                         1,

	 

	 	 

	2019

	 

	 

	2018

	 

	 

	2017

	 

	 

	2017

	 

	Assets

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Current

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	Cash

	 

	$

	-

	 

	 

	$

	-

	 

	 

	$

	-

	 

	 

	$

	60

	 

	Prepaid
                                         expenses

	 

	 

	1,108

	 

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	 

	1,108

	 

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	60

	 

	Investment
                                in joint venture (Note 5)

	 

	 

	4,901,696

	 

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	-

	 

	Intangible
                                assets, net (Note 6)

	 

	 

	-

	 

	 

	 

	4,000,000

	 

	 

	 

	5,000,000

	 

	 

	 

	6,000,000

	 

	 

	 

	$

	4,902,804

	 

	 

	$

	4,000,000

	 

	 

	$

	5,000,000

	 

	 

	$

	6,000,060

	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Liabilities

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Current

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	Accounts
                                payable and accrued liabilities (Notes 7, 12)

	 

	$

	100,452

	 

	 

	$

	82,159

	 

	 

	$

	56,886

	 

	 

	$

	46,431

	 

	Convertible
                                promissory notes (Note 7)

	 

	 

	200,000

	 

	 

	 

	200,000

	 

	 

	 

	200,000

	 

	 

	 

	-

	 

	Warrant
                                liability (Note 8)

	 

	 

	-

	 

	 

	 

	11,612

	 

	 

	 

	356,473

	 

	 

	 

	831,531

	 

	Related
                                party notes payable (Note 12)

	 

	 

	450,000

	 

	 

	 

	450,000

	 

	 

	 

	450,000

	 

	 

	 

	450,000

	 

	 

	 

	 

	750,452

	 

	 

	 

	743,771

	 

	 

	 

	1,063,359

	 

	 

	 

	1,327,962

	 

	Equity
                                in net assets

	 

	 

	4,152,352

	 

	 

	 

	3,256,229

	 

	 

	 

	3,936,641

	 

	 

	 

	4,672,098

	 

	 

	 

	$

	4,902,804

	 

	 

	$

	4,000,000

	 

	 

	$

	5,000,000

	 

	 

	$

	6,000,060

	 

  

Organization, Nature of Operations and Going Concern (Note 1)

 

	/s/ “Stephen L Hurst"		 
	Managing Member	 	 

 

The accompanying notes are an integral part of these combined financial statements

 

1

     

    - I-1-29 - 

    

  

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc. 
Combined Statements of Operations and Comprehensive Earnings (Loss)

(Expressed in United States Dollars)

For the Nine Month Period Ended September 30, 2019 
and Years Ended December 31, 2018 and 2017

 

		 

	Nine
                                         Months 
Ended
                                         
September
                                         30,
2019

	 

	 

	Year
                                         Ended 
December
                                         31,
2018

	 

	 

	Year
                                         Ended 
December
                                         31,
2017

	 

	Operating
                                         revenue

	 

	$

	-

	 

	 

	$

	-

	 

	 

	$

	8,208

	 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Expenses

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	Research
                                and development

	 

	 

	-

	 

	 

	 

	30

	 

	 

	 

	167,227

	 

	General
                                and administrative

	 

	 

	-

	 

	 

	 

	297

	 

	 

	 

	111,279

	 

	Share-based
                                payments (Note 9)

	 

	 

	766

	 

	 

	 

	1,377

	 

	 

	 

	3,233

	 

	Amortization
                                (Note 6)

	 

	 

	500,000

	 

	 

	 

	1,000,000

	 

	 

	 

	1,000,000

	 

	 

	 

	 

	500,766

	 

	 

	 

	1,001,704

	 

	 

	 

	1,281,739

	 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Earnings
                                (loss) before the undernoted items

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	Gain
                                on disposal of 18-MC program (Note 6)

	 

	 

	2,000,000

	 

	 

	 

	-

	 

	 

	 

	-

	 

	Equity
                                in loss of Mind Medicine, Inc. (Note 5)

	 

	 

	(598,304

	)

	 

	 

	-

	 

	 

	 

	-

	 

	Gain
                                on change in fair value of warrants

	 

	 

	11,612

	 

	 

	 

	344,861

	 

	 

	 

	475,058

	 

	Interest
                                expense

	 

	 

	(18,905

	)

	 

	 

	(25,273

	)

	 

	 

	(19,844

	)

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net
                                earnings (loss) and comprehensive earnings (loss) for the Period/Years Ended

	 

	$

	893,637

	 

	 

	$

	(682,116

	)

	 

	$

	(818,317

	)

 

The accompanying notes are an integral part of these combined financial statements

 

2

     

    - I-1-30 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Combined Statements of Changes in Equity 
(Expressed in United States Dollars)

For the Nine Month Period Ended September 30, 2019 
and Years Ended December 31, 2018 and 2017

 

		 

	Equity
In
Net Assets

	 

	Balance,
December 31, 2016

	 

	$

	4,672,098

	 

	Net
loss

	 

	 

	(818,317

	)

	Net
contributions

	 

	 

	82,860

	 

	 	 	 	 	 
	Balance,
December 31, 2017

	 

	$

	3,936,641

	 

	Net
loss

	 

	 

	(682,116

	)

	Net
contributions

	 

	 

	1,704

	 

	 	 	 	 	 
	Balance,
December 31, 2018

	 

	$

	3,256,229

	 

	Net
earnings

	 

	 

	893,637

	 

	Net
contributions

	 

	 

	2,486

	 

	 	 	 	 	 
	Balance,
September 30, 2019

	 

	$

	4,152,352

	 

 

The accompanying notes are an integral part of these combined financial statements

 

3

     

    - I-1-31 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Combined Statements of Cash Flows 
(Expressed in United States Dollars)

For the Nine Month Period Ended September 30, 2019 
and Years Ended December 31, 2018 and 2017

 

		 

	Nine
                                         Months 
Ended 
September 30,
2019

	 

	 

	Year
                                         Ended 
December 31,
2018

	 

	 

	Year
                                         Ended 
December 31,
2017

	 

	Cash
                                    provided by (used in):

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 	 	 	 

	 	 	 	 

	 	 	 
	Operating
                                    activities

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	Net
                                    earnings (loss)

	 

	$

	893,637

	 

	 

	$

	(682,116

	)

	 

	$

	(818,317

	)

	Items
                                    not affecting cash

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	Amortization

	 

	 

	500,000

	 

	 

	 

	1,000,000

	 

	 

	 

	1,000,000

	 

	Gain
                                    on disposal of 18-MC program (Note 6)

	 

	 

	(2,000,000

	)

	 

	 

	 

	 

	 

	 

	 

	 

	Equity
                                    in loss of Mind Medicine, Inc.

	 

	 

	598,304

	 

	 

	 

	-

	 

	 

	 

	-

	 

	Gain
                                    on fair value of warrants

	 

	 

	(11,612

	)

	 

	 

	(344,861

	)

	 

	 

	(475,058

	)

	Net
                                    contributions to equity

	 

	 

	2,486

	 

	 

	 

	1,704

	 

	 

	 

	82,860

	 

	Changes
                                    in non-cash operating assets and liabilities Prepaid expenses

	 

	 

	(1,108

	)

	 

	 

	-

	 

	 

	 

	-

	 

	Accounts
                                    payable and accrued liabilities

	 

	 

	18,293

	 

	 

	 

	25,273

	 

	 

	 

	10,455

	 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net
                                    cash used in operating activities

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	(200,060

	)

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Financing
                                    activities

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	Issue
                                    of convertible promissory notes payable

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	200,000

	 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net
                                    cash provided by financing activities

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	200,000

	 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Increase
                                    (decrease) in cash

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	(60

	)

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cash,
                                    beginning of period/year

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	60

	 

	Cash,
                                    end of period/year

	 

	$

	-

	 

	 

	$

	-

	 

	 

	$

	-

	 

 

The accompanying notes are an integral part of these combined financial statements

 

4

     

    - I-1-32 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Notes to Combined Financial Statements 
(Expressed in United States Dollars)

Nine Month Period Ended September 30, 2019 
and Years Ended December 31, 2018 and 2017

 

	
1.

	
ORGANIZATION, NATURE OF OPERATIONS AND GOING CONCERN

 

These combined financial statements include the accounts of Savant Addiction Medicine, LLC (the “Company”) and the carve-out financial statements of Savant HWP, Inc. (“Savant HWP”; together, the “Group”), for the nine months ended September 30, 2019 and the years ended December 31, 2018 and 2017.

 

	
 

	
(a)

	
Savant Addiction Medicine, LLC

 

The Company is a Delaware limited liability company organized on December 4, 2013. The Group was in the process of developing a medical drug that would target the dopamine “reward” pathway in the brain that drives pleasure-seeking behaviors associated with addiction and obesity. The Group’s product still requires clinical trial and patient follow up. The Group’s primary activities to date have consisted of raising capital to perform product research and development.

 

The Company is under common control with Savant HWP. The Company’s operations were spun out from Savant HWP. The Company received certain operating and administrative services from Savant HWP in 2017. Under this structure, Savant HWP performs all operational activities under contract to the Company. The Company owns all the rights to the profits from production in exchange for payment of product development expenses invoiced by Savant HWP and a 10% profit interest in the Company.

 

	
 

	
(b)

	
Savant HWP, Inc.

 

Savant HWP – 18-MC division, as presented in the carve-out financial statements, is not a legal entity. The carve-out financial statements represent the operations in Savant HWP that were attributable to the 18-MC research project (the “Project”). The goal of the Project is to develop a medical drug that would target the dopamine “reward” pathway in the brain that drives pleasure-seeking behaviors associated with addiction and obesity.

 

The carve-out financial statements have been prepared based on the financial statements of Savant HWP and are presented as if the operations in the Project were accounted for on a stand-alone basis.

 

Because the operations are part of a corporate group, the carve-out financial statements depict the equity in net assets and represent the amounts of balances and transactions associated with the operations. Management’s estimates, when necessary, have been used to prepare such allocations.

 

The carve-out financial statements are not necessarily indicative of the results that would have been attained if the Project had been operated as a separate legal entity during the periods presented and, therefore, are not necessarily indicative of future operating results.

 

5

     

    - I-1-33 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Notes to Combined Financial Statements 
(Expressed in United States Dollars)

Nine Month Period Ended September 30, 2019 
and Years Ended December 31, 2018 and 2017

 

	
1.

	
ORGANIZATION, NATURE OF OPERATIONS AND GOING CONCERN (continued)

 

While these combined financial statements have been prepared in accordance with International Financial Reporting Standards on a going concern basis that presumes the realization of assets and discharge of liabilities in the normal course of business, there are material uncertainties related to adverse conditions and events that may cast significant doubt on the Group’s ability to continue as a going concern.

 

For
the nine months ended September 30, 2019, the Group had net earnings of $893,637 (net loss of $682,116 and $818,317 for the
years ended December 31, 2018 and December 31, 2017, respectively).

 

The Group’s continuing ability to meet its obligations as they come due is dependent upon its ability to raise additional funds through the issuance of shares and debt borrowings and the support of creditors to meet its current obligations and to continue operations. Management has implemented a plan of action to reduce operating costs and is in the process of securing additional financing. These circumstances and conditions may cast significant doubt about the Group’s ability to continue as a going concern.

 

These combined financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Group be unable to continue operations. Such adjustments may be material.

 

	
2.

	
STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION

 

	
 

	
(a)

	
Statement of compliance

  

The combined financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

 

This is the Group’s first annual financial statements prepared in accordance with IFRS. The 2017 financial statements include an opening statement of financial position as at January 1, 2017, the date at which the impact of IFRS transition was recorded against equity, in accordance with the provisions of IFRS 1 “First time adoption of International Financial Reporting Standards” and the 2017 comparative statements were prepared using the same basis of accounting. A detailed reconciliation of the financial statements prepared under US GAAP and the comparative 2017 IFRS financial information is presented in Note 14.

 

These financial statements were approved by the Group’s board of directors on December 19, 2019.

 

(b)   Basis of measurement

 

These combined financial statements have been prepared on the historical cost basis, except for certain financial assets and liabilities measured at fair value.

 

(c)   Functional and presentation currency

 

These combined financial statements are presented in United States dollars, which is the Group’s functional currency.

 

6

     

    - I-1-34 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Notes to Combined Financial Statements 
(Expressed in United States Dollars)

Nine Month Period Ended September 30, 2019 
and Years Ended December 31, 2018 and 2017

 

	
2.

	
STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION (continued)

  

(d)    Use of significant estimates and assumptions

 

The preparation of these combined financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, revenue and expenses, related disclosures of contingent assets and liabilities. Actual results could differ materially from these estimates and assumptions. The Group reviews its estimates and underlying assumptions on an ongoing basis. Revisions are recognized in the period in which the estimates are revised and may impact future periods.

 

Management has applied significant estimates and assumptions to the following:

 

Useful life of intangible assets

 

The Group estimates the useful lives of intangible assets from the date they are available for use in the manner intended by management and periodically reviews the useful lives to reflect management’s intent about developing and commercializing the assets.

 

Impairment of long-lived assets

 

Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances indicating that the carrying value of the asset may not be recoverable. For the purpose of measuring recoverable amounts, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use (being the present value of the expected future cash flows of the relevant asset or cash-generating unit). An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. Management evaluates impairment losses for potential reversals when events or circumstances warrant such consideration.

 

Valuation of share-based compensation and warrants

 

Management measures the costs for share-based compensation and warrants using market-based option valuation techniques. Assumptions are made and estimates are used in applying the valuation techniques. These include estimating the future volatility of the share price, expected dividend yield, expected risk-free interest rate, future employee turnover rates, future exercise behaviours and corporate performance. Such estimates and assumptions are inherently uncertain. Changes in these assumptions affect the fair value estimates of share-based compensation and warrants.

 

Determination of investment in joint venture

 

When determining the appropriate basis of accounting for the Group’s interests in joint arrangements, the Group makes judgments about the degree of influence that it exerts directly or through an arrangement over the investees’ relevant activities. Judgment was used to determine whether the joint venture arrangements described in Note 5 should be accounted for as a joint operation or a joint venture. Given the Group has rights to the net assets of the separate legal entity, the Group has concluded it will be accounted for as a joint venture. The Group will recognize the initial investment at cost and the carrying amount is increased or decreased to recognize the Group’s share of the profit or loss of the venture after the date of acquisition.

 

7

     

    - I-1-35 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Notes to Combined Financial Statements 
(Expressed in United States Dollars)

Nine Month Period Ended September 30, 2019 
and Years Ended December 31, 2018 and 2017

 

	
3.

	
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Combined financial statements

 

The combined
financial statements comprise the financial statements of the Company and the carve-out financial statements of Savant HWP. The
Company and Savant HWP are companies under common control. These combined financial statements are prepared as of the same dates and
periods. The combined financial statements are prepared using uniform accounting policies by the Group, which is considered to have
one operating and reportable segment. Significant intragroup balances and transactions and gains or losses resulting from intragroup
transactions are eliminated in full in the combined financial statements.

 

Investment in Joint Venture

 

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Investments in a joint venture are accounted for using the equity method and are initially recognized at cost. The entire carrying amount of the investment is tested for impairment annually.

 

Under the equity method, the investment is initially recognized at cost and adjusted thereafter for the post-acquisition change in the investor’s share of comprehensive income less distributions of the joint venture.

 

The Group’s share of its joint venture’s post-acquisition profits or losses is recognized in the statement of net income, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Distributions received from an investee reduce the carrying amount of the investment.

 

If the Group’s share of losses of a joint venture equals or exceeds its interest in the joint venture, the Group does not provide for additional losses, unless it has incurred obligations or made payments on behalf of the joint venture.

 

Intangible assets

 

Externally acquired intangible assets are measured at cost less accumulated amortization and any accumulated impairment losses. The cost of intangible assets acquired through asset acquisitions is their fair value at the acquisition date. These intangible assets are amortized on a straight-line basis over their estimated useful lives and are tested for impairment whenever events or changes indicate that their carrying amount may not be recoverable. Useful lives, residual values and amortization methods for these intangible assets with finite useful lives are reviewed at least annually.

 

Expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures are recognized in profit or loss as incurred.

 

The significant intangibles recognized by the Company and their useful economic lives are as follows:

 

	
Intangible assets

	
 

	
Useful life

	
18-MC program

	
 

	
9 years

 

8

     

    - I-1-36 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Notes to Combined Financial Statements 
(Expressed in United States Dollars)

Nine Month Period Ended September 30, 2019 
and Years Ended December 31, 2018 and 2017

 

	
3.

	
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 

 

Revenue recognition

 

Revenues
are recognized as earned when all the services are performed according to terms of the contracts.

 

Research and development

 

Expenditures on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are recognized in profit or loss as incurred.

 

Development activities involve a plan or design for the production of new or substantially improved products and processes.

 

Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to complete development and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are expensed as incurred. No internal development costs have been capitalized to date.

 

Research and development expenses include all direct and indirect operating expenses supporting the products in development.

 

The costs incurred in establishing and maintaining patents are expensed as incurred.

 

Income taxes

 

(a)
   Savant Addiction Medicine, LLC

 

The Company is a limited liability company for federal and state income tax purposes. Under laws pertaining to income taxation of limited liability companies, no federal income tax is paid by the Company. The income or loss of the Company is taxed to the member in its respective return. Accordingly, no provision for income taxes besides the $800 minimum California state franchise tax and the LLC gross receipts fees are reflected in the accompanying financial statements.

 

The Company evaluates its tax positions taken or expected to be taken in the course of preparing tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as an expense in the applicable year. As of September 30, 2019, December 31, 2018 and December 31, 2017, the Company does not have any significant uncertain tax positions for which a reserve would be necessary.

 

(b)
   Savant HWP, Inc.

 

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable income or loss.

 

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity.

 

9

     

    - I-1-37 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Notes to Combined Financial Statements 
(Expressed in United States Dollars)

Nine Month Period Ended September 30, 2019 
and Years Ended December 31, 2018 and 2017

 

	
3.

	
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Income taxes (continued)

 

(b)   Savant HWP, Inc. (continued)

 

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted at the reporting date. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Investment tax credits earned from scientific research and development expenditures are recorded when collectability is reasonably assured.

 

Financial instruments

 

The Group’s financial assets and liabilities are classified and measured as follows:

 

	
Financial asset or financial liability

	
 

	
Classification and measurement

	
Cash

	
 

	
Amortized cost

	
Accounts payable and accrued liabilities

	
 

	
Amortized cost

	
Related party notes payable

	
 

	
Amortized cost

	
Convertible promissory notes

	
 

	
Amortized cost

	
Warrant liability

	
 

	
Fair value through profit or loss

 

The Group recognizes financial assets and financial liabilities when the Group becomes party to the contractual provisions of the financial instrument.

 

i)     Classification of financial assets and financial liabilities

 

Financial assets

 

The Group classifies financial assets as subsequently measured at amortized cost, fair value through other comprehensive income (“FVTOCI”) or fair value through profit or loss (“FVTPL”) based on the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.

 

A financial asset is measured at amortized cost if the financial assets is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on a specified date to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

A financial asset is measured at FVTOCI if the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Group does not have financial assets classified as subsequently measured at FVTOCI.

 

A financial asset is measured at FVTPL if the financial assets is neither classified as amortized cost nor FVTOCI or can be designated FVTPL at initial recognition. The Group does not have financial assets classified as subsequently measured at FVTPL.

 

10

     

    - I-1-38 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Notes to Combined Financial Statements 

(Expressed in United States Dollars)

Nine Month Period Ended September 30, 2019 

and Years Ended December 31, 2018 and 2017

 

	
3.

	
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Financial instruments (continued)

 

i)     Classification of financial assets and financial liabilities (continued) 

 

Financial liabilities

 

The Group classifies all financial liabilities as subsequently at amortized costs except for financial liabilities at FVTPL which include the convertible debentures and contingent consideration in a business combination or financial liabilities that have been designated FVTPL on initial recognition.

 

ii)    Initial recognition

 

Financial assets or financial liabilities classified as amortized cost are initially recognized by the Group at their fair value less transaction costs that are directly attributable to the acquisition or issuance of the financial assets or financial liability, except for transaction costs on financial assets or liability designed as FVTPL which are expensed. Amounts receivable though, are initially recognized at their transaction price if the trade receivable does not contain a significant financing component.

 

iii)   Subsequent measurement

 

The Group will subsequently measure a financial instrument based on its classification. Financial assets and financial liabilities classified as subsequently measured at amortized cost will be measured at initial recognition minus the principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any loss allowance. The amortization of the effective interest is recognized in profit or loss. Financial assets at FVTOCI will have subsequently measured changes in fair value recognized in other comprehensive income. Transaction costs of financial liabilities classified as FVTPL are expensed as incurred. Gains and losses of financial assets and financial liabilities classified as subsequently measured at FVTPL are recognized in net profit and loss.

 

iv)   Derecognition of financial instruments

 

A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or the Group has transferred its contractual rights to receive cash flows from the financial asset or assumes an obligation to pay the cash flows in full without material delay to a third party and has transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

 

A financial liability is derecognized when it is extinguished, that is when the obligation is discharged, cancelled or expires. A financial liability is extinguished when the debtor discharges the liability by paying in cash, other financial assets, goods or services or is legally released from the liability.

 

Convertible promissory notes

 

Convertible promissory notes issued by the Group are automatically converted to a number of membership units of the Group, based on the closing of a financing event, when certain conditions apply. The components of the convertible debt are classified as separate financial liabilities in accordance with the substance of the contractual agreements and definitions of financial liabilities. The conversion feature that is settled by the exchange of a variable number of membership units of the Group is a derivative liability and has been recorded as FVTPL.

 

11

     

    - I-1-39 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Notes to Combined Financial Statements 

(Expressed in United States Dollars)

Nine Month Period Ended September 30, 2019 

and Years Ended December 31, 2018 and 2017

 

	
3.

	
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Financial instruments (continued)

 

Convertible promissory notes (continued)

 

The derivative liability component of a convertible note is recognized initially at the fair value. The host debt component is recognized initially at the difference between the fair value of the convertible note as a whole and the fair value of the derivative liability component. Any directly attributable transaction costs are allocated to the liability and equity component in proportion to their initial carrying amounts. Subsequent to initial recognition, the host debt component of a convertible note is measured at amortized cost using the effective interest method. The derivative liability component of the convertible note is re-measured subsequent to initial recognition with changes in fair value being recognized in profit or loss. Interest related to the host debt liability is recognized in profit or loss. On conversion, the financial liability is reclassified to equity reserve and no gain or loss is recognized.

 

Warrants

 

Promissory notes issued by the Group include warrants to purchase a number of membership units of the Group, at the option of the holder. The components of the promissory note are classified as separate financial liabilities in accordance with the substance of the contractual agreements and definitions of financial liabilities. The contractual terms of the warrants include features that result in the issuance of a variable number of membership units of the Group and this derivative liability has been recorded as FVTPL.

 

The derivative liability component of a promissory note is recognized initially at the fair value. The host debt component is recognized initially at the difference between the fair value of the promissory note as a whole and the fair value of the derivative liability component. Any directly attributable transaction costs are allocated to the liability and equity component in proportion to their initial carrying amounts. Subsequent to initial recognition, the host debt component of a promissory note is measured at amortized cost using the effective interest method. The derivative liability component of the promissory note is re-measured subsequent to initial recognition with changes in fair value being recognized in profit or loss. Interest related to the host debt liability is recognized in profit or loss.

 

Share-based compensation

 

The Group accounts for share-based compensation for all share-based awards made to employees based on their estimated fair values on the date of grant. The fair value of each employee stock option is estimated on the date of grant using the Black-Scholes option pricing model. The model requires management to make a number of assumptions including expected volatility, expected term, risk-free interest rate, and expected dividends. The Group recognizes compensation expense over the requisite period for stock options expected to vest.

 

The Group recognizes compensation expense for stock option awards to non-employees based on their then current fair value, using the Black-Scholes option pricing model in the period in which such options vest.

 

12

     

    - I-1-40 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Notes to Combined Financial Statements 

(Expressed in United States Dollars)

Nine Month Period Ended September 30, 2019 

and Years Ended December 31, 2018 and 2017

 

	
3.

	
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Financial instruments (continued)

 

Impairment of non-financial assets

 

The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If such an indication exists, the recoverable amount is estimated. The recoverable amount of an asset or a cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of cash inflows of other assets or cash-generating units. An impairment loss is recognized if the carrying amount of an asset or its related cash-generating unit exceeds its estimated recoverable amount. Impairment losses for intangible assets are recognized in research and development expenses.

 

Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

 

	4.	DISCLOSURES OF NEW STANDARDS ADOPTED AND PRIOR TO
THEIR ADOPTION 

 

IFRS 15
Revenue from Contracts with Customers

 

IFRS
15 Revenue from Contracts with Customers covers principles for reporting about the nature, amount, timing and uncertainty of
revenue and cash flows arising from contracts with customers. The Group has concluded that the adoption of IFRS 15 did not
result in any material changes to the current amount and the timing of the recognition of revenue.

 

IFRS 9 Financial Instruments

 

On January 1, 2018, IFRS 9 Financial Instruments became effective. IFRS 9 replaces the provisions of IAS 39 that relate to the recognition, classification and measurement of financial assets and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting. The adoption of IFRS 9 from January 1, 2018 resulted in changes in accounting policies as described in Note 3. In accordance with the transitional provisions in IFRS 9, comparative figures have not been restated.

 

As of January 1, 2018, the Group’s management has assessed that the Group has a business model whose objective is to hold financial assets held by the Group in order to collect contractual cash flows and has determined that amortized cost is the appropriate IFRS 9 category. The Group was required to revise its impairment methodology under IFRS 9. There was no additional impairment loss identified. There was no impact from the IFRS 9 adoption on the Group’s financial assets and financial liabilities as these continued to be accounted as financial assets and financial liabilities at amortized cost except for warrant liabilities that are classified as FVTPL.

 

Financial liabilities at FVTPL which include warrant liabilities are initially recognized at fair value with changes to fair value recognized in the consolidated statements of loss.

 

13

     

    - I-1-41 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Notes to Combined Financial Statements 

(Expressed in United States Dollars)

Nine Month Period Ended September 30, 2019 

and Years Ended December 31, 2018 and 2017

 

4.              DISCLOSURES OF NEW STANDARDS ADOPTED AND PRIOR TO THEIR ADOPTION (continued)

 

 IFRS 9 Financial Instruments (continued)

 

The following table explains the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Group’s financial assets and financial liabilities:

 

	
Financial asset or financial liability

	
 

	
Prior Classification and Measurement under IAS 39

	
 

	
Current Classification and Measurement under IFRS 9

	
Cash

	
 

	
Loans and receivables at amortized cost

	
 

	
Amortized cost

	
Accounts payable and accrued liabilities

	
 

	
Loans and receivables at amortized cost

	
 

	
Amortized cost

	
Convertible promissory notes

	
 

	
Other liabilities at amortized cost

	
 

	
Amortized cost

	
Related party notes payable

	
 

	
Other liabilities at amortized cost

	
 

	
Amortized cost

	
Warrant liability

	
 

	
Fair value through profit or loss

	
 

	
Fair value through profit or loss

 

IFRS 16 Leases

 

IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model, with certain exemptions. The standard includes two recognition exemptions for lessees – leases of “low-value” assets and short-term leases with a lease term of 12 months or less. At the commencement date of a lease, a lessee will recognize a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees are also required to remeasure the lease liability upon the occurrence of certain events such as a change in lease term. The lessee will generally recognize the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

 

IFRS 3 Business Combinations

 

The Group adopted the Amendments to IFRS 3, Business Combinations (“IFRS 3 Amendments”) effective January 1, 2019, in advance of its mandatory effective date. The amendments clarify the definition of a business in determining whether an acquisition is a business combination or an asset acquisition. It has removed the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs and the reference to an ability to reduce costs, and requires, at a minimum, the acquired set of activities and assets to include an input and a substantive process to meet the definition of a business. IFRS 3 Amendments also provides for an optional concentration test to permit a simplified assessment of whether an acquired set of activities and assets is not a business. If substantially all the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set of activities and assets is determined to not be a business and no further assessment is needed. This election is made separately for each transaction. The Group has adopted the standard prospectively and all acquisitions in the current year are considered asset acquisitions.

 

After the adoption of the IFRS 3 Amendments, the Group will account for business combinations in which control is acquired under the acquisition method. When an acquisition is made, the Group considers the inputs, processes, and outputs of the acquiree in assessing whether it meets the definition of a business. If the acquired set of activities and assets lack a substantive process in place but will be integrated into the Group’s existing operations, the acquisition ceases to meet the definition of a business and is accounted for as an asset acquisition. Assets acquired through asset acquisitions are initially measured at cost, which includes transaction costs incurred.

 

14

     

    - I-1-42 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Notes to Combined Financial Statements 

(Expressed in United States Dollars)

Nine Month Period Ended September 30, 2019 

and Years Ended December 31, 2018 and 2017

 

5.            INVESTMENT IN JOINT VENTURE

 

The Group acquired its investment in the shares of Mind Medicine, Inc. (“MindMed”) when it exchanged its 18-methyloxycoronaridine (“18-MC”) program in July 2019. The Group received 55,000,000 Class A voting shares of MindMed which, under the Foundational Agreement it entered into with the holders of the Class B voting shares of MindMed, gave it 80% voting rights. Notwithstanding the majority voting rights position this gave to the Group, the Foundational Agreement also specified that until the completion of a reverse takeover of MindMed, all major business decisions required the unanimous agreement of the Class A and Class B shareholders or a majority of the Board of Directors of MindMed. As a result, the Group has determined that the most appropriate manner in which to record its holding in the MindMed shares is as a joint venture investment. Accordingly, the Group equity accounts for its investment and has recognized its proportionate share of the loss incurred by MindMed in the period from the date of acquisition of its shares to September 30, 2019.

 

The Group recognized a gain on sale of the 18-MC program of $2,000,000, based on the $5,500,000 value of the MindMed shares received. The Group valued the shares received at $0.10 per share based on arm’s- length sales of other MindMed shares being sold in a private placement at the same time as the sale of the 18-MC program occurred.

 

	Joint
venture investment in shares of Mind Medicine, Inc.

	 

	$

	5,500,000

	 

	Equity
in loss of Mind Medicine, Inc.

	 

	 

	(598,304

	)

	 	 	 	 	 
	Investment
in shares of Mind Medicine, Inc., net of equity pickup in loss

	 

	$

	4,901,696

	 

 

6.         
   INTANGIBLE ASSETS

 

	Cost

	 

	 

	 

	 

	Balance,
                                December 31, 2018, December 31, 2017 and January 1, 2017

	 

	$

	9,000,000

	 

	Disposal
                                of 18-MC program (Note 5)

	 

	 

	(9,000,000

	)

	 	 	 	 	 
	Balance,
                                September 30, 2019

	 

	$

	-

	 

	Accumulated
                                amortization

	 

	 

	 

	 

	Balance,
                                January1, 2017

	 

	$

	6,000,000

	 

	Amortization

	 

	 

	(1,000,000

	)

	 	 	 	 	 
	Balance,
                                December 31, 2017

	 

	$

	5,000,000

	 

	Amortization

	 

	 

	(1,000,000

	)

	 	 	 	 	 
	Balance,
                                December 31, 2018

	 

	$

	4,000,000

	 

	Amortization

	 

	 

	(500,000

	)

	Disposal
                                of 18-MC program (Note 5)

	 

	 

	(3,500,000

	)

	 	 	 	 	 
	Balance,
                                September 30, 2019

	 

	$

	-

	 

 

In July 2019, the Group sold the assets of the 18-methyloxycoronaridine platform to Mind Medicine, Inc. in exchange for the issuance by Mind Medicine, Inc. of 55,000,000 Class A common shares with a fair value of $0.10 per share.

 

	Proceeds
on sale of 18-MC program

	 

	$

	5,500,000

	 

	Amortized
cost of intangible assets sold

	 

	 

	(3,500,000

	)

	Gain
on sale

	 	$	 2,000,000

	 

 

15

     

    - I-1-43 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Notes to Combined Financial Statements 

(Expressed in United States Dollars)

Nine Month Period Ended September 30, 2019 

and Years Ended December 31, 2018 and 2017

 

7.            CONVERTIBLE PROMISSORY NOTES

 

In March 2017, Savant Addiction Medicine, LLC issued convertible promissory notes totaling $200,000. The convertible promissory notes incur interest at 12% and have no fixed maturity date. All outstanding principal and accrued interest may not be prepaid without prior written consent of the holders of greater than 50% of the outstanding and unpaid principal of all the notes issued.

 

As defined in the convertible note purchase agreement, all of the outstanding principal and interest on the convertible promissory notes will be automatically converted upon the closing of the next stock equity financing of the Savant Addiction Medicine, LLC of at least $2,000,000 into the same type of securities issued in the financing at the same price paid by the investors in the financing and subject to all of the rights, preferences and privileges of such investors.

 

The
outstanding principal balance on convertible promissory notes amounted to $200,000 as at September 30, 2019, December 31,
2018 and December 31, 2017 and the accrued interest amounted to $60,526, $42,575 and $18,575 at September 30, 2019, December
31, 2018 and December 31, 2017, respectively. Interest expense on the convertible promissory notes totaled $17,951, $24,000
and $18,575 for the nine months ended September 30, 2019 and the years ended December 31, 2018 and 2017, respectively.

 

Each convertible note includes a warrant to purchase membership interests in the Savant Addiction Medicine, LLC. The warrant coverage provided is equal to 100% of the principal amount of the convertible notes purchased by the note holder.

 

8.            WARRANTS

 

The following warrants are outstanding.

 

	Exercise
                                         price

	 

	Number

	 

	 

	 	 

	Balance
                                         - December 31, 2016

	 

	 

	 

	 

	 

	 

	1,481,250

	 

	Issued
                                in connection with convertible notes (Note 7)

	 

	 

	No
                                         fixed price

	 

	 

	 

	200,000

	 

	 	 	 	 	 	 	 	 	 
	Balance
                                - December 31, 2017 and 2018

	 

	 

	 

	 

	 

	 

	1,681,250

	 

	Expired
                                - April 1, 2019 and July 1, 2019

	 

	 

	No
                                         fixed price

	 

	 

	 

	(1,481,250

	)

	 	 	 	 	 	 	 	 	 
	Balance
                                - September 30, 2019

	 

	 

	 

	 

	 

	 

	200,000

	 

 

The Black-Scholes inputs for valuation of the warrants are as follows:

 

 

	
Volatility

	
 

	
60% to 274%

	
Risk free interest rate

	
 

	
1.20% to 2.45%

	
Expected life of warrant

	
 

	
0.25 to 5 years

	
Expected dividend yield

	
 

	
0.0%

	
Warrant Strike price

	
 

	
$1.00

	
Market value of the shares

	
 

	
$0.60 to $1.00

 

16

     

    - I-1-44 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Notes to Combined Financial Statements 

(Expressed in United States Dollars)

Nine Month Period Ended September 30, 2019 

and Years Ended December 31, 2018 and 2017

 

8.            WARRANTS (continued)

 

The following warrants are outstanding. 

 

	Exercise
                                         price

	 

	Number

	 

	 

	 	 

	Balance
                                         - December 31, 2016

	 

	 

	 

	 

	 

	 

	1,481,250

	 

	Issued
                                in connection with convertible notes (Note 7)

	 

	 

	No
                                         fixed price

	 

	 

	 

	200,000

	 

	 	 	 	 	 	 	 	 	 
	Balance
                                - December 31, 2017 and 2018

	 

	 

	 

	 

	 

	 

	1,681,250

	 

	Expired
                                - April 1, 2019 and July 1, 2019

	 

	 

	No
                                         fixed price

	 

	 

	 

	(1,481,250

	)

	 	 	 	 	 	 	 	 	 
	Balance
                                - September 30, 2019

	 

	 

	 

	 

	 

	 

	200,000

	 

  

During the year ended December 31, 2014, the Company issued $493,750 of notes payable (see Note 12) of which $43,750 were repaid during the year ended December 31, 2016. These notes contained a provision to recognize a variable number of equity shares depending on the repayment date, in accordance with IAS 32, a contract to issue a variable number of equity shares fails to meet the definition of equity. Accordingly, such a contract or instrument would be accounted for as a derivative liability and measured at fair value with changes in fair value recognized in the Statements of Operations and Comprehensive Loss at each period-end.

 

Details of the outstanding warrants and their fair values is as follows:

 

	Warrants
                                         liability

	 

	Amount

	 

	Balance
                                         – January 1, 2017 (Note 12)

	 

	$

	831,531

	 

	Change
                                in fair value

	 

	 

	(475,058

	)

	 	 	 	 	 
	Balance
                                - December 31, 2017

	 

	 

	356,473

	 

	Change
                                in fair value

	 

	 

	(344,861

	)

	 	 	 	 	 
	Balance
                                – December 31, 2018

	 

	 

	11,612

	 

	Gain
                                on expiry of warrants (Note 12)

	 

	 

	(11,612

	)

	Balance
                                - September 30, 2019

	 

	$

	-

	 

 

	Expiry Date	 	Weighted average 
exercise price	 	 	Number of 
warrants	 
	April 1, 2019 – July 3, 2019	 	$	1.00	 	 	 	1,481,250	 
	March 10, 2022	 	 	No fixed price	 	 	 	200,000	 

 

9.         
   STOCK OPTION PLAN    

 

The Board of Directors of Savant HWP, Inc., has authorized the 2009 Equity Incentive Plan (the “Plan”). Under the Plan, the Board of Directors may grant stock awards to employees, directors and consultants of the Savant HWP, Inc. and its affiliates. The exercise price of an option cannot be less than the fair value of one share of common stock on the date of grant for incentive stock options and nonstatutory stock options (not less than 110% of the fair value for stockholders owning greater than 10% of all classes of stock).

 

17

     

    - I-1-45 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Notes to Combined Financial Statements 

(Expressed in United States Dollars)

Nine Month Period Ended September 30, 2019 

and Years Ended December 31, 2018 and 2017

 

9.            STOCK OPTION PLAN (continued)

 

Option vesting schedules are determined by the Board of Directors at the time of issuance and they generally vest over a four-year period. Options are exercisable over periods not to exceed ten years (five years for incentive stock options granted to holders of 10% or more of the voting stock) from the date of grant.

 

As at September 30, 2019, 4,086,200 shares of common stock, respectively, were reserved for stock option grants (December 31, 2018 and 2017, 4,086,200).

 

A summary of the Savant HWP, Inc., stock option activity under the Plan is as follows:

 

	 	 	September,
30 2019	 	 	December
31, 2018	 	 	December
31, 2017	 
	 

	 

	
Average
                                         exercise
Price per shares

	 

	 

	
Number
                                         of options

	 

	 

	
Average
                                         exercise price per shares

	 

	 

	
Number
                                         of options

	 

	 

	
Average
                                         exercise price per shares

	 

	 

	
Number
                                         of options

	 

	As
                                         at 1 January

	 	 	0.0242

	 

	 

	 

	1,981,213

	 

	 	 

	0.0242

	 

	 

	 

	1,981,213

	 

	 

	 

	 0.0242

	 

	 

	 

	 1,983,572

	 

	Granted
                                during the period/year

	 

	 

	0.0500

	 

	 

	 

	858,208

	 

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	-

	 

	Exercised
                                during the period/year

	 	 	0.0500

	 	 

	 

	(8,546

	)

	 

	 

	 -

	 

	 

	 

	-

	 

	 

	 

	 0.0500

	 

	 

	 

	 (2,359

	)

	Forfeited
                                during the period/year

	 

	 

	

-	 

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	-

	 

	As
                                at period/year end

	 

	 

	0.0319

	 

	 

	 

	2,830,875

	 

	 

	 

	0.0242

	 

	 

	 

	1,981,213

	 

	 

	 

	0.0242

	 

	 

	 

	1,981,213

	 

	Vested
                                and exercisable as at period/year end.

	 

	 

	0.0231

	 

	 

	 

	2,057,187

	 

	 

	 

	0.0238

	 

	 

	 

	1,955,872

	 

	 

	 

	0.0227

	 

	 

	 

	1,874,820

	 

 

No options expired during the periods covered by the above tables.

 

Share options outstanding at the end of the year have the following expiry dates and exercise prices.

 

	
Grant Date

	
 

	
Expiry Date

	
 

	
 

	
Exercise Price

	
 

	
 

	
Share options 
September 30,
2019

	
 

	
 

	
Share options 
December 31,
2018

	
 

	
 

	
Share options 
December 31,
2017

	
 

	 
	
November 10, 2010

	
 

	
 

	
November 10, 2020

	
 

	
 

	
 

	
0.0007

	
 

	
 

	
 

	
177,767

	
 

	
 

	
 

	
177,767

	
 

	
 

	
 

	
177,767

	
 

	 
	
February 11, 2011

	
 

	
 

	
February 11, 2021

	
 

	
 

	
 

	
0.0007

	
 

	
 

	
 

	
352,542

	
 

	
 

	
 

	
352,542

	
 

	
 

	
 

	
352,542

	
 

	 
	
February 10, 2012

	
 

	
 

	
February 10, 2022

	
 

	
 

	
 

	
0.0333

	
 

	
 

	
 

	
94,438

	
 

	
 

	
 

	
94,438

	
 

	
 

	
 

	
94,438

	
 

	 
	
April 25, 2012

	
 

	
 

	
April 25, 2022

	
 

	
 

	
 

	
0.0033

	
 

	
 

	
 

	
355,391

	
 

	
 

	
 

	
355,391

	
 

	
 

	
 

	
355,391

	
 

	 
	
August 25, 2012

	
 

	
 

	
August 25, 2022

	
 

	
 

	
 

	
0.0033

	
 

	
 

	
 

	
242,862

	
 

	
 

	
 

	
242,862

	
 

	
 

	
 

	
242,862

	
 

	 
	
October 8, 2012

	
 

	
 

	
October 8, 2022

	
 

	
 

	
 

	
0.05

	
 

	
 

	
 

	
53,415

	
 

	
 

	
 

	
53,415

	
 

	
 

	
 

	
53,415

	
 

	 
	
January 1, 2013

	
 

	
 

	
January 1, 2023

	
 

	
 

	
 

	
0.05

	
 

	
 

	
 

	
32,049

	
 

	
 

	
 

	
32,049

	
 

	
 

	
 

	
32,049

	
 

	 
	
May 23, 2013

	
 

	
 

	
May 23, 2023

	
 

	
 

	
 

	
0.05

	
 

	
 

	
 

	
59,540

	
 

	
 

	
 

	
59,540

	
 

	
 

	
 

	
59,540

	
 

	 
	
December 31, 2013

	
 

	
 

	
December 31, 2023

	
 

	
 

	
 

	
0.05

	
 

	
 

	
 

	
712

	
 

	
 

	
 

	
712

	
 

	
 

	
 

	
712

	
 

	 
	
August 3, 2015

	
 

	
 

	
August 3, 2025

	
 

	
 

	
 

	
0.05

	
 

	
 

	
 

	
612,497

	
 

	
 

	
 

	
612,497

	
 

	
 

	
 

	
612,497

	
 

	 
	
February 26, 2019

	
 

	
 

	
February 26, 2029

	
 

	
 

	
 

	
0.05

	
 

	
 

	
 

	
858,208

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	 
	
Total

	
 

	
 

	 	
 

	 	 	 	
 

	 	 	
2,830,875

	 	 	 	
1,981,213

	
 

	
 

	
 

	
1,981,213

	
 

	 
	
Weighted average remaining contractual life of options outstanding at the end of the period/year

	
 

	
 

	 	
 

	 	 	 	
 

	 	 	
5.52

	 	 	 	
4.08

	
 

	
 

	
 

	
5.08

	
 

	 

 

18

     

    - I-1-46 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Notes to Combined Financial Statements 

(Expressed in United States Dollars)

Nine Month Period Ended September 30, 2019 

and Years Ended December 31, 2018 and 2017

 

9.            STOCK OPTION PLAN (continued)

 

The assessed fair value at grant date of options granted during the nine months ended September 30, 2019 was $0.004 per option. The fair value at grant date is independently determined using the Black-Scholes model (Note 3), which takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield, the risk-free interest rate for the term of the option, and the correlations and volatilities of the peer group companies.

 

The model inputs for options granted during the nine months ended September 30, 2019 included:

 

1.     Options are granted for no consideration. Of the 858,208 options granted, 71,221 options vest on a straight-line basis over a 12-month period, and 21,366 vest immediately. The remaining options granted vest over a 4-year period, with a 1-year cliff. The option holder can exercise options at any time prior to the vesting date, but the company has the option to repurchase all unvested shares if the employee’s service is terminated before the vesting end-date.

 

2.     Exercise price: $0.05

 

3.     Grant date: February 26, 2019

 

4.     Expiry date: February 26, 2029

 

5.     Share price at grant date: $0.02

 

6.     Expected price volatility of the company’s shares: 43%

 

7.     Expected dividend yield: 0.0%

 

8.     Risk-free interest rate: 2.50%

 

The expected stock price volatility assumptions for the Savant HWP, Inc., stock options during 2019 were determined by examining the historical volatilities for industry peers, as the Company did not have any trading history for its common stock. The risk-free interest rate assumption is based on U.S. Treasury instruments whose term was consistent with the expected term of the Savant HWP, Inc. stock options. The expected dividend assumption is based on the company’s history and expectation n of dividend payouts.

 

The expected term of the options is based on the average period the stock options are expected to remain outstanding calculated as the midpoint of the options’ vesting term, and contractual expiration period, as the Group did not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior.

 

Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

 

Total stock compensation expense amounted to $766, $1,377 and $3,233 for the nine months ended September 30, 2019 and the years ended December 31, 2018 and 2017, respectively.

 

10.          RETIREMENT PLANS

 

During 2013, the Company adopted a 401(k) Plan under Section 401(k) of the Internal Revenue Code (“Plan”) covering all eligible employees. Plan participants may contribute into the Plan up to limits established by the Internal Revenue Service. The Company contributes 3% of eligible employee’s compensation into the plan. The Company made no contributions to the Plan in 2017, 2018 and 2019.

 

19

     

    - I-1-47 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Notes to Combined Financial Statements 

(Expressed in United States Dollars)

Nine Month Period Ended September 30, 2019 

and Years Ended December 31, 2018 and 2017

 

11.          INCOME TAXES

 

Income taxes recoverable have not been recognized in the statements of operations, as the Company has been incurring losses since inception, and it is not probable that future taxable profits will be available against which the accumulated tax losses can be utilized.

 

Unrecognized deferred tax assets

 

As at September 30, 2019, December 31, 2018, and December 31, 2017 deferred tax assets have not been recognized with respect to the following items:

 

	 	 	September 30,
2019	 	 	December 31,
2018	 	 	December 31,
2017	 
	Non-capital losses carried forward	 	$		1,403,646	 	 	$	1,403,646	 	 	$	1,403,646	 

 

The reconciliation of the United States statutory income tax rate applied to the net loss for the period to the income tax expense is as follows:

 

		 

	September
30, 2019

	 

	 

	December
31, 2018

	 

	 

	December
31, 2017

	 

	Income
(Loss) before income taxes

	 

	$

	893,637

	 

	 

	$

	(682,116

	)

	 

	$

	(818,317

	)

	Statutory
income tax rate

	 

	 

	27.87

	%

	 

	 

	27.87

	%

	 

	 

	27.87

	%

	Income
tax recovery (expense) based

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	on
statutory income tax rate

	 

	 

	249,083

	 

	 

	 

	(190,126

	)

	 

	 

	(228,089

	)

	Non-deductible
SAM LLC Expenses

	 

	 

	(249,297

	)

	 

	 

	189,742

	 

	 

	 

	227,162

	 

	Qualified
Shared based compensation

	 

	 

	214

	 

	 

	 

	384

	 

	 

	 

	901

	 

	Meals
and entertainment

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	26

	 

	Tax
effect of loss carryforward

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	2,748

	 

	 

	 

	$

	-

	 

	 

	$

	-

	 

	 

	$

	—

	 

 

12.          RELATED PARTY TRANSACTIONS

 

Operating agreement

 

The Group does
not have any employees. The Group’s operating activities are performed by Savant HWP through an operating agreement (the
 “Operating Agreement”) entered into on December 4, 2013. Per the terms of the Operating Agreement, Savant HWP provides
professional services to the Group for product development and other operational costs in exchange for certain fees. The Group owns
all the rights to the profits from production. Savant HWP has a 10% profit interest in the Group.

 

During 2013 the Group was reorganized into an operating entity, Savant HWP, Inc., and several LLC’s, including Savant HWP Holdings LLC (“Savant Holdings”), Savant Addition Medicine, LLC (“SAM”), and Savant Neglected Diseases, LLC (“SND”). The operating activities of Savant Holdings and SND are performed by the Group in exchange for payment of product development expenses and a 10% profit interest in the LLC’s.

 

The Group recognized revenues of $NIL, $NIL and $8,208 during the nine months ended September 30, 2019, and the years ended December 31, 2018 and 2017, respectively, for services performed for Savant Holdings and SND.

 

20

     

    - I-1-48 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Notes to Combined Financial Statements 

(Expressed in United States Dollars)

Nine Month Period Ended September 30, 2019 

and Years Ended December 31, 2018 and 2017

 

12.          RELATED PARTY TRANSACTIONS (continued)

 

Related party notes payable

 

The Group entered into borrowing agreements with one of the Group’s members. The promissory notes incur interest of 0.28% and matured in 2016. The Group is in the process of extending the maturity date of the agreements. The borrowing agreements include warrants to purchase membership interests of the Group at an exercise price of $1.00 per unit, or to exercise the warrants on a net cash basis where the number of units issued is determined by the terms of the contractual agreement. The warrants expired unexercised during the nine months ended September 30, 2019.

 

The
outstanding principal balance on the promissory notes amounted to $450,000 as at September 30, 2019, December 31, 2018,
December 31, 2017 and January 1, 2017 and the accrued interest amounted to $6,561, $5,619, $4,359 and $3,099 at September 30,
2019, December 31, 2018, December 31, 2017 and January 1, 2017, respectively. Interest expense on the convertible promissory
notes totaled $954, $1,273 and $1,269 for the nine months ended September 30, 2019 and the years ended December 31, 2018 and
2017, respectively.

 

Related party expenses

 

The Group recognized expenses of $NIL, $NIL and $83,337 during the nine months ended September 30, 2019, and the years ended December 31, 2018 and 2017, respectively, for consulting fees performed by shareholders of the Company.

 

Other related party transactions

 

During 2017, the Group received management consulting services totaling $21,000 from a company owned by one of the Group’s members.

 

13.         COMMITMENTS AND CONTINGENCIES Lease commitments

 

In March 2017, the Group entered into an operating lease agreement for office space in Reno, Nevada with monthly rental payments of $610 through February 2022.

 

Legal proceedings

 

From time to time, the Group may be subject to certain routine legal proceedings, as well as demands, and claims that arise in the normal course of its business. The Group believes that the ultimate amount of liability, if any, for any pending claims of any type (either alone or combined) will not materially affect its financial position, results of operations or liquidity.

 

14.         TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS

 

As stated in Statement of Compliance (Note 2(a)), these are the Group’s first financial statements prepared in accordance with IFRS. IFRS 1 requires the presentation of comparative information as at the January 1, 2017 transition date and subsequent comparative years, as well as the consistent and retrospective application of IFRS accounting policies.

 

21

     

    - I-1-49 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Notes to Combined Financial Statements 

(Expressed in United States Dollars)

Nine Month Period Ended September 30, 2019 

and Years Ended December 31, 2018 and 2017 

 

14.         TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (continued)

 

The policies set out in Note 3, Significant Accounting Policies, have been applied in preparing the financial statements for the nine month period ended September 30, 2019, the year ended December 31, 2018, the comparative information presented in these financial statements for the year ended December 31, 2017 and the opening IFRS statement of financial position at January 1, 2017.

 

The Group has followed the recommendations in IFRS 1 First-time adoption of IFRS, in preparing its transitional statements. IFRS 1 provides specific one-time choices and mandates specific one-time exceptions with respect to first-time adoption of IFRS.

 

Choices available at first-time adoption

 

Share-based payment

 

IFRS 1 does not require first-time adopters to apply IFRS 2 Share-based Payment to equity instruments that were granted on or before November 7, 2002, or equity instruments that were granted subsequent to November 7, 2002 and vested before the date of transition to IFRS. The Group has elected to apply this exemption to awards that vested prior to January 1, 2017.

 

Exceptions that are mandated by IFRS 1

 

Estimates

 

IFRS 1 prohibits use of hindsight to create or revise previous estimates. The estimates previously made by the Group under accounting principles generally accepted in the United States of America (“US GAAP”) were not revised for application of IFRS except where necessary to reflect any differences in accounting policies.

 

Reconciliation of equity, net income and comprehensive income as reported under US GAAP to IFRS

 

Reconciliations have not been prepared as the Group did not present financial statements for the previous period in accordance with the same basis of presentation under US GAAP.

 

15.          FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

 

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the inputs to estimate the fair value are observable:

 

•      Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

 

•      Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and

 

•      Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

22

     

    - I-1-50 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Notes to Combined Financial Statements 

(Expressed in United States Dollars)

Nine Month Period Ended September 30, 2019 

and Years Ended December 31, 2018 and 2017

 

15.          FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

 

The inputs are considered as observable if they are developed using market data, such as publicly available information about actual events or transactions, and that reflect the assumption that market participants would use when pricing the assets or liability.

 

		 

	As
at September 30, 2019

	 

	 	 

	Fair
value measurements using:

	 

	 

	 	 

	Liability

	 

	Level
1

	 

	 

	Level
2

	 

	 

	Level
3

	 

	 

	Assets
at fair value

	 

	Convertible
promissory notes

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	650,000

	 

	 

	 

	650,000

	 

	Warrant
liability

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	-

	 

  

		 

	As
at December 31, 2018

	 

	 	 

	Fair
value measurements using:

	 

	 

	 	 

	Liability

	 

	Level
1

	 

	 

	Level
2

	 

	 

	Level
3

	 

	 

	Assets
at fair value

	 

	Convertible
promissory notes

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	650,000

	 

	 

	 

	650,000

	 

	Warrant
liability

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	11,612

	 

	 

	 

	11,612

	 

 

		 

	As
at December 31, 2017

	 

	 	 

	Fair
value measurements using:

	 

	 

	 	 

	Liability

	 

	Level
1

	 

	 

	Level
2

	 

	 

	Level
3

	 

	 

	Assets
at fair value

	 

	Convertible
promissory notes

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	650,000

	 

	 

	 

	650,000

	 

	Warrant
liability

	 

	 

	-

	 

	 

	 

	-

	 

	 

	 

	356,473

	 

	 

	 

	356,473

	 

 

		 	As at January 1, 2017	 
	 	 	Fair value measurements using:	 	 	 	 
	Liability	 	Level 1	 	 	Level 2	 	 	Level 3	 	 	Assets at fair value	 
	Convertible promissory notes	 	 	-	 	 	 	-	 	 	 	450,000	 	 	 	450,000	 
	Warrant liability	 	 	-	 	 	 	-	 	 	 	831,531	 	 	 	831,531	 

 

There were no transfers between levels during
the nine months ended September 30, 2019 or the years ended December 31, 2018 or 2017.

 

Risks

 

The Group has exposure to credit risk, liquidity risk and interest rate risk. The Group’s board of directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Audit Committee of the board of directors is responsible for reviewing the Group’s risk management policies.

 

(a)   Credit risk

 

Credit risk is the risk of financial loss to the Group if a counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s cash. The carrying amount of these financial assets represents the maximum credit exposure. The Group follows an investment policy to mitigate against the deterioration of principal and to enhance the Group’s ability to meet its liquidity needs.

 

23

     

    - I-1-51 - 

    

 

Savant Addiction Medicine, LLC and Carve-out Financial Statements of Savant HWP, Inc.

Notes to Combined Financial Statements 

(Expressed in United States Dollars)

Nine Month Period Ended September 30, 2019 

and Years Ended December 31, 2018 and 2017

 

15.         FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

 

Risks (continued)

 

(b)   Liquidity risk

 

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group is a development stage company and is reliant on external fundraising to support its operations. Once funds have been raised, the Group manages its liquidity risk by investing in cash and short-term instruments to provide regular cash flow for current operations. It also manages liquidity risk by continuously monitoring actual and projected cash flows. The board of directors reviews and approves the Group’s operating and capital budgets, as well as any material transactions not in the ordinary course of business.

 

(c)   Interest rate risk

 

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group holds its cash in bank accounts that pay no interest. The Group manages its interest rate risk by holding highly liquid short-term instruments and by holding its investments to maturity, where possible. The Group earned no interest income for the period ended September 30, 2019 or the two years ended December 31, 2018 and 2017. Therefore, a change in the average interest rate would have no impact on finance income. The convertible promissory notes and the related party notes payable all pay a fixed rate of interest and therefore a change in the average interest rate would have no impact on finance expense for the period ended September 30, 2019 or the two years ended December 31, 2018 and 2017.

 

24

     

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SCHEDULE 2 TO APPENDIX I – MANAGEMENT DISCUSSION AND ANALYSIS

 

(begins on following page)

  

     

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MIND MEDICINE, INC.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

FOR
THE PERIOD FROM MAY 30, 2019, DATE OF INCORPORATION, TO SEPTEMBER 30, 2019

 

Dated: December 19, 2019

 

http://mindmed.co

     

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MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

ABOUT THIS MANAGEMENT’S DISCUSSION AND ANALYSIS

 

All references in this management’s discussion and analysis, or MD&A to “the Company”, “MindMed”, “we”, “us”, or “our” refer to Mind Medicine, Inc., unless otherwise indicated or the context requires otherwise. The following MD&A is prepared as of December 19, 2019 for Mind Medicine, Inc. for the period from May 30, 2019, date of incorporation, to September 30, 2019, and should be read in conjunction with the audited financial statements for the period from May 30, 2019, date of incorporation, to September 30, 2019, which have been prepared by management in accordance with International Financial Reporting Standards, or IFRS as issued by the International Accounting Standards Board, or IASB. Our IFRS accounting policies are set out in note 3 of the audited financial statements for the period from May 30, 2019, date of incorporation, to September 30, 2019. All amounts are in United States dollars, unless otherwise indicated. References to “CAD$” are to Canadian dollars.

 

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

 

This MD&A contains forward-looking statements within the meaning of applicable securities laws. All statements contained herein that are not clearly historical in nature are forward-looking, and the words “anticipate”, “believe”, “expect”, “estimate”, “may”, “will”, “could”, “leading”, “intend”, “contemplate”, “shall” and similar expressions are generally intended to identify forward-looking statements. Forward-looking statements in this MD&A include, but are not limited to, statements with respect to:

 

	
•

	
our expected future loss and accumulated deficit levels;

	
•

	
our projected financial position and estimated cash burn rate;

	
•

	
our requirements for, and the ability to obtain, future funding on favorable terms or at all;

	
•

	
our projections for the 18-MC development plans and progress of each of our products and technologies, particularly with respect to the timely and successful completion of studies and trials and availability of results from such studies and trials;

	
•

	
our expectations about our products’ safety and efficacy;

	
•

	
our expectations regarding our ability to arrange for and scale up the manufacturing of our products and technologies;

		•	our expectations regarding the progress, and the successful
and timely completion, of the various stages of the regulatory approval process;

		•	our expectations about the timing of achieving milestones
and the cost of our development programs;

		•	our plans to market, sell and distribute our products and
technologies;

		•	our expectations regarding the acceptance of our products
and technologies by the market;

		•	our ability to retain and access appropriate staff, management
and expert advisers;

		•	our expectations about whether various clinical and regulatory
milestones will be achieved;

		•	our ability to secure strategic partnerships with larger
pharmaceutical and biotechnology companies;

		•	our strategy to acquire and develop new products and technologies
and to enhance the safety and efficacy of existing products and technologies;

		•	our expectations with respect to existing and future corporate
alliances and licensing transactions with third parties, and the receipt and timing of any payments to be made by us or to us
in respect of such arrangements; and

		•	our strategy with respect to the protection of our intellectual
property.

 

     

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MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

All
forward-looking statements reflect our beliefs and assumptions based on information available at the time the assumption was
made. These forward-looking statements are not based on historical facts but rather on management’s expectations
regarding future activities, results of operations, performance, future capital and other expenditures (including the amount,
nature and sources of funding thereof), competitive advantages, business prospects and opportunities. By its nature,
forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, known
and unknown, that contribute to the possibility that the predictions, forecasts, projections or other forward-looking
statements will not occur. In evaluating forward-looking statements, readers should specifically consider various factors,
including the risks outlined under the heading “Risk Factors” in this MD&A. Some of these risks and
assumptions include, among others:

 

		•	substantial fluctuation of losses from quarter to quarter
and year to year due to numerous external risk factors, and anticipation that we will continue to incur significant losses in
the future;

		•	uncertainty as to our ability to raise additional funding
to support operations;

		•	our ability to generate product revenue to maintain our
operations without additional funding;

		•	the risks associated with the development of our product
candidates which are at early stages of development;

		•	positive results from preclinical and early clinical research
are not necessarily predictive of the results of later-stage clinical trials;

		•	reliance on third parties to plan, conduct and monitor
our preclinical studies and clinical trials;

		•	our product candidates may fail to demonstrate safety and
efficacy to the satisfaction of regulatory authorities or may not otherwise produce positive results;

		•	risks related to filing Investigational New Drug applications,
or INDs, to commence clinical trials and to continue clinical trials if approved;

		•	the risks of delays and inability to complete clinical
trials due to difficulties enrolling patients;

		•	competition from other biotechnology and pharmaceutical
companies;

		•	our reliance on the capabilities and experience of our
key executives and scientists and the resulting loss of any of these individuals;

		•	our ability to fully realize the benefits of acquisitions;

		•	our ability to adequately protect our intellectual property
and trade secrets;

		•	our ability to source and maintain licenses from third-party
owners; and

		•	the risk of patent-related litigation,

 

all as further and more fully described under the heading “Risk Factors” in this MD&A.

 

Although the forward-looking statements contained in this MD&A are based upon what our management believes to be reasonable assumptions, we cannot assure readers that actual results will be consistent with these forward-looking statements. Any forward-looking statements represent our estimates only as of the date of this MD&A and should not be relied upon as representing our estimates as of any subsequent date. We undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events, except as may be required by securities legislation.

 

BUSINESS

 

Overview

 

We are a clinical stage company developing innovative therapies for the treatment of opioid and other addictions as well as post-traumatic stress disorder and ADHD.

 

MindMed’s mission is to discover, develop and deploy psychedelic inspired medicines to alleviate suffering and improve health. In furtherance of our mission, MindMed is assembling a compelling drug development pipeline of psychedelic inspired medicines planning or undertaking human clinical trials under the supervision and guidance of the US Food and Drug Administration (FDA) and ex-US regulatory authorities. MindMed plans to grow its pipeline of psychedelic inspired medicines through its internal proprietary discovery program, acquisitions, joint ventures and collaborative development agreements.

 

MindMed is developing a transformational treatment for opioid addiction to address the growing U.S. opioid crisis. MindMed holds 100% of the right, title and assets connected with the drug development project for 18-MC (the “18- MC Program”), a synthetic congener of the naturally-occurring psychedelic compound ibogaine. Ibogaine is a Schedule 1 psychedelic and psychoactive substance that is extracted from the West Africa iboga shrub. Historically, ibogaine has been used to treat opioid and other forms of substance addiction. While ibogaine is a mild stimulant in small doses, in larger doses it induces a profound psychedelic state. Inspired by ibogaine’s apparent medicinal properties to treat addiction, MindMed’s scientific co-founder, Stanley Glick, PhD, MD, invented synthetic molecules that are related to ibogaine including 18-MC. 18-MC is designed to be non-hallucinogenic while retaining anti- addictive properties.

 

     

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MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

The 18-MC program previously received US$6.8 million in grant support from the NIDA for the study of 18-MC as an anti-addictive treatment. Following successful first-in-human studies, MindMed is currently preparing 18-MC for clinical trials for the treatment of opioid addiction, continuing clinical development in support of studies in opioid addicted patients and in other addictions, including nicotine dependence.

 

MindMed will continue to adapt and improve its strategy in the future as it continues to learn, but MindMed’s objective will not change. Developing medicines that treat the cause of the brain disease that is addiction - dopamine dysregulation in the reward/pleasure centers of the midbrain - rather than merely substituting one addictive substance for another less harmful one, will transform the field of addiction medicine by alleviating the human suffering currently experienced by millions of addicts, their families and friends. Such medicines will benefit all society by disrupting the enormous economic loss in the United States and elsewhere due to this ubiquitous disease.

 

Industry Information & Market Trends

 

Addictions and Substance Abuse

 

Substance use disorders (“SUDs”), more commonly known as addictions, comprise one of the largest unmet medical needs worldwide. The widespread use and abuse of pain medications, such as OxyContin®, is a very high-profile example of addiction. Addictions to opioid-based pain medications often begin from proper post-surgical use but progress to addiction. In fact, the per capita rate of opioid use in the U.S. has quadrupled since 1999, an increase that far outstrips the increase in reported pain incidence. Alcohol abuse is another – there are more than 17 million heavy drinkers in the U.S. and 140 million worldwide by World Health Organization estimates.

 

In November 2016, the U.S. Surgeon General issued “Facing Addiction in America – The Surgeon General’s Report on Alcohol, Drugs, and Health”, which is their first report on addiction since their report on smoking in 1964. In this report, the U.S. Secretary of Health and Human Services, Sylvia Mathews Burwell, noted:

 

All across the United States, individuals, families, communities, and health care systems are struggling to cope with substance use, misuse, and substance use disorders. Substance misuse and substance use disorders have devastating effects, disrupt the future plans of too many young people, and all too often, end lives prematurely and tragically. Substance misuse is a major public health challenge and a priority for our nation to address.

 

For 2015, the Substance Abuse and Mental Health Services Administration (“SAMHSA”), estimated that over 21.7 million Americans 12 years and older had a chemical substance dependence or abuse problem other than tobacco needing treatment. The total social and healthcare cost to society of dealing with alcohol and illegal drug abuse is estimated to exceed $193 billion annually. Fewer than one-in-ten patients receive treatment for their addiction in the U.S., at a cost of one in every four deaths. The combined annual cost of substance use disorders in the U.S. is estimated to exceed $600 billion – a staggering economic impact.

 

     

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MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

 

Even more staggering than these numbers, in 2018 the White House Council of Economic Advisors calculated the negative impact of the US opioid crisis alone at more than $500 billion in annual costs to the economy.

 

The overall potential U.S. market for safe, effective, and convenient drug therapy in addiction is extensive and growing. The vast majority of global and U.S. sales of medicines for addiction are concentrated in smoking cessation (≈$2.5 billion), opioids (≈$1.4 billion) and alcohol (≈$100 million). This is a dynamic market globally, with approximately 10% compound annual growth over the last five years. The overall market for drug therapy in addiction is currently undergoing significant remodeling due to various trends, including:

 

		•	Nicotine.
                                         The introduction and prevalence of e-cigarettes has increased nicotine use. Between
                                         2011 and 2015, e-cigarette use rose 900% among high school students. These products are
                                         now the most commonly used form of nicotine among youth in the United States.10 The Surgeon
                                         General of the U.S. has concluded that e-cigarette use among youths and young adults is
                                         of public health concern; exposure to nicotine during adolescence can cause addiction
                                         and can harm the developing adolescent brain.11

 

		•	Opioids.
                                         Generic competition for Suboxone, a treatment for opiate dependence, contributed
                                         to a decline in the Suboxone market from $1.4 billion in 2012 to $1.26 billion in 2013.

 

		•	Alcohol.
                                         Considering that in 2012 there were an estimated 60 million binge drinkers and another
                                         17 million heavy drinkers in the U.S. alone, market revenues from medicines for the treatment
                                         of alcohol related disorders are thus far surprisingly modest, with an annual global
                                         market of around$100 million in 2013. Efforts to understand these numbers have produced
                                         as many reasons as there are studies, including the acceptance of alcohol use by society,
                                         the ineffectiveness of current medications, and the wide range of recovery programs that
                                         do not use medications. It is also significant, however, that 31% of heavy alcohol uses
                                         are illicit drug users as well.

 

		•	Cocaine
                                         or methamphetamine. There are no approved pharmaceutical treatments for either cocaine
                                         or methamphetamine addiction. A recent analysis by NIDA estimates the market size for
                                         a first-in- class treatment for cocaine addiction at $1.2 billion in annual revenue.
                                         In the U.S., NIDA estimates approximately 5.3 million people use cocaine annually and
                                         1.6 million are regular uses of cocaine.

 

 

 

10 U.S.
Department of Health and Human Services. E-cigarette use among youth and young adults: a report of the Surgeon
General. Atlanta, GA: U.S. Department of Health and Human Services, CDC, National Center for Chronic Disease Prevention and
Health Promotion, Office on Smoking and Health; 2016.
https://e-cigarettes.surgeongeneral.gov/documents/2016_SGR_Full_Report_non-508.pdfpdf icon

 

11
Cullen KA, Ambrose BK, Gentzke AS, Apelberg BJ, Jamal A, King BA. Notes from the Field: Use of Electronic Cigarettes and Any Tobacco
Product Among Middle and High School Students — United States, 2011–2018. MMWR Morb Mortal Wkly Rep 2018;67:1276–1277.

     

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MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

While addictions are often viewed as separate medical conditions, segregated by the class of substance (alcohol, opiates, stimulants, tobacco, and the like), all addictions are driven by a single and central disease process, the dysregulation of dopamine, a potent neurotransmitter, in the brain’s reward/pleasure center (Path 3, below) originating in the midbrain.

 

 

Addiction is a Brain Disease

 

Current pharmacological approaches to treatment fall into two classes of therapy, substitution and aversion, with the former constituting the majority of pharmaceutical-based treatments. Substitution therapies for tobacco cessation include nicotine replacement, and the use of bupropion and varenicline – compounds that produce pleasurable sensations and gratification similar to tobacco but with fewer health risks. Substitution therapies for opiate addiction include Suboxone and methadone, which do provide a viable substitute for the addictive cravings of opiates but are themselves addictive in nature and have proven difficult for some patients to discontinue. An example of aversion therapy is the use of disulfiram which causes unpleasant side effects with the consumption of alcohol.

 

Unlike 18-MC, these medications do not target the dysregulation of dopamine in the midbrain, the primary cause of the brain disease that is addiction and the driving force behind drug craving. The sensation of craving is regulated by dopamine release and reuptake by neurons originating in the midbrain’s reward/pleasure centers. Craving is triggered by many factors, but environmental cues are particularly powerful. Seeing a pack of cigarettes can trigger irresistible craving for the nicotine addict. The sight and sound of beer being opened and poured can do the same for the alcoholic patient. Clearly, there is a compelling need for medicines that alleviate substance craving on a long-term basis. No currently approved drug significantly affects drug craving associated with any type of addiction. An effective drug would be first-in-class and capture a significant portion of what is currently a multi-billion-dollar market.

 

Nicotine Addiction and Smoking Cessation

 

There are more than 40 million daily tobacco users in the United States and nearly 10 times that number in China. It has been estimated that more than 100 million people worldwide lost their lives due to tobacco-related illness in the last century. The projected loss of life for the 21st century is a staggering one billion people globally. More than 42 million Americans use tobacco products with two-thirds having attempted to quit without success. In 2014, the Centers for Disease Control and Prevention (“CDC”) estimated that smokers cost the United States of America $170 billion a year in direct health care costs and an additional $156 billion a year in lost productivity.

 

Current smoking cessation products approved by the U.S. Food and Drug Administration (the “FDA”), are substitution approaches that do not treat the cause of the disease, replacing tobacco with substances of lower health liability, such as nicotine products and nicotinic receptor agonists, in the hope that patients will eventually quit. The best of these products has a one-year abstinence rate of only about 20% as compared to 10% for placebo. Even with this performance, these nicotine substitute products constitute a well-established global market exceeding US$3 billion annually.

 

     

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MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

Limitation of Available Treatment Options for Smoking Cessation

 

Current approved smoking cessation treatments segment into several approaches, nicotine replacement in the form of skin patches, chewing gum, etc., neurotransmitter reuptake inhibitors in the form of bupropion (Zyban® - GlaxoSmithKline), a relatively weak inhibitor of the neuronal reuptake of norepinephrine and dopamine, and nicotinic receptor agonists in the form of varenicline (Chantix®/Champix® - Pfizer), an α4β2 nicotinic cholinergic receptor partial agonist. At best, these therapies are about 20% effective at 12-months post treatment compared to placebo.

 

Even with no more than one in five patients benefiting from treatment with Chantix at 12 months, Pfizer reported 37% sales growth in the U.S. for the third quarter of 2016 compared to the same period in 2015 ($142 million vs. $103 million respectively). With the removal of the boxed warning from the Chantix label in December 2016, Pfizer has aggressively promoted Chantix. Prior to the FDA’s boxed warning for suicidal ideation in 2009, Chantix/Champix annual worldwide sales reached $848 million. In 2009, Pfizer reported worldwide sales of $700 million. The majority of patients who try Chantix are not successful in curbing their nicotine addiction for reasons ranging from ineffectiveness to severe side effects. Some patients have reported smoking even more while on Chantix. While the boxed warning has been removed from the label, patients are still warned of the potential for serious psychiatric side effects. Chantix will likely face generic competition as well with expiration of patent coverage in 2020 and 2022.

 

Medications for the treatment of drug addiction other than nicotine are either limited (treatments for opioids, nicotine, alcohol) or are not available (treatments for stimulants like cocaine or methamphetamine). See Table C-1, below.

 

MindMed’s novel approach to addiction targets the dopamine “reward” pathway in the brain that drives pleasure- seeking behaviors associated with addiction and obesity. Targeting the brain’s central reward pathway enables us to develop drug candidates potentially effective against all forms of smoking, substance abuse, and other negative behaviors reinforced by the dopamine reward pathway. The results of MindMed’s work with 18-MC suggest that nicotinic α3β4 receptor antagonists, by interfering with neuronal activity in the dorsal diencephalic conduction system, represent a truly novel class of anti-addictive agents.

 

     

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MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

Table C-1. Pharmacological Therapies Used to Treat Alcohol and Opioid Use Disorders

 

	
Medication

	
 

	
Manufacturer

	
 

	
Use

	
 

	
Application

	
 

	
Buprenorphine- Naloxone

	
 

	
-BIODELIVERY SCIENCES INTERNATIONAL, INC.

-AKORN, INC.

-AMNEAL PHARMACEUTICALS LLC

-AVKARE, INC.

-MALLINCKRODT INC.

-TEVA PHARMACEUTICALS USA

-WEST-WARD PHARMACEUTICAL CORP.

-INDIVIOR, INC.

(Suboxone☐)

-OREXO US, INC.

(Zubsolv☐)

	
 

	
Opioid use disorder

	
 

	
Used for detoxification or maintenance of abstinence for individuals aged 16 or older. Physicians who wish to prescribe buprenorphine, must obtain a waiver from SAMHSA and be issued an additional registration number by the U.S. Drug Enforcement Administration.

	
 

	
Buprenorphine- Hydrochloride

	
 

	
-ACTAVIS (sublingual)

-RECKITT BENCKISER HEALTHCARE (UK) LTD.

(Subutex☐)

	
 

	
Opioid use disorder

	
 

	
This formulation is indicated for treatment of opioid dependence and is preferred for induction. However, it is considered the preferred formulation for pregnant patients, patients with hepatic impairment, and patients with sensitivity to naloxone. It is also used for initiating treatment in patients transferring from methadone, in preference to products containing naloxone, because of the risk of precipitating withdrawal in these patients. For those already stable on low to moderate dose buprenorphine. The administration of the implant dosage form requires specific

training and must be surgically inserted and removed.

	
 

	
Methadone

	
 

	
-ROXANE LABORATORIES, INC.

-MALLINCKRODT

-AUROLIFE PHARMA LLC

-COREPHARMA

-SANDOZ

-THE PHARMANETWORK

	
 

	
Opioid use disorder

	
 

	
Methadone used for the treatment of opioid addiction in detoxification or maintenance program is dispensed only by OTPs certified by SAMHSA and approved by the designated state authority. Under federal regulations it can be used in persons under age 18 at the discretion of an OTP physician.

	
 

	
Naltrexone

	
 

	
-ALKERMES

-DURAMED PHARMACEUTICALS

	
 

	
Opioid use disorder; Alcohol

use disorder

	
 

	
Provided by prescription; naltrexone blocks opioid receptors, reduces cravings, and diminishes the rewarding effects of alcohol and opioids. Extended-release injectable naltrexone is recommended to prevent relapse to opioids or alcohol. The

prescriber need not be a physician but must be licensed and authorized to prescribe by the state.

	
 

	
Acamprosate

	
 

	
-MERCK
SANTÉ S.A.S.

-TEVA PHARMACEUTICALS

USA

	
 

	
Alcohol use disorder

	
 

	
Provided by prescription; acamprosate is used in the maintenance of alcohol abstinence. The prescriber need not be a physician but must be licensed and authorized to

prescribe by the state.

	
 

	
Disulfiram

	
 

	
-PLIVA KRAKOW PHARMACEUTICAL CORPORATION S.A., KRAKOW, POLAND for DURAMED

PHARMACEUTICALS, INC.

	
 

	
Alcohol use disorder

	
 

	
When taken in combination with alcohol, disulfiram causes severe physical reactions, including nausea, flushing, and heart palpitations. The knowledge that such a reaction is likely if alcohol is consumed acts as a deterrent to drinking.

	
 

     

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MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

Rise in Youth E-cigarette Use

 

Between 2011 and
2015, e-cigarette use rose 900% among high school students. These products are now the most commonly used form of tobacco among
youth in the United States.12 Sylvia Burwell, Secretary, U.S. Department of Health and Human Services said, “as
cigarette smoking among those under 18 has fallen, the use of other nicotine products, including e-cigarettes, has taken a drastic
leap. All of this is creating a new generation of Americans who are at risk of nicotine addiction.”13 The Surgeon
General has concluded that e-cigarette use among youths and young adults is of public health concern; exposure to nicotine during
adolescence can cause addiction and can harm the developing adolescent brain.14,15 E-cigarettes are now the most commonly
used tobacco product among youth in the United States.16

 

From 2017 to 2018,
current e-cigarette use—defined by use on at least one day in the past 30 days—by high school students increased 78%,
from 11.7% to 20.8%, accounting for 3.05 million American high school students using e-cigarettes in 2018. 17 One in
20 middle school kids now use e-cigarettes; an increase by 48%.18

 

Intellectual Property

 

Prior to the acquisition of the 18-MC program by MindMed, Savant Addiction Medicine, LLC, maintained intellectual property as trade secrets. Following the acquisition, MindMed filed a U.S. Provisional Patent Application entitled 18- MC FOR TREATMENT OF SUBSTANCE USE DISORDERS (No.: 62/908,754, filed October 1, 2019) encompassing the intellectual property previously held as trade secrets. This application covers extensive data on 18- MC in humans, including surprising results relating to absorption and metabolism in humans and human pharmacokinetic activity. 

 

As MindMed generates new data it will continue to expand patent coverage throughout the 18-MC and other development programs.

 

Product Information and Distribution

 

MindMed does not currently market or distribute any products. Product information will be available following regulatory approval of its products.

 

Distribution Methods & Principal Markets

 

MindMed does not currently have nor does it plan to acquire the infrastructure or capability internally to manufacture its clinical drug supplies for use in MindMed’s clinical trials, and it lacks the resources and the capability to manufacture any of its drug candidates on a clinical or commercial scale. Instead, MindMed relies on contract manufacturers for the production of 18-MC and its other drug candidates. The facilities used by MindMed’s contract manufacturers must be approved by the applicable regulatory authorities, including the FDA, pursuant to inspections that will be conducted after an NDA is submitted to the FDA or the foreign equivalent thereof. Other than through Quality Agreements with its vendors, MindMed does not control the manufacturing process of 18-MC and is dependent on its contract manufacturing partners for compliance with the FDA’s requirements for manufacture of both the active drug substances and finished drug products.

 

 

 

12 U.S. Department of Health and Human Services. E-cigarette use among youth and young adults: a report of the Surgeon General. Atlanta, GA:

U.S. Department of Health and Human Services, CDC, National Center for Chronic Disease Prevention and Health Promotion, Office on Smoking and Health; 2016. https://e-cigarettes.surgeongeneral.gov/documents/2016_SGR_Full_Report_non-508.pdfpdf icon

13 Ibid.

14 Ibid.

15 Cullen KA, Ambrose BK, Gentzke AS, Apelberg BJ, Jamal A, King BA. Notes from the Field: Use of Electronic Cigarettes and Any Tobacco Product Among Middle and High School Students — United States, 2011–2018. MMWR Morb Mortal Wkly Rep 2018;67:1276–1277.

16 Supra note 3.

17 Supra note 6.

18 Ibid.

 

     

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MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

Future Research and Development

 

MindMed’s mission to discover, develop and deploy psychedelic inspired medicines to alleviate suffering and improve health encompasses the research and development of new and improved psychedelic inspired medicines ranging from proprietary psychedelic compounds to non-psychedelic analogs with medicinal properties. While our clinical development programs are MindMed’s first priority, our proprietary research and development programs are essential to advancing our product portfolio position as the leader in psychedelic inspired medicines. For the time being, MindMed maintains intellectual property generated by its R&D programs as trade secrets. We anticipate that as these programs mature patent applications will be filed and more details about these programs will be available at that time.

 

Operations

 

While MindMed’s compound, 18-MC, may have broad application across nearly all addictions, MindMed has embarked on a clinical program that addresses each category of substance abuse separately. MindMed has elected to focus its efforts on opioid use disorder (OUD) and nicotine dependence, the categories MindMed believes to be most compelling for the following reasons:

 

		•	the opioid crisis in the United States is now a national
emergency;

		•	the regulatory path to approval is well established by
current approved drugs;

		•	current treatments are marginally effective with only approximately
one in five patients continuing to show benefit 12-months’ post treatment;

		•	the unmet need is tremendous with more than 150 opioid
overdose deaths per day in the U.S. and more than 30 million nicotine users who have unsuccessfully attempted to quit smoking;
and

		•	MindMed can expect an efficacy signal in humans within
months of initiating proof-of-concept and proof-of-principle studies; obtaining signals with other addictive substances would
likely take longer.

 

MindMed designed its clinical studies in opiate withdrawal in consultation with addiction specialists at, head of New York University, including Drs. John Rotrosen, Steve Ross, Ken Alper and Michael Bogenschutz and in nicotine dependence in consultation with Dr. Jed Rose of Duke University, one of the leading authorities on smoking cessation in the world. If MindMed obtains an efficacy signal in humans in opioid and nicotine addiction and the drug continues to be well tolerated by patients as demonstrated in the Phase 1 clinical trial, MindMed will have an opportunity to utilize its extensive partnering expertise and seek a strong development and commercialization partner to maximize shareholder value by providing:

 

		•	non-dilutive capital necessary to expand and/or complete
clinical development and regulatory approval;

		•	regulatory and commercialization expertise to achieve and
expand a strong product label;

		•	development expertise to complete product development as
efficiently as possible; and

		•	sales and marketing resources for a successful market launch
following regulatory approval.

 

Specifically, MindMed’s plans call for the initiation of additional normal, healthy volunteer studies in support of its OUD and nicotine dependence studies in the second quarter of 2020 initially employing a multiple ascending dose (“MAD”) study design before proceeding to so called drug-drug interaction studies ahead of Phase 1b/2a studies in patients. Once the dose-ranging and drug-drug interaction data are available, MindMed plans to conduct

 

While a target date for a U.S. NDA is uncertain, filing could occur as early as 2022.

 

	
18-MC

	
 

	
Ex-US IND

	
 

	
 

	
US IND

	
 

	
 

	
First-in- 

Human

	
 

	
 

	
First-in 

Patients

	
 

	
 

	
Earliest 

NDA*

	
 

	
Opioids

	
 

	
 

	
2013

	
 

	
 

	
 

	
2014

	
 

	
 

	
 

	
2015

	
 

	
 

	
 

	
2020

	
 

	
 

	
 

	
2022

	
 

	
Nicotine

	
 

	
 

	
2013

	
 

	
 

	
 

	
2014

	
 

	
 

	
 

	
2015

	
 

	
 

	
 

	
2020

	
 

	
 

	
 

	
2023

	
 

 

*U.S. or foreign equivalent

     

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MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

The opioid
crisis in the United States is now a national health emergency and grown to near epidemic proportions in parts of the U.S.
There is currently nearly daily news flow on the problems associated with opioid addiction resulting from heroin use and the
abuse of prescription drugs such as OxyContin®, Vicodin®, Percocet®, and Fentanyl®. The states with the
highest drug overdose death rates include Kentucky, Massachusetts, New Hampshire, New Mexico, Oklahoma, Ohio, Pennsylvania,
Tennessee, Utah, West Virginia, and Wyoming - all with death rates between 19 and 35.5 per 100,000 population. To give this
context, according to the CDC, in 2011 the death rate from accidents, including traffic-related, was 42.7 per 100,000
population in the United States. Today, more than 150 people die from an opiate overdose every day in the United States.

 

MindMed’s clinical program in opioids is already in the planning stages with world renown opinion leaders in addiction medicine at New York University. This program will focus on improving medication-assisted treatments for both opioid withdrawal and chronic use.

 

Government Regulation

 

The FDA and other federal, state, local and foreign regulatory agencies impose substantial requirements upon the clinical development, approval, labeling, manufacture, marketing and distribution of drug products. These agencies regulate, among other things, research and development activities and the testing, approval, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, advertising and promotion of any product candidates or commercial products. The regulatory approval process is generally lengthy and expensive, with no guarantee of a positive result. Moreover, failure to comply with applicable FDA or other requirements may result in civil or criminal penalties, recall or seizure of products, injunctive relief including partial or total suspension of production, or withdrawal of a product from the market.

 

Various regulatory authorities regulate, among other things, the research, manufacture, promotion and distribution of drugs in the United States under the Federal Food, Drug, and Cosmetic Act (“FFDCA”) and other statutes and implementing regulations. The process required by the FDA before prescription drug product candidates may be marketed in the United States generally involves the following:

 

		•	completion of extensive nonclinical laboratory tests, animal
studies and formulation studies, all performed in accordance with the FDA’s Good Laboratory and/or Manufacturing Practice
regulations;

		•	submission to the FDA of an investigational new drug application
(“IND”), which must become effective before human clinical trials may begin;

		•	for some products, performance of adequate and well-controlled
human clinical trials in accordance with the FDA’s regulations, including Good Clinical Practices, to establish the safety
and efficacy of the product candidate for each proposed indication;

		•	submission to the FDA of a new drug application (“NDA”);
and

		•	FDA review and approval of the NDA prior to any commercial
marketing, sale or shipment of the drug.

 

The testing and approval process requires substantial time, effort and financial resources, and MindMed cannot be certain that any approvals for its product candidates will be granted on a timely basis, if at all.

 

Nonclinical tests include laboratory evaluations of product chemistry, formulation and stability, as well as studies to evaluate toxicity in animals and other animal studies. The results of nonclinical tests, together with manufacturing information and analytical data, are submitted as part of an IND to the FDA. Some nonclinical testing may continue even after an IND is submitted. The IND also includes one or more protocols for the initial clinical trial or trials and an investigator’s brochure. An IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions relating to the proposed clinical trials as outlined in the IND and places the clinical trial on a clinical hold. In such cases, the IND sponsor and the FDA must resolve any outstanding concerns or questions before any clinical trials can begin. Clinical trial holds also may be imposed at any time before or during studies due to safety concerns or non-compliance with regulatory requirements. An independent institutional review board (“IRB”), at each of the clinical centers proposing to conduct the clinical trial must review and approve the plan for any clinical trial before it commences at that center. An IRB considers, among other things, whether the risks to individuals participating in the trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the consent form signed by the trial participants and must monitor the study until completed.

 

     

    - I-2-13 - 

    

MIND MEDICINE,
INC.

Management’s Discussion and Analysis

 

The FDA offers a number of regulatory mechanisms that provide expedited or accelerated approval procedures for selected drugs in the indications on which MindMed is focusing its efforts. These include accelerated approval under Subpart H of the agency’s NDA approval regulations, fast track drug development procedures and priority review.

 

MindMed plans to seek orphan drug designation for indications qualified for such designation. The U.S., E.U. and other jurisdictions may grant orphan drug designation to drugs intended to treat a “rare disease or condition,” which, in the U.S., is generally a disease or condition that affects no more than 200,000 individuals. In the E.U., orphan drug designation can be granted if: the disease is life threatening or chronically debilitating and affects no more than 50 in 100,000 persons in the E.U.; without incentive it is unlikely that the drug would generate sufficient return to justify the necessary investment; and no satisfactory method of treatment for the condition exists or, if it does, the new drug will provide a significant benefit to those affected by the condition. If a product that has an orphan drug designation subsequently receives the first regulatory approval for the indication for which it has such designation, the product is entitled to orphan exclusivity, meaning that the applicable regulatory authority may not approve any other applications to market the same drug for the same indication, except in very limited circumstances, for a period of seven years in the U.S. and 10 years in the E.U. Orphan drug designation does not prevent competitors from developing or marketing different drugs for the same indication or the same drug for different indications. Orphan drug designation must be requested before submitting an NDA. After orphan drug designation is granted, the identity of the therapeutic agent and its potential orphan use are publicly disclosed. Orphan drug designation does not convey an advantage in, or shorten the duration of, the development, review and approval process. However, this designation provides an exemption from marketing and authorization (NDA) fees.

 

REGULATORY STRATEGY

 

18-MC is extraordinary in that it is active in animal models against all forms of substance abuse and certain compulsive behaviors including compulsive eating. The regulatory path to NDA approval for substance abuse disorders in the U.S. is through the FDA. The U.S. IND for 18-MC (IND 118783) was filed February 9, 2014 and became effective July 9, 2014. Once the safety profile of 18-MC is better understood through MindMed’s ex-US studies, U.S. clinical studies under the U.S. IND will be initiated with a significant human safety database already in place.

 

LEGAL PROCEEDINGS

 

To our knowledge, there have not been any legal or arbitration proceedings, including those relating to bankruptcy, receivership or similar proceedings, those involving any third party, and governmental proceedings pending or known to be contemplated, which may have, or have had in the recent past, significant effect on our financial position or profitability.

 

Also, to our knowledge, there have been no material proceedings in which any director, any member of senior management, or any of our affiliates is either a party adverse to us or has a material interest adverse to us.

 

RESULTS OF OPERATIONS

 

For the period from May 30, 2019, date of incorporation, to September 30, 2019

 

Overview

 

Since inception, we have incurred losses while advancing the research and development of our products. Net loss for the period from May 30, 2019, date of incorporation, to September 30, 2019 (hereinafter referred to as the “period ended September 30, 2019) was $1,708,109. The net loss was due primarily to compensation paid to management of $684,159 and legal fees of $393,252.

 

     

    - I-2-14 - 

    

MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

Research and Development

 

Research and development expenses by program for the period ended September 30, 2019 were as follows:

 

	
18-MC program (Note 1)

	
 

	
$

	
451,385

	
 

	
Total

	
 

	
$

	
451,385

	
 

	
Note:

	
 

	
 

	
 

	
 

 

(1)   Research and development expenditures in the above table include all direct and indirect costs for the programs, personnel costs, intellectual property and amortization.

 

During 2019, our resources were focused exclusively on the development of our 18-MC program.

 

Components of research and development expenses for the period ended September 30, 2019 were as follows:

 

	
Research and development expenses, excluding the below items

	
 

	
$

	
22,909

	
 

	
Consulting fees and short-term benefits

	
 

	
 

	
347,624

	
 

	
Clinical research expenses and manufacturing expenses

	
 

	
 

	
80,852

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 $

	
451,385 

	
 

 

General and Administrative

 

Components of general and administrative expenses for the period ended September 30, 2019 were as follows:

 

	
General and administrative expenses, excluding the below items

	
 

	
$

	
226,828

	
 

	
Legal fees

	
 

	
 

	
393,252

	
 

	
Accounting and audit

	
 

	
 

	
153,191

	
 

	
Consulting fees and short-term benefits

	
 

	
 

	
336,535

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
$

	
1,109,806

	
 

 

Finance income and costs and foreign exchange gains and losses

 

Share-based compensation of $9,575 for the period ended September 30, 2019 resulted from a loan made to a director of the Company to purchase shares of the Company. The Loan has been accounted for as an option plan since the Company does not have full recourse to the outstanding loan balance.

 

Finance income for the period ended September 30, 2019 of $2,261 consisted of interest income on a money market account.

 

Finance costs for the period ended September 30, 2019 of $2,104 consisted of interest expense on a loan from a director of the Company.

 

During the period ended September 30, 2019, we recorded a net foreign currency loss of $847. The net foreign currency loss in the current period reflected a weakening of the U.S. dollar versus the Canadian dollar while holding net U.S. dollar denominated assets.

 

     

    - I-2-15 - 

    

MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

LIQUIDITY AND CAPITAL RESOURCES

 

Cash and working capital

 

Since inception, we have financed our operations primarily from sales of equity and from interest income on funds available for investment. Our primary capital needs are for funds to support our scientific research and development activities including staffing, manufacturing, preclinical studies, clinical trials, administrative costs and for working capital.

 

We have experienced operating losses and cash outflows from operations since incorporation, will require ongoing financing in order to continue our research and development activities and we have not earned any revenue or reached successful commercialization of our products. Our future operations are dependent upon our ability to finance our cash requirements which will allow us to continue our research and development activities and the commercialization of our products. There can be no assurance that we will be successful in continuing to finance our operations.

 

In September 2019, we completed a non-brokered private placement financing of common shares. In the offering, we sold 46,993,671 Class C shares at a price of $0.10 per share. The gross proceeds from this offering were $4,699,367.

 

In September 2019, the Company sold 10,000,000 Class D shares, at a price of $0.10 per share yielding gross proceeds of $1,000,000 to two members of the Board of Directors of the Company.

 

Our cash and working capital at September 30, 2019 were $3,093,048 and $4,056,833 respectively. The increase in cash and cash equivalents was due mainly to the $5,616,944 of net financings mentioned above net of the cash used in operations of $794,845. The increase in working capital was due mainly to the net financings of $5,616,944 net of the loss of $1,708,109.

 

Cash flows from operating activities

 

Cash used in operating activities of $794,845 for the period ended September 30, 2019 was due mainly to the net loss of $1,708,109 partially offset by an increase in accounts payable and accrued liabilities of $802,394.

 

Cash flows from financing activities

 

Cash provided by financing activities totaled $5,616,944 for the period ended September 30, 2019. The funds arose from the financing activities in September 2019.

 

Contractual Obligations and Contingencies

 

We enter into research, development and license agreements in the ordinary course of business where we receive research services and rights to proprietary technologies. Milestone and royalty payments that may become due under various agreements are dependent on, among other factors, clinical trials, regulatory approvals and ultimately the successful development of a new drug, the outcome and timing of which is uncertain.

 

We periodically enter into research and license agreements with third parties that include indemnification provisions customary in the industry. These guarantees generally require us to compensate the other party for certain damages and costs incurred as a result of claims arising from research and development activities undertaken by or on our behalf. In some cases, the maximum potential amount of future payments that could be required under these indemnification provisions could be unlimited. These indemnification provisions generally survive termination of the underlying agreement. The nature of the indemnification obligations prevents us from making a reasonable estimate of the maximum potential amount we could be required to pay. Historically, we have not made any indemnification payments under such agreements and no amount has been accrued in our financial statements with respect to these indemnification obligations.

 

     

    - I-2-16 - 

    

MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

Other than as disclosed below, we did not have any contractual obligations relating to long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or other long-term liabilities reflected on our statement of financial position as at September 30, 2019:

 

	 	 	Payment
due by period	 
	Contractual

 Obligations
(1)	 	Total	 	 	Less
than 1 

year	 	 	1 to
3 years	 	 	3 to
5 years	 	 	More
than 5

 years	 
	Purchase Obligations(2)	 	$	127,095	 	 	$	127,095	 	 	$	-	 	 	$	-	 	 	$	-	 
	Operating lease obligations(3)	 	 	18,410	 	 	 	7,460	 	 	 	10,950	 	 	 	-	 	 	 	-	 
	 	 	$	145,505	 	 	$	134,555	 	 	$	10,950	 	 	$	 	 	 	$	 	 

Notes:

 

(1)
Contractual obligations in the above table do not include amounts in accounts payable and accrued liabilities on our
statement of financial position as at September 30, 2019.

 

(2) Purchase
obligations include all non-cancellable contracts, and all cancellable contracts with $5,000 or greater remaining committed
at the period end including agreements related to the conduct of our clinical trials, preclinical studies and manufacturing
activities.

 

(3)
Represents operating lease obligations for office facility.

 

DESCRIPTION OF SHARE CAPITAL

 

The continuity of the number of our issued and outstanding common shares from May 30, 2019 to the date of this MD&A is presented below:

 

	
 

	
 

	
Number of Class A common shares

	
 

	
 

	
Number of Class B common shares(1)

	
 

	
 

	
Number of Class C common shares(2)

	
 

	
 

	
Number of Class D common shares(3)

	
 

	
Balance at May 30, 2019

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
Issued on

acquisition of MC- 18 program

	
 

	
 

	
55,000,000

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
Founders shares issued

	
 

	
 

	
-

	
 

	
 

	
 

	
35,000,000

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
Issued in private placement

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
46,993,671

	
 

	
 

	
 

	
-

	
 

	
Issued in private placement

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
10,000,000

	
 

	
Share-based compensation

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
95,750

	
 

	
Balance at September 30, 2019 and at the date of

this MD&A

	
 

	
 

	
 

55,000,000

	
 

	
 

	
 

	
 

35,000,000

	
 

	
 

	
 

	
 

46,993,671

	
 

	
 

	
 

	
 

10,095,750

	
 

Notes:

 

		(1)	Convertible at a ratio of one Class B share for one Class
A common share after completion of a reverse takeover.

 

		(2)	Convertible at a ratio of one Class C share for one Class
A common share after completion of a reverse takeover.

 

		(3)	Convertible at a ratio of one Class D share for one Class
A common share after completion of a reverse takeover.

 

     

    - I-2-17 - 

    

MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

Share capital issued – for the period ended September 30, 2019

 

In July 2019, 55,000,000 class A common shares were issued for the acquisition of the 18-MC program.

 

In July 2019, 35,000,000 class B common shares were issued to the founders of the Company for gross proceeds of $3,500.

 

In September 2019, the Company completed a non-brokered private placement financing and sold 46,993,671 class C common shares at a price of $0.10 per share yielding gross proceeds of $4,699,367.

 

Also, in September 2019, the Company sold 10,000,000 Class D common shares at a price of $0.10 per share yielding gross proceeds of $1,000,000 to two directors of the Company.

 

Fully Diluted Share Capital

 

The number of issued and outstanding common shares and stock options on a fully converted basis as at September 30, 2019 and at the date of this MD&A was as follows:

 

	
 

	
 

	
Number of Common Share Equivalents

	
 

	
Class A common shares

	
 

	
55,000,000

	
 

	
Class B common shares

	
 

	
35,000,000

	
 

	
Class C common shares

	
 

	
46,993,671

	
 

	
Class D common shares

	
 

	
10,000,000

	
 

	
Class D common shares

	
 

	
95,750

	
 

	
Stock options

	
 

	
-

	
 

	
Total

	
 

	
147,089,421

	
 

 

TREND INFORMATION

 

Historical patterns of expenditures cannot be taken as an indication of future expenditures. The amount and timing of expenditures and therefore liquidity and capital resources vary substantially from period to period depending on the number of research and development programs being undertaken at any one time, the stage of the development programs, the timing of significant expenditures for manufacturing, toxicology and pharmacology studies and clinical trials and the availability of funding from investors and prospective commercial partners.

 

Selected Quarterly Financial Information

 

	
2019

	
 

	
Q3-2019
$

	
 

	
 

	
Q2-2019
$

	
 

	
Revenue

	
 

	
-

	
 

	
 

	
-

	
 

	
Research and development expenses

	
 

	
425,185

	
 

	
 

	
26,200

	
 

	
General and administrative expenses

	
 

	
1,045,236

	
 

	
 

	
64,570

	
 

	
Net loss for the period

	
 

	
(1,617,339

	
)

	
 

	
(90,770

	
)

	
Basic and diluted net loss per share

	
 

	
0.03

	
 

	
 

	
0.00

	
 

	
Cash

	
 

	
3,093,048

	
 

	
 

	
59,282

	
 

	
Total assets

	
 

	
10,222,267

	
 

	
 

	
59,282

	
 

 

Research and development expenses increased throughout 2019 due to the costs of preparing drug substance for clinical trials and the amortization of intangibles related to the acquisition of the 18-MC program. The net loss increased in the third quarter of 2019 due to higher personnel and legal costs. Cash increased in the third quarter due to the private placement financing undertaken in September 2019. Total assets increased in the third quarter of 2019 due to the acquisition of the 18-MC program and the financings in September 2019.

 

     

    - I-2-18 - 

    

MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

OFF-BALANCE SHEET ARRANGEMENTS

 

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

CRITICAL ACCOUNTING ESTIMATES

 

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, revenue and expenses, related disclosures of contingent assets and liabilities and the determination of our ability to continue as a going concern. Actual results could differ materially from these estimates and assumptions. We review our estimates and underlying assumptions on an ongoing basis. Revisions are recognized in the period in which the estimates are revised and may impact future periods.

 

The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements have been set out in note 2 of our audited financial statements for the period ended September 30, 2019.

 

ACCOUNTING POLICIES

 

Our significant accounting policies are set out in note 3 of our audited financial statements for the period ended September 30, 2019. This MD&A should be read in conjunction with the audited financial statements for the period ended September 30, 2019.

 

Other accounting standards or amendments to existing accounting standards that have been issued, but have future effective dates, are either not applicable or are not expected to have a significant impact on our financial statements.

 

RISK FACTORS

 

The following
information sets forth material risks and uncertainties that may affect our business, including our future financing and operating
results and could cause our actual results to differ materially from those contained in forward-looking statements we have made
in this MD&A. The risks and uncertainties below are not the only ones we face. Additional risks and uncertainties not presently
known to us or that we believe to be immaterial may also adversely affect our business. Further, if we fail to meet the future
expectations of the public market in any given period after we become listed, the market price of our common shares could decline.
We operate in a highly competitive environment that involves significant risks and uncertainties, some of which are outside of
our control.

 

Risks Related to Our Financial Position and Need for Additional Capital

 

We expect to incur future losses and we may never become profitable.

 

We have incurred a loss of $1,708,109 for the period ended September 30, 2019 and expect to incur an operating loss for the period ending December 31, 2019 and the year ending December 31, 2020. We have an accumulated deficit since inception through September 30, 2019 of $1,708,109. We believe that operating losses will continue as we are planning to incur significant costs associated with the clinical development of 18-MC. Our net losses have had and will continue to have an adverse effect on, among other things, our shareholders’ equity, total assets and working capital. We expect that losses will fluctuate from quarter to quarter and year to year, and that such fluctuations may be substantial. We cannot predict when we will become profitable, if at all.

 

     

    - I-2-19 - 

    

MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

We will require additional capital to finance our operations, which may not be available to us on acceptable terms, or at all. As a result, we may not complete the development and commercialization of our product candidates or develop new product candidates.

 

As a research and development company, we expect to spend substantial funds to continue the research, development and testing of our product candidates and to prepare to commercialize products subject to approval of the FDA, in the U.S. and similar approvals in other jurisdictions. We will also require significant additional funds if we expand the scope of our current clinical plans or if we were to acquire any new assets and advance their development. Therefore, for the foreseeable future, we will have to fund all of our operations and development expenditures from cash on hand, equity financings, through collaborations with other biotechnology or pharmaceutical companies or through financings from other sources. We expect that our existing cash and funds held in trust as at September 30, 2019 of $4,822,099 will enable us to fund our current operating plan requirements for at least the next three months. Additional financing will be required to meet our longer-term liquidity needs. If we do not succeed in raising additional funds on acceptable terms, we might not be able to complete planned preclinical studies and clinical trials or pursue and obtain approval of any product candidates from the FDA and other regulatory authorities. It is possible that future financing will not be available or, if available, may not be on favorable terms. The availability of financing will be affected by the achievement of our corporate goals, the results of scientific and clinical research, the ability to obtain regulatory approvals, the state of the capital markets generally and with particular reference to drug development companies, the status of strategic alliance agreements and other relevant commercial considerations. If adequate funding is not available, we may be required to delay, reduce or eliminate one or more of our product development programs, or obtain funds through corporate partners or others who may require us to relinquish significant rights to product candidates or obtain funds on less favourable terms than we would otherwise accept. To the extent that external sources of capital become limited or unavailable or available on onerous terms, our intangible assets and our ability to continue our clinical development plans may become impaired, and our assets, liabilities, business, financial condition and results of operations may be materially or adversely affected.

 

We currently have no product revenue and will not be able to maintain our operations and research and development without additional funding.

 

To date, we have generated no product revenue and cannot predict when and if we will generate product revenue. Our ability to generate product revenue and ultimately become profitable depends upon our ability, alone or with partners, to successfully develop our product candidates, obtain regulatory approval, and commercialize products, including any of our current product candidates, or other product candidates that we may develop, in-license or acquire in the future. We do not anticipate generating revenue from the sale of products for the foreseeable future. We expect our research and development expenses to increase in connection with our ongoing activities, particularly as we advance our product candidates through clinical trials.

 

We are exposed to the financial risk related to the fluctuation of foreign exchange rates and the degrees of volatility of those rates.

 

We may be adversely affected by foreign currency fluctuations. To date, we have been primarily funded through issuances of equity and from interest income on funds available for investment, which are denominated in U.S. dollars. Also, a significant portion of our expenditures are in other currencies, and we are therefore subject to foreign currency fluctuations which may, from time to time, impact our financial position and results of operations.

 

Risks Related to Our Business and Our Industry

 

Our prospects depend on the success of our product candidates which are at early stages of development, and we may not generate revenue for several years, if at all, from these products.

 

Given the early stage of our product development, we can make no assurance that our research and development programs will result in regulatory approval or commercially viable products. To achieve profitable operations, we, alone or with others, must successfully develop, gain regulatory approval, and market our future products. We currently have no products that have been approved by the FDA, Health Canada (“HC”) or any similar regulatory authority. To obtain regulatory approvals for our product candidates being developed and to achieve commercial success, clinical trials must demonstrate that the product candidates are safe for human use and that they demonstrate efficacy. While we have commenced clinical trials for 18-MC, we have not yet completed later stage clinical trials for any of our product candidates.

 

     

    - I-2-20 - 

    

MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

Many product candidates never reach the stage of clinical testing and even those that do have only a small chance of successfully completing clinical development and gaining regulatory approval. Product candidates may fail for a number of reasons, including, but not limited to, being unsafe for human use or due to the failure to provide therapeutic benefits equal to or better than the standard of treatment at the time of testing. Unsatisfactory results obtained from a particular study relating to a research and development program may cause us or our collaborators to abandon commitments to that program. Positive results of early preclinical research may not be indicative of the results that will be obtained in later stages of preclinical or clinical research. Similarly, positive results from early-stage clinical trials may not be indicative of favourable outcomes in later-stage clinical trials, we can make no assurance that any future studies, if undertaken, will yield favourable results.

 

The early stage of our product development makes it particularly uncertain whether any of our product development efforts will prove to be successful and meet applicable regulatory requirements, and whether any of our product candidates will receive the requisite regulatory approvals, be capable of being manufactured at a reasonable cost or be successfully marketed. If we are successful in developing our current and future product candidates into approved products, we will still experience many potential obstacles such as the need to develop or obtain manufacturing, marketing and distribution capabilities. If we are unable to successfully commercialize any of our products, our financial condition and results of operations may be materially and adversely affected.

 

We can make no assurance that any future studies, if undertaken, will yield favorable results. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in later-stage clinical trials after achieving positive results in early-stage development, and we cannot be certain that we will not face similar setbacks. These setbacks have been caused by, among other things, preclinical findings made while clinical trials were underway or safety or efficacy observations made in clinical trials, including previously unreported adverse events. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain FDA approval. If we fail to produce positive results in our future clinical trials of 18-MC, the development timeline and regulatory approval and commercialization prospects for our leading product candidates, and, correspondingly, our business and financial prospects, would be materially adversely affected.

 

We rely and will continue to rely on third parties to plan, conduct and monitor our preclinical studies and clinical trials, and their failure to perform as required could cause substantial harm to our business.

 

We rely and will continue to rely on third parties to conduct a significant portion of our preclinical and clinical development activities. Preclinical activities include in vivo studies providing access to specific disease models, pharmacology and toxicology studies, and assay development. Clinical development activities include trial design, regulatory submissions, clinical patient recruitment, clinical trial monitoring, clinical data management and analysis, safety monitoring and project management. If there is any dispute or disruption in our relationship with third parties, or if they are unable to provide quality services in a timely manner and at a feasible cost, our active development programs will face delays. Further, if any of these third parties fails to perform as we expect or if their work fails to meet regulatory requirements, our testing could be delayed, cancelled or rendered ineffective.

 

We rely on contract manufacturers over whom we have limited control. If we are subject to quality, cost or delivery issues with the preclinical and clinical grade materials supplied by contract manufacturers, our business operations could suffer significant harm.

 

We have limited manufacturing experience and rely on contract manufacturing organizations, or CMOs to manufacture our product candidates for preclinical studies and clinical trials. We rely on CMOs for manufacturing, filling, packaging, storing and shipping of drug product in compliance with current Good Manufacturing Practice, or cGMP, regulations applicable to our products. The FDA ensures the quality of drug products by carefully monitoring drug manufacturers’ compliance with cGMP regulations. The cGMP regulations for drugs contain minimum requirements for the methods, facilities and controls used in manufacturing, processing and packing of a drug product.

 

     

    - I-2-21 - 

    

MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

We contracted with Sterling for the manufacture of the 18-MC congener to supply drug substance for our phase 2 clinical trials. We believe that Sterling has the capacity, the systems, and the experience to supply 18-MC for our clinical trials and we may consider using them for manufacturing for later clinical trials. Any manufacturing failures, delays or compliance issues could cause delays in the conduct of preclinical studies and clinical trials.

 

There can be no assurances that CMOs will be able to meet our timetable and requirements. We have not contracted with alternate suppliers for 18-MC drug substance production in the event Sterling is unable to scale up production, or if it otherwise experiences any other significant problems. If we are unable to arrange for alternative third-party manufacturing sources on commercially reasonable terms or in a timely manner, we may be delayed in the development of our product candidates. Further, CMOs must operate in compliance with cGMP and failure to do so could result in, among other things, the disruption of product supplies. Our dependence upon third parties for the manufacture of our products may adversely affect our profit margins and our ability to develop and deliver products on a timely and competitive basis.

 

We require commercial scale and quality manufactured product to be available for pivotal or registration clinical trials. If we do not have commercial grade drug supply when needed, we may face delays in initiating or completing pivotal trials and our business operations could suffer significant harm.

 

To date, our product has been manufactured in small quantities for pre-clinical studies and clinical trials by third party manufacturers. In order to commercialize our product, we need to manufacture commercial quality drug supply for use in registration clinical trials. Most, if not all, of the clinical material used in phase 3/pivotal/registration studies must be derived from the defined commercial process including scale, manufacturing site, process controls and batch size. If we have not scaled up and validated the commercial production of our product prior to the commencement of pivotal clinical trials, we may have to employ a bridging strategy during the trial to demonstrate equivalency of early stage material to commercial drug product, or potentially delay the initiation or completion of the trial until drug supply is available. The manufacturing of commercial quality drug product requires significant efforts including, but not limited to scale-up of production to anticipated commercial scale, process characterization and validation, analytical method validation, identification of critical process parameters and product quality attributes, multiple process performance and validation runs, has long lead times and is very expensive. If we do not have commercial drug supply available when needed for pivotal clinical trials, our regulatory and commercial progress may be delayed, and we may incur increased product development cost. This may have a material adverse effect on our business, financial condition and prospects, and may delay marketing of the product.

 

If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive results, we would incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

 

Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct preclinical studies in animals and extensive clinical trials in humans to demonstrate the safety and efficacy of the product candidates. Clinical testing is expensive and difficult to design and implement, can take many years to complete and has uncertain outcomes. The outcome of preclinical studies and early clinical trials may not predict the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety profiles, notwithstanding promising results in earlier trials. We do not know whether the clinical trials we may conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market any of our product candidates in any jurisdiction. A product candidate may fail for safety or efficacy reasons at any stage of the testing process. A major risk we face is the possibility that none of our product candidates under development will successfully gain market approval from the FDA or other regulatory authorities, resulting in us being unable to derive any commercial revenue from them after investing significant amounts of capital in their development.

 

     

    - I-2-22 - 

    

MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

If we experience delays in clinical testing, we will be delayed in commercializing our product candidates, and our business may be substantially harmed.

 

We cannot predict whether any clinical trials will begin as planned, will need to be restructured, or will be completed on schedule, or at all. Our product development costs will increase if we experience delays in clinical testing. Significant clinical trial delays could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before us, which would impair our ability to successfully commercialize our product candidates and may harm our financial condition, results of operations and prospects. The commencement and completion of clinical trials for our products may be delayed for a number of reasons, including delays related, but not limited, to:

 

• failure by regulatory
authorities to grant permission to proceed or placing the clinical trial on hold; 

•  patients failing
to enroll or remain in our trials at the rate we expect; 

•  suspension
or termination of clinical trials by regulators for many reasons, including concerns about patient safety or failure of our CMOs
to comply with cGMP requirements;

•  any changes
to our manufacturing process that may be necessary or desired;

•  delays or failure
to obtain clinical supply from CMOs of our products necessary to conduct clinical trials;

•  product candidates
demonstrating a lack of safety or efficacy during clinical trials;

•  patients choosing
an alternative treatment for the indications for which we are developing any of our product candidates or participating in competing
clinical trials;

•  patients failing
to complete clinical trials due to dissatisfaction with the treatment, side effects or other reasons;

•  reports of clinical testing on similar technologies and products raising safety and/or efficacy concerns;

• competing clinical
trials and scheduling conflicts with participating clinicians;

•  clinical investigators
not performing our clinical trials on their anticipated schedule, dropping out of a trial, or employing methods not consistent
with the clinical trial protocol, regulatory requirements or other third parties not performing data collection and analysis in
a timely or accurate manner;

•  failure of
our contract research organizations, or CROs, to satisfy their contractual duties or meet expected deadlines;

•  inspections
of clinical trial sites by regulatory authorities or Institutional Review Boards, or IRBs, or ethics committees finding regulatory
violations that require us to undertake corrective action, resulting in suspension or termination of one or more sites or the
imposition of a clinical hold on the entire study;

•  one or more
IRBs or ethics committees rejecting, suspending or terminating the study at an investigational site, precluding enrollment of
additional subjects, or withdrawing its approval of the trial; or

•  failure to reach agreement on acceptable terms with prospective clinical trial sites.

 

Our product development costs will increase if we experience delays in testing or approval or if we need to perform more or larger clinical trials than planned. Additionally, changes in regulatory requirements and policies may occur, and we may need to amend study protocols to reflect these changes. Amendments may require us to resubmit our study protocols to regulatory authorities or IRBs or ethics committees for re-examination, which may impact the cost, timing or successful completion of that trial. Delays or increased product development costs may have a material adverse effect on our business, financial condition and prospects.

 

We may not be able to file INDs to commence additional clinical trials on the timelines we expect, and even if we are able to, the FDA may not permit us to proceed in a timely manner, or at all.

 

Prior to commencing clinical trials in the United States for any of our product candidates, we may be required to have an allowed IND for each product candidate and to file additional INDs prior to initiating any additional clinical trials for 18-MC. We believe that the data from previous studies will support the filing of additional INDs, to enable us to undertake additional clinical studies as we have planned. However, submission of an IND may not result in the FDA allowing further clinical trials to begin and, once begun, issues may arise that will require us to suspend or terminate such clinical trials. Additionally, even if relevant regulatory authorities agree with the design and implementation of the clinical trials set forth in an IND, these regulatory authorities may change their requirements in the future. Failure to submit or have effective INDs and commence or continue clinical programs will significantly limit our opportunity to generate revenue.

 

     

    - I-2-23 - 

    

MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

If we have difficulty enrolling patients in clinical trials, the completion of the trials may be delayed or cancelled.

 

As our product candidates advance from preclinical testing to clinical testing, and then through progressively larger and more complex clinical trials, we will need to enroll an increasing number of patients that meet our eligibility criteria. There is significant competition for recruiting patients in clinical trials, and we may be unable to enroll the patients we need to complete clinical trials on a timely basis or at all. The factors that affect our ability to enroll patients are largely uncontrollable and include, but are not limited to, the following:

 

•
size and nature of the patient population;

•
eligibility and exclusion criteria for the trial;

•
design of the study protocol;

•
competition with other companies for clinical sites or patients; 

•
the perceived risks and benefits of the product candidate under study;

•
the patient referral practices of physicians; and

• the number, availability, location and accessibility of clinical trial sites.

 

Regulatory approval processes are lengthy, expensive and inherently unpredictable. Our inability to obtain regulatory approval for our product candidates would substantially harm our business.

 

Our development and commercialization activities and product candidates are significantly regulated by a number of governmental entities, including the FDA, HC, and comparable authorities in other countries. Regulatory approvals are required prior to each clinical trial and we may fail to obtain the necessary approvals to commence or continue clinical testing. We must comply with regulations concerning the manufacture, testing, safety, effectiveness, labeling, documentation, advertising, and sale of products and product candidates and ultimately must obtain regulatory approval before we can commercialize a product candidate. The time required to obtain approval by such regulatory authorities is unpredictable but typically takes many years following the commencement of preclinical studies and clinical trials. Any analysis of data from clinical activities we perform is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. Even if we believe results from our clinical trials are favorable to support the marketing of our product candidates, the FDA or other regulatory authorities may disagree. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that none of our existing product candidates or any future product candidates will ever obtain regulatory approval.

 

We could fail to receive regulatory approval for our product candidates for many reasons, including, but not limited to:

 

•
disagreement with the design or implementation of our clinical trials;

•
failure to demonstrate that a product candidate is safe and effective for its proposed indication;

•
failure of clinical trials to meet the level of statistical significance required for approval;

•
failure to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;

•
disagreement with our interpretation of data from preclinical studies or clinical trials;

•
the insufficiency of data collected from clinical trials of our product candidates to support the submission and filing of an
Investigational New Drug application, or IND, or other submission to obtain regulatory approval;

•
deficiencies in the manufacturing processes or the failure of facilities of CMOs with whom we contract for clinical and commercial
supplies to pass a pre-approval inspection; or

• changes in the approval policies or regulations that render our preclinical and clinical data insufficient for approval.

 

     

    - I-2-24 - 

    

MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

A regulatory authority may require more information, including additional preclinical or clinical data to support approval, which may delay or prevent approval and our commercialization plans, or we may decide to abandon the development program. If we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Moreover, depending on any safety issues associated with our product candidates that garner approval, the FDA may impose a risk evaluation and mitigation strategy, thereby imposing certain restrictions on the sale and marketability of such products.

 

We may not achieve our publicly announced milestones according to schedule, or at all.

 

From time to time, we may announce the timing of certain events we expect to occur, such as the anticipated timing of results from our clinical trials. These statements are forward-looking and are based on the best estimates of management at the time relating to the occurrence of such events. However, the actual timing of such events may differ from what has been publicly disclosed. The timing of events such as initiation or completion of a clinical trial, filing of an application to obtain regulatory approval, or announcement of additional clinical trials for a product candidate may ultimately vary from what is publicly disclosed. These variations in timing may occur as a result of different events, including the nature of the results obtained during a clinical trial or during a research phase, timing of the completion of clinical trials, problems with a CMO or a CRO or any other event having the effect of delaying the publicly announced timeline. We undertake no obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as otherwise required by law. Any variation in the timing of previously announced milestones could have a material adverse effect on our business plan, financial condition or operating results and the trading price of common shares.

 

We face competition from other biotechnology and pharmaceutical companies and our financial condition and operations will suffer if we fail to effectively compete.

 

The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. Our competitors include large, well-established pharmaceutical companies, biotechnology companies, and academic and research institutions developing therapeutics for the same indications we are targeting and competitors with existing marketed therapies. Many other companies are developing or commercializing therapies to treat the same diseases or indications for which our product candidates may be useful. Although there are no approved therapies that specifically target the opioid addiction, some competitors use therapeutic approaches that may compete directly with our product candidates.

 

Many of our competitors have substantially greater financial, technical and human resources than we do and have significantly greater experience than us in conducting preclinical testing and human clinical trials of product candidates, scaling up manufacturing operations and obtaining regulatory approvals of products. Accordingly, our competitors may succeed in obtaining regulatory approval for products more rapidly than we do. Our ability to compete successfully will largely depend on:

 

• the
efficacy and safety profile of our product candidates relative to marketed products and other product candidates in
development;

• our
ability to develop and maintain a competitive position in the product categories and technologies on which we focus;

•
the time it takes for our product candidates to complete clinical development and receive marketing approval;

•
our ability to obtain required regulatory approvals;

•
our ability to commercialize any of our product candidates that receive regulatory approval;

•
our ability to establish, maintain and protect intellectual property rights related to our product candidates; and

• acceptance of any of our product candidates that receive regulatory approval by physicians and other healthcare providers and payers.

 

     

    - I-2-25 - 

    

MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

Competitors have developed and may develop technologies that could be the basis for products that challenge the discovery research capabilities of 18-MC. Some of those products may have an entirely different approach or means of accomplishing the desired therapeutic effect than our product candidates and may be more effective or less costly than our product candidates. The success of our competitors and their products and technologies relative to our technological capabilities and competitiveness could have a material adverse effect on the future preclinical studies and clinical trials of our product candidates, including our ability to obtain the necessary regulatory approvals for the conduct of such clinical trials. This may further negatively impact our ability to generate future product development programs using 18-MC.

 

If we are not able to compete effectively against our current and future competitors, our business will not grow, and our financial condition and operations will substantially suffer.

 

We heavily rely on the capabilities and experience of our key executives and scientists and the loss of any of them could affect our ability to develop our products.

 

The loss of Stephen Hurst, our Executive Chair, Robert Tessarolo, our President and Chief Executive Officer or other key members of our staff, could harm us. We do not have employment agreements with any members of our staff, although such employment agreements do not guarantee their retention. We also depend on our scientific and clinical collaborators and advisors, all of whom have outside commitments that may limit their availability to us. In addition, we believe that our future success will depend in large part upon our ability to attract and retain highly skilled scientific, managerial, medical, manufacturing, clinical and regulatory personnel, particularly as we expand our activities and seek regulatory approvals for clinical trials. We enter into agreements with our scientific and clinical collaborators and advisors, key opinion leaders and academic partners in the ordinary course of our business. We also enter into agreements with physicians and institutions who will recruit patients into our clinical trials on our behalf in the ordinary course of our business. Notwithstanding these arrangements, we face significant competition for these types of personnel from other companies, research and academic institutions, government entities and other organizations. We cannot predict our success in hiring or retaining the personnel we require for continued growth. The loss of the services of any of our executive officers or other key personnel could potentially harm our business, operating results or financial condition.

 

Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.

 

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include failures to comply with FDA regulations, provide accurate information to the FDA, comply with manufacturing standards we have established, comply with federal and state healthcare fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a substantial impact on our business and results of operations, including the imposition of substantial fines or other sanctions.

 

We may expand our business through the acquisition of companies or businesses or by entering into collaborations or by in-licensing product candidates, each of which could disrupt our business and harm our financial condition.

 

We have in the past and may in the future seek to expand our pipeline and capabilities by acquiring one or more companies or businesses, entering into collaborations, or in-licensing one or more product candidates. Acquisitions, collaborations and in-licenses involve numerous risks, including, but not limited to:

 

• substantial cash expenditures;

 

     

    - I-2-26 - 

    

MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

•
technology development risks;

•
potentially dilutive issuances of equity securities;

•
incurrence of debt and contingent liabilities, some of which may be difficult or impossible to identify at the time of acquisition;

•
difficulties in assimilating the operations of the acquired companies;

•
potential disputes regarding contingent consideration;

•
diverting our management’s attention away from other business concerns;

•
entering markets in which we have limited or no direct experience; and

• potential loss of our key employees or key employees of the acquired companies or businesses.

 

We have experience in making acquisitions, entering collaborations and in-licensing product candidates, however, we cannot provide assurance that any acquisition, collaboration or in-license will result in short-term or long-term benefits to us. We may incorrectly judge the value or worth of an acquired company or business or in-licensed product candidate. In addition, our future success would depend in part on our ability to manage the rapid growth associated with some of these acquisitions, collaborations and in-licenses. We cannot provide assurance that we would be able to successfully combine our business with that of acquired businesses, manage a collaboration or integrate in-licensed product candidates. Furthermore, the development or expansion of our business may require a substantial capital investment by us.

 

Negative results from clinical trials or studies of others and adverse safety events involving the targets of our products may have an adverse impact on our future commercialization efforts.

 

From time to time, studies or clinical trials on various aspects of biopharmaceutical products are conducted by academic researchers, competitors or others. The results of these studies or trials, when published, may have a significant effect on the market for the biopharmaceutical product that is the subject of the study. The publication of negative results of studies or clinical trials or adverse safety events related to our product candidates, or the therapeutic areas in which our product candidates compete, could adversely affect our share price and our ability to finance future development of our product candidates, and our business and financial results could be materially and adversely affected.

 

We face the risk of product liability claims, which could exceed our insurance coverage and product recalls, each of which could deplete our cash resources.

 

We are exposed to the risk of product liability claims alleging that use of our product candidates caused an injury or harm. These claims can arise at any point in the development, testing, manufacture, marketing or sale of our product candidates and may be made directly by patients involved in clinical trials of our product candidates, by consumers or healthcare providers or by individuals, organizations or companies selling our products. Product liability claims can be expensive to defend, even if the product or product candidate did not actually cause the alleged injury or harm.

 

Insurance
covering product liability claims becomes increasingly expensive as a product candidate moves through the development
pipeline to commercialization. We currently maintain clinical trial liability insurance coverage of $2,000,000. However,
there can be no assurance that such insurance coverage is or will continue to be adequate or available to us at a cost
acceptable to us or at all. We may choose or find it necessary under our collaborative agreements to increase our insurance
coverage in the future. We may not be able to secure greater or broader product liability insurance coverage on acceptable
terms or at reasonable costs when needed. Any liability for damages resulting from a product liability claim could exceed the
amount of our coverage, require us to pay a substantial monetary award from our own cash resources and have a material
adverse effect on our business, financial condition and results of operations. Moreover, a product recall, if required, could
generate substantial negative publicity about our products and business, inhibit or prevent commercialization of other
products and product candidates or negatively impact existing or future collaborations.

 

     

    - I-2-27 - 

    

MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

If we are unable to maintain product liability insurance required by our third parties, the corresponding agreements would be subject to termination, which could have a material adverse impact on our operations.

 

Some of our licensing and other agreements with third parties require or might require us to maintain product liability insurance. If we cannot maintain acceptable amounts of coverage on commercially reasonable terms in accordance with the terms set forth in these agreements, the corresponding agreements would be subject to termination, which could have a material adverse impact on our operations.

 

Risks Related to Intellectual Property

 

If we are unable to adequately protect and enforce our intellectual property, our competitors may take advantage of our development efforts or acquired technology and compromise our prospects of marketing and selling our key products.

 

Our success will depend in part upon our ability to protect our intellectual property and proprietary technologies and upon the nature and scope of the intellectual property protection we receive. The ability to compete effectively and to achieve partnerships will depend on our ability to develop and maintain proprietary aspects of our technology and to operate without infringing on the proprietary rights of others. The presence of such proprietary rights of others could severely limit our ability to develop and commercialize our products, to conduct our existing research and could require financial resources to defend litigation, which may be in excess of our ability to raise such funds. There is no assurance that our pending patent applications or those that we intend to acquire will be approved in a form that will be sufficient to protect our proprietary technology and gain or keep any competitive advantage that we may have or, once approved, will be upheld in any post-grant proceedings brought by any third parties.

 

The patent positions of pharmaceutical companies can be highly uncertain and involve complex legal, scientific and factual questions for which important legal principles remain unresolved. Patents issued to us or our respective licensors may be challenged, invalidated or circumvented. To the extent our intellectual property, including licensed intellectual property, offers inadequate protection, or is found to be invalid or unenforceable, we are exposed to a greater risk of direct competition. If our intellectual property does not provide adequate protection against our competitors’ products, our competitive position could be adversely affected, as could our business, financial condition and results of operations. Both the patent application process and the process of managing patent disputes can be time consuming and expensive, and the laws of some foreign countries may not protect our intellectual property rights to the same extent as do the laws of Canada and the United States.

 

We will be able to protect our intellectual property from unauthorized use by third parties only to the extent that our proprietary technologies, key products, and any future products are covered by valid and enforceable intellectual property rights including patents or are effectively maintained as trade secrets, and provided we have the funds to enforce our rights, if necessary.

 

If we lose our licenses from third-party owners, we may be unable to continue a substantial part of our business.

 

We are party to licenses that give us rights to intellectual property that is necessary or useful for a substantial part of our business.

 

We may also enter into licenses in the future to access additional third-party intellectual property. If we fail to pay annual maintenance fees, development and sales milestones, or it is determined that we did not use commercially reasonable efforts to commercialize licensed products, we could lose our licenses which could have a material adverse effect on our business and financial condition.

 

We may require additional third-party licenses to effectively develop and manufacture our key products and are currently unable to predict the availability or cost of such licenses.

 

A substantial number of patents have already been issued to other biotechnology and pharmaceutical companies. To the extent that valid third-party patent rights cover our products or services, we or our strategic collaborators would be required to seek licenses from the holders of these patents in order to manufacture, use or sell these products and services, and payments under them would reduce our profits from these products and services. We are currently unable to predict the extent to which we may wish or be required to acquire rights under such patents, the availability and cost of acquiring such rights, and whether a license to such patents will be available on acceptable terms or at all. There may be patents in the U.S. or in foreign countries or patents issued in the future that are unavailable to license on acceptable terms. Our inability to obtain such licenses may hinder or eliminate our ability to manufacture and market our products.

 

     

    - I-2-28 - 

    

MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

Changes in patent law and its interpretation could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

 

As is the case with other biotechnology and pharmaceutical companies, our success is heavily dependent on intellectual property rights, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involves technological and legal complexity, and obtaining and enforcing biopharmaceutical patents is costly, time consuming and inherently uncertain. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our and our licensors’ or collaborators’ ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the U.S. Patent and Trademark Office, or USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our and our licensors’ or collaborators’ ability to obtain new patents or to enforce existing patents and patents we and our licensors or collaborators may obtain in the future.

 

Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our and our licensors’ or collaborators’ patent applications and the enforcement or defense of our or our licensors’ or collaborators’ issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation. The USPTO recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our or our licensors’ or collaborators’ patent applications and the enforcement or defense of our or our licensors’ or collaborators’ issued patents, all of which could have a material adverse effect on our business and financial condition.

 

Litigation regarding patents, patent applications, and other proprietary rights may be expensive, time consuming and cause delays in the development and manufacturing of our key products.

 

Our success will depend in part on our ability to operate without infringing the proprietary rights of third parties. The pharmaceutical industry is characterized by extensive patent litigation. Other parties may have, or obtain in the future, patents and allege that the use of our technologies infringes these patent claims or that we are employing their proprietary technology without authorization.

 

In addition, third parties may challenge or infringe upon our existing or future patents. Proceedings involving our patents or patent applications or those of others could result in adverse decisions regarding:

 

•
the patentability of our inventions relating to our key products; and/or

• the enforceability, validity, or scope of protection offered by our patents relating to our key products.

 

     

    - I-2-29 - 

    

MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action, or challenge the validity of the patents in court. Regardless of the outcome, patent litigation is costly and time consuming. In some cases, we may not have sufficient resources to bring these actions to a successful conclusion. In addition, if we do not obtain a license, develop or obtain non-infringing technology, fail to defend an infringement action successfully or have infringed patents declared invalid, we may:

 

•
incur substantial monetary damages;

•
encounter significant delays in bringing our key products to market; and/or 

• be precluded from participating in the manufacture, use or sale of our key products or methods of treatment requiring licenses.

 

Even if we are successful in these proceedings, we may incur substantial costs and divert management time and attention in pursuing these proceedings, which could have a material adverse effect on us.

 

Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them.

 

Because we rely on third parties to develop our products, we must share trade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similar agreements with our collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreements typically restrict the ability of our collaborators, advisors, employees and consultants to publish data potentially relating to our trade secrets. Our academic and clinical collaborators typically have rights to publish data, provided that we are notified in advance and may delay publication for a specified time in order to secure our intellectual property rights arising from the collaboration. In other cases, publication rights are controlled exclusively by us, although in some cases we may share these rights with other parties. We may also conduct joint research and development programs which may require us to share trade secrets under the terms of research and development collaborations or similar agreements. Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of these agreements, independent development or publication of information including our trade secrets in cases where we do not have proprietary or otherwise protected rights at the time of publication. A competitor’s discovery of our trade secrets may impair our competitive position and could have a material adverse effect on our business and financial condition.

 

Risks Related to Our Common Shares

 

The market prices for securities of biopharmaceutical companies have historically been volatile.

 

Even though we are not yet a public company, we expect to be so in the foreseeable future. A number of factors could influence the volatility in the trading price of our common shares, including changes in the economy or in the financial markets, industry related developments, the results of product development and commercialization, changes in government regulations, and developments concerning proprietary rights, litigation and cash flow. Our quarterly losses may vary because of the timing of costs for manufacturing, preclinical studies and clinical trials. Also, the reporting of adverse safety events involving our products and public rumors about such events could cause our share price to decline or experience periods of volatility. Each of these factors could lead to increased volatility in the market price of our common shares. In addition, changes in the market prices of the securities of our competitors may also lead to fluctuations in the trading price of our common shares.

 

We have never paid dividends and do not expect to do so in the foreseeable future.

 

We have not declared or paid any cash dividends on our common shares to date. The payment of dividends in the future will be dependent on our earnings and financial condition in addition to such other factors as our board of directors considers appropriate. Unless and until we pay dividends, shareholders may not receive a return on their shares. There is no present intention by our board of directors to pay dividends on our shares.

 

Future sales or issuances of equity securities and the conversion of outstanding securities to common shares could decrease the value of the common shares, dilute investors’ voting power, and reduce our earnings per share.

 

We may sell additional equity securities in future offerings, including through the sale of securities convertible into equity securities, to finance operations, acquisitions or projects, and issue additional common shares, which may result in dilution.

 

     

    - I-2-30 - 

    

MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

Our board of directors has the authority to authorize certain offers and sales of additional securities without the vote of, or prior notice to, shareholders. Based on the need for additional capital to fund expected expenditures and growth, it is likely that we will issue additional securities to provide such capital. Such additional issuances may involve the issuance of a significant number of common shares at prices less than the current market price for our common shares.

 

Sales of substantial amounts of our securities, or the availability of such securities for sale, as well as the issuance of substantial amounts of our common shares upon conversion of outstanding convertible equity securities, could adversely affect the prevailing market prices for our securities and dilute investors’ earnings per share. A decline in the market prices of our securities could impair our ability to raise additional capital through the sale of securities should we desire to do so.

 

The effect of comprehensive U.S. tax reform legislation on the Company is uncertain.

 

On December 22, 2017, the U.S. government enacted H.R. 1, “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” (informally titled the “Tax Cuts and Jobs Act”). Among a number of significant changes to the U.S. federal income tax rules, the Tax Cuts and Jobs Act reduces the marginal U.S. corporate income tax rate from 35% to 21%, limits the deduction for net interest expense, shifts the United States toward a more territorial tax system, and imposes new taxes to combat erosion of the U.S. federal income tax base, such as a one-time tax on earnings of certain foreign subsidiaries that were previously tax deferred and a new minimum tax on foreign earnings. The effects of the Tax Cuts and Jobs Act on our company, whether adverse or favorable, are uncertain, and may not become evident for some period of time but could have a material adverse effect on our business, financial position or results from operations.

 

It may be difficult for non-American investors to obtain and enforce judgments against us because of our United States incorporation and presence.

 

We are a corporation existing under the laws of the State of Delaware, United States of America. Some of our directors and officers, and some of the experts are residents of the United States, and all or a substantial portion of their assets, and a substantial portion of our assets, are located outside Canada. Consequently, it may be difficult for holders of our securities who reside in Canada to effect service within Canada upon those directors and officers, and the experts who are not residents of Canada. It may also be difficult for holders of our securities who reside in Canada to realize in Canada upon judgments of courts of Canada predicated upon our civil liability and the civil liability of our directors, officers and experts under Canadian federal securities laws. Investors should not assume that American courts (i) would enforce judgments of Canadian courts obtained in actions against us or such directors, officers or experts predicated upon the civil liability provisions of Canadian federal securities laws or the securities or “blue sky” laws of any state or jurisdiction of Canada or (ii) would enforce, in original actions, liabilities against us or such directors, officers or experts predicated upon the Canadian federal securities laws or any securities laws of any province or jurisdiction of Canada. In addition, the protections afforded by American securities laws may not be available to investors in Canada.

 

Any failure to maintain an effective system of internal controls may result in material misstatements of our financial statements or cause us to fail to meet our reporting obligations or fail to prevent fraud; and in that case, our shareholders could lose confidence in our financial reporting, which would harm our business and could negatively impact the price of our common shares.

 

Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. If we fail to maintain an effective system of internal controls, we might not be able to report our financial results accurately or prevent fraud; and in that case, our shareholders could lose confidence in our financial reporting, which would harm our business and could negatively impact the price of our common shares. While we believe that we have sufficient personnel and review procedures to allow us to maintain an effective system of internal controls, we cannot provide assurance that we will not experience potential material weaknesses in our internal control. Even if we conclude that our internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS as issued by the IASB, because of its inherent limitations, internal control over financial reporting may not prevent or detect fraud or misstatements. Failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our results of operations or cause us to fail to meet our future reporting obligations. If we fail to timely achieve and maintain the adequacy of our internal control over financial reporting, we may not be able to produce reliable financial reports or help prevent fraud. Our failure to achieve and maintain effective internal control over financial reporting could prevent us from complying with our reporting obligations on a timely basis, which could result in the loss of investor confidence in the reliability of our consolidated financial statements, harm our business and negatively impact the trading price of our common shares.

 

     

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MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

There is no assurance of an active or liquid market

 

No assurance can be given that an active or liquid trading market for the common shares will be sustained. If an active or liquid market for the common shares fails to be sustained, the prices at which such securities trade may be adversely affected. Whether or not the common shares will trade at lower prices depends on many factors, including the liquidity of the common shares, prevailing interest rates, the markets for similar securities, general economic conditions and our financial condition, historic financial performance and future prospects. There is currently no market through which the Securities (other than the common shares) may be sold and purchasers may not be able to resell such securities. This may affect the pricing of such securities in the secondary market, the transparency and availability of trading prices, the liquidity of such securities and the extent of issuer regulation.

 

Public markets and share prices

 

The market price of the common shares that may become listed and posted for trading on the NEO or any other stock exchange could be subject to significant fluctuations in response to variations in our operating results or other factors. In addition, fluctuations in the stock market may adversely affect the market price of the Common Shares and any other Securities offered hereunder that may become listed and posted for trading on the NEO or any other stock exchange regardless of the operating performance of the company. Securities markets have also experienced significant price and volume fluctuations from time to time. In some instances, these fluctuations have been unrelated or disproportionate to the operating performance of issuers. Market fluctuations may adversely impact the market price of the Common Shares and any other Securities offered hereunder that may become listed and posted for trading on the NEO or any other stock exchange. There can be no assurance of the price at which the Common Shares and any other Securities offered hereunder that may become listed and posted for trading on the NEO or any other stock exchange will trade.

 

Additional issuances and dilution

 

We may issue and sell additional securities to finance our operations. We cannot predict the size or type of future issuances of our securities or the effect, if any, that future issuances and sales of securities will have on the market price of any of our securities issued and outstanding from time to time. Sales or issuances of substantial amounts of our securities, or the perception that such sales could occur, may adversely affect prevailing market prices for our securities issued and outstanding from time to time. With any additional sale or issuance of our securities, holders will suffer dilution with respect to voting power and may experience dilution in our earnings per share. Moreover, this circular may create a perceived risk of dilution resulting in downward pressure on the price of our issued and outstanding common shares, which could contribute to progressive declines in the prices of such securities.

 

We have broad discretion in the use of the net proceeds from the sale of securities

 

Our management will have broad discretion with respect to the application of net proceeds received from the sale of securities and may spend such proceeds in ways that do not improve our results of operations or enhance the value of the common shares or any other securities outstanding from time to time. Any failure by management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business or cause the price of our securities issued and outstanding from time to time to decline.

 

     

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MIND MEDICINE, INC.

Management’s Discussion and Analysis

 

DISCLOSURE CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTING

 

We have implemented a system of internal controls that we believe adequately protects our assets and is appropriate for the nature of our business and the size of our operations. Our internal control system was designed to provide reasonable assurance that all transactions are accurately recorded, that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that our assets are safeguarded. These internal controls include disclosure controls and procedures designed to ensure that information required to be disclosed by us is accumulated and communicated as appropriate to allow timely decisions regarding required disclosure. Internal control over financial reporting means a process designed by or under the supervision of the Chief Executive Officer and the Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS as issued by the IASB. The internal controls are not expected to prevent and detect all misstatements due to error or fraud. There were no changes in our internal control over financial reporting that occurred during the three months ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As at September 30, 2019, we have assessed the effectiveness of our internal control over financial reporting and disclosure controls and procedure. Based on their evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that these controls and procedures are effective.

 

     

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SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC. 
MANAGEMENT’S DISCUSSION AND ANALYSIS

 

FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2019 AND THE YEARS ENDED DECEMBER 31, 
2018 AND 2017

 

Dated: December 20, 2019

 

     

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SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

ABOUT THIS MANAGEMENT’S DISCUSSION AND ANALYSIS

 

All references in this management’s discussion and analysis, or MD&A to “the Company”, “Savant”, “we”, “us”, or “our” refer to Savant Addiction Medicine, LLC and the carve-out portion of Savant HWP, Inc., the affiliated company through which Savant Addiction Medicine, LLC conducts its business, unless otherwise indicated or the context requires otherwise. All references in this MD&A to “SAM” refer to Savant Addiction Medicine, LLC. All references in this MD&A to “HWP” refer to Savant HWP, Inc. The following MD&A is prepared as of December 20, 2019 for Savant for the nine month period ended September 30, 2019 and years ended December 31, 2018 and 2017, and should be read in conjunction with the audited combined financial statements for the nine month period ended September 30, 2019 and years ended December 31, 2018 and 2017, which have been prepared by management in accordance with International Financial Reporting Standards, or IFRS as issued by the International Accounting Standards Board, or IASB. Our IFRS accounting policies are set out in note 3 of the audited combined financial statements for the nine- month period ended September 30, 2019 and years ended December 31, 2018 and 2017. All amounts are in United States dollars, unless otherwise indicated.

 

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

 

This MD&A contains forward-looking statements within the meaning of applicable securities laws. All statements contained herein that are not clearly historical in nature are forward-looking, and the words “anticipate”, “believe”, “expect”, “estimate”, “may”, “will”, “could”, “leading”, “intend”, “contemplate”, “shall” and similar expressions are generally intended to identify forward-looking statements. Forward-looking statements in this MD&A include, but are not limited to, statements with respect to:

 

• our expected future loss and accumulated deficit levels;

• our projected financial position and estimated cash burn rate;

• our requirements for, and the ability to obtain, future funding on favorable terms or at all;

• our projections for the 18-MC development plans and progress of each of our products and technologies, particularly with respect to the timely and successful completion of studies and trials and availability of results from such studies and trials;

• our expectations about our products’ safety and efficacy;

• our expectations regarding our ability to arrange for and scale up the manufacturing of our products and technologies;

• our expectations regarding the progress, and the successful and timely completion, of the various stages of the regulatory approval process;

• our expectations about the timing of achieving milestones and the cost of our development programs; • our plans to market, sell and distribute our products and technologies;

• our expectations regarding the acceptance of our products and technologies by the market;

• our ability to retain and access appropriate staff, management and expert advisers;

• our expectations about whether various clinical and regulatory milestones will be achieved;

• our ability to secure strategic partnerships with larger pharmaceutical and biotechnology companies;

• our strategy to acquire and develop new products and technologies and to enhance the safety and efficacy of existing products and technologies;

• our expectations with respect to existing and future corporate alliances and licensing transactions with third parties, and the receipt and timing of any payments to be made by us or to us in respect of such arrangements; and

• our strategy with respect to the protection of our intellectual property.

 

     

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SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

All forward-looking statements reflect our beliefs and assumptions based on information available at the time the assumption was made. These forward-looking statements are not based on historical facts but rather on management’s expectations regarding future activities, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, known and unknown, that contribute to the possibility that the predictions, forecasts, projections or other forward-looking statements will not occur. In evaluating forward-looking statements, readers should specifically consider various factors, including the risks outlined under the heading “Risk Factors” in this MD&A. Some of these risks and assumptions include, among others:

 

• fluctuation of losses from quarter to quarter and year to year due to numerous external risk factors, and anticipation that we will continue to incur losses in the future;

• uncertainty as to our ability to raise additional funding to support operations;

• our ability to generate product revenue to maintain our operations without additional funding;

• the risks associated with the development of our product candidates;

• positive results from preclinical and early clinical research are not necessarily predictive of the results of later-stage clinical trials;

• reliance on third parties to plan, conduct and monitor our preclinical studies and clinical trials;

• our product candidates may fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or may not otherwise produce positive results;

• risks related to filing Investigational New Drug applications, or INDs, to commence clinical trials and to continue clinical trials if approved;

• the risks of delays and inability to complete clinical trials due to difficulties enrolling patients;

• competition from other biotechnology and pharmaceutical companies;

• our reliance on the capabilities and experience of our key executives and scientists and the resulting loss of any of these individuals;

• our ability to fully realize the benefits of acquisitions;

• our ability to adequately protect our intellectual property and trade secrets;

• our ability to source and maintain licenses from third-party owners; and

• the risk of patent-related litigation.

 

all as further and more fully described under the heading “Risk Factors” in this MD&A.

 

Although the forward-looking statements contained in this MD&A are based upon what our management believes to be reasonable assumptions, we cannot assure readers that actual results will be consistent with these forward-looking statements. Any forward-looking statements represent our estimates only as of the date of this MD&A and should not be relied upon as representing our estimates as of any subsequent date. We undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events, except as may be required by securities legislation.

 

BUSINESS

 

Overview

 

We are a clinical-stage healthcare company developing transformational and potentially disruptive new oral medications for the treatment of addiction. Unique among addiction therapies, we target receptors concentrated in the reward/pleasure centers of the brain in order to reverse dopamine dysregulation, the driving force behind substance abuse and the biologic cause of the neurological disease that underlies all addictions.

 

Our lead compound, 18-methoxycoronaridine (“18-MC”), which we sold to Mind Medicine, Inc. on July 23, 2019 along with all related intellectual property, demonstrates broad antiaddictive effects against many substances (nicotine, opioids, cocaine, methamphetamine, alcohol and compulsive eating) of abuse in animal addiction studies because it acts in the central brain’s pleasure center common to all mammals, including humans. Third party studies also demonstrated that 18-MC is potentially effective in treating leishmaniasis, a neglected infectious disease, through a mechanism of action unrelated to the compound’s anti-addictive properties. We intend to pursue this indication in addition to the much larger opportunity in addiction, in part because it may allow us to obtain a valuable priority review voucher from the FDA.

 

     

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SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

Our program in addiction medicine received its initial funding in late 2012 in the form of a non-dilutive, multi-million- dollar grant from the National Institute on Drug Abuse, or NIDA, to support the filing of an investigational new drug application for our lead program. Having successfully completed first-in-human safety studies with 18-MC, we are focused on conducting human efficacy studies in opiate withdrawal and smoking cessation where we see a well- defined regulatory path to approval and robust global markets. Given the potentially broad applicability of 18-MC and the ever-growing prevalence of addiction, we believe we have the opportunity to become the leader in the treatment of addiction and other destructive human behaviors mediated by the brain’s reward/pleasure centers.

 

We approach this opportunity in substance abuse disorders with a team of proven innovators with more than a century and a half of combined experience bringing new medicines to market. We focus on quick and cost-efficient methods to deliver high-value to our patients, partners and investors. In order to maximize returns for our investors, we focus on efficiently shepherding 18-MC through nonclinical and clinical proof-of-concept studies, while keeping infrastructure and personnel expenses to a minimum. We work through an extensive collaborative resource base comprised of key opinion leaders, contract research organizations, or CROs, contract development and manufacturing organizations, or CDMOs, highly experienced consultants, and collaborative development partners. This allows us to maintain a small employee base and reduce capital expenditures, both of which results in lower cash burn rates. As our clinical trials progress, and to the extent our candidate drug reaffirms its potential efficacy, we expect to expand development beyond our initial focus on nicotine addiction.

 

Strategy

 

While our compound, 18-MC, may have broad application across nearly all addictions, we have embarked on a clinical program that addresses each category of substance abuse separately. Indeed, without unlimited resources, we have elected to focus our efforts on opiate abuse and nicotine addiction, the categories we believe to be most compelling for the following reasons:

 

	
 

	
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The regulatory path to approval is well established by current approved drugs;

	
 

	
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Current treatments are marginally effective with only approximately 1 in 5 patients continuing to show benefit 12-months post treatment;

	
 

	
•

	
The unmet need is tremendous with more than 140 opiate overdose deaths per day in the U.S. and more than 30 million nicotine users who have unsuccessfully attempted to quit smoking; and,

	
 

	
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We can expect an efficacy signal in humans within months of initiating a proof of-concept and proof-of-principle studies; obtaining signals with other addictive substances would likely take considerably longer.

 

We designed our studies on opiate withdrawal in consultation with Dr. Stephen Ross, head of addiction medicine at New York University and on nicotine addiction in consultation with Dr. Jed Rose of Duke University, one of the leading authorities on smoking cessation in the world. If we obtain an efficacy signal in humans in opiate and nicotine addiction and the drug continues to be well tolerated by patients as demonstrated in the Phase 1 clinical trial, we will have an opportunity to utilize our extensive partnering expertise and seek a strong development and commercialization partner to maximize shareholder value by providing:

 

	
 

	
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Non-dilutive capital necessary to expand and/or complete clinical development and regulatory approval;

	
 

	
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Regulatory and commercialization expertise to achieve and expand a strong product label;

	
 

	
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Development expertise to complete product development as efficiently as possible; and,

	
 

	
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Sales and marketing resources for a successful market launch following regulatory approval.

 

     

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SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

The opiate abuse problem has grown to near epidemic proportions in parts of the U.S. We are exposed to a nearly daily news flow on the problems associated with opiate addiction resulting from heroin use and the abuse of prescription drugs such as OxyContin®, Vicodin®, Percocet®, and Fentanyl®. In 2014, the states with the highest drug overdose death rates included Kentucky, Massachusetts, New Hampshire, New Mexico, Oklahoma, Ohio, Pennsylvania, Tennessee, Utah, West Virginia, and Wyoming - all with death rates between 19 and 35.5 per 100,000 population. To give this context, according to the Centers for Disease Control and Prevention, or CDC, in 2011 the death rate from accidents, including traffic-related, was 42.7 per 100,000 population in the United States. Today, more than 140 people die from an opiate overdose every day in America.

 

Our clinical program in opiates is already in the planning stages with world renown opinion leaders in addiction medicine at New York University, including Drs. John Rotrosen and Stephen Ross. This program will focus on opiate withdrawal for patients on opiate replacement therapies such as methadone or Suboxone® which are particularly challenging to withdraw from. We expect patients in these trials to be especially motivated since they will have already transitioned from uncontrolled opiate use to controlled use in an effort to recover from their addiction.

 

Withdrawal studies are also attractive since they are of short duration, with patients enrolled for less than one month, and have what are considered gold-standard clinical endpoints with little or no placebo effect.

 

Any good business strategy must be adaptable to changing times and circumstances and ours is no exception. We will continue to adapt and improve our strategy in the future as we continue to learn but our objective will not change. Developing medicines that treat the cause of the brain disease that is addiction - dopamine dysregulation in the reward/pleasure centers of the midbrain - rather than merely substituting one addictive substance for another less harmful one, will transform the field of addiction medicine by alleviating the human suffering currently experienced by millions of addicts, their families and friends. Such medicines will benefit all society by disrupting the enormous economic loss in the United States and elsewhere due to this ubiquitous disease.

 

Addictions and Substance Abuse

 

Substance Use Disorders, or SUDs, more commonly known as addictions, comprise one of the largest unmet medical needs worldwide. As used herein, the term “addictions” will generally include all SUDs. The widespread use and abuse of pain drugs, such as OxyContin®, is a very high profile example of addiction. Addictions to opioid-based pain medications often begin from proper post-surgical use but progress to addiction. In fact, the per capita rate of opiate use in the U.S. has quadrupled since 1999, an increase that far outstrips the increase in reported pain incidence. Alcohol abuse is another – there are more than 17 million heavy drinkers in the U.S. and 140 million worldwide by World Health Organization estimates.

 

In November 2016, the U.S. Surgeon General issued Facing Addiction in America – The Surgeon General’s Report on Alcohol, Drugs, and Health, which is their first report on addiction since their report on smoking in 1964. In this report, the U.S. Secretary of Health and Human Services, Sylvia Mathews Burwell, noted:

 

All across the United States, individuals, families, communities, and health care systems are struggling to cope with substance use, misuse, and substance use disorders. Substance misuse and substance use disorders have devastating effects, disrupt the future plans of too many young people, and all too often, end lives prematurely and tragically. Substance misuse is a major public health challenge and a priority for our nation to address.

 

For 2015, the Substance Abuse and Mental Health Services Administration, or SAMHSA, estimated that over 21.7 million Americans 12 years and older had a chemical substance dependence or abuse problem other than tobacco needing treatment. The total social and healthcare cost to our society of dealing with alcohol and illegal drug abuse is estimated to exceed $193 billion annually. Fewer than one-in-ten patients receive treatment for their addiction in the U.S., at a cost of one in every four deaths. The combined annual cost of substance use disorders in the U.S. is estimated to exceed $600 billion – a staggering economic impact.

 

     

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SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

The overall potential U.S. market for safe, effective, and convenient drug therapy in addiction is extensive and growing. The vast majority of global and US sales of medicines for addiction are concentrated in smoking cessation (≈$2.5 billion), opiates (≈$1.4 billion) and alcohol (≈$100 million). This is a dynamic market globally, with approximately 10% annual growth over the last five years. The overall market for drug therapy in addiction is currently undergoing significant remodeling due to various trends, including:

 

	
 

	
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Nicotine. The introduction and increasing prevalence of electronic cigarettes is likely to bring about a modest reduction in nicotine addiction and therefore reduce the size of our opportunity. While healthcare professionals are not recommending e-cigarettes, there is a consensus that they pose a lower health risk than tobacco products. Studies are underway to determine the actual health risks associated with e-cigarettes. The adoption of e-cigarettes in Europe may have contributed to the stagnation in sales growth of smoking cessation products in the past few years.

	
 

	
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Opiates. Generic competition for Suboxone, a treatment for opiate dependence, contributed to a decline in the Suboxone market from $1.4 billion in 2012 to $1.26 billion in 2013.

	
 

	
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Alcohol. Considering that in 2012 there were an estimated 60 million binge drinkers and another 17 million heavy drinkers in the U.S. alone, market revenues from medicines for the treatment of alcohol related disorders are thus far surprisingly modest, with an annual global market of around $100 million in 2013. Efforts to understand these numbers have produced as many reasons as there are studies, including the acceptance of alcohol use by society, the ineffectiveness of current medications, and the wide range of recovery programs that do not use medications. It is also significant, however, that 31% of heavy alcohol uses are illicit drug users as well.

	
 

	
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Cocaine or methamphetamine. There are no approved pharmaceutical treatments for either cocaine or methamphetamine addiction. A recent analysis by the NIDA estimates the market size for a first- in-class treatment for cocaine addiction at $1.2 billion in annual revenue. In the U.S., NIDA estimates approximately 5.3 million people use cocaine annually and 1.6 million are regular uses of cocaine.

 

While addictions are often viewed as separate medical conditions, segregated by the class of substance (alcohol, opiates, stimulants, tobacco, and the like), all addictions are driven by a single and central disease process, the dysregulation of dopamine, a potent neurotransmitter, in the brain’s reward/pleasure center (Path 3, below) originating in the midbrain.

     

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SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

Addiction Is a Brain Disease

All Addictive Substances Result in Dysregulation of Dopamine Reward Pathway

 

Current pharmacological approaches to treatment fall into two classes of therapy, substitution and aversion, with the former constituting the majority of pharmaceutical-based treatments. Substitution therapies for tobacco cessation include nicotine replacement, and the use of bupropion and varenicline – compounds that produce pleasurable sensations and gratification similar to tobacco but with fewer health risks. Substitution therapies for opiate addiction include Suboxone and methadone, which do provide a viable substitute for the addictive cravings of opiates but are themselves addictive in nature and have proven difficult for some patients to discontinue. An example of aversion therapy is the use of disulfiram which causes unpleasant side effects with the consumption of alcohol.

 

Unlike 18-MC, these medications do not target the dysregulation of dopamine in the midbrain, the primary cause of the brain disease that is addiction and the driving force behind drug craving. The sensation of craving is regulated by dopamine release and reuptake by neurons originating in the midbrain’s reward/pleasure centers. Craving is triggered by many factors, but environmental cues are particularly powerful. Seeing a pack of cigarettes can trigger irresistible craving for the nicotine addict. The sight and sound of beer being opened and poured can do the same for the alcoholic patient. Clearly, there is a compelling need for medicines that alleviate substance craving on a long-term basis. No currently approved drug significantly affects drug craving associated with any type of addiction. An effective drug would be first-in-class and capture a significant portion of what is currently a multi-billion-dollar market.

 

Nicotine Addiction and Smoking Cessation

 

There are more than 40 million daily tobacco users in the United States and nearly 10 times that number in China. It has been estimated that more than 100 million people worldwide lost their lives due to tobacco-related illness in the last century. The projected loss of life for the 21st century is a staggering 1 billion people globally. More than 42 million Americans use tobacco products with two-thirds having attempted to quit without success. In 2014, the Centers for Disease Control and Prevention, or CDC, estimated that smokers cost the US $170 billion a year in direct health care costs and an additional $156 billion a year in lost productivity.

 

Current smoking cessation products approved by the U.S. Food and Drug Administration, or FDA, are substitution approaches that do not treat the cause of the disease, replacing tobacco with substances of lower health liability, such as nicotine products and nicotinic receptor agonists, in the hope that patients will eventually quit. The best of these products has a one-year abstinence rate of only about 20% as compared to 10% for placebo. Even with this middling performance, these nicotine substitute products constitute a well-established global market exceeding $3 billion annually.

 

Limitation of Available Treatment Options for Smoking Cessation

 

Current approved smoking cessation treatments segment into several approaches, nicotine replacement in the form of skin patches, chewing gum, etc., neurotransmitter reuptake inhibitors in the form of bupropion (Zyban® - GlaxoSmithKline), a relatively weak inhibitor of the neuronal reuptake of norepinephrine and dopamine, and nicotinic receptor agonists in the form of varenicline (Chantix®/Champix® - Pfizer), an α4β2 nicotinic cholinergic receptor partial agonist. At best, these therapies are about 20% effective at 12-months post treatment compared to placebo.

 

     

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SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

Even with no more than one in five patients benefiting from treatment with Chantix at 12 months, Pfizer reported 24% sales growth in the U.S. for the third quarter of 2016 compared to the same period in 2015 ($142 MM vs. $103 MM, respectively). With the removal of the boxed warning from the Chantix label in December 2016, we expect Pfizer to aggressively promote Chantix. Prior to FDA’s boxed warning for suicidal ideation in 2009, Chantix/Champix annual worldwide sales reached $848 million. In 2009, Pfizer reported worldwide sales of $700 million. The majority of patients who try Chantix are not successful in curbing their nicotine addiction for reasons ranging from ineffectiveness to severe side effects. Some patients have reported smoking even more while on Chantix. While the boxed warning has been removed from the label, patients are still warned of the potential for serious psychiatric side effects. Chantix will likely face generic competition as well with expiration of patent coverage in 2020 and 2022.

 

Medications for the treatment of drug addiction other than nicotine are either limited (treatments for opioids, nicotine, alcohol) or are not available (treatments for stimulants like cocaine or methamphetamine). See Table C-1, below.

 

As noted elsewhere in this MD&A, our novel approach to addiction targets the dopamine “reward” pathway in the brain that drives pleasure-seeking behaviors associated with addiction and obesity. Targeting the brain’s central reward pathway enables us to develop drug candidates potentially effective against all forms of smoking, substance abuse, and other negative behaviors reinforced by the dopamine reward pathway. The results of our work with 18- MC suggest that nicotinic α3β4 receptor antagonists, by interfering with neuronal activity in the dorsal diencephalic conduction system, represent a truly novel class of anti-addictive agents.

 

Scientific Rationale

 

Mechanistically, 18-MC, a novel coronaridine congener, appears to indirectly modulate the dopaminergic mesolimbic pathway. It accomplishes this by the blockade of α3β4 nicotinic cholinergic receptors in the habenulo-interpeduncular pathway and the basolateral amygdala associated with the dorsal diencephalic conduction system. In the rat model, 18-MC decreases the self-administration of morphine and cocaine, methamphetamine, nicotine and ethanol. This compound has also undergone first-in-human, single-dose studies in normal, healthy volunteers.

 

Animal models, mostly rats, are widely accepted as being the most predictive of human efficacy for the study of addictions and additive behavior. Specifically, these studies allow the animal to self-administer various drugs such as nicotine, morphine or cocaine, using a foot pedal apparatus. The goal of these studies is to look for a statistically significant reduction in self-administering of the addictive drug between the control group and those animals given the treatment drug. Essentially any substance addictive to one mammalian species has been shown to be addictive to another, including humans. These models are the gold standard in addiction medicine research. Our scientific co- founder, Dr. Stanley Glick, and his colleagues at Albany Medical College, began publishing the results of 18-MC in self-administration animal models in peer-reviewed scientific journals in the 1990s, time and again demonstrating the efficacy of 18MC without regard to the addictive substance, in both acute and chronic settings, and in models of obesity, suggesting potential applications for 18-MC in compulsive eating disorders as well. Independent scientists have performed and published self-administration studies confirming Dr. Glick’s work. In 2013, we independently confirmed the efficacy of 18-MC in a rat cocaine self-administration study funded by the National Institute on Drug Abuse, or NIDA.

 

Regulatory Strategy

 

18-MC is extraordinary in that it is active against two very different diseases: substance abuse and leishmaniasis. The regulatory path to NDA approval for substance abuse disorders in the U.S. is through the FDA. The U.S. IND for 18- MC (IND 118783) was filed February 9, 2014 and became effective July 9, 2014. The regulatory path to NDA approval for leishmaniasis in Brazil is through ANVISA.

 

     

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SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

Leishmaniasis is a devastating parasitic disease that causes skin sores, ulcers, fever and results in significant morbidities. We believe that MC-18 could potentially be used as a treatment for leishmaniasis. We have elected to perform initial early safety studies in Brazil regarding the use of MC-18 as a treatment for leishmaniasis because conducting Phase 1 clinical trials is less expensive in Brazil than in the United States. The lower cost of the trials will also likely allow us to complete the trials more quickly than had the trials been conducted in the United States.

 

Since leishmaniasis patients are “sicker” than patients with substance abuse disorders, the risk-benefit profile of testing a (any) new drug in leishmaniasis patients is more heavily “benefit” weighted than the risk-benefit profile of testing a (any) new drug in patients with a substance abuse disorder. As a result, we expect these studies will proceed more quickly from a regulatory perspective due to the lower risks and greater benefits possible for these patients.

 

Once the
safety profile of 18-MC is better understood through our Brazilian studies, U.S. clinical studies under the U.S. IND will be
initiated with a significant human safety database already in place. These studies will initially focus on confirming the
18-MC safety profile established in our Brazilian studies before progressing to additional addiction studies. The focus of
the studies on leishmaniasis lowers the “risk” component of the risk-benefit profile of these studies and we
believe will result in faster completion of the studies and at less comparative cost. Further, because leishmaniasis is a
rare disease and satisfies other requirements that we believe make it a priority for FDA review.

 

Intellectual Property

 

In 2012, we exclusively licensed on a worldwide basis the intellectual property (patents and know-how) underlying our addiction medicine program and covering 18-MC and related compounds from the University of Vermont and Albany Medical College. While the initial patent portfolio was of limited scope, we have expanded the portfolio to cover additional uses and territories and broadened the scope of the patent claims.

 

As we generate new data, we will continue to expand patent coverage throughout the development program. This is an important business strategy for experience tells us that the greatest competitive advantage is gained not through a single patent but through a “mine the harbor” approach, with multiple patents covering diverse aspects of a given product during commercialization.

 

Competition

 

We believe that we currently have a thorough understanding of the competitive landscape with respect to both approved medicines and those in development for the treatment of substance use disorders in general, and nicotine in particular. In 2013, when very limited market research data were publicly available in the addiction medicine field, we commissioned our own extensive competitive analysis report, which has been updated periodically, including a review of the status of nicotine-related medicines in development as recently as of the second half of 2016.

 

As mentioned previously, current approved smoking cessation treatments segment into several approaches: nicotine replacement in the form of skin patches, chewing gum, etc.; neurotransmitter reuptake inhibitors in the form of bupropion (Zyban® - GlaxoSmithKline), a relatively weak inhibitor of the neuronal reuptake of norepinephrine and dopamine; and nicotinic receptor agonists in the form of varenicline (Chantix®/Champix® - Pfizer), an α4β2 nicotinic cholinergic receptor partial agonist. Five FDA-approved medications (in various dosage forms) are available to treat alcohol and opioid use disorders: buprenorphine, methadone, naltrexone, acamprosate, and disulfiram. In addition, FDA has approved naloxone for the treatment of opioid overdose. Naloxone can be used in combination with buprenorphine to prevent an opioid “high” in patients receiving opioid substitution therapy. There are no approved medications available to treat marijuana, amphetamine or cocaine use disorders. Table C-1 (adapted from Table 4.4 of the US Surgeon General’s report) lists these medications. Like all other FDA approved medications, those listed in Table C-1 demonstrate “well-supported” experimental evidence of safety and effectiveness for improving outcomes for individuals with alcohol and opioid use disorders. At the same time, all of these medications have side effects; the two opioid substitution therapies (methadone and buprenorphine) have the potential to be misused, and methadone (and to a lesser extent buprenorphine) has the potential for overdose.

     

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SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

At best, smoking cessation therapies are about 20% effective at 12 months compared to placebo. Even with no more than one in five patients benefiting from treatment with Chantix, Pfizer reported 24% sales growth in the US for the third quarter of 2016 compared to the same period in 2015 ($142 MM vs. $103 MM, respectively). These sales correspond to approximately 120,000 patients receiving Chantix in at any given time, a mere 0.3% of smokers in the United States. With the removal of the boxed warning from the Chantix label in December 2016, we expect Pfizer to more aggressively promote Chantix.

 

Approved more than ten years ago by the US FDA, varenicline (Chantix) is the last new medicine (new chemical entity or NCE) approved for smoking cessation, or substance use disorders generally. As mentioned previously, varenicline is a partial agonist to nicotinic receptors, and has a mechanism of action that involves filling up these nicotinic receptors to give a sensation of satisfaction to the patient. Bupropion (Zyban), is a norepinephrine-dopamine reuptake inhibitor, with a mechanism of action that is poorly understood. Both Chantix and Zyban continue to be evaluated in other substance use disorders and Chantix in particular has shown promise in alcohol abuse. To date, based on limited clinical studies, neither drug appears effective in methamphetamine abuse.

 

With the stage of development ranging from discovery to Phase 2 clinical studies, as of the second half of 2016, there are more than thirty new medicines under development for the treatment of nicotine use disorders targeting a variety of receptors from orexin receptor type 1 to neuronal acetylcholine receptor subunit alpha 7. We are tracking all known development programs, and especially those that are most relevant as potential competition for 18-MC in smoking cessation and substance use disorders. These are listed in Table C-2. Savant believes that the most relevant competitive development programs at this time are Omeros Corporation’s OMS-405 program, Johnson & Johnson’s JNJ-39393406 program and Embera NeuroTherapeutics’ EMB-001 program. OMS-405 is a peroxisome proliferator- activated gamma receptor (PPARgamma) agonist. Omeros announced successful Phase 2 results in November 2016 in both heroin and cocaine use disorders and is evaluating smoking cessation as well. JNJ-39393406 is a neuronal acetylcholine receptor subunit alpha 7 allosteric modulator currently in a Phase 2 clinical trial sponsored by the University of Pittsburgh with an expected completion date of June 2017. EMB-001 is a combination of two off-patent medications, metyrapone, a GABA agonist, and oxazepam, a steroid 11 beta-hydroxase inhibitor, currently in a Phase 1 cocaine safety study following a successful Phase 1 in normal, healthy volunteers announced in January 2016. Embera received an $11.1 million, three-year grant from the National Institute on Drug Abuse (NIDA) in July 2016 to support development of EMB-001for the treatment of cocaine use disorders.

 

Other development programs of note include Pfizer’s PF-06413367, a vaccine intended to produce antibodies against nicotine to prevent passage through the blood-brain barrier, that completed a Phase 1 study in December 2015. The French company Bioproject is developing BP-1.4979, a dopamine D3 receptor partial agonist, and completed a Phase 2 study in 2014. DemeRx’s noribogaine (the active metabolite of ibogaine) program that reported a Phase 1 in opioid patients in 2016. While reporting possible efficacy in a small study of patients on opioid substitution therapy, patients receiving noribogaine experienced concentration-dependent QTc prolongation, a potentially serious cardiac side effect. QTc prolongation refers to a cardiac rhythm disturbance that can often be fatal. While DemeRx’s approach is similar to ours in that we are both seeking to benefit from the normalization of dopamine regulation attributed to ibogaine and its active metabolite, our medicinal chemistry program resulting in 18-MC was conducted to eliminate the harmful side effects of ibogaine, such as QTc prolongation, while maintaining the dopamine regulation normalization effect.

 

We are following the Orexin OX1 program at Heptares Therapeutics LTD, currently in preclinical development. This is perhaps the best supported of the half dozen programs targeting orexin receptor type 1 and, having received a $5.5 MM grant from NIDA in 2015 to support the program, the science has been peer reviewed. Heptares is a wholly- owned subsidiary of Sosei Group Corporation (Japan).

 

Finally, in addition to ourselves, Astraea Therapeutics, LLC of Sunnyvale, CA developed a library of specific negative allosteric modulators of α3β4 nicotinic cholinergic receptors based in part on structure-activity relationship studies of 18-MC. Astraea has identified several lead candidates and has advanced at least one to early preclinical studies. We have reviewed the Astraea program under confidentiality and we continue to follow their progress.

 

     

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SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

These myriad of activities, some of which are being conducted by the largest pharmaceutical companies in the world, and the broad range of target receptors that have been identified, many of which could turn out to represent the silver bullet for addiction treatments, underscore the tremendous commercial potential for addiction medicines. And, even given the considerable resources and efforts that have been expended in this area, we still have not identified definitive drug targets for smoking cessation and substance use disorders generally. As promising as these new development efforts may be, including our own 18-MC program, they must be balanced with the knowledge that an equal number of development programs have been unsuccessful over the years, including programs conducted by multinational pharmaceutical companies including Eli Lilly, GlaxoSmithKline, Merck, Novartis, Pfizer and Sanofi.

 

Government Regulation

 

The FDA and other federal, state, local and foreign regulatory agencies impose substantial requirements upon the clinical development, approval, labeling, manufacture, marketing and distribution of drug products. These agencies regulate, among other things, research and development activities and the testing, approval, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, advertising and promotion of any product candidates or commercial products. The regulatory approval process is generally lengthy and expensive, with no guarantee of a positive result. Moreover, failure to comply with applicable FDA or other requirements may result in civil or criminal penalties, recall or seizure of products, injunctive relief including partial or total suspension of production, or withdrawal of a product from the market.

 

Various regulatory authorities regulate, among other things, the research, manufacture, promotion and distribution of drugs in the United States under the FFDCA and other statutes and implementing regulations. The process required by the FDA before prescription drug product candidates may be marketed in the United States generally involves the following:

 

	
 

	
•

	
completion of extensive nonclinical laboratory tests, animal studies and formulation studies, all performed in accordance with the FDA’s Good Laboratory and/or Manufacturing Practice regulations;

	
 

	
•

	
submission to the FDA of an investigational new drug application, or IND, which must become effective before human clinical trials may begin;

	
 

	
•

	
for some products, performance of adequate and well-controlled human clinical trials in accordance with the FDA’s regulations, including Good Clinical Practices, to establish the safety and efficacy of the product candidate for each proposed indication;

	
 

	
•

	
submission to the FDA of a new drug application or NDA; and,

	
 

	
•

	
FDA review and approval of the NDA prior to any commercial marketing, sale or shipment of the drug.

 

The testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for our product candidates will be granted on a timely basis, if at all.

 

Nonclinical tests include laboratory evaluations of product chemistry, formulation and stability, as well as studies to evaluate toxicity in animals and other animal studies. The results of nonclinical tests, together with manufacturing information and analytical data, are submitted as part of an IND to the FDA. Some nonclinical testing may continue even after an IND is submitted. The IND also includes one or more protocols for the initial clinical trial or trials and an investigator’s brochure. An IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions relating to the proposed clinical trials as outlined in the IND and places the clinical trial on a clinical hold. In such cases, the IND sponsor and the FDA must resolve any outstanding concerns or questions before any clinical trials can begin. Clinical trial holds also may be imposed at any time before or during studies due to safety concerns or non-compliance with regulatory requirements. An independent institutional review board, or IRB, at each of the clinical centers proposing to conduct the clinical trial must review and approve the plan for any clinical trial before it commences at that center. An IRB considers, among other things,whether the risks to individuals participating in the trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the consent form signed by the trial participants and must monitor the study until completed.

 

     

    - I-2-44 - 

    

SAVANT ADDICTION
MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.

Management’s Discussion and Analysis

 

The FDA offers a number of regulatory mechanisms that provide expedited or accelerated approval procedures for selected drugs in the indications on which we are focusing our efforts. These include accelerated approval under Subpart H of the agency’s NDA approval regulations, fast track drug development procedures and priority review.

 

We plan to seek orphan drug designation for indications qualified for such designation.

 

The U.S., E.U. and other jurisdictions may grant orphan drug designation to drugs intended to treat a “rare disease or condition,” which, in the U.S., is generally a disease or condition that affects no more than 200,000 individuals. In the E.U., orphan drug designation can be granted if: the disease is life threatening or chronically debilitating and affects no more than 50 in 100,000 persons in the E.U.; without incentive it is unlikely that the drug would generate sufficient return to justify the necessary investment; and no satisfactory method of treatment for the condition exists or, if it does, the new drug will provide a significant benefit to those affected by the condition. If a product that has an orphan drug designation subsequently receives the first regulatory approval for the indication for which it has such designation, the product is entitled to orphan exclusivity, meaning that the applicable regulatory authority may not approve any other applications to market the same drug for the same indication, except in very limited circumstances, for a period of seven years in the U.S. and 10 years in the E.U. Orphan drug designation does not prevent competitors from developing or marketing different drugs for the same indication or the same drug for different indications. Orphan drug designation must be requested before submitting an NDA. After orphan drug designation is granted, the identity of the therapeutic agent and its potential orphan use are publicly disclosed. Orphan drug designation does not convey an advantage in, or shorten the duration of, the development, review and approval process. However, this designation provides an exemption from marketing and authorization (NDA) fees.

 

OUR ORGANIZATION

 

Savant HWP, Inc., was formed as a Delaware corporation in August 2009. In October 2013, Savant HWP, Inc. was reorganized into a structure consisting of a new holding company and several project companies. The current structure consists of the parent company, Savant HWP Holdings LLC, owning Savant HWP, Inc., (“HWP”) as well as Savant Addiction Medicine, LLC and Savant Neglected Diseases, LLC. The reorganization was undertaken with the goal of providing greater flexibility for the acquisition, disposition and licensing of discoveries in a tax-efficient manner. For example, financings may occur at the holding company level or at an individual project company, and potential acquirors may purchase either the holding company or one or more of the project companies.

 

 

 

•
     Master LLC structure facilitates exits from individual Savant projects.

•
     Holding LLC consist of Founders’ Common Stock interest in Savant HWP, Inc., and ownership interests in individual project
LLCs.

•

     Savant HWP, Inc. is the recipient of government grants, employs core team, offers stock options to employees, and conducts development
work.

•

     Individual project LLCs engage Savant HWP, Inc., to provide services and in exchange Savant HWP, Inc., receives profits interests
from project LLCs.

•

     Buyers of project LLCs receive a tax benefit from the “step up” in the tax basis of the LLCs’ assets, resulting
in greater value to the buyers than if assets were held in corporations.

 

     

    - I-2-45 - 

    

SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

Under the current structure, Savant HWP, Inc. performs all research and development under a contract with each product company, pursuant to which the product company owns all of the rights to the developed discoveries. In connection with such arrangement, and until its termination, Savant HWP, Inc. owns a 10% profits interest.

 

Employment Agreements with Executive Officers of Savant HWP, Inc., Our Operating Entity

 

There are no material employment agreements in effect with any executive officers who serve as either at will employees or consultants.

 

Equity Incentive Plan

 

Savant HWP, Inc., the operating entity through which we conduct all of our business operations, adopted its 2009 Equity Incentive Plan in October 2009 and the plan was approved by its stockholders in October 2010. The purpose of the equity incentive plan is to advance the interests of our company by providing an incentive to attract, retain and motivate highly qualified and competent persons who are important to us and upon whose efforts and judgment our success may be dependent. The recipient of any grant under the equity incentive plan, and the amount and terms of a specific grant, are determined by the Board of Directors of Savant HWP, Inc. We currently do not issue stock options other than through Savant HWP, Inc.

 

Savant HWP, Inc., holds a 10% profit interest on an ongoing basis as partial consideration of this arrangement.

 

Director Compensation of Savant HWP, Inc., Our Operating Entity

 

Non-employee members of the board of directors of Savant HWP, Inc., which employs Stephen L. Hurst as President & CEO and managing member of Savant Addiction Medicine, serve for single, calendar year terms and, as compensation for their service, receive a stock option grant of 20,000 shares of Savant HWP, Inc. vesting monthly over 12 months.

 

LEGAL MATTERS

 

Profits Interests

 

SAM is party to a contract services agreement with its affiliate, HWP, pursuant to which HWP provides various services necessary to SAM’s ongoing operations. In connection with the services provided to SAM by HWP, pursuant to the services agreement, HWP receives a 10% profits interest.

 

Legal Proceedings

 

To our knowledge, there have not been any legal or arbitration proceedings, including those relating to bankruptcy, receivership or similar proceedings, those involving any third party, and governmental proceedings pending or known to be contemplated, which may have, or have had in the recent past, significant effect on our financial position or profitability.

 

Also, to our knowledge, there have been no material proceedings in which any director, any member of senior management, or any of our affiliates is either a party adverse to us or our subsidiary or has a material interest adverse to us or our subsidiary.

 

RESULTS OF OPERATIONS

 

For the nine month period ended September 30, 2019 and years ended December 31, 2018 and 2017

 

Overview

 

Since inception, we have incurred losses while advancing the research and development of our products. Net earnings for the nine month period ended September 30, 2019 were $892,637 compared to net losses for the years ended December 31, 2018 and 2017 of $682,116 and $818,317, respectively. The net earnings in 2019 were due mainly to the $2,000,000 gain on disposal of the 18-MC program to Mind Medicine, Inc. (“MindMed”) partially offset by the $598,304 equity in the loss of MindMed and $500,000 of amortization of the intangible assets of the 18-MC program. The losses in 2018 and 2017 were primarily due to the $1,000,000 of amortization expense in each year.

 

     

    - I-2-46 - 

    

SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

Research and Development

 

Research and development expenses by program for the nine month period ended September 30, 2019 and years ended December 31, 2018 and 2017 were as follows:

 

	
 

	
 

	
Nine months ended

	
 

	
 

	
Year ended

	
 

	
 

	
Year ended

	
 

	
 

	
 

	
September 30, 2019

	
 

	
 

	
December 31, 2018

	
 

	
 

	
December 31, 2017

	
 

	
 

	
 

	
$

	
 

	
 

	
$

	
 

	
 

	
$

	
 

	
18-MC program

	
 

	
 

	
- 

	
 

	
 

	
 

	
30

	
 

	
 

	
 

	
167,227

	
 

Note:

 

	
 

	
(2)

	
Research and development expenditures in the above table include all direct and indirect costs for the program, personnel costs, intellectual property, amortization and research and development overhead. Research and development overhead costs have been allocated to the 18-MC program based mainly on HWP personnel time spent on the programs.

 

During 2017, our resources were focused on the development of our 18-MC program. For the year ended December 31, 2017, we incurred research and development operating expenses of $167,227, which consisted primarily of compensation expenses paid to the management team.

 

The decrease in research and development program expenses for the year ended December 31, 2018 compared to the prior year was due mainly to lower operating cost incurred by HWP as it wound down its operations in June 2017 and all of its employees left the HWP.

 

General and Administrative

 

General and
administrative expenses for the year ended December 31, 2017 consisted primarily of consulting fees of $21,000 paid to a
company controlled by the President of HWP.

 

Finance costs, gains on disposal and equity pick-up

 

Interest expense for the nine month period ended September 30, 2019 was $18,905 compared with the years ended December 31, 2018 and 2017 of $25,273 and $19,844, respectively. The higher interest expense in 2018 was due to the issuance of $200,000 of notes payable bearing interest at 12% during 2017.

 

The gain on disposal of $2,000,000 resulted from the sale of the 18-MC program to MindMed for 55,000,000 Class A shares of MindMed valued at $5,500,000. The valuation was based on sales of similar common shares at the time in an arm’s length sale to third parties. The unamortized cost of the intangible assets sold of $3,500,000 was offset against the sales proceeds.

 

The gain on fair value of the warrants was amortized to income over the five year term of the warrants and resulted in gains of $11,612, $344,861 and $475,058 over the nine month period ended September 30, 2019, and the years ended September 30, 2018 and 2017, respectively.

 

The Company recorded a $598,304 share of the loss of MMED for the period since the sale of the 18-MC program and the receipt of the MMED shares in July 2019.

     

    - I-2-47 - 

    

SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

Liquidity and Capital Resources

 

Cash and working capital

 

Since inception, we have financed our operations primarily from sales of equity and proceeds from the issuance of interest bearing notes payable. Our primary capital needs are for funds to support our scientific research and development activities including staffing, facilities, manufacturing, preclinical studies, clinical trials provided to SAM by HWP and for administrative costs and working capital.

 

We have experienced operating losses and cash outflows from operations since incorporation, will require ongoing financing in order to continue our research and development activities and we have not earned revenue or reached successful commercialization of our products. Our future operations are dependent upon our ability to finance our cash requirements which will allow us to continue our research and development activities and the commercialization of our products. There can be no assurance that we will be successful in continuing to finance our operations.

 

In March and April of 2017, SAM issued $200,000 of notes payable bearing simple interest at 12%. Interest expense on these notes was $18,575 in the year and $24,000 and $17,951 in the year ended September 30, 2018 and the nine month period ended September 30, 2019, respectively. Interest on notes payable to a related party constituted the balance of the interest expense during the three periods.

 

Our cash and cash
equivalents at September 30, 2019, December 31, 2018 and December 31, 2017 were $0 on all three dates. Our working capital deficiency
at September 30, 2019, December 31, 2018 and December 31, 2017 were $749,344, $743,771 and $1,063,359, respectively.

 

The changes in working capital deficiency were due to changes in accounts payable and accrued liabilities offset by the accretion of the warrant liability.

 

Cash flows from operating activities

 

Cash used in operations amounted to $0 for the nine months ended September 30, 2019 compared with cash used in operations of $0 for the year ended December 31, 2018 due to the net income earned in 2019 of $893,637 compared with the net loss of $682,116 in 2018. Cash used in operating activities of $0 for the year ended December 31, 2018, compared to $200,060 for the year ended December 31, 2017, due primarily to a reduction in research and development expenses of $167,197 and in general and administrative expenses of $110,982 from 2017, partially offset by a $130,197 reduction in the non-cash gain on change in fair value of warrants.

 

Cash flows from financing activities

 

Cash provided by financing activities was $0 for both the nine months ended September 30, 2019 and the year ended December 31, 2018 compared to $200,000 for the year ended December 31, 2017. The decrease was due to the issuance of $200,000 of convertible notes payable in 2017.

 

Contractual Obligations and Contingencies

 

We enter into research, development and license agreements in the ordinary course of business where we receive research services and rights to proprietary technologies. Milestone and royalty payments that may become due under various agreements are dependent on, among other factors, clinical trials, regulatory approvals and ultimately the successful development of a new drug, the outcome and timing of which is uncertain. The Company had no agreements outstanding during 2017 and 2016.

 

The only debt
we have on our balance sheet as at September 30, 2019, December 31, 2018 and December 31, 2017 is $650,000 of notes payable.
The notes are payable upon demand and can be called on 60 days’ notice in writing to the Company.

 

     

    - I-2-48 - 

    

SAVANT ADDICTION
MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.

Management’s Discussion and Analysis

 

Trend Information

 

Historical patterns of expenditures cannot be taken as an indication of future expenditures. The amount and timing of expenditures and therefore liquidity and capital resources vary substantially from period to period depending on the number of research and development programs being undertaken at any one time, the stage of the development programs, the timing of significant expenditures for manufacturing, toxicology and pharmacology studies and clinical trials, and the availability of funding from investors and prospective commercial partners.

 

	
 

	
 

	
2019

	
 

	
 

	
2018

	
 

	
 

	
2017

	
 

	
Selected Annual Financial Information

	
 

	
($)

	
 

	
 

	
($)

	
 

	
 

	
($)

	
 

	
Net earnings (loss) and comprehensive loss

	
 

	
 

	
893,639

	
 

	
 

	
 

	
(682,116

	
)

	
 

	
 

	
(818,317

	
)

	
Total assets

	
 

	
 

	
4,902,804

	
 

	
 

	
 

	
4,000,000

	
 

	
 

	
 

	
5,000,000

	
 

	
Total liabilities

	
 

	
 

	
750,452

	
 

	
 

	
 

	
743,771

	
 

	
 

	
 

	
1,063,359

	
 

 

Net earnings for the nine month period ended September 30, 2019 were higher than the net loss for the year ended December 31, 2018 primarily due to the gain on disposal of the 18-MC program of $2,000,000.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

Critical Accounting Estimates

 

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, revenue and expenses, related disclosures of contingent assets and liabilities and the determination of our ability to continue as a going concern. Actual results could differ materially from these estimates and assumptions. We review our estimates and underlying assumptions on an ongoing basis. Revisions are recognized in the period in which the estimates are revised and may impact future periods.

 

The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements have been set out in note 2 of our audited combined financial statements for the nine month period ended September 30, 2019 and years ended December 31, 2018 and 2017.

 

Accounting Policies

 

Our significant accounting policies are set out in Note 3 of our audited combined financial statements for the nine month period ended September 30, 2019 and the years ended December 31, 2018 and 2017. This MD&A should be read in conjunction with the audited combined financial statements for the nine months ended September 30, 2019 and the years ended December 31, 2018 and 2017.

 

Other accounting standards or amendments to existing accounting standards that have been issued, but have future effective dates, are either not applicable or are not expected to have a significant impact on our combined financial statements.

 

RISK FACTORS

 

The following
information sets forth material risks and uncertainties that may affect our business, including our future financing and operating
results and could cause our actual results to differ materially from those contained in forward-looking statements we have made
in this MD&A. The risks and uncertainties below are not the only ones we face. Additional risks and uncertainties not presently
known to us or that we believe to be immaterial may also adversely affect our business. Further, if we fail to meet the expectations
of the public market in any given period, the market price of our common shares could decline. We operate in a highly competitive
environment that involves significant risks and uncertainties, some of which are outside of our control.

 

     

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SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

Risks Related to Our Financial Condition and Capital Requirements

 

We have a limited operating history, have incurred material operating losses since our inception and anticipate that we will continue to incur losses for the foreseeable future.

 

We are a preclinical stage biopharmaceutical company. Our operations began in 2009 and we have only a limited operating history upon which you can evaluate our business and prospects. For the last several years, we have focused our efforts on research and development, and primarily on developing 18-MC, with the goal of achieving regulatory approval for its use in nicotine addiction. Our operations to date have been limited to conducting product development activities for 18-methoxycoronaridine HCl, or 18-MC, and other drug candidates and performing research and development with respect to our clinical and preclinical programs. In addition, as an early stage company, we have limited experience and have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the pharmaceutical area. Nor have we demonstrated an ability to obtain regulatory approval for or to commercialize a drug candidate. Consequently, any predictions about our future performance may not be as accurate as they would be if we had a history of successfully developing and commercializing pharmaceutical products.

 

From our inception we have incurred cumulative operating losses. To date, we have financed our combined operations primarily through private investments and government grants and we have incurred material operating losses since our inception. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our equity and working capital. Our losses have resulted principally from costs incurred in our search and development activities. We anticipate that our operating losses will increase over the next several years as we execute our plan to expand our research, development and commercialization activities, including the clinical development and planned commercialization. Because of the numerous risks and uncertainties associated with developing pharmaceutical products, we are unable to predict the extent of any future losses or whether or when we will become profitable, if ever.

 

If we fail to obtain additional financing, we may be unable to complete the development of any drug candidates or continue our other research and development programs.

 

Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial amounts, if available, to:

 

	
 

	
•

	
continue our research and development programs to advance our internal product pipeline; and

	
 

	
•

	
launch and commercialize drug candidates for which we receive regulatory approval.

 

However, changing circumstances may cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. We will require additional capital for the further development and commercialization of other drug candidates and may need to raise additional funds sooner if we choose to expand more rapidly than we presently anticipate.

 

We cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development of one or more of our drug candidates or other research and development initiatives. We also could be required to:

 

	
 

	
•

	
seek collaborators for one or more of our current or future drug candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available; or

 

	
 

	
•

	
relinquish or license on less favorable terms our rights to technologies or drug candidates that we otherwise would seek to develop or commercialize ourselves.

     

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SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

Any of the above events could significantly harm our business, prospects, financial condition and results of operations.

 

Raising additional capital may cause dilution to our existing equity holders, restrict our operations or require us to relinquish rights to our technologies or drug candidates.

 

We may seek additional capital through a combination of private equity offerings, debt financings, strategic partnerships and alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as an equity holder. The incurrence of indebtedness would result in increased fixed payment obligations and could involve certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or drug candidates, or grant licenses on terms unfavorable to us.

 

Risks Related to Our Operations

 

If we are unable to obtain FDA approval of our drug candidates, we will not be able to commercialize them in the United States and our business will be adversely impacted.

 

We need FDA approval prior to marketing our drug candidates in the United States. If we fail to obtain FDA marketing approval, we will be unable to sell our drug candidates in the United States, which will significantly impair our ability to generate any revenues.

 

The FDA may determine that any of our current or future drug candidates have undesirable side effects that could delay or prevent their regulatory approval or commercialization.

 

A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to adverse safety profiles, notwithstanding promising results in prior trials.

 

Undesirable side effects caused by our drug candidates could cause us, IRBs, and other reviewing entities or regulatory authorities to interrupt, delay, or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. For example, if concerns are raised regarding the safety of a new drug as a result of undesirable side effects identified during clinical or nonclinical testing, the FDA may order us to cease further development, decline to approve the drug, or issue a letter requesting additional data or information prior to making a final decision regarding whether or not to approve the drug.

 

Undesirable side effects caused by our current or future drug candidates could also result in denial of regulatory approval by the FDA or other comparable foreign authorities for any or all targeted indications or the inclusion of unfavorable information in our product labeling, such as limitations on the indicated uses for which the products may be marketed or distributed, a label with significant safety warnings, including boxed warnings, contraindications, and precautions, a label without statements necessary or desirable for successful commercialization, or may result in requirements for costly post-marketing testing and surveillance, or other requirements, including a Risk Evaluation and Mitigation Strategy, or REMS, to monitor the safety or efficacy of the products, and in turn prevent us from commercializing and generating revenues from the sale of our current or future drug candidates.

 

     

    - I-2-51 - 

    

SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

We rely completely on third parties to manufacture our preclinical and clinical drug supplies and we intend to rely on third parties to produce commercial supplies of any approved drug candidate. Our third-party manufacturers will be subject to ongoing regulatory review and may fail to obtain and maintain regulatory approval of their facilities, fail to provide us with sufficient quantities of drug product or fail to do so at acceptable quality levels or prices.

 

We do not currently have nor do we plan to acquire the infrastructure or capability internally to manufacture our clinical drug supplies for use in our clinical trials, and we lack the resources and the capability to manufacture any of our drug candidates on a clinical or commercial scale. Instead, we rely on contract manufacturers for the production of our drug candidates. The facilities used by our contract manufacturers must be approved by the applicable regulatory authorities, including the FDA, pursuant to inspections that will be conducted after an NDA is submitted to the FDA. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the FDA’s strict regulatory requirements, they will not be able to secure or maintain FDA approval for the manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or any other applicable regulatory authority does not approve these facilities for the manufacture of our drug candidates or if it withdraws any such approval in the future, or if our contract manufacturers decide they no longer want to manufacture our products, we may need to find alternative manufacturing facilities, and we might not be able to identify manufacturers for clinical or commercial supply on acceptable terms, or at all, which would significantly impact our ability to develop, obtain regulatory approval for or market our drug candidates.

 

We rely on our manufacturers to purchase from third-party suppliers the materials necessary to produce our drug candidates for our clinical trials. There are a small number of suppliers for certain capital equipment and raw materials that we use to manufacture our drugs. We do not have any control over the process or timing of the acquisition of these raw materials by our manufacturers. Moreover, we currently do not have any agreements for the commercial production of these raw materials. Although we generally do not begin a clinical trial unless we believe we have a sufficient supply of a drug candidate to complete the clinical trial, any significant delay in the supply of a drug candidate or the raw material components thereof for an ongoing clinical trial due to the need to replace a third-party manufacturer or supplier could considerably delay completion or increase the cost of our clinical trials and, depending upon the period of delay, require us to commence new clinical trials at additional expense or terminate clinical trials completely, any of which could delay product testing and potential regulatory approval of our drug candidates. If our manufacturers or we are unable to purchase these raw materials after regulatory approval has been obtained for our drug candidates, the commercial launch of our drug candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our drug candidates.

 

In addition, the manufacture of pharmaceutical products is complex and requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter difficulties in production, particularly in scaling up and validating initial production and absence of contamination. These problems include difficulties with production costs and yields, quality control, including stability of the product, quality assurance testing, operator error, shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. Furthermore, if contaminants are discovered in our products or in the manufacturing facilities in which our products are made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. We cannot assure you that instability or other issues relating to the manufacture of any of our products will not occur in the future.

 

Any adverse developments affecting our clinical or commercial manufacturing operations for our products may result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls, or other interruptions in the supply of our products. We may also have to take inventory write-offs and incur other charges and expenses for products that fail to meet specifications, undertake costly remediation efforts or seek more costly manufacturing alternatives. Accordingly, failures or difficulties faced at any level of our supply chain could materially adversely affect our business and delay or impede the development and commercialization of our drug candidates and could have a material adverse effect on our business, prospects, financial condition or results of operations.

 

     

    - I-2-52 - 

    

SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

We face significant competition from other biotechnology and pharmaceutical companies and our operating results will suffer if we fail to compete effectively.

 

The biotechnology and pharmaceutical industries are intensely competitive. We have competitors both in the United States and internationally, including major multinational pharmaceutical companies, biotechnology companies and universities and other research institutions. Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff, experienced marketing and manufacturing organizations and well-established sales forces. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing, on an exclusive basis, drug products that are more effective or less costly than any drug candidate that we are currently developing or those we may develop.

 

Our competitors may:

 

	
 

	
•

	
develop products that are safer or more effective than our product candidates;

	
 

	
•

	
obtain FDA and other regulatory approvals or reach the market with their products more rapidly than we can, reducing the potential sales of our product candidates;

	
 

	
•

	
devote greater resources to market or sell their products;

	
 

	
•

	
adapt more quickly to new technologies and scientific advances;

	
 

	
•

	
initiate or withstand substantial price competition more successfully than we can;

	
 

	
•

	
have greater success in recruiting skilled scientific workers from the limited pool of available talent;

	
 

	
•

	
more effectively negotiate third-party licensing and collaboration arrangements; and

	
 

	
•

	
take advantage of acquisition or other opportunities more readily than we can.

 

The availability and price of our competitors’ products could limit the demand, and the price we are able to charge, for our drug candidates, if approved. In addition, established pharmaceutical companies may invest heavily to accelerate search and development of novel compounds or to in-license novel compounds that could make our drug candidates less competitive. Any new product that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be commercially successful. Accordingly, our competitors may succeed in obtaining patent protection, receiving FDA approval or discovering, developing and commercializing medicines before we do, which would have a material adverse impact on our business.

 

We may be unable to establish sales and marketing capabilities necessary to successfully commercialize our potential products.

 

We currently have no direct sales or marketing capabilities. We may rely on third parties to market our drug candidates or we may out-license these products prior to the time when sales and marketing capabilities are needed. We may be unable to establish marketing, sales and distribution capabilities necessary to commercialize and gain market acceptance for our potential products and be competitive. In addition, co-promotion or other marketing arrangements with third parties to commercialize our potential drug candidates could significantly limit the revenues we derive from these products, and these third parties may fail to commercialize our compounds successfully.

     

    - I-2-53 - 

    

SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

If our drug candidates do not gain market acceptance, our business will suffer.

 

Even if clinical trials demonstrate the safety and efficacy of our drug candidates and the necessary regulatory approvals are obtained, our drug candidates may not gain market acceptance among physicians, patients, healthcare payors and other members of the medical community. The degree of market acceptance of any drug candidate that we may develop will depend on a number of factors, including:

 

	
 

	
•

	
their degree of clinical efficacy and safety;

	
 

	
•

	
their advantage over alternative treatment methods;

	
 

	
•

	
our ability to gain acceptable reimbursement and the reimbursement policies of government and third-party payors; and

	
 

	
•

	
the quality of the distribution capabilities for our drug candidates.

 

Physicians may be reluctant to switch from existing drug products or may choose other new drug products. Physicians, patients, third-party payors and the medical community may not accept and use our drug candidates. If our products do not achieve significant market acceptance and use, it would have a material adverse impact on our business, prospects, financial condition and results of operations.

 

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our drug candidates.

 

We face an inherent risk of product liability as a result of the clinical testing of our drug candidates and will face an even greater risk if we commercialize any products. For example, we may be sued if any drug candidate we develop allegedly causes injury or is found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to halt or limit commercialization of our drug candidates. Regardless of the merits or eventual outcome, liability claims may result in:

 

	
 

	
•

	
decreased demand for our drug candidates or products that we may develop;

	
 

	
•

	
injury to our reputation;

	
 

	
•

	
withdrawal of clinical trial participants;

	
 

	
•

	
initiation of investigations by regulators;

	
 

	
•

	
costs to defend the related litigation;

	
 

	
•

	
a diversion of management’s time and our resources;

	
 

	
•

	
substantial monetary awards to trial participants or patients;

	
 

	
•

	
product recalls, withdrawals or labeling, marketing or promotional restrictions;

	
 

	
•

	
loss of revenue;

	
 

	
•

	
exhaustion of any available insurance and our capital resources; and

	
 

	
•

	
the inability to commercialize our drug candidates.

 

We may not have sufficient resources to successfully defend or satisfy any liability resulting from a potential product liability claim. Our inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop. We will carry product liability insurance covering our clinical trials at a level we believe to be customary; however, our coverage may not be adequate in scope to protect us from a successful product liability claim. If we determine that it is prudent to increase our product liability coverage due to the commercial launch of any approved product, we may be unable to obtain such increased coverage on acceptable terms, or at all. This insurance, even if we can obtain and maintain it, may not be sufficient to provide us with adequate coverage against potential liabilities.

 

     

    - I-2-54 - 

    

SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

Failure to obtain marketing approval in international jurisdictions would prevent our drug candidates from being marketed abroad.

 

In order to market and sell our products in the European Union and many other jurisdictions, we or our third-party collaborators must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We or these third parties may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. However, the failure to obtain approval in one jurisdiction may compromise our ability to obtain approval elsewhere. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market.

 

Risks Related to Our Intellectual Property

 

If our efforts to protect the proprietary nature of the intellectual property related to our technologies are not adequate, we may not be able to compete effectively in our market.

 

We rely upon a combination of patents, trade secret protection, exclusive dealing and confidentiality agreements to protect the intellectual property related to our technologies and drug candidates. Any disclosure to or misappropriation by third parties of our confidential proprietary information could enable competitors to quickly duplicate or surpass our technological achievements, thus eroding our competitive position in our market.

 

For certain of our drug candidates, there are third parties who have patents or pending patent applications that they may claim necessitate payment of a royalty or prevent us from commercializing these product candidates in certain territories.

 

Patent disputes are frequent, costly and can preclude, delay or increase the cost of commercialization of products. We may be in the future involved in patent litigation. A patent dispute or litigation may not discourage a potential violator from bringing the product that is alleged to infringe to market prior to a final resolution of the dispute or litigation. The period of time from inception until resolution of a patent dispute or litigation is subject to the availability and schedule of the court, agency or tribunal before which the dispute or litigation is pending. We may be subject to competition during this period and may not be able to fully recover for the losses, damages, and harms we incur from the infringing product even if we prevail. Moreover, if we lose or settle current or future litigations at certain stages or entirely, we could be subject to competition and/or significant liabilities, be required to enter into third-party licenses for the infringed product or technology or be required to cease using the technology or product in dispute. We cannot guarantee that such licenses will be available on terms acceptable to us, or at all. Further, under the Hatch- Waxman Act, our drug candidates approved by the FDA under the FDCA may be the subject of patent litigation with generic competitors before expiry of the five-year period of data exclusivity provided for under the Hatch-Waxman Act and prior to the expiration of the patents listed for the product.

 

We continue to seek patent protection relating to our products, including patents on our drug candidates, specific processes for making our drug candidates, formulations and particular uses of our drug candidates. However, competitors may be able to invalidate, design around or otherwise circumvent our patents and sell competing products. Although we continue to develop new products, and obtain patent protection for these new drug candidates, we may not be able to replace the revenue lost upon the expiration of the patents on our current drug candidates.

     

    - I-2-55 - 

    

SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

Any inability to license proprietary technologies or processes from third parties which we use in connection with the development and manufacture of our product candidates may impair our business.

 

Other companies, universities and research institutions have or may obtain patents that could limit our ability to use, manufacture, market or sell our drug candidates or impair our competitive position. To the extent that valid third party patent rights cover our drug candidates, we or our strategic collaborators would be required to seek licenses from the holders of these patents in order to manufacture, use or sell these products, and payments under the licenses would reduce our profits from these products. We are currently unable to predict the extent to which we may wish or be required to acquire rights under third-party patents and the availability and cost of acquiring such rights, or whether a license to such patents will be available on acceptable terms or at all. There may be patents in the United States or in foreign countries or patents issued in the future that are unavailable for license on acceptable terms. Our inability to obtain required third party licenses may hinder our ability to manufacture and market our drug candidates.

 

Any licensing or collaboration arrangements that we may enter into in the future may not be successful, which could adversely affect our ability to develop and commercialize our product candidates. We may not be able to identify suitable licensors or collaborators and, even if we do, our dependence on such relationships may adversely affect our business.

 

Because we have limited resources, we may seek to enter into licensing or collaboration agreements with other pharmaceutical or biotechnology companies for the development of other therapies. We may be unable to secure collaborative licensing or other arrangements that are necessary for us to further develop and commercialize such therapies. Supporting diligence activities conducted by potential collaborators and negotiating the financial and other terms of a license or collaboration agreement are long and complex processes with uncertain results.

 

Any failure by our future partners to perform their obligations or any decision by future partners to terminate these agreements could negatively impact our ability to successfully develop, obtain regulatory approvals for and commercialize a product candidate. If we grant exclusive rights to such partners, we could be precluded from potential commercialization of our product candidates within the territories in which we have a partner.

 

Further, our potential future collaborators may develop alternative products or pursue alternative technologies either on their own or in collaboration with others, including our competitors, and the priorities or focus of our collaborators may shift such that our product candidates receive less attention or resources than we would like, or they may be terminated altogether. Any such actions by our potential future collaborators may harm our business prospects and ability to earn revenues. In addition, we could have disputes with our potential future collaborators, such as the interpretation of terms in our agreements. Any such disagreements could lead to delays in the development or commercialization of our product candidates or could result in time-consuming and expensive litigation or arbitration, which may not be resolved in our favor.

 

Risks Related to Ownership of our Securities

 

We do not know whether an active, liquid and orderly trading market will develop for our securities or what the market value of our securities will be and as a result it may be difficult for you to sell our securities which you may own.

 

Our securities are not listed on any stock exchange and may never be listed. You may not be able to sell your securities at all in the absence of an active, liquid and orderly trading market for our securities. Further, the absence of an active market may also impair our ability to raise capital by selling our securities and may impair our ability to enter into strategic partnerships or acquire companies or products by using our securities as consideration.

 

We do not intend to pay dividends on our securities so returns will be limited to any appreciation in the value of our securities.

 

We have never declared or paid any cash dividend on our securities. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to security holders will therefore be limited to the appreciation of their securities.

 

     

    - I-2-56 - 

    

SAVANT ADDICTION MEDICINE, LLC and CARVE-OUT OF SAVANT HWP, INC.
Management’s Discussion and Analysis

 

Future sales and issuances of our securities or rights to purchase securities, could result in additional dilution of the percentage ownership of each equity holder and could cause the value of our securities to fall.

 

We expect that significant additional capital may be needed in the future to continue our planned operations, including conducting clinical trials, commercialization efforts and expanded research and development activities. To raise capital, we may sell securities, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. Such sales may result in material dilution to our existing security holders and new investors could gain rights, preferences and privileges senior to the existing holders of our securities, including the securities sold in this offering.

 

In addition to the above risks, businesses are often subject to risks not foreseen or fully appreciated by management. In reviewing this MD&A, you should keep in mind that other possible risks could be or become important.

 

     

     -J-1-

    

APPENDIX J
INFORMATION CONCERNING THE RESULTING ISSUER

 

Corporate Structure

 

The Resulting Issuer will be the entity resulting from the Plan of Arrangement between Broadway, SpinCo, Delaware Subco and MindMed and will be renamed “Mind Medicine (MindMed) Inc.” The Resulting Issuer will continue to be governed by the BCBCA. The registered office and records office of the Resulting Issuer will be located at 1166 Alberni Street, Suite 1604, Vancouver, BC V6E 3Z3. The head office will be located at 365 Bay Street, Suite 800, Toronto, Ontario M5H 2V1.

 

All necessary amendments to the articles of Broadway will be made as of the date of this Circular. See Appendix “B”

– Arrangement Resolution and Appendix “G” – Authorized Capital Amendment – Multiple Voting Share Terms.

 

Narrative Description of the Business

 

General

 

The business of the Resulting Issuer will be the business of MindMed as currently conducted by MindMed and as conducted by MindMed prior to the date hereof. For a full description of the business of MindMed and significant milestones, see above under Appendix “I” - Additional Information concerning MindMed– Narrative Description of the Business.

 

Description of Securities

 

The authorized capital of Resulting Issuer will consist of an unlimited number of Resulting Issuer Shares of which, following completion of the Arrangement, there are expected to be 204,780,984 issued and outstanding.

 

Resulting Issuer Shares

 

The Resulting Issuer will be authorized to issue an unlimited number of Subordinate Voting Shares and an unlimited number of Multiple Voting Shares. The holders of Subordinate Voting Shares will be entitled to receive notice of and attend all meetings of the shareholders of Resulting Issuer and will be entitled to one vote in respect of each Subordinate Voting Share held at such meetings. Upon any liquidation, dissolution or winding-up of Resulting Issuer, the holders of Subordinate Voting Shares will be entitled to share rateably in the remaining assets of Resulting Issuer.

 

The holders of Multiple Voting Shares will be entitled to receive notice of and attend all meetings of the shareholders of Resulting Issuer and will each carry 100 votes per Multiple Voting Share. Upon any liquidation, dissolution or winding-up of Resulting Issuer, the holders of Multiple Voting Shares will, subject to the prior rights of the holders of any shares of the Corporation ranking in priority to the Multiple Voting Shares, be entitled to participate rateably along with all other holders of Multiple Voting Shares (on an as-converted to Subordinate Voting Share basis) and Subordinate Voting Shares.

 

The Multiple
Voting Shares contain special provisions forcing any person making an offer for all or a majority of the Majority Voting
Shares to also make the same offer to holders of the Subordinate Voting Shares. See Appendix “G” – Authorized
Capital Amendment – Multiple Voting Share Terms.

 

     

     -J-2-

    

Pro Forma Consolidated Capitalization

 

The following table sets forth the pro forma capitalization of the Resulting Issuer based on the pro forma unaudited consolidated statement of financial position of the Resulting Issuer set forth in Schedule 1 to this Appendix “J” to this Circular and should be read in conjunction with such pro forma unaudited consolidated statement of financial position and the notes thereto:

 

	
Designation of Security

	
 

	
Amount Authorized or to be Authorized

	
 

	
 

	
Amount Outstanding as at the date of the Completion of the Arrangement after Giving Effect to the Arrangement

	
 

	
Resulting Issuer Shares(1)

	
 

	
 

	
Unlimited

	
 

	
 

	
 

	
204,780,984

	
 

	
Resulting Issuer Options(2)

	
 

	
 

	
20,478,098

	
 

	
 

	
 

	
381,250

	(2)

	
Resulting Issuer Warrants

	
 

	
 

	
387,563

	
 

	
 

	
 

	
387,563

	
 

	
Compensation Options

	
 

	
 

	
3,247,053

	(4)

	
 

	
 

	
3,247,053

	(4)

 

Notes

	
(1)

	
Each Multiple Voting Share equals 100 Subordinate Voting Shares (please see Appendix “G” for a detailed description of the terms of Multiple Voting Shares). For this reason, the Resulting Issuer calculates the number of Subordinate Voting Shares that are issued and outstanding as if all Multiple Voting Shares have been converted to Subordinate Voting Shares.

	
(2)

	
A total of 3,400,000 Broadway Options are outstanding. 450,000 Broadway Options issued to Shawn Parnham are equivalent to 100,000 Broadway Common Shares. Broadway Options are subject to the Consolidation Ratio resulting in 381,250 options outstanding. However, if Broadway Shareholders approve the Resulting Issuer Option Plan, all issued and outstanding Broadway Options will be cancelled within 30 days after the Effective Date as per the Broadway Stock Option Plan.

	
(3)

	
A total of 3,100,500 Broadway Warrants are outstanding. Broadway Warrants are subject to the Consolidation Ratio resulting in 387,563 warrants outstanding.

	
(4)

	
1,341,033 MindMed Compensation Options were issued in the first tranche of the MindMed December Offering. It is anticipated that an additional 26,682,648 Class D shares will be issued in the second tranche of the MindMed December Offering which would result in an estimated 1,906,020 MindMed Compensation Options.

 

Fully-Diluted Share Capital

 

In addition to the information set out in the capitalization table above, the following table sets out the fully diluted share capital of the Resulting Issuer immediately following completion of all of the transactions contemplated herein.

 

	
 

	
 

	
Number of Resulting Issuer Shares

	
 

	
 

	
Percentage of Total Diluted Resulting Issuer Shares After Giving Effect to Arrangement

	
 

	
Outstanding Number of all Classes of MindMed Shares post MindMed December Offering

	
 

	
 

	
198,548,458

	
 

	
 

	
 

	
86.75

	
%

	
Outstanding Number of Broadway Common Shares Post-Consolidation

	
 

	
 

	
6,232,526

	
 

	
 

	
 

	
2.72

	
%

	
TOTAL Undiluted

	
 

	
 

	
204,780,984

	
 

	
 

	
 

	
89.47

	
%

	
Resulting Issuer Shares to be issued on exercise of Compensation Options

	
 

	
 

	
3,247,053

	
 

	
 

	
 

	
1.42

	
%

	
Resulting Issuer Shares to be issued on exercise of Resulting Issuer Warrants

	
 

	
 

	
387,563

	
 

	
 

	
 

	
0.17

	
%

	
Resulting Issuer Shares to be issued on exercise of Resulting Issuer Options

	
 

	
 

	
381,250

	
(1)

	
 

	
 

	
0.17

	
%

     

     -J-3-

    

	
 

	
 

	
Number of Resulting Issuer Shares

	
 

	
 

	
Percentage of Total Diluted Resulting Issuer Shares After Giving Effect to Arrangement

	
 

	
Resulting Issuer Shares to be issued on exercise of Unallocated Resulting Issuer Options

	
 

	
 

	
20,081,848

	
 

	
 

	
 

	
8.77

	
%

	
TOTAL Diluted

	
 

	
 

	
24,097,714

	
 

	
 

	
 

	
10.53

	
%

	
TOTAL Number of Fully Diluted Resulting Issuer Shares

	
 

	
 

	
228,878,697

	
 

	
 

	
 

	
100

	
%

 

Note

	
(1)

	
A total of 3,400,000 Broadway Options are outstanding. 450,000 Broadway Options issued to Shawn Parnham are equivalent to 100,000 Broadway Common Shares. Broadway Options are subject to the Consolidation Ratio resulting in 381,250 options outstanding.

 

Estimated Available Funds and Principal Purposes

 

Estimated Available Funds and Principal Purposes

 

Upon completion of the Arrangement, the Resulting Issuer will have estimated funds of approximately $12,400,000 available. The Resulting Issuer expects that the principal purpose of such funds will be used to effect MindMed’s business plan. Specifically, the Resulting Issuer intends to use the funds available for the following purposes (the following estimates based on 12-month breakdown):

 

	
Available Funds

	
 

	
Up to December 18, 2019 (CAD $)

	
 

	
Approximate working capital of the Resulting Issuer as of December 18, 2019

	
 

	
 

	
2,464,373.00

	
 

	
Gross Proceeds of Tranche 1 of the MindMed December Offering

	
 

	
 

	
6,194,726.00

	
 

	
Agents’ Fees on Tranche 1 of the MindMed December Offering

	
 

	
 

	
(281,741.00

	
)

	
Gross Proceeds of Tranche 2 of the MindMed December Offering

	
 

	
 

	
8,805,274.00

	
(1)

	
Agents’ Fees on Tranche 2 of the MindMed December Offering

	
 

	
 

	
(400,440.60

	
)(1)

	
Costs associated with regulatory approval of Arrangement

	
 

	
 

	
(200,000.00

	
)

	
Total Available Funds

	
 

	
 

	
16,582,191.40

	
 

	
Anticipated Use of Funds

	
 

	
 

	
 

	
 

	
Research and development

	
 

	
 

	
11,500,000.00

	
 

	
Lab Equipment

	
 

	
 

	
Nil

	
 

	
Utilities

	
 

	
 

	
Nil

	
 

	
Maintenance

	
 

	
 

	
Nil

	
 

	
Working Capital

	
 

	
 

	
482,191.40

	
 

	
General and Administration Costs for 12 Months following completion of the Arrangement

	
 

	
 

	
4,600,000.00

	
 

	
Total Anticipated Use of Funds

	
 

	
 

	
16,582,191.40

	
 

 

Note

	
(1)

	
Anticipated gross proceeds and agents’ fee for Tranche 2 of the MindMed December Offering.

 

     

     -J-4-

    

It is currently anticipated that the Resulting Issuer’s unallocated working capital will be used for such purposes as determined by management from time to time.

 

The Resulting Issuer will utilize the funds available to it upon completion of the Arrangement for the principal purposes indicated above. Notwithstanding the foregoing, there may also be circumstances where, for sound business reasons, a reallocation of funds may be necessary for the Resulting Issuer to achieve its objectives. The Resulting Issuer may require additional funds in order to fulfill all of the Resulting Issuer’s expenditure requirements to meet its objectives, in which case the Resulting Issuer expects to either issue additional shares or incur indebtedness. The Resulting Issuer anticipates completing a financing in the second quarter of 2020 to raise approximately $16,000,000 (US$12,000,000) in which case, research and development expenditure would increase to $24,500,000 and general and administration costs would increase to $6,600,000. There can be no assurance that additional funding required by the Resulting Issuer will be available if required. However, it is anticipated that the available funds will be sufficient to satisfy the Resulting Issuer’s objectives over the next 12 months.

 

Dividend Record and Policy

 

There will be no restrictions on the Resulting Issuer’s ability to pay dividends on the Resulting Issuer Shares other than the Resulting Issuer’s financial position. It is expected that the Resulting Issuer will retain future profits to finance further growth and that the Resulting Issuer will not pay dividends in the near future. However, the Resulting Issuer may consider paying dividends on the Resulting Issuer Shares in the future when circumstances permit, having regard to, among other things, its earnings, cash flow and financial requirements, as well as relevant legal and business considerations. All of the Resulting Issuer Shares are entitled to an equal share in any dividends declared and paid.

 

Principal Securityholders

 

To the knowledge of Broadway and MindMed’s directors and officers, and based on existing information as of the date hereof, no person or company, upon completion of the Arrangement will, beneficially own, or control or direct, directly or indirectly, voting securities of the Resulting Issuer carrying 10% or more of the voting rights attached to any class of voting securities of the Resulting Issuer other than:

 

	
 

	
 

	
Number of Shares Owned (Percentage of Class and Type of Ownership)

	
 

	
Name of Shareholder & Municipality of Residence

	
 

	
Resulting Issuer Shares

	
 

	
 

	
Percentage of Voting Rights(1)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Savant Addiction Medicine, LLC Wilmington Delaware

	
 

	
550,000 Multiple Voting Shares(2)

	
 

	
 

	
 

	
26.86%

	
 

 

Notes

	
(1)

	
Percentage of voting rights is calculated based on 204,630,984 Resulting Issuer Shares.

	
(2)

	
Each Multiple Voting Share equals 100 Subordinate Voting Shares (please see Appendix “G” for a detailed description of the terms of Multiple Voting Shares) thus, 550,000 Multiple Voting Shares is equivalent to 55,000,000 Subordinate Voting Shares. For this reason, the Resulting Issuer calculates the number of Subordinate Voting Shares that are issued and outstanding as if all Multiple Voting Shares have been converted to Subordinate Voting Shares.

 

Directors and Executive Officers of the Resulting Issuer

 

Summary Information on Proposed Directors and Officers

 

It is expected that upon completion of the Arrangement the Resulting Issuer will have a board of six individuals, all of whom shall be nominated by MindMed. As well, it is anticipated that the Resulting Issuer will form an executive committee consisting of Stephen Hurst (Founder, Executive Director, Co-Chief Executive Officer and Secretary), JR Rahn (Director and Co-Chief Executive Officer) and Scott Freeman (President and Chief Medical Officer) to handle and agree on the coordination of the various aspects of the business and to oversee the implementation of the company’s business plan, including the hiring of a full-time Chief Executive Officer, for which a comprehensive search process is underway.

 

     

     -J-5-

    

The following are the names, ages and municipalities of residence of those individuals who will serve as directors and officers of the Resulting Issuer, their positions and offices with the Resulting Issuer, their principal occupations during the last five years, the number of Resulting Issuer Shares that each will hold upon completion of the Arrangement and the percentage of the class that such holdings represent. The information concerning the initial directors of Resulting Issuer is as furnished by such directors.

 

	
Name & Municipality of Residence

	
 

	
Proposed Position with Resulting Issuer

	
 

	
Principal Occupations for the Last Five Years

	
 

	
Period as Director or Officer of MindMed

	
 

	
Number and Percentage of Resulting Issuer Shares(1)

	
 

	
Number and Percentage of Resulting Issuer Options(5)

	
Stephen Hurst Reno,

Nevada, USA Age: 64

	
 

	
Founder, Executive Chair, Co- Chief Executive Officer and Secretary

	
 

	
Prior to co-founding MindMed, Mr. Hurst was Co-founder & CEO of Savant HWP, Inc. (2009-2019) a biopharmaceutical Corporation developing new medicines for particularly challenging diseases including drug addiction and neglected infectious diseases

	
 

	
Director
May 30, 2019 until present Chief Executive Officer May 30, 2019 until

October 7,

2019 and Co- Chief Executive Officer from December 26,

2019 until present

	
 

	
17,075,676(2)

8.34%

	
 

	
Nil

	
 

	
 

	
 

	
 

	
 

	
 

	
Secretary December 23,

2019 until present

	
 

	
 

	
 

	
 

	
Paul Van Damme Toronto, Ontario, Canada

 

Age: 69

	
 

	
Chief Financial Officer

	
 

	
From 2012 to 2019 Mr. Van Damme held the CFO position at Structural Genomics Consortium, a British public/private partnership. He currently serves as a Director and Chair of the Audit Committee of XORTX Therapeutics and OncoQuest, a subsidiary of Quest PharmaTech. Mr. Van Damme

holds an MBA from the Rotman School of Management.

	
 

	
September 13, 2019 to

until present

	
 

	
Nil

	
 

	
Nil

	
Scott Freeman Las Vegas,

Nevada, USA

 

Age: 62

	
 

	
President and Chief Medical Officer

	
 

	
Prior to MindMed, Dr. Freeman was the Chief Medical Officer at Savant HWP, Inc.

	
 

	
Chief Medical Officer from September 13, 2019 to

until present;

President from

	
 

	
17,027,027(2)

8.31%

	
 

	
Nil

	
 

	
 

	
 

	
 

	
 

	
 

	
December 26,

2019 until present

	
 

	
 

	
 

	
 

     

     -J-6-

    

	
Don Gehlert Boulder, Colorado, USA

 

Age: 61

	
 

	
Chief Scientific Officer

	
 

	
Mr. Gehlert is a consultant for Matrix Pharma Consulting, LLC. Prior to acting as a consultant, Mr. Gehlert was a research fellow at Eli Lilly Company from 1989 to 2015.

	
 

	
September 13, 2019 until present

	
 

	
Nil

	
 

	
Nil

	
Jamon Alexander (JR) Rahn Boca Raton, Florida, USA

 

Age: 32

	
 

	
Founder, Director and Co-Chief Executive Officer

	
 

	
Before starting MindMed, Mr. Rahn worked in market expansion and operations at Uber. After leaving Uber, he was backed by the Silicon Valley tech accelerator Y Combinator for his company Upgraded. Upgraded has partnered with Apple to provide device

financing for Apple customers in Europe.

	
 

	
Director from July 23, 2019

until present

 

Co-Chief Executive Officer from December 26,

2019 until present

	
 

	
10,000,000

4.88%

	
 

	
Nil

	
Stanley Glick New York City, New

York, USA Age: 75

	
 

	
Director

	
 

	
Dr. Glick is the co-inventor
of 18- MC. His major research interest focuses on the neurobiology of drug addiction. His research has been funded by the NIDA
since 1972. Dr. Glick is the Director Emeritus of the Center for Neuro- pharmacology and Neuroscience (CNN), Albany Medical College,
Albany, NY and was Director of the CNN 2000 until his retirement in 2014.

	
 

	
October 8,

2019 until present

	
 

	
Nil

	
 

	
Nil

     

     -J-7-

    

	
Bruce Linton Ottawa, Ontario, Canada

 

Age: 53

	
 

	
Director

	
 

	
Mr. Linton is Special Advisor with Better Choice Company, which is an animal health and wellness cannabinoid company that acquired TruPet LLC, an online seller of ultra-premium, all-natural pet food, treats and supplements, with a special focus on freeze dried and dehydrated raw products. Bruce is also an Activist Investor with SLANG Worldwide Inc. (CSE:SLNG), a leading global cannabis consumer packaged goods company with a robust portfolio of renowned brands distributed across 2,600 stores in 12 U.S. states as well as with OG DNA Genetics Inc. (“DNA”). DNA has built and curated a seasoned genetic library and developed proven standard operating procedures for genetic selection, breeding, and cultivation. Mr. Linton is the Founder and Former Chairman and CEO of Canopy Growth Corporation (CGC/WEED), Co-Chairman and past CEO of Martello Technologies, and co-founder of Ruckify & Better Software.

	
 

	
September 20, 2019

until present

	
 

	
10,000,000(3)

4.88%

	
 

	
Nil

	
Perry Dellelce Toronto, Ontario, Canada

 

Age: 56

	
 

	
Director

	
 

	
Mr. Dellelce is a founder and managing partner of Wildeboer Dellelce LLP, one of Canada’s leading corporate finance and transactional law firms. Mr. Dellelce practices in the areas of securities, corporate finance and mergers and acquisitions. Mr. Dellelce serves on the boards of many of Canada’s leading businesses. Perry is chair of the NEO Exchange, Canada’s newest stock exchange. He is also a member of the board of Mount Logan Capital Inc. and Lendified Inc.

	
 

	
October 8,

2019 until present

	
 

	
6,621,041(4)

3.23%

	
 

	
Nil

     

     -J-8-

    

	
Brigid Makes Foster City, California, USA

 

Age: 64

	
 

	
Director

	
 

	
Ms. Makes has served as an independent consultant for primarily private medical device companies since July 2017. Prior to that, Ms. Makes served as Senior Vice President and Chief Financial Officer of Miramar Labs, a global medical device company dedicated to bringing innovative and clinically proven applications to treat unmet needs in the aesthetic marketplace, which was acquired by Sientra in July 2017. From 2006 to 2011 Ms. Makes served in the same roles for AGA Medical, a medical device company specializing in the treatment of cardiovascular defects, which was acquired by St. Jude Medical, another medical device company, in November 2010.

	
 

	
December 11, 2019

until present

	
 

	
Nil

	
 

	
Nil

 

Notes

	
(1)

	
Percentage based on 204,780,984 Resulting Issuer Shares.

	
(2)

	
Scott Freeman and Sunray Asset Management, Inc., a family corporation that is wholly-owned by Stephen Hurst and his spouse as community property, each own approximately 38% of Savant, with the result that if Savant were to distribute its Class A Shares to its shareholders prior to the completion of the Arrangement, Scott Freeman would be entitled to receive 17,027,027 Resulting Issuer Shares and Sunray Asset Management Inc. would be entitled to receive 17,075,676 Resulting Issuer Shares upon completion of the Arrangement.

	
(3)

	
An additional 5,000,000 Resulting Issuer Shares through The Linton Family Trust.

	
(4)

	
Mr. Dellelce beneficially owns 6,121,041 Resulting Issuer Shares through Perry N. Dellelce Professional Corporation.

	
(5)

	
The Resulting Issuer Board will determine stock option grants, if any, to members, upon completion of the Arrangement.

 

If the Arrangement is completed the proposed directors, officers and promoters of the Resulting Issuer as a group, will control, directly or indirectly, 26,621,041 Resulting Issuer Shares, representing 13.00% of the outstanding Resulting Issuer Shares, not including 34,102,703 Resulting Issuer Shares, representing 16.65% of the outstanding Resulting Issuer Shares, if Savant, prior to the completion of the Arrangement, distributed its Class A Shares to, among others, Sunray Asset Management, Inc. and Scott Freeman.

 

The affairs of the Resulting Issuer are managed by a Board who are elected annually for a one (1) year term at each annual meeting of Shareholders and who hold office until the next annual meeting, or until their successors are duly elected or appointed or until a director vacates his office or is replaced in accordance with the by-laws of the Resulting Issuer.

 

Biographical Information

 

Biographical information for the Resulting Issuer directors and officers is summarized below:

 

Stephen Hurst, JD – Founder, Executive Chair, Co-Chief Executive Officer and Secretary

 

Steve has more than thirty-five years’ experience in the biopharmaceutical industry and is an advisor to non-profits furthering the research of psychedelics. Prior to co-founding MindMed, he was co-founder & CEO of Savant HWP, Inc. (2009-2019) a biopharmaceutical company developing new medicines for particularly challenging diseases including drug addiction and neglected infectious diseases. He served as Senior Vice President of Operations and General Counsel at Inhale Therapeutic Systems, Inc., (now Nektar Therapeutics, Inc.) (1994-2002), helping to raise more than $700 million in investment capital and out-license multiple clinical development projects, generating revenues in excess of $100 million annually. He has also served as a consultant to The World Bank and BIO Ventures for Global Health (2005-2009), advancing the PneumoAMC program which has vaccinated approximately 100 million children in the developing world. Steve is a graduate of Golden Gate University School of Law and the University of California, Berkeley.

 

     

     -J-9-

    
Paul Van Damme – Chief Financial Officer

 

Paul earned his CPA at PricewaterhouseCoopers, working in the London and Toronto offices. He has served in senior financial roles for several public companies in both the United States and Canada. While at Laidlaw Inc. he helped implement its expansion into Europe. After serving as Chief Financial Officer of TeleZone, a start-up wireless telecommunications company, he became CFO of a private biotech firm and helped raise venture financing to expand its product portfolio. Mr. Van Damme later joined Allelix Biopharmaceuticals and participated in the merger of the company with NPS Pharmaceuticals of Salt Lake City. He was also CFO of Lorus Therapeutics, Vasogen and Bradmer Pharmaceuticals. From 2012 to 2019 he held the CFO position at Structural Genomics Consortium, a British public/private partnership. He currently serves as a Director and Chair of the Audit Committee of XORTX Therapeutics and OncoQuest, a subsidiary of Quest PharmaTech. Paul holds an MBA from the Rotman School of Management.

 

Scott Freeman, MD – President and Chief Medical Officer

 

Prior to MindMed, Scott was the Chief Medical Officer at Savant HWP, Inc. Scott served as Vice President of Clinical Development at Onyx Pharmaceutical (2001-2006) and was head of both clinical development and operations, which executed the clinical trials for renal cell, melanoma, liver, lung, and colorectal cancer. He successfully performed the Phase 1, 2, and 3 studies, which lead to NDA approval of Nexavar. As Clinical Project Director at Schering-Plough Research Institute (1998-2001), his clinical projects included an anti-estrogen program, a breast cancer treatment, and a P53 gene therapy program trial. He was Associate Professor at Tulane University (1992-1998) and also served as the Medical Director for the Blood Center. Scott earned his BA from the University of Colorado in 1978 and received his MD from the University of Nevada in 1983.

 

Don Gehlert – Chief Scientific Officer

 

Don is a consultant for Matrix Pharma Consulting, LLC. Prior to acting as a consultant, he was a research fellow at Eli Lilly Company from 1989 to 2015. Don holds a PHD in Pharmacology from the University of Utah and a Bachelor of Science (Pharmacy) from Purdue University.

 

Jamon Alexander (JR) Rahn – Founder, Director and Co-Chief Executive Officer

 

JR is a former Silicon Valley tech executive who realized that transformational solutions to mental illness and addiction might lie in developing psychedelic medicines through FDA clinical trials. He spent 2+ years researching the space and began personally investing in psychedelic research. JR partnered with drug development veteran Stephen Hurst to start MindMed in 2019, assembling a leading clinical drug discovery and development team with vast experience conducting clinical trials and research on drug candidates derived from psychedelics. Before starting MindMed, JR worked in market expansion and operations at Uber. After leaving Uber, he was backed by the Silicon Valley tech accelerator Y Combinator for his company Upgraded. Upgraded is partnered with Apple to provide device financing for Apple customers in Europe.

 

Stanley Glick, PhD, MD – Director

 

Stan
is the co-inventor of 18-MC. His major research interest focuses on the neurobiology of drug addiction. His research has been funded
by the NIDA since 1972. Stan is the Director Emeritus of the Center for Neuro-pharmacology and Neuroscience (CNN), Albany Medical College,
Albany, NY and was Director of the CNN 2000 until his retirement in 2014. Previously, he was Chair of the Department of Pharmacology
and Neuroscience (1995-2000) and Chair of the Department of Pharmacology and Toxicology (1984-1995). Prior to joining Albany Medical
College, Dr. Glick was a professor of pharmacology at Mount Sinai School of Medicine (1971-1984). He also functioned as Vice- Chairman
(1975-1984) and was Associate Director of the Medical Scientist (MD-PhD) Training Program (1980- 1984). Stan has authored and co-authored
over 450 experimental papers, reviews, and abstracts. He has served as Editor of a scientific journal and of a professional newsletter,
in addition to serving on editorial boards and National Institute of Health (NIH) advisory committees.

 

     

     -J-10-

    

Bruce Linton – Director

 

Bruce has a passion for entrepreneurship and making a positive difference in the world. He brings a wealth of experience in building strong technology driven companies, developing world-class teams and positioning his companies to deliver exceptional customer value and service. In his newly appointed role as an Active Advisor, Bruce will serve as Executive Chairman with GAGE Cannabis Co., following completion of the acquisition of Innovations. GAGE is innovating and curating the highest quality cannabis experiences possible for patients in the state of Michigan and bringing internationally renowned brands to market. He is Special Advisor with Better Choice Company, which is an animal health and wellness cannabinoid company that acquired TruPet LLC, an online seller of ultra-premium, all-natural pet food, treats and supplements, with a special focus on freeze dried and dehydrated raw products. Bruce is also an Activist Investor with SLANG Worldwide Inc. (CSE:SLNG), a leading global cannabis consumer packaged goods company with a robust portfolio of renowned brands distributed across 2,600 stores in 12 U.S. states as well as with OG DNA Genetics Inc. OG DNA Genetics Inc. has built and curated a seasoned genetic library and developed proven standard operating procedures for genetic selection, breeding, and cultivation. He is the Founder and Former Chairman and CEO of Canopy Growth Corporation (CGC/WEED), Co-Chairman and past CEO of Martello Technologies, and co-founder of Ruckify & Better Software. Bruce chairs the board’s Compensation, Governance and Nomination Committee.

 

Perry Dellelce – Director

 

Perry is a founder and the managing partner of Wildeboer Dellelce LLP, one of Canada’s leading corporate finance and transactional law firms. Perry practices in the areas of securities, corporate finance and mergers and acquisitions. Perry serves on the boards of many of Canada’s leading businesses. Perry is chair of the NEO Exchange, Canada’s newest stock exchange. He is also a member of the board of Mount Logan Capital Inc. and Lendified Inc. He has received many awards and recognitions for his public service. Perry has been bestowed an honorary Doctorate of Laws from Laurentian University. In addition, the University of Notre Dame honoured Perry with the Distinguished Alumni Award from the Mendoza College of Business. He has also been recognized by the Western University with the Purple and White Award for long-standing dedication to the University and by the University of Ottawa by being admitted to the Common Law Honour Society recognizing the Law School’s most accomplished graduates. Perry is the past chair and a current member of the board of directors of the Sunnybrook Foundation and the current chair of the Canadian Olympic Foundation. Recently, Perry was awarded the Paul Harris Award by the Rotary Club of Sudbury, the Rotary Club’s highest recognition for community service.

 

Brigid Makes – Director

 

Ms. Makes has served as an independent consultant for primarily private medical device companies since July 2017. Prior to that, Ms. Makes served as Senior Vice President and Chief Financial Officer of Miramar Labs, a global medical device company dedicated to bringing innovative and clinically proven applications to treat unmet needs in the aesthetic marketplace, which was acquired by Sientra in July 2017. From 2006 to 2011 Ms. Makes served in the same roles for AGA Medical, a medical device company specializing in the treatment of cardiovascular defects, which was acquired by St. Jude Medical, another medical device company, in November 2010. Prior to AGA Medical, from 1999 to 2006, Ms. Makes served in a variety of executive positions, including as Chief Financial Officer, for Nektar Therapeutics (formerly Inhale Therapeutics), a biopharmaceutical company. Ms. Makes also served as Chief Financial Officer for Oravax, a biopharmaceutical company, from 1998 to 1999 and for Haemonetics Corp, a company specializing in the management of blood supplies, from 1995 to 1998. Ms. Makes holds a Bachelor’s degree in Finance and International Business from McGill University and an M.B.A. from Bentley University. Brigid chairs the board’s Audit Committee.

 

Corporate Governance of the Resulting Issuer

 

Set forth below is a description of the Resulting Issuer’s proposed corporate governance practices, which disclosure is provided pursuant to Form 58-101F1, which is attached to NI 58-101. The Resulting Issuer will implement and adopt a continuous disclosure policy and insider trading policy no later than the date on which the Resulting Issuer’s first set of financial statements must be filed following the Closing Date of the Arrangement.

 

     

     -J-11-

    

Board of Directors

 

NI 52-110 provides that a director is independent if he or she has no direct or indirect “material relationship” with the company. In addition to certain objective criteria, a “material relationship” is defined as a relationship which could, in the view of the Board of the Resulting Issuer, be reasonably expected to interfere with the exercise of a director’s independent judgment. The directors have determined that Bruce Linton, Perry Dellelce, Brigid Makes, and Stanley Glick, proposed members of the Board of the Resulting Issuer, will be independent as such term is defined in NI 58- 101, and that: (i) Stephen Hurst (Founder, Executive Chair, Co-Chief Executive Officer and Secretary) will not be independent as such term is defined in NI 52-110, as he as he will be an executive officer (as such term is defined in NI 51-102) of the Resulting Issuer; and (ii) JR Rahn (Founder, Director and Co-Chief Executive Officer) will not be considered independent as he will be an executive officer (as such term is defined in NI 51-102) of the Resulting Issuer. In assessing Form 58-101F2 and making the foregoing determinations, the circumstances of each director have been examined in relation to a number of factors.

 

Orientation and Continuing Education

 

It is expected that the Resulting Issuer Board will establish a formal orientation and education program for new Resulting Issuer Board members, with the Resulting Issuer being committed to providing such information so as to ensure that the new directors are familiar with the Resulting Issuer’s business and the procedures of the Resulting Issuer Board. Information may include the Resulting Issuer’s corporate and organizational structure, recent filings and financial information, governance documents and important policies and procedures. The Resulting Issuer Compensation, Nomination and Governance Committee will ensure that every director possesses the capabilities, expertise, availability and knowledge required to fill his or her position adequately. From time to time, the Resulting Issuer will arrange on-site tours of its operations, as applicable.

 

The Resulting Issuer Compensation, Nomination and Governance Committee will ensure that all new directors receive a comprehensive orientation. All new directors should fully understand the role of the Resulting Issuer Board and its committees, as well as the contribution individual directors are expected to make (including, in particular, the commitment of time and resources that the Resulting Issuer expects from its directors). All new directors are expected to understand the nature and operation of the business.

 

The Resulting Issuer Compensation, Nomination and Governance Committee will provide continuing education opportunities for all directors, so that individuals may maintain or enhance their skills and abilities as directors, as well as to ensure their knowledge and understanding of the Resulting Issuer’s business remains current.

 

Ethical Business Conduct

 

The Resulting Issuer will adopt an anti-bribery and anti-corruption policy (the “Anti-Bribery and Anti-Corruption Policy”). The Anti-Bribery and Anti-Corruption Policy is intended to ensure that the business activities of the Resulting Issuer are conducted in an honest and ethical manner, with a zero-tolerance approach to bribery and corruption. The Anti-Bribery and Anti-Corruption Policy will apply to all directors, officers, employees, consultants and contractors of the Resulting Issuer and compliance with the Anti-Bribery and Anti-Corruption Policy will constitute terms of service, employment and engagement, as the case may be. The Anti-Bribery and Anti-Corruption Policy will prohibit corrupt practices such as acceptance of bribes, inducements, advantages or kickbacks, and all directors, officers, employees, consultants and contractors of the Resulting Issuer will be required to comply with and report any violations of the Anti-Bribery and Anti-Corruption Policy. Violations of the Anti-Bribery and Anti- Corruption Policy will be investigated and, if violations are found to have occurred, could result in dismissal for gross misconduct.

 

The Board of the Resulting Issuer intends to adopt a formal written “Code of Business Conduct and Ethics”.

 

Audit Committee

 

Assuming completion of the Arrangement, it is proposed that the Resulting Issuer will have an Audit Committee comprised of Brigid Makes (Chair), Bruce Linton and Perry Dellelce, all of whom will be considered “independent” as that term is defined in Multilateral Instrument 52-110 – Audit Committees. Also, all of the Audit Committee members are expected to be “financially literate” as defined in Multilateral Instrument 52-110 – Audit Committees.All of the Audit Committee members have experience in financial matters; each has an understanding of accounting principles used to prepare financial statements and varied experience as to the general application of such accounting principles, as well as the internal controls and procedures necessary for financial reporting, garnered from working in their individual fields. It is anticipated that the Resulting Issuer will adopt a Charter of the Audit Committee in the form set out at Schedule 2 to this Appendix “J”.

 

     

     -J-12-

    

Nomination and Compensation of Directors

 

Compensation, Nomination and Governance Committee

 

Assuming completion of the Arrangement, it is proposed that the Resulting Issuer will have a Compensation, Nomination and Governance Committee comprised of Bruce Linton (Chair), Perry Dellelce and Brigid Makes, all of whom will be considered independent. The primary function of the Resulting Issuer Compensation, Nomination and Governance Committee will be to assist the Resulting Issuer Board with respect to management succession and development, administer, review and make recommendations with regards to compensation programs and practices, advise the Resulting Issuer Board on corporate governance matters, develop, recommend and over-see the assessment of effective governance practices and identify and recommend qualified candidates to the Resulting Issuer Board. Each member of the Resulting Issuer Compensation, Nomination and Governance Committee possesses the necessary skills and experience to effect the mandate of the Resulting Issuer Compensation, Nomination and Governance Committee. It is anticipated that the Resulting Issuer will adopt a Charter of the Compensation, Nomination and Governance Committee in the form set out at Schedule 3 to this Appendix “J”.

 

Other Committees

 

The Resulting Issuer Board has no other committees other than the Audit Committee and the Compensation, Nomination and Governance Committee. As the Resulting Issuer evolves, and its operations and management structure become more complex, the Resulting Issuer Board may consider constituting additional standing committees.

 

Assessments

 

The Resulting Issuer will not have a formal process for assessing the effectiveness of the Resulting Issuer Board as a whole, its committees or individual directors but will consider implementing one in the future should circumstances warrant.

 

Corporate Cease Trade Orders or Bankruptcies

 

Except as disclosed elsewhere herein (see below, “Penalties or Sanctions”) to the best of the Broadway’s knowledge, no director, proposed director or executive officer of Resulting Issuer is at the date hereof, or within the ten years prior to the date hereof has been, a director, chief executive officer or chief financial officer of any company (including Broadway) that, while that person was acting in that capacity:

 

	
 

	
(a)

	
was the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days; or

 

	
 

	
(b)

	
was subject to a cease trade order or similar order or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days, that was issued after the proposed director ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer.

 

To the best of Broadway’s and MindMed’s knowledge, no proposed director of Resulting Issuer is at the date hereof, or within the ten years prior to the date hereof has been, a director or executive officer of any company (including Broadway) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets.

 

     

     -J-13-

    

Individual Bankruptcies

 

No proposed director, officer, promoter or principal shareholder of Resulting Issuer is or has, within ten years prior to the date hereof, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold the assets of that individual.

 

Penalties or Sanctions

 

No proposed director or officer of Resulting Issuer has been subject to any penalties or sanctions imposed by a court relating to securities legislation or by any securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or been subject to any other penalties or sanctions imposed by a court or regulatory body or self-regulatory authority that would be likely to be considered important to a reasonable investor making a decision about the Arrangement.

 

Conflicts of Interest

 

Certain directors and officers of Resulting Issuer currently, or may in the future, act as directors or officers of other companies and, consequently, it is possible that a conflict may arise between their duties as a director or officer of Resulting Issuer and their duties as a director or officer of any other such company. There is no guarantee that while performing their duties for Resulting Issuer, the directors or officers of Resulting Issuer will not be in situations that could give rise to conflicts of interest. There is no guarantee that these conflicts will be resolved in favour of Resulting Issuer. The proposed directors and officers of Resulting Issuer are aware of the existence of laws governing accountability of directors and officers for corporate opportunity and requiring disclosure by directors and officers of conflicts of interest and the fact that Resulting Issuer will rely upon such laws in respect of any director’s or officer’s conflicts of interest or in respect of any breaches of duty by any of its directors or officers. All such conflicts must be disclosed by such directors or officers in accordance with the BCBCA, and they will govern themselves in respect thereof to the best of their ability in accordance with the obligations imposed upon them by law.

 

Other Reporting Issuer Experience

 

The following table sets out the proposed directors and officers of the Resulting Issuer that are, or have been within the last five years, directors, officers or promoters of other reporting issuers:

 

	
Name

	
 

	
Name & Jurisdiction of 
Reporting Issuer

	
 

	
Exchange

	
 

	
Position

	
 

	
From

	
 

	
To

	
Bruce Linton

	
 

	
Canopy Growth Corporation British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland

	
 

	
TSX, 
NYSE

	
 

	
Co-CEO

Chairman

	
 

	
March 26,

2014

	
 

	
July 2, 2019

	
 

	
Canopy Rivers Inc.

British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland

	
 

	
TSX

	
 

	
Chairman and Director

	
 

	
September 17, 2018

	
 

	
July 2, 2019

	
 

	
Thermal Energy International Inc.

British Columbia, Alberta, Manitoba and Ontario

	
 

	
TSXV

	
 

	
Director

	
 

	
August 25,

2012

	
 

	
November 28, 2016

 

 

     

     -J-14-

    

 

	
Name

	
 

	
Name & Jurisdiction of
 Reporting Issuer

	
 

	
Exchange

	
 

	
Position

	
 

	
From

	
 

	
To

	
 

	
 

	
LL One Inc.

British Columbia, Alberta and Ontario

	
 

	
TSXV

	
 

	
Director

	
 

	
August 8,

2019

	
 

	
Present

	
Martello Technologies Group Inc.

British Columbia, Alberta and Ontario

	
 

	
TSXV

	
 

	
CEO

 

Director

	
 

	
2013

 

August 16,

2018

	
 

	
2017

 

Present

	
 

 

 

 

Perry Dellelce

	
 

	
Mount Logan Capital Inc. British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland

	
 

	
NEO

	
 

	
Director

	
 

	
October 19,

2018

	
 

	
Present

	
Cricket Media Group Ltd.

Ceased Reporting

	
 

	
TSXV

	
 

	
Director

	
 

	
June 20,

2011

	
 

	
May 18,

2016

	
 

 

 

 

 

 Paul Van Damme

	
 

	
Galaxy Digital Holdings Ltd. British Columbia, Alberta, Manitoba, Ontario and Quebec

	
 

	
TSXV

	
 

	
CFO

	
 

	
September 
12, 2007

	
 

	
July 30,

2018

	
XORTX Therapeutics Inc. British Columbia, Alberta and Ontario

	
 

	
CSE

	
 

	
Director & Audit Committe e Chair

	
 

	
January
25, 2018

	
 

	
Present

	
Ellipsiz Communications Ltd. British Columbia, Quebec and Ontario

	
 

	
TSXV

	
 

	
CFO

	
 

	
June 21,

2011

	
 

	
November 4,

2015

	
ZipLocal Inc.

Ceased Reporting

	
 

	
TSXV

	
 

	
CFO

	
 

	
May 3,

2012

	
 

	
May 13,

2016

	
Bradmer Pharmaceuticals Inc.

Ceased Reporting

	
 

	
TSXV

	
 

	
CFO

	
 

	
January 1,

2010

	
 

	
July 30,

2018

Proposed Executive Compensation

 

The board of directors of MindMed has not yet determined the salaries and other compensation payable to its executives, leaving that decision to be made by the Compensation, Nomination and Governance Committee, as explained in Appendix “I” – Information Concerning MindMed – Executive Compensation and paying them on a consulting basis until appropriate, salaried compensation is determined and agreed to. Therefore, there is currently no proposed compensation to be reported with regard to the Named Executive Officers (“NEOs”) of the Resulting Issuer during the first 12 months following the Effective Date, with the expectation that the compensation of NEOs of the Resulting Issuer will be determined on or prior to the completion of the Arrangement.

 

     

     -J-15-

    

Indebtedness of Directors and Officers

 

	
 

Name and Principal Position

	
 

	
 

 

Involvement

	
 

	
Largest Amount Outstanding During Last Completed Financial Year

	
 

	
 

Amount Outstanding as at December 29,

2019

	
 

	
Financially Assisted Securities Purchases During Last Financial Year

	
 

	
 

 

Security for
 Indebtedness

	

Bruce Linton Director

	

	

Promissory Note(1)

	

	

US$500,000

	

	

US$500,000

	

	

5,000,000 MindMed
Class D Shares

	

	
Sole recourse of 
5,000,000 MindMed 
Class D Shares

 

Notes

	
(1)

	
One-quarter of the principal amount (being US$125,000) shall be automatically deemed to be repaid and satisfied on each six-month anniversary of the date of the date of the note, September 16, 2019.

 

Investor Relations Arrangements

 

No investor relations arrangements have been reached with any person to provide any promotion or investor relations services for the Resulting Issuer, other than the contract between MindMed and Primoris, which is scheduled to expire in March 2020. MindMed is currently interviewing and negotiating with a number of candidates to assist it with running an investor relations function and campaign once the Arrangement is completed.

 

Options to Purchase Securities

 

As of the date of this Circular, MindMed (and therefore, post-Arrangement, the Resulting Issuer) has no option-based awards outstanding held by the Named Executive Officers.

 

Escrowed Securities

 

In connection with the MindMed December Offering and as a condition to agency agreement entered into between MindMed and the Agents on December 19, 2019, officers, directors, shareholders holding 5.0% or more of MindMed Shares and all holders of MindMed Class B Shares (the “First Group Locked-Up Persons”) entered into lock-up agreements with MindMed commencing on the closing of the MindMed December Offering and ending six (6) months from the date the Resulting Issuer is listed on a recognized Canadian stock exchange. Employees of the Agent entered into voluntary lock-up agreements as First Group Locked-Up Persons. Additionally, all holders of MindMed Class A Shares (the “Second Group Locked-Up Persons”) entered into lock-up agreements with MindMed commencing on the closing of the MindMed December Offering with the following release schedule:

 

 

	
Date of Release

	
 

	
Percentage of Securities Released

	
6 months

	
 

	
10%

	
12 months

	
 

	
10%

	
18 months

	
 

	
10%

	
24 months

	
 

	
70%

 

     

     -J-16-

    

To the best knowledge of the management of Broadway and MindMed, as of the date of this Circular, the following securities are held in escrow and subject to contractual restrictions on transfer:

 

	
Designation of Class

	
 

	
Number of securities held in escrow or that are subject to a contractual restriction on transfer

	
 

	
Percentage of class

	
Multiple Voting Shares

	
 

	
550,000(1)(2)

	
 

	
100%(3)

	
Subordinate Voting Shares

	
 

	
35,000,000(4)

	
 

	
17.10%(5)

	
Subordinate Voting Shares

	
 

	
10,000,000(6)

	
 

	
4.89%(5)

	
Subordinate Voting Shares

	
 

	
6,121,041(7)

	
 

	
3.24%(5)

	
Subordinate Voting Shares

	
 

	
10,000,000(8)

	
 

	
4.89%(5)

	
Subordinate Voting Shares

	
 

	
2,250,000(9)

	
 

	
1.10%(5)

 

Notes

	
(1)

	
Lock-up agreement entered into pursuant to the MindMed December Offering.

 

	
(2)

	
Second Group Locked-Up Persons.

 

	
(3)

	
Percentage based on 550,000 Multiple Voting Shares issued and outstanding.

 

	
(4)

	
MindMed Class B Shareholders who entered into lock-up agreements as First Group Locked-Up Persons.

 

	
(5)

	
Percentage based on 204,780,984 Resulting Issuer shares issued and outstanding.

 

	
(6)

	
MindMed Shareholders holding 5.0% or more of issued and outstanding MindMed Shares who entered into lock-up agreements as First Group Locked-Up Persons.

 

	
(7)

	
Perry Dellelce, director of MindMed, entered into a lock-up agreement as a First Group Locked-Up Person.

 

	
(8)

	
Bruce Linton, director of MindMed, entered into a lock-up agreement as a First Group Locked-Up Person.

 

	
(9)

	
Employees of the Agents who entered into lock-up agreements as First Group Locked-Up Persons.

 

In addition to the First Group Locked-Up Persons and the Second Group Locked-Up Persons, as set out above, all of the Resulting Issuer Shares to be issued to Principals of the Resulting Issuer and certain other individuals as determined by the Exchange, will be subject to escrow restrictions, unless otherwise determined by the Exchange. Any escrow requirements imposed by the Exchange will restrict the ability of Principals and certain other individuals to sell, assign, hypothecate, transfer within escrow or otherwise deal with in any manner without the written consent of the Exchange while in escrow. Any entity controlled by one or more persons, that holds escrowed Resulting Issuer Shares may not participate in a transaction that results in a change of its control or a change in the economic exposure of the persons to the risks of holding escrowed Resulting Issuer Shares.

 

Auditors, Transfer Agent and Registrar

 

The auditors of the Resulting Issuer following completion of the Arrangement will be RSM Canada and the transfer agent and registrar for the Resulting Issuer Shares will be Odyssey Trust Company.

 

     

    - J-1-1-

    

SCHEDULE
1 TO APPENDIX J - PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS OF THE

RESULTING ISSUER

 

This Schedule contains the pro-forma financial statements of Broadway:

 

	
•

	
Pro forma consolidated statement of financial position as at the date of the most recent statement of financial position in the circular as if the Spinout Transaction and RTO had taken place on that date but is not reflected in the most recent consolidated statement of financial position of Broadway included in the circular;

 

	
•

	
Pro forma consolidated income statement giving effect to the RTO and Spinout Transaction for the most recently completed financial year for which statements are included as if the spinout had taken place at the beginning of the financial year;

 

	
•

	
Pro forma earnings per share based on the above consolidated financial statements

 

(begins on following page)

 

     

    - J-1-2-

    

 

Unaudited Pro Forma Consolidated Financial Statements of

Broadway Gold Mining Ltd.

(Expressed in United States Dollars) 

For the Year Ended August 31, 2019

 

 

     

    - J-1-3-

    

 

Broadway Gold Mining Ltd. 

Pro Forma Consolidated Statements of Financial Position 

(Expressed in United States Dollars) 

As at August 31, 2019 

 

		
 

	
Broadway Gold
Mining Ltd.
(in Canadian
Dollars

August 31, 2019

	
 

	
 

	
Mind Medicine, Inc
.(in US Dollars)
September 30,
2019

	
 

	
 

	
Savant
Combination
(as defined in Note
1, in US Dollars)
September 30,
2019

	
 

	
 

	
Delaware SubCo
(as defined in Note
1, in US Dollars)
September 30,
2019

	
 

	
 

	 	
 

	
 

	
Pro Forma
Adjustments
(in US Dollars)

	
 

	
 

	
Pro-Forma
Consolidated
(in US Dollars)

	
 

	
Cash

	
 

	
 

	
23,827

	
 

	
 

	
 

	
3,093,048

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
1

	
 

	
 

	
 

	
3(c

	
)

	
 

	
 

	
(5,904

	
)

	
 

	
 

	
3,110,972

	
 

	
Accounts receivable and deposits

	
 

	
 

	
6,745

	
 

	
 

	
 

	
1,729,051

	
 

	
 

	
 

	
1,108

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(b

	
)

	
 

	
 

	
(1,108

	
)

	
 

	
 

	
1,735,796

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
3(c

	
)

	
 

	
 

	
(1,671

	
)

	
 

	
 

	
(1,671

	
)

	
Notes receivable

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
Prepaid expenses

	
 

	
 

	
28,594

	
 

	
 

	
 

	
37,668

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(c

	
)

	
 

	
 

	
(7,086

	
)

	
 

	
 

	
59,176

	
 

	
Assets held for sale

	
 

	
 

	
3,843,419

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(a

	
)

	
 

	
 

	
(3,843,419

	
)

	
 

	
 

	
-

	
 

	
Total current assets

	
 

	
 

	
3,902,585

	
 

	
 

	
 

	
4,859,767

	
 

	
 

	
 

	
1,108

	
 

	
 

	
 

	
1

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(3,859,188

	
)

	
 

	
 

	
4,904,273

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Investment in Mind-Med

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
4,901,696

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(b

	
)

	
 

	
 

	
(4,948,748

	
)

	
 

	
 

	
(47,052

	
)

	
Intangible assets, net

	
 

	
 

	
-

	
 

	
 

	
 

	
5,362,500

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
5,362,500

	
 

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
5,362,500

	
 

	
 

	
 

	
4,901,696

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(4,948,748

	
)

	
 

	
 

	
5,315,448

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Total assets

	
 

	
 

	
3,902,585

	
 

	
 

	
 

	
10,222,267

	
 

	
 

	
 

	
4,902,804

	
 

	
 

	
 

	
1

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(8,807,936

	
)

	
 

	
 

	
10,219,721

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Accounts payable and accrued liabilities

	
 

	
 

	
192,256

	
 

	
 

	
 

	
802,934

	
 

	
 

	
 

	
100,452

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(b

	
)

	
 

	
 

	
(100,452

	
)

	
 

	
 

	
947,549

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
3(c

	
)

	
 

	
 

	
(47,641

	
)

	
 

	
 

	
 

	
 

	
Convertible promissory notes

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
200,000

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(b

	
)

	
 

	
 

	
(200,000

	
)

	
 

	
 

	
-

	
 

	
Related party notes payable

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
450,000

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(b

	
)

	
 

	
 

	
(450,000

	
)

	
 

	
 

	
-

	
 

	
Liabilities related to assets held for sale

	
 

	
 

	
72,119

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(a

	
)

	
 

	
 

	
(72,119

	
)

	
 

	
 

	
-

	
 

	
Total current liabilities

	
 

	
 

	
264,375

	
 

	
 

	
 

	
802,934

	
 

	
 

	
 

	
750,452

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(870,212

	
)

	
 

	
 

	
947,549

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Total liabilities

	
 

	
 

	
264,375

	
 

	
 

	
 

	
802,934

	
 

	
 

	
 

	
750,452

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(870,212

	
)

	
 

	
 

	
947,549

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Equity

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Share capital

	
 

	
 

	
7,381,694

	
 

	
 

	
 

	
11,127,442

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
1

	
 

	
 

	
 

	
3(e

	
)

	
 

	
 

	
(1,829,184

	
)

	
 

	
 

	
17,384,462

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
3(d

	
)

	
 

	
 

	
704,509

	
 

	
 

	
 

	
 

	
 

	
Equity in net assets

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
4,152,352

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(b

	
)

	
 

	
 

	
(4,199,404

	
)

	
 

	
 

	
(47,052

	
)

	
Contributed surplus

	
 

	
 

	
1,060,901

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(e

	
)

	
 

	
 

	
(262,891

	
)

	
 

	
 

	
798,010

	
 

	
Accumulated other comprehensive income

	
 

	
 

	
46,099

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(c

	
)

	
 

	
 

	
(11,423

	
)

	
 

	
 

	
34,676

	
 

	
Deficit

	
 

	
 

	
(4,850,484

	
)

	
 

	
 

	
(1,708,109

	
)

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(a

	
)

	
 

	
 

	
(3,771,300

	
)

	
 

	
 

	
(8,897,924

	
)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
3(c

	
)

	
 

	
 

	
2,136,478

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
3(e

	
)

	
 

	
 

	
(704,509

	
)

	
 

	
 

	
 

	
 

	
Total Equity

	
 

	
 

	
3,638,210

	
 

	
 

	
 

	
9,419,333

	
 

	
 

	
 

	
4,152,352

	
 

	
 

	
 

	
1

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(7,937,724

	
)

	
 

	
 

	
9,272,172

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Total equity and liabilities

	
 

	
 

	
3,902,585

	
 

	
 

	
 

	
10,222,267

	
 

	
 

	
 

	
4,902,804

	
 

	
 

	
 

	
1

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(8,807,936

	
)

	
 

	
 

	
10,219,721

	
 

 

The accompanying
notes are an integral part of these pro forma consolidated financial statements.

 

1

     

    - J-1-4-

    

 

Broadway Gold Mining Ltd. 

Pro Forma Consolidated Statements of Operations and Comprehensive Loss

(Expressed in United States Dollars) 

As at August 31, 2019

		
 

	
Broadway Gold
Mining Ltd.
(in Canadian
Dollars)
Year Ended August
31, 2019

	
 

	
 

	
Mind Medicine, Inc.
(in US Dollars)
Period Ended
September 30, 2019

	
 

	
 

	
Savant
Combination
(as defined in Note
1, in US Dollars)
Period Ended
September 30, 2019

	
 

	
 

	
Delaware SubCo
(as defined in Note
1, in US Dollars)
Period Ended
September 30, 2019

	
 

	
 

	 	
 

	
 

	
Pro Forma
Adjustments
(in US Dollars)

	
 

	
 

	
Pro-Forma
Consolidated
(in US Dollars)

	
 

	
Expenses

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Accounting and audit fees

	
 

	
 

	
64,003

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(c

	
)

	
 

	
 

	
(15,706

	
)

	
 

	
 

	
48,297

	
 

	
Acquisition related costs

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(d

	
)

	
 

	
 

	
804,619

	
 

	
 

	
 

	
804,619

	
 

	
Advertising and marketing expenses

	
 

	
 

	
18,957

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(c

	
)

	
 

	
 

	
(4,652

	
)

	
 

	
 

	
14,305

	
 

	
Amortization

	
 

	
 

	
8,859

	
 

	
 

	
 

	
137,500

	
 

	
 

	
 

	
500,000

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(g

	
)

	
 

	
 

	
250,000

	
 

	
 

	
 

	
887,500

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
3(a

	
)

	
 

	
 

	
(8,859

	
)

	
 

	
 

	
 

	
 

	
Consulting fees

	
 

	
 

	
312,217

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(c

	
)

	
 

	
 

	
(76,618

	
)

	
 

	
 

	
235,599

	
 

	
General and administrative expenses

	
 

	
 

	
54,452

	
 

	
 

	
 

	
1,109,806

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(a

	
)

	
 

	
 

	
23,582

	
 

	
 

	
 

	
1,180,265

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
3(c

	
)

	
 

	
 

	
(7,575

	
)

	
 

	
 

	
 

	
 

	
Legal fees

	
 

	
 

	
17,472

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(c

	
)

	
 

	
 

	
(4,288

	
)

	
 

	
 

	
13,184

	
 

	
Rent

	
 

	
 

	
20,966

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(c

	
)

	
 

	
 

	
(5,145

	
)

	
 

	
 

	
15,821

	
 

	
Research and development

	
 

	
 

	
-

	
 

	
 

	
 

	
451,385

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
451,385

	
 

	
Shareholder information and communication

	
 

	
 

	
9,295

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(c

	
)

	
 

	
 

	
(2,281

	
)

	
 

	
 

	
7,014

	
 

	
Share-based compensation

	
 

	
 

	
60,380

	
 

	
 

	
 

	
9,575

	
 

	
 

	
 

	
766

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(c

	
)

	
 

	
 

	
(14,817

	
)

	
 

	
 

	
55,904

	
 

	
Transfer agent and filing fees

	
 

	
 

	
37,130

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(c

	
)

	
 

	
 

	
(9,112

	
)

	
 

	
 

	
28,018

	
 

	
Travel expenses

	
 

	
 

	
16,832

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(c

	
)

	
 

	
 

	
(4,131

	
)

	
 

	
 

	
12,701

	
 

	
 

	
 

	
 

	
(620,563

	
)

	
 

	
 

	
(1,708,266

	
)

	
 

	
 

	
(500,766

	
)

	
 

	
 

	
-

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(925,017

	
)

	
 

	
 

	
(3,754,612

	
)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Write-off of exploration and evaluation asset

	
 

	
 

	
(47,400

	
)

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(c

	
)

	
 

	
 

	
11,632

	
 

	
 

	
 

	
(35,768

	
)

	
Gain on disposal of 18-MC program

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
2,000,000

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(f

	
)

	
 

	
 

	
(2,000,000

	
)

	
 

	
 

	
-

	
 

	
Equity in loss of Mind-Medicine Inc.

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
(598,304

	
)

	
 

	
 

	
-

	
 

	
 

	
 

	
3(f

	
)

	
 

	
 

	
598,304

	
 

	
 

	
 

	
-

	
 

	
Gain on fair value of warrants

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
11,612

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
11,612

	
 

	
Interest income

	
 

	
 

	
-

	
 

	
 

	
 

	
2,261

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
2,261

	
 

	
Interest expense

	
 

	
 

	
-

	
 

	
 

	
 

	
(2,104

	
)

	
 

	
 

	
(18,905

	
)

	
 

	
 

	
-

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
(21,009

	
)

	
Impairment of assets held for sale

	
 

	
 

	
(811,000

	
)

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(a

	
)

	
 

	
 

	
811,000

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
 

	
(858,400

	
)

	
 

	
 

	
157

	
 

	
 

	
 

	
1,394,403

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(579,064

	
)

	
 

	
 

	
(42,904

	
)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Net loss for the year

	
 

	
 

	
(1,478,963

	
)

	
 

	
 

	
(1,708,109

	
)

	
 

	
 

	
893,637

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(1,504,081

	
)

	
 

	
 

	
(3,797,516

	
)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Other comprehensive income

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Foreign currency translation gain

	
 

	
 

	
78,446

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
3(c

	
)

	
 

	
 

	
(11,423

	
)

	
 

	
 

	
67,023

	
 

	
Comprehensive loss for the year

	
 

	
 

	
(1,400,517

	
)

	
 

	
 

	
(1,708,109

	
)

	
 

	
 

	
893,637

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(1,515,504

	
)

	
 

	
 

	
(3,730,493

	
)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Weighted average number of common shares

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Basic and diluted

	
 

	
 

	
7,045,088

	
 

	
 

	
 

	
147,089,421

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
154,134,509

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Loss per share

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Basic and diluted

	
 

	
 

	
(0.20

	
)

	
 

	
 

	
(0.01

	
)

	
 

	
 

	
-

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
-

	
 

	
 

	
 

	
(0.02

	
)

 

The accompanying notes are an integral part of these pro forma consolidated financial statements.

 

2

     

    - J-1-5-

    

Broadway Gold Mining Ltd.

Notes to Pro Forma Consolidated Financial Statements

(Expressed in United States Dollars)

For the Year Ended August 31, 2019

 

	
1.

	
BASIS OF PRESENTATION

 

The accompanying unaudited pro forma consolidated statement of financial position and statement of operations of Broadway Gold Mining Ltd. (“Broadway”) give effect to the proposed reverse take- over (the “RTO”) by the current shareholders of Mind Medicine, Inc. (“MindMed”) as detailed in the plan of arrangement (the “Plan of Arrangement”) dated October 11, 2019 under the provisions of the Business Corporations Act (British Columbia) (the “Arrangement”).

 

The unaudited pro forma consolidated statement of financial position and statement of operations of Broadway (“pro forma financial statements”) have been prepared by the management of MindMed based on historical financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) for inclusion in the Filing Statement for the proposed RTO detailed in Note 2.

 

In the opinion of management, these pro forma financial statements include all adjustments necessary for fair presentation in accordance with IFRS. The pro forma financial statements have been adjusted to give effect to pro forma events that are directly attributable to the proposed RTO. In preparing these pro forma financial statements, adjustments have not been made to reflect the operating and administrative benefits that could result from the combination of the companies.

 

The pro forma financial statements are not intended to reflect the financial position that will exist following RTO, nor the statement of loss and comprehensive loss that may be obtained in the future. Actual amounts recorded when the RTO closes will likely differ from those recorded in the pro forma financial statements. Any potential synergies that may be realized and integration costs that may be incurred upon consummation of the RTO have been excluded from the pro forma financial statements.

 

The unaudited pro forma consolidated statement of financial position of Broadway as at August 31, 2019 is based on combining the audited statement of financial position of MindMed and audited combined statements of financial position of the Savant Combination as at September 30, 2019. The unaudited pro forma consolidated statement of operations of Broadway for the year ended August 31, 2019 is based on combining the audited statement of operations of MindMed for the nine month period ended September 30, 2019 and combined statements of operations of the Savant Combination for the nine month period ended September 30, 2019. The “Savant Combination” means the combined financial statements of Savant Addiction Medicine, LLC and the carve-out financial statements of Savant HWP, Inc.

 

The pro forma financial statements include the transfer of Broadway’s right, title and interest, and all associated liabilities, in the Broadway and Madison mine (the “Spin-Out Transaction”) to Madison Metals Inc. (“SpinCo”).

 

The pro forma financial statements are presented in US Dollars, unless otherwise noted. These pro forma financial statements should be read in conjunction with the above noted financial statements and the Arrangement.

 

3

     

    - J-1-6-

    

Broadway Gold Mining Ltd.

Notes to Pro Forma Consolidated Financial Statements

(Expressed in United States Dollars)

For the Year Ended August 31, 2019

 

	
2.

	
REVERSE TAKE-OVER

 

Broadway and MindMed entered into a definitive arrangement agreement (the “Arrangement Agreement) that will, if fully implemented, result in a RTO of Broadway by the current shareholders of MindMed by way of the Plan of Arrangement.

 

Subject to the approval of the Supreme Court of British Columbia (the “Court”), as well as all required TSX Venture Exchange (“TSX-V”), Aequitas NEO (“NEO”), regulatory and other approvals and the satisfaction or waiver of the conditions contained in the Arrangement Agreement (a summary of which is set out below), the Arrangement will occur via a RTO of Broadway by MindMed under the policies of the TSX-V. Pursuant to the terms of the Arrangement Agreement, Broadway Delaware Subco Inc., a wholly-owned subsidiary of Broadway incorporated for the purpose under the laws of Delaware (“Delaware Subco”) will merge with MindMed. In accordance with the Arrangement and the articles of MindMed, all outstanding Class B common shares (“Class B Shares”), Class C common shares (“Class C Shares”) and Class D common shares (“Class D Shares”) of MindMed will be exchanged for Class A common shares (“Class A Shares”), immediately following which all Class A Shares of MindMed will be exchanged, on a one-for-one basis (the “Exchange Ratio”), for securities of Broadway on a Consolidated (as defined below) basis (Broadway following the completion of the Arrangement herein referred to as the “Resulting Issuer”). Any outstanding convertible securities of MindMed, including any convertible securities issued in connection with the MindMed Financing (as defined below), will be exchanged for convertible securities of the Resulting Issuer on the basis of the Exchange Ratio.

 

As part of the Arrangement and subject to the receipt of all required approvals, Broadway will consolidate its outstanding shares, warrants and options on an eight (8) old common shares for one (1) new common share basis (the “Consolidation”) and change its name to “Mind Medicine (MindMed), Inc.” (or such other name as MindMed may determine) (the “Name Change”). It will also amend its capital structure (the “Capital Structure Amendment”) by creating a new class of multiple voting shares that will each carry 100 votes per share (the “Multiple Voting Shares”), and change the name of its common shares to “subordinate voting shares” (with all other terms of the common shares remaining unchanged). The Multiple Voting Shares will be issued to certain U.S. resident holders of MindMed shares in connection with the Arrangement. Prior to the Consolidation, there are currently outstanding an aggregate of 49,860,204 common shares in the capital of Broadway (each, a “Broadway Common Share”) as well as approximately 3,100,500 share purchase warrants exercisable at CDN$0.15 per share (the “Broadway Warrants”) and 3,400,000 stock options exercisable at prices ranging from CDN$0.05 to CDN$0.43 (the “Broadway Options”). All of these securities will be subject to the Consolidation. MindMed currently has a total of 147,089,421 voting and non-voting shares in the capital of MindMed (each, a “MindMed Share”), prior to the completion of the MindMed Financing (as defined below). All securities issued to MindMed shareholders pursuant to the Plan of Arrangement will be on a post-Consolidated basis. It is anticipated that in the aggregate the (former) MindMed shareholders will hold approximately 95.40% of the post-Consolidated outstanding voting securities of the Resulting Issuer on an undiluted basis, prior to the completion of the MindMed Financing.

 

4

     

    - J-1-7-

    

 

Broadway Gold Mining Ltd.

Notes to Pro Forma Consolidated Financial Statements

(Expressed in United States Dollars)

For the Year Ended August 31, 2019

 

	
2.

	
REVERSE TAKE-OVER (continued)

 

The resulting ownership percentage and all share amounts on a post-consolidation, pre-financing basis is summarized in the Capitalization Table below:

 

		
 

	 	
 

	
 

	
Consolidated

	
 

	
 

	
Total Post-

	
 

	
 

	 	
 

	 	
 

	
Common

	
 

	
 

	
Common Shares

	
 

	
 

	
Consolidation

	
 

	
 

	
Total%

	
 

	 	
 

	
Shares

	
 

	
 

	
@ 8:1

	
 

	
 

	
Common Shares

	
 

	
 

	
Ownership

	
 

	
Broadway

	
 

	
 

	
56,360,704

	
 

	
 

	
 

	
7,045,088

	
 

	
 

	
 

	
7,045,088

	
 

	
 

	
 

	
4.57

	
% 

	
MindMed

	
 

	
 

	
147,089,421

	
 

	
 

	
 

	
—

	
 

	
 

	
 

	
147,089,421

	
 

	
 

	
 

	
95.43

	
% 

	
Savant Combination

	
 

	
 

	
—

	
 

	
 

	
 

	
—

	
 

	
 

	
 

	
—

	
 

	
 

	
 

	
0.00

	
%

	
Delaware SubCo

	
 

	
 

	
—

	
 

	
 

	
 

	
—

	
 

	
 

	
 

	
—

	
 

	
 

	
 

	
0.00

	
%

	
 

	
 

	
 

	
203,450,125

	
 

	
 

	
 

	
7,045,088

	
 

	
 

	
 

	
154,134,509

	
 

	
 

	
 

	
100.00

	
%

 

The Plan of Arrangement also includes the transfer of all of Broadway’s right, title and interest, and all associated liabilities, in the Broadway and Madison mine (the “Spin-Out Transaction”), which comprises 450 acres of land, a 192 acre ranch, buildings, mine equipment and fixtures, 6 patented, 35 unpatented mineral claims, and mineral rights to a four-square-mile property, in the Butte- Anaconda region of Montana (the “Madison Project”) to a wholly-owned B.C. subsidiary of Broadway, Madison Metals Inc. (“SpinCo”). SpinCo was incorporated for the purpose of acquiring the Madison Project and has not carried on nor will carry on any other business.

 

The Madison Project is currently held by Broadway Gold Corp. (“Broadway Montana”), a wholly- owned subsidiary of the Company. The Spin-Out Transaction will consist of the transfer of all of the shares of Broadway Montana and any related assets and liabilities in connection with the Madison Project to SpinCo (the “Transferred Assets”). SpinCo will also assume all liabilities associated with Broadway’s mineral exploration and development business as conducted prior to the completion of the Arrangement. Pursuant to the Plan of Arrangement, SpinCo will issue 49,860,204 common shares to Broadway as consideration for the Transferred Assets (the “SpinCo Consideration Shares”), which SpinCo Consideration Shares will be distributed to the holders of record of the Company’s shares immediately before completion of the RTO on a pro-rata basis (other than to shareholders who dissent in accordance with the provisions of the Arrangement). Broadway shareholders will be entitled to receive one SpinCo Consideration Share for every common share of Broadway on a pre-Consolidation basis held by such shareholder. As a result, in connection with the Arrangement (and assuming it is completed, for which there can be no assurances), each Broadway shareholder will hold shares of SpinCo as well as their post-Consolidation shares of the Resulting Issuer. The SpinCo Consideration Shares will not be listed or posted for trading on any stock exchange, therefore there will be reduced liquidity for SpinCo shares. There is no guarantee or assurance that securities of SpinCo will ever be listed for trading on any stock exchange.

 

	
3.

	
PRO FORMA TRANSACTIONS AND ASSUMPTIONS

 

The unaudited pro forma consolidated statement of financial position gives effect to the transactions below as if they occurred on August 31, 2019 and the unaudited pro forma consolidated statements of operations give effect to the transactions below as if they occurred on August 31, 2019. The pro forma financial statements do not reflect transactions that have occurred subsequent to the period ended August 31, 2019 for the individual entities, except where events are directly attributable to the proposed reverse take-over. Other subsequent events that could impact MindMed are in Note 4.

 

5

     

    - J-1-8-

    

Broadway Gold Mining Ltd.

Notes to Pro Forma Consolidated Financial Statements

(Expressed in United States Dollars)

For the Year Ended August 31, 2019

 

	
3.

	
PRO FORMA TRANSACTIONS AND ASSUMPTIONS (continued)

 

The difference between consideration and the carrying value of net assets has been recognized as an expense.

 

These pro forma consolidated financial statements give effect to the following transactions, assumptions and adjustments:

 

	
 

	
a)

	
The financial position and results of operations from the Madison Project are removed to reflect the Spin-Out Transaction.

 

	
 

	
b)

	
The combined financial position of the Savant Combination are not included in the RTO as Broadway does not have title to the assets or liabilities.

 

	
 

	
c)

	
The statement of operations of Broadway are translated from Canadian Dollars to United States Dollars using the average rate for the year ended August 31, 2019. The statement of financial position of Broadway is translated from Canadian Dollars to United States Dollars using the year end rate for August 31, 2019.

 

	
 

	
d)

	
The RTO does not constitute a business combination for accounting purposes. Therefore, consistent with IFRS 2, Share Based Payments, consideration transferred has been measured at the fair value of the equity instruments granted, as the fair value of the goods and services received is not reliably measurable. The number of shares issued to Broadway shareholders is determined by the Consolidation.

 

See reconciliation below:

 

		
 

	 	
 

	
 

	 	
 

	
Number of shares issued to Broadway shareholders

	
 

	
 

	
 

	
 

	
 

	
 

	
7,045,088

	
 

	
Fair value of shares

	
 

	
 

	
 

	
 

	
 

	
$

	
 0.10

	
 

	
Total consideration

	
 

	
 

	
 

	
 

	
 

	
$

	
 704,509

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Fair value of assets (CAD$59,166*0.7522)

	
 

	
 

	
44,405

	
 

	
 

	
 

	
 

	
 

	
Fair value of liabilities (CAD$192,256*0.7522)

	
 

	
 

	
(144,615)

	
 

	
 

	
 

	
 

	
 

	Net
                 liabilities

	 

	 

	 

	 

	 

	 

	(100,110

	)

	
Transaction expense

	
 

	
 

	
 

	
 

	
 

	
$

	
 804,619

	
 

 

	
 

	
e)

	
The shares, warrants and options outstanding of Broadway are consolidated on an eight (8) old common shares to one (1) new common share basis. All securities issued to MindMed shareholders pursuant to the Plan of Arrangement are on a post-Consolidated basis.

 

	
 

	
f)

	
Transactions between MindMed and the combination of SAM and HWP are eliminated.

 

	
 

	
g)

	
The combined statements of operations of the Savant Combination are adjusted to record amortization of $250,000 for the three months ended December 31, 2018.

 

	
4.

	
SUBSEQUENT EVENTS

 

Subsequent to August 31, 2019, there were the following subsequent events that have not been adjusted in the pro forma consolidated financial statements:

 

On November 25, 2019, MindMed has signed an engagement letter with Canaccord Genuity Corp. (“Canaccord”) pursuant to which MindMed will complete a brokered private placement financing (the “Brokered Private Placement”) of up to C$15 million in Class D non-voting common shares (the “Shares”) at a price of C$0.33 per Share.

 

6

     

    - J-1-9-

    

Broadway Gold Mining Ltd.

Notes to Pro Forma Consolidated Financial Statements

(Expressed in United States Dollars)

For the Year Ended August 31, 2019

 

	
4.

	
SUBSEQUENT EVENTS (continued)

 

MindMed has entered into an engagement agreement with Canaccord to act as the agent in connection with the Brokered Private Placement on a commercially reasonable efforts basis. The Brokered Private Placement is expected to close by December 19, 2019. Under the engagement agreement, MindMed has agreed to pay to Canaccord a cash commission equal to 7.0% of the gross proceeds raised in the Brokered Private Placement. In addition, Canaccord will receive broker compensation units (the “Broker Units”) equal to 7.0% of the number of the Shares sold pursuant to the Brokered Private Placement, which Broker Units shall be exercisable for a period of 12 months from the completion of the Arrangement (defined below)

 

7

     

    -J-2-1 -

    

SCHEDULE 2 TO APPENDIX J - AUDIT COMMITTEE CHARTER OF RESULTING ISSUER

 

 

	

	
A.

	
 PURPOSE

 

The audit committee (the “Audit Committee”) is a committee of the board of directors (the “Board”) of Mind Medicine, Inc. (the “Corporation”). The primary function of the Audit Committee is to assist the directors of the Corporation in fulfilling their applicable roles by:

 

	
 

	
(a)

	
recommending to the Board the appointment and compensation of the Corporation’s external auditor;

 

	
 

	
(b)

	
overseeing the work of the external auditor, including the resolution of disagreements between the external auditor and management;

 

	
 

	
(c)

	
pre-approving all non-audit services (or delegating such pre-approval if and to the extent permitted by law) to be provided to the Corporation by the Corporation’s external auditor;

 

	
 

	
(d)

	
satisfying themselves that adequate procedures are in place for the review of the Corporation’s public disclosure of financial information, other than those described in (g) below, extracted or derived from its financial statements, including periodically assessing the adequacy of such procedures;

 

	
 

	
(e)

	
establishing procedures for the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal controls or auditing matters, and for the confidential, anonymous submission by employees of the Corporation of concerns regarding questionable accounting or auditing matters;

 

	
 

	
(f)

	
reviewing and approving any proposed hiring of current or former partners or employees of the current and former auditor of the Corporation; and

 

	
 

	
(g)

	
reviewing and approving the annual and interim financial statements, related Management Discussion and Analysis (“MD&A”) and other financial information provided by the Corporation to any governmental body or the public.

 

The Audit Committee should primarily fulfill these roles by carrying out the activities enumerated in this Charter. However, it is not the duty of the Audit Committee to prepare financial statements, to plan or conduct internal or external audits, to determine that the financial statements are complete and accurate and are in accordance with Canadian generally accepted accounting principles, to conduct investigations, or to assure compliance with laws and regulations or the Corporation’s internal policies, procedures and controls, as these are the responsibility of management, and in certain cases, the external auditor.

 

	B.

	
LIMITATIONS ON AUDIT COMMITTEE’S DUTIES

 

In contributing to the Audit Committee’s discharge of its duties under this Charter, each member of the Audit Committee shall be obliged only to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Nothing in this Charter is intended to be, or may be construed as, imposing on any members of the Audit Committee a standard of care or diligence that is in any way more onerous or extensive than the standard to which the directors are subject.

 

Members of the Audit Committee are entitled to rely, absent actual knowledge to the contrary, on: (i) the integrity of the persons and organizations from whom they receive information, (ii) the accuracy and completeness of the information provided, (iii) representations made by management as to the non-audit services provided to the Corporation by the external auditor, (iv) financial statements of the Corporation represented to them by a member of management or in a written report of the external auditors to present fairly the financial position of the Corporation in accordance with generally accepted accounting principles, and (v) any report of a lawyer, accountant, engineer, appraiser or other person whose profession lends credibility to a statement made by any such person.

 

     

    -J-2-2 -

    

	
C.

	
COMPOSITION AND MEETINGS

 

The Audit Committee should be comprised of not less than three directors as determined by the Board, all of whom shall be independent within the meaning of National Instrument 52-110 – Audit Committees (“52-110”) of the Canadian Securities Administrators, and free of any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Audit Committee, unless an exemption from such independence requirement is available to the Corporation under 52-110. All members of the Audit Committee should have (or should gain within a reasonable period of time after appointment) a working familiarity with basic finance and accounting practices. At least one member of the Audit Committee should have accounting or related financial management expertise and be considered a financial expert. Each member should be “financially literate” within the meaning of 52-110. The Audit Committee members may enhance their familiarity with finance and accounting by participating in educational programs conducted by the Corporation or an outside consultant.

 

The members of the Audit Committee shall be elected by the Board on an annual basis or until their successors shall be duly appointed. Unless a Chair of the Audit Committee (the “Chair”) is elected by the full Board, the members of the Audit Committee may designate a Chair by majority vote of the full Audit Committee membership.

 

In addition, the Audit Committee members should meet all of the requirements for members of audit committees as defined from time to time under applicable legislation and the rules of any stock exchange on which the Corporation’s securities are listed or traded.

 

The Audit Committee should meet at least four times annually, or more frequently as circumstances require. The Audit Committee should meet within forty-five (45) days following the end of the first three financial quarters to review and discuss the unaudited financial results for the preceding quarter and the related MD&A, and should meet within 90 days following the end of the fiscal year end to review and discuss the audited financial results for the preceding quarter and year and the related MD&A.

 

The Audit Committee may ask members of management or others to attend meetings and provide pertinent information as necessary. For purposes of performing their duties, members of the Audit Committee shall have full access to all corporate information and any other information deemed appropriate by them, and shall be permitted to discuss such information and any other matters relating to the financial position of the Corporation with senior employees, officers and the external auditor of the Corporation, and others as they consider appropriate.

 

For greater certainty, management is indirectly accountable to the Audit Committee and is responsible for the timeliness and integrity of the financial reporting and information presented to the Board.

 

In order to foster open communication, the Audit Committee or its Chair should meet at least annually with management and the external auditor in separate sessions to discuss any matters that the Audit Committee or each of these groups believes should be discussed privately. In addition, the Audit Committee or its Chair should meet with management quarterly in connection with the Corporation’s interim financial statements.

 

A quorum for the transaction of business at any meeting of the Audit Committee shall be a majority of the number of members of the Audit Committee or such greater number as the Audit Committee shall by resolution determine.

 

Meetings of the Audit Committee shall be held from time to time and at such place as any member of the Audit Committee shall determine upon 48 hours’ notice to each of its members. The notice period may be waived by all members of the Audit Committee. Each of the Chair of the Board, the external auditor, the Chief Executive Officer, the Chief Financial Officer or the Secretary shall be entitled to request that any member of the Audit Committee call a meeting. This Charter is subject in all respects to the Corporation’s articles of incorporation and by-laws from time to time.

 

     

    -J-2-3 -

    

 

	
D.

	
ROLE

 

As part of its function in assisting the Board in fulfilling its oversight role (and without limiting the generality of the Audit Committee’s role), the Audit Committee should:

 

	
(1)

	
Determine any desired agenda items.

 

	
(2)

	
Review and recommend to the Board changes to this Charter, as considered appropriate from time to time.

 

	
(3)

	
Review the public disclosure regarding the Audit Committee required by 52-110.

 

	
(4)

	
Review and seek to ensure that disclosure controls and procedures and internal controls over financial reporting frameworks are operational and functional.

 

	
(5)

	
Summarize in the Corporation’s annual information form the Audit Committee’s composition and activities,

 

as required.

 

	
(6)

	
Submit the minutes of all meetings of the Audit Committee to the Board upon request.

 

Documents / Reports Review

 

	
(7)

	
Review and recommend to the Board for approval the Corporation’s annual and interim financial statements, including any certification, report, opinion, undertaking or review rendered by the external auditor and the related MD&A, as well as such other financial information of the Corporation provided to the public or any governmental body as the Audit Committee or the Board require.

 

	
(8)

	
Review other financial information provided to any governmental body or the public as they see fit.

 

	
(9)

	
Review, recommend and approve any of the Corporation’s press releases that contain financial information.

 

	
(10)

	
Seek to satisfy itself and ensure that adequate procedures are in place for the review of the Corporation’s public disclosure of financial information extracted or derived from the Corporation’s financial statements and related MD&A and periodically assess the adequacy of those procedures.

 

External Auditor

 

	
(11)

	
Recommend to the Board the selection of the external auditor, considering independence and effectiveness, and review the fees and other compensation to be paid to the external auditor.

 

	
(12)

	
Review and seek to ensure that all financial information provided to the public or any governmental body, as required, provides for the fair presentation of the Corporation’s financial condition, financial performance and cash flow.

 

	
(13)

	
Instruct the external auditor that its ultimate client is not management and that it is required to report directly to the Audit Committee, and not management.

 

     

    -J-2-4 -

    

	
(14)

	
Monitor the relationship between management and the external auditor including reviewing any management letters or other reports of the external auditor and discussing any material differences of opinion between management and the external auditor.

 

	
(15)

	
Review and discuss, on an annual basis, with the external auditor all significant relationships it has with the Corporation to determine the external auditor’s independence.

 

	
(16)

	
Pre-approve all non-audit services (or delegate such pre-approval, as the Audit Committee may determine and as permitted by applicable Canadian securities laws) to be provided by the external auditor.

 

	
(17)

	
Review the performance of the external auditor and any proposed discharge of the external auditor when circumstances warrant.

 

	
(18)

	
Periodically consult with the external auditor without management present about significant risks or exposures, internal controls and other steps that management has taken to control such risks, and the fullness and accuracy of the financial statements, including the adequacy of internal controls to expose any payments, transactions or procedures that might be deemed illegal or otherwise improper.

 

	
(19)

	
Communicate directly with the external auditor and arrange for the external auditor to be available to the Audit Committee and the full Board as needed.

 

	
(20)

	
Review and approve any proposed hiring by the Corporation of current or former partners or employees of the current (and any former) external auditor of the Corporation.

 

Audit Process

 

	
(21)

	
Review the scope, plan and results of the external auditor’s audit and reviews, including the auditor’s engagement letter, the post-audit management letter, if any, and the form of the audit report. The Audit Committee may authorize the external auditor to perform supplemental reviews, audits or other work as deemed desirable.

 

	
(22)

	
Following completion of the annual audit and quarterly reviews, review separately with each of management and the external auditor any significant changes to planned procedures, any difficulties encountered during the course of the audit and, if applicable, reviews, including any restrictions on the scope of work or access to required information and the cooperation that the external auditor received during the course of the audit and, if applicable, reviews.

 

	
(23)

	
Review any significant disagreements between management and the external auditor in connection with the preparation of the financial statements.

 

	
(24)

	
Where there are significant unsettled issues between management and the external auditor that do not affect the audited financial statements, the Audit Committee shall seek to ensure that there is an agreed course of action leading to the resolution of such matters.

 

     

    -J-2-5 -

    

Financial Reporting Processes

 

	
(25)

	
Review the integrity of the financial reporting processes, both internal and external, in consultation with the external auditor as they see fit.

 

	
(26)

	
Consider the external auditor’s judgments about the quality, transparency and appropriateness, not just the acceptability, of the Corporation’s accounting principles and financial disclosure practices, as applied in its financial reporting, including the degree of aggressiveness or conservatism of its accounting principles and underlying estimates, and whether those principles are common practices or are minority practices.

 

	
(27)

	
Review all material balance sheet issues, material contingent obligations (including those associated with material acquisitions or dispositions) and material related party transactions.

 

	
(28)

	
Review with management and the external auditor the Corporation’s accounting policies and any changes that are proposed to be made thereto, including all critical accounting policies and practices used, any alternative treatments of financial information that have been discussed with management, the ramification of their use and the external auditor’s preferred treatment and any other material communications with management with respect thereto.

 

	
(29)

	
Review the disclosure and impact of contingencies and the reasonableness of the provisions, reserves and estimates that may have a material impact on financial reporting.

 

	
(30)

	
If considered appropriate, establish separate systems of reporting to the Audit Committee by each of management and the external auditor.

 

	
(31)

	
Periodically consider the need for an internal audit function, if not present.

 

Risk Management

 

	
(32)

	
Review program of risk assessment and steps taken to address significant risks or exposures of all types, including insurance coverage and tax compliance.

 

General

 

	
(33)

	
With prior Board approval, the Audit Committee may at its discretion retain independent counsel, accountants and other professionals to assist it in the conduct of its activities and to set and pay (as an expense of the Corporation) the compensation for any such advisors.

 

	
(34)

	
Respond to requests by the Board with respect to the functions and activities that the Board requests the Audit Committee to perform.

 

	
(35)

	
Periodically review this Charter and, if the Audit Committee deems appropriate, recommend to the Board changes to this Charter.

 

	
(36)

	
Review the public disclosure regarding the Audit Committee required from time to time by applicable Canadian securities laws, including:

 

	
 

	
(i)

	
the Charter of the Audit Committee;

 

	
 

	
(ii)

	
the composition of the Audit Committee;

 

     

    -J-2-6 -

    

	
 

	
(iii)

	
the relevant education and experience of each member of the Audit Committee;

 

	
 

	
(iv)

	
the external auditor services and fees; and

 

	
 

	
(v)

	
such other matters as the Corporation is required to disclose concerning the Audit Committee.

 

	
(37)

	
Review in advance, and approve, the
hiring and appointment of the Corporation’s senior financial executives by the Corporation, if any.

 

	
(38)

	
Perform any other activities as the Audit Committee deems necessary or appropriate including ensuring all regulatory documents are compiled to meet Committee reporting obligations under 52-110.

 

	
E.

	
AUDIT COMMITTEE COMPLAINT PROCEDURES 

 

Submitting a Complaint

 

	
(39)

	
Anyone may submit a complaint
regarding conduct by the Corporation or its employees or agents (including its independent auditors) reasonably believed to
involve questionable accounting, internal accounting controls or auditing matters. The Chair should oversee treatment of such
complaints.

 

Procedures

 

	
(40)

	
The Chair will be responsible for the receipt and administration of employee complaints.

 

	
(41)

	
In order to preserve anonymity when submitting a complaint regarding questionable accounting or auditing matters, the employee may submit a complaint confidentially.

 

Investigation

 

	
(42)

	
The Chair should review and
investigate the complaint. Corrective action will be taken when and as warranted in the Chair’s discretion.

 

Confidentiality

 

	
(43)

	
The identity of the complainant and the details of the investigation should be kept confidential throughout the investigatory process.

 

Records and Report

 

	
(44)

	
The Chair should maintain a log of complaints, tracking their receipt, investigation, findings and resolution, and should prepare a summary report for the Audit Committee.

 

The Audit Committee is a committee of the Board and is not and shall not be deemed to be an agent of the Corporation’s securityholders for any purpose whatsoever. The Board may, from time to time, permit departures from the terms hereof, either prospectively or retrospectively, and no provision contained herein is intended to give rise to civil liability to securityholders of the Corporation or other liability whatsoever.

 

     

    -J-3-1 -

    

 

SCHEDULE 3 TO APPENDIX J – COMPENSATION, NOMINATION AND GOVERNANCE

COMMITTEE CHARTER OF RESULTING ISSUER

 

	
 

	
A.

	
 PURPOSE AND SCOPE

 

The primary function of the Compensation, Nomination, and Governance Committee (the “Committee”) of the Board of Directors of the Corporation (the “Board”) with respect to compensation matters is to exercise the responsibilities and duties set forth below, including but not limited to: (i) discharging the Board’s responsibilities relating to the compensation of the Corporation’s executive officers, (ii) administering the Corporation’s incentive compensation and equity-based plans, and (iii) assisting the Board with respect to management succession and development. The Committee shall review and make recommendations to the Board on an annual basis regarding (A) company-wide compensation programs and practices, (B) all aspects of the remuneration of the Corporation’s executive officers and directors, and (C) equity-based plans and any material amendments thereto (including increases in the number of securities available for grant as options or otherwise thereunder); and

 

The primary function of the Committee with respect to nomination and governance matters is to exercise the responsibilities and duties set forth below, including but not limited to: (i) advising the Board on corporate governance in general, (ii) identifying candidates to act as directors of the Corporation, (iii) recommending to the Board qualified candidates to nominate as a director of the Corporation for consideration by the shareholders of the Corporation at the next annual meeting of shareholders (“Annual Meeting”), (iv) overseeing and assessing the functioning of the Board and the committees of the Board, and (v) developing and recommending to the Board, and overseeing the implementation and assessment of, effective corporate governance principles.

 

	
 

	
B.

	
PROCEDURES, POWERS, COMPOSITION AND MEETINGS

 

The Committee shall have the following procedures, powers, composition and meetings:

 

	
1.

	
The Committee shall be composed of at least three directors as shall be designated by the Board from time-to-time, the majority of whom shall meet any independence requirements of Sections 1.4 and 1.5 of National Instrument 52-110 – Audit Committees of the Canadian Securities Administrators, any exchange upon which securities of the Corporation are traded, or any governmental or regulatory body exercising authority over the Corporation (each, a “Regulatory Body” and, collectively, the “Regulatory Bodies”). One member of the Committee shall be designated by the Board to serve as chairperson (the “Chair”). The members of the Committee shall be selected by the Board taking into account prior experience in matters to be considered by the Committee, probable availability at times required for consideration of these matters, and their individual objectivity. All members shall have the skills or experience which are relevant to the mandate of the Committee, as determined by the Board. The members of the Committee shall serve until the earliest to occur of the date on which the appointed member shall be replaced by the Board, resign from the Committee, or leave the Board.

 

	
2.

	
If and whenever a vacancy shall exist, the remaining members of the Committee may exercise all of its powers and responsibilities so long as a quorum remains in office.

 

	
3.

	
Meetings of the Committee shall be held from time-to-time as the Committee or the Chair thereof shall determine as necessary to perform the duties described herein upon 48 hours’ notice to each of its members; provided that the Committee shall meet at least once per year. The notice period may be waived by a quorum of the Committee.

 

	
4.

	
A minimum of two and at least 50% of the members of the Committee present either in person or by telephone shall constitute a quorum.

 

	
5.

	
Any member of the Committee may participate in a meeting of the Committee by means of telephone conference or other communication equipment, and the member participating in a meeting pursuant to this paragraph shall be deemed, for purposes hereof, to be present in person at the meeting.

 

     

    -J-3-2 -

    

	6.	The
                                         Committee shall keep minutes of its meetings which, if requested, shall be submitted
                                         to the Board. The Committee may, from time-to-time, appoint any person, who need not
                                         be a member, to act as a secretary at any meeting. Supporting schedules and information
                                         reviewed by the Committee shall be available for examination by any director of the Board.

 

	7.	The
                                         Committee shall investigate any activity of the Corporation, including all of its subsidiaries,
                                         relating to environmental and social matters. The Committee has been, and shall be, granted
                                         unrestricted access to any information it considers to be necessary or desirable in order
                                         to perform its duties and responsibilities.

 

	8.	The
                                         Committee may engage, set and pay the compensation, at the Corporation’s expense,
                                         for persons having specialized competencies (including, without limitation, legal or
                                         other consultants and experts) and other advisors as it determines necessary to assist
                                         in fulfilling its duties and responsibilities.

 

	9.	The
                                         Committee may invite any officers, directors, employees or advisors of the Corporation,
                                         or any of its Subsidiaries, or such other persons as it may see fit, from time to time,
                                         to attend its meetings and to take part in discussion and consideration of the affairs
                                         of the Committee, provided that the Chief Executive Officer (“CEO”)
                                         and other executives may not be present during any voting or deliberations on compensation
                                         of the CEO or such other executives, respectively.

 

	10.	Any
                                         matters to be determined by the Committee shall be decided by a majority of votes cast
                                         at a meeting of the Committee called for such purpose. Actions of the Committee may be
                                         taken by an instrument or instruments in writing signed by all members of the Committee
                                         in as many counterparts as may be necessary, and such actions shall be effective as though
                                         they had been decided by a majority of votes cast at a meeting of the Committee called
                                         for such purpose.

 

	11.	Following
                                         meetings of the Committee, the Committee, through its Chair, will report to the Board
                                         on matters considered by the Committee.

 

		C.	RESPONSIBILITIES
                                         AND DUTIES

 

COMPENSATION
MATTERS

 

	12.	In
                                         respect of compensation matters, to fulfill its responsibilities and duties the Committee
                                         shall:

 

		a)	At
                                         least annually, establish a Committee work plan for a period of not less than one year.

 

		b)	Periodically
                                         review and advise the Board (supported, in the discretion of the Committee, by internal
                                         or external experts) on (i) current trends in regional and industry-wide compensation
                                         practices and (ii)
how the Corporation’s compensation programs and practices compare to those of comparable companies in the
industry.

 

		c)	Review
                                         and make recommendations to the Board regarding the terms and conditions, design, approval,
                                         implementation, administration and interpretation of the Corporation’s compensation
                                         plans, including any equity-based compensation plans, and each amendment thereof, all
                                         subject to final approval by the Board, and take such actions in regard to such plans
                                         as may be required by the terms of the plan, provided that equity-based plans and material
                                         amendments to equity-based plans shall require shareholder approval as required under
                                         applicable laws, rules or regulations or as otherwise required by a Regulatory Body.

 

		d)	Establish,
                                         and review annually, share ownership guidelines, if any, for the executive officers of
                                         the Corporation as appropriate.

     

    -J-3-3 -

    

		e)	Determine
                                         the eligibility requirements applicable to participants in the Corporation’s compensation
                                         plans as may be required by the terms of a plan, and evaluate the performance of each
                                         compensation plan, as required under applicable laws, rules or regulations or as otherwise
                                         required by a Regulatory Body.

 

		f)	At
                                         least annually, review and make recommendations to the Board regarding corporate goals
                                         and objectives relevant to compensation of the CEO, evaluate the CEO’s performance
                                         in light of those goals and objectives and make recommendations to the Board regarding
                                         the annual salary, bonus, stock options, share-based awards and other benefits, direct
                                         and indirect, of the CEO.

 

		g)	At
                                         least annually, review and make recommendations to the Board regarding corporate goals
                                         and objectives relevant to compensation of the executive officers, evaluate the performance
                                         of the Corporation’s executive officers and make recommendations to the Board regarding
                                         the annual salary, bonus, stock options, share-based awards and other benefits, direct
                                         and indirect, of the executive officers.

 

		h)	At
                                         least annually, review, in conjunction with the Audit Committee, incentive compensation
                                         arrangements to confirm they do not encourage inappropriate or unintended risk taking
                                         and do not involve risks that are reasonably likely to have a material adverse effect
                                         on the Corporation.

 

		i)	At
                                         least annually, review and discuss the relationship between risk management policies
                                         and practices and compensation, and evaluate compensation policies and practices that
                                         could mitigate such risk.

 

		j)	At
                                         least annually, review on a periodic basis the operation of the Corporation’s executive compensation
programs to determine whether they are properly coordinated and administered.

 

		k)	At
                                         least annually, review policies in the area of management perquisites.

 

		l)	Oversee
                                         management succession planning and make appropriate recommendations to the Board at least
annually regarding the appointment and succession of the Corporation’s executive officers.

 

		m)	Form
                                         and delegate authority to subcommittees where appropriate.

 

		n)	On
                                         a periodic basis, as determined necessary or advisable, retain the services of a compensation
                                         consultant. The Committee shall approve in advance any other work the consultant performs
                                         at the request of management and ensure compliance with the requirements established
                                         by Regulatory Bodies related to the retaining and using of such consultants.

 

		o)	Oversee
                                         the Corporation’s compliance with any rules promulgated by any Regulatory Body prohibiting
loans to officers and directors of the Corporation.

 

		p)	Review
                                         and discuss with management the Corporation’s Statement of Executive Compensation,
                                         including the compensation discussion and analysis and the related executive compensation
                                         information, to be included in the Corporation’s management information circular
                                         and any other disclosure with respect to executive compensation to be included in any
                                         other public disclosure documents of the Corporation.

 

		q)	Perform
                                         such additional functions as shall be assigned to it by resolution of the Board and exercise
                                         such additional powers as may be reasonably necessary or desirable, in the Committee’s
                                         discretion, to fulfill its responsibilities and duties under this Charter.

 

		r)	Review,
                                         consider, and recommend to the Board (if deemed advisable) all employment, severance or
change in control agreements with, and any special or supplemental benefits provided to, any executive officers or directors of
the Corporation. The Committee will review the impact of any potential material transaction, such as a merger, acquisition, or
spin-off, on the Corporation’s compensation plans.

     

    -J-3-4 -

    

BOARD
COMPOSITION AND DIRECTOR NOMINATIONS

 

	13.	The
                                         Committee shall identify and recommend to the Board qualified director nominees for election
                                         at the Annual Meeting.

 

	14.	The
                                         Committee shall:

 

		a)	review
                                         from time to time the size, composition, operation, practice and tenure policies of the
                                         Board;

 

		b)	develop
                                         and review periodically the standards to be applied in making determinations as to the
                                         presence or absence of material relationships between a director and the Corporation;

 

		c)	review
                                         annually the competencies, skills and personal qualities required of directors in order
                                         to add value to the Corporation, in light of:

 

		i.	the
                                         opportunities and risks facing the Corporation and the Corporation’s proposed strategy;

 

		ii.	the
                                         need to ensure that a majority of the Board is comprised of “independent”
                                         directors; and

 

		iii.	the
                                         Corporation’s corporate governance guidelines and Board policies with respect to,
                                         among other things, diversity, director tenure, retirement and succession and the number
                                         of boards on which directors may sit;

 

		d)	review
                                         periodically the competencies, skills and personal qualities of each existing director,
                                         and the contributions made by the director to the effective operation of the Board and
                                         review any significant change in the primary occupation of the director; and

 

		e)	in
                                         light of (a), (b), (c) and (d) above, make recommendations for changes to the composition
                                         of the Board.

 

	15.	The
                                         Committee shall recruit and consider candidates for nomination as a director, including
                                         any candidates recommended by shareholders, having regard to the background, employment
                                         and qualifications of possible candidates. The Committee shall:

 

		a)	consider
                                         whether the candidate’s competencies, skills and personal qualities are aligned
                                         with the Corporation’s needs and any criteria for selecting new directors established
                                         by the Board;

 

		b)	consider
                                         the commitment of time and resources that the candidate is able to devote to the Corporation
                                         as a member of the Board in light of what the Corporation expects from the candidate;

 

		c)	consider
                                         the recommendations of the Chair of the Board, if any; and

 

		d)	ensure
                                         the candidate understands the demands and expectations of being a director of the Corporation.

     

    -J-3-5 -

    

DIRECTOR
PROTECTION

 

	16.	The
                                         Committee shall receive a report from management with respect to the directors and officers’
                                         insurance policy of the Corporation and make recommendations for its renewal or amendment
                                         or the replacement of the insurer.

 

CHIEF
EXECUTIVE OFFICER AND OTHER EXECUTIVE OFFICERS

 

	17.	The
                                         Committee shall make recommendations to the Board on the selection and evaluation of
                                         the CEO and other executive officers, including in respect of the integrity of the CEO
                                         and other executive officers, after considering the recommendations of the Chair of the
                                         Board, if any, on such matters.

 

CORPORATE
GOVERNANCE

 

	18.	The
                                         Committee is responsible for reviewing at least annually the Corporation’s approach
                                         to governance issues and shall make recommendations to the Board in respect of revisions
                                         to the Corporation’s corporate governance guidelines to ensure compliance with
                                         applicable securities laws and industry standards. The Committee shall make recommendations
                                         to the Board respecting the number of boards on which directors may sit and Board policies
                                         with respect to director diversity, tenure, retirement and succession.

 

	19.	The
                                         Committee shall approve, in appropriate circumstances, the engagement of an outside advisor
                                         by an individual director at the expense of the Corporation.

 

INSIDER
TRADING AND PUBLIC DISCLOSURE

 

	20.	The
                                         Committee shall review any changes recommended by management regarding the Corporation’s
                                         Disclosure Policy, if any, and revise as necessary the Corporation’s Insider Trading
                                         Policy.

 

	21.	The
                                         Committee shall periodically review management’s systems and practices for ensuring
                                         that all directors and officers of the Corporation who are required to do so file insider
                                         reports in connection with any trade of securities of the Corporation or any derivative
                                         transaction which results in the effective disposition of the individual’s economic
                                         interest in a security of the Corporation within the time period in which such reports
                                         are required to be filed.

 

DIRECTOR
ORIENTATION AND CONTINUING EDUCATION

 

	22.	The
                                         Committee shall provide such information to new members of the Board so as to ensure
                                         that such directors are familiar with the Corporation’s business and procedures
                                         of the Board. Information may include the Corporation’s corporate and organizational
                                         structure, recent filings and financial information, governance documents and important
                                         policies and procedures. The Committee shall ensure that every director possesses the
                                         capabilities, expertise, availability and knowledge required to fill his or her position
                                         adequately. From time to time, the Committee shall arrange on-site tours of the Corporation’s
                                         operations.

 

	23.	The
                                         Committee shall ensure that all new directors receive a comprehensive orientation seminar
                                         or package so that they fully understand the role of the Board and its committees, as
                                         well as the contributions individual directors are expected to make.

 

	24.	The
                                         Committee shall provide continuing educational opportunities for all directors, so that
                                         individuals may maintain or enhance their skills and abilities as directors, as well
                                         as to ensure that their knowledge and understanding of the Corporation’s
                                         business remains current.

     

    -J-3-6 -

    

BOARD
EVALUATIONS

 

	25.	The
                                         Committee shall annually review and make recommendations to the Board for changes to
                                         the mandate of the Board and the position description of the Chair of the Board.

 

	26.	The
                                         Committee shall conduct annual surveys of directors with respect to their views on the
                                         effectiveness of the Board, the Chair of the Board, each committee of the Board and its
                                         chair and the contribution of individual directors.

 

	27.	The
                                         Committee shall evaluate the performance of the Chair of the Board, having regard for
                                         the position description for the Chair of the Board and his or her attendance at Board
                                         and Board committee meetings and overall contribution.

 

	28.	The
                                         Committee shall also annually assess the effectiveness of the Board as a whole and each
                                         committee of the Board, including the Committee, and make recommendations to the Board.

 

OPERATIONS
OF THE BOARD

 

	29.	The
                                         Committee shall assess the needs of the Board and make recommendations with respect to
                                         rules and guidelines governing and regulating the affairs of the Board, including:

 

		a)	the
                                         frequency and location of Board and committee meetings;

 

		b)	procedures
                                         for establishing meeting agendas and the conduct of meetings;

 

		c)	the
                                         adequacy and quality of the information provided to the Board prior to and during its
                                         meetings; and

 

		d)	the
                                         availability, relevance and timeliness of discussion papers, reports and other information
                                         required by the Board.

 

BOARD
COMMITTEES

 

	30.	At
                                         the first meeting of the Board following each Annual Meeting, the Committee shall recommend
                                         to the Board the allocation of directors to each of the Board committees. Thereafter,
                                         when a vacancy occurs at any time in the membership of any Board committee, the Committee
                                         shall recommend a particular director to the Board to fill such vacancy.

 

BOARD
INDEPENDENCE

 

	31.	The
                                         Committee shall monitor and assess the relationship between the Board and management,
                                         defining the limits to management’s responsibilities and making such recommendations
                                         as it may deem necessary with a view to ensuring that the Board is able to function independently
                                         of management.

 

REPORTING
AND DISCLOSURE REQUIREMENTS

 

	32.	The
                                         Committee shall annually prepare, review and approve the corporate governance report
                                         to be given in either the annual report to shareholders or the proxy circular prepared
                                         in connection with the Annual Meeting. The corporate governance report shall describe
                                         the corporate governance practices of the Corporation with reference to the reporting
                                         requirements of any stock exchange on which the common shares of the Corporation are
                                         listed, National Instrument 58-101 Disclosure of Corporate Governance Practices,
                                         and any other applicable securities laws.

     

    -J-3-7 -

    

STAKEHOLDER
ENGAGEMENT

 

	33.	The
                                         Committee shall implement and oversee procedures by which shareholders may provide feedback
                                         directly to any individual director, including the independent directors as a group,
                                         the Board or any Board committee and by which any interested party may communicate directly
                                         with the Chair of the Board and the independent directors.

 

		D.	GENERAL

 

	34.	The
                                         Committee shall undertake on behalf of the Board such other corporate governance initiatives
                                         as may be necessary or desirable to enable the Board to provide effective corporate governance
                                         for the Corporation and contribute to the success of the Corporation and enhance shareholder
                                         value.

 

	35.	Notwithstanding
                                         the foregoing and subject to applicable laws, nothing contained in this Charter is intended
                                         to require the Committee to ensure the Corporation’s compliance with applicable
                                         laws or regulations.

 

	36.	Notwithstanding
                                         the foregoing and subject to applicable laws, the Committee may delegate authority to
                                         one or more members or subcommittees when deemed appropriate, provided that the actions
                                         of any such members or subcommittees must be reported to the full Committee no later
                                         than at its next scheduled meeting.

 

	37.	The
                                         Committee is a committee of the Board and it is not and shall not be deemed to be an
                                         agent of the Corporation’s shareholders for any purpose whatsoever. The Board may,
                                         from time to time, permit departures from the terms hereof, either prospectively or retrospectively.
                                         No provision contained herein is intended to give rise to civil liability to security
                                         holders of the Corporation or any other liability whatsoever.

 

		E.	THIS
                                         CHARTER

 

The
Committee shall review and reassess the adequacy of this Charter at least annually and otherwise as it deems appropriate and recommend
changes to the Board. Each year the Committee shall review its performance with reference to this Charter.

 

The
Committee shall ensure that this Charter or a summary of it which has been approved by the Committee is disclosed in accordance
with all applicable securities laws or regulatory requirements in the proxy circular prepared in connection with the Annual Meeting
or annual report of the Corporation.

 

		F.	CURRENCY
                                         OF THIS CHARTER

 

This
Charter was adopted by the Board on [•].

     

    -K-1 -

    

APPENDIX
K 

INFORMATION CONCERNING SPINCO

 

The
following information is provided by Spinco, is presented on a post-Arrangement basis and is reflective of the proposed business,
financial and share capital position of Spinco. Unless otherwise indicated, all currency amounts are stated in Canadian dollars.
The following information should be read together with the audited financial statements for the period from incorporation to November
30, 2019 appended hereto as Schedule “1” to Appendix “K” and related management discussion and analysis
appended hereto as Schedule “2” to Appendix “K”, and the audited carve-out consolidated financial statements
for the years ended August 31, 2019 and 2018 (the “Carve-Out Financial Statements”) of the Madison Project
also appended hereto as Schedule “1” and the related management discussion and analysis also appended hereto as Schedule
 “2” to Appendix “K”.

 

Corporate
Structure

 

Spinco
was incorporated under the BCBCA on October 11, 2019 for the purposes of the Arrangement. Spinco is currently a private company
and is a wholly-owned subsidiary of Broadway. No material amendments have been made to Spinco’s articles or other constating
documents since its incorporation.

 

Spinco’s
head and principal business address, as well as its registered office are all located at 1199 West Hastings Street, Vancouver,
British Columbia, V6E 3T5.

 

As
at the date of this Circular, Spinco does not have any of its securities listed or quoted, has not applied to list or quote any
of its securities, and does not intend to apply to list or quote any of its securities, on the Toronto Stock Exchange, a U.S.
marketplace, or a marketplace outside of Canada and the United States of America other than the Alternative Investment Market
of the London Stock Exchange or the PLUS markets operated by PLUS Markets Group plc.

 

The
Madison Project is currently held by Broadway Gold Corp. (“Madison Subsidiary”), a wholly-owned subsidiary
of Broadway. The Spin-Out Transaction will consist of the transfer of all of the shares of Madison Subsidiary and any related
assets and liabilities in connection with the Madison Project to Spinco pursuant to a transfer agreement entered into by Broadway
and Spinco (the “Transfer Agreement”) in connection with the Plan of Arrangement. The Transfer Agreement is
a schedule to the Arrangement Agreement, which can be accessed under Broadway’s profile on www.SEDAR.com. Spinco will also
assume all liabilities associated with Broadway’s mineral exploration and development business as conducted prior to the
completion of the Arrangement.

 

Intercorporate
Relationships

 

Spinco
currently has no subsidiaries. If the Arrangement is completed, Spinco will acquire all of the issued and outstanding securities
of the Madison Subsidiary.

 

Narrative
Description of the Business

 

Spinco
was incorporated on October 11, 2019 and has had no business operations to date. Following completion of the Arrangement, Spinco
will be engaged in the mineral exploration business and will carry on the business formerly conducted by Broadway. Pursuant to
the Plan of Arrangement, the only material property held by Spinco will be the Madison Project for which disclosure is provided
below. Upon completion of the Arrangement, subject to regulatory approvals, Spinco will be a reporting issuer in the Provinces
of British Columbia and Alberta. At this time, Spinco has no plans to apply to list its securities on any stock exchange; therefore,
readers are cautioned that no active market for the securities of Spinco may develop and investors many not be able to re-sell
their shares of Spinco.

 

On
April 30, 2019, Broadway announced that the Madison Subsidiary and Broadway had entered into an earn-in with option to joint venture
agreement (the “Kennecott Agreement”) with Kennecott Exploration Company (“Kennecott”),
part of the Rio Tinto Group, with respect to the Madison Project.

     

    -K-2 -

    

Under
the terms of the Kennecott Agreement, Kennecott has an option to acquire a 55% undivided interest in the Madison Project by incurring
exploration and related expenditures of US$5 million within the first five years, including a minimum exploration budget of US$1
million in the first year. If Kennecott exercises the first option, it may elect to earn an additional 10% undivided interest,
for a total undivided interest of 65%, by incurring additional expenditures of US$10 million within the following three years.
If Kennecott exercises the second option, it may elect to earn an additional 5% undivided interest, for a total of 70%, by incurring
additional expenditures of US$15 million within the subsequent three-year period. Kennecott may elect to form the joint venture
after exercising each option to earn-in. The joint venture, if formed, will be managed by Kennecott and funded by each participant
in accordance with its interest. The Madison Subsidiary has a right of first offer to acquire Kennecott’s interest in the
property in the event Kennecott wishes to divest its interest;

 

The
Madison Subsidiary may elect to not fund its interest and be diluted down to a 10% interest. If Madison Subsidiary is diluted
below a 10% interest, its interest will convert to a 2% net smelter royalty capped at US$50.

 

The
Kennecott Agreement continues in full force and effect as of the date hereof. It is a condition of closing of the Arrangement
that Kennecott agrees to remove Broadway as a guarantor under the Kennecott Agreement. There are no changes expected to the rights
and obligations of the Madison Subsidiary under the Kennecott Agreement as it will continue to be the “Optionor” thereunder
since it holds the Madison Project directly. Upon completion of the Arrangement, Spinco will hold the Madison Project (which will
be subject to the Kennecott Agreement) indirectly through Madison Subsidiary.

 

APM
Transaction

 

On
January 8, 2020, Spinco, the Madison Subsidiary and Broadway signed an exclusivity agreement with American Pacific Mining Ltd.
(“APM”) whereby APM was granted the exclusive right to negotiate a definitive agreement with Spinco to acquire
all of the shares of the Madison Subsidiary. The negotiation and completion of the definitive agreement is subject to a number
of conditions, including the parties agreeing to terms, the execution of a definitive agreement, the receipt of all required regulatory,
corporate and stock exchange approvals, the completion of the Arrangement and approval by the shareholders of Spinco, which can
only be sought after the Arrangement is completed, assuming it is completed. The exclusivity agreement automatically terminates
if the Arrangement does not close. The Resulting Issuer will not be a party to any definitive agreement that may be executed.
There can be no assurances that APM and Spinco will be able to complete such a transaction.

 

Spinco
Selected Financial Information

 

The
following table sets out selected consolidated financial information for the periods indicated and should be considered in conjunction
with the more complete information contained in the audited “carve out” financial statements of Spinco for the fiscal
years ended August 31, 2019 and 2018, set out in Schedule “1” to Appendix “K” and the audited financial
statements of Spinco from the date of incorporation, being October 11, 2019, to November 30, 2019 also set out in Schedule “1”
to Appendix “K”. The financial statements have been prepared in accordance with IFRS.

 

Carve-Out
Financial Statements

 

	 	 	Year Ended
 August 31, 2019

 ($)
	 	 	Year Ended
 August 31, 2018

 ($)
	 
	Loss	 	 	(32,441	)	 	 	(35,679	)
	Comprehensive loss	 	 	(843,441	)	 	 	(843,441	)
	Total assets	 	 	3,843,419	 	 	 	4,323,686	 
	Mineral interests	 	 	3,587,077	 	 	 	4,039,824	 

     

    -K-3 -

    

Significant
Acquisitions and Dispositions

 

Spinco
has not completed a financial year. The future operating results and financial position of Spinco cannot be predicted. Pursuant
to the Arrangement, Spinco will acquire the Madison Project conditional upon the receipt of all required approvals for the Arrangement.
Please see Schedule “1” to Appendix “K” of this Circular for the financial statements of Spinco.

 

Trends

 

Management
is not aware of any trend, commitment, event or uncertainty that is both presently known to management and reasonably expected
to have a material effect on Spinco’s business, financial condition or results of operations as at the date of this Circular,
except as otherwise disclosed herein or except in the ordinary course of business.

 

Current
Technical Report – Madison Project

 

The
following disclosure regarding the Madison Project is derived from the NI 43-101 technical report with an effective date of March
4, 2019, prepared by Philip S. Mulholland, C.P.G. and co-authored by Robert S. Middleton, MSc, BSc, P.Eng titled “NI 43-101
Technical Report For The Madison Project, Madison Count, Montana USA” (the “Technical Report”). The Technical
Report is available under Broadway’s profile on www.SEDAR.com.

 

Robert
S. Middleton, MSc, BSc, P.Eng, co-author of the Technical Report, is the qualified person for the purposes of NI 43-101, and has
reviewed and approved the scientific and technical information contained herein related to the Madison Project.

 

Units
of Measure and Abbreviations

 

	Unit	 	Description
	%	 	Percent
	°F	 	Degrees
    Fahrenheit
	in	 	Inch
	ft	 	Foot
    (12 Inches)
	oz	 	ounce
	g/t	 	grams
    per tonne
	ac	 	Acres
	lb	 	Pounds
	mi	 	Miles
	opt	 	Ounces
    Per Ton
	ppm	 	Parts
    Per Million
	SG	 	Specific
    Gravity
	in	 	Inches
	m3	 	Cubic
    Meters
	cm3	 	Cubic
    Centimeters

 

Acronyms
and Symbols

 

	Term	 	Description
	Ag	 	Silver
	Amsl	 	Above
    mean sea level
	As	 	Arsenic
	Au	 	Gold
	BLM	 	United
    States Bureau of Land Management
	CIM	 	Canadian
    Institute of Mining, Metallurgy and Petroleum
	Co	 	Cobalt
	Company	 	Broadway
    Gold Mining Ltd.
	CWA	 	Clean
    Water Act

     

    -K-4 -

    

	Term	 	Description
	ESA	 	Endangered
    Species Act
	FWS	 	Fish
    and Wildlife Services
	Ma	 	Million
    Years
	MMC	 	Metal
    Mining Consultants Inc
	NEPA	 	National
    Environmental Policy Act
	NHPA	 	National
    Historic Preservation Act
	POO	 	Plan
    of operations
	PRISM	 	Parameter-Elevation
    Regressions on Independent Slopes Model
	Property	 	Madison
    Mine Project
	QA	 	Quality
    Assurance
	QA/QC	 	Quality
    Assurance/Quality Control
	QC	 	Quality
    Control
	QP(s)	 	Qualified
    Person(s)
	RC
    or RVC	 	Reverse
    Circulation
	US	 	United
    States
	USFS	 	United
    States Forest Service
	USGS	 	United
    States Geological Survey

 

	2.	Property
                                         Description, Location and Access

 

	2.1	Area
                                         and Location

 

The
Madison Project lies in Madison County in southwestern Montana, approximately 23.6 miles southeast of the city of Butte. The area
is a major mining camp hosting the world renowned Butte Copper Mine. The road accessible claims are 0.9 miles west of the hamlet
of Silver Star in Sections 2 and 3 of Township 2 South, Range 6 West. The center of the property is 398000E 5060500N in Zone 12
in the NAD27 datum. The claims lie on the Silver Star 7.5 minute quadrangle map sheet.

 

Figure
2.1 Location Map

 

 

     

    -K-5 -

    

 

 

	2.2	Mineral
                                         Tenure

 

Broadway
added 102 additional lode claims to the Madison Project in 2017. The claims now comprise 6 federal patented lode claims, 136 federal
unpatented lode claims and 1 federal unpatented placer claim. The claim details can be found in Tables 2.2 and 2.3. These claims
bring the Project footprint to a total of 2,514 acres plus a deeded land parcel of 192 acre. The claims are contiguous to the
west and to the south of the active exploration area. These new claims also provide a buffer along the western and southern extensions
of geophysical targets identified by IP and magnetic surveys.

 

Table
2.2 List of Federal BLM Patented Claims

 

	Name	 	BLM No.	 	Lot No.	 	Expl. No.	 	Acres	 	Tax ID. No.
	Victoria	 	MS491b	 	43	 	ME393	 	1.5	 	12335200
	American	 	MS529	 	46	 	ME403	 	15.4	 	12335600
	Ajax	 	MS564	 	48	 	ME416	 	3.8	 	12335700
	Delaware	 	MS1236	 	53	 	ME983	 	18.9	 	12335300
	Maryland	 	MS1237	 	54	 	ME990	 	10	 	12335400
	Bowery	 	MS1380	 	55	 	ME1232	 	20.8	 	12335500

 

Table
2.3 List of Federal BLM Claims

 	Serial Number	 	Claim Name	 	Last Assmt Year	 	Claimant(s)	 	Location Date	 	Meridian Township Range Section
	MMC100481	 	BOWERY FRACTION	 	2018	 	Broadway Gold Corp	 	03/17/1983	 	20 0020S 0060W 003
	MMC210975	 	LLOYD	 	2018	 	Broadway Gold Corp	 	04/10/2003	 	20 0020S 0060W 002
	MMC210976	 	RYAN	 	2018	 	Broadway Gold Corp	 	04/10/2003	 	20 0020S 0060W 002
	MMC210977	 	TAYLOR	 	2018	 	Broadway Gold Corp	 	04/10/2003	 	20 0020S 0060W 002
	MMC214976	
    
	GARRETT	
    
	2018	
    
	Broadway Gold Corp	
    
	02/10/2006	
    
	20 0020S 0060W 002
	 	 	 	 	 	 	Broadway Gold Corp	 	 	 	20 0020S 0060W 003
	MMC215333	 	NEW MONTANA	 	2018	 	Broadway Gold Corp	 	04/07/2006	 	20 0020S 0060W 003
	MMC229769	 	MADISON NO 1	 	2018	 	Broadway Gold Corp	 	09/19/2013	 	20 0020S 0060W 002

 

     

    -K-6 -

    

	MMC229770	 	MADISON NO 2	 	2018	 	Broadway Gold Corp	 	09/19/2013	 	20 0020S 0060W 002
	MMC229771	 	MADISON NO 3	 	2018	 	Broadway Gold Corp	 	09/19/2013	 	20 0020S 0060W 002
	MMC229772	 	MADISON NO 4	 	2018	 	Broadway Gold Corp	 	09/19/2013	 	20 0020S 0060W 002
	MMC229773	 	MADISON NO 5	 	2018	 	Broadway Gold Corp	 	09/19/2013	 	20 0020S 0060W 002
	MMC229774	 	MADISON NO 6	 	2018	 	Broadway Gold Corp	 	09/19/2013	 	20 0020S 0060W 002
	MMC229775	 	MADISON NO 7	 	2018	 	Broadway Gold Corp	 	09/19/2013	 	20 0020S 0060W 002
	MMC229776	 	MADISON NO 8	 	2018	 	Broadway Gold Corp	 	09/19/2013	 	20 0020S 0060W 002
	MMC229777	 	MADISON NO 9	 	2018	 	Broadway Gold Corp	 	09/19/2013	 	20 0020S 0060W 002
	MMC229778	 	MADISON NO 10	 	2018	 	Broadway Gold Corp	 	09/19/2013	 	20 0020S 0060W 002
	MMC229779	 	MADISON NO 11	 	2018	 	Broadway Gold Corp	 	09/19/2013	 	20 0020S 0060W 002
	MMC229780	 	MADISON NO 12	 	2018	 	Broadway Gold Corp	 	09/19/2013	 	20 0020S 0060W 002
	MMC231189	 	MADISON 13	 	2018	 	Broadway Gold Corp	 	09/02/2014	 	20 0020S 0060W 002
	MMC231190	 	MADISON 14	 	2018	 	Broadway Gold Corp	 	09/02/2014	 	20 0020S 0060W 003
	MMC231191	 	MADISON 15	 	2018	 	Broadway Gold Corp	 	09/02/2014	 	20 0020S 0060W 002
	MMC231192	 	MADISON 16	 	2018	 	Broadway Gold Corp	 	09/02/2014	 	20 0020S 0060W 002
	MMC231193	 	MADISON 17	 	2018	 	Broadway Gold Corp	 	09/02/2014	 	20 0020S 0060W 002
	MMC231194	 	MADISON 18	 	2018	 	Broadway Gold Corp	 	09/02/2014	 	20 0020S 0060W 002
	MMC231195	 	MADISON 19	 	2018	 	Broadway Gold Corp	 	09/02/2014	 	20 0020S 0060W 002
	MMC231196	 	MADISON 20	 	2018	 	Broadway Gold Corp	 	09/02/2014	 	20 0020S 0060W 002
	MMC231197	 	MADISON 21	 	2018	 	Broadway Gold Corp	 	09/02/2014	 	20 0020S 0060W 002
	MMC231198	 	MADISON 22	 	2018	 	Broadway Gold Corp	 	09/02/2014	 	20 0020S 0060W 002
	MMC235347	 	MADISON 93	 	2018	 	Broadway Gold Corp	 	10/25/2017	 	20 0020S 0060W 009
	 	 	 	Broadway Gold Corp	 	 	20 0020S 0060W 010
	MMC235348	 	MADISON 94	 	2018	 	Broadway Gold Corp	 	10/25/2017	 	20 0020S 0060W 010
	MMC235349	 	MADISON 95	 	2018	 	Broadway Gold Corp	 	10/25/2017	 	20 0020S 0060W 010
	MMC235350	 	MADISON 96	 	2018	 	Broadway Gold Corp	 	10/25/2017	 	20 0020S 0060W 010
	MMC235351	 	MADISON 97	 	2018	 	Broadway Gold Corp	 	10/25/2017	 	20 0020S 0060W 010
	MMC235352	 	MADISON 98	 	2018	 	Broadway Gold Corp	 	10/25/2017	 	20 0020S 0060W 010
	MMC235353	 	MADISON 99	 	2018	 	Broadway Gold Corp	 	10/25/2017	 	20 0020S 0060W 010
	MMC235354	 	MADISON 100	 	2018	 	Broadway Gold Corp	 	10/25/2017	 	20 0020S 0060W 010
	MMC235355	 	MADISON 101	 	2018	 	Broadway Gold Corp	 	10/25/2017	 	20 0020S 0060W 010
	 	 	 	Broadway Gold Corp	 	 	20 0020S 0060W 011
	MMC235356	 	MADISON 102	 	2018	 	Broadway Gold Corp	 	10/25/2017	 	20 0020S 0060W 009
	 	 	 	Broadway Gold Corp	 	 	20 0020S 0060W 010
	MMC235357	 	MADISON 103	 	2018	 	Broadway Gold Corp	 	10/25/2017	 	20 0020S 0060W 010
	MMC235358	 	MADISON 104	 	2018	 	Broadway Gold Corp	 	10/25/2017	 	20 0020S 0060W 010
	MMC235359	 	MADISON 105	 	2018	 	Broadway Gold Corp	 	10/25/2017	 	20 0020S 0060W 010
	 	 	 	Broadway Gold Corp	 	 	20 0020S 0060W 011
	MMC235360	 	MADISON 106	 	2018	 	Broadway Gold Corp	 	10/25/2017	 	20 0020S 0060W 011
	MMC235361	 	MADISON 107	 	2018	 	Broadway Gold Corp	 	10/25/2017	 	20 0020S 0060W 011
	MMC235362	 	MADISON 108	 	2018	 	Broadway Gold Corp	 	10/25/2017	 	20 0020S 0060W 011
	MMC235363	 	MADISON 109	 	2018	 	Broadway Gold Corp	 	10/25/2017	 	20 0020S 0060W 011
	MMC235364	 	MADISON 110	 	2018	 	Broadway Gold Corp	 	10/25/2017	 	20 0020S 0060W 011

     

    -K-7 -

    

	MMC235365	 	MADISON
    111	 	2018	 	Broadway
    Gold Corp	 	10/25/2017	 	20
    0020S 0060W 011
	MMC235366	 	MADISON
    112	 	2018	 	Broadway
    Gold Corp	 	10/25/2017	 	20
    0020S 0060W 011
	MMC235367	 	MADISON
    113	 	2018	 	Broadway
    Gold Corp	 	10/25/2017	 	20
    0020S 0060W 011
	MMC235368	 	MADISON
    114	 	2018	 	Broadway
    Gold Corp	 	10/25/2017	 	20
    0020S 0060W 011
	 	 	 	Broadway
    Gold Corp	 	 	20
    0020S 0060W 012
	MMC235369	 	MADISON
    115	 	2018	 	Broadway
    Gold Corp	 	10/25/2017	 	20
    0020S 0060W 011
	 	 	 	Broadway
    Gold Corp	 	 	20
    0020S 0060W 014
	MMC235370	 	MADISON
    116	 	2018	 	Broadway
    Gold Corp	 	10/25/2017	 	20
    0020S 0060W 011
	 	 	 	Broadway
    Gold Corp	 	 	20
    0020S 0060W 014
	MMC235371	 	MADISON
    117	 	2018	 	Broadway
    Gold Corp	 	10/25/2017	 	20
    0020S 0060W 011
	 	 	 	Broadway
    Gold Corp	 	 	20
    0020S 0060W 014
	MMC235372	 	MADISON
    118	 	2018	 	Broadway
    Gold Corp	 	10/25/2017	 	20
    0020S 0060W 011
	 	 	 	Broadway
    Gold Corp	 	 	20
    0020S 0060W 014
	MMC235373	 	MADISON
    119	 	2018	 	Broadway
    Gold Corp	 	10/25/2017	 	20
    0020S 0060W 011
	 	 	 	Broadway
    Gold Corp	 	 	20
    0020S 0060W 014
	MMC235374	 	MADISON
    120	 	2018	 	Broadway
    Gold Corp	 	10/25/2017	 	20
    0020S 0060W 011
	 	 	 	Broadway
    Gold Corp	 	 	20
    0020S 0060W 014
	MMC235375	 	MADISON
    121	 	2018	 	Broadway
    Gold Corp	 	10/25/2017	 	20
    0020S 0060W 011
	 	 	 	Broadway
    Gold Corp	 	 	20
    0020S 0060W 014
	MMC235376	 	MADISON
    122	 	2018	 	Broadway
    Gold Corp	 	10/25/2017	 	20
    0020S 0060W 011
	 	 	 	Broadway
    Gold Corp	 	 	20
    0020S 0060W 014
	MMC235377	 	MADISON
    123	 	2018	 	Broadway
    Gold Corp	 	10/25/2017	 	20
    0020S 0060W 011
	 	 	 	Broadway
    Gold Corp	 	 	20
    0020S 0060W 012
	 	 	 	Broadway
    Gold Corp	 	 	20
    0020S 0060W 013
	 	 	 	Broadway
    Gold Corp	 	 	20
    0020S 0060W 014
	MMC235378	 	MADISON
    124	 	2018	 	Broadway
    Gold Corp	 	10/25/2017	 	20
    0020S 0060W 014
	MMC51847	 	ASPERIN	 	2018	 	Broadway
    Gold Corp	 	02/19/1934	 	20
    0020S 0060W 002
	 	 	 	Broadway
    Gold Corp	 	 	20
    0020S 0060W 003
	MMC51849	 	NORTH
    AMERICAN	 	2018	 	Broadway
    Gold Corp	 	03/10/1937	 	20
    0010S 0060W 034
	 	 	 	Broadway
    Gold Corp	 	 	20
    0010S 0060W 035
	 	 	 	Broadway
    Gold Corp	 	 	20
    0020S 0060W 002
	 	 	 	Broadway
    Gold Corp	 	 	20
    0020S 0060W 003
	MMC51850	 	NUT
    PINE	 	2018	 	Broadway
    Gold Corp	 	06/12/1935	 	20
    0020S 0060W 002
	 	 	 	Broadway
    Gold Corp	 	 	20
    0020S 0060W 003
	MMC51851	 	SILVER
    GLANCE	 	2018	 	Broadway
    Gold Corp	 	05/08/1939	 	20
    0020S 0060W 002
	 	 	 	Broadway
    Gold Corp	 	 	20
    0020S 0060W 003
	MMC51852	 	VALLEY
    VIEW	 	2018	 	Broadway
    Gold Corp	 	06/12/1935	 	20
    0020S 0060W 002
	MMC51853	 	VICTORY	 	2018	 	Broadway
    Gold Corp	 	06/04/1935	 	20
    0020S 0060W 002
	MMC51854	 	WONDER	 	2018	 	Broadway
    Gold Corp	 	06/12/1935	 	20
    0020S 0060W 002
	MMC234023	 	MADISON
    23	 	2018	 	Broadway
    Gold Corp	 	01/21/2017	 	20
    0020S 0060W 002
	MMC234024	 	MADISON
    24	 	2018	 	Broadway
    Gold Corp	 	01/21/2017	 	20
    0020S 0060W 002
	 	 	 	Broadway
    Gold Corp	 	 	20
    0020S 0060W 003
	MMC234025	 	MADISON
    25	 	2018	 	Broadway
    Gold Corp	 	01/21/2017	 	20
    0020S 0060W 002

     

    -K-8 -

    

	MMC234026	 	MADISON 26	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 002
	 	 	 	Broadway Gold Corp	 	 	20 0020S 0060W 003
	MMC234027	 	MADISON 27	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 002
	MMC234028	 	MADISON 28	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 002
	 	 	 	Broadway Gold Corp	 	 	20 0020S 0060W 003
	MMC234029	 	MADISON 29	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 002
	MMC234030	 	MADISON 30	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 002
	 	 	 	Broadway Gold Corp	 	 	20 0020S 0060W 003
	MMC234031	 	MADISON 31	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234032	 	MADISON 32	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234033	 	MADISON 33	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234034	 	MADISON 34	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234035	 	MADISON 35	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 011
	MMC234036	 	MADISON 36	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 011
	MMC234037	 	MADISON 37	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 011
	MMC234038	 	MADISON 38	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 002
	 	 	 	Broadway Gold Corp	 	 	20 0020S 0060W 011
	MMC234039	 	MADISON 39	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 011
	MMC234040	 	MADISON 40	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 011
	MMC234041	 	MADISON 41	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 011
	MMC234042	 	MADISON 42	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 011
	MMC234043	 	MADISON 43	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 011
	MMC234044	 	MADISON 44	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 011
	MMC234045	 	MADISON 45	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 011
	MMC234046	 	MADISON 46	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 011
	MMC234047	 	MADISON 47	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 011
	MMC234048	 	MADISON 48	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 011
	MMC234049	 	MADISON 49	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 011
	MMC234050	 	MADISON 50	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 011
	MMC234051	 	MADISON 51	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 010
	MMC234052	 	MADISON 52	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 010
	MMC234053	 	MADISON 53	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 010
	MMC234054	 	MADISON 54	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 010
	MMC234055	 	MADISON 55	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 010
	MMC234056	 	MADISON 56	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 010
	MMC234057	 	MADISON 57	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 010
	MMC234058	 	MADISON 58	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 010
	MMC234059	 	MADISON 59	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 010
	MMC234060	 	MADISON 60	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	 	 	 	Broadway Gold Corp	 	 	20 0020S 0060W 010
	MMC234061	 	MADISON 61	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	 	 	 	Broadway Gold Corp	 	 	20 0020S 0060W 010
	MMC234062	 	MADISON 62	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	 	 	 	 	 	 	Broadway Gold Corp	 	 	 	20 0020S 0060W 010

     

    -K-9 -

    

	MMC234063	 	MADISON 63	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	 	 	 	 	 	 	Broadway Gold Corp	 	 	 	20 0020S 0060W 010
	MMC234064	 	MADISON 64	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	 	 	 	 	 	 	Broadway Gold Corp	 	 	 	20 0020S 0060W 010
	MMC234065	 	MADISON 65	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	 	 	 	 	 	 	Broadway Gold Corp	 	 	 	20 0020S 0060W 010
	MMC234066	 	MADISON 66	 	2018	 	
    Broadway Gold Corp
	 	01/21/2017	 	20 0020S 0060W 003
	 	 	 	 	 	 	Broadway Gold Corp	 	 	 	20 0020S 0060W 010
	MMC234067	 	MADISON 67	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	 	 	 	 	 	 	Broadway Gold Corp	 	 	 	20 0020S 0060W 010
	MMC234068	 	MADISON 68	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	 	 	 	 	 	 	Broadway Gold Corp	 	 	 	20 0020S 0060W 010
	MMC234069	 	MADISON 69	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234070	 	MADISON 70	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234071	 	MADISON 71	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234072	 	MADISON 72	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234073	 	MADISON 73	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234074	 	MADISON 74	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234075	 	MADISON 75	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234076	 	MADISON 76	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234077	 	MADISON 77	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234078	 	MADISON 78	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234079	 	MADISON 79	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234080	 	MADISON 80	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234081	 	MADISON 81	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234082	 	MADISON 82	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234083	 	MADISON 83	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234084	 	MADISON 84	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234085	 	MADISON 85	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234086	 	MADISON 86	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234087	 	MADISON 87	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234088	 	MADISON 88	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234089	 	MADISON 89	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234090	 	MADISON 90	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234091	 	MADISON 91	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003
	MMC234092	 	MADISON 92	 	2018	 	Broadway Gold Corp	 	01/21/2017	 	20 0020S 0060W 003

     

    -K-10 -

    

Figure
2.4 Madison Project Claims 2017

 

 

 

The
following permits are current and cover mining, surface and underground exploration:

 

		•	Small
                                         Miners Exclusion Statement, which allows for a maximum disturbance of 5 acres with no
                                         upper limit on the amount of material mined on an annual basis;

		•	Montana
                                         Department of Environmental Quality water discharge permit MTX000205, for dewatering
                                         the Madison Mine;

		•	Montana
                                         Department of Environmental Quality water storm water discharge permit MTX300246 to properly
                                         collect runoff from the surface mine workings;

		•	Federal
                                         right of way grant MTM 96462, for operation of a 6-inch pipeline; and

		•	Federal
                                         right of way grant MTM 95835, for use of a single lane road over federal lands.

 

	2.3	Royalties
                                         and Underlying Agreements

 

Broadway
is subject to the following agreements and royalties on the claims:

 

		•	Payment
                                         of CAD$250,000 to the vendor, upon TSXV approval of the purchase (paid);

		•	Issuance
                                         of 500,000 shares on the first anniversary of TSXV approval (issued);

		•	Issuance
                                         of a further 500,000 shares on the second anniversary of TSXV approval (issued);

		•	Payment
                                         of CAD$100,000 upon commencement of commercial production from the Madison Mine. Commercial
                                         production is defined as “the last day of the first period of 30 consecutive days
                                         during which ore has been shipped from the property on a reasonably regular basis for
                                         the purpose of earning revenues.”

 

Through
an underlying agreement between Minera Capital Corporation (subsequently Coronado Resources Ltd.) and Berglynn Resources (USA)
Inc. dated April 1, 2005 the 6 patented claims and the oldest 12 unpatented claims (all except the Madison 1-12, Madison 13-22
and the Victory placer claim) are subject to a 2% Net Smelter Return

     

    -K-11 -

    

(“NSR”)
royalty. An annual pre-production payment of US$50,000 is required on April 1st, commencing in 2010, until such time as commercial
production has been reached and the NSR becomes payable.

 

The
Berglynn–Minera agreement was amended on December 22, 2011 when Berglynn Resources (USA) Inc. assigned its interest to Victoria
Broadway Mines, LLC. In addition, the preproduction payment was clarified. Broadway is required to pay the greater of the US$50,000
pre-production royalty or the 2% NSR on an annual basis, due on April 1.

 

All
mineral claims are patented and unpatented lode claims located on Federal land. The claims are on land administered by the United
States Bureau of Land Management (“BLM”). Patented claims require annual payment of taxes. The unpatented claims
are renewable annually by paying the US$155 per claim as a maintenance fee by September 1 of each year. Each lode claim is 1,500
feet long and 600 feet wide. The placer claim is 1,500 feet long by 600 feet wide and it requires the similar payment as the unpatented
claims. If the taxes, maintenance fees, or the exploration expenditures are not paid or registered by the September 1 deadline
the claims will revert to the BLM. As of the date of this report, the fees on all claims which comprise the property have been
paid as of September 1, 2018. The author anticipates that Broadway will make the required payments prior to the September 1, 2019
deadline.

 

The
author is unaware of any other royalties, back-in rights, payments, or other agreements or encumbrances to which the property
is subject. To the extent known, there are no undisclosed environmental liabilities related to the Broadway or Madison mines.
Broadway has acquired all of the necessary permits to perform its work. To the extent known, there are no other significant factors
or risks that may affect access, title, or the right or ability to perform work on the Property.

 

	2.4	Environmental

 

There
are no environmental liabilities associated with the Madison Project to the best of the author’s knowledge.

 

	3.	History

 

The
following condensed summary of the Silver Star district is taken from the Abandoned Mine Page of the Montana Department of Environmental
Quality website. (http://deq.mt.gov/Land/AbandonedMines/linkdocs/126tech)

 

The
Silver Star District, located on the southeast slopes of the Highland Mountain range, is one of the oldest lode mining districts
in Montana. Many of the mines of the district were well known. In the 1860s and for the next decade, the town of Silver Star was
the most important community between Virginia City and Helena.

 

The
district is on the southeastern slope of Table Mountain, one of the 10,000 foot peaks of the Highland Mountain Range. The rocks
of the area are schists, slates and quartzites with a small area of limestone partially surrounded by a granitic intrusion. The
granitic intrusion has been traced to the north to Butte and is part of the Boulder Batholith. The quartz monzonite of the intrusion
is cut by dikes of fine grained rhyolite porphyry; the schists are cut by more basic intrusive rocks such as basalts. Ore deposits
in the district appear to be in rocks found in the marginal remains of the roof of the Boulder Batholith. The ore deposits in
the Broadway group are of contact origin, while those in mines such as the Green Campbell are recrystallizations of deposits in
the rocks prior to the placement of the batholith.

 

Following
the opening of the initial Green Campbell mine, other quartz lodes were soon located and major mining operations, such as the
Broadway, the Hudson Group, and the Iron Rod went into production. Silver Star acquired a post office in June 1869 and continued
to be one of the major communities in southwestern Montana, ranking with Virginia City and Helena.

 

To
process ore from the mines, a number of mills were constructed throughout the district in the 1860s. By the early 1870s, lode
mines were well established in the district and were attracting miners from around the state.

     

    -K-12 -

    

	3.1	Previous
                                         Mining

 

The
Broadway mine, a gold-bearing vein, was the third largest mine in the district. The Broadway mine property is composed of the
Bowery, Delaware, Maryland and Victoria claims. The mine was ultimately developed by two shafts of 550 feet and 400 feet in depth
on the Bowery claim and a 1,100 foot long tunnel driven from Tom Benton gulch on the Maryland Claim. The main shaft levels were
driven at 75, 175, 300, 350, and 450 feet. In 1902, a winze was extended from the lower level down to 650 feet. Drifting in the
mine exceeded 2,000 feet. The operation is credited with over a million dollars in production; half of which was from 30,000 tons
of oxidized ore mined prior to 1880. This oxidized ore came from a large stope west of the No. 2 shaft at a depth of less than
200 feet. Around 1880 the mine began to work deeper deposits which proved refractory and could not be worked locally. From 1887
to 1900 ore from Shaft No. 1 was shipped to the smelters. About 5,000 tons of oxidized ore was taken out above the 175 foot level
with a further 3,000 tons from the 175 foot level down to the 300 foot level. In the 1890s the mine was producing a carload of
$20 per ton gold ore per day. In 1900 a 20-stamp mill and a cyanidation plant was constructed, however only 60 percent of the
gold was recovered. In the early 1930s the mill tails were reworked for a good profit. The Broadway Gold Mining Company ran the
mine from 1935 until it was shut down during World War II, milling 2,000 to 3,000 tons per month.

 

The
Hudson Mine, located to the southeast within the claim boundaries, is not a part of Broadway’s mining claims, has reported
historical production of $150,000. Figure 2.4 shows the area outlined for the Hudson Mine. Geological details are not provided.

 

	3.2	Previous
                                         Work

 

The
Broadway Mine has been the focus of several exploration programs since the mid 1970s. A brief summary of the various programs
was provided in Price’s (2005) technical report supporting the acquisition of the Madison property by Minera Capital Corp.,
which subsequently became Coronado Resources Ltd. Table 3.1 summarizes previous exploration work conducted on the Madison Project.

 

Table
3.1 Property Exploration Summary

 

	Year	 	Summary
    of Program
	1975
	 	Homestake
    Mining Company obtained a lease-option agreement from Kibbe and Company of Salt Lake City, Utah, July 1, 1975, on the Broadway-Victoria
    Property. At that time, the property consisted of seven patented claims and nine unpatented claims.
	1983
	 	Berglynn
    Resources Inc., a Vancouver junior Company optioned the property from Victoria Mines Inc., staked additional claims, and drilled
    36 drill holes, some of which are now outside the current mineral titles.
	1986
	 	Inspiration
Mines Inc. (a subsidiary of an Anglo American Corp) - formed the Madison Gold Venture (MGV) with Berglynn (67%:33%). The JV completed
detailed surface and underground mapping and sampling. Later, the partners completed 12 core holes and 26 reverse circulation
drill holes.

	1987
	 	Western
    Energy Co. joined the JV with the two JV participants noted above. The new JV completed 28 RVC holes and 2 core holes, a district
    scale airborne magnetic survey, and other work.
	1988
	 	WestGold
    (IMI) optioned the property from Berglynn after Western Energy dropped out of the Joint Venture. WestGold completed 21 RVC
    holes and 9 core holes, and completed a sampling program within 3 trenches and the Black Pit.
	1992
	 	Berglynn
    Resources Inc. (BGN:VSE) changed its name to Arkona Resources Inc. with a consolidation of capital on a 1-new-for-2-old-share
    basis. Galleon Mining (VSE) and BMR Gold (VSE) arranged a Joint Venture to option the property from Berglynn/Arkona.
	1994	 	BMR
    Gold Corp drilled five RC holes totaling 2,958 feet within the property.
	1996
	 	Billiton
    Mining Co. acquired the Madison Gold Venture claims, the Rocky Mountain Gold claims and the adjacent Green Campbell mine (owned
    by others) with a view to exploring the whole package as a major copper-gold project, but Company management and priorities
    changed and the options were never completed. About this time, the property was also examined by Newmont Mining.
	1999
	 	Arkona
    Resources Inc. acquired a 100% interest, on behalf of Berglynn Resources (USA) Inc., in the property from BMR Gold.
	2005
	 	Lexington
    Resources Inc., a private Company, purchased 100% equity in Berglynn Resources (USA) Inc. and in the project, from Action
    Minerals Inc. (formerly Arkona Resources Inc.)
	2005	 	Minera
    Capital Corporation initiated the option agreement with Lexington.
	2016	 	Carolina
    Capital Corp. acquires 100% interest in the Madison Gold and Copper Mine. The Company name is changed to Broadway Gold Mining
    Ltd.
	2017	 	Broadway
Gold completed 26 surface core holes for 6,121 meters and 7 underground core holes for 305 meters; IP/Resistivity, magnetics,
and Mise-a-la-Masse surveys, soil and rock sampling, staked 32 additional unpatented mining claims, rehabilitated the Madison
Mine

     

    -K-13 -

    

	Year	 	Summary
    of Program
	2018	 	Broadway
    Gold completed core logging and sampling, collected additional soil and rock samples, whole rock sample analysis, geochemical
    modeling, Cu-Au skarn resource modeling, engineering study, searched for a major mining Company partner

 

3.2.1
Berglynn Resources Inc.

 

A
drill program was undertaken in 1983 by Berglynn Resources (USA) Inc. Data and collar information exists for 25 drill holes as
shown in Table 3.3. Table 3.3 results are drilling intercepts and do not represent true thickness. Total footage of the program
was 12,000 feet. The drilling was oriented at 35o, perpendicular to the limestone/quartz monzonite contact, with the
exception of 83-16 which was drilled at 206o. Several holes were not assayed for copper.

 

Figure
3.2 Surface Drill Traces (1983)

 

 

Table
3.3 1983 Core Drilling Summary (lengths are in feet)

 

	Number	 	27Z12E	 	27Z12N	 	Elevation	 	Azimuth	 	Dip	 	Depth	 	from	 	to	 	length	 	opt Au	 	% Cu	 	Geology
	83-1	 	397503	 	5061052	 	5253	 	37	 	-45	 	386.3	 	no significant intersection	 	 
	83-2	 	397547	 	5061052	 	5238	 	35	 	-45	 	437	 	272	 	292	 	20	 	0.604	 	 	 	JA
	 	 	 	 	 	 	 	337	 	348	 	11	 	 	 	9.004	 	JA
	83-3	 	397596	 	5061055	 	5236	 	36	 	-60	 	442	 	244	 	308	 	64	 	 	 	0.789	 	JA
	83-4	 	397493	 	5061083	 	5276	 	0	 	-90	 	592	 	155	 	181	 	26	 	0.264	 	 	 	JA
	 	 	 	 	 	 	 	330	 	560	 	230	 	 	 	0.795	 	JA HS
	83-5	 	397624	 	5061051	 	5237	 	40	 	-45	 	477	 	no significant intersection	 	 
	83-6	 	397467	 	5061044	 	5264	 	35	 	-45	 	445	 	196	 	246	 	50	 	0.303	 	 	 	LS HS
	83-7	 	397428	 	5061074	 	5296	 	35	 	-60	 	492	 	414	 	432	 	18	 	0.195	 	 	 	JA
	83-8	 	397518	 	5061056	 	5243	 	35	 	-45	 	436	 	302	 	436	 	134	 	 	 	0.256	 	JA QM
	83-9	   	397501	   	5061019	   	5261	   	35	   	-45	   	546	   	451		546		95	 	 		1.354	 	HS MS QM
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	480	 	497	 	17	 	0.389	 	 	 	MS

 

     

    -K-14 -

    

	Number	 	27Z12E	 	27Z12N	 	Elevation	 	Azimuth	 	Dip	 	Depth	 	from	 	to	 	length	 	opt Au	 	% Cu	 	Geology
	83-10	 	397479	 	5060844	 	5287	 	0	 	-90	 	406	 	no significant intersection	 	 
	83-11	 	397393	 	5061008	 	5287	 	35	 	-45	 	612	 	516	 	553	 	37	 	 	 	0.382	 	JA
	
        83-14

         
	 	
        397587

         
	 	
        5061083

         
	 	
        5255

         
	 	
        0

         
	 	
        -90

         
	 	
        635

         
	 	143	 	180	 	37	 	 	 	2.006	 	HS
	 	 	 	 	 	 	 	226	 	271	 	45	 	 	 	2.538	 	HS JA
	 	 	 	 	 	 	 	256	 	266	 	10	 	0.355	 	 	 	JA
	 	 	 	 	 	 	 	292	 	427	 	135	 	 	 	0.356	 	JA MS ES
	83-15	 	397616	 	5061076	 	5252	 	0	 	-90	 	606	 	no significant intersection	 	 
	83-16	 	397688	 	5061147	 	5155	 	206	 	-60	 	845	 	no significant intersection	 	 
	83-17	 	397488	 	5061100	 	5294	 	35	 	-60	 	294	 	no significant intersection	 	 
	83-18	 	397518	 	5061118	 	5314	 	35	 	-60	 	159	 	no significant intersection	 	 
	83-19	 	397584	 	5061111	 	5287	 	0	 	-90	 	168	 	48	 	168	 	120	 	 	 	0.156	 	LS JA
	83-20	 	397456	 	5061095	 	5306	 	35	 	-60	 	394	 	no significant intersection	 	 
	83-21	 	397482	 	5061113	 	5317	 	35	 	-60	 	245	 	no significant intersection	 	 
	83-22	 	397440	 	5061047	 	5272	 	35	 	-45	 	477	 	no significant intersection	 	 
	83-23	 	397471	 	5061018	 	5262	 	35	 	-45	 	545	 	364	 	382	 	18	 	0.109	 	 	 	PD HS
	 	 	 	 	 	 	 	462	 	545	 	83	 	 	 	1.423	 	JA QM
	83-24	 	397527	 	5061014	 	5264	 	35	 	-45	 	623	 	410	 	594	 	184	 	 	 	0.373	 	JA MS QM
	 	 	 	 	 	 	 	504	 	544	 	40	 	0.241	 	 	 	MS
	83-25	 	397561	 	5061021	 	5254	 	35	 	-60	 	464	 	no significant intersection	 	 
	83-26	 	397531	 	5060990	 	5261	 	35	 	-60	 	552	 	no significant intersection	 	 
	83-27	 	397503	 	5060993	 	5244	 	35	 	-60	 	731	 	705	 	715	 	10	 	0.114	 	 	 	GS

 

	3.2.2.	Inspiration
                                         Mines Inc. (1986)

 

The
1986 core drill program was undertaken by Inspiration Mines Inc. Data and collar information exists for 19 drill holes as shown
in Table 3.5. Table 3.5 results are drilling intercepts and do not represent true thickness. Total footage of the program was
5,004 feet. Though most of the holes were drilled at 35o, which is perpendicular to the limestone/quartz monzonite
contact, four holes were drilled at various other directions.

 

Inspiration
Mines Inc. also conducted a reverse circulation drill program. Data and collar information exists for 15 drill holes as shown
in Table 3.5. Total footage of the program was 4,605 feet. There were no copper assays for 86- R1 to 86R-4.

 

Inspiration
contacted Vance Thornsberry to provide a resource estimate on the Madison Mine Project. With the drilling Inspiration Mines Inc.
added to the previous drilling database Thornberry estimated a historic resource of 1,406,400 tons at 0.102 ounces per ton gold
using a 0.020 ounces per ton cut-off (Thornsberry 1986). Broadway Gold Mining Ltd. has not done sufficient exploration to verify
this historic estimate and is not treating it as a current resource.

 

Thornsberry
1986 noted an altered and mineralized monzonite intrusive that was exposed on the north side of the Victoria Pit. The intrusion
displayed anomalously high precious metal and copper contents. He suggested this was indicative of a porphyry copper system. He
suggested that this was likely to be the mineralizer for sulphide mineralization found in the skarns on the Property.

     

    -K-15 -

    

 

Figure
3.4 Surface Drill Traces (1986)

 

 

 

Table
3.5 1986 Core Drilling Summary (all lengths in ft)

 

	Number	 	27Z12E	 	27Z12N	 	Collar El	 	Azimuth	 	Dip	 	Depth	 	from	 	to	 	length	 	opt Au	 	% Cu	 	Geology
	86-1	 	
        397589

         
	 	
        5061089

         
	 	
        5263

         
	 	
        34

         
	 	
        -45

         
	 	
        202.5

         
	 	87	 	200	 	113	 	 	 	0.286	 	JA QM
	 	 	 	 	 	 	 	120	 	136.5	 	16.5	 	0.114	 	 	 	JA
	86-1B	 	397722	 	5060843	 	5312	 	0	 	-90	 	132.5	 	no significant intersection	 	 
	86-2	 	397614	 	5061071	 	5255	 	35	 	-46	 	402	 	103.5	 	308.5	 	205	 	 	 	1.677	 	JA GS MS
	86-2B	 	397744	 	5060823	 	5309	 	0	 	-90	 	125	 	no significant intersection	 	 
	86-3	 	
        397551

         
	 	
        5061090

         
	 	
        5215

         
	 	
        33

         
	 	
        -47

         
	 	
        245

         
	 	58.5	 	68.5	 	10	 	0.113	 	 	 	LS
	 	 	 	 	 	 	 	100	 	245	 	145	 	 	 	0.179	 	JA QM
	86-3B	 	397685	 	5060748	 	5246	 	0	 	-90	 	155	 	no significant intersection	 	 
	86-4	 	
        397491

         
	 	
        5061078

         
	 	
        5280

         
	 	
        37

         
	 	
        -46

         
	 	
        302

         
	 	170	 	182	 	12	 	0.122	 	 	 	LS
	 	 	 	 	 	 	 	232	 	260	 	28	 	 	 	0.205	 	JA QM
	86-4B	 	397721	 	5060799	 	5287	 	0	 	-90	 	79.5	 	72	 	73	 	1	 	0.582	 	 	 	QM
	
        86-5

         
	 	
        397487

         
	 	
        5061060

         
	 	
        5270

         
	 	
        72

         
	 	
        -47

         
	 	
        603

         
	 	142	 	154.5	 	12.5	 	0.122	 	 	 	HS
	 	 	 	 	 	 	 	392	 	396	 	4	 	1.788	 	1.700	 	JA
	 	 	 	 	 	 	 	413	 	480.5	 	67.5	 	 	 	0.943	 	HS MS GS
	 	 	 	 	 	 	 	469.5	 	480.5	 	11	 	0.140	 	 	 	MS ES
	86-5B	 	397779	 	5060863	 	5334	 	0	 	-90	 	119.5	 	no significant intersection	 	 
	
        86-6

         
	 	
        397613

         
	 	
        5061139

         
	 	
        5250

         
	 	
        125

         
	 	
        -46

         
	 	
        549

         
	 	70	 	225	 	155	 	 	 	0.458	 	QM GS CZ
	 	 	 	 	 	 	 	211	 	223	 	12	 	0.181	 	 	 	CZ
	 	 	 	 	 	 	 	383.5	 	443.5	 	60	 	 	 	0.518	 	GDS MS

     

    -K-16 -

    

	Number	 	27Z12E	 	27Z12N	 	Collar El	 	Azimuth	 	Dip	 	Depth	 	from	 	to	 	length	 	opt Au	 	% Cu	 	Geology
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	395	 	419	 	24	 	0.751	 	 	 	MS
	86-6B	 	397810	 	5060908	 	5294	 	0	 	-90	 	124.5	 	no significant intersection	 	 
	86-7	 	
        397605

         
	 	
        5061135

         
	 	
        5251

         
	 	
        215

         
	 	
        -45

         
	 	
        283.5

         
	 	0	 	147	 	147	 	 	 	0.197	 	JA QM LS
	 	 	 	 	 	 	 	175	 	246.7	 	71.7	 	 	 	0.679	 	LS JA HS
	86-7B	 	397828	 	5060954	 	5271	 	0	 	-90	 	163.5	 	no significant intersection	 	 
	86-8	 	397684	 	5061128	 	5159	 	122	 	-45	 	267.5	 	58	 	210	 	152	 	 	 	0.236	 	ES GS QM
	86-9	 	397663	 	5061031	 	5242	 	33	 	-46	 	406.5	 	326	 	375.3	 	49.3	 	 	 	0.469	 	GS
	86-10	 	397679	 	5060976	 	5253	 	34	 	-47	 	350	 	no significant intersection	 	 
	86-11	 	397738	 	5060968	 	5263	 	34	 	-69	 	204	 	no significant intersection	 	 
	86-12	 	397630	 	5061034	 	5231	 	76	 	-46	 	289.5	 	no significant intersection	 	 

 

	3.2.3.	Western
                                         Energy Company

 

Western
Energy Company continued to drill the Madison project in 1987 with a core drill program. Data and collar information exists for
two core and four reverse circulation drill holes as shown in Figure 3.5 and Tables 3.6 and 3.7. Tables 3.6 and 3.7 results are
drilling intercepts and do not represent true thickness. The total footage of the program 3,019 feet for both core and RC.

 

Western
Energy Company concluded with this drill program that the gold mineralization was confined to the jasper and sulphide skarn material.
The jasper occurs as a semi-continuous sheet commonly in contact with the intrusion. The sulphide mineralization was found in
hedenbergite and garnet skarns.

 

Western
Energy Company consulted with Garry Anderson and Martin Foote to update the resource estimate for the Project. The resultant resource
estimation equated to 1,125,000 tons at 0.090 ounces per ton Au using a 0.020 ounces per ton cutoff (Anderson and Foote 1987).
Broadway Gold Mining Ltd. has not done sufficient exploration to verify this historic estimate and is not treating it as a current
resource; and, further, the historic estimate cannot be relied upon.

     

    -K-17 -

    

Figure
3.5 Surface Drill Traces (1987)

 

 

 

Table
3.6 1987 Drilling Summary (lengths in feet)

 

	Number	 	27Z12E	 	27Z12N	 	Collar
    El	 	Azimuth	 	Dip	 	Depth	 	From	 	To	 	Length	 	Opt
    Au	 	%
    Cu	 	Geology
	87-C12	 	397395	 	5060976	 	5277	 	27	 	-62	 	924	 	712	 	717	 	5	 	0.154	 	 	 	HS
	87-C30	 	397453	 	5061052	 	5273	 	24	 	-71	 	665	 	401

         

        537
	 	577

         

        568
	 	176

         

        31
	 	 	 	1.197

         

        3.757
	 	JA
        ES

         

        JA

 

Table
3.7 1987 Reverse Circulation Drilling Summary (lengths in feet)

 

	Number	 	27Z12E	 	27Z12N	 	Collar El	 	Azimuth	 	Dip	 	Depth	 	From	 	To	 	Length	 	Opt Au	 	% Cu	 	Geology
	
        87-33

         
	 	
        397461

         
	 	
        5061060

         
	 	
        5275

         
	 	
        35

         
	 	
        -60

         
	 	
        460

         
	 	170	 	185	 	15	 	0.105	 	 	 	PB
	 	 	 	 	 	 	 	345	 	460	 	115	 	 	 	0.504	 	JA QM
	 	 	 	 	 	 	 	390	 	410	 	20	 	0.127	 	 	 	JA
	87-34	 	397478	 	5061141	 	5350	 	240	 	-45	 	280	 	no significant intersection	 	 
	
        87-40

         
	 	
        397651

         
	 	
        5061044

         
	 	
        5254

         
	 	
        27

         
	 	
        -58

         
	 	
        310

         
	 	0	 	25	 	25	 	 	 	0.276	 	TL GS
	 	 	 	 	 	 	 	275	 	310	 	35	 	 	 	0.395	 	GS DS
	87-40A	 	397657	 	5061045	 	5248	 	26	 	-58	 	380	 	285	 	360	 	75	 	 	 	0.281	 	GS

 

	3.2.4	Western
                                         Gold Exploration and Mining Company, Limited Partnership

 

Western
Energy Company terminated its participation in the Madison Joint Venture, leaving only Berglynn Resources (USA) Inc. and Inspiration
Mining Inc. through its Western Gold Exploration and Mining Company, Limited Partnership) as joint venture partners going forward
into 1988.

 

The
1988 core drill program was undertaken by Western Gold Exploration and Mining Company, Ltd. Data and collar information exists
for 9 drill holes as shown in Table 3.10. Total footage of the program was 2,560 feet. The holes were in numerous directions with
only two drilled perpendicular to the limestone/quartz monzonite contact.

     

    -K-18 -

    

The
1988 reverse circulation drill program was undertaken by Western Gold Exploration and Mining Company, Limited Partnership. Data
and collar information exists for 8 drill holes as shown in Table 3.10. Total footage of the program was 3,191 feet. All holes
were drilled at 35o, with 1 drilled at a -90o, perpendicular to the limestone/quartz monzonite contact,
with the exception of one hole drilled at an angle to the contact. Tables 3.9 and 3.10 results are drilling intercepts and do
not represent true thickness.

 

Figure
3.8 Surface Drill Traces (1988)

 

 

 

Table
3.9 1988 Core Drilling Summary (lengths in feet)

 

	Number	 	27Z12E	 	27Z12N	 	Collar El	 	Azimuth	 	Dip	 	Depth	 	From	 	To	 	Length	 	OPT Au	 	% Cu	 	Geology
	
        88-C1

         
	 	
        397529

         
	 	
        5061029

         
	 	
        5268

         
	 	
        35

         
	 	
        -46

         
	 	
        584

         
	 	260	 	265	 	5	 	2.001	 	 	 	LM
	 	 	 	 	 	 	 	375	 	564	 	189	 	 	 	1.021	 	PB MS GS DS ES
	 	 	 	 	 	 	 	447	 	461	 	14	 	0.146	 	 	 	MS
	
        88-C2

         
	 	
        397692

         
	 	
        5061100

         
	 	
        5151

         
	 	
        238

         
	 	
        -75

         
	 	
        269

         
	 	37	 	47	 	10	 	0.187	 	 	 	GS DS
	 	 	 	 	 	 	 	134	 	135	 	1	 	0.547	 	2.720	 	GS DS
	 	 	 	 	 	 	 	183.5	 	221	 	37.5	 	 	 	0.717	 	GS DS MS HS
	88-C3	 	397593	 	5061083	 	5258	 	105	 	-45	 	135	 	no significant intersection	 	 
	88-C4	 	397592	 	5061083	 	5258	 	106	 	-73	 	309	 	140.5	 	150.5	 	10	 	 	 	0.909	 	HS
	
        88-C5

         
	 	
        397533

         
	 	
        5061070

         
	 	
        5266

         
	 	
        107

         
	 	
        -50

         
	 	
        253

         
	 	88.5	 	92.5	 	4	 	0.230	 	 	 	HS
	 	 	 	 	 	 	 	131	 	137	 	6	 	0.694	 	 	 	HS
	88-C6	 	397603	 	5061108	 	5286	 	111	 	-57	 	113	 	41	 	61	 	20	 	 	 	0.169	 	JA
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	69	 	83	 	14	 	0.077	 	 	 	JA
	88-C7	 	397645	 	5061071	 	5260	 	128	 	-45	 	178	 	no significant intersection	 	 
	88-C8	 	397621	 	5061063	 	5254	 	32	 	-45	 	383	 	104	 	258	 	154	 	 	 	0.562	 	LM HS JA GS DS
	
        88-C9

         
	 	
        397731

         
	 	
        5061071

         
	 	
        5139

         
	 	
        247

         
	 	
        -46

         
	 	
        336

         
	 	103	 	267.5	 	164.5	 	 	 	0.372	 	GS DS MS
	 	 	 	 	 	 	 	193.5	 	228	 	34.5	 	0.294	 	 	 	MS

     

    -K-19 -

    

Table
3.10 1988 Reverse Circulation Drilling Summary (lengths in feet)

 

	Number	 	27Z12E	 	27Z12N	 	Collar El	 	Azimuth	 	Dip	 	Depth	 	From	 	To	 	Length	 	OPT Au	 	% Cu	 	Geology
	88-R9	 	397480	 	5061058	 	5272	 	35	 	-44	 	395	 	205	 	225	 	20	 	0.157	 	 	 	PB
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	325	 	360	 	35	 	 	 	0.216	 	JA QM
	
        88-R10

         
	 	
        397586

         
	 	
        5061064

         
	 	
        5356

         
	 	36	 	-43	 	
        495

         
	 	135	 	495	 	360	 	 	 	0.563	 	JA MS GS DS QM
	 	 	 	 	 	 	 	255	 	280	 	25	 	 	 	2.664	 	JA MS
	 	 	 	 	 	 	 	330	 	350	 	20	 	 	 	2.330	 	GS DS MS
	88-R11	 	397555	 	5061023	 	5262	 	35	 	-45	 	186	 	no significant intersection	 	 
	88-R11A	 	397557	 	5061026	 	5262	 	35	 	-45	 	495	 	300	 	420	 	120	 	 	 	0.588	 	JA MS DS GS
	 	 	 	 	 	 	 	410	 	420	 	10	 	0.664	 	 	 	DS GS
	88-R12	 	397607	 	5061125	 	5276	 	0	 	-90	 	185	 	25	 	185	 	160	 	 	 	0.224	 	JA ES QM
	88-R13	 	397595	 	5061048	 	5257	 	35	 	-45	 	475	 	210	 	335	 	125	 	 	 	0.574	 	JA GS DS
	88-R18	 	397477	 	5061074	 	5284	 	76	 	-55	 	480	 	130	 	285	 	155	 	0.105	 	 	 	PB HS
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	415	 	450	 	35	 	 	 	0.802	 	JA
	88-R19	 	397565	 	5061060	 	5243	 	35	 	-45	 	480	 	170	 	325	 	155	 	 	 	0.336	 	PB JA GS DS ES

 

	3.2.5	BRM
                                         Gold Corp

 

BMR
Gold Corp. acquired an option on the property in 1992 and commissioned an evaluation report undertaken by Bourns (1992). He reviewed
all of the existing data and historic estimates and concluded a historic drill indicated resource in the order of 1 million tons
at 0.090 ounces per ton gold utilizing a 0.020 ounces per ton cutoff was reasonable. Bourns (1992) also determined a historic
drill indicated copper resource of 1.9 million tons at 0.64 % in the same area as the historic gold resource. Broadway Gold Mining
Ltd. has not done sufficient exploration to verify this historic estimate, is not treating it as a current resource; and, further,
this historic estimate cannot be relied upon. Bourns (1992) suggested “a high grade porphyry style of mineralization”
was indicated at depth. He recommended acquiring and reviewing all existing data, metallurgical work, underground access and sampling.
He also recommended deeper drilling of holes to a depth of 600 to 2,000 feet.

 

BRM
Gold Corp. followed up on the recommendations by the Bourns report and conducted a reverse circulation drilling program in 1994.
Data and collar information exists for 5 drill holes as shown in Table 3.16. Table 3.16 results are drilling intercepts and do
not represent true thickness. Total footage of the program was 2,945 feet. All holes were drilled at 35o, perpendicular
to the limestone/quartz monzonite.

 

Figure
3.11 Surface Drill Traces (1994)

 

 

 

     

    -K-20 -

    

Table
3.12 Reverse Circulation Drilling Summary (lengths in feet)

 

	Number	 	27Z12E	 	27Z12N	 	Collar El	 	Azimuth	 	Dip	 	Depth	 	From	 	To	 	Length	 	OPT Au	 	% Cu	 	Geology
	
        94-1R

         
	 	
        397500

         
	 	
        5061017

         
	 	
        5268

         
	 	
        35

         
	 	
        -60

         
	 	
        585

         
	 	485	 	490	 	5	 	0.329	 	 	 	HS GS
	 	 	 	 	 	 	 	505	 	510	 	5	 	 	 	2.180	 	GS DS
	 	 	 	 	 	 	 	535	 	540	 	5	 	 	 	2.620	 	GS DS
	
        94-2R

         
	 	
        397546

         
	 	
        5061050

         
	 	
        5243

         
	 	
        35

         
	 	
        -70

         
	 	
        540

         
	 	340	 	360	 	20	 	0.190	 	0.118	 	GS DS HS
	 	 	 	 	 	 	 	380	 	445	 	65	 	 	 	0.221	 	JA HS DS GS
	
        94-3R

         
	 	
        397584

         
	 	
        5061055

         
	 	
        5254

         
	 	
        35

         
	 	
        -70

         
	 	
        520

         
	 	220	 	230	 	10	 	0.136	 	 	 	HS DS
	 	 	 	 	 	 	 	310	 	345	 	35	 	 	 	0.360	 	GS ES DA
	94-4R	 	397520	 	5060975	 	5233	 	35	 	-65	 	665	 	495	 	500	 	5	 	0.410	 	 	 	GS
	
        94-5R

         
	 	
        397466

         
	 	
        5061044

         
	 	
        5198

         
	 	
        35

         
	 	
        -60

         
	 	
        635

         
	 	475	 	635	 	160	 	 	 	1.649	 	HS DS JA GS QM
	 	 	 	 	 	 	 	480	 	490	 	10	 	 	 	10.580	 	HS DS

 

	3.2.6	Coronado
                                         Resources Ltd.

 

Surface
Programs

 

Coronado
completed surface drilling over the fall of 2005 and the summer of 2006. The purpose of the two phase program was to duplicate
and confirm the earlier drill results and extend the mineralized zones in preparation for underground development. This program
was largely successful as shown in Table 3.17. Table 3.17 results are drilling intercepts and do not represent true thickness.
The fall 2005 program was 6 holes totaling 2,419.5 feet while the summer 2006 program was another 8 holes totaling 2,940.5 feet.

 

Figure
3.13 Surface Drill Traces (2005-2006)

 

 

 

Table
3.14 2005-2006 Coronado Surface Core Drilling Summary (lengths in feet)

 

	Number	 	27Z12E	 	27Z12N	 	Collar El	 	Azimuth	 	Dip	 	Depth	 	From	 	To	 	Length	 	OPT Au	 	% Cu	 	Geology
	
        C05-01

         
	 	
        397542

         
	 	
        5061033

         
	 	
        5194

         
	 	
        35

         
	 	
        -45

         
	 	
        584

         
	 	410	 	570	 	160	 	 	 	0.149	 	JA MS HS
	 	 	 	 	 	 	 	436	 	446.9	 	10.9	 	0.102	 	 	 	JA
	 	 	 	 	 	 	 	505	 	518	 	13	 	0.171	 	 	 	MS
	C05-02	 	397567	 	5061118	 	5285	 	0	 	-90	 	388	 	25	 	54.5	 	29.5	 	 	 	0.184	 	JA GS DS

     

    -K-21 -

    

	Number	 	27Z12E	 	27Z12N	 	Collar El	 	Azimuth	 	Dip	 	Depth	 	From	 	To	 	Length	 	OPT Au	 	% Cu	 	Geology
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	194	 	377.5	 	183.5	 	 	 	0.883	 	PB JA GS QM
	 	 	 	 	 	 	 	305	 	326	 	21	 	 	 	3.813	 	JA
	 	 	 	 	 	 	 	224.8	 	281.3	 	56.5	 	0.342	 	 	 	JA
	
        C05-03

         
	 	
        397598

         
	 	
        5061136

         
	 	
        5250

         
	 	
        117

         
	 	
        -46

         
	 	
        488

         
	 	10	 	80	 	70	 	 	 	0.386	 	PB ES
	 	 	 	 	 	 	 	214.5	 	244	 	29.5	 	 	 	0.789	 	MS GS
	 	 	 	 	 	 	 	222.5	 	229	 	6.5	 	0.272	 	 	 	GS
	C05-04	 	397602	 	5061104	 	5281	 	0	 	-90	 	435	 	10	 	435	 	425	 	 	 	0.273	 	PB JA QM
	 	 	 	 	 	 	 	292	 	323	 	31	 	0.202	 	 	 	JA
	C05-05	 	397559	 	5061122	 	5248	 	0	 	-90	 	106	 	no significant intersection	 	 
	
        C05-06

         
	 	
        397579

         
	 	
        5061072

         
	 	
        5157

         
	 	
        35

         
	 	
        -57

         
	 	
        418.5

         
	 	210.8	 	411	 	200.2	 	 	 	6.966	 	JA MS GS
	 	 	 	 	 	 	 	265.2	 	293	 	27.8	 	 	 	40.028	 	JA MS
	 	 	 	 	 	 	 	314.0	 	319	 	5.2	 	 	 	19.400	 	MS
	 	 	 	 	 	 	 	395.8	 	402	 	6.2	 	 	 	13.650	 	MS
	 	 	 	 	 	 	 	347.6	 	395.8	 	48.2	 	0.353	 	 	 	MS
	C06-07	 	397591	 	5061065	 	5166	 	35	 	-58	 	389	 	222.7	 	313	 	90.3	 	 	 	0.659	 	PB JA MS
	 	 	 	 	 	 	 	238	 	247.4	 	9.4	 	0.601	 	 	 	PB
	
        C06-08

         
	 	
        397574

         
	 	
        5061065

         
	 	
        5213

         
	 	
        35

         
	 	
        -50

         
	 	
        460

         
	 	155	 	432.9	 	277.9	 	 	 	1.899	 	HS GS PB JA MS ES
	 	 	 	 	 	 	 	156.7	 	169	 	12.3	 	0.188	 	4.962	 	GS PB
	 	 	 	 	 	 	 	272.5	 	280	 	7.5	 	 	 	19.060	 	MS
	 	 	 	 	 	 	 	409.7	 	418.7	 	9	 	1.217	 	19.584	 	MS
	C06-09	 	397572	 	5061063	 	5200	 	35	 	-64	 	468	 	235.5	 	410.5	 	175	 	 	 	0.378	 	PB JA GS DS MS
	 	 	 	 	 	 	 	308.8	 	311.6	 	2.8	 	1.144	 	 	 	MS
	C06-10	 	397577	 	5061117	 	5287	 	0	 	-90	 	446	 	212.4	 	356	 	143.6	 	 	 	0.302	 	JA PB MG QM
	 	 	 	 	 	 	 	228	 	257.8	 	29.8	 	0.333	 	 	 	MS
	C06-11	 	397500	 	5061067	 	5224	 	5	 	-54	 	234	 	124	 	199.4	 	75.4	 	0.167	 	 	 	HS JA
	C06-12	 	397500	 	5061066	 	5208	 	5	 	-65	 	288	 	138	 	151.4	 	13.4	 	0.206	 	1.053	 	PB HS
	 	 	 	 	 	 	 	201	 	223	 	22	 	0.194	 	 	 	HS MG MS
	C06-13	 	397714	 	5061081	 	5128	 	255	 	-57	 	263	 	86.4	 	251	 	164.6	 	 	 	0.412	 	GS DS MS
	 	 	 	 	 	 	 	148	 	188	 	40	 	0.315	 	 	 	MS
	C06-14	 	397581	 	5061078	 	5190	 	37	 	-50	 	392.5	 	134.7	 	302	 	167.3	 	 	 	0.488	 	HS PB JA MS GS
	 	 	 	 	 	 	 	173	 	182	 	9	 	0.133	 	 	 	PB

 

Underground
Activity

 

The
successful drilling program led to the decision to commence a decline in October 2006. The decline (collar 5,150 feet) eventually
reached a length of 1,427 feet developing the 200 Level (5,070 feet, 5,050 feet and 5,030 feet), 500 Level (4,970 feet) and 4,930
feet) and 600 Level (4,900 feet and 4,890 feet). Three small drilling programs (U07, U09, and U10) were completed underground
as shown in Table 3.18.

 

The
2007 program consisted of 575.6 feet in four holes from the drilling station above 200 Level. The target was the East Drift area
testing gold intersections from the earlier surface drilling programs (Figures 3.15 and 3.16). Significant copper values were
encountered as shown in Table 3.18.

 

The
2009 program comprised of 7 holes totaling 766.5 feet. Figure 3.17 shows the locations of these holes in relation to underground
drifts. U09-07 was drilled from the same drill station as the four previous holes, targeting the same gold area. Encouraging gold
values were encountered. U09-05 and U09-06 were drilled for a copper-gold target. The remaining holes tested the down dip extension
of the main mineralized zone below the 500 level.

 

The
three holes drilled in 2010 targeted the same down dip extension, leading to the extension of the decline to the 600 Level. Locations
can be seen in Figure 3.17. Results can be seen in Table 3.18. Table 3.18 results are drilling intercepts and do not represent
true thickness. Figure 3.18 shows the development of the 600 Level.

     

    -K-22 -

    

Figure
3.15 Coronado Decline

 

 

*UTM
NAD 83 Zone 12

 

Figure
3.16 200 Level

 

 

*UTM
NAD 83 Zone 12

     

    -K-23 -

    

Figure
3.17 500 Level

 

 

*UTM
NAD 83 Zone 12

 

Figure
3.18 600 Level

 

 

 

*UTM
NAD 83 Zone 12

 

Table
3.19 2007-2010 Coronado Underground Core Drilling Summary (lengths in feet)

 

	Number	 	27Z12E	 	27Z12N	 	Collar El	 	Azimuth	 	Dip	 	Depth	 	From	 	To	 	Length	 	OPT Au	 	% Cu	 	Geology
	
        U07-01

         
	 	
        397664

         
	 	
        5061078

         
	 	
        5101

         
	 	
        57

         
	 	
        -45

         
	 	
        142.3

         
	 	105	 	109	 	4	 	 	 	2.090	 	ES
	 	 	 	 	 	 	 	109	 	116	 	7	 	0.14	 	2.090	 	ES
	 	 	 	 	 	 	 	116	 	135	 	19	 	 	 	2.090	 	ES
	U07-02	 	397664	 	5061078	 	5102	 	57	 	-30	 	124	 	109	 	122.5	 	13.5	 	 	 	0.253	 	EGS
	U07-03	 	397664	 	5061077	 	5102	 	79	 	-35	 	155.3	 	116	 	155.3	 	39.3	 	 	 	0.303	 	ES
	
        U07-04

         
	 	
        397664

         
	 	
        5061077

         
	 	
        5101

         
	 	
        69

         
	 	
        -41

         
	 	
        154

         
	 	95.5	 	130.5	 	35	 	 	 	0.848	 	ES
	 	 	 	 	 	 	 	130.5	 	143	 	13	 	0.194	 	0.848	 	ES
	 	 	 	 	 	 	 	143	 	154	 	11	 	 	 	0.848	 	ES
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0	 	57	 	57	 	 	 	1.356	 	HS MS

     

    -K-24 -

    

	Number	 	27Z12E	 	27Z12N	 	Collar El	 	Azimuth	 	Dip	 	Depth	 	From	 	To	 	Length	 	OPT Au	 	% Cu	 	Geology
	
        U09-01

         
	 	
        397596

         
	 	
        5061108

         
	 	
        4958

         
	 	
        88

         
	 	
        -45

         
	 	
        81.5

         
	 	12.5	 	27	 	14.5	 	0.541	 	 	 	HS
	 	 	 	 	 	 	 	35.0	 	57	 	22	 	0.233	 	1.360	 	HS
	 	 	 	 	 	 	 	50.5	 	57	 	7	 	 	 	8.000	 	MS
	
        U09-02

         
	 	
        397596

         
	 	
        5061109

         
	 	
        4957

         
	 	
        69

         
	 	
        -40

         
	 	
        68

         
	 	0	 	63	 	63	 	 	 	1.457	 	HS
	 	 	 	 	 	 	 	22	 	58	 	36	 	0.435	 	 	 	HS
	 	 	 	 	 	 	 	39.5	 	63	 	23.5	 	 	 	2.963	 	HS
	U09-03	 	397596	 	5061108	 	4958	 	69	 	-57	 	89	 	10	 	75.5	 	65.5	 	 	 	0.944	 	HS
	 	 	 	 	 	 	 	28.5	 	70	 	41.5	 	0.639	 	 	 	HS
	
        U09-04

         
	 	
        397595

         
	 	
        5061109

         
	 	
        4957

         
	 	
        54

         
	 	
        -40

         
	 	
        82

         
	 	17.5	 	73	 	55.5	 	 	 	2.975	 	GS JA MS
	 	 	 	 	 	 	 	61	 	73	 	12	 	 	 	10.253	 	MS
	 	 	 	 	 	 	 	23	 	25	 	2	 	0.612	 	 	 	JA MS
	 	 	 	 	 	 	 	48	 	73	 	25	 	0.588	 	 	 	JA MS
	U09-05	 	397585	 	5061080	 	4941	 	278	 	-40.5	 	140	 	0	 	140	 	140	 	 	 	0.734	 	GS JA
	 	 	 	 	 	 	 	0	 	21	 	21	 	0.191	 	 	 	GS
	U09-06	 	397585	 	5061104	 	4960	 	264	 	-40	 	95	 	0	 	95	 	95	 	 	 	1.622	 	MS GS
	 	 	 	 	 	 	 	0	 	18.5	 	18.5	 	0.153	 	5.616	 	MS GS
	
        U09-07

         
	 	
        397662

         
	 	
        5061078

         
	 	
        5100

         
	 	
        313

         
	 	
        -66

         
	 	
        211

         
	 	111	 	217	 	106	 	 	 	0.614	 	GS MS
	 	 	 	 	 	 	 	158	 	163	 	5	 	0.308	 	 	 	MS
	 	 	 	 	 	 	 	180.5	 	184	 	4	 	0.400	 	 	 	GS
	 	 	 	 	 	 	 	201	 	207	 	6	 	0.172	 	2.391	 	GS
	
        U10-01

         
	 	
        397592

         
	 	
        5061107

         
	 	
        4958

         
	 	
        69

         
	 	
        -70

         
	 	
        142.5

         
	 	20.5	 	94	 	73.5	 	 	 	0.608	 	MS GS
	 	 	 	 	 	 	 	29	 	64.4	 	35.4	 	0.779	 	 	 	MS GS
	 	 	 	 	 	 	 	84	 	94	 	10	 	0.774	 	 	 	GS
	
        U10-02

         
	 	
        397592

         
	 	
        5061107

         
	 	
        4958

         
	 	
        0

         
	 	
        -90

         
	 	
        138

         
	 	12	 	119	 	107	 	 	 	1.289	 	GS HS MS MG
	 	 	 	 	 	 	 	12	 	19	 	7	 	 	 	13.570	 	GS
	 	 	 	 	 	 	 	45	 	119	 	74	 	0.743	 	 	 	MS MG HS
	U10-03	 	397592	 	5061106	 	4958	 	0	 	-90	 	59.5	 	0	 	53	 	53	 	 	 	0.715	 	no geology
	 	 	 	 	 	 	 	53	 	59.5	 	6.5	 	0.62	 	0.715	 	no geology

 

Underground
Grab Sampling

 

Grab
sampling of the material as it was hauled to the surface was undertaken by blind sampling of scoop tram buckets. Table 3.19 shows
the tabulated results of these various blind grab samples. The samples include the level, heading, raise and stope; the number
of samples; the maximum, minimum and average ore values.

 

Table
3.20 Underground Heading Sampling Summary

 

	 	 	%
    Copper	 	 	 	OPT
    Au
	Level	 	Heading	 	#
    Samples	 	Average	 	Min	 	Max	 	#
    Samples	 	Average	 	Min	 	Max
	100	 	100
    Cu	 	59	 	7.358	 	0.242	 	16.160	 	 	 	 	 	 	 	 
	200	 	200
    Au	 	 	 	 	 	 	 	 	 	158	 	0.103	 	0.002	 	20.728
	200	 	200
    Cu	 	54	 	5.494	 	0.328	 	25.880	 	 	 	 	 	 	 	 
	300	 	 	 	 	 	 	 	 	 	 	 	120	 	0.342	 	0.002	 	1.426
	400	 	East
    Drift	 	 	 	 	 	 	 	 	 	52	 	0.235	 	0.004	 	1.3
	500	 	500N	 	 	 	 	 	 	 	 	 	29	 	0.463	 	0.008	 	3.172
	500	 	503
    XC	 	 	 	 	 	 	 	 	 	5	 	0.008	 	0.004	 	0.028
	500	 	500
    XC	 	 	 	 	 	 	 	 	 	58	 	0.408	 	0.044	 	2.12
	500	 	501
    XC	 	 	 	 	 	 	 	 	 	25	 	0.151	 	0.008	 	0.512
	500	 	500
    stope	 	 	 	 	 	 	 	 	 	88	 	0.372	 	0.006	 	1.326
	500	 	500/501	 	93	 	4.600	 	0.214	 	56.600	 	 	 	 	 	 	 	 
	600	 	600
    XC	 	17	 	1.644	 	0.053	 	4.482	 	 	 	 	 	 	 	 
	600	 	601
    XC	 	163	 	4.688	 	0.070	 	16.56	 	168	 	0.429	 	0.010	 	2.728
	600	 	601
    Stope	 	36	 	2.005	 	0.265	 	6.816	 	 	 	 	 	 	 	 

     

    -K-25 -

    

	 	 	%
    Copper	 	 	 	OPT
    Au
	Level	 	Heading	 	#
    Samples	 	Average	 	Min	 	Max	 	#
    Samples	 	Average	 	Min	 	Max
	600	 	602
    XC	 	22	 	0.628	 	0.297	 	1.307	 	33	 	0.088	 	0.012	 	0.272
	600	 	604
    XC	 	42	 	0.820	 	0.133	 	7.651	 	48	 	0.663	 	0.012	 	1.924

 

Bulk
Sample Testing

 

A
mineralized bulk sample was brought to surface, separated as gold rich mineralization or copper rich mineralization, crushed and
shipped to three different mills for processing and metal recovery tests. The bulk samples were shipped to Barrick’s Golden
Sunlight Mill near Whitehall, Montana, the Kinross Gold Kettle River Mill at Republic, Washington or the Contact Mill and Mining
Co. flotation mill near Philipsburg Montana. A total of just under 20,000 tons were shipped as shown in Table 3.20.

 

Table
3.21 Bulk Sample Mill Settlement Summary

 

	 	 	Grade	 	Contained
    Metal
	Heading	 	Mineralization	 	Tons	 	OPT	 	%
    Cu	 	Oz
    Au	 	Lbs
    Cu
	600
    Level 601 I Drift	 	Massive
    sulphide	 	4,521	 	0.39	 	 	 	1,763	 	339,200
	600
    Level 604 I Drift	 	Massive
    sulphide	 	1,512	 	0.73	 	 	 	1,104	 	 
	500
    Level	 	Chalcocite	 	3,909	 	0.56	 	 	 	2,189	 	 
	100
    level copper	 	Chalcocite
    + native copper	 	1,230	 	 	 	18	 	 	 	442,800
	200
    Level copper	 	Chalcocite
    + native copper	 	1,300	 	 	 	14	 	 	 	364,000
	200
    Level Jasper Gold	 	Gold-bearing
    jasper	 	4,655	 	0.54	 	 	 	2,514	 	 
	Copper
    Stope 500 Level	 	Massive
    sulphide	 	2,678	 	 	 	35	 	 	 	1,874,600
	Totals	 	 	 	14,597	 	0.36	 	16	 	7,570	 	3,020,600

 

In
addition to the underground development, Coronado completed a gradient array Induced Polarization Survey in the summer of 2008
(Gradient Geophysics, 2008). Four targets were identified as shown on Figures 3.19 and 3.20.

 

		•	Target
                                         1: a chargeability high next to a resistivity low, suggesting straight, direct, vertically
                                         orientated targets in an area of intensive mineralization.

		•	Target
                                         2: suggests a continuation of the sharp vein system directly to the north.

		•	Target
                                         3: a zone of high chargeability and low resistivity related to the trend along target
                                         2.

		•	Target
                                         4: a vein (narrow) system associated with the main east-west trend but offset to the
                                         west.

 

The
anomalies appear to be sharply defined to the northeast. With the southern area readings, the anomaly diminishes considerably
where the east-west anomaly strengthens. This may denote a deep, main source for mineralization along an east-west trend that
may exploit a fracture system in a northerly direction.

     

    -K-26 -

    

Figure
3.22 Resistivity

 

 

*UTM
NAD 83 Zone 12

     

    -K-27 -

    

                   

 

*UTM NAD 83 Zone 12

 

	
4.

	
 Geological Setting, Mineralization and Depository Types

 

	
4.1

	
Regional Geology

 

The Madison Project is in the Silver Star-Rochester District along the south flank of the Radar Creek pluton in southwestern Montana. The world famous Butte Mining District lies 23.6 miles to the northwest.

 

The regional geology (Figure 4.1) is taken from the digital geological map of MBMG Open-File Report 622 October 2012. The oldest rocks are in the northwestern portion of the map area and consist of middle Proterozoic Meta conglomerates and quartzites. A small outlier of Cambrian carbonates and mudstones lay in the northwest corner of the map area. Devonian and Mississippian carbonates and fine grained mixed clastic rocks lay in the southeast corner of the map area.

 

Tertiary through Archean metamorphic rocks lie in the west central map area and includes the units hosting the Madison Project. These rocks are classified as metamorphic and plutonic rocks. They are intruded by Tertiary to Cretaceous quartz monzonites and diorites, including the Radar Creek pluton. These rocks are overlain by Tertiary medium to coarse grained mixed clastic rocks. Quaternary alluvium covers much of the lower Jefferson River valley and lower reaches of several of its tributaries.

 

     

    -K-28 -

    

Figure 4.1   Regional
Geology

	
4.2

	
 Property Geology

 

The property lies within the Great Falls Tectonic Zone, a major crustal break that controls porphyry and epithermal mineralization from Boise, Idaho to the Central Montana Gold Province. The Broadway property lies approximately along the boundary between the calc-alkaline intrusives of the Butte district to the west and the sub-alkaline latite intrusives associated with the Golden Sunlight mine to the east.

 

The property geology as shown in Figure 4.2 was compiled by the various geologists of the Madison Joint Venture, led by Inspiration Mines Inc. dated April 1986. The following surface geology has been summarized by MBMG Open- File report 622 (2012).

 

The Madison Project lies along the south flank of the Radar Creek pluton, a composite intrusion (mostly granodiorite) of Cretaceous age. This pluton intrudes a carbonate-bearing formation of middle-Paleozoic age along a northwest trending contact zone. Contact metamorphism, along with jasper, can be traced for more than 9,000 feet along strike. Southwest of the contact zone, Mississippian-age Madison Group limestone and Devonian-age Jefferson Formation (dolomite) are the most common rock types. The sedimentary rocks occupy a block about 3000 feet wide. The southwestern boundary of the sedimentary block is juxtaposed against Archean age Cherry Creek gneiss and schist by the Green Campbell Fault, a major re-verse fault of unknown age.

 

 

     

    -K-29 -

    

 

The geological mapping did not go into any detail in describing the rock units outside of the immediate mine area, concentrating on the intrusive and the various skarn zones and types.

 

The Devonian Three Forks Formation consisting of dolomite, mudstone and bituminous shale, forms a thrust fault slice in the southwest section of the property. The bulk of the mapped portion of the property is underlain by the Mississippian Madison Group, consisting of the Mission Canyon and Lodgepole Formations.

 

The Mission Canyon formation is composed of white bioclastic limestone and oolitic calcarenite with zones of dolomitization and occasional anhydrite. The Lodgepole Formation is composed of limey mudstone, shale and chert. The Lodgepole Formation appears to be the host of the mineralization at Madison.

 

Figure
4.2    Property Geology

 

*UTM NAD 83 Zone 12

 

	
4.3

	
Radar Creek Pluton

 

The geology of the Radar Creek
Pluton and the various skarns is summarized from Hillesland and Winslow (1988). The Radar Creek pluton is primarily a
medium-grained quartz monzonite. Syenodiorite occurs locally where K- metasomatism is pervasive. Near the skarn contact,
endomorphism and calcium-contamination are intense and augite is frequently supplanted by coarsely crystalline hornblende.
Disseminated sulphides, including pyrite, pyrrhotite, and chalcopyrite commonly occur within the quartz monzonite along the
intrusive/skarn contact. Typical mineral assemblages include: quartz 5%, orthoclase 25%, plagioclase 38%, hornblende 19%,
biotite 5%, augite 3%, magnetite 3%, sphene 1%, and apatite 1%.

 

 

     

    -K-30 -

    

 

An altered diabase porphyry with disseminated sulphides was logged in one drill hole. The majority of the rock is composed of coarse grained plagioclase laths in random orientation with mafics packed into the interstices. Primary igneous textures are preserved despite strong K-metasomatism. Pyrite is not only disseminated, but is localized in narrow veins of orthoclase. An estimate of the rock mode is as follows: orthoclase 12%, illite 53%, biotite 23%, pyrite 3%, goethite 2%, leucoxene 2%, clinozoisite 5%, ilmenite (trace), and apatite (trace).

 

Zones of epidote endoskarn were developed along the chilled margin of the Radar Creek intrusion. Epidote content increases away from the intrusion, comprising up to 95% of the rock before grading into exoskarn lithologies. The rock is mainly a densely-packed jumble of prismatic to granular epidote. Other documented accessory minerals include salite, garnet, actinolite, quartz, calcite, sphene, zircon, smectite (formerly an amphibole), goethite, byssolite, and disseminated sulphides, such as pyrite, pyrrhotite, and chalcopyrite.

 

Garnet-pyroxene skarn lies between epidote endoskarn and hedenbergite skarn or marble. The unit has variable amounts of garnet and diopside and includes both garnet skarn and diopside skarn end-members. In thin-section, it is apparent that most of these rocks were at one time a garnet-pyroxene skarn. Garnet skarns contain fine to coarsely crystalline amber colored grossularite which is typically welded by dense, light-brown cherty quartz (the replacement product of diopside). Other less altered diopside or salite skarn contains a small percentage of actinolite or hydromica that replaces pyroxene. Fine to coarse-grained garnet crystals typically fill interstitial spaces in pyroxene skarns.

 

High-sulphide skarns (5%-50% sulphides) and massive sulphides (50%-100% sulphides) are an important gold ore type that was mined in the American Pit and below the 800 level (400 feet below the surface) in the Broadway Mine. Although hedenbergite skarn, epidote endoskarn, and intrusive rocks contain disseminated sulphides, most zones of semi-massive to massive sulphides are hosted by garnet-pyroxene skarns. Sulphides can be very fine-grained to coarse-grained. In the high-sulphide skarns, sulphides often exhibit a crude foliation. Sulphide minerals include pyrite, pyrrhotite, chalcopyrite and minor amounts of sphalerite, bornite, covellite, and possibly marcasite.

 

A zone of black to dark green coarsely-crystalline hedenbergite exoskarn in the Black Pit area occurs between zones of garnet-pyroxene skarn and marble or marble breccia. Long, prismatic crystals of hedenbergite, frequently up to 2 inches long, dominate this lithology. Near the garnet-pyroxene skarn boundary, strongly zoned amber-colored garnet crystals make-up over 30% of the rock. Garnet occurs with calcite, quartz, and sulphides in veins and pods. Minor amounts of hedenbergite have been replaced by actinolite.

 

A jasper or jasperoid body extends nearly 3,000 feet along the intrusive contact as shown in Figure 4.2. This jasper was a primary target of previous mining activity. The jasper, hosted by either garnet pyroxenes or hedenbergite exoskarn, consists of iron-rich amorphous silica. High grade jasper typically contains native gold and/or copper carbonates. Several episodes of brecciation and quartz, chert or calcite veining have affected the jasper zone. Although silicification of the skarn host rocks was intense, garnet is often unaffected, and in thin-section can be seen to comprise up to 20% of the rock. Other minerals include microgranular quartz, goethite, calcite and garnet.

 

A zone of marble breccia and polylithic breccia occurs along the contact between marble and hedenbergite in the Black Pit area. The marble breccia is composed of large blocks of sheared, completely recrystallized limestone, whereas the polylithic breccia has a matrix composed of fine to coarse grained marble. The polylithic breccia, which crosscuts the marble breccia and grades into it, contains a large percentage of hedenbergite clasts, along with clasts of other skarn and intrusive rock types. Polylithic breccia and hedenbergite exoskarn, which contain native gold, were mined in the Black Pit.

 

Faulting is prevalent throughout the property and also in the main mining area. Mineralization seems intimately associated with the two northeast trending faults/fracture zones, particularly in the area of the east-west trending cross fault.

 

	
4.4

	
Alteration and Mineralization

 

The mineralization at the Madison and Broadway Mines is located where the contact between the sedimentary and igneous rocks are nearly vertical, striking northwest.

 

 

     

    -K-31 -

    

 

The Madison Mine gold-copper skarn developed
along the contact between the Radar Creek quartz monzonite and the Madison Group limestone with contact metamorphism traced for more
than 9,000 feet along the irregular contact. The underground development focused on the center of an area 200 feet wide by 500 feet long
along this contact zone, dictated by drilling results. The three levels of development have defined a zone approximately 98 feet wide
by 230 feet long as shown on Figure 4.3.

 

Figure 4.3   
Mine Drifts with Mineralized Zones

 

*UTM NAD 83 Zone 12

 

Gold rich zones, copper rich zones and gold-copper zones were encountered in the workings. The gold rich zones were confined to the upper levels, largely as oxide ore. Gold mineralization was confined to jasper rich horizons. Gold occurs as free gold and microscopic grains, resulting from oxidation of the hedenbergite skarn protore. A vertical, tabular body of hematitic jasperoid resulted. The jasperoid is cut by a stockwork of anastomosing veins of calcite and occasionally carries native copper as shown in Figure 4.4.

 

The copper rich zones were found on the upper levels in the zone of oxidation, marginal to the jasper. These zones consisted of massive chalcocite as shown in Figure 4.5, as well as local native copper. The abundant carbonate in the host rocks quickly oxidized the chalcocite to azurite and other copper carbonates as shown in Figure 4.6 and 4.7. The chalcocite carried very little gold.

 

 

     

    -K-32 -

    

Figure 4.4   Native Copper in Drill Hole C05-02

 

 

Figure 4.5    Massive Chalcocite in Drill Hole C05-06

 

 

Figure 4.6     Massive Chalcocite and Azurite (200 Level)

 

 

 

     

    -K-33 -

    

Figure 4.7     Azurite (300 Level Decline)

 

 

Childs, et. al (2017) observed granitic rocks are weakly to non-altered, suggesting that if skarn development is related to a porphyry system, the porphyry is likely at a significant depth, is centered farther south, or has been displaced from the skarn by post-mineral faulting. However, widespread argillic alteration has been observed in historical drill core in the immediate Madison Mine area. Drilling in the 1980s encountered mineralized and altered plutonic rock (e.g. drill hole 83-23 ended in altered quartz monzonite grading 0.40% Cu).

 

Pebble dikes, limestone breccias, marble breccias and polylithic breccias containing clasts of marble and minor skarn, gossan, jasperoid and occasional visible gold have been identified in drilling and mapping in the immediate mine area. The possibility of the presence of mineralized breccia pipes should be kept in mind as exploration continues because these features are important ore controls at other porphyry and skarn systems including the Golden Sunlight Mine fifteen miles to the north, the Elkhorn deposit near Boulder, Montana, and the New World deposit near Cooke City, Montana.

 

	
5.

	
Deposit Types

 

The Madison Project is being explored for gold skarns and porphyry copper gold deposits. The following description of gold skarns is condensed from British Columbia Ore Deposit Models (Ray, 1998). The following description of porphyry copper gold deposits is summarized from the British Columbia Ore Deposit Models (Panteleyev, 1995). Many aspects of these models are evident at the Madison Project.

 

Gold-dominant mineralization genetically associated with a skarn gangue typically consists of Ca-Fe-Mg silicates, such as clinopyroxene, garnet and epidote. Gold is often intimately associated with Bi or Au tellurides, and commonly occurs as minute blebs (<40 microns) that lie within or on sulphide grains. The vast majority of Au skarns are hosted by calcareous rocks. The gold skarns can be separated into either pyroxene-rich, garnet-rich or epidote-rich types based on gangue mineralogy with the contrasting mineral assemblages reflecting the differences in the host rock lithologies as well as the oxidation and sulfidation conditions in which the skarns developed.

 

Most Au skarns form in orogenic belts at convergent plate margins. They tend to be associated with syn to late island arc intrusions emplaced into calcareous sequences in arc or back-arc environments. The age of mineralization is Phanerozoic, primarily Cenozoic and Mesozoic. Gold skarns are hosted by sedimentary carbonates, calcareous clastics, volcaniclastics or (rarely) volcanic flows. They are commonly related to high to intermediate level stocks, sills and dikes of gabbro, diorite, and quartz diorite or granodiorite composition. Economic mineralization is rarely developed in the endoskarn.

 

     

    -K-34 -

    

 

Gold skarns vary from irregular lenses and veins to tabular or stratiform orebodies with lengths ranging up to many hundreds of feet. Rarely, they can form vertical pipe-like bodies along permeable structures. The ore exhibit strong stratigraphic and structural controls. Orebodies form along sill-dike intersections, sill-fault contacts, bedding-fault intersections, fold axes and permeable faults or tension zones. In the pyroxene-rich and epidote-rich types, ore commonly develops in the more distal portions of the alteration envelopes. In some districts, specific suites of reduced, Fe-rich intrusions are spatially related to Au skarn mineralization. Orebodies in the garnet-rich Au skarns tend to lie more proximal to the intrusions. Igneous textures are found in the endoskarn, while coarse to fine grained, massive granoblastic to layered textures are found in the exoskarn. Hornfelsic textures can be locally noted. Fractures, sill-dike margins and fold hinges can be an important location for mineralization.

 

Gold is commonly present as micron sized inclusions in sulphides, or at sulphide grain boundaries. To the naked eye, ore is generally indistinguishable from waste rock. Due to the poor correlation between Au and Cu in some Au skarns, the economic potential of a prospect can be overlooked if Cu-sulphide-rich outcrops are preferentially sampled and other sulphide-bearing or sulphide-lean assemblages are ignored. The ore in pyroxene-rich and garnet-rich skarns tends to have low Cu:Au (<2000:1), Zn:Au (<100:1) and Ag/Au (<1:1) ratios, and the gold is commonly associated with Bi minerals (particularly Bi tellurides).

 

Pyroxene-rich Au skarn ore mineralogy consists of: native gold ± pyrrhotite ± arsenopyrite ± chalcopyrite ± tellurides (e.g. hedleyite, tetradymite, altaite and hessite) ± bismuthinite ± cobaltite ± native bismuth ± pyrite ± sphalerite ± maldonite. They generally have a high sulphide content and high pyrrhotite:pyrite ratios. Mineral and metal zoning is common in the skarn envelope.

 

Garnet-rich Au skarn ore mineralogy consists of: Native gold ± chalcopyrite ± pyrite ± arsenopyrite ± sphalerite ± magnetite ± hematite ± pyrrhotite ± galena ± tellurides ± bismuthinite. They generally have a low to moderate sulphide content and low pyrrhotite:pyrite ratios.

 

Epidote-rich Au skarn ore mineralogy consists of: Native gold ± chalcopyrite ± pyrite ± arsenopyrite ± hematite ± magnetite ± pyrrhotite ± galena ± sphalerite ± tellurides. They generally have a moderate to high sulphide content with low pyrrhotite:pyrite ratios.

 

Pyroxene-rich Au skarns have extensive exoskarns, generally with high pyroxene:garnet ratios. Prograde minerals include diopsidic to hedenbergitic clinopyroxene (Hd 20-100), K-feldspar, Fe-rich biotite, low Mn grandite garnet (Ad 10-100), wollastonite and vesuvianite. Other less common minerals include rutile, axinite and sphene. Late or retrograde minerals include epidote, chlorite, clinozoisite, vesuvianite, scapolite, tremolite-actinolite, sericite and prehnite.

 

Garnet-rich Au skarns also have extensive exoskarn, generally with low pyroxene:garnet ratios. Prograde minerals include low Mn grandite garnet (Ad 10-100), K-feldspar, wollastonite, diopsidic clinopyroxene (Hd 0-60), epidote, vesuvianite, sphene and apatite. Late or retrograde minerals include epidote, chlorite, clinozoisite, vesuvianite, tremolite-actinolite, sericite, dolomite, siderite and prehnite.

 

Epidote-rich Au skarns exhibit abundant epidote and lesser chlorite, tremolite-actinolite, quartz, K-feldspar, garnet, vesuvianite, biotite, clinopyroxene and late carbonate.

 

Gold skarns have Moderate endoskarn development with K-feldspar, biotite, Mg-pyroxene (Hd 5-30) and garnet. Many Au skarns are related to plutons formed during oceanic plate subduction. There is a worldwide spatial, temporal and genetic association between porphyry Cu provinces and calcic Au skarns. Pyroxene-rich Au skarns tend to be hosted by siltstone-dominant packages and form in hydrothermal systems that are sulfur-rich and relatively reduced. Garnet-rich Au skarns tend to be hosted by carbonate dominant packages and develop in more oxidizing and/or more sulfur-poor hydrothermal systems.

 

Stream sediment, soil and rock sampling can identify geochemical zoning patterns, looking at Au, As, Bi, Te, Co, Cu, Zn or Ni. The intrusions related to Au skarns may be relatively enriched in the compatible elements Cr, Sc and V, and depleted in lithophile incompatible elements (Rb, Zr, Ce, Nb and La), compared to intrusions associated with most other skarn types. Airborne magnetic or gravity surveys can be used to locate plutons, with induced polarization and ground magnetic follow-up surveys directed at outlining some deposits. In temperate and wet tropical climates, skarns often form topographic features with positive relief.

 

     

    -K-35 -

    

 

Any carbonates, calcareous tuffs or calcareous volcanic flows intruded by arc-related plutons have a potential for hosting Au skarns. Favorable features in a skarn envelope include the presence of: (a) proximal Cu-bearing garnet skarn and extensive zones of distal pyroxene skarn which may carry micron Au, (b) hedenbergitic pyroxene (although diopsidic pyroxene may predominate overall), (c) sporadic As-Bi-Te geochemical anomalies, and, (d) undifferentiated, Fe-rich intrusions with low Fe2O3/FeO ratios. Any permeable calcareous volcanics intruded by high- level porphyry systems (particularly alkalic plutons) have a potential for hosting epidote rich skarns with micron Au. During exploration, skarns of all types should be routinely sampled and assayed for Au, even if they are lean in sulphides.

 

Porphyry Cu+Au deposits consist of stockworks of quartz veinlets, quartz veins, closely spaced fractures and breccias containing pyrite and chalcopyrite with lesser molybdenite, bornite and magnetite occurring in large zones of economically bulk-mineable mineralization in or adjoining porphyritic intrusions and related breccia bodies. Disseminated sulphide minerals are present, generally in subordinate amounts. The mineralization is spatially, temporally and genetically associated with hydrothermal alteration of the hostrock intrusions and wallrocks. In British Columbia, porphyry deposits are either Triassic-Jurassic or Cretaceous-Tertiary in age.

 

Porphry Cu-Au deposits are typically hosted in orogenic belts at convergent plate boundaries, commonly linked to subduction-related magmatism or in association with the emplacement of high-level stocks during extensional tectonism related to strike-slip faulting and back-arc spreading following continent margin accretion. They are associated with highlevel (epizonal) stocks within volcano-plutonic arcs. Virtually any type of country rock can be mineralized, but commonly the high-level stocks and related dikes intrude their coeval and cogenetic volcanic pile. These intrusions range from coarse-grained phaneritic to porphyritic stocks, batholiths and dike swarms. Compositions range from calcalkaline quartz diorite to granodiorite and quartz monzonite. Commonly there is multiple emplacement of successive intrusive phases and a wide variety of breccias.

 

Porphyry Cu-Au deposits consist of large zones of hydrothermally altered rock containing quartz veins and stockworks, sulphide-bearing veinlets; fractures and lesser disseminations in areas up to 10 km2 in size, commonly coincident wholly or in part with hydrothermal or intrusion breccias and dike swarms. Deposit boundaries are determined by economic factors that outline ore zones within larger areas of low-grade, concentrically zoned mineralization. High grade mineralization is often controlled by igneous contacts. Breccias, mainly early formed intrusive and hydrothermal types also commonly host high-grade mineralization. Zones of intensely developed fracturing give rise to high-grade vein stockworks, notably where there are coincident or intersecting multiple mineralized fracture sets.

 

Alteration mineralogy consists of quartz, sericite, biotite, K-feldspar, albite, anhydrite /gypsum, magnetite, actinolite, chlorite, epidote, calcite, clay minerals, tourmaline. Early formed alteration can be overprinted by younger assemblages. Central and early formed potassic zones (K-feldspar and biotite) commonly coincide with high grade material. This alteration can be flanked in volcanic hostrocks by biotite-rich rocks that grade outward into propylitic rocks. The biotite is a fine-grained, ‘shreddy’ looking secondary mineral that is commonly referred to as an early developed biotite (EDB) or a ‘biotite hornfels’. These older alteration assemblages in cupriferous zones can be partially to completely overprinted by later biotite and K-feldspar and then phyllic (quartz-sericite-pyrite) alteration, less commonly argillic, and rarely, in the uppermost parts of some ore deposits, advanced argillic alteration (kaolinite- pyrophyllite).

 

Ore deposits are associated with multiple intrusions in subvolcanic settings of small stocks, sills, dikes and diverse types of intrusive breccias. Reconstruction of volcanic landforms, structures, vent-proximal extrusive deposits and subvolcanic intrusive centres is possible in many cases, or can be inferred. Mineralization at depths of 1 km, or less, is mainly associated with breccia development or as lithologically controlled preferential replacement in hostrocks with high primary permeability. Propylitic alteration is widespread and generally flanks early, centrally located potassic alteration; the latter is commonly well mineralized. Younger mineralized phyllic alteration commonly overprints the early mineralization. Barren advanced argillic alteration is rarely present as a late, high-level hydrothermal carapace.

 

 

     

    -K-36 -

    

 

Pyrite is the predominant sulphide mineral; in some deposits the Fe oxide minerals magnetite, and rarely hematite, are abundant. Ore minerals are chalcopyrite; molybdenite, lesser bornite and rare (primary) chalcocite. Subordinate minerals are tetrahedrite/tennantite, enargite and minor gold, electrum and arsenopyrite. In many deposits late veins commonly contain galena and sphalerite in a gangue of quartz, calcite and barite. Gangue minerals in mineralized veins are mainly quartz with lesser biotite, sericite, K-feldspar, magnetite, chlorite, calcite, epidote, anhydrite and tourmaline. Many of these minerals are also pervasive alteration products of primary igneous mineral grains.

 

Geochemically, calcalkalic systems can be zoned with a Cu+Au ore zone having a ‘barren’, low-grade pyritic core and surrounded by a pyritic halo with peripheral base and precious metal-bearing veins. Central zones with Cu commonly have coincident Mo, Au and Ag with possibly Bi, W, B and Sr. Peripheral enrichment in Pb, Zn, Mn, V, Sb, As, Se, Te, Co, Ba, Rb and possibly Hg is documented. Overall the deposits are large-scale repositories of sulphur, mainly in the form of metal sulphides, chiefly pyrite. Geophysically, ore zones, particularly those with higher Au content, can be associated with magnetite-rich rocks and are indicated by magnetic surveys. Alternatively the more intensely hydrothermally altered rocks, particularly those with quartz-pyrite-sericite (phyllic) alteration produce magnetic and resistivity lows. Pyritic haloes surrounding cupriferous rocks respond well to induced polarization (I.P.) surveys but in sulphide-poor systems the ore itself provides the only significant IP response.

 

	
6.

	
Exploration

 

Historic mining at the Madison project has been well documented. The Broadway Mine operated from the 1880s to the 1950s and produced an estimated 144,000 ounces of gold (450,000 tons averaging 0.32 oz/t gold) from 3,000 feet of underground workings to a vertical depth of 250 feet. Broadway’s initial exploration goals for the Madison Project included detailed mapping, surface and underground core drilling, induced polarization surveys, magnetic geophysical surveys, grab samples from underground workings and stopes, grab samples from the surface pits, trenches, shafts and adits. Based upon the results of these initial programs Broadway shifted its focus to identify the source of the mineralization at the Project. The main hypothesis is that the skarn mineralization assemblages at the Project seem to be related to a deeper porphyry mineralization. This led to more detailed mapping at the project, modern geophysical surveys and the identification of argillic alteration locally.

 

	
6.1

	
Sampling Program

 

During 2016, 60
surface samples were collected throughout the property from historic dumps. Highlights included: 17 of the 60 samples
returned copper values in excess of 1,000 ppm with highlights of 24,100; 14,800; 12,400 and 10,800 ppm (equivalent to 2.41%,
1.48%, 1.24% and 1.08%); 28 of the 60 samples returned gold values in excess of 0.1 ppm with highlights of 16.15, 13.75, 11.1
and 9.91 ppm (equivalent to 16.15 g/t, 13.75 g/t, 11.1 g/t and 9.91 g/t). Detailed rock descriptions were recorded for each
sample and locations were marked by GPS. These results helped guide the surface drilling locations.

 

Additional rock and soil sampling programs were carried out in 2017 and then again in 2018. To date, 571 rock samples and 1,457 soil samples have been collected throughout the Madison Property. The assay results indicate several coincident multi-element anomalies that are consistent with porphyry-based mineralization.

 

	
6.2

	
Rock Sampling

 

Statistically significant mineralization found in rock samples is defined as a concentration of copper, lead, zinc and manganese of greater than or equal to 1,000 ppm; a concentration greater than or equal to 10 ppm in silver and molybdenum; and, a concentration of greater than or equal to 1 ppm in gold. Background mineralization in these samples is defined as a concentration of copper, lead, zinc and manganese of less than 1,000 ppm; a concentration less than 10 ppm in silver and molybdenum; and, concentration of less than 1 ppm in gold.

 

 

     

    -K-37 -

    

Table 6.1 describes the number of background and statistically significant multiple element occurrences. The heat maps in figures 6.2 through 6.8 illustrate the individual occurrences spatially, to enable visualization of the coincident nature of all mineralization.

 

Table 6.1               Statistically Significant Multiple Elements

 

	
Elements

	
 

	
Background Occurrences

	
 

	
Statistically Significant Occurrences

	
Gold

	
 

	
464

	
 

	
86

	
Silver

	
 

	
510

	
 

	
40

	
Copper

	
 

	
489

	
 

	
61

	
Molybdenum

	
 

	
460

	
 

	
90

	
Manganese

	
 

	
400

	
 

	
150

	
Lead

	
 

	
513

	
 

	
37

	
Zinc

	
 

	
367

	
 

	
58

 

 

Laboratory duplicates, blanks and standard
samples confirm that good quality control standards were followed by the laboratory and by the ground team for this group of sample results.

 

Figure
6.2  Statistically significant Au in rock samples

 

           

     

    -K-38 -

    

 

Figure
6.3   Statistically significant Ag in rock samples

 

 

Figure
6.4   Statistically significant Cu in rock samples

 

     

    -K-39 -

    

 

Figure
6.5   Statistically significant Mo in rock samples

 

 

Figure
6.6   Statistically significant Mn in rock samples

 

     

    -K-40 -

    

Figure 6.7  
Statistically significant Pb in rock samples

 

 

Figure
6.8   Statistically significant Zn in rock samples

 

     

    -K-41 -

    

 

Soil Sampling

 

A total of 1,457 assays are reported in this soil sample set and indicate several coincident multi-element anomalies that are consistent with porphyry-based mineralization.

 

The soil anomalies consist of coincident gold, silver, copper, molybdenum, manganese, lead and zinc (Au, Ag, Cu, Mo, Mn, Pb and Zn, respectively). Table 6.9, below, lists the number of samples that reported above the numerical average of the sample set, and the low to high values indicated by the anomalies. Laboratory duplicates, blanks and standard samples confirm that good quality control standards were followed by the laboratory and by the ground team for this group of sample results.

 

Table 6.9

	 
1,457 Samples ppm
	 	 
Average
	 	 	 
Samples
	 	 	 
Low
	 	 	 
High
	 
	Au	 	 	0.041	 	 	 	242	 	 	 	0.001	 	 	 	3.81	 
	Ag	 	 	0.281	 	 	 	243	 	 	 	0.006	 	 	 	14.65	 
	Cu	 	 	282	 	 	 	266	 	 	 	1.64	 	 	 	3,700	 
	Mo	 	 	2.31	 	 	 	264	 	 	 	0.06	 	 	 	143.5	 
	Mn	 	 	571	 	 	 	345	 	 	 	68.2	 	 	 	13,550	 
	Pb	 	 	47	 	 	 	230	 	 	 	1.31	 	 	 	>10k
	 
	Zn	 	 	152	 	 	 	208	 	 	 	15.8	 	 	 	12,400	 

 

 

The heat map in Figure 6.10 illustrates the combined occurrences spatially to enable visualization of the coincident nature of all mineralization. This plot shows gold in soils. Note, the higher Au values near the top of the map are shown in red to brown colors; blue shades show very low values. The area circled with the yellow oval is probably due to historic contamination. The four black bands indicate areas consistently anomalous in the elements listed in Table 6.9 that are commonly associated with the upper levels of porphyry deposits.

 

Figure 6.10, Coincident soil geochemical anomalies

 

                 

 

 

 

     

    -K-42 -

    

Seventeen whole rock samples were collected throughout the Madison property both from surface exposures and drill core in holes C17-22, 23, 24 and 27. Based on work by Kolb and others (2013); Loucks (2014) and Rohrlach and Loucks (2005). Figure 6.11 displays Strontium/Yttrium (Sr/Y) ratios for the variety of intrusions located on the Madison Property. The left-hand side of the slide shows that most of our intrusive rocks fall within the Adakite-like magmas; a few samples fall outside. Calc-alkaline arc rocks that share these distinct trace-element signatures are known as ‘adakite-like’. Adakitic signatures are commonly associated with economic porphyry-style Cu–Au–Mo ore deposits.

 

Figure 6.11, Sr/Y Ratios for from Whole Rock Analysis

 

                  

Following these findings, the field team completed a retrospective analysis of the rock chip and soil geochemistry files and corroborated similar favorable Sr/Y ratios in both soil and rock chip samples.

 

Rock chip and soil sample geochemical modeling identified statistically significant strontium/yttrium ratios over a 1.5-mile contact zone. Broadway’s Sr/Y data is based on 571 rock chip and 1,468 soil samples collected across prospective areas of the property. The geochemical model reveals distinctive Sr/Y ratio-based-anomalies that are found throughout a zone of strong structural preparation and mineralization, see Figure 6.12.

 

 

     

    -K-43 -

    

Figure 6.12 Map of Madison Project showing geology, land position and Sr/Y/Y soil anomalies

 

 

Figure 6.13          Gold Soil Samples

 

 

     

    -K-44 -

    

Figure 6.14          Copper Soil Samples

 

 

	
6.3

	
 Induced Polarization Surveys

 

Previous work done at the Madison project suggests there is potential for a deeper porphyry system. Historic drilling, however, has focused solely on the shallow gold found in the oxidized skarn and did not explore deeper to test the potential porphyry. Of the 116 historic drill holes, only six reached a vertical depth in excess of 492 feet. The presence of altered and a mineralized intrusives in some of these historic drill holes has led to this speculation.

 

A property-wide deep induced polarization (IP) survey was conducted for the Project by Peter E Walcott & Associates Limited (Walcott 2017). Figure 6.26 shows the areas of interest for the different surveys to be performed. The IP survey searched for the suspected deeper copper-gold porphyry system believed to be a feeder for the shallower gold- copper skarn mineralization of the Project.

 

 

     

    -K-45 -

    

Figure 6.15    Madison Copper-Gold Project with Survey Targets

(Walcott 2017)

 

The IP survey was carried out with five east-west traverses spaced 1,312 feet apart, with a fill-in traverse between the 3rd and 4th southernmost lines. From the results of the IP survey it was deemed additional information was needed to assist with the interpretation. More surveying was carried out on another three fill-in lines which covered the property with lines 656 feet apart. A total of 10 IP traverses were conducted.

 

The surveys identified four resistivity lows, four resistivity highs, seven chargeability highs and two magnetic highs. Some of these are proximal to the known mineralized zones, while others are deep seated and could reflect or be associated with a porphyry style mineralization at depth. The IP probed the area to a depth of 1,640 feet.

 

The modelled response to the DC resistivity highlights several features of potential interest. Figure 6.16 illustrates the resistivity results. Anomaly rLA is a northeasterly trending resistivity low, encompassing the historic Madison mine within its northeastern extent. This feature is bound by two readily discernible northeasterly trending topographic lineaments. Contained within this zone of low resistivity, lies the large negative chargeability response observed within the raw dataset.

 

 

     

    -K-46 -

    

Figure 6.16   Model Slice 5,085 feet with Topographic Lineaments

 

 

(Walcott 2017)

 

The chargeability results identified anomaly cHA which is situated on the northeasterly end of the resistivity anomaly rLA. This zone of elevated chargeability thickens in the same direction as it trends and appears to correlate well with the known geometry of Cu mineralization. There is also a potential for this anomaly to be the construct of two features. Anomaly cHA is also partially contained within a zone of reduced magnetic susceptibility. Anomaly cHB is a small chargeability anomaly to the northwest of the Madison mine. It is contained wholly with the elevated resistivity zone rHA. Figure 6.17 is an oblique view of these two chargeability zones projected with known Cu mineralization.

 

Figure 6.17    Anomaly cHA and cHB with Cu Mineralization

 

(Walcott 2017)

 

Combining the data from the resistivity and chargeability is way of displaying the different anomalies that may correlate with each other and identify potential exploration targets of interests. Figure 6.6 combines these anomalies for a visual assessment. The 3d structures colored purple represent the chargeability anomalies in relation to a section view of the resistivity anomalies. Anomaly cHC is a steep northwesterly trending chargeability on the western property boundary. It flanks a zone of elevated resistivity to the east, and is constrained within a zone of low resistivity (rLD) of similar intensity to anomaly rLA. The feature also appears to be a northwesterly trending lineament. There is a potential that wrapping may be occurring between anomalies, cHB and cHC.

 

 

     

    -K-47 -

    

Anomaly cHD, is situated on the northern extent of resistivity anomaly rHB and is decreasing resistivity intensity with depth. A weak magnetic response is associated with this feature. The anomaly appears to be confined within several structural features and may be of potential interest.

 

Anomaly cHE is a deep chargeability anomaly immediately to the east of anomaly cHD. This northeasterly trending feature is mostly confined to the central corridor of resistivity anomaly rLB.

 

Anomaly cHF is a small chargeability situated on the intercepts of the features rLA and rLB. These features are within the weak northwesterly trending anomalies containing cHA and cHB. The anomaly is contained within an embayment of reduce magnetic susceptibility, similar to that of the main zone.

 

Figure 6.18    Chargeability Features > 12 mV/V with Resistivity Slice at 1350M

 

(Walcott 2017)

 

Figure 6.19 is a chargeability voxel model which is used to portray different corridor trends seen within the survey data. Anomaly cHG is situated on the northern boundary of the survey. In the southeastern corner of the survey area, a large broad zone of moderate chargeability appears at depth on the southern third of resistivity anomaly rHC. The zone is coincident with a concentric feature observed within residual total magnetic field intensity mHA.

 

A zone of high chargeability, consisting of chargeability anomalies cHA, cHB and cHC, in the northwest section of the property is of particular interest. This area hosts the Broadway Mine, the Madison Mine and the current drilling area to the northwest of the Madison Mine decline. The chargeability zone appears to coincide with the known contact of the Radar Creek intrusive and the response may be an indication of skarn-type mineralization. There appears to be a second zone of high chargeability further to the west, which is also believed to relate to the Radar Creek contact, where the contact has swung back around forming a horseshoe-like shape. Only minimal historic drilling has taken place in this second zone, making it a high-priority target. The multiple, deep-seated chargeability and resistivity anomalies could reflect or be associated with porphyry-style mineralization at depth.

 

 

     

    -K-48 -

    

Figure 6.19    Modelled Chargeability Voxel

 

(Walcott 2017)

 

	
6.4

	
Magnetic Survey

 

The magnetic survey was carried out along north south traverses spaced 328 feet apart using a GEM SYS walking system. Figure 6.20 shows that the anomaly mHB is a relatively high intensity magnetic anomaly with a general northwesterly trend. The feature is associated with a moderate resistivity zone rHD, however with only limited chargeability response.

 

Figure 6.20    Residual Total Field Magnetic Intensity

 

(Walcott 2017)

 

     

    -K-49 -

    

	
6.5

	
Mise-a-la-Masse

 

A Mise-a-la-Masse electrical geophysical survey was conducted to trace the location, shape and extent of the massive sulphide zone intersected in surface and underground drilling. Surface hole C17-20 and underground holes UG17-02 through UG17-06 identified a massive sulphide zone of high grade gold mineralization. These core holes, were utilized to conduct the Mise-a-la-Masse survey. Figure 6.21 shows the results of the survey in plan view including the fan of underground drill holes and the surface hole C17-20. Note the definition of the geometry of the massive sulphide zone in plan view. The survey confirmed an ovoid cylindrically shaped massive sulphide mineralized body and its western plunge to depth. Additional Mise-a-la-Masse surveys will be used to target drilling, and to locate new mineralized massive sulphide bodies that lay contiguous and lateral to the current one.

 

Figure 6.21    Mise-a-la-Masse Survey

 

 

(Walcott 2017)

 

Overall this geophysical surveying program succeeded in advancing existing drill targets and generating new targets across the project’s area. The IP survey identified chargeability and resistivity anomalies that may be associated with porphyry-style mineralization at depth. These results strongly suggest that a second anomalous zone with similar geophysical characteristics lies to the northwest of the anomalous zone that host the auriferous and cupriferous jasperoid.

 

	
6.6

	
Exploration Drilling

 

The exploration drilling performed by Broadway Gold at the Madison project, has occurred in three phases over a one-year period, (Jan 2017 to Jan 2018). A total of 26 surface (6,121 m) and 7 underground (305 m) drill holes have been completed. Figures 6.22 and 6.23 show surface (Phase 1) and underground drilling (Phase 2) programs. Phase 1-2 drilling has resulted in the discovery of a larger jasperoid zone with native copper and gold. Results included 1.725% Cu and 0.097 g/t Au over 49.4 meters in hole C17-16, including 2.571% Cu and 0.151 g/t Au over 30.2 meters. Hole C17-17 returned 1.020% Cu and 0.159 g/t Au over 31.1 meters and hole C17-20 drilled into a massive-sulphide zone that remains open at depth, which returned 1.247% Cu and 1.843 g/t Au over 23.8 meters.

 

 

     

    -K-50 -

    

Figure 6.22    Surface Drilling Program (Phase 1)

 

 

Figure 6.23    Underground Exploration Drilling Program (Phase 2)

 

 

Phase 1 surface drilling indicated that the jasperoid body remains well mineralized. The zone has now been traced a total of 85 meters to the northwest of the current underground decline, verifying one of a series of chargeability highs located during the initial IP survey. These multiple chargeability highs form a semi-continuous, horseshoe-shaped zone (Figures 6.17 and 6.18), mirroring the intrusive/carbonate contact over a strike length in excess of 800 meters. Drill hole C17-02 cut through the projected jasperoid interval above the “400-foot level” and did not intersect any jasperoid. This suggest that the copper zone potentially begins at approximately 90-120 meters vertically below the surface and plunges to the northwest.

 

     

    -K-51 -

    

Results from drill hole C17-10 have confirmed that high-grade sulphide mineralization exists in the area adjacent to the underground infrastructure, as well as indications of a potential second nearby massive sulphide zone.

 

Another high-grade massive sulphide target was confirmed by underground (UG17-03 to UG17-06) and surface drilling (C17-20). Intersected 139 feet below the 600 level in C17-20, this mineralized zone remains open to depth. The massive sulphide and garnet epidote zone continues to display consistent gold concentrations over 2.2 to 30-meter widths.

 

Figure 6.24, Significant Results of Underground Phase 2 Drilling

 

 

A third deposit type at Madison, contains lower grade gold over longer widths within an epidote-diopside-garnet skarn zone, and was discovered in C17-09 west of the high-grade gold massive sulphides. The copper interval also included a 3.7-meter section of jasperoid containing 1.88% copper.

 

Broadway Gold commenced Phase 3 surface drilling in August 2017 to test several of the better coincident geophysical and geochemical targets. These coincident anomalies were interpreted to be associated with a copper- gold porphyry system at depth.

 

Hole C17-24 was designed to evaluate a chargeability anomaly identified within the Northeast target area, a highly prospective part of the Project. This successful drill intersection is currently interpreted to be related to the porphyry system that may be the feeder for the majority of the mineralization at the Madison Project.

 

     

    -K-52 -

    

Figure 6.25, Priority Exploration Targets

 

                    

 

Table 6.26     Phase 3 Drilling Program

 

	
Hole #

	
 

	
Target

	
 

	
Azimuth

	
 

	
Dip

	
 

	
TD (m)

	
C17-21

	
 

	
NC-1

	
 

	
90

	
 

	
-70

	
 

	
28.3

	
C17-22

	
 

	
NC-2A

	
 

	
93

	
 

	
-70

	
 

	
362

	
C17-23

	
 

	
MM

	
 

	
0

	
 

	
-90

	
 

	
191

	
C17-24

	
 

	
SE-1

	
 

	
245

	
 

	
-60

	
 

	
377

	
C17-25

	
 

	
SE-2

	
 

	
182

	
 

	
-65

	
 

	
409

	
C17-26

	
 

	
SE-3

	
 

	
245

	
 

	
-45

	
 

	
425

	
C17-27

	
 

	
SE-3B

	
 

	
173

	
 

	
-90

	
 

	
530.6

	
Total

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
2,324

 

C17-21 was designed to test a strong chargeability anomaly near the Radar Creek Intrusive-Devonian-Mississippian carbonate contact. Drilling conditions were challenging from the beginning. The hole collard in hornfels and strongly fractured dolomite. Fault and fracture zones were encountered through the entire length of the hole. The drilling advanced to 28.3 meters when the hole caved and became un-manageable. The decision was made to abandoned the hole and move to C17-22.

 

C17-22 is located in the north-central part of the property and was designed to evaluate a prominent northwest striking chargeability high found along the Silver Star Fault Zone. This hole collared in Archean amphibolite to a depth of

 

12.8 meters. Drilling continued into the Devonian Jefferson Dolomite, intercepting a sheared and jasperoid veined zone measuring 9.9 meters wide. The core of this zone (20.4- 24 meters) averaged 0.470 ppm gold over 3.65 meters in width.

 

As drilling continued, a zone of strong fracture-controlled chlorite and calcite veining with minor disseminated pyrite was encountered, leading into a much stronger series of crackle breccia and fracture zones between 217 to 266.3 meters. Further down the hole a hard and dense dolomite hornfels was encountered at 323.7 meters leading into a 6.85-meter-thick pyrite rich (>15% py) carbonaceous dolomite in contact with the Radar Creek Granodiorite. The hole was terminated in fresh Radar Creek Granodiorite at a total depth of 362 meters.

 

 

     

    -K-53 -

    

C17-23 is located
approximately 61 meters north of the mine on the same drill pad that C17-20 occupied earlier this year. C17-23 was designed to
evaluate the northward extension of a skarn and massive sulphide zone intercepted in C17-20 that reported (5.5 meters of 0.108
opt gold and 2.65% copper) and a corresponding Mise-a-la-Masse anomaly near the Radar Creek contact.

 

C17-23 collard in Radar
Creek granodiorite and ended in Radar Creek at 191 meters. Several zones of moderate to strong propylitic alteration were encountered.
A zone of strong propylitic alteration at 86.8 meters, consisting of chlorite-calcite fracture filling, possibly weak argillic
alteration contained trace amounts of disseminated native copper grains. We terminated drilling in fresh Radar Creek granodiorite.

 

A follow-up test of this target
might be better accomplished by drilling a -700 angled core hole.

 

Anomalous gold and copper
values were reported in the core samples collected from a jasperoid veined zone in the granodiorite from 21.2 meters to 31.2 meters.
Gold values ranged between 0.02 ppm to 0.274 ppm gold, copper values in this same zone ranged between 322 and 1,035 ppm copper.

 

C17-24 is located
at the southeastern corner of the Madison Property. C17-24 was designed to evaluate a chargeability anomaly identified within a
highly prospective part of the district. Numerous historic prospect pits are scattered throughout the area within a section of
carbonate rocks displaying skarn and jasperoid alteration.

 

C17-24 collard in a small
outcrop of Devonian Jefferson dolomite as indicated by Marty Footes geology map. Numerous limestone-dolomite breccia zones were
encountered throughout the hole with some zones containing fine grained disseminated py-cpy. A quartz latite porphyry contact was
intercepted at 988 feet. The carbonate rocks near the contact displayed chaotic plastic fold deformation, multi-lithologic breccias,
and hornfels at the immediate contact. The quartz latite porphyry is fine grained and shows a well-developed propyllitic alteration
at the contact. Phyllic alteration begins at 309 meters as alteration selvages around quartz-pyrite and pyrite microveinlets. Assay
results in this zone are low but indicate an increase in gold-copper values when pyrite and quartz-pyrite veinlet density increase.

 

C17-25
is located approximately 359.6 meters southeast of C17-24. C17-25 was designed to test a chargeability anomaly identified within
a highly prospective part of the district. Numerous historic prospect pits are scattered throughout the area hosted by carbonate
rocks, aplite to diorite intrusions, jasperoid and widespread skarn alteration. C17-25 drilled approximately 274 meters (0-274)
of mixed skarn-endoskarn (epidote-chlorite-serpentine) with narrow limestone, marble and dolomite sections. Diorite intrusions
mixed with skarns were frequently encountered between 274 to 365.7 meters. The hole was terminated at 409 meters after drilling
43.3 meters (365.7-409) of fresh limestone. Anomalous Mn clusters (0.3 to 1.4% Mn) were identified near faults and diorite-endoskarn
alteration zones. Trace to anomalous Ag values 1.7 to 4.9 ppm were found within a fault zone cutting endoskarn-skarn contacts.

 

C17-26 This hole
re-occupied drill site C17-24 using the same drill azimuth but drilling at a flatter angle of -450. The goal of this hole
was to intercept the quartz latite porphyry further to the west and deeper into the heart of the IP anomaly.

 

This hole failed to intercept
the latite porphyry; however, numerous zones of quartz-calcite veining, brecciation and marbilization were observed and sampled.
A total of 81 samples were collected throughout the hole with the intent of providing structural and geochemical indications to
guide a follow up drilling program. Periodic zones of marble were encountered through the thick sequence of limestone-dolomite
suggesting zones of heat transfer, presumably from a deep porphyry driven hydrothermal system.

 

Several of these zones
reported elevated Pd-Zn values of 0.20 to 1.50% with elevated but trace Cu values 140 to 1000 ppm.

 

C17-27 is
located on a shared site with C17-24 and C17-26. Like C17-26, the goal of this hole was to intercept the quartz latite porphyry
and gain an understanding of local extent, dip of the system and indicators of porphyry style mineralization. C17-27 collard in
a breccia zone indicating the surface expression of a breccia pipe, shown on Foote’s geology map as “Cave Fill”.
Continued drilling revealed numerous zones of marbilization and silicification within the limestone-dolomite section with zones
of quartz-calcite veining. A 1.5-meter-thick zone of MnOx-calcite-galena stockwork veining was intercepted at 453 feet averaging
1.8% Zn and 1.5% Pb.

     

    -K-54 -

    

The quartz latite porphyry was
intercepted at 272.5 meters and continued to 506.8 meters (234.3 meters thick) within a zone of mixed propylitic and phyllic alteration.
Phyllic alteration zones were controlled by quartz-calcite-sulphide veinlets and stockwork zones. Sulphide content ranged between
5-7% as fine disseminations, microveinlets and course blebs of pyrite. Some sulphide veinlets contained pyrite with sphalerite-galena
rims within a phyllic alteration selvage invading pervasive propylitic alteration.

 

The latite porphyry was
intercepted at 271.9 meters. The latite appeared darker and more mafic than previous encounters of latite probably due to the pervasive
propylitic alteration. Narrow zones of vein and fracture controlled phyllic alteration have been identified. Sulphide content ranges
between 5-7% in the phyllic zones; some pyrite microveinlets have been observed. A weak phyllic alteration pattern starting at
378.8 meters has become more pervasive and less veinlet controlled. The latite has taken on a light to medium grey color, and occasional
sulphide rich zones exceed 7% and become clots. Trace amounts of very fine disseminated black specs have been identified in the
core, probably sphalerite-galena.

 

The assay results indicate
pervasive Mn mineralization with elevated Au, Ag, Cu, Pb and Zn primarily controlled by stockwork veining in phyllically altered
latite.

 

Table 6.27               Significant
Core Geochemistry

 

	Core Geochemistry in C17-27	272 to 363 meters	363 to 511 meters
	Alteration Zones	Propylitic	Phyllic
	Gold (ppm)	<0.001	0.019
	Silver (ppm)	<0.05	1.0 (4.7 high)
	Copper (ppm)	46	54
	Manganese (ppm)	657	1,343
	Lead (ppm)	20	129
	Zinc (ppm)	63	225

 

However, the assay results failed to indicate
ore grade Cu-Au porphyry style mineralization but were successful in encountering structurally controlled phyllic alteration with
anomalous (Au, Ag, Cu, Mn, Pb and Zn) quartz-pyrite stockwork mineralization.

     

    -K-55 -

    

Figure 6.28    Phase 3 Drill Hole Location Map
with Geology

 

 

Geologic Map, The Madison
project is located 2 miles west of Silver Star, Montana. Xmb - Archean metamorphic rocks in brown; Cp - Cambrian Pilgrim Fm; Dj
 – Devonian Jefferson Fm; MDt – Devonian-Mississippian Three Forks Shale; Mm – Mississippian Madison Group; Pp
 – Pennsylvanian-Permian meta-sediments; Kem – Cretaceous Elkhorn Mountains Volcanics; Kgdr – Cretaceous Rader
Creek Granodiorite; Qa – Quaternary Gravels; Ts – Tertiary Sediments. (Foote 1987 and McDonald, Elliot, Vuke, Lonn
and Berg, MBMG Open-file report 622, 2012

     

    -K-56 -

    

Figure 6.29, Geologic Model X-section A-B, showing
porphyry intercepts in C17-24, 26 and 27.

 

		7.	Drilling

 

Prior to 2016, the Project
had approximately 116 reverse circulation and core drill holes that averaged 346 ft per hole, a total of 40,106 ft (12,224m), drilled
by various companies. That drilling produced 5,732 assays and 145 surveys. Although no QA/QC documentation is available for these
drill programs, Robb (2016) states: “For exploration prior to 2005 the author was unable to review the procedures utilized
by the various companies, but believes the sampling methods and analysis were to industry standards of that time.”

 

In 2017, Broadway commenced
surface drilling using AK Drilling, Inc. of Butte, Montana concluded three phases of drilling throughout that year, a total of
26 core holes, 20,084 ft. (6,121m). Broadway also contracted Groundhog Mining, Dillon, Montana, to conduct an underground drilling
program that resulted in seven drill holes, a total of 1,000 ft. (305m).

 

The purpose of Broadway’s
drill programs was to verify known copper and gold mineralization identified in historic drill programs and test copper and gold
mineralization to the west of the existing underground workings and at depth. The first and second phases of drilling confirmed
observable alteration and mineralization reported in historic in drill holes. The third phase of surface drilling conducted in
2017 followed up on the first two phases, which identified multiple priority target areas including areas interpreted to be associated
with a copper-gold porphyry system at depth. Broadway also commenced the first phase of an underground core drill program consisting
of seven holes. The purpose of these holes was to test the down dip continuation of copper and gold mineralization mined on the
600 Level and to follow up on newly discovered mineralization to the west of the decline.

 

The drilling database now contains 149
drill holes, 11,481 assays and 498 surveys. The complete database contains 62,189 feet of drilling. Table 7.1 shows significant
intercepts that were encountered from the four Broadway drill programs. The intervals are core intercepts and do not represent
true thickness.

     

    -K-57 -

    

 

Table7.1                  Madison
2017 Drilling Significant Intercepts

 

	 	 	 	 	 	 	 	 	 	 	From	 	To	 	Interval	 	Copper	 	Gold
	HoleID	 	Easting	 	Northing	 	Elevation	 	 	 	(ft)	 	(ft)	 	(ft)	 	(m)	 	(%)	 	(g/t)	 	(oz/t)
	C17-01	 	1303822	 	16605185	 	5279.7	 	 	 	342.5	 	498.5	 	156	 	45.7	 	1.010	 	0.480	 	0.017
	 	 	 	 	 	 	 	 	including	 	404.5	 	413.5	 	9	 	2.7	 	7.140	 	0.560	 	0.019
	 	 	 	 	 	 	 	 	including	 	429.5	 	441.5	 	12	 	3.7	 	0.890	 	2.650	 	0.093
	 	 	 	 	 	 	 	 	including	 	432.5	 	435.5	 	3	 	0.9	 	0.820	 	7.130	 	0.252
	C17-02	 	1303822	 	16605185	 	5279.7	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	405	 	573	 	168	 	51.2	 	0.570	 	0.190	 	0.006
	C17-03	 	1303801	 	16605231	 	5293	 	including	 	411	 	420	 	9	 	2.7	 	1.300	 	0.050	 	0.001
	 	 	 	 	 	 	 	 	 	 	267	 	291	 	24	 	7.3	 	0.500	 	1.170	 	0.006
	C17-04	 	1303841	 	16605236	 	5312	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	360	 	372	 	12	 	3.7	 	0.200	 	0.810	 	0.001
	 	 	 	 	 	 	 	 	 	 	353	 	371	 	18	 	5.5	 	0.040	 	1.640	 	0.272
	 	 	 	 	 	 	 	 	 	 	419	 	443	 	24	 	7.3	 	0.600	 	0.020	 	0.051
	C17-05	 	1303769	 	16605085	 	5253	 	 	 	479	 	608	 	129	 	39.3	 	1.470	 	0.420	 	0.035
	 	 	 	 	 	 	 	 	including	 	524	 	572	 	48	 	14.6	 	2.130	 	0.180	 	0.004
	 	 	 	 	 	 	 	 	including	 	566	 	587	 	21	 	10.1	 	2.830	 	0.990	 	0.143
	C17-06	 	1303815	 	16605079	 	5256	 	 	 	379	 	418	 	39	 	11.9	 	0.001	 	0.710	 	0.086
	C17-07	 	1303806	 	16605082	 	5271	 	 	 	319	 	356	 	37	 	11.3	 	0.040	 	1.740	 	0.051
	 	 	 	 	 	 	 	 	including	 	337	 	356	 	19	 	5.8	 	0.060	 	2.940	 	0.086
	C17-08	 	1303726	 	16604915	 	5282	 	 	 	810	 	819	 	9	 	2.7	 	101	 	1.152	 	0.034
	 	 	 	 	 	 	 	 	 	 	246.5	 	357.5	 	111	 	33.8	 	0.001	 	0.76	 	0.022
	C17-09	 	1303917	 	16605079	 	5267	 	 	 	480.5	 	492.5	 	12	 	3.7	 	1.882	 	4.249	 	0.124
	 	 	 	 	 	 	 	 	 	 	492.5	 	528.5	 	36	 	11	 	0.124	 	0.375	 	0.011
	 	 	 	 	 	 	 	 	including	 	516.5	 	528.5	 	12	 	3.7	 	0.331	 	0.389	 	0.011
	C17-10	 	1303844	 	16604967	 	5279	 	 	 	452	 	482	 	30	 	9.1	 	3.122	 	4.288	 	0.125
	 	 	 	 	 	 	 	 	 	 	540	 	570	 	30	 	9.1	 	1.391	 	0.361	 	0.011
	C17-12	 	1303695	 	16605151	 	5285	 	including	 	540	 	555	 	15	 	4.6	 	2.41	 	0.68	 	0.02
	 	 	 	 	 	 	 	 	 	 	387	 	453	 	66	 	20.1	 	1.466	 	0.253	 	0.007
	C17-13	 	1303695	 	16605151	 	5285	 	including	 	405	 	420	 	15	 	4.6	 	6.048	 	0.357	 	0.01
	 	 	 	 	 	 	 	 	including	 	408	 	414	 	6	 	1.8	 	11.45	 	0.02	 	0.001
	C17-14	 	1303711	 	16605235	 	5301	 	 	 	410	 	431	 	21	 	6.4	 	0.14	 	2.467	 	0.072
	 	 	 	 	 	 	 	 	including	 	413	 	419	 	6	 	1.8	 	0.154	 	8.255	 	0.241
	C17-15	 	1303652	 	16605255	 	5309	 	 	 	438	 	447	 	9	 	2.7	 	0.002	 	1.578	 	0.046
	 	 	 	 	 	 	 	 	and	 	462	 	486	 	24	 	7.3	 	0.23	 	0.812	 	0.024
	 	 	 	 	 	 	 	 	 	 	58	 	743	 	162	 	49.4	 	1.725	 	0.097	 	0.003
	C17-16	 	1303618	 	16605014	 	5287	 	including	 	641	 	740	 	99	 	30.2	 	2.571	 	0.151	 	0.004
	 	 	 	 	 	 	 	 	and	 	767	 	776	 	9	 	2.7	 	0.392	 	0.398	 	0.012
	C17-17	 	1303589	 	16605075	 	5299	 	 	 	536	 	584	 	48	 	14.6	 	0.228	 	0.015	 	0
	C17-18	 	1303491	 	16605036	 	5302	 	and	 	614	 	716	 	102	 	31.1	 	1.02	 	0.159	 	0.005

  

     

    -K-58 -

    

	 	 	 	 	 	 	 	 	 	 	From	 	To	 	Interval	 	Copper	 	Gold
	HoleID	 	Easting	 	Northing	 	Elevation	 	 	 	(ft)	 	(ft)	 	(ft)	 	(m)	 	(%)	 	(g/t)	 	(oz/t)
	 	 	 	 	 	 	 	 	 	 	350	 	359	 	9	 	2.7	 	0.007	 	3.263	 	0.095
	 	 	 	 	 	 	 	 	and	 	395	 	407	 	12	 	3.7	 	0.004	 	1.977	 	0.058
	C17-19	 	1303911	 	16604931	 	5318	 	and	 	629	 	632	 	3	 	0.9	 	0	 	4.07	 	0.119
	 	 	 	 	 	 	 	 	and	 	728	 	761	 	33	 	10.1	 	0.115	 	2.99	 	0.087
	 	 	 	 	 	 	 	 	including	 	728	 	731	 	3	 	0.9	 	1.16	 	26.8	 	0.782
	 	 	 	 	 	 	 	 	including	 	758	 	761	 	3	 	0.9	 	0.03	 	5.57	 	0.162
	 	 	 	 	 	 	 	 	 	 	270	 	372	 	102	 	31.1	 	0.206	 	0.146	 	0.004
	C17-20	 	1304282	 	16605554	 	5167	 	and	 	387	 	399	 	12	 	3.7	 	0.336	 	0.096	 	0.003
	 	 	 	 	 	 	 	 	and	 	429	 	507	 	78	 	23.8	 	1.247	 	1.843	 	0.054
	 	 	 	 	 	 	 	 	including	 	480	 	492	 	12	 	3.7	 	2.156	 	3.214	 	0.094
	UG17-02	 	1304321	 	16605364	 	4893	 	 	 	45	 	57	 	12	 	3.7	 	1.428	 	0.609	 	0.018
	 	 	 	 	 	 	 	 	 	 	27	 	141	 	114	 	34.7	 	0.163	 	0.7	 	0.02
	UG17-03	 	1304318	 	16605351	 	4891	 	including	 	27	 	36	 	9	 	2.7	 	0.748	 	4.108	 	0.12
	 	 	 	 	 	 	 	 	including	 	57	 	75	 	18	 	5.5	 	1.625	 	1.702	 	0.05
	 	 	 	 	 	 	 	 	including	 	108	 	123	 	15	 	4.6	 	0.353	 	0.289	 	0.008
	 	 	 	 	 	 	 	 	 	 	30	 	113	 	83	 	25.3	 	1.098	 	1.651	 	0.048
	UG17-04	 	1304318	 	16605351	 	4891	 	including	 	63	 	87	 	24	 	7.3	 	2.717	 	2.466	 	0.072
	 	 	 	 	 	 	 	 	including	 	105	 	113	 	8	 	2.4	 	0.049	 	4.786	 	0.14
	 	 	 	 	 	 	 	 	 	 	27	 	126	 	99	 	30.2	 	0.391	 	24.500	 	0.710
	 	 	 	 	 	 	 	 	including	 	30	 	39	 	9	 	2.7	 	0.366	 	82.870	 	2.420
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	145.00	 	 
	UG17-05	 	1304318	 	16605351	 	4891	 	including	 	33	 	36	 	3	 	0.9	 	0.450	 	 	 	4.110
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0	 	 
	 	 	 	 	 	 	 	 	including	 	75	 	90	 	15	 	4.6	 	0.276	 	68.610	 	2.000
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	178.50	 	 
	 	 	 	 	 	 	 	 	including	 	75	 	78	 	3	 	0.9	 	0.274	 	 	 	6.120
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0	 	 
	 	 	 	 	 	 	 	 	 	 	27	 	63	 	36	 	11	 	0.384	 	41.65	 	1.21
	UG17-06	 	1304318	 	16605351	 	4892	 	including	 	30	 	45	 	15	 	4.6	 	0.271	 	51.84	 	1.51
	 	 	 	 	 	 	 	 	including	 	57	 	60	 	3	 	0.9	 	0.368	 	90.1	 	2.63

 

		7.1	Drilling Statistics

 

The drilling database is composed of 149 drill
holes. A total of 9,882 Au, 8,831 Cu, and 5,803 Ag assays were included with these drill holes. Table 7.2 presents the assay statistics
for the Madison Project.

 

Table 7.2                   Assay Statistics
for the Madison Project

 

	Metal
	 	Number
	 	Mean
 Au (g/t)
	 	Stand. Dev.	 	Min Assay	 	Max Assay	 	Coef.
 of Variation

	Au	 	9,882	 	1.583	 	14.605	 	0.001	 	480	 	9.227
	Cu	 	8,831	 	2048.4	 	15125	 	0.206	 	653,600	 	7.384
	Ag	 	5,803	 	6.952	 	27.092	 	0.003	 	651	 	3.897

     

    -K-59 -

    
		8.	Sampling, Analyses and Security

 

For exploration prior
to 2005, the author was unable to review the procedures utilized by the various companies; however, it is very likely that the
sampling methods and analysis were to industry standards of that time. For drilling samples conducted post 2005, the described
procedures are as follows: “All drill core samples were logged, split with a diamond saw, and photographed on site. Reverse
circulation chip samples were split at the drill rig. Select intervals were bagged and driven to the Norris lab facilities in
Norris, Montana for assaying, while retaining half the core and reverse circulation chip samples duplicates on site in locked
storage sheds. For QC/QA purposes, the sample rejects and pulps were brought back to the mine site and random pulps were sent
to ALS-Chemex in Vancouver, B.C., Canada for assaying (25% of the total samples). Standards, repeats and duplicate samples were
also sent to Norris labs for quality control purposes.”

 

In the author’s opinion
the sampling method employed by Broadway for its core drilling programs was suitable to obtain representative samples of the mineralization
sought and the QA/QC program as described was sufficient to ensure that the results obtained from the labs were reliable.

 

For the check sample taken
by the author, the sample was a grab sample from the wall of the Madison decline between the 200 and 500 level. The sample was
placed in a 3mil plastic bag with an identification paper tag. The sample remained with author until it was hand delivered to ALS
geochemistry (“ALS”) in North Vancouver, British Columbia. ALS is an ISO 9001:2008 and 17025 accredited laboratory.
At the lab 1kg of sample was crushed so that 70% was less than 6mm. The entire sample was then pulverized to better than 80% passing
a 75 micron sieve. A 50 gram portion was fire assayed with a gravimetric finish for gold and silver. For copper, a split was digested
in four acids and it was tested by Induced Coupled Plasma ICP -AES analysis.

 

The author relied on QA/QC
protocols used by ALS for the check samples. The author is satisfied with the results obtained from ALS.

 

		8.1	Sample Preparation and Quality Control

 

Supervision, organization
and splitting of drilling core samples were undertaken by Company personnel. Samples were collected at three-foot intervals from
half core samples. Samples were cataloged by Broadway geologists and stored in a secure location. Certified reference standards
were placed in the sample stream of each drill hole at random intervals. Blank material was also inserted at random intervals.
Samples were packed into rice bags, zip strapped and securely stored until they were turned over to the local trucking company
for transport to the ALS Minerals Laboratory in North Vancouver, B.C.

 

		8.2	Blanks

 

Blank material is used to
monitor for carryover contamination and to ensure that there is not a high bias in the assay. Carryover is a process where a small
portion of the previous sample contaminates the next sample. ALS Minerals allows a total of 1% carryover from preparation and analytical
processes combined. Each blank that assays higher than three times the detection limit is evaluated to see if the value reflects
carryover or some other problem. For example, if a blank assayed 0.006 ppm Au for the Au-ICP22 method and the previous sample ran
1 ppm Au then the blank is not investigated because acceptable carryover could explain up to 0.01 ppm. However, if the blank had
assayed 0.015 ppm Au, and that is more than a 1 ppm carryover of a previous sample, then an investigation is initiated. The investigation
includes a rerun of the blank and surrounding samples as well as any documentation that was associated with the work order at ALS
Minerals. There are cases where the investigation does not resolve the reason for the higher than expected value.

 

A blank sample is inserted
at random intervals into the sample sequence. Figure 8.1 shows the historical performances of blank samples submitted for the Madison
Project Quality Control. A total of 12 (0.8%) blank samples were assayed at 3x above the detection limit for gold. Procedures for
high assays of blanks were then followed.

 

     

    -K-60 -

    

Figure 8.1    Blank Samples

 

 

		8.3	Certified Reference Materials

 

Certified Reference Materials
(“CRM’s”) or “standards” are used to monitor the accuracy of the assay results reported by ALS Minerals.
A CRM is inserted at random intervals into the sample sequence and serves to monitor both accuracy and sample sequence errors.
The CRM comes with a certified concentration with a stated uncertainty. However, the precision of the assay is ultimately controlled
by the 10% analytical precision reported by ALS Minerals. The CRM used in the 2017 drill campaign was analyzed using the Au-ICP21
analytical method. Figure 8.2 and 8.3 show the assay distributions for gold and copper for CRM used by Broadway.

     

    -K-61 -

    

Figure 8.2    CRM CDN-CM-27 Au Performance

 

     

    -K-62 -

    

Figure 8.3    CRM CDN-CM-27 Cu Performance

 

 

 

		8.4	Assay Techniques

 

Three different assay
procedures were designed by ALS Minerals for the samples based on the presence of copper sulphides, or oxides, and native copper.
The standard assay procedure of Au-ICP21 and CU-ICP61 was applied to most of the samples. Au-ICP21 is a 30g fire assay with an
ICP-AES finish. ICP61 is a four acid digestion of a one gram sample with an ICP finish. Samples with visible copper mineralization
received a CU-OG62 copper analysis, a four acid digestion of a 0.5 g sample with ICP-AES finish. OG62 has a copper range from 0.001
to 40%, while the ICP61 analysis has a copper maximum range of 10,000 ppm. Samples with visible native copper received a duplicate
Cu-OG62 analysis that included a WSH-22 procedure where the pulverizers are cleaned with barren material after every sample. Over-limit
copper values from ICP61 analyses received an OG62 procedure to determine the final Cu grade.

 

		8.5	Laboratory Quality Assurance/Quality Control

 

Quality control samples from the lab include
numerous control blanks, duplicates and standards. Reference standards used include OREAS-904, OREAS-45b, OGGeo08 and PGMS25. No
issues were noted with analytical accuracy or precision. Details of the laboratory’s QA/QC may be found at www.alsglobal.com.

 

		9.	Data Verification

 

One
grab sample was identified in the 2016 technical report. Sample MD-1, Table 9.1, confirmed the existence of mineralization for
the Project.

     

    -K-63 -

    

Table 9.1 2016 Madison
Decline Grab Sample

 

	Sample	 	Location	 	Width (m)	 	Type	 	Description	 	Au( g/t)	 	Ag ppm	 	Cu%
	MD-1	 	Madison 
Decline	 	NA	 	GRAB	 	GRAB SMAPLE OF MASSIVE 
CHALCOITE WITH MALCHITE	 	3.29	 	64	 	>40

 

Data verification for
this report consisted of taking quarter cuts of core during the October 25, 2017 site visit. The samples were selected to represent
average grades within different lithologies. All cut samples were kept by the author and shipped independently for assaying. In
addition, an interval of the standard, CND Resources Laboratories Ltd. CDN-CM-27, as well one blank of silica sand were submitted
as in order to check the assaying laboratory QA/QC. Table 9.2 compares the original assay value with the assay values receive by
the author.

 

Table 9.2 2017 MMC Data
Verification Samples

 

	Hole Id	 	From (ft)	 	To (ft)	 	Lithology	 	Au (ppm) Original	 	Au (ppm) Check	 	Cu ppm Original	 	Cu ppm Check
	UG17-05	 	54	 	57	 	Massive Sulphide Skarn	 	12.4	 	 	 	2560	 	 
	C17-05	 	491	 	494	 	Jasperoid	 	.355	 	 	 	5510	 	 
	C17-10	 	452	 	455	 	Epidote Skarn	 	6.25	 	 	 	22400	 	 
	CDN-CM-27	 	 	 	 	 	Certified Standard	 	0.636	 	 	 	5930	 	 
	Blank	 	 	 	 	 	Silica Sand	 	 	 	 	 	 	 	 

 

No restrictions were placed
on the author during the data verification process. The data collected and used by the Broadway is adequate for the purposes used
in this technical report.

 

		10.	Mineral Processing and Metallurgical Testing

 

		10.1	Bottle Roll Cyanide

 

Preliminary mineral processing
and metallurgical testing carried out on drill core and reverse circulation cuttings during the late 1980’s were summarized
in Bourns (1992).

 

Preliminary bottle roll
cyanide testing on 12 representative samples of the oxide deposit indicated the need for agitation leaching on several of the composites
due to lower recoveries on 3/8” material (Table 10.1). The testing indicated that a 24 hour bottle roll was sufficient. Sodium
cyanide consumption was low at 0.4 - 0.6 lbs/ton. Bottle roll testing on other oxide composites indicate that a 3/8" product
would be suitable as recoveries in the +90% range were obtained.

 

Table 10.1    Metallurgical
Tests Sodium Cyanide Recoveries

 

	 	 	Gold Extraction %
	Oxide Head Samples	 	Size 100% -3/8”	 	Size
 60% -200 mesh

	Victoria pit 10812	 	82.61%	 	97.83%
	Victoria pit 10813	 	71.43%	 	88.57%
	Black pit 10814	 	43.86%	 	96.43%
	Black pit 10815	 	63.96%	 	98.20%
	MGV-1	 	58.62%	 	97.70%
	MGV-5	 	52.17%	 	95.65%
	MGV-6	 	65.96%	 	98.58%
	MGV-7	 	66.67%	 	92.75%

     

    -K-64 -

    

The original 12 drill hole
composites were combined into three composites designated A, B, and C. Further bottle testing at 3/8" designed to test the
effects of pH, retention time and CN concentration were performed. The results obtained from this testing are shown in Table 10.2.

 

Two composites, composite
B above and a 50/50 blend of the Victoria pit material were subjected to 30 day column leach tests. Both tests were done on -3/8
inch ore. The Victoria pit test yielded a recovery of 89. 0% with a cyanide consumption of 0.67 lbs/ton. After six days the recovery
was 85% indicating very rapid kinetics. Composite B yielded 80.6% recovery after 30 days.

 

Conventional flotation
of the sulphide component yielded recoveries that ranged from 60-70%. Concentrate grades ranged from 0.9 opt Au to 7.0 opt Au and
were highly dependent upon head grade. A flowsheet that incorporated a floatation tailings cyanide leach increased recovery by
15%. Straight cyanidation leaching of the sulphide ore after pre-aerating with a chemical pretreatment yielded recoveries above
90%.

 

Table 10.2 Metallurgical
Test Composites

 

	 
	 	Composite sample
	Parameters	 	A	 	B	 	C
	Leach time (hours)	 	72	 	72	 	72
	pH	 	10.5	 	10.5	 	10.5
	NaCN Concentration	 	1 g/l	 	5 g/l	 	1 g/l
	NaCN Consumption	 	0.4 lbs/ton	 	2.7 lbs/ton	 	1.1 lbs/ton
	Recovery	 	86.9%	 	82.5%	 	90.5%

 

10.2
Bond Work Index

 

Coronado contracted Thomas
McIntyre (2007) to undertake metallurgical testing of the underground mineralization. The crushing tests found the silicates and
oxides resulted in a fairly hard ore. The Bond Work was 14.5 KM hours per ton. His work suggested gravity separation may be the
preferred method of copper concentration based on the chalcocite sample he was supplied. Utilizing mill feeds of 14.6% to 15.8%
copper he obtained recoveries of 74.5% to 89.1% on a shaking table. His floatation tests on the 14.6% copper material obtained
a recovery of 33.4% at pH 9.5 utilizing Sodium Isopropyl Xanthate at 0.02 lbs/ton, or a recovery of 63.45% utilizing Potassium
Ethyl Xanthate at 0.02 lb/ton.

 

McIntyre (2007) also conducted
metallurgical testing on the gold oxide ore. The Mineral Liberation Analysis found the gold to be less than 5 microns in size.
His testing on a 0.412 ounces per ton sample obtained recoveries of 79.9% at 2.5 minute grind, 64.9% at 5 minute grind and 63.1%
at 7.5 minute grind. A series of actual mill test runs were completed between 2010 and 2013 as detailed in Table 10.3.

 

10.3
Bulk Sample Tests

 

A Bulk Sample Test was completed
in 2010 at the US Grant Mine Mill in Virginia City, Montana. A three day run was completed September 13, 14 and 20. Both floatation
and gravity circuits were utilized with the floatation results shown in Table 13.3. The gravity circuit gold recoveries ranged
from 21.14% to 55.56%. The floatation recoveries ranged from 64.1% to 66.2% for copper and 55.6% to 61.3% for gold.

 

A Bulk Sample Test was completed
in 2011 at the Philipsburg, Montana mill between June 8 and June 12. A total of 934 tons were processed producing 175.78 dry tons
of concentrate containing 172.9 ounces of gold, 1,236 ounces of silver and 27.05 tons of copper. Floatation head grades averaged
0.227 opt Au, 2.96 opt Ag and 4.94% Cu. Recoveries were 83.8% for gold, 46% for silver and 60.3% for copper.

     

    -K-65 -

    

A Bulk Sample Test was completed in 2012 at the
Philipsburg, Montana mill between March 8 and March 12. A total of 1,063.5 tons was processed producing 199.8 dry tons of
concentrate containing 248.5 ounces of gold, 1,992 ounces of silver and 42.68 tons of copper. Floatation head grades averaged
0.384 opt Au, 3.31 opt Ag and 5.39% Cu. Recoveries were only 57.4% for gold, 75.4% for silver and 75.4% for copper.

 

A Bulk Sample Test was completed in 2013 at the Philipsburg,
Montana mill between September 3 and September 23. A total of 2,360.3 tons was processed. Roughly 522 wet metric tons of concentrate
was produced with 964.7 ounces of gold, 4,996 ounces of silver and 81.62 tons of copper recovered. Floatation head grades averaged
0.401 opt Au, 2.17 opt Ag and 3.13% Cu. Recoveries were 71.5% for gold, 65.2% for silver and 71.1% for copper. McIntyre (2013)
reviewed the mill run and provided a summary report.

     

    -K-66 -

    

Table 10.3    Bulk Sample Test Run
Summaries

 

	 	 	Floatation Heads	 	Floatation Concentrates	 	Floatation Tailings	 	Recoveries	 	Recoveries	 	 
	Day	 	Tons	 	% Cu	 	OPT Ag	 	OPT Au	 	% Cu	 	OPT Ag	 	OPT Au	 	% Cu	 	OPT Ag	 	OPT Au	 	Cu %	 	Ag %	 	Au %	 	Tons Cu	 	OZ Ag	 	OZ Au
	2010-Sep-13	 	NDA	 	0.704	 	0.72	 	0.176	 	3.791	 	17.12	 	0.572	 	0.271	 	0.61	 	0.084	 	66.2	 	15.8	 	61.3	 	NDA	 	NDA	 	NDA
	2010-Sep-14	 	NDA	 	1.498	 	1.01	 	0.168	 	7.746	 	6.47	 	0.840	 	0.614	 	1.39	 	0.084	 	64.1	 	47.9	 	55.6	 	NDA	 	NDA	 	NDA
	2010-Sep-20	 	NDA	 	NDA	 	0.8	 	0.244	 	NDA	 	4.43	 	0.552	 	NDA	 	1.04	 	0.136	 	NDA	 	NDA	 	NDA	 	NDA	 	NDA	 	NDA
	2011-Jun-12	 	934	 	4.94	 	2.96	 	0.227	 	15.39	 	7.03	 	0.983	 	NDA	 	NDA	 	NDA	 	60.3	 	46.0	 	83.8	 	27.05	 	1236.17	 	172.86
	2012-Mar-08	 	NDA	 	5.96	 	2.72	 	0.391	 	21.59	 	10.77	 	0.988	 	3.04	 	2.33	 	0.251	 	NDA	 	NDA	 	NDA	 	NDA	 	NDA	 	NDA
	2012-Mar-09	 	NDA	 	5.53	 	4.87	 	0.336	 	22.80	 	11.12	 	3.628	 	1.94	 	1.37	 	0.186	 	NDA	 	NDA	 	NDA	 	NDA	 	NDA	 	NDA
	2012-Mar-10	 	NDA	 	4.68	 	2.35	 	0.424	 	19.55	 	7.42	 	1.310	 	1.31	 	1.05	 	0.100	 	NDA	 	NDA	 	NDA	 	NDA	 	NDA	 	NDA
	2013-Sep-03	 	54.75	 	4.06	 	2.67	 	0.276	 	13.13	 	4.82	 	1.296	 	1.53	 	1.51	 	0.168	 	70.6	 	63.3	 	45.0	 	2.22	 	146.18	 	15.11
	2013-Sep-04	 	177.82	 	4.30	 	2.19	 	0.422	 	15.01	 	6.52	 	1.100	 	1.47	 	1.11	 	0.159	 	73.0	 	59.3	 	72.9	 	7.35	 	558.35	 	143.68
	2013-Sep-05	 	178.60	 	1.82	 	1.19	 	0.239	 	15.63	 	4.94	 	1.370	 	1.32	 	0.61	 	0.133	 	30.2	 	55.8	 	49.1	 	8.15	 	324.16	 	66.08
	2013-Sep-06	 	175.47	 	4.02	 	2.26	 	0.318	 	12.11	 	4.36	 	1.014	 	1.32	 	0.95	 	0.138	 	75.5	 	74.1	 	65.5	 	6.80	 	281.63	 	59.31
	2013-Sep-09	 	177.98	 	3.71	 	2.67	 	0.400	 	12.74	 	5.78	 	1.382	 	1.02	 	0.85	 	0.146	 	78.7	 	80.1	 	71.0	 	6.89	 	344.39	 	44.85
	2013-Sep-10	 	180.32	 	3.34	 	2.22	 	0.368	 	14.80	 	5.74	 	0.982	 	1.44	 	1.34	 	0.160	 	63.0	 	51.7	 	67.5	 	5.77	 	360.64	 	45.44
	2013-Sep-11	 	180.68	 	3.55	 	2.43	 	0.554	 	11.80	 	5.59	 	0.962	 	1.18	 	1.52	 	0.188	 	74.3	 	51.4	 	82.1	 	6.13	 	455.31	 	61.25
	2013-Sep-12	 	182.46	 	3.67	 	2.81	 	0.364	 	13.85	 	6.47	 	0.821	 	1.64	 	1.52	 	0.180	 	62.9	 	60.0	 	64.7	 	7.09	 	468.92	 	72.80
	2013-Sep-16	 	176.30	 	2.90	 	2.46	 	0.412	 	13.45	 	4.30	 	0.922	 	1.42	 	1.28	 	0.196	 	57.1	 	68.3	 	66.6	 	4.56	 	370.23	 	68.40
	2013-Sep-17	 	162.05	 	2.29	 	1.69	 	0.401	 	8.55	 	3.98	 	1.098	 	0.84	 	0.53	 	0.205	 	70.4	 	79.2	 	60.1	 	3.11	 	233.35	 	53.80
	2013-Sep-18	 	117.55	 	2.70	 	1.97	 	0.475	 	7.67	 	3.62	 	1.450	 	0.60	 	0.63	 	0.114	 	84.4	 	82.4	 	82.5	 	4.25	 	192.78	 	38.32
	2013-Sep-19	 	151.13	 	2.47	 	0.97	 	0.402	 	7.75	 	3.97	 	1.200	 	0.70	 	0.72	 	0.155	 	78.8	 	31.5	 	70.6	 	4.34	 	261.45	 	53.65
	2013-Sep-20	 	158.29	 	2.05	 	1.94	 	0.451	 	6.98	 	3.98	 	1.195	 	0.54	 	0.66	 	0.084	 	79.8	 	79.1	 	87.5	 	3.72	 	291.25	 	73.92
	2013-Sep-21	 	135.73	 	2.98	 	2.89	 	0.429	 	8.05	 	4.74	 	1.220	 	0.65	 	1.52	 	0.104	 	85.0	 	69.9	 	82.8	 	5.15	 	316.25	 	74.24
	2013-Sep-23	 	151.13	 	3.33	 	2.45	 	0.460	 	10.80	 	5.83	 	1.013	 	0.92	 	1.18	 	0.155	 	79.1	 	65.0	 	78.3	 	6.10	 	391.43	 	93.85

     

    -K-67 -

    

10.4  
Summary

 

McIntyre (2013) noted the
recoveries of pay metals were hampered by lack of control of pH in the mill circuit, resulting from highly oxidized feed material.
He felt the broken feed material had sat in the stope and then on surface for too long, allowing thorough oxidation of the sulphide
rich material in addition to free acid generation. Previous mill runs suggested recoveries in excess of 80% were feasible with
the pH held in a narrow range between 7.0 and 7.5. The oxidized nature of the feed material caused wild swings in the pH over hourly
ranges effecting recoveries.

 

McIntyre (2013) states the
results of the September 2013 mill run were similar in some ways to most of the earlier mill runs. The results were less than expected
when compared to the previous laboratory testing. He concluded this was principally due to the oxidation of the bulk sample material,
a result of months of time between the actual mining of the bulk sample and the milling of the bulk sample. Acid formation resulting
from the oxidation of marcasite, pyrrhotite and pyrite occurs rapidly in the bulk sample material, mainly due to the speed at which
pyrrhotite generates acid which increases the reactivity of the other two iron sulphide species. The quantities of free acid produced
prior to milling appear to be more than the normal mill is capable of handling. Additionally, available acid oxidizes the chalcocite
copper mineral that is the predominant copper mineral at Madison. The oxidation results in poor recovery as the collectors utilized
in the processing scheme are highly selective to sulphides but are truly ineffective in the recovery of copper oxide minerals.
Further, the acid is at times at concentrations that result in pH’s less than neutral, i.e., 7.0 which results in destruction
of the collector reagents and promoters. This only adds to the inability to put the pay metals into the froth and into the flotation
product.

 

He further concluded minimal
time for the ore to oxidize and create acid is the key to getting good results from this particular ore. He suggested either an
on-site mill or arranging a milling contract where the broken mineralization could be processed on a daily time frame.

 

11.
Mineral Resource Estimates

There are no mineral resources,
within the meaning of that term in National Instrument 43-101 (“NI 43-101”), identified for the Madison Project.

 

12.
Mining Operations

The Madison Project is not an
advanced property within the meaning of that term in NI 43-101.

 

13.
Processing and Recovery Operations

The Madison Project is not
an advanced property within the meaning of that term in NI 43-101.

 

14.
Infrastructure, Permitting, and Compliance Activities

The Madison Project is not
an advanced property within the meaning of that term in NI 43-101.

 

15.
Capital and Operating Costs

The Madison Project is not
an advanced property within the meaning of that term in NI 43-101.

 

16.
Exploration, Development and Production

Kennecott Exploration
has optioned the Madison Project with interest in developing the Au-Cu porphyry potential, and is managing the exploration activities
of the Madison Project pursuant to the Option Agreement. Spinco has been advised that Kennecott has completed rock chip sampling,
geologic mapping, geophysical surveys and deep core drilling but does not have access to the results of such activities. Spinco
has been advised that Kennecott is expanding its program to include testing deep Au-Cu skarn targets based on favorable results
generated from previous Broadway exploration programs.

 

Description of
the Spinco Common Shares

 

The authorized capital of Spinco consists
of an unlimited number of common shares. On completion of the Arrangement, it is anticipated that there will be approximately
49,860,204 Spinco Common Shares outstanding (assuming no Broadway convertible securities are exercised prior to the Effective
Time).

     

    -K-68 -

    

Dividend Policy

 

Spinco has not paid dividends
since its incorporation. Spinco currently intends to retain all available funds, if any, for use in its business and does not anticipate
paying any dividends for the foreseeable future.

 

Voting and Other Rights

 

Holders of Spinco Common
Shares are entitled to one vote per share at all meetings of Spinco Shareholders, to receive dividends as and when declared by
the directors and to receive a pro rata share of the assets of Spinco available for distribution to holders of Spinco Common Shares
in the event of liquidation, dissolution or winding up of Spinco. All rank pari passu, each with the other, as to all benefits
which might accrue to the holders of Spinco Common Shares.

 

Consolidated Capitalization

 

Spinco has not completed
a financial year. There have not been any material changes in the share and loan capital of Spinco since the date of incorporation.
See the audited financial statements of Spinco for the period ended November 30, 2019 appended as Schedule “1” to Appendix
 “K” to this Circular, and the Carve Out Financial Statements of Spinco also appended as Schedule “1” to
Appendix “K” to this Circular.

 

Options and Other Rights to Purchase
Shares

 

The Spinco Board is expected
to approve a stock option plan (the “Spinco Option Plan”), which is expected to be substantially similar to
Broadway’s current stock option plan, subject to the receipt of any necessary shareholder or regulatory approvals. The purpose
of the Spinco Option Plan will be to allow Spinco to grant options to directors, officers, employees and consultants, as additional
compensation, and as an opportunity to participate in the success of Spinco. The granting of such options is intended to align
the interests of such persons with that of the shareholders.

 

No stock options have
been granted under the Spinco Option Plan or otherwise since incorporation. As the date hereof, there is no current market for
the Spinco Common Shares. As such, the market value of the Spinco Common Shares underlying the Spinco Options has not been determined.

 

Prior Sales

 

Spinco has not issued
any shares except one incorporation Spinco Common Share to Broadway on October 11, 2019 for consideration of $1.00. This share
will be cancelled in connection with the effectiveness of the Plan of Arrangement.

 

Escrowed Securities and Securities Subject
to Contractual Restriction on Transfer

 

There are no Spinco Common
Shares currently held in escrow or that are subject to a contractual restriction on transfer. On completion of the Arrangement,
no Spinco Common Shares will be held in escrow by the Transfer Agent.

 

Resale Restrictions

 

See “Securities Law
Considerations” in this Circular.

 

There is currently no
market through which the Spinco Common Shares may be sold and, unless the Spinco Common Shares are listed on a stock exchange,
Broadway Shareholders may not be able to resell the Spinco Common Shares. Spinco has no current plans to apply to list the Spinco
Common Shares on any stock exchange. There can be no assurances that Spinco will be able to obtain such a listing on any stock
exchange, in the event it does apply.

 

Principal Shareholders

 

To the knowledge of Spinco’s directors
and executive officers, and based on existing information as of the date hereof, no person or company, upon completion of the
Arrangement will, beneficially own, or control or direct, directly or indirectly, voting securities of Spinco carrying 10% or
more of the voting rights attached to any class of voting securities of Spinco.

     

    -K-69 -

    

Directors and Officers

 

The following table sets forth certain information
with respect to each director and executive officer of Spinco.

 

	Name,
 Jurisdiction of
 Residence and
 Position(s) (1)(2)
	 	Principal Occupation
 During Past Five Years (1)
	 	Director
 Since	 	Number of Spinco
 Common Shares
 Beneficially Owned,
 Controlled or
 Directed, Directly or
 Indirectly,
 Immediately
 Following the
 Completion of the
 Arrangement (3)
	 	Percentage of
 Spinco Common
 Shares Issued and
 Outstanding
 Immediately
 Following the
 Completion of the
 Arrangement (4)

	Duane Parnham Director and Chief Executive Officer 
  
Nassau, Bahamas	 	Duane Parnham is the Executive Chairman of Giyani Gold Corp., Canoe Mining Ventures Corp. and the Chairman of Nevada Zinc Corporation. Mr. Parnham has over 30 years of experience in the mining and hydrocarbon industries and has spent his career developing and founding several resource-focused companies, including but not limited to, Temex Resources Corp., Forsys Metals Corp., Giyani Gold Corp. and Canoe Mining Ventures Corp. Mr. Parnham was also the founder and Chairman of UNX Energy Corp., a junior oil and gas company which was sold in 2011 to HRT Participacoes em Petroleo S.A. for C$730 million. Mr. Parnham is a graduate of the Mineral Engineering Technology program at Fleming College. In 2011, Mr. Parnham established the Parnham Foundation, a Canadian non-profit organization aimed at advancing education internationally by providing scholarships and other educational assistance for underprivileged, impoverished or otherwise disadvantaged students, with a specific emphasis on Namibia. The focus of the advancement of education is in collaboration with Fleming College, located in Ontario, Canada.	 	October 11, 2019 to present	 	4,848,167	 	9.72%
	Shawn Parnham Director. 
  
Burlington, Ontario	 	Shawn Parnham is a graduate of McMaster University and holds a Bachelor of Commerce and is also a Chartered Professional Accountant (CPA, CMA). He has extensive senior level finance experience working in several international public and private companies in the areas of corporate finance, internal and external financial reporting, treasury, internal audit, corporate governance, acquisitions, debt financing and restructuring. Since August 2013, Mr. Parnham has been Vice President Finance & Treasurer of the IMT Group, a diversified group of industrial companies with operations in Canada, United States and the People’s Republic of China. He leads the company finance function and is responsible for creating and monitoring the internal control environment and corporate governance. In previous roles he has been involved in developing company compliance with Sarbanes Oxley and performed IFRS conversions. Mr. Parnham was the Chief Financial Officer for Green for Life Environmental (GFL) from December 2011 to August 2013 and for Turtle Island Recycling Corporation from November 2010 to December 2011.	 	October 11, 2019 to present	 	Nil	 	Nil

     

    -K-70 -

    

	Name,
 Jurisdiction of
 Residence and
 Position(s) (1)(2)
	 	Principal Occupation
 During Past Five Years (1)
	 	Director
 Since	 	Number of Spinco
 Common Shares
 Beneficially Owned,
 Controlled or
 Directed, Directly or
 Indirectly,
 Immediately
 Following the
 Completion of the
 Arrangement (3)
	 	Percentage of
 Spinco Common
 Shares Issued and
 Outstanding
 Immediately
 Following the
 Completion of the
 Arrangement (4)

	Victoria Donato Director. 
  
Toronto, Ontario	 	Victoria has experience in Finance, Internal Audit, Compliance and Risk Management. Prior to joining Broadway Gold, she was the Chief Financial Officer for a Toronto hedge fund, Red Sky Capital Management Ltd. She was responsible for overseeing controls, compliance, financial reporting and off-shore tax structures for five companies. She has extensive experience establishing structure, developing controls and improving efficiencies. Previously, Victoria headed the Risk Management department at CI Investments. Within one year of her role as Senior Risk Manager she organized and implemented a successful new risk management framework. She joined CI in 2007 as a Senior Internal Auditor and helped establish the Internal Audit department. She was responsible for implementing process and control improvements throughout the organization. She participated in multiple projects including: fiscal year end audits, fund fact audits, fraud investigations and multiple system conversion projects. She was also responsible for assessing anti-money laundering programs for all business units. Her experience includes writing various reports to multiple audiences including the Board of Directors of CI Financial. Prior to CI, Victoria completed her Chartered Accountant (CPA, CA) designation at Stern Cohen LLP, servicing private companies in a wide range of industries, predominantly in an assurance capacity. Victoria graduated from Western University with a Bachelor’s degree in Business.	 	October 11, 2019 to present	 	220,000	 	0.44%
	Suzanne Wood, Director 
  
Vancouver, BC 
	 	Suzanne Wood is the founder and CEO of Wood & Associates, a small cap management and corporate finance services firm with over 25 years’ experience in the financial and corporate sectors. The firm provides management and corporate finance services including the preparation of financial statements and financial reports in compliance with various regulatory jurisdictions both domestic and international. She also provides senior level consulting services for companies to restructure, further develop their business model or to engage in the acquisition of new business opportunities or merger candidates. She is a graduate from the University of British Columbia and has also completed an MBA (Masters in Business Administration) and CGA (Certified General Accounting) programs as well as the CSC (Canadian Securities Course). From February 2013 to present, she is the CFO and a Director of Sante Veritas Therapeutics Inc., an emerging North American cannabis platform company with a pending license to become a Licensed Producer under Canada’s Access to Cannabis for Medical Purposes Regulations. From October 2011 to August 2014 she was the President, CEO, CFO, Secretary, Treasurer and Director of Alexandra Capital Corp., a TSX-V Tier 2 Mining Issuer. For the past 25 years she has served as a Director and Officer of numerous private and public companies in a variety of business sectors both in Canada and the United States.	 	October 11, 2019 to present	 	830,000	 	1.66%

     

    -K-71 -

    

	Name,
 Jurisdiction of
 Residence and
 Position(s) (1)(2)
	 	Principal Occupation
 During Past Five Years (1)
	 	Director
 Since	 	Number of Spinco
 Common Shares
 Beneficially Owned,
 Controlled or
 Directed, Directly or
 Indirectly,
 Immediately
 Following the
 Completion of the
 Arrangement (3)
	 	Percentage of
 Spinco Common
 Shares Issued and
 Outstanding
 Immediately
 Following the
 Completion of the
 Arrangement (4)

	Dr. Roger Laine Director 
  
France 
	 	Dr. Roger Laine, PhD, P. Geo. (APEGBC) was a Member of the Association of Professional Engineers and Geoscientists of British Columbia from 1991 until end of 2016, and was a "Qualified Person" in accordance with National Instrument 43-101. Dr. Laine is a graduated as a Geological Engineer from the Nancy Polytechnical Institute in France and holds his Ph.D. in Economic Geology and Geosciences from the University of Arizona at Tucson. Dr. Laine has over 35 years of experience in mineral exploration throughout the Americas, West & Central Africa and Europe. Dr. Laine served as the Chief Geologist of Forsys Metals Corp., since August 1, 2007 until December 31, 2011. As well, Vice President of Exploration at Landmark Minerals Inc. since May 2006 until the merger with Ucore, remained Technical Advisor for U Core until the end of 2007. Dr. Laine specialized in exploration, development, Geostatistics and reserve estimating, underground and open-pit mines, grade and quality control using advance computerized information systems. Particularly, his 15 years uranium experience working for Cogema and their subsidiaries, as a Senior manager exploring for roll-front, granite hosted and Permian stratigraphically controlled deposits in France, Canada, US and Mexico proves to be an invaluable asset as Forsys Metals Corp's advances the Valencia Uranium Deposit located in Namibia to a production decision. Dr. Laine served 18 6 year tenure as Vice President of Exploration for Amok Ltd., a division of Cogema. Dr. Laine served as an Independent Director of Giyani Gold Corp. (Formerly 99 Capital Corporation) from June 18, 2010 to September 21, 2016. Dr. Laine served as an Independent Director of Forsys Metals Corp. from March 2006 to November 2009 and served as its Member Advisory Board since September 2005. He has been a Member of Advisory Board of Anglo-Canadian Mining Corp. (Anglo-Canadian Uranium Corp.) since June 2008. He served as a Director of Anglo-Canadian Uranium Corp. from April 6, 2006 to August 2008 and served as Director of Landmark Minerals Inc. since July 12, 2006 until end of 2007.	 	October 11, 2019 to present	 	133,000	 	0.27%

     

    -K-72 -

    

	Name,
 Jurisdiction of
 Residence and
 Position(s) (1)(2)
	 	Principal Occupation
 During Past Five Years (1)
	 	Director
 Since	 	Number of Spinco
 Common Shares
 Beneficially Owned,
 Controlled or
 Directed, Directly or
 Indirectly,
 Immediately
 Following the
 Completion of the
 Arrangement (3)
	 	Percentage of
 Spinco Common
 Shares Issued and
 Outstanding
 Immediately
 Following the
 Completion of the
 Arrangement (4)

	Eric Myung Chief Financial Officer 
  
Toronto, Ontario	 	Eric Myung is a Senior Financial Analyst of Marrelli Support Services Inc. (2018 to present), providing CFO, accounting, regulatory compliance, and management advisory services to numerous issuers on the TSX, TSX-Venture and other Canadian and US exchanges. Previously, Mr. Myung has worked at public accounting firms, focused on small and medium-sized businesses, for seven years. Mr. Myung is a Canadian Professional Accountant and has a Master of Accounting degree and Bachelor in Mathematics/Chartered Accountancy from the University of Waterloo.	 	N/A	 	Nil	 	Nil

 

Notes

 

		(1)	The information as to residence and principal occupation,
not being within the knowledge of Broadway or Spinco, has been furnished by the respective directors and officers individually.

 

		(2)	Directors serve until the earlier of the next annual
general meeting or their resignation.

 

		(3)	The information as to securities beneficially owned or
over which a director or officer exercises control or direction, not being within the knowledge of Broadway or Spinco, has been
furnished by the respective directors and officers individually based on shareholdings in Broadway as of the date of this Circular.

 

		(4)	Assuming approximately 49,860,204 Spinco Common Shares
are outstanding after completion of the Arrangement.

 

Upon the completion of
the Arrangement, it is expected that the directors and executive officers of Spinco as a group, will beneficially own, directly
or indirectly, or exercise control or direction over an aggregate of approximately 6,031,167 Spinco Common Shares, representing
approximately 12.1% of the issued Spinco Common Shares Assuming approximately 49,860,204 Spinco Common Shares are outstanding after
completion of the Arrangement.

 

The principal occupations
of each of the proposed directors and executive officers of Spinco within the past five years are disclosed in the chart above.

 

Corporate Cease
Trade Orders, Bankruptcies, Penalties or Sanctions or Individual Bankruptcies, Penalties or Sanctions or Individual Bankruptcies

 

Other than as disclosed below,
to the knowledge of Spinco, no director or executive officer:

 

		(a)	is, as at the date of this Circular, or has been, within
ten years before the date of this Circular, a director, chief executive officer or chief financial officer of any company (including
Spinco) that:

 

		(i)	was the subject, while the director was acting in that
capacity as a director, chief executive officer or chief financial officer of such company, of a cease trade or similar order
or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period
of more than 30 consecutive days; or

 

     

    -K-73 -

    

		(ii)	was subject to a cease trade or similar order or an order
that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more
than 30 consecutive days, that was issued after the director ceased to be a director, chief executive officer or chief financial
officer but which resulted from an event that occurred while the director was acting in the capacity as director, chief executive
officer or chief financial officer of such company; or

 

		(b)	is, as at the date of this Circular, or has been within 10 years before
the date of this Circular, a director or executive officer of any company (including Spinco) that, while that person was acting
in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation
relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors
or had a receiver, receiver manager or trustee appointed to hold its assets; or

 

		(c)	has, within the ten years before the date of this Circular, become bankrupt,
made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings,
arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director;

 

None of the proposed directors
(or any of their personal holding companies) has been subject to:

 

		(a)	any penalties or sanctions imposed by a court relating
to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities
regulatory authority; or

 

		(b)	any other penalties or sanctions imposed by a court or
regulatory body that would likely be considered important to a reasonable security holder in deciding whether to vote for a proposed
director.

 

Indebtedness of
Directors, Executive Officers and Senior Officers

 

There is and has been
no indebtedness of any director, executive officer or senior officer or associate of any of them, to or guaranteed or supported
by Spinco during the period from incorporation.

 

Statement of Executive
Compensation

 

Compensation Discussion
and Analysis

 

Spinco was incorporated
on October 11, 2019 and, accordingly, has not yet completed a financial year and has not yet developed a compensation program.
Spinco anticipates that it will adopt a compensation program that reflects its stage of development, the main elements of which
are expected to be comprised of base salary, option-based awards and annual cash incentives.

 

Summary Compensation

 

Spinco was incorporated
on October 11, 2019 and has not yet completed a financial year. No compensation has been paid to date. In addition, it has no compensatory
plan or other arrangements in respect of compensation received or that may be received by its executive management in its current
financial year.

 

Following the completion of the Arrangement,
Spinco will establish a Compensation Committee (the “Compensation Committee”), which will administer the compensation
mechanisms to be implemented by the Spinco Board. The individuals that will be appointed to the Compensation Committee, once formed,
will each have direct experience that is relevant to their responsibilities in determining executive compensation for Spinco.

     

    -K-74 -

    

 

On an annual basis, the
Compensation Committee will review the compensation of the Named Executive Officers to ensure that each is being compensated in
accordance with the objectives of Spinco’s compensation program, which will be to:

 

		•	provide competitive compensation that attracts and retains
talented employees;

		•	align compensation with shareholder interests;

		•	pay for performance;

		•	support the Spinco’s vision, mission and values; and

		•	be flexible to recognize the needs of Spinco in different business environments.

 

Spinco does not currently
have any compensation policies or mechanisms in place. The compensation policies are anticipated to be comprised of three components;
namely, base salary, equity compensation in the form of stock options, and discretionary performance-based. A Named Executive Officer’s
base salary will be intended to remunerate the Named Executive Officer for discharging job responsibilities and will reflect the
executive’s performance over time. Base salaries are used as a measure to compare to, and remain competitive with, compensation
offered by competitors and as the base to determine other elements of compensation and benefits. The stock option component of
a NEO’s compensation will aim to meet the objectives of the compensation program to be implemented, by both motivating the
executive towards increasing share value and enabling the executive to share in the future success of Spinco. Discretionary performance-based
bonuses will be considered from time to time to reward those who have achieved exceptional performance and meet the objectives
of Spinco’s compensation program by rewarding pay for performance. Other benefits will not form a significant part of the
remuneration package of any of the Named Executive Officers of Spinco.

 

The Spinco Board expects
to adopt the Spinco Option Plan. The Spinco Option Plan, once implemented, will allow for the granting of incentive stock options
to its officers, employees and directors. The purpose of granting such options would be to assist Spinco in compensating, attracting,
retaining and motivating the directors of Spinco and to closely align the personal interests of such persons to that of the shareholders
of Spinco.

 

Option-Based Awards

 

The purpose of the Spinco
Option Plan will be to allow Spinco to grant options to directors, officers, employees and consultants, as additional compensation,
and as an opportunity to participate in the success of Spinco. The granting of such options is intended to align the interests
of such persons with that of the shareholders. The Spinco Option Plan, once implemented, will be used to provide stock options
which will be awarded based on the recommendations of the directors of Spinco, taking into account the level of responsibility
of such person, as well as his or her past impact on or contribution to, and/or his or her ability in future to have an impact
on or to contribute to the longer term operating performance of Spinco. In determining the number of options to be granted, Spinco
Board will take into account the number of options, if any, previously granted, and the exercise price of any outstanding options
to ensure that such grants closely align the interests of such person with the interests of shareholders. The Spinco Board will
determine the vesting provisions of all stock option grants.

 

Incentive Plan Awards

 

Spinco does not have any
incentive plans, pursuant to which compensation that depends on achieving certain performance goals or similar conditions within
a specified period is awarded, earned, paid or payable to its Named Executive Officers. Other than the Spinco Options that the
Named Executive Officers will receive on completion of the Arrangement, Spinco has made no option-based or share-based awards to
any of its Named Executive Officers.

 

Pension Plan Benefits

 

Spinco does not have a pension plan that
provides for payments or benefits to the Named Executive Officers at, following, or in connection with retirement.

     

    -K-75 -

    

Termination of Employment,
Change in Responsibilities and Employment Contracts

 

Spinco has no employment
contracts between it and either of its Named Executive Officers. Further, it has no contract, agreement, plan or arrangement that
provides for payments to a Named Executive Officer following or in connection with any termination (whether voluntary, involuntary
or constructive), resignation, retirement, a change of control of Spinco or its subsidiaries, if any, or a change in responsibilities
of a Named Executive Officer following a change of control. Spinco will consider entering into contracts with its Named Executive
Officers following completion of the Arrangement.

 

Defined Benefit or Actuarial
Plan Disclosure

 

Spinco has no defined benefit or actuarial plans.

 

Director Compensation

 

Spinco currently has no arrangements,
standard or otherwise, pursuant to which directors are compensated by Spinco for their services in their capacity as directors,
or for committee participation, involvement in special assignments or for services as a consultant or expert since its incorporation
on October 11, 2019 and up to and including the date of this Circular.

 

Upon completion of the Arrangement,
Spinco will adopt a compensation program for directors. The objectives of the director compensation program will be to attract,
retain and inspire performance of members of the Spinco Board of a quality and nature that will enhance Spinco’s growth.
The compensation will be intended to provide an appropriate level of remuneration considering the experience, responsibilities,
time requirements and accountability of directors. The philosophy, and market comparisons and review with respect to director compensation,
will be the same as for the executive compensation programs to be implemented by Spinco.

 

The Spinco Option Plan, once
implemented, will allow for the granting of incentive stock options to its officers, employees and directors. The purpose of granting
such options would be to assist Spinco in compensating, attracting, retaining and motivating the directors of Spinco and to closely
align the personal interests of such persons to that of the shareholders of Spinco.

 

No stock options have been
granted by Spinco since the date of its incorporation on October 11, 2019 and Spinco does not have a share-based awards program.

 

Aggregate Options Exercised
and Option Values

 

No stock options have been granted
by Spinco or exercised since the date of its incorporation on October 11, 2019.

 

AUDIT COMMITTEE AND
CORPORATE GOVERNANCE

 

Audit Committee

 

Spinco will appoint an Audit
Committee following the completion of the Arrangement. Each member of the Audit Committee to be appointed will have adequate education
and experience that is relevant to their performance as an audit committee member and, in particular, the requisite education and
experience that have provided the member with the ability to read and understand a set of financial statements that present a breadth
and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can
reasonably be expected to be raised by Spinco’s financial statements.

 

It is intended that the
Audit Committee will establish a practice of approving audit and non-audit services provided by the external auditor. The Audit
Committee intends to delegate to its Chair the authority, to be exercised between regularly scheduled meetings of the Audit Committee,
to preapprove audit and non-audit services provided by the independent auditor. All such preapprovals would be reported by the
Chair at the meeting of the Audit Committee next following the pre-approval.

     

    -K-76 -

    

The charter to be adopted
by the Audit Committee is expected to be substantially similar to that of Broadway’s Audit Committee, which is appended
to this Circular as Schedule 4 in Appendix “K”.

 

To date, Spinco has paid no fees
to its external auditor.

 

Corporate Governance

 

Please refer to Schedule 3 to
this Appendix “K” for the required disclosure under National Instrument 58-101 –

 

Disclosure of Corporate Governance
Practices for Spinco.

 

Risk Factors

 

In addition to the other
information contained in this Circular, the following factors should be considered carefully when considering risk related to Spinco’s
proposed business.

 

Nature of the Securities
and No Assurance of any Listing

 

Spinco Common Shares are
not currently listed on any stock exchange and there is no assurance that the shares will be listed. Even if a listing is obtained,
the holding of Spinco Common Shares will involve a high degree of risk and should be undertaken only by investors whose financial
resources are sufficient to enable them to assume such risks and who have no need for immediate liquidity in their investment.
Spinco Common Shares should not be held by persons who cannot afford the possibility of the loss of their entire investment. Furthermore,
an investment in securities of Spinco should not constitute a major portion of an investor’s portfolio.

 

Possible Non-Completion of
Arrangement

 

There is no assurance that
the Arrangement will receive regulatory, stock exchange, Court or shareholder approval or will be completed. If the Arrangement
is not completed, Spinco will remain a private company and a wholly-owned subsidiary of Broadway. If the Arrangement is completed,
Spinco Broadway Shareholders (which will consist of Broadway Shareholders who receive Spinco Common Shares) will be subject to
the risk factors described below relating to resource properties.

 

Limited Operating History

 

Spinco was incorporated on October
11, 2019 and has a limited operating history and no operating revenues.

 

Dependence on Management

 

Spinco will be very dependent
upon the personal efforts and commitment of its directors and officers. If one or more of Spinco’s proposed executive
officers become unavailable for any reason, a severe disruption to the business and operations of Spinco could result, and Spinco
may not be able to replace them readily, if at all. As Spinco’s business activity grows, Spinco will require additional key
financial, administrative and mining personnel as well as additional operations staff. There can be no assurance that Spinco will
be successful in attracting, training and retaining qualified personnel as competition for persons with these skill sets increase.
If Spinco is not successful in attracting, training and retaining qualified personnel, the efficiency of its operations could be
impaired, which could have an adverse impact on Spinco’s future cash flows, earnings, results of operations and financial
condition.

 

Spinco’s operations
are subject to human error

 

Despite efforts to attract
and retain qualified personnel, as well as the retention of qualified consultants, to manage Spinco’s interests, and even
when those efforts are successful, people are fallible and human error could result in significant uninsured losses to Spinco.
These could include loss or forfeiture of mineral claims or other assets for non- payment of fees or taxes, significant tax liabilities
in connection with any tax planning effort Spinco might undertake and legal claims for errors or mistakes by Spinco personnel.

     

    -K-77 -

    

Financing Risks

 

If the Arrangement is
completed, additional funding will be required to conduct future exploration programs on the Spinco Property and to conduct other
exploration programs. If Spinco’s proposed exploration programs are successful, additional funds will be required for the
development of an economic mineral body and to place it in commercial production. The only sources of future funds presently available
to Spinco are the sale of equity capital, or the offering by Spinco of an interest in its properties to be earned by another party
or parties carrying out exploration or development thereof. There is no assurance that any such funds will be available for operations.
Failure to obtain additional financing on a timely basis could cause Spinco to reduce or terminate its proposed operations.

 

Conflicts of Interest

 

Certain directors and officers
of Spinco are, and may continue to be, involved in the mining and mineral exploration industry through their direct and indirect
participation in corporations, partnerships or joint ventures which are potential competitors of Spinco. Situations may arise in
connection with potential acquisitions in investments where the other interests of these directors and officers may conflict with
the interests of Spinco. Directors and officers of Spinco with conflicts of interest will be subject to the procedures set out
in applicable corporate and securities legislation, regulation, rules and policies.

 

No History of Earnings

 

Spinco has no history of
earnings or of a return on investment, and there is no assurance that the Madison Project or any other property or business that
Spinco may acquire or undertake will generate earnings, operate profitably or provide a return on investment in the future. Spinco
has no plans to pay dividends for some time in the future, if ever. The future dividend policy of Spinco will be determined by
the Spinco Board.

 

Exploration and Development

 

Resource exploration
and development is a speculative business and involves a high degree of risk. There are no known mineral resources or mineral reserves
on the Spinco Property. There is no certainty that the expenditures to be made by Spinco in the exploration of the Spinco Property
or otherwise will result in discoveries of commercial quantities of minerals. The marketability of natural resources which may
be acquired or discovered by Spinco will be affected by numerous factors beyond the control of Spinco. These factors include market
fluctuations, the proximity and capacity of natural resource markets and processing equipment, government regulations, including
regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental
protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in
Spinco not receiving an adequate return on invested capital.

 

Environmental Risks and Other
Regulatory Requirements

 

The current or future operations
of Spinco, including future exploration and development activities and commencement of production on its property or properties,
will require permits or licences from various federal and local governmental authorities, and such operations are and will be governed
by laws and regulations governing prospecting, development, mining, production, taxes, labour standards, occupational health, waste
disposal, toxic substances, land use, environmental protection, mine safety and other matters. Companies engaged in the development
and operation of mines and related facilities generally experience increased costs and delays as a result of the need to comply
with the applicable laws, regulations and permits. There can be no assurance that all permits which Spinco may require for the
conduct of its operations will be obtainable on reasonable terms or that such laws and regulations would not have an adverse effect
on any project which Spinco might undertake.

 

Failure to comply with
applicable laws, regulations and permitting requirements may result in enforcement actions including orders issued by regulatory
or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures,
installation of additional equipment or remedial actions. Parties engaged in mining operations may be required to compensate those
suffering loss or damage by reason of such activities and may have civil or criminal fines or penalties imposed upon them for
violation of applicable laws or regulations.

     

    -K-78 -

    

Amendments to current laws,
regulations and permits governing operations and activities of mining companies and mine reclamation and remediation activities,
or more stringent implementation thereof, could have a material adverse impact on Spinco and cause increases in capital expenditures
or production costs or reduction in levels of production at producing properties or require abandonment or delays in the development
of new mining properties.

 

Dilution

 

Issuances of additional securities
including, but not limited to, its common stock or some form of convertible securities, will result in a substantial dilution of
the equity interests of any persons who may become Spinco Shareholders as a result of or subsequent to the Arrangement.

 

Market for securities

 

There is currently no
market through which the Spinco Common Shares may be sold and Spinco currently has no plans to apply for a stock market listing.
Spinco Shareholders may not be able to resell the Spinco Common Shares acquired under the Plan of Arrangement. There can be no
assurance that an active trading market will develop for the Spinco Common Shares following the completion of the Plan of Arrangement,
or if developed, that such a market will be sustained at the trading price of the Spinco Common Shares on the TSXVE immediately
after the Effective Date. While management of Spinco believes that Spinco will be a reporting issuer following completion of the
Arrangement, there can be no assurances that any securities regulatory authority will recognize Spinco as a reporting issuer, or
that if Spinco does apply for a stock exchange listing that it will be able to obtain such a listing on any stock exchange.

 

Nature of Mineral Exploration and Development

 

All of Spinco’s
operations are at the exploration stage and there is no guarantee that any such activity will result in commercial production of
mineral deposits. The exploration for mineral deposits involves significant risks which even a combination of careful evaluation,
experience and knowledge may not eliminate. While the discovery of an mineralization may result in substantial rewards, few properties
which are explored are ultimately developed into producing mines. Major expenses may be required to locate and establish mineral
reserves, to develop metallurgical processes and to construct mining and processing facilities at a particular site. It is impossible
to ensure that the exploration programs planned by Spinco or any future development programs will result in a profitable commercial
mining operation. There is no assurance that the Spinco’s mineral exploration activities will result in any discoveries of
commercial mineralization. There is also no assurance that, even if commercial mineralization is discovered, a mineral property
will be brought into commercial production. Whether a mineral deposit will be commercially viable depends on a number of factors,
some of which are: the particular attributes of the deposit, such as size, grade and proximity to infrastructure, metal prices
which are highly cyclical and government regulations, including regulations relating to prices, taxes, royalties, land tenure,
land use, importing and exporting of minerals and environmental protection. The exact effect of these factors cannot be accurately
predicted. The long-term profitability of Spinco will be in part directly related to the cost and success of its exploration programs
and any subsequent development programs.

 

No Operating History

 

Exploration projects have no operating
history upon which to base estimates of future cash flows. Substantial expenditures are required to develop mineral projects.
It is possible that actual costs and future economic returns may differ materially from Spinco’s estimates. There can be
no assurance that the underlying assumed levels of expenses for any project will prove to be accurate. Further, it is not unusual
in the mining industry for new mining operations to experience unexpected problems during start-up, resulting in delays and requiring
more capital than anticipated. There can be no assurance that Spinco’s projects will move beyond the exploration stage and
be put into production, achieve commercial production or that Spinco will produce revenue, operate profitably or provide a return
on investment in the future. Mineral exploration involves considerable financial and technical risk. There can be no assurance
that the funds required for exploration and future development can be obtained on a timely basis. There can be no assurance that
Spinco will not suffer significant losses in the near future or that Spinco will ever be profitable.

     

    -K-79 -

    

Commodity Prices

 

The price of the Spinco
Common Shares and Spinco’s financial results may be significantly adversely affected by a decline in the price of copper,
gold, silver and other mineral commodities. Metal prices fluctuate widely and are affected by numerous factors beyond Spinco’s
control. The level of interest rates, the rate of inflation, world supply of mineral commodities, global and regional consumption
patterns, speculative trading activities, the value of the United States dollar and stability of exchange rates can all cause significant
fluctuations in prices. Such external economic factors are in turn influenced by changes in international investment patterns and
monetary systems, political systems and political and economic developments. The price of mineral commodities has fluctuated widely
in recent years and future serious price declines could cause potential commercial production to be uneconomic. A severe decline
in the price of minerals would have a material adverse effect on Spinco.

 

Dividend Policy

 

No dividends on Spinco
Common Shares have been paid by Spinco to date. Spinco anticipates that it will retain all earnings and other cash resources for
the foreseeable future for the operation and development of its business. Spinco does not intend to declare or pay any cash dividends
in the foreseeable future. Payment of any future dividends will be at the discretion of the Spinco Board after taking into account
many factors, including Spinco’s operating results, financial condition and current and anticipated cash needs.

 

Permitting

 

Spinco’s mineral property
interests are subject to receiving and maintaining permits from appropriate governmental authorities. There is no assurance that
delays will not occur in connection with obtaining all necessary renewals of existing permits, additional permits for any possible
future developments or changes to operations or additional permits associated with new legislation. Prior to any development of
any of their properties, Spinco must receive permits from appropriate governmental authorities. There can be no assurance that
Spinco will continue to hold all permits necessary to develop or continue its activities at any particular property. Failure to
comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders
issued by regulatory or judicial authorities causing activities to cease or be curtailed, and may include corrective measures requiring
capital expenditures or remedial actions. Amendments to current laws, regulations and permitting requirements, or more stringent
application of existing laws, may have a material adverse impact on Spinco, resulting in increased capital expenditures and other
costs or abandonment or delays in development of properties.

 

Land Title

 

The acquisition of title
to resource properties is a very detailed and time-consuming process. No assurances can be given that there are no title defects
affecting the properties in which Spinco has an interest. The properties may be subject to prior unregistered liens, agreements,
transfers or claims, including native land claims, and title may be affected by, among other things, undetected defects. Other
parties may dispute the title to a property or the property may be subject to prior unregistered agreements and transfers or land
claims by Indigenous people. The title may also be affected by undetected encumbrances or defects or governmental actions. Spinco
has not conducted surveys of properties in which it holds an interest and the precise area and location of claims or the properties
may be challenged. Spinco may not be able to register rights and interests it acquires against title to applicable mineral properties.
An inability to register such rights and interests may limit or severely restrict Spinco’s ability to enforce such acquired
rights and interests against third parties or may render certain agreements entered into by Spinco invalid, unenforceable, uneconomic,
unsatisfied or ambiguous, the effect of which may cause financial results yielded to differ materially from those anticipated.
Although Spinco believes it has taken reasonable measures to ensure proper title to the properties in which it has an interest,
there is no guarantee that such title will not be challenged or impaired.

 

Influence of Third Party Stakeholders

 

The mineral properties in which Spinco
holds an interest, or the exploration equipment and road or other means of access which Spinco intends to utilize in carrying
out its work programs or general business mandates, may be subject to interests or claims by third party individuals, groups or
companies. In the event that such third parties assert any claims, Spinco’s work programs may be delayed even if such claims
are not meritorious. Such claims may result in significant financial loss and loss of opportunity
for Spinco.

     

    -K-80 -

    

Insurance

 

Exploration, development
and production operations on mineral properties involve numerous risks, including unexpected or unusual geological operating conditions,
ground or slope failures, fires, environmental occurrences and natural phenomena such as prolonged periods of inclement weather
conditions, floods and earthquakes. It is not always possible to obtain insurance against all such risks and Spinco may decide
not to insure against certain risks because of high premiums or other reasons. Such occurrences could result in damage to, or destruction
of, mineral properties or production facilities, personal injury or death, environmental damage to Spinco’s properties or
the properties of others, delays in exploration, development or mining operations, monetary losses and possible legal liability.
Spinco expects to maintain insurance within ranges of coverage which it believes to be consistent with industry practice for companies
of a similar stage of development. Spinco expects to carry liability insurance with respect to its mineral exploration operations,
but is not expected to cover any form of political risk insurance or certain forms of environmental liability insurance, since
insurance against political risks and environmental risks (including liability for pollution) or other hazards resulting from exploration
and development activities is prohibitively expensive. Should such liabilities arise, they could reduce or eliminate future profitability
and result in increasing costs and a decline in the value of the securities of Spinco. If Spinco is unable to fully fund the cost
of remedying an environmental problem, it might be required to suspend operations or enter into costly interim compliance measures
pending completion of a permanent remedy. The lack of, or insufficiency of, insurance coverage could adversely affect Spinco’s
future cash flow and overall profitability.

 

Significant Competition for
Attractive Mineral Properties

 

Significant and increasing
competition exists for the limited number of mineral acquisition opportunities available. Spinco expects to selectively seek strategic
acquisitions in the future, however, there can be no assurance that suitable acquisition opportunities will be identified. As a
result of this competition, some of which is with large established mining companies with substantial capabilities and greater
financial and technical resources than Spinco, Spinco may be unable to acquire additional attractive mineral properties on terms
it considers acceptable. In addition, Spinco’s ability to consummate and to integrate effectively any future acquisitions
on terms that are favourable to Spinco may be limited by the number of attractive acquisition targets, internal demands on resources,
competition from other mining companies and, to the extent necessary, Spinco’s ability to obtain financing on satisfactory
terms, if at all.

 

Promoter

 

Broadway took the initiative
in Spinco’s organization and, accordingly, may be considered to be the promoter of Spinco within the meaning of applicable
Securities Legislation. Broadway will not, at the closing of the Arrangement, beneficially own, or control or direct, any Spinco
Common Shares. During the period from incorporation to and including the closing of the Arrangement, the only material thing of
value which Broadway has or will receive from Spinco is the Spinco Common Shares to be issued to Broadway in consideration for
the transfer to Spinco by Broadway of the Spinco Property, which Spinco Common Shares will be distributed to the Broadway Shareholders
pursuant to the Arrangement. The Spinco Common Share issued to Broadway on incorporation of Spinco will be cancelled in accordance
with the terms of the Plan of Arrangement.

 

Legal Proceedings

 

To the best of Spinco’s
knowledge, following due enquiry, Spinco is not a party to any material legal proceedings and Spinco is not aware of any such proceedings
known to be contemplated.

 

To the best of Spinco’s
knowledge, following due enquiry, there have been no penalties or sanctions imposed against Spinco by a court relating to federal,
state, provincial and territorial securities legislation or by a securities regulatory authority since incorporation, nor have
there been any other penalties or sanctions imposed by a court or regulatory body against Spinco and it has not entered into any
settlement agreements before a court relating to provincial and territorial securities legislation or with a securities regulatory
authority.

     

    -K-81 -

    

Interest of Management and Others in Material
Transactions

 

No director, executive officer
or greater than 10% shareholder of Spinco and no associate or affiliate of the foregoing persons has or had any material interest,
direct or indirect, in any transaction since incorporation or in any proposed transaction which in either such case has materially
affected or will materially affect Spinco save as described herein.

 

Auditors

 

The auditors of Spinco are
MNP LLP. The auditors of Spinco are expected to be present at the Meeting, and will be able to respond to questions with respect
to the Carve-Out Financial Statements.

 

     

    -K-1-1 -

    

SCHEDULE 1 TO APPENDIX
K - FINANCIAL STATEMENTS OF SPINCO

 

Audited financial statement of Spinco from the
date of incorporation to a date not more than 90 days before the date of the circular comprised of:

 

		•	a statement of changes in equity;

		•	a statement of cash flows; and

		•	a statement of financial position.

 

Audited “carve-out” financial statements
of Spinco for the Madison exploration project for the years ended August 31, 2019 and 2018 comprised of:

 

		•	a statement of comprehensive income;

		•	a statement of changes in equity;

		•	a statement of cash flows; and

		•	a statement of financial position.

 

(begins on following
page)

     

    -K-1-2 -

    
 

 

MADISON
METALS INC.

FINANCIAL STATEMENTS

PERIOD
FROM INCORPORATION (OCTOBER 11, 2019)

TO
NOVEMBER 30, 2019

(EXPRESSED IN CANADIAN DOLLARS)

 

     

    -K-1-3 -

    

 

Independent Auditor's Report

 

 

To the Shareholder of Madison
Metals Inc.:

 

Opinion

 

We have audited the financial
statements of Madison Metals Inc. (the "Company"), which comprise the statement of financial position as at November
30, 2019, the statement of changes in equity and cash flows for the period from incorporation on October 11, 2019 to November 30,
2019, and notes to the financial statements, including a summary of significant accounting policies.

 

In our opinion, the accompanying
financial statements present fairly, in all material respects, the financial position of the Company as at November 30, 2019, and
its financial performance and its cash flows for the period from incorporation on October 11, 2019 to November 30, 2019 in accordance
with International Financial Reporting Standards.

 

Basis for Opinion

 

We conducted our audit in
accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described
in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of
the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Other Information

 

Management is responsible
for the other information. The other information comprises Management’s Discussion and Analysis.

 

Our opinion on the financial
statements does not cover the other information and we do not express any form of assurance conclusion thereon.

 

In connection with our audit
of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information
is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on
the work we have performed on this other information, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.

 

Responsibilities of Management and Those Charged
with Governance for the Financial Statements

 

Management is responsible
for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards,
and for such internal control as management determines is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.

 

In preparing the financial
statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to
liquidate the Company or to cease operations, or has no realistic alternative but to do so.

 

Those charged with governance are responsible
for overseeing the Company’s financial reporting process.

 

 

 

     

    -K-1-4 -

    

 

Auditor's Responsibilities
for the Audit of the Financial Statements

 

Our objectives are to obtain
reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a
material misstatement when it exists.

 

Misstatements can arise from
fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these financial statements.

 

As part of an audit in accordance
with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout
the audit. We also:

 

		☐	Identify
and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

		☐	Obtain
an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

		☐	Evaluate
the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by
management.

		☐	Conclude
on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's
report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions
may cause the Company to cease to continue as a going concern.

		☐	Evaluate
the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a manner that achieves fair presentation.

 

We communicate with those
charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify during our audit.

 

We also provide those charged
with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate
with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.

 

The engagement partner on the
audit resulting in this independent auditor's report is Jian-Kun Xu.

 

Vancouver, British Columbia

 

	 	 
	January 10, 2020	Chartered Professional Accountants

 

 

 

     

    -K-1-5 -

    

 

Madison Metals Inc.

Statement of Financial Position

(Expressed
in Canadian Dollars)

 

 

	 	 	As at
 November 30,
 2019	 
	ASSETS	 	 	 	 
	Current assets	 	 	 	 
	Amounts receivable	 	$	1	 
	Total assets	 	$	1	 
	 	 	 	 	 
	EQUITY	 	 	 	 
	 	 	 	 	 
	Share capital	 	$	1	 
	Deficit	 	 	-	 
	Total equity	 	$	1	 

 

The accompanying notes to the financial statements
are an integral part of these statements.

 

Nature of operations (note 1)

 

Subsequent event (note 8)

 

Approved on behalf of the Board:

 

(Signed)
 “Duane Parnham”                   Director

 

- 1 -

     

    -K-1-6 -

    

	
        Madison Metals Inc.

        Statement of Changes in Equity

(Expressed in
        Canadian Dollars)

         

 

	 	 	Share capital	 	 	Deficit	 	 	Total	 
	Balance, October 11, 2019	 	$	-	 	 	$	-	 	 	$	-	 
	Incorporation share issued (note 4)	 	 	1	 	 	 	-	 	 	 	1	 
	Net loss for the period	 	 	-	 	 	 	-	 	 	 	-	 
	Balance, November 30, 2019	 	$	1	 	 	$	-	 	 	$	1	 

 

The
accompanying notes to the financial statements are an integral part of these statements.

 

- 2 -

     

    -K-1-7 -

    
 

Madison Metals Inc.

Notes to Financial Statements

Period from Incorporation (October 11,
2019) to November 30, 2019

(Expressed in Canadian Dollars)

 

 

		1.	Nature of operations

 

Madison Metals Inc. ("Madison
Metals" or the "Company") is a private company incorporated under the provisions of the British Columbia Business
Corporations Act on October 11, 2019 in order to complete the Arrangement (as defined in note 7). Madison Metals is a wholly owned
subsidiary of Broadway Gold Mining Ltd. ("Broadway"), a TSX-V listed entity. Its registered and head office is located
at 1199 West Hastings Street, Vancouver, British Columbia, V6E 3T5.

 

		2.	Significant accounting policies

 

The Company applies International
Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board (“IASB”)
and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”).

 

The policies applied in
these financial statements are based on IFRSs issued and outstanding as of November 30, 2019. These financial statements were approved
by the Board of Directors on January 10, 2020.

 

Basis of presentation

 

These
financial statements have been prepared on a historical cost basis, with the exception of certain financial instruments, which
are measured at fair value. The Company's functional and presentation currency is Canadian dollars.

 

These financial statements
do not include the statement of income and comprehensive income and the statement of cash flowsas there were no activities during
the period from October 11, 2019 (date of incorporation) to November 30, 2019.

 

Cash

 

Cash is comprised of cash on hand. As of November
30, 2019, there were no cash equivalents held by the Company.

 

Share capital

 

The Company records proceeds
from share issuances net of issue costs and any tax effects. Common shares issued for consideration other than cash are valued
based on their market value at the date the agreement to issue shares was concluded.

 

- 3 -

     

    -K-1-8 -

    
 

Madison Metals Inc.

Notes to Financial Statements

Period from Incorporation (October 11,
2019) to November 30, 2019

(Expressed in Canadian Dollars)

 

 

		2.	Significant accounting policies (continued) 

 

Financial instruments

 

Recognition

 

The Company recognizes
a financial asset or financial liability on the statement of financial position when it becomes party to the contractual provisions
of the financial instrument. Financial assets are initially measured at fair value, and are derecognized either when the Company
has transferred substantially all the risks and rewards of ownership of the financial asset, or when cash flows expire. Financial
liabilities are initially measured at fair value and are derecognized when the obligation specified in the contract is discharged,
cancelled or expired.

 

A write-off of a financial
asset (or a portion thereof) constitutes a derecognition event. Write-off occurs when the Company has no reasonable expectations
of recovering the contractual cash flows on a financial asset.

 

Classification and measurement

 

The
Company determines the classification of its financial instruments at initial recognition. Financial assets and financial liabilities
are classified according to the following measurement categories:

 

		•	those
to be measured subsequently at fair value, either through profit or loss (“FVTPL”) or through other comprehensive
income (“FVTOCI”); and

		•	those
to be measured subsequently at amortized cost.

 

The classification and
measurement of financial assets after initial recognition at fair value depends on the business model for managing the financial
asset and the contractual terms of the cash flows. Financial assets that are held within a business model whose objective is to
collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on
the principal outstanding, are generally measured at amortized cost at each subsequent reporting period. All other financial assets
are measured at their fair values at each subsequent reporting period, with any changes recorded through profit or loss or through
other comprehensive income (which designation is made as an irrevocable election at the time of recognition).

 

After initial recognition at
fair value, financial liabilities are classified and measured at either:

 

		•	amortized
cost;

		•	FVTPL,
if the Company has made an irrevocable election at the time of recognition, or when required (for items such as instruments held
for trading or derivatives); or,

		•	FVTOCI,
when the change in fair value is attributable to changes in the Company’s credit risk.

 

The
Company reclassifies financial assets when and only when its business model for managing those assets changes. Financial liabilities
are not reclassified.

 

Transaction costs that
are directly attributable to the acquisition or issuance of a financial asset or financial liability classified as subsequently
measured at amortized cost are included in the fair value of the instrument on initial recognition. Transaction costs for financial
assets and financial liabilities classified at fair value through profit or loss are expensed in profit or loss.

 

The Company’s financial asset consists
of amounts receivable, which are classified and measured at FVTPL, with realized and unrealized gains or losses related to changes
in fair value reported in net profit and loss.

 

- 4 -

     

    -K-1-9 -

    

 

 

Madison
Metals Inc. 

Notes
to Financial Statements 

Period
from Incorporation (October 11, 2019) to November 30, 2019 

(Expressed in Canadian Dollars)

 

 

		3.	Capital
                                         management

 

The
Company manages its capital structure and makes adjustment to it based on the funds available to the Company in order to support
the acquisition and exploration of mineral properties. The Board of Directors does not establish quantitative return on capital
criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of
the business. The Company defines capital that it manages as share capital and cash.

 

Management
reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company,
is reasonable. There were no changes in the Company’s approach to capital management during the period ended November 30,
2019.

 

		4.	Share
                                         capital

 

Authorized share capital  

 

An unlimited number of common shares without par value, voting and participating

 

Issued

 

	 	 	Number of shares	 	 	Share
capital
	 
	Balance, October 11, 2019	 	 	-	 	 	$	-	 
	Issued (i)	 	 	1	 	 	 	1	 
	Balance, November 30, 2019	 	 	1	 	 	$	1	 

 

(i)
The Company was incorporated on October 11, 2019 issuing a single share for $1 per share.

 

		5.	Related
                                         party transactions

 

The
Company did not have any related party transactions during the period from incorporation October 11, 2019 to November 30, 2019.

 

		6.	Income
                                         tax

 

The
relationship between the expected tax recovery based on the combined federal and provincial income tax rate in Canada and the
reported tax expense can be reconciled as follows:

 

	 	 	Period from 
 incorporation 
 October 11,
 2019 to 
 November 30,
 2019	 
	Income (loss) before income taxes	 	$	-	 
	Expected tax payable (recovery) at 27%	 	 	-	 
	Expected income tax (recovery)	 	$	-	 

 

-
5 -

     

    -K-1-10 -

    

 

 

Madison
Metals Inc. 

Notes
to Financial Statements 

Period
from Incorporation (October 11, 2019) to November 30, 2019 

(Expressed in Canadian Dollars)

 

 

		7.	Proposed
                                         transaction

 

On
October 15, 2019, Broadway entered into a definitive arrangement agreement (“Arrange Agreement”) with Mind Medicine,
Inc., a privately held issuer incorporated under the laws of Delaware (“MindMed”), which will result in a reverse
take-over (“RTO”) of Broadway by the current shareholders of MindMed by way of plan of arrangement (“Plan of
Arrangement”) under the Business Corporations Act (British Columbia) (“Arrangement”).

 

Pursuant
to the terms of the Arrangement Agreement, Broadway Delaware Subco Inc., a wholly-owned subsidiary of Broadway incorporated for
the purpose under the laws of Delaware (“Delaware Subco”) will merge with MindMed. In accordance with the Arrangement
and the articles of MindMed, all outstanding Class B common shares (“Class B Shares”), Class C common shares (“Class
C Shares”) and Class D common shares (“Class D Shares”) of MindMed will be exchanged for Class A common shares
(“Class A Shares”), immediately following which all Class A Shares of MindMed will be exchanged, on a one-for-one
basis (the “Exchange Ratio”), for securities of Broadway on a Consolidated (as defined below) basis (Broadway following
the completion of the Arrangement herein referred to as the “Resulting Issuer”). Any outstanding convertible securities
of MindMed, including any convertible securities issued in connection with the MindMed Financing (as defined below), will be exchanged
for convertible securities of the Resulting Issuer on the basis of the Exchange Ratio.

 

As
part of the Arrangement and subject to the receipt of all required approvals, Broadway will consolidate its outstanding shares,
warrants and options on an eight (8) old common shares for one (1) new common share basis (the “Consolidation”) and
change its name to “Mind Medicine (MindMed), Inc.” (or such other name as MindMed may determine) (the “Name
Change”). It will also amend its capital structure (the “Capital Structure Amendment”) by creating a new class
of multiple voting shares that will each carry 100 votes per share (the “Multiple Voting Shares”), and change the
name of its common shares to “subordinate voting shares” (with all other terms of the common shares remaining unchanged).
The Multiple Voting Shares will be issued to certain U.S. resident holders of MindMed shares in connection with the Arrangement.

 

Broadway
has a 100% interest in 6 patented and 35 unpatented claims in the Madison Property located in Montana, USA. The Plan of Arrangement
also includes the transfer of all of Broadway’s right, title and interest, and all associated liabilities, in the Madison
Property. The Spin-Out Transaction will consist of the transfer of all of the shares of Broadway and any related assets and liabilities
in connection with the Madison Property to Madison Metals (“Transferred Assets”). Madison Metals will also assume
all liabilities associated with Broadway’s mineral exploration and development business as conducted prior to the completion
of the Arrangement. Pursuant to the Plan of Arrangement, Madison Metals will issue common shares to Broadway as consideration
for the Transferred Assets, which will be distributed to the holders of record of the Company’s shares immediately before
completion of the RTO on a pro-rata basis. Broadway shareholders will be entitled to receive one Madison Metals share for every
common share of Broadway on a pre-Consolidation basis held by such shareholder.

 

In
connection with the Arrangement, MindMed has agreed to make a bridge loan available to Broadway (“Bridge Loan”)
as provided in the Arrangement Agreement. The terms of the Bridge Loan provide that MindMed will lend to Broadway (i) $15,000
on execution of the Agreement; (ii) a maximum of $30,000 per month, starting on the later of the date of execution of the
Arrangement Agreement and October 1, 2019 and ending on the earlier of the Closing Date (as defined in the Arrangement
Agreement) or January 1, 2020, to cover the costs and expenses necessary to maintain Broadway’s and the Broadway
Montana’s business, and (iii) no more than $170,000 to pay down the aggregate accounts payable currently owed by
Broadway and the Broadway Montana, which amounts will be forgiven or assumed by MindMed upon completion of the
Arrangement.

 

- 6 -

     

    -K-1-11 -

    

 

 

Madison
Metals Inc. 

Notes
to Financial Statements 

Period
from Incorporation (October 11, 2019) to November 30, 2019 

(Expressed in Canadian Dollars)

 

 

		8.	Subsequent
                                         event

 

On
January 8, 2020, Madison Metals and Broadway entered into an exclusivity agreement (“Agreement”) with American Pacific
Mining Corp. (“APM”) wherein APM is granted an exclusive right to negotiate the acquisition of the Madison Property
during the period from the date of Agreement until the earlier of (i) the date of execution of a mutually acceptable definitive
purchase agreement; (ii) five business days after the closing of the Arrangement; (iii) the termination of the Arrangement Agreement;
and (iv) the date, if any, upon which Broadway, Madison Metals and APM mutually agree in writing to terminate discussions.

 

- 7 -

     

    -K-1-12 -

    

 

 

BROADWAY
GOLD MINING LTD. CARVE-OUT FINANCIAL STATEMENTS 

YEARS
ENDED AUGUST 31, 2019 AND 2018 (EXPRESSED IN CANADIAN DOLLARS)

 

 

     

    -K-1-13 -

    

 

 

Broadway Gold Mining Ltd.  

Carve-Out Statements of Financial Position

(Expressed in Canadian Dollars)    

 

 

	 	 	As
at 

August 31, 
 2019
	 	 	As
at 

August 31, 
 2018
	 
	ASSETS	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Current assets	 	 	 	 	 	 	 	 
	

Prepaid
expenses
	 	$	-	 	 	$	23,228	 
	Total current assets	 	 	-	 	 	 	23,228	 
	 	 	 	 	 	 	 	 	 
	Non-current assets	 	 	 	 	 	 	 	 
	Property and equipment (note 4)	 	 	75,749	 	 	 	83,301	 
	Exploration and evaluation assets (note 5)	 	 	3,587,077	 	 	 	4,039,824	 
	Reclamation deposits (note 5)	 	 	180,593	 	 	 	177,333	 
	Total assets	 	$	3,843,419	 	 	$	4,323,686	 
	 	 	 	 	 	 	 	 	 
	EQUITY AND LIABILITIES
 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Current liabilities	 	 	 	 	 	 	 	 
	
Accounts payable and accrued liabilities
 
	 	$	72,119	 	 	$	7,001	 
	Total liabilities	 	 	72,119	 	 	 	7,001	 
	 	 	 	 	 	 	 	 	 
	Equity	 	 	 	 	 	 	 	 
	
Owner’s
net investment
	 	 	3,771,300	 	 	 	4,316,685	 
	Total equity	 	 	3,771,300	 	 	 	4,316,685	 
	Total equity and liabilities	 	$	3,843,419	 	 	$	4,323,686	 

 

The
accompanying notes to the carve-out financial statements are an integral part of these statements.

 

Business activities and background
(note 1)

 

Approved
on behalf of the Board:

 

	(Signed)
    “Director”	 	Director
	 	 	 
	(Signed)
    “Director”	 	Director

 

-
1 -

     

    -K-1-14 -

    

 

 

Broadway Gold Mining Ltd.   

Carve-Out Statements of Loss and Comprehensive Loss  

(Expressed in Canadian Dollars except for shares and per share amounts)    

 

 

	 	 	Year
Ended 

August 31,
 2019
	 	 	Year
Ended 

August 31,
 2018
	 
	Expenses	 	 	 	 	 	 	 	 
	
Depreciation (note 4)
	 	$	8,859	 	 	$	8,537	 
	General office expenses	 	 	23,582	 	 	 	27,142	 
	Net loss before other income	 	$	(32,441	)	 	$	(35,679	)
	 	 	 	 	 	 	 	 	 
	Other income	 	 	 	 	 	 	 	 
	

Impairment of exploration and evaluation asset
	 	 	(811,000	)	 	 	-	 
	Comprehensive loss for the year	 	$	(843,441	)	 	$	(35,679	)

 

The
accompanying notes to the carve-out financial statements are an integral part of these statements.

 

- 2 -

     

    -K-1-15 -

    

 

 

Broadway Gold Mining Ltd.  

Carve-Out Statements of Cash Flows

(Expressed in Canadian Dollars)

 

 

	 	 	Year Ended
 August 31,
 2019	 	 	Year Ended
 August 31,
 2018	 
	Operating activities	 	 	 	 	 	 	 	 
	Net loss for the year	 	$	(843,441	)	 	$	(35,679	)
	Adjustments for:	 	 	 	 	 	 	 	 
	Depreciation	 	 	8,859	 	 	 	8,537	 
	Impairment of exploration and evaluation asset	 	 	811,000	 	 	 	-	 
	Changes in non-cash working capital items:	 	 	 	 	 	 	 	 
	 Prepaid expenses	 	 	23,228	 	 	 	1,336	 
	Accounts payable and accrued liabilities	 	 	65,118	 	 	 	(67,697	)
	Net cash provided by (used in) operating activities	 	 	64,764	 	 	 	(93,503	)
	 	 	 	 	 	 	 	 	 
	Investing activities	 	 	 	 	 	 	 	 
	Exploration activities and maintenance of properties	 	 	(282,527	)	 	 	(1,333,714	)
	Reclamation bonds	 	 	-	 	 	 	(89,584	)
	Net cash used in investing activities	 	 	(282,527	)	 	 	(1,423,298	)
	 	 	 	 	 	 	 	 	 
	Financing activities	 	 	 	 	 	 	 	 
	Owner’s contributions	 	 	298,056	 	 	 	1,621,775	 
	Net cash provided by financing activities	 	 	298,056	 	 	 	1,621,775	 
	Net change in cash	 	 	80,293	 	 	 	104,974	 
	 	 	 	 	 	 	 	 	 
	Effect of exchange rate changes on cash	 	 	(80,293	)	 	 	(104,974	)
	 	 	 	 	 	 	 	 	 
	Cash, beginning of year	 	 	-	 	 	 	-	 
	Cash, end of year	 	$	-	 	 	$	-	 

 

The
accompanying notes to the carve-out financial statements are an integral part of these statements.

 

- 3 -

     

    -K-1-16 -

    

 

 

Broadway Gold Mining Ltd.   

Carve-Out Statements of Changes in Equity

(Expressed in Canadian Dollars)    

 

 

	 	 	Owner’s 

net investment	 
	Balance, August 31, 2017	 	$	2,730,589	 
	Contributions	 	 	1,621,775	 
	Net loss for the year	 	 	(35,679	)
	Balance, August 31, 2018	 	$	4,316,685	 
	Contributions	 	 	298,056	 
	Net loss for the year	 	 	(843,441	)
	Balance, August 31, 2019	 	$	3,771,300	 

 

The accompanying notes to the carve-out financial statements are an integral part of these statements.

 

- 4 -

     

    -K-1-17 -

    

 

 

Broadway
Gold Mining Ltd. 

Notes
to Carve-Out Financial Statements 

Years Ended August 31, 2019 and 2018 

(Expressed in Canadian Dollars)

 

 

		1.	Nature
                                         of operations and going concern

 

Broadway
Gold Mining Ltd. (“Broadway” or the “Company”) was incorporated under the Business Corporations Act of
British Columbia on July 26, 2010. The head office and principal address of the Company is 277 Lakeshore Road East, Suite 403,
Oakville, Ontario, L6J 6J3.

 

The
Company was a capital pool company as defined by the rules of the TSX Venture Exchange (“Exchange”) in Policy 2.4
of the Exchange and on March 26, 2013, received Exchange approval for its Qualifying Transaction and commenced trading on the
Exchange as a Tier 2 Mining Issuer. In March 2013, the Company acquired the GP Property located in British Columbia, Canada.
In September 2016, the Company through its wholly owned subsidiary, Broadway Gold Corp., acquired a 100% interest in 6
patented and 35 unpatented claims in the Madison Property located in Montana, USA. The Company’s principal business
activity is the exploration of mineral resources on the Madison Property. Subsequent to the acquisition of the Madison
Project, the Company changed its name to Broadway Gold Mining Ltd. and trades on the TSX Venture Exchange under the symbol
 “BRD”.

 

The
Madison Property is anticipated to be acquired by Madison Metals Inc. (“Madison Metals”) pursuant to a definitive
arrangement agreement involving Broadway (note 7). Madison Metals was incorporated under the Business Corporations Act of British
Columbia on October 11, 2019. All outstanding shares are currently held by Broadway.

 

Broadway
is in the process of a business reorganization, described in note 7, that would result in a spin-out of the Madison Property to
Madison Metals.

 

These
carve-out financial statements have been prepared on a going concern basis, which contemplates that the Company will continue
in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course
of business.

 

Madison
Property has no current source of operating revenue and expects to incur further losses in the development of its business, all
of which constitutes a material uncertainty which casts significant doubt about the Company’s ability to continue as a going
concern. The Company’s ability to continue as a going concern is dependent upon its ability to raise future equity financing
to fund its operations and advance the development of its exploration mining business.

 

Mineral
exploration involves a high degree of risk and there is no assurance that exploration projects will result in future profitable
operations. The business is subject to risk, market conditions, supply and demand and competition. The Company has cash requirements
to meet its administrative overhead and maintain its exploration and evaluation assets. The recoverability of amounts shown for
exploration and evaluation assets is dependent on several factors. These factors include the discovery of economically recoverable
reserves, the ability of the Company to obtain the necessary financing to complete the development of these properties, and the
future profitable production or proceeds from disposition of exploration and evaluation assets. The carrying value of the Company’s
exploration and evaluation assets reflect historical costs incurred and is not intended to reflect current or future values.

 

- 5 -

     

    -K-1-18 -

    

 

 

Broadway
Gold Mining Ltd. 

Notes
to Carve-Out Financial Statements 

Years Ended August 31, 2019 and 2018 

(Expressed in Canadian Dollars)

 

 

		2.	Basis
                                         of presentation

 

These
carve-out financial statements reflect the exploration and evaluation expenditures relating to the operations of certain interests
in the Madison Property for years ended August 31, 2019 and 2018.

 

The
carve-out financial statements have been prepared from the books and records of Broadway and include only exploration and evaluation
expenditures associated with the Madison Property. The carve-out statements of loss and comprehensive loss does not include any
general and administrative expenses for the properties as these amounts are based on the consolidated operations of Broadway of
which the operations, financial position, or cash flows would have been had the Madison Property been a separate entity.

 

The
carve-out financial statements have been prepared in accordance with the financial reporting framework specified in subsection
8.4(1)-(3) of National Instrument 51-102 Continuous Disclosure Obligations for the statements for a significant acquisition.
The information reported in the carve-out financial statements for the years ended August 31, 2019 and 2018 are stated in accordance
with International Financial Reporting Standards (“IFRS”).

 

		3.	Significant
                                         accounting policies 

 

Basis
of measurement

 

These
carve-out financial statements have been prepared on a historical cost basis except for certain financial instruments classified
as fair value through profit or loss (“FVTPL”) and available-for-sale which are stated at their fair value. In addition,
these carve-out financial statements have been prepared using the accrual basis of accounting, except cash flow information.

 

Foreign
currency translation and transaction

 

These
carve-out financial statements are presented in Canadian dollars. The functional currency of the Company is the Canadian dollar.

 

Transactions
denominated in foreign currencies are translated to the functional currency of the Company and its subsidiary at exchange rates
prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated
at the exchange rate prevailing at the reporting date. Non-monetary assets and liabilities are translated at historical exchange
rates prevailing at each transaction date. Revenues and expenses are translated at exchange rates prevailing on the date of transactions.
All exchange gains and losses are included in determination of earnings.

 

The
carve-out financial statements of the entity that has a functional currency different from Canadian dollars are translated into
Canadian dollars as follows: assets and liabilities – at the closing rate at the date of the carve-out statements of financial
position, and income and expenses – at the average rate of the period (as this is considered a reasonable approximation
to actual rates). All resulting changes are recognized in other comprehensive loss as foreign currency translation adjustments.

 

- 6 -

     

    -K-1-19 -

    

 

 

Broadway
Gold Mining Ltd. 

Notes
to Carve-Out Financial Statements 

Years Ended August 31, 2019 and 2018 

(Expressed in Canadian Dollars)

 

 

		3.	Significant
                                         accounting policies (continued) 

 

Financial instruments

 

Recognition

 

The
Company recognizes a financial asset or financial liability on the statement of financial position when it becomes party to the
contractual provisions of the financial instrument. Financial assets are initially measured at fair value, and are derecognized
either when the Company has transferred substantially all the risks and rewards of ownership of the financial asset, or when cash
flows expire. Financial liabilities are initially measured at fair value and are derecognized when the obligation specified in
the contract is discharged, cancelled or expired.

 

A
write-off of a financial asset (or a portion thereof) constitutes a derecognition event. Write-off occurs when the Company has
no reasonable expectations of recovering the contractual cash flows on a financial asset.

 

Classification
and measurement

 

The
Company determines the classification of its financial instruments at initial recognition. Financial assets and financial liabilities
are classified according to the following measurement categories:

 

		•	those
                                         to be measured subsequently at fair value, either through profit or loss (“FVTPL”)
                                         or through other comprehensive income (“FVTOCI”); and

		•	those
                                         to be measured subsequently at amortized cost.

 

The
classification and measurement of financial assets after initial recognition at fair value depends on the business model for managing
the financial asset and the contractual terms of the cash flows. Financial assets that are held within a business model whose
objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal
and interest on the principal outstanding, are generally measured at amortized cost at each subsequent reporting period. All other
financial assets are measured at their fair values at each subsequent reporting period, with any changes recorded through profit
or loss or through other comprehensive income (which designation is made as an irrevocable election at the time of recognition).

 

After
initial recognition at fair value, financial liabilities are classified and measured at either:

 

		•	amortized
                                         cost;

		•	FVTPL,
                                         if the Company has made an irrevocable election at the time of recognition, or when required
                                         (for items such as instruments held for trading or derivatives); or,

		•	FVTOCI,
                                         when the change in fair value is attributable to changes in the Company’s credit
                                         risk.

 

The
Company reclassifies financial assets when and only when its business model for managing those assets changes. Financial liabilities
are not reclassified.

 

Transaction
costs that are directly attributable to the acquisition or issuance of a financial asset or financial liability classified as
subsequently measured at amortized cost are included in the fair value of the instrument on initial recognition. Transaction costs
for financial assets and financial liabilities classified at fair value through profit or loss are expensed in profit or loss.

 

The
Company’s financial asset consists of reclamation deposits, which is classified as subsequently measured at amortized cost.

 

The
Company’s financial liabilities consist of accounts payable and accrued liabilities, which are classified and measured at
amortized cost using the effective interest method. Interest expense is reported in net loss.

 

- 7 -

     

    -K-1-20 -

    

 

 

Broadway
Gold Mining Ltd. 

Notes
to Carve-Out Financial Statements 

Years Ended August 31, 2019 and 2018 

(Expressed in Canadian Dollars)

 

 

		3.	Significant
accounting policies (continued)

 

Significant
accounting judgments, estimates and assumptions

 

The
preparation of these carve-out financial statements in conformity of IFRS requires management to make judgments, estimates and
assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements
and reported amounts of expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based
on management’s experience and other factors, including expectations of future events that are believed to be reasonable
under the circumstances. However, actual outcomes can differ from these estimates.

 

Significant
estimates used in preparing the carve-out financial statements include, but are not limited to:

 

		(i)	Impairment
                                         of long lived assets

 

Determining
the amount of impairment of long lived assets requires an estimation of the recoverable amount, which is defined as the higher
of fair value less the cost of disposal or value in use. Many of factors used in assessing recoverable amounts are outside of
the control of management and it is reasonably likely that assumptions and estimates will change from period to period. These
changes may result in future impairments in the Company’ long term assets such as property, plant and equipment and exploration
and evaluation assets.

 

		(ii)	Current
                                         and deferred taxes

 

Accounting
for income taxes is a complex process requiring management to interpret frequently changing laws and regulations and make judgments
relating to the application of tax law, the estimated timing of temporary difference reversals, and the estimated realization
of tax assets. All tax filings are subject to subsequent government audits and potential reassessment. These interpretations,
judgments and changes related to them impact current and deferred tax provisions, deferred tax assets and liabilities and results
of operations.

 

Significant
judgments used in the preparation of these carve-out financial statements include, but are not limited to:

 

		(i)	Going
                                         concern

 

Management
has applied judgements in the assessment of the Company’s ability to continue as a going concern when preparing its financial
statements for the year ended August 31, 2019. Management prepares the carve-out financial statements on a going concern basis
unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. In
assessing whether the going concern assumption is appropriate, management takes into account all available information about the
future, which is at least, but is not limited to, twelve months from the end of the reporting period. Please refer to note 1 for
additional information.

 

		(ii)	Exploration
                                         and evaluation expenditures

 

The
application of the Company’s accounting policy for exploration and evaluation expenditures capitalized requires judgment
in determining which expenditures are recognized as exploration and evaluation assets and applying the policy consistently. In
making this determination, the Company considers the degree to which the expenditure can be associated with finding specific mineral
resources.

 

- 8 -

     

    -K-1-21 -

    

 

 

Broadway
Gold Mining Ltd. 

Notes
to Carve-Out Financial Statements 

Years Ended August 31, 2019 and 2018 

(Expressed in Canadian Dollars)

 

 

		3.	Significant
accounting policies (continued)

 

Significant
accounting judgments, estimates and assumptions (continued)

 

		(iii)	Decommissioning
                                         obligations

 

The
provision for decommissioning obligations is based on numerous assumptions, estimates and judgements including the ultimate settlement
amounts, inflation factors, risk free discount rates, timing of settlement and changes in the applicable legal and regulatory
environments. To the extent future revisions to these assumptions impact the measurement of the existing decommissioning obligation,
a corresponding adjustment is made to the exploration and evaluation assets balance.

 

Property
and equipment

 

Property
and equipment are measured at cost less accumulated depreciation. Cost includes expenditures that are directly attributable to
the acquisition of the related asset. All assets are depreciated using the straight-line method. Depreciation is calculated based
on the cost of an asset less its residual value and is recognized over the anticipated useful life of the asset as follows:

 

	Asset class	 	Depreciation term
	Mining equipment	 	5 years
	Buildings	 	25 years

 

Depreciation
methods, useful lives and residual values are reviewed at each financial year-end and adjusted, if appropriate.

 

Expenditures
for repairs and maintenance are expensed as incurred.

 

Exploration
and evaluation assets

 

Expenditures
incurred before the Company has obtained legal rights to explore an area are recognized in the carve-out statement of operation
as exploration expenses.

 

Exploration
and evaluation assets reflect expenditures for an area where technical feasibility and commercial viability have not yet been
determined. Expenditures, including, but are not limited to, land acquisition, geological and geophysical studies, exploratory
drilling and sampling and directly attributable employee salaries and benefits are capitalized and accumulated pending determination
of technical feasibility and commercial viability.

 

Exploration
and evaluation assets are not depleted. When assets are determined to be technically feasible and commercially viable, the accumulated
costs are tested for impairment and the recoverable amount is transferred to property, plant and equipment. Upon transfer of exploration
and evaluation costs into property, plant and equipment, all subsequent expenditures on the construction, installation or completion
of infrastructure facilities are capitalized within mine development. After production starts, all assets included in mine development
costs are transferred to producing mines. At such time as commercial production commences, these expenditures will be charged
to operations on a unit- of-production method based on proven and probable resources.

 

Exploration
and evaluation assets are also assessed for impairment when facts and circumstances suggest that the carrying amount exceeds the
recoverable amount. The aggregate costs related to abandoned exploration and evaluation assets are charged to operations at the
time of any abandonment or when it has been determined that there is evidence of a permanent impairment.

 

- 9 -

     

    -K-1-22 -

    

 

 

Broadway
Gold Mining Ltd. 

Notes
to Carve-Out Financial Statements 

Years Ended August 31, 2019 and 2018 

(Expressed in Canadian Dollars)

 

 

		3.	Significant
accounting policies (continued)

 

Impairment of non-financial assets

 

The
carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to determine whether there is
any indication of impairment. If any such indication exists, the recoverable amount is estimated by reference to the higher of
the value in use and fair value less costs to sell. Fair value less costs to sell is defined as the estimated price that would
be received on the sale of the asset in an orderly transaction between market participants at the measurement date. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discounted rate that reflects
current market assessments of the time value of money and the risks specific to the asset. For the purposes of impairment testing,
assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of other groups of assets.

 

An
impairment loss is recognized if the carrying amount of an asset or group of assets exceeds the estimated recoverable amount.
Impairment losses are recognized in profit or loss.

 

When
impairment subsequently reverses, the carrying amount of the asset is increased to the revised estimated recoverable amount, but
to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for
the asset in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

 

Decommissioning
obligations

 

The
Company recognizes the fair value of liabilities for decommissioning obligations in the period in which a reasonable estimate
of such costs can be made. The decommissioning obligation is recorded as a liability with a corresponding increase to the carrying
amount of the related long-lived asset. Subsequently, the decommissioning cost is allocated to expenses using a systematic and
rational method and is adjusted to reflect period-to-period changes in the liability resulting from the passage of time and revisions
to either timing or the amount of the original estimate of the undiscounted cash flow. As at August 31, 2019, the Company did
not have any decommissioning obligations.

 

- 10 - 

     

    -K-1-23 -

    

 

 

Broadway
Gold Mining Ltd. 

Notes
to Carve-Out Financial Statements 

Years Ended August 31, 2019 and 2018 

(Expressed in Canadian Dollars)

 

 

		3.	Significant
accounting policies (continued)

 

New
accounting standards adopted

 

		(i)	IFRS
9 “Financial instruments”

 

Effective
September 1, 2018, the Company adopted IFRS 9. In July 2014, the IASB issued the final publication of the IFRS 9 standard, which
supersedes IAS 39 - Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 includes revised guidance
on the classification and measurement of financial instruments, new guidance for measuring impairment on financial assets, and
new hedge accounting guidance. The Company has adopted IFRS 9 on a retrospective basis, however, this guidance did not have a
material impact to the Company’s carve-out financial statements.

 

Under
IFRS 9, financial assets are classified and measured based on the business model in which they are held and the characteristics
of their contractual cash flows. IFRS 9 contains the primary measurement categories for financial assets: measured at amortized
cost, fair value through other comprehensive income (“FVTOCI”) and fair value through profit and loss (“FVTPL”).
The new hedge accounting guidance had no impact on the Company’s carve-out financial statements.

 

Below
is a summary showing the classification and measurement bases of the Company’s financial instruments as at September 1,
2018 as a result of adopting IFRS 9, along with comparison to IAS 39.

 

	Classification	 	IAS
    39	 	IFRS
    9
	Reclamation deposits	 	Loans
    and receivables	 	Amortized
    cost
	Accounts
    payable and accrued liabilities	 	Other
    financial liabilities	 	Amortized
    cost

 

New
accounting standards and recent pronouncements

 

Standards
issued but not yet effective up to the date of issuance of the Company’s carve-out financial statements are listed below
except those which the Company does not expect any impacts on its carve-out financial statements.

 

		(i)	IFRS
16 “Lease”

 

In
January 2016, the International Accounting Standards Board (IASB) issued a new International Financial Reporting Standard (IFRS)
on lease accounting which was incorporated into Part I of the CPA Canada Handbook – Accounting by the Accounting Standards
Board (AcSB) in June 2016. IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining Whether an Arrangement Contains a Lease, SIC-15
Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16
introduces a single lessee accounting model that requires a lessee to recognize assets and liabilities for all leases with a term
of more than 12 months, unless the underlying asset is of low value. Lease assets and liabilities are initially recognized on
a present value basis and subsequently, similarly to other non-financial assets and financial liabilities, respectively. The lessor
accounting requirements are substantially unchanged and, accordingly, continue to require classification and measurement as either
operating or finance leases. The new standard also introduces detailed disclosure requirements for both the lessee and lessor.
The adoption of IFRS 16 is not expected to have a material impact on these financial statements.

 

- 11 -

     

    -K-1-24 -

    

 

 

Broadway Gold Mining Ltd.   

Notes to Carve-Out Financial Statements 

Years Ended August 31, 2019 and 2018 

(Expressed in Canadian Dollars)    

 

 

		4.	Property
and equipment

 

	Cost 
	 	Mining 

equipment	 	 	Buildings 
	 	 	Total
	 
	Balance, August 31, 2017	 	$	28,679	 	 	$	66,622	 	 	$	95,301	 
	Foreign exchange differences	 	 	1,118	 	 	 	2,597	 	 	 	3,715	 
	Balance, August 31, 2018	 	$	29,797	 	 	$	69,219	 	 	$	99,016	 
	Foreign exchange differences	 	 	548	 	 	 	1,272	 	 	 	1,820	 
	Balance, August 31, 2019	 	$	30,345	 	 	$	70,491	 	 	$	100,836	 

 

	Accumulated
depreciation 
	 	Mining 

equipment	 	 	Buildings
	 	 	Total
	 
	Balance, August 31, 2017	 	$	5,258	 	 	$	1,651	 	 	$	6,909	 
	Additions	 	 	5,829	 	 	 	2,708	 	 	 	8,537	 
	Foreign exchange differences	 	 	205	 	 	 	64	 	 	 	269	 
	Balance, August 31, 2018	 	$	11,292	 	 	$	4,423	 	 	$	15,715	 
	Additions	 	 	6,050	 	 	 	2,811	 	 	 	8,861	 
	Foreign exchange differences	 	 	359	 	 	 	152	 	 	 	511	 
	Balance, August 31, 2019	 	$	17,701	 	 	$	7,386	 	 	$	25,087	 

 

	Carrying
value
	 	Mining 

equipment	 	 	Buildings
	 	 	Total
	 
	Balance, August 31, 2018	 	$	18,505	 	 	$	64,796	 	 	$	83,301	 
	Balance, August 31, 2019	 	$	12,644	 	 	$	63,105	 	 	$	75,749	 

 

-
12 -

     

    -K-1-25 -

    

 

 

Broadway
Gold Mining Ltd. 

Notes
to Carve-Out Financial Statements 

Years Ended August 31, 2019 and 2018 

(Expressed in Canadian Dollars)

 

 

		5.	Exploration
and evaluation assets

 

The
Company’s exploration and evaluation assets are comprised of properties located in Montana, USA (the Madison Property).
Capitalized expenditures are as follows:

 

 

	 	 	Madison 
 Property	 
	Balance, August 31, 2017	 	$	2,604,582	 
	Mining claims	 	 	63,843	 
	Assessment and taxes	 	 	2,015	 
	Camp costs	 	 	42,949	 
	Consulting engineers	 	 	697,044	 
	Fieldwork and wages	 	 	363,884	 
	Permits, assay and testing	 	 	154,408	 
	Power utilities	 	 	9,571	 
	Net expenditures during the year	 	 	1,333,714	 
	Foreign exchange differences	 	 	101,528	 
	Balance, August 31, 2018	 	$	4,039,824	 
	Mining claims	 	 	66,475	 
	Assessment and taxes	 	 	1,634	 
	Camp costs	 	 	13,516	 
	Consulting engineers	 	 	55,475	 
	Fieldwork and wages	 	 	270,467	 
	Permits, assay and testing	 	 	3,718	 
	Power utilities	 	 	4,192	 
	Recovery	 	 	(132,950	)
	Impairment of exploration and evaluation assets	 	 	(811,000	)
	Net expenditures during the year	 	 	(528,473	)
	Foreign exchange differences	 	 	75,726	 
	Balance, August 31, 2019	 	$	3,587,077	 

 

On
July 21, 2016, the Company through its subsidiary entered into an agreement to purchase 100% right, title and interest in 450
acres of land with a 192 acre ranch, buildings, mine equipment and fixtures and 6 patented and 35 unpatented mineral claims situated
in Madison County, Montana. The agreement called for a cash payment of CDN$250,000 (inclusive of the US$25,000 paid on May 18,
2016 towards the annual property payment) and the issuance of 500,000 common shares each on the First (issued) and Second (issued)
Anniversary and CDN$100,000 upon attainment of commercial production. The 1,000,000 shares to be issued were valued at the prevailing
stock price at the time of closing of the transaction of $0.115 per share for total additional consideration of $115,000. The
acquisition is also subject to an annual payment equal to the greater of a 2% NSR or US$50,000. Final TSX approval for the closing
of the transaction was received on September 30, 2016.

 

As
at August 31, 2019, the Company has provided aggregate funding of $180,593 (August 31, 2018 - $177,333) for deposits as security
against potential future reclamation work related to the Madison property.

 

- 13 -

     

    -K-1-26 -

    

 

 

Broadway
Gold Mining Ltd. 

Notes
to Carve-Out Financial Statements 

Years Ended August 31, 2019 and 2018 

(Expressed in Canadian Dollars)

 

  

		5.	Exploration
                                         and evaluation assets (continued)

 

In
April 2019, the Company signed an Earn-In with Option to Joint Venture Agreement (the “Earn-In Agreement”) with Kennecott
Exploration Company (“Kennecott”), part of the Rio Tinto Group.

 

Under
the terms of the Earn-In Agreement,

 

		•	Kennecott
                                         has an option to:

 

(i) acquire
a 55% undivided interest in the property by incurring exploration and related expenditures of US$5 million within the first five
years. Kennecott may elect to earn an additional 10% undivided interest by incurring additional expenditures of US$10 million
within the following three years.

 

(ii) acquire
a 65% undivided interest in the property by incurring exploration and related expenditures of US$15 million within the first eight
years. Kennecott may elect to earn an additional 5% undivided interest by incurring additional expenditures of US$15 million within
the following three years.

 

 (iii) acquire a 70% undivided interest in the property by incurring exploration and related expenditures of US$30 million over eleven years.

 

		•	Kennecott
                                         is to incur a minimum of US$1 million of exploration expenditures in the first year.

 

		•	Broadway
                                         is to receive cash payments of US$225,000 (US$100,000 received) over the first five years.

 

		•	Kennecott
                                         may request Broadway to conduct exploration on its behalf during the first year in return
                                         for 10% administration charge.

 

Title
to exploration and evaluation asset

 

Although
the Company has taken steps to verify title to exploration and evaluation assets in which it has an interest, in accordance with
industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company’s
title. Property title may be subject to unregistered prior agreements or transfers and title may be affected by undetected defects.

 

Environmental

 

Environmental
legislation is becoming increasingly stringent and costs and expenses of regulatory compliance are increasing. The impact of new
and future environmental legislation on the Company’s operations may cause additional expenses and restrictions.

 

If
the restrictions adversely affect the scope of exploration and development on the exploration and evaluation assets, the potential
for production on the property may be diminished or negated.

 

The
Company is subject to the laws and regulations relating to environmental matters in all jurisdictions in which it operates, including
provisions relating to property reclamation, discharge of hazardous material and other matters.

 

The
Company may also be held liable should environmental problems be discovered that were caused by former owners and operators of
its properties and properties in which it has previously had an interest. The Company conducts its exploration and evaluation
asset activities in compliance with applicable environmental protection legislation. The Company is not aware of any existing
environmental problems related to any of its current or former properties that may result in material liability to the Company.

 

- 14 -

     

    -K-1-27 -

    

 

 

Broadway
Gold Mining Ltd. 

Notes
to Carve-Out Financial Statements 

Years Ended August 31, 2019 and 2018 

(Expressed in Canadian Dollars)

 

 

		6.	Income
                                         tax

 

The
following table reconciles the expected income taxes expense (recovery) at the Canadian statutory income tax rates to the amounts
recognized in the statement of operations and comprehensive loss for the years ended August 31, 2019 and 2018:

 

	 	 	Year Ended 

August 31, 

2019	 	 	Year Ended
 August 31,
 2018	 
	Income (loss) before income taxes	 	$	(843,441	)	 	$	(35,679	)
	Statutory tax rate	 	 	26.7	%	 	 	26.7	%
	Expected income tax (recovery)	 	 	(292,318	)	 	 	(292,318	)
	Non-deductible items	 	 	50,861	 	 	 	50,861	 
	Change in deferred tax asset not recognized	 	 	241,457	 	 	 	241,457	 
	Income tax expense (recovery)	 	 	-	 	 	 	-	 

 

Deferred
taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and their corresponding values for tax purposes. The unrecognized deductible temporary differences at August 31, 2019
and 2018 are as follows:

 

	 	 	August
31, 

2019
	 	 	August
31,
 2018
	 
	Exploration and evaluation assets	 	$	12,063	 	 	$	12,063	 
	Property and equipment	 	 	2,682	 	 	 	2,682	 
	Net operating losses carryforward	 	 	309,525	 	 	 	309,525	 
	Total unrecognized deductible temporary differences	 	 	324,270	 	 	 	324,270	 

 

As
at August 31, 2019, the Company has net operating loss carryforwards in the US of approximately $96,343 (2018 - $96,343),
which can be applied to reduce future US taxable income and will expire between 2036 and 2037; and net operating tax loss
carryforwards of $96,343, which have an unlimited expiry period.

 

	2036	 	 	$	4,890	 
	2037	 	 	 	87,837	 
	2038	 	 	 	-	 
	 	 	 	$	92,727	 

 

-
15 -

     

    -K-1-28 -

    

 

 

Broadway
Gold Mining Ltd. 

Notes
to Carve-Out Financial Statements 

Years Ended August 31, 2019 and 2018 

(Expressed in Canadian Dollars)

 

 

		7.	Subsequent
                                         event

 

On
October 15, the Company entered into a definitive arrangement agreement (“Arrange Agreement”) with Mind Medicine,
Inc., a privately held issuer incorporated under the laws of Delaware (“MindMed”), which will result in a reverse
take-over (“RTO”) of the Company by the current shareholders of MindMed by way of plan of arrangement (“Plan
of Arrangement”) under the Business Corporations Act (British Columbia) (“Arrangement”).

 

Pursuant
to the terms of the Arrangement Agreement, Broadway Delaware Subco Inc., a wholly-owned subsidiary of the Company incorporated
for the purpose under the laws of Delaware (“Delaware Subco”) will merge with MindMed. In accordance with the Arrangement
and the articles of MindMed, all outstanding Class B common shares (“Class B Shares”), Class C common shares (“Class
C Shares”) and Class D common shares (“Class D Shares”) of MindMed will be exchanged for Class A common shares
(“Class A Shares”), immediately following which all Class A Shares of MindMed will be exchanged, on a one-for-one
basis (the “Exchange Ratio”), for securities of Broadway on a Consolidated (as defined below) basis (Broadway following
the completion of the Arrangement herein referred to as the “Resulting Issuer”). Any outstanding convertible securities
of MindMed, including any convertible securities issued in connection with the MindMed Financing (as defined below), will be exchanged
for convertible securities of the Resulting Issuer on the basis of the Exchange Ratio.

 

As
part of the Arrangement and subject to the receipt of all required approvals, Broadway will consolidate its outstanding shares,
warrants and options on an eight (8) old common shares for one (1) new common share basis (the “Consolidation”) and
change its name to “Mind Medicine (MindMed), Inc.” (or such other name as MindMed may determine) (the “Name
Change”). It will also amend its capital structure (the “Capital Structure Amendment”) by creating a new class
of multiple voting shares that will each carry 100 votes per share (the “Multiple Voting Shares”), and change the
name of its common shares to “subordinate voting shares” (with all other terms of the common shares remaining unchanged).
The Multiple Voting Shares will be issued to certain U.S. resident holders of MindMed shares in connection with the Arrangement.

 

The
Plan of Arrangement also includes the transfer of all of Broadway’s right, title and interest, and all associated liabilities,
in the Madison Property (the “Spin-Out Transaction”). The Madison Property is currently held by Broadway Gold Corp.
The Spin-Out Transaction will consist of the transfer of all of the shares of Broadway Gold Corp. and any related assets and liabilities
in connection with the Madison Property to Madison Metals. Madison Metals will also assume all liabilities associated with Broadway’s
mineral exploration and development business as conducted prior to the completion of the Arrangement. Pursuant to the Plan of
Arrangement, Madison Metals will issue 49,860,204 common shares to Broadway as consideration for the Transferred Assets, which
will be distributed to the holders of record of the Company’s shares immediately before completion of the RTO on a pro-rata
basis. Broadway shareholders will be entitled to receive one Madison Metals share for every common share of Broadway on a pre-
Consolidation basis held by such shareholder.

 

In
connection with the Arrangement, MindMed has agreed to make a bridge loan available (“Bridge Loan”) as provided in
the Arrangement Agreement. The terms of the Bridge Loan provide that MindMed will lend to Broadway (i) $15,000 on execution of
the Agreement; (ii) a maximum of $30,000 per month, starting on the later of the date of execution of the Arrangement Agreement
and October 1, 2019 and ending on the earlier of the Closing Date (as defined in the Arrangement Agreement) or January 1, 2020,
to cover the costs and expenses necessary to maintain Montana’s business, and (iii) no more than C$170,000 to pay down the
aggregate accounts payable currently owed by Broadway and the Broadway Montana, which amounts will be forgiven or assumed by MindMed
upon completion of the Arrangement.

 

- 16 -

     

    -K-2-1 -

    

SCHEDULE
2 TO APPENDIX K – SPINCO MANAGEMENT DISCUSSION AND ANALYSIS

 

 •           MD&A for Spinco from date of incorporation to November 30, 2019

 

 •           MD&A for carve-out financial statements for Spinco for each of the financial statements included in the circular (year ended Aug 31, 2019 and 2018)

 

(begins
on following page)

     

    -K-2-2 -

    

SPINCO
MANAGEMENT DISCUSSION AND ANALYSIS

 

FORWARD
LOOKING STATEMENTS

 

This
Management’s Discussion and Analysis (“MD&A”) contains certain statements that may be deemed “forward-
looking statements,” within the meaning of certain securities laws. Forward-looking statements relate to management’s
expectations or beliefs about future performance, events, or circumstances that include, but are not limited to, future production,
costs of production, prices of gold, reserve or resource potential, exploration and operational activities, and events or developments
that Madison Metals expects or targets. Forward-looking statements can usually be identified by words such as: “future”,
 “plans”, “scheduled”, “expects”, “intends”, “estimates”, “forecasts”,
 “will”, “may”, “could”, “would”, and variations thereof. Although Madison Metals
believes that these statements are based on reasonable assumptions, all forward-looking statements involve known and unknown risks
and uncertainties that may cause the actual performance, events, or circumstances of Madison Metals to be materially different
than anticipated. The forward-looking information in this MD&A describes Madison Metals’ expectations as of the date
of this MD&A.

 

Madison
Metals cautions that the foregoing list of material factors is not exhaustive. When relying on Madison Metals’ forward-looking
information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and
potential events. Madison Metals has assumed a certain progression, which may not be realized. It has also assumed that the material
factors referred to in the previous paragraph will not cause such forward- looking information to differ materially from actual
results or events. However, the list of these factors is not exhaustive and is subject to change and there can be no assurance
that such assumptions will reflect the actual outcome of such items or factors.

 

Forward-looking
statements are based on management’s current plans, estimates, projections, beliefs, and opinions and we do not undertake
any obligation to update forward-looking statements should the assumptions related to these plans, estimates, projections, beliefs
and opinions change, except as required by law.

 

Date 

The
following management’s discussion and analysis (“MD&A”), which is dated of January 10, 2020, provides a
review of the activities, results of operations and financial condition of Madison Metals as at and for the fifty day period beginning
on the date of incorporation of Madison Metals on October 11, 2019 and ended November 30, 2019 as well as future prospects of
Madison Metals. This MD&A should be read in conjunction with the audited financial statements of Madison Metals as at and
for the fifty day period ended November 30, 2019 (the “Audited Financial Statements”).

 

All
dollar amounts in this MD&A are expressed in Canadian dollars unless otherwise specified (the Madison Metals’ financial
statements are prepared in Canadian dollars).

 

Overall
Performance

 

General 

Madison
Metals is a private company incorporated under the provisions of the British Columbia Business Corporations Act on October 11,
2019 in order to complete the Arrangement. Madison Metals is a wholly owned subsidiary of Broadway Gold Mining Ltd. (“Broadway”),
a TSX-V listed entity. Its registered and head office is located at 1199 West Hastings Street, Vancouver, British Columbia, V6E
3T5.

 

Stated
Business Objectives 

Madison
Metals intends to develop the Madison Project.

     

    -K-2-3 -

    

Property
Holdings 

As
at the date of this MD&A, Madison Metals does not hold any property. Upon the effectiveness of the Arrangement, Madison Metals
will hold the Madison Project and related assets pursuant to the Transfer Agreement.

 

Selected
Annual Financial Information 

Madison
Metals has not completed a financial year since its incorporation.

 

Results
of Operations 

For
the period from incorporation (October 11, 2019) to November 30, 2019 Madison Metals reported a net loss of $nil.

 

Summary
of Quarterly Results 

Madison
Metals was incorporated on October 11, 2019 and has not had operation activities for the last eight quarters to report.

 

Liquidity 

Madison
Metals is a mining exploration and development company with no producing resource properties, and consequently does not generate
operating income or cash flow. To date, Madison Metals has relied upon the sale of equity securities to provide working capital
for capital acquisitions, exploration and development activities, and to fund the administration of Madison Metals. Since Madison
Metals does not expect to generate any revenues in the near future, it will continue to rely upon equity and debt financing to
raise capital. There can be no assurance that financing will be available to Madison Metals when required, or on terms satisfactory
to Madison Metals. At November 30, 2019, Madison Metals had $nil in cash.

 

Capital
Resources 

Madison
Metals’ working capital at November 30, 2019 was $1.

 

Fourth
Quarter 

Not
applicable.

 

Proposed
Transaction 

The
details of the proposed Arrangement are discussed in the Audited Financial Statement note 7.

 

Critical
Accounting Estimates 

Madison
Metals’ significant accounting policies are contained in Note 3 to the Audited Financial Statements for the period from
incorporation (October 11, 2019) to November 30, 2019. The preparation of the Audited Financial Statements in conformity with
International Financial Reporting Standards (“IFRS”) requires management to make judgments, estimates and assumptions
that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Estimates and
underlying assumptions are reviewed on an ongoing basis.

 

Changes
in Accounting Policies including Initial Adoption of IFRS

 

Madison
Metals adopted IFRS for the period ending November 30, 2019. There were no changes in accounting policies for the period ending
November 30, 2019.

 

Future
Accounting Pronouncements 

A
number of other new standards and issued amendments to standards and interpretations are not yet effective for the year ending
November 30, 2019 and have not been applied when preparing Madison Metals’ financial statements. Management does not currently
expect the implementation of these new standards and amendments will have a significant effect on the financial statements of
Madison Metals.

 

Fair
value 

Madison
Metals classifies its financial assets as fair value through profit or loss (“FVTPL”). The classification depends
on the purpose for which the financial assets were acquired. Management determines the classification of financial assets at recognition.

     

    -K-2-4 -

    

Fair
value through profit or loss 

Financial
assets are classified as FVTPL when the financial asset is held-for-trading or it is designated as FVTPL. A financial asset is
classified as FVTPL when it has been acquired principally for the purpose of selling in the near future; it is a part of an identified
portfolio of financial instruments that Madison Metals manages and has an actual pattern of short-term profit-taking or if it
is a derivative that is not designated and effective as a hedging instrument. Upon initial recognition, attributable transaction
costs are recognized in profit or loss when incurred. Financial instruments at FVTPL are measured at fair value, and changes therein
are recognized in profit or loss. Cash is included in this category of financial assets.

 

Fair
value hierarchy 

Determination
of Fair Value:

 

Fair
values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further
information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

 

The
Statement of Financial Position carrying amounts for cash and cash equivalents, amounts receivable, trade and other payables,
and due to related parties approximate fair value due to their short-term nature. Due to the use of subjective judgments and uncertainties
in the determination of fair values these values should not be interpreted as being realizable in an immediate settlement of the
financial instruments.

 

Fair
Value Hierarchy:

 

Financial
instruments that are measured subsequent to initial recognition at fair value are grouped in Levels 1 to 3 based on the degree
to which the fair value is observable:

 

■         Level
1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
and

■         Level
2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for
the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

■         Level
3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are
not based on observable marker data (unobservable inputs).

 

Madison
Metals has no financial instruments subject to level 1, 2 or level 3 fair value measurements.

 

Financial
risk management 

Madison
Metals is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors
the risk management processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting
structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:

 

Credit
Risk 

Credit
risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur
a financial loss. Madison Metals is not exposed to significant credit risk.

 

Foreign
Exchange Risk 

Foreign
currency risk is the risk that the fair values or future cash flows of a financial instrument will fluctuate as they are denominated
in currencies that differ from the respective functional currency. Madison Metals is not exposed to significant foreign currency
risk.

 

Liquidity
Risk 

Liquidity
risk is the risk that Madison Metals will encounter difficulty in satisfying financial obligations as they become due. Madison
Metals manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities.
Madison Metals’ objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet
its liquidity requirements. Madison Metals is not exposed to significant liquidity risk.

     

    -K-2-5 -

    

Interest
Rate Risk 

Interest
rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market
interest rates. Madison Metals manages interest rate risk by maintaining an investment policy that focuses primarily on preservation
of capital and liquidity. There were no changes in Madison Metals’ approach to risk management during the reporting period.

 

Capital
Management 

Madison
Metals is actively looking to acquire an interest in a business or assets and this involves a high degree of risk. Madison Metals
does not generate cash flows from operations. Madison Metals’ primary source of funds comes from the issuance of capital
stock. Madison Metals does not use other sources of financing that require fixed payments of interest and principal due to lack
of cash flow from current operations, and is not subject to any externally imposed capital requirements. Madison Metals’
objective when managing capital is to safeguard Madison Metals’ ability to continue as a going concern. Madison Metals defines
its capital as equity. Capital requirements are driven by Madison Metals’ general operations. To effectively manage Madison
Metals’ capital requirements, Madison Metals monitors expenses and overhead to ensure costs and commitments are being paid.

 

Other MD&A Requirements

 

Disclosure
of Outstanding Share Data 

At
November 30, 2019 and as at the date of this Circular, there was one (1) outstanding Madison Metals Inc. Common
Share.

 

Risks
and uncertainties 

Madison
Metals is in the business of exploring and, if warranted, developing mineral properties, which is a highly speculative endeavour,
and Madison Metals’ future performance may be affected by events, risks or uncertainties that are outside of Madison Metals’
control. Madison Metals’ management consider the risks set out below to be the most significant to potential investors of
Madison Metals, but not all risks associated with an investment in securities of Madison Metals. If any of these risks materialize
into actual events or circumstances or other possible additional risks and uncertainties of which the directors are currently
unaware or which they consider not be material in relation to Madison Metals’ business, actually occur, Madison Metals’
assets, liabilities, financial condition, results of operations (including future results of operations), business and business
prospects, are likely to be materially and adversely affected. In such circumstances, the price of Madison Metals’ securities
could decline and investors may lose all or part of their investment.

 

Limited
Operating History 

Madison
Metals is still in an early stage of development. Madison Metals is engaged in the business of exploring and, if warranted, developing
mineral properties in the hope of locating economic deposits of minerals. Madison Metals’ mineral interests are in the exploration
stage and do not have mineral reserves. Madison Metals has no history of earnings. There is no guarantee that economic quantities
of mineral reserves will be discovered on Madison Metals’ property.

 

Management 

The
success of Madison Metals is currently dependant on the performance of its directors and officers. The loss of the services of
any of these persons could have a materially adverse effect on Madison Metals’ business and prospects. There is no assurance
that Madison Metals can maintain the services of its directors, officers or other qualified personnel required to operate its
business. At this date there are no indications that any change in management cannot be maintained at the current structure.

     

    -K-2-6 -

    

Conflicts
of Interest 

Madison
Metals’ directors, officers and other members of management serve as directors, officers, promoters and members of management
of other companies involved in the acquisition, exploration and development of mineral resource properties and, therefore, it
is possible that a conflict may arise between their duties as a director, officer, promoter or member of Madison Metals’
management team and their duties as a director, officer, promoter or member of management of such other companies. The Madison
Metals’ directors and officers are aware of the laws governing accountability of directors and officers for corporate opportunity
and the requirement of directors to disclose conflicts of interest. Madison Metals will rely upon these laws in respect of any
directors’ and officers’ conflicts of interest or in respect of any breaches of duty by any of its directors or officers.

 

Additional
Funding Requirements 

From
time to time, Madison Metals will require additional financing in order to carry out its acquisition, exploration and development
activities. Failure to obtain such financing on a timely basis could cause the Madison Metals to forfeit its interest in certain
properties, miss certain acquisition opportunities and reduce or terminate its operations. If Madison Metals’ cash flow
from operations is not sufficient to satisfy its capital or resource expenditure requirements, there can be no assurance that
additional debt or equity financing will be available to meet these requirements or be available on favourable terms.

 

Price
Volatility and Lack of Active Market 

In
recent years, the securities markets in Canada and elsewhere have experienced a high level of price and volume volatility, and
the market prices of securities of many public companies have experienced significant fluctuations in price which have not necessarily
been related to the operating performance, underlying asset values or prospects of such companies. Any quoted market for Madison
Metals’ securities may be subject to such market trends and that the value of such securities may be affected accordingly.

 

Subsequent
Events 

Madison
Metals plans to complete the terms of the Arrangement Agreement with Broadway, an exploration stage public company whose common
shares are listed for trading on the TSX Venture Exchange (“TSX-V”). Broadway’s primary business has been the
development of the Madison Project. Following completion of the Arrangement, Broadway’s principal operations will be operating
the MindMed business. The Arrangement has been proposed to, among other things, provide a better opportunity for the Madison Project
to be further explored and developed. Pursuant to the Arrangement, Broadway will transfer all of its right, title and interest
in the Madison Project to Madison Metals in consideration for approximately 49,860,204 Madison Metals Common Shares, which Broadway
will then distribute on a pro rata basis to its shareholders, other than dissenting shareholders, on the basis of one Madison
Metals share for each Broadway share held immediately prior to the effective time. Each shareholder (other than dissenting shareholders)
as at the Effective Time will, immediately after completion of the Arrangement, continue to hold the same pro rata interest in
Madison Metals that such shareholder held in Broadway prior to the completion of the Arrangement. Completion of the Arrangement
is subject to a number of conditions, including, but not limited to, approval of the shareholders of Broadway and the Supreme
Court of British Columbia. Such approvals, if granted, are expected to be received subsequent to the date of approval of the financial
statements. Madison Metals will have to raise additional funds for its operation and exploration programs. There can be no assurances
that Madison Metals will be able to do so, either on terms favourable to it or at all.

 

On
January 8, 2020, Madison Metals and Broadway entered into an exclusivity agreement (“Agreement”) with American Pacific
Mining Corp. (“APM”) wherein APM is granted an exclusive right to negotiate the acquisition of the Madison Property
during the period from the date of Agreement until the earlier of (i) the date of execution of a mutually acceptable definitive
purchase agreement; (ii) five business days after the closing of the Arrangement; (iii) the termination of the Arrangement Agreement;
and (iv) the date, if any, upon which Broadway, Madison Metals and APM mutually agree in writing to terminate discussions.

     

    -K-2-7 -

    

BROADWAY
GOLD MINING LTD.

FORM 51-102F1 

MANAGEMENT’S
DISCUSSION AND ANALYSIS 

OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

For
the Year Ended August 31, 2019

 

The
following discussion and analysis of financial results should be read in conjunction with the audited carve-out financial statements
of Broadway Gold Mining Ltd.’s (“Broadway”) principal business operations, being the exploration and evaluation
expenditures relating to the operations in the Madison Project (“Madison Operation”), for the year ended August 31,
2019, including the notes thereto. The financial data contained in this discussion and analysis is presented in accordance with
International Financial Reporting Standards (“IFRS”). The reporting currency is the Canadian dollar.

 

The
following discussion and analysis provides information that management believes is relevant to the assessment and understanding
of Broadway’s results of operations and financial conditions in connection with the Madison Project. Certain statements
herein contain forward-looking statements relating to the operations or to the environment in which we operate, which are based
on our operations, forecasts, and projections. Forward-looking statements are not guarantees of future performance. They involve
risks, uncertainties and assumptions, and actual results may differ materially from those anticipated in these forward-looking
statements. The risks include those outlined under the “Risk Factors” section of this MD&A and as set out elsewhere
in the Circular, including Schedule “K”.

 

This
Management Discussion and Analysis is dated January 10, 2020.

 

BUSINESS
OVERVIEW

 

Broadway
was incorporated under the Business Corporations Act of British Columbia (the “BCBCA”) on July 26, 2010 as
Carolina Capital Corp. On October 12, 2016, it changed its name to Broadway Gold Mining Ltd. to reflect the change of geographical
location of its principal business activity to the gold and copper mining property located in Silver Star, Montana, USA (the “Madison
Project”). Broadway’s head and principal office is located in Vancouver, British Columbia, Canada. Broadway’s
common shares trade on the TSX-V under the symbol “BRD”. Broadway’s shares also trade on the USA OTCQB Venture
Marketplace under the symbol “BDWYF” and on the Frankfurt exchange under the symbol “BGH”.

 

Broadway
has three subsidiaries: (i) Broadway Gold Corp., a Montana corporation under which it conducts the exploration activities on the
Madison Project; (ii) Madison Metals Inc., a company existing under the BCBCA which was formed on October 11, 2019 to complete
the Arrangement with Broadway and to acquire the Madison Project in connection therewith; and (iii) Broadway Delaware Subco Inc.,
a company existing under the Delaware General Corporation Law, which was formed for the purpose of completing the Merger with
MindMed.

 

1

     

    -K-2-8 -

    

PROPOSED
TRANSACTION

 

On
October 15, the Company entered into a definitive arrangement agreement (“Arrange Agreement”) with Mind Medicine,
Inc., a privately held issuer incorporated under the laws of Delaware (“MindMed”), which will result in a reverse
take-over (“RTO”) of the Company by the current shareholders of MindMed by way of plan of arrangement (“Plan
of Arrangement”) under the Business Corporations Act (British Columbia) (“Arrangement”).

 

Pursuant
to the terms of the Arrangement Agreement, Broadway Delaware Subco Inc., a wholly-owned subsidiary of the Company incorporated
for the purpose under the laws of Delaware (“Delaware Subco”) will merge with MindMed. In accordance with the Arrangement
and the articles of MindMed, all outstanding Class B common shares (“Class B Shares”), Class C common shares (“Class
C Shares”) and Class D common shares (“Class D Shares”) of MindMed will be exchanged for Class A common shares
(“Class A Shares”), immediately following which all Class A Shares of MindMed will be exchanged, on a one-for-one
basis (the “Exchange Ratio”), for securities of Broadway on a Consolidated (as defined below) basis (Broadway following
the completion of the Arrangement herein referred to as the “Resulting Issuer”). Any outstanding convertible securities
of MindMed, including any convertible securities issued in connection with the MindMed Financing (as defined below), will be exchanged
for convertible securities of the Resulting Issuer on the basis of the Exchange Ratio.

 

As
part of the Arrangement and subject to the receipt of all required approvals, Broadway will consolidate its outstanding shares,
warrants and options on an eight (8) old common shares for one (1) new common share basis (the “Consolidation”) and
change its name to “Mind Medicine (MindMed), Inc.” (or such other name as MindMed may determine) (the “Name
Change”). It will also amend its capital structure (the “Capital Structure Amendment”) by creating a new class
of multiple voting shares that will each carry 100 votes per share (the “Multiple Voting Shares”), and change the
name of its common shares to “subordinate voting shares” (with all other terms of the common shares remaining unchanged).
The Multiple Voting Shares will be issued to certain U.S. resident holders of MindMed shares in connection with the Arrangement.

 

The
Plan of Arrangement also includes the transfer of all of right, title and interest, and all associated liabilities, in the Madison
Property (the “Spin-Out Transaction”). The Madison Property is currently held by Broadway. The Spin-Out Transaction
will consist of the transfer of all of the shares of Broadway. and any related assets and liabilities in connection with the Madison
Property to a wholly- owned subsidiary of Broadway (“Transferred Assets”), Madison Metals Inc. (“Madison Metals”
or the “Spinco”). Madison Metals will also assume all liabilities associated with Broadway’s mineral exploration
and development business as conducted prior to the completion of the Arrangement. Pursuant to the Plan of Arrangement, Madison
Metals will issue common shares to Broadway as consideration for the Transferred Assets, which will be distributed to the holders
of record of the Company’s shares immediately before completion of the RTO on a pro-rata basis. Broadway shareholders will
be entitled to receive one Madison Metals share for every common share of Broadway on a pre-Consolidation basis held by such shareholder.

 

In
connection with the Arrangement, MindMed has agreed to make a bridge loan available (“Bridge Loan”) as provided in
the Arrangement Agreement. The terms of the Bridge Loan provide that MindMed will lend to Broadway (i) $15,000 on execution of
the Agreement; (ii) a maximum of $30,000 per month, starting on the later of the date of execution of the Arrangement Agreement
and October 1, 2019 and ending on the earlier of the Closing Date (as defined in the Arrangement Agreement) or January 1, 2020,
to cover the costs and expenses necessary to maintain Montana’s business, and (iii) no more than $170,000 to pay down the
aggregate accounts payable currently owed by Broadway and the Broadway Montana, which amounts will be forgiven or assumed by MindMed
upon completion of the Arrangement.

 

2 

     

    -K-2-9 -

    

On
January 8, 2020, Madison Metals and Broadway entered into an exclusivity agreement (“Agreement”) with American Pacific
Mining Corp. (“APM”) wherein APM is granted an exclusive right to negotiate the acquisition of the Madison Property
during the period from the date of Agreement until the earlier of (i) the date of execution of a mutually acceptable definitive
purchase agreement; (ii) five business days after the closing of the Arrangement; (iii) the termination of the Arrangement Agreement;
and (iv) the date, if any, upon which Broadway, Madison Metals and APM mutually agree in writing to terminate discussions.

 

INTEREST
IN MINERAL PROPERTIES

 

Madison
Project

 

In
July 2016, Broadway entered into an agreement to purchase 100% right, title and interest in 450 acres of land with a 192-acre
ranch, buildings, mine equipment and fixtures and 6 patented and 35 unpatented mineral claims situated in Madison County, Montana.
The agreement called for a cash payment of CDN$250,000 and the issuance of 500,000 common shares on the First and Second Anniversary
and CDN$100,000 upon attainment of commercial production. The acquisition was also subject to an annual payment equal to the greater
of a 2% NSR or US$50,000. Final TSX approval for the closing of the transaction was received on September 30, 2016. 500,000 common
shares were issued in October 2017 for the First Anniversary share allotment. 500,000 common shares were issued in October 2018
for the Second Anniversary share allotment.

 

Subsequent
to the initial purchase, Broadway has increased the footprint and scope of the project.

 

Currently,
the Madison Project covers 2,514 acres consisting of six federal patented lode claims and 137 unpatented mineral claims. The road
accessible claims lie 1.5 kilometers west of the hamlet of Silver Star in Sections 2 and 3 of Township 2 South, Range 6 West.
The Madison Project lies in the Silver Star District along the south flank of the Radar Creek pluton 38 kilometers southwest of
the world-famous Butte copper mine, an area of high geological potential. The property is underlain by Mississippian calcareous
sediments intruded by quartz monzonite of the Tertiary to Cretaceous Radar Creek pluton. Gold and copper skarn deposits have developed
at the contact.

 

The
Madison Project encompasses two mines, several shafts and adits and numerous pits and trenches, largely centered along the limestone
intrusive contact. The largest of these is the Broadway Mine, developing a gold-bearing skarn zone to a vertical depth of 750
feet between the 1880’s and the 1950’s. A total of 450,000 tons averaging 0.32 ounces per ton gold were produced from
approximately 6,000 feet of underground workings. Broadway feels the depth potential of the Broadway Mine has yet to be tested.

 

The
second mine is the Madison Mine. A series of drill programs throughout the 1980’s and into the early 1990’s located
gold, copper and gold-copper mineralization in a 152 metre long by 61 metre wide zone along the limestone intrusive contact. During
the 2007 to 2012 period Coronado Resources Ltd. drove a decline and bulk sampled several blocks within a 70 metre long by 30 metre
wide section of the larger zone. A number of the significant drill intersections from the earlier drill programs were not followed
up and these present Broadway with a second area of immediate potential on the property.

 

3 

     

    -K-2-10 -

    

Interested
readers can review the updated March 7, 2019 NI 43-101 report on the Madison Project posted on Broadway’s website. www.broadwaymining.com.

 

UPDATES
ON CURRENT EXPLORATION ACTIVITIES

 

Broadway
completed a Vulcan 3-D model of its Madison Project. Based on the positive results generated, Broadway is planning Phase II and
III underground diamond drilling programs.

 

In
April 2019, Broadway signed an Earn-In with Option to Joint Venture Agreement (the “Earn-In Agreement”) with Kennecott
Exploration Company (“Kennecott”), part of the Rio Tinto Group. Under the terms of the Earn-In Agreement,

		•	Kennecott
                                         has an option to:

		(i)	acquire
                                         a 55% undivided interest in the property by incurring exploration and related expenditures
                                         of US$5 million within the first five years. Kennecott may elect to earn an additional
                                         10% undivided interest by incurring additional expenditures of US$10 million within the
                                         following three years.

		(ii)	acquire
                                         a 65% undivided interest in the property by incurring exploration and related expenditures
                                         of US$15 million within the first eight years. Kennecott may elect to earn an additional
                                         5% undivided interest by incurring additional expenditures of US$15 million within the
                                         following three years.

		(iii)	acquire
                                         a 70% undivided interest in the property by incurring exploration and related expenditures
                                         of US$30 million over eleven years.

		•	Kennecott
                                         is to incur a minimum of US$1 million of exploration expenditures in the first year.

		•	Broadway
                                         is to receive cash payments of US$225,000 (US$100,000 received) over the first five years.

		•	Kennecott
                                         may request Broadway to conduct exploration on its behalf during the first year in return
                                         for 10% administration charge.

 

In
June 2019, Broadway announced that Kennecott has commenced with a drilling campaign at the Madison Project. The initial drilling
program consists of three drill holes targeting an area displaying multi-element soil and rock chip geochemical anomalies, historic
prospects, strong Induced Polarization (IP) anomalies and porphyry drill intercepts identified by Broadway’s technical team
and four holes targeting skarn mineralization.

 

4 

     

    -K-2-11 -

    

Mineral
Property Expenditures

 

Broadway
capitalized exploration and evaluation expenditures in the period incurred. During the year ended August 31, 2019, Broadway has
incurred the following exploration expenditures on the Madison Project:

 

	 	 	Year
Ended 

August 31, 2019 
 $
	 	 	Year
Ended 

August 31, 2018
 $
	 
	Mining claims	 	 	66,475	 	 	 	63,843	 
	Assessment and taxes	 	 	1,634	 	 	 	2,015	 
	Camp costs	 	 	13,516	 	 	 	42,949	 
	Consulting engineers	 	 	55,475	 	 	 	697,044	 
	Fieldwork and wages	 	 	270,467	 	 	 	363,884	 
	Permits, assay and testing	 	 	3,718	 	 	 	154,408	 
	Power utilities	 	 	4,192	 	 	 	9,571	 
	Recovery	 	 	(132,950	)	 	 	-	 
	Impairment of exploration and evaluation assets	 	 	(811,000	)	 	 	-	 
	 	 	 	 	 	 	 	 	 
	Net
expenditures during the year	 	 	(528,473	)	 	 	1,333,714	 

 

An
impairment loss of $811,000 was recorded for the year ended August 31, 2019 to reduce the carrying amount to the recoverable amount.
The recoverable amount is determined by reference to the fair value of the consideration estimated based on the quoted market
price of the Company’s share at the year end.

 

RESULTS
OF OPERATIONS

 

Selected
Annual Information

 

The
following table provides a brief summary of the Company’s financial operations for the last three fiscal years. This information
has been presented in accordance with IFRS. The reporting currency is the Canadian dollar. For more detailed information, refer
to the August 31, 2019 and 2018 audited financial statements.

 

	 	 	Year
Ended 

August 31, 2019
 $
	 	 	Year
Ended 

August 31, 2018
 $
	 
	Net income (loss) for the year	 	 	(843,441	)	 	 	(35,679	)
	Imapirment of exploration and evaluation asset	 	 	(811,000	)	 	 	-	 
	Total assets	 	 	3,843,419	 	 	 	4,323,686	 

 

5

     

    -K-2-12 -

    

Year
Ended August 31, 2019 Compared to Year Ended August 31, 2018

 

During
the year ended August 31, 2019, the Company recorded a net loss of $843,441 compared to a net loss of $35,679 during the year
ended August 31, 2018. The $807,762 in net loss is attributable to the following:

 

		•	Impairment
                                         of exploration and evaluation asset increased to $811,000 for the year ended August 31,
                                         2019 compared to $nil for the year ended August 31, 2018.

 

LIQUIDITY
AND CAPITAL RESOURCES

 

Broadway’s
approach to managing its liquidity is to ensure that it has sufficient resources to meet its liabilities as they come due and
have sufficient working capital to fund operations for the ensuing fiscal year.

 

As
at August 31, 2019, the Madison Operation had $nil in current assets (August 31, 2018 - $23,228) and current liabilities of $72,119
(August 31, 2018 - $7,001) for a working capital deficit of $72,119 compared to working capital of $16,227 at August 31, 2018.
As at the date of this report, the Madison Operation does not have adequate cash and working capital to fund its operations and
planned capital expenditures for the next 12 months, assuming completion of the Arrangement, and is reliant upon future equity
financing to fund its operations and advance the development of its exploration mining business.

 

SUBSEQUENT
EVENTS

 

On
October 15, 2019, Broadway entered into a definitive arrangement agreement with Mind Medicine, Inc., a privately held issuer incorporated
under the laws of Delaware, which will result in a reverse take- over of Broadway by the current shareholders of MindMed by way
of plan of arrangement under the Business Corporations Act (British Columbia). See “Proposed Transaction” section.

 

OFF-BALANCE
SHEET ARRANGEMENTS

 

To
the best of Management’s knowledge, there are no off-balance sheet arrangements that have, or are reasonably likely to have,
a current or future effect on the results of operations or financial condition of Broadway.

 

CONTRACTUAL
COMMITMENTS

 

See
 “Interest in Mineral Properties” for mineral property commitments.

 

TRANSACTIONS
WITH RELATED PARTIES

 

During
the year ended August 31, 2019, the Madison Operation did not have any related party transactions.

 

6 

     

    -K-2-13 -

    

SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING
ESTIMATES

 

All
significant accounting policies and critical accounting estimates are fully disclosed in Note 3 of the financial statements for
the year ended August 31, 2019.

 

FUTURE
ACCOUNTING STANDARDS AND INTERPRETATIONS

 

New
and Revised IFRS Issued but Not Effective

 

The
following standards or amendments are effective for annual periods beginning on or after September 1, 2019:

 

		1)	IFRS
                                         16 – Lease

 

In
January 2016, the International Accounting Standards Board (IASB) issued a new International Financial Reporting Standard (IFRS)
on lease accounting which was incorporated into Part I of the CPA Canada Handbook – Accounting by the Accounting Standards
Board (AcSB) in June 2016. IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining Whether an Arrangement Contains a Lease, SIC15
Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16
introduces a single lessee accounting model that requires a lessee to recognize assets and liabilities for all leases with a term
of more than 12 months, unless the underlying asset is of low value. Lease assets and liabilities are initially recognized on
a present value basis and subsequently, similarly to other non-financial assets and financial liabilities, respectively. The lessor
accounting requirements are substantially unchanged and, accordingly, continue to require classification and measurement as either
operating or finance leases. The new standard also introduces detailed disclosure requirements for both the lessee and lessor.
The new standard is effective for annual periods beginning on or after January 1, 2019. Broadway expects that the adoption of
the new standard will not have a material impact on its consolidated financial statements.

 

RISKS
RELATED TO BUSINESS

 

Following
completion of the Arrangement, Madison Metals will be in the business of acquiring, exploring and, if warranted, developing and
exploiting natural resource properties. Due to the nature of Spinco’s business and the present stage of exploration of its
mineral properties (which are primarily early stage exploration properties with no known resources or reserves), the following
risk factors, among others, will apply:

 

Spinco’s
ability to continue to conduct exploration and development depends upon Spinco’s ability to obtain additional financing.
The business of mineral exploration and extraction involves a high degree of risk with very few properties that are explored ultimately
achieving commercial production. As a mining company in the exploration stage, the future ability of Spinco to conduct exploration
and development will be affected principally by its ability to raise adequate amounts of capital through equity financings, debt
financings, joint venturing of projects and other means. In turn, Spinco’s ability to raise such funding depends in part
upon the market’s perception of its management and properties, but to a great degree upon the price of gold and the marketability
of securities of speculative exploration and development mining companies.

 

7 

     

    -K-2-14 -

    

Spinco
has no history of earnings and no foreseeable earnings. The property in which Spinco has acquired an interest has not
been determined to be commercially feasible and hence may not have any commercial production. Spinco has no history of profits
and has a deficit. Spinco receives no revenues from production or otherwise and is entirely dependent on raising additional equity
and loan financing.

 

Spinco
has no mineral producing properties, and Spinco has not demonstrated that any mineralized material on the property in which it
may acquire an interest constitutes proven or probable reserves of ore. It is uncertain what level, if any, of
recovery of gold or other minerals from mineralized material will in fact be realized. Identified mineralized deposits may never
qualify as commercially mineable (or viable) reserves, and even if they do qualify, they may fail to yield the estimated level
of copper or other minerals. Estimates of mineralized deposits and production costs can also be affected by such factors as metals
prices, availability of capital for development, permitting regulations and requirements, weather, environmental factors, unforeseen
technical difficulties, unusual or unexpected geological formations and work interruptions. In addition, the grade of mineralization
ultimately mined (if any) may differ from that indicated by drilling results. Short term factors relating to mineralized material,
such as the need for orderly development or the processing of new or different grades, may also have an adverse effect on mining
operations and on the results of operations. Gold and other minerals recovered in small scale laboratory tests may fail to be
duplicated in large scale tests under on-site conditions. Material changes in mineralized material, grades, stripping ratios or
recovery rates may affect the economic viability of projects. Mineralized deposits are reported as general indicators of mine
life and should not be interpreted as assurances of mine life or of the profitability of current or future operations.

 

As
mineral prices are volatile, a profitable market may not develop for any commercial quantities of mineral resources discovered
by Spinco. Mineral prices are subject to fluctuation. The effect of these factors cannot accurately be predicted.
The mining industry in general is intensely competitive and, even if commercial quantities of mineral resources are discovered,
a profitable market may not develop for the sale of the same. Factors beyond the control of Spinco may affect the marketability
of any gold or any other materials discovered. The price of precious metals is affected by numerous factors beyond the control
of Spinco, including international economic and political trends, expectations of inflation, currency exchange fluctuations, interest
rates and global or regional consumption patterns, speculative activities and increased production due to improved mining and
production methods.

 

Competition.
The resource industry is intensively competitive in all of its phases, and Spinco competes with many other companies possessing
much greater financial and technical resources. Competition is particularly intense with respect to the acquisition of desirable
undeveloped properties. The principal competitive factors in the acquisition of prospective properties include the staff and data
necessary to identify and investigate such properties, and the financial resources necessary to acquire and develop the projects.
Competition could adversely affect Spinco’s ability to acquire additional suitable prospects suitable for exploration.

 

No
Market for Securities. Spinco will not initially trade on any stock exchange and therefore there will be no market for
Spinco’s securities. There can be no assurances that Spinco will ever be listed or posted for trading on any exchange, and
no market for Spinco’s securities may develop and Broadway Shareholders who acquire securities of Spinco pursuant to the
Arrangement may never be able to re- sell their Spinco securities.

 

8 

     

    -K-2-15 -

    

Title
to Property. Although Spinco has exercised the usual due diligence with respect to title of its properties, there is no
guarantee that title to the properties will not be challenged or impugned as a result of prior unregistered agreements or transfers,
aboriginal land claims, government expropriation and undetected defects.

 

Government
Regulations and Environmental Risks and Hazards. Spinco’s conduct is subject to various federal, provincial, state
laws, rules and regulations, including environmental legislation. Environmental legislation is becoming increasingly stringent
and costs and expenses of regulatory compliance are increasing. The impact of new and future environmental legislation on Spinco’s
operations may cause additional expenses and restrictions. If the restrictions adversely affect the scope of exploration and development
on the resource property interests, the potential for production on the property may be diminished or negated. Spinco has adopted
environmental practices designed to ensure that it continues to comply with environmental regulations currently applicable to
it.

 

Licenses
and Permits. The operations of Spinco require licenses and permits from various government authorities. Spinco believes
that it will hold all necessary licenses and permits under applicable laws and regulations for work in progress. However, such
licenses and permits are subject to change in various circumstances. There can be no guarantee that Spinco will be able to obtain
or maintain all necessary licenses and permits that may be required to explore and develop its properties, commence construction
or operation of mining facilities or to maintain continued operations that economically justify the cost.

 

CAPITAL
MANAGEMENT

 

Spinco
manages its capital structure and makes adjustments to it, based on the funds available to Spinco, in order to support the acquisition
and exploration of mineral properties. The Board of Directors does not establish quantitative return on capital criteria for management,
but rather relies on the expertise of Spinco’s management to sustain future development of the business. Spinco defines
capital that it manages as share capital and cash equivalents.

 

The
properties in which Spinco currently has an interest are in the exploration stage; as such, Spinco has historically relied on
equity financing to fund its activities. Management reviews its capital management approach on an ongoing basis and believes that
this approach, given the relative size of Spinco, is reasonable.

 

EVALUATION
OF DISCLOSURE CONTROLS AND POLICIES

 

Disclosure
controls and procedures are designed to provide reasonable assurance that information required to be disclosed by Spinco in reports
filed with or submitted to the various securities regulators is recorded, processed, summarized and reported within the time periods
specified. This information is gathered and reported to Spinco’s management, which includes the Chief Executive Officer
(“CEO”) and Chief Financial Officer (“CFO”), so that timely decisions can be made regarding disclosure.
Spinco’s management, under the supervision of, and with the participation of, the CEO and CFO has designed Spinco’s
disclosure controls and procedures. As at the date hereof, the CEO and CFO have evaluated the design and operation of Spinco’s
disclosure controls and procedures. Based on that evaluation, the CEO and CFO concluded that Spinco’s disclosure controls
and procedures were effective as at the date hereof.

 

9 

     

    -K-2-16 -

    

EVALUATION
OF INTERNAL CONTROLS OVER FINANCIAL REPORTING

 

Designing,
establishing and maintaining adequate internal control over financial reporting is the responsibility of Spinco’s management.
Internal control over financial reporting is a process designed by, or under the supervision of management, and affected by the
Board of Directors, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Spinco’s
financial statements in accordance with IFRS.

 

These
controls include policies and procedures that: pertain to the maintenance of records that, in reasonable detail, accurately reflect
transactions pertaining to its assets, provide reasonable assurance that all transactions are recorded to permit the preparation
of its financial statements in accordance with IFRS, and that expenditures are being made only in accordance with authorizations
of management of Spinco, and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of Spinco’s assets that could have a material effect on its financial statements.

 

Management
is responsible for establishing and maintaining internal control over financial reporting and has designed and implemented such
controls to ensure that the required objectives of these internal controls have been met. The management of Spinco applied its
judgment in evaluating the cost benefit relationship to controls and procedures. The result of which was, because of the inherent
limitations in all control systems, that no evaluation of the controls can provide absolute assurance that all control issues
and instances of fraud, if any, have been detected.

 

As
at the date hereof, the officers of Spinco evaluated the design and implementation of Spinco’s internal control over financial
reporting (“ICFR”). Based on this evaluation of the design and operating effectiveness of Spinco’s ICFR, the
CEO and CFO concluded that Spinco’s ICFR was effective as at the date hereof.

 

ADDITIONAL
INFORMATION

 

Additional
information relating to Spinco can also be found under Broadway’s profile (and, if the Arragement is completed, under Spinco’s
profile) on SEDAR at www.sedar.com.

 

10 

     

    -K-3-1 -

    

SCHEDULE
3 TO APPENDIX K - STATEMENT OF CORPORATE GOVERNANCE PRACTICES

 

National
Policy 58-201 Corporate Governance Guidelines (“NP 58-201”) establishes corporate governance guidelines
which apply to all public companies. Spinco has reviewed its own corporate governance practices in light of these guidelines.
In certain cases, Spinco’s practices comply with the guidelines, however, the Spinco Board considers that some of the guidelines
are not suitable for Spinco at its current stage of development and therefore these guidelines have not been adopted. National
Instrument 58-101 - Disclosure of Corporate Governance Practices mandates disclosure of corporate governance practices
for Venture Issuers in Form 58-101F2, which disclosure is set out below.

 

Board
of Directors

 

Structure
and Compensation

 

The
Spinco Board is currently composed of five (5) directors; being Duane Parnham, Suzanne Wood, Shawn Parnham, Dr. Roger Laine and
Victoria Donato.

 

NP
58-201 suggests that the board of directors of every listed corporation should be constituted with a majority of individuals who
qualify as “independent” directors under NP 58-201 which provides that a director is independent if he or she has
no direct or indirect “material relationship” with Spinco. “Material relationship” is defined as a relationship
which could, in the view of the Spinco Board, be reasonably expected to interfere with the exercise of a director’s independent
judgement. Of the current directors, Shawn Parnham, Dr. Roger Laine and Victoria Donato are considered “independent”.
Suzanne Wood has been a member of management within three years of the date hereof, and Duane Parnham is currently a member of
management.

 

Board
Responsibilities

 

The
mandate of the Spinco Board is to manage or supervise the management of the business and affairs of Spinco and to act with a view
to the best interests of Spinco. In doing so, the Spinco Board oversees the management of Spinco’s affairs directly and
through its committees (see “Other Board Committees” below). In fulfilling its mandate, the Spinco Board, among other
matters, is responsible for reviewing and approving Spinco’s overall business strategies and its annual business plan, reviewing
and approving the annual corporate budget and forecast, reviewing and approving significant capital investments outside the approved
budget; reviewing major strategic initiatives to ensure that Spinco’s proposed actions accord with shareholder objectives;
reviewing succession planning; assessing management’s performance against approved business plans and industry standards;
reviewing and approving the reports and other disclosure issued to shareholders; ensuring the effective operation of the Spinco
Board; and safeguarding shareholders’ equity interests through the optimum utilization of Spinco’s capital resources.
The Spinco Board also takes responsibility for identifying the principal risks of Spinco’s business and for ensuring these
risks are effectively monitored and mitigated to the extent reasonably practicable. At this stage of Spinco’s development,
the Spinco Board does not believe it is necessary to adopt a written mandate, as sufficient guidance is found in the applicable
corporate and securities legislation and regulatory policies. However, as Spinco grows, the Spinco Board will move to develop
a formal written mandate.

 

In
keeping with its overall responsibility for the stewardship of Spinco, the Spinco Board is also responsible for the integrity
of Spinco’s internal control and management information systems and for Spinco’s policies respecting corporate disclosure
and communications.

 

The
Spinco Board delegates to management, through the Chief Executive Officer and the Chief Financial Officer, responsibility for
meeting defined corporate objectives, implementing approved strategic and operating plans, carrying on Spinco’s business
in the ordinary course, managing Spinco’s cash flow, evaluating new business opportunities, recruiting staff and complying
with applicable regulatory requirements. The Spinco Board also looks to management to furnish recommendations respecting corporate
objectives, long-term strategic plans, and annual operating plans.

     

    -K-3-2 -

    

The
Spinco Board currently does not have a Chair and does not consider that, at this stage of Spinco’s development, it is necessary
to have one. Given the size of Spinco’s current operations, the Spinco Board believes that Spinco is well serviced. In addition,
the Spinco Board has found that the fiduciary duties placed on management by Spinco’s governing corporate legislation and
common law and the restrictions on an individual director’s participation in decisions of the Spinco Board in which the
director has an interest under applicable corporate and securities legislation provide the “independent” directors
with significant input and leadership in exercising their responsibilities for independent oversight of management. In addition,
each member of the Spinco Board understands that he is entitled to seek the advice of an independent expert if he reasonably considers
it warranted under the circumstances and the “independent” directors have the ability to meet independently of management
whenever deemed necessary. As of the year ended November 30, 2016 the independent directors have not exercised their right to
meet independently of management given Spinco’s limited operations at the current time; as such the decisions required of
the Spinco Board have been considered routine and in the ordinary course of business, the independent directors have not deemed
it necessary to review such materials separate and apart from management.

 

The
Spinco Board, through the Audit Committee, has the responsibility to identify the principal risks of Spinco’s business.
It works with management to implement policies to identify the risks and to establish systems and procedures to ensure that these
risks are monitored.

 

The
Spinco Board has delegated responsibility for the integrity of internal controls and management information systems to the Audit
Committee. Spinco’s external auditors report directly to the Audit Committee. In its regular meetings with the external
auditors, the Audit Committee discusses, among other things, Spinco’s financial statements and the adequacy and effectiveness
of Spinco’s internal controls and management information systems.

 

Directorships

 

The
following directors of Spinco are currently directors of other reporting issuers:

 

	Name of Director	 	Reporting Issuer
	Duane Parnham	 	Broadway Gold Mining Ltd.

                                                      Giyani Gold Corp.   
Canoe Mining Ventures Corp.   
Nevada Zinc. Corp. 

	Suzanne Wood	 	Sante Veritas Therapeutics Inc. (wholly owned subsidiary of Sante Veritas Holdings Ltd.)

 

Orientation
and Continuing Education

 

The
skills and knowledge of the Spinco Board as a whole is such that no formal continuing education process is currently deemed required.
The Spinco Board is comprised of individuals with varying backgrounds, who have, both collectively and individually, extensive
experience in running and managing public companies. Board members are encouraged to communicate with management, auditors, and
technical consultants to keep themselves current with industry trends and developments and changes in legislation, with management’s
assistance. Board members have full access to Spinco’s records.

 

Spinco
provides continuing education to its directors as such need arises and encourages open discussion at all meetings which format
encourages learning by the directors. Members of the Spinco Board are encouraged to communicate with management, auditors and
technical consultants; to keep themselves current with industry trends and developments and changes in legislation; and to attend
related industry seminars and visit Spinco’s operations.

 

Ethical
Business Conduct

 

The
Spinco Board expects management to operate the business of Spinco in a manner that enhances shareholder value and is consistent
with the highest level of integrity. Management is expected to execute Spinco’s business plan and to meet performance goals
and objectives.

     

    -K-3-3 -

    

However,
to date, the Spinco Board has not adopted a formal written Code of Business Conduct and Ethics. The Spinco Board has found that
the fiduciary duties placed on individual directors by Spinco’s governing corporate legislation and the common law, as well
as the restrictions placed by applicable corporate and securities legislation on the individual director’s participation
in decisions of the Spinco Board in which the director has an interest, have been sufficient to ensure that the Spinco Board operates
independently of management and in the best interests of Spinco and its shareholders.

 

In
addition, the limited size of Spinco’s operations and the small number of officers and employees allows the Spinco Board
to monitor on an ongoing basis the activities of management and to ensure that the highest standard of ethical conduct is maintained.
As Spinco grows in size and scope, the Spinco Board anticipates that it will formulate and implement a formal Code of Business
Conduct and Ethics.

 

Nomination
of Directors

 

Given
its current size and stage of development, the Spinco Board has not appointed a nominating committee and these functions are currently
performed by the Spinco Board as a whole. Nominees are generally the result of recruitment efforts by the Spinco Board members,
including both formal and informal discussions among the Spinco Board members and the Chief Executive Officer, and proposed directors’
credentials are reviewed in advance of a Board meeting with one or more members of the Spinco Board prior to the proposed director’s
nomination.

 

Compensation

 

The
quantity and quality of the Spinco Board compensation is reviewed on an annual basis. At present, the Spinco Board is satisfied
that the current Spinco Board compensation arrangements, Given Spinco’s current size and stage of development, the Spinco
Board has not appointed a formal compensation committee, but instead the independent directors make recommendations to the Spinco
Board regarding executive compensation (including longterm incentive in the form of stock options) to be paid to Spinco’s
executive officers having regard to the responsibilities and risks associated with each position. In addition, compensation to
be paid to executive officers who are also directors must be approved by the disinterested directors thereby providing the nonexecutive
officer directors with significant input into compensation decisions.

 

Other
Board Committees

 

The
Spinco Board has no other committees other than the Audit Committee. As Spinco evolves, and its operations and management structure
become more complex, the Spinco Board will likely find it appropriate to constitute additional standing committees, such as a
formal Governance Committee, a Compensation Committee, and a Nominating Committee, and to ensure that such committees are governed
by written charters and are composed of at least a majority of independent directors.

 

Assessments

 

The
Spinco Board does not, at present, have a formal process in place for assessing the effectiveness of the Spinco Board as a whole,
its committees or individual directors, but will consider implementing one in the future should circumstances warrant. Based on
Spinco’s current size, its stage of development and the limited number of individuals on the Spinco Board, the Spinco Board
considers a formal assessment process to be inappropriate at this time. The Spinco Board plans to continue evaluating its own
effectiveness and the effectiveness and contribution of its committees or individual directors on an ad hoc basis.

     

    -K-4-1 -

    

SCHEDULE
4 TO APPENDIX K - SPINCO AUDIT COMMITTEE CHARTER

 

MADISON
METALS INC. 

AUDIT
COMMITTEE CHARTER

 

		A.	ROLE

 

The
overall purpose of the Audit Committee (the “Committee”) is to assist the Board in fulfilling its responsibility to
ensure that the Corporation’s management has designed and implemented an effective system of internal financial control,
to review and report on the integrity of the financial statements and related financial disclosure of the Corporation and to review
the Corporation’s compliance with regulatory and statutory requirements as they relate to financial statements, taxation
matters and disclosure of financial information.

 

		B.	COMPOSITION,
                                         PROCEDURES AND ORGANIZATION

 

		1.	The
                                         Committee shall consist of at least three members of the Board of Directors (the “Board”).

 

		2.	The
                                         Board, at its organizational meeting held in conjunction with each annual general meeting
                                         of the shareholders, shall appoint the members of the Committee for the ensuing year.
                                         The Board may at any time remove or replace any member of the Committee and may fill
                                         any vacancy in the Committee.

 

		3.	Unless
                                         the Board shall have appointed a chair of the Committee, the members of the Committee
                                         shall elect a chair and a secretary from among their number.

 

		4.	The
                                         quorum for meetings shall be a majority of the members of the Committee, present in person
                                         or by telephone or other telecommunication device that permits all persons participating
                                         in the meeting to speak and to hear each other.

 

		5.	The
                                         Committee shall have access to such officers and employees of the Corporation and to
                                         the Corporation’s external auditors, and to such information respecting the Corporation,
                                         as it considers to be necessary or advisable in order to perform its duties and responsibilities.

 

		6.	Meetings
                                         of the Committee shall be conducted as follows:

 

		a.	the
                                         Committee shall meet at least twice annually (before and after the annual audit) at such
                                         times and at such locations as may be requested by the chair of the Committee. The external
                                         auditors or any member of the Committee may request a meeting of the Committee;

 

		b.	the
                                         external auditors shall receive notice of and have the right to attend all meetings of
                                         the Committee; and

 

		c.	management
                                         representatives may be invited to attend all meetings except private sessions with the
                                         external auditors.

 

		7.	The
                                         external auditors shall have a direct line of communication to the Committee through
                                         its chair and may bypass management if deemed necessary. The Committee, through its chair,
                                         may contact directly any employee in the Corporation as it deems necessary, and any employee
                                         may bring before the Committee any matter involving questionable, illegal or improper
                                         financial practices or transactions.

 

		C.	RESPONSIBILITIES
                                         AND PROCESSES

 

		1.	The
                                         Committee’s primary responsibilities are as follows:

 

		a.	to
                                         assist the Board in the discharge of its responsibilities relating to the Corporation’s
                                         accounting principles, reporting practices and internal controls and its approval of
                                         the Corporation’s annual and quarterly consolidated financial statements and related
                                         financial disclosure;

     

    -K-4-2 -

    

		b.	to
                                         establish and maintain a direct line of communication with the Corporation’s internal
                                         and external auditors and assess their performance;

 

		c.	pre-approve
                                         all audit services and permissible non-audit services as may be amended from time to
                                         time;

 

		d.	to
                                         ensure that the management of the Corporation has designed, implemented and is maintaining
                                         an effective system of internal financial control; and

 

		e.	to
                                         report regularly to the Board on the fulfillment of its duties and responsibilities.

 

		2.	The
                                         duties of the Committee relating to its oversight responsibilities are:

 

		a.	to
                                         recommend to the Board a firm of external auditors to be engaged by the Corporation,
                                         and to verify the independence of such external auditors;

 

		b.	to
                                         review and approve the fee, scope and timing of the audit and other related services
                                         rendered by the external auditors;

 

		c.	review
                                         the audit plan of the external auditors prior to the commencement of the audit;

 

		d.	to
                                         discuss with the independent auditor and CFO’s financial and accounting personnel,
                                         both together and separately, the adequacy and effectiveness of the internal controls
                                         over financial reporting ; whereby eliciting recommendations for the improvement of such
                                         internal control procedures or specific areas where new or more detailed controls may
                                         be desirable;

 

		e.	to
                                         provide sufficient opportunity for the independent auditor to meet with members of the
                                         Committee without members of management present, to perform an evaluation of the CFO’s
                                         financial and accounting personnel and the cooperation that the independent auditor received
                                         during the course of the audit;

 

		f.	to
                                         discuss with the external auditors the quality and not just the acceptability of the
                                         Corporation’s accounting principles; and

 

		g.	to
                                         implement structures and procedures to ensure that the Committee meets the external auditors
                                         on a regular basis in the absence of management.

 

	3.	The
                                         duties and responsibilities of the Committee as they relate to the internal control procedures
                                         of the Corporation are to:

 

		a.	review
                                         the appropriateness and effectiveness of the Corporation’s policies and business
                                         practices which impact on the financial integrity of the Corporation, including those
                                         relating to internal auditing, insurance, accounting, information services and systems
                                         and financial controls, management reporting and risk management;

 

		b.	review
                                         compliance under the Corporation’s business conduct and ethics policies and to
                                         periodically review these policies and recommend to the Board changes which the Committee
                                         may deem appropriate;

 

		c.	review
                                         any unresolved issues between management and the external auditors that could affect
                                         the financial reporting or internal controls of the Corporation; and (d) periodically
                                         review the Corporation’s financial and auditing procedures and the extent to which
                                         recommendations made by the external auditors have been implemented.

     

    -K-4-3 -

    

		4.	The
                                         Committee is also charged with the responsibility to:

 

		a.	review
                                         the Corporation’s quarterly statements of earnings, including the impact of unusual
                                         items and changes in accounting principles and estimates and report to the Board with
                                         respect thereto;

 

		b.	review
                                         and approve the financial sections of the annual report to shareholders; annual and interim
                                         MD&A; prospectuses; news releases discussing financial results of the Corporation;
                                         and any other public reports of a financial nature requiring approval by the Board, and
                                         report to the Board with respect thereto;

 

		c.	review
                                         regulatory filings and decisions as they relate to the Corporation’s financial
                                         statements;

 

		d.	review
                                         the appropriateness of the policies and procedures used in the preparation of the Corporation’s
                                         financial statements and other required disclosure documents, and consider recommendations
                                         for any material change to such policies;

 

		e.	review
                                         and report on the integrity of the Corporation’s financial statements;

 

		f.	review
                                         the minutes of any audit committee meeting of subsidiary companies (if applicable);

 

		g.	review
                                         with management, the external auditors and, if necessary, with legal counsel, any litigation,
                                         claim or other contingency, including tax assessments that could have a material effect
                                         upon the financial position or operating results of the Corporation and the manner in
                                         which such matters have been disclosed in the consolidated financial statements;

 

		h.	review
                                         the Corporation’s compliance with regulatory and statutory requirements as they
                                         relate to financial statements, tax matters and disclosure of financial information;
                                         and

 

		i.	develop
                                         a calendar of activities to be undertaken by the Committee for each ensuing year and
                                         to submit the calendar in the appropriate format to the Board of Directors following
                                         each annual general meeting of shareholders.

     

    - L- 1 -

    

APPENDIX
L 

INFORMATION
CONCERNING DELAWARE SUBCO

 

Corporate
Structure

 

Delaware
Subco was incorporated in accordance with the DGCL on September 26, 2019 for the purposes of the Arrangement. Delaware Subco is
a private company and is a wholly-owned subsidiary of Broadway. No material amendments have been made to Delaware Subco’s
articles or other constating documents since its incorporation.

 

Delaware
Subco’s registered office address is c/o Cogency Global Inc., 850 New Burton Rd., Suite 201, Dover, County of Kent, Delaware
19904 and the name of its registered agent at that address is Cogency Global Inc.

 

As
at the date of this Circular, Delaware Subco does not have any of its securities listed or quoted, has not applied to list or
quote any of its securities, and does not intend to apply to list or quote any of its securities, on the Toronto Stock Exchange,
a U.S. marketplace, or a marketplace outside of Canada and the United States of America other than the Alternative Investment
Market of the London Stock Exchange or the PLUS markets operated by PLUS Markets Group plc.

 

General
Description of The Business

 

The
purpose for the existence of Delaware Subco is to complete the Merger with MindMed pursuant to the Arrangement and in accordance
with the Plan of Arrangement (please Appendix “C” for more information regarding the Plan of Arrangement). In connection
with the Merger, MindMed will be the surviving corporation and Delaware Subco will cease to exist as a separate entity. Upon incorporation,
one common share of Delaware Subco was issued to Broadway and it is therefore a wholly-owned subsidiary of Broadway. This common
share will be cancelled upon completion of the Merger. Delaware Subco does not have any business operations and does not have
any plans to operate any business.

 

Intercorporate
Relationships

 

Delaware
Subco is a wholly-owned subsidiary of Broadway. It has no subsidiaries.

 

General
Development of The Business – Three Year History

 

Delaware
Subco was incorporated on September 26, 2019 and has had no business operations to date.

 

Significant
Acquisitions and Dispositions

 

Delaware
Subco has not completed a financial year. The future operating results and financial position of Delaware Subco cannot be predicted.
If the Arrangement is completed, the separate existence of Delaware Subco will cease pursuant to the terms of the Plan of Arrangement
and the Merger.

 

Trends

 

Management
is not aware of any trend, commitment, event or uncertainty that is both presently known to management and reasonably expected
to have a material effect on Delaware Subco’ business, financial condition or results of operations as at the date of this
Circular, except as otherwise disclosed herein or except in the ordinary course of business.

     

    - L- 2 -

    

Delaware
Subco Selected Financial Information

 

The
following table sets out selected financial information in respect of Delaware Subco as at November 30, 2019.

 

	 	 	November 30, 2019 

($)
	Current assets	 	1.00
	Total assets	 	1.00
	Total liabilities	 	Nil
	Delaware Subco Shareholders’ equity	 	1.00
	Net Loss	 	Nil

 

The
authorized capital of Delaware Subco consists of an unlimited number of common shares. There is currently one common share outstanding,
which is held by Broadway and is expected to be cancelled in connection with the Merger.

 

Dividend
Policy

 

Delaware
Subco has not paid dividends since its incorporation and does not anticipate paying any dividends.

 

Voting
and Other Rights

 

Holders
of Delaware Subco Common Shares are entitled to one vote per share at all meetings of Delaware Subco Shareholders, to receive
dividends as and when declared by the directors and to receive a pro rata share of the assets of Delaware Subco available for
distribution to holders of Delaware Subco Common Shares in the event of liquidation, dissolution or winding up of Delaware Subco.
All rank pari passu, each with the other, as to all benefits which might accrue to the holders of Delaware Subco Common Shares.

 

Consolidated
Capitalization

 

Delaware
Subco has not completed a financial year. There have not been any material changes in the share and loan capital of Delaware Subco
since the date of incorporation. See the audited financial statements of Delaware Subco for the period ended November 30, 2019
appended as Schedule 1 to Appendix “L” to this Circular.

 

Options
and Other Rights to Purchase Shares

 

Delaware
Subco has not issued any options or other rights to purchase common shares and does not have any current intention to do so.

 

Prior
Sales

 

Delaware
Subco has not issued any shares except one incorporation Delaware Subco Common Share to Broadway on September 26, 2019 for consideration
of $1.00. This share will be cancelled upon closing of the Plan of Arrangement and the effectiveness of the Merger.

 

Escrowed
Securities and Securities Subject to Contractual Restriction On Transfer

 

There
are no Delaware Subco Common Shares currently held in escrow or that are subject to a contractual restriction on transfer. On
completion of the Arrangement, no Delaware Subco Common Shares will be held in escrow.

 

Resale
Restrictions

 

See
 “Securities Law Matters” in this Circular.

 

Principal
Shareholders

 

Broadway
is the principal shareholder of Delaware Subco, as it holds the only issued and outstanding security of Delaware Subco, being
one common share. Upon completion of the Merger pursuant to the Plan of Arrangement, the separate legal existence of Delaware
Subco will cease and the common share will be cancelled.

     

    - L- 3 -

    

Directors
and Officers

 

Duane
Parnham, the current Chief Executive Officer and a director of Broadway, is the current President and the sole director of Delaware
Subco.

 

Corporate
Cease Trade Orders, Bankruptcies, Penalties or Sanctions or Individual Bankruptcies, Penalties or Sanctions or Individual Bankruptcies

 

To
the knowledge of Delaware Subco, no director or executive officer:

 

		(d)	is,
                                         as at the date of this Circular, or has been, within ten years before the date of this
                                         Circular, a director, chief executive officer or chief financial officer of any company
                                         (including Delaware Subco) that:

 

		(i)	was
                                         the subject, while the director was acting in that capacity as a director, chief executive
                                         officer or chief financial officer of such company, of a cease trade or similar order
                                         or an order that denied the relevant company access to any exemption under securities
                                         legislation, that was in effect for a period of more than 30 consecutive days; or

 

		(ii)	was
                                         subject to a cease trade or similar order or an order that denied the relevant company
                                         access to any exemption under securities legislation, that was in effect for a period
                                         of more than 30 consecutive days, that was issued after the director ceased to be a director,
                                         chief executive officer or chief financial officer but which resulted from an event that
                                         occurred while the director was acting in the capacity as director, chief executive officer
                                         or chief financial officer of such company; or

 

		(e)	is,
                                         as at the date of this Circular, or has been within 10 years before the date of this
                                         Circular, a director or executive officer of any company (including Delaware Subco) that,
                                         while that person was acting in that capacity, or within a year of that person ceasing
                                         to act in that capacity, became bankrupt, made a proposal under any legislation relating
                                         to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement
                                         or compromise with creditors or had a receiver, receiver manager or trustee appointed
                                         to hold its assets; or

 

		(f)	has,
                                         within the ten years before the date of this Circular, become bankrupt, made a proposal
                                         under any legislation relating to bankruptcy or insolvency, or become subject to or instituted
                                         any proceedings, arrangement or compromise with creditors, or had a receiver, receiver
                                         manager or trustee appointed to hold the assets of the director;

 

None
of the director of Delaware SubCo (or any personal holding companies) has been subject to:

 

		(i)	any
                                         penalties or sanctions imposed by a court relating to securities legislation or by a
                                         securities regulatory authority or has entered into a settlement agreement with a securities
                                         regulatory authority; or

 

		(ii)	any
                                         other penalties or sanctions imposed by a court or regulatory body that would likely
                                         be considered important to a reasonable security holder in deciding whether to vote for
                                         a proposed director.

 

Indebtedness
of Directors, Executive Officers and Senior Officers

 

There
is and has been no indebtedness of any director, executive officer or senior officer or associate of any of them, to or guaranteed
or supported by Delaware Subco during the period from incorporation.

     

    - L- 4 -

    

Statement
of Executive Compensation

 

Compensation
Discussion and Analysis

 

Delaware
Subco was incorporated on September 26, 2019 and, accordingly, has not yet completed a financial year and has not yet developed
a compensation program. It is not expected that Delaware Subco will adopt a compensation program as it was incorporated for the
purposes of completing the Merger with MindMed.

 

Summary
Compensation

 

Delaware
Subco was incorporated September 26, 2019 and has not yet completed a financial year. No compensation has been paid to date. In
addition, it has no compensatory plan or other arrangements in respect of compensation received or that may be received by its
any director or officer.

 

Following
the completion of the Arrangement and the Merger, the separate existence of Delaware Subco will cease. Delaware Subco does not
currently have any compensation policies or mechanisms in place and does not expect to put any in place.

 

Option-Based
Awards

 

Delaware
Subco has not granted any option-based awards and does not expect to do so.

 

Incentive
Plan Awards

 

Delaware
Subco does not have any incentive plans, pursuant to which compensation that depends on achieving certain performance goals or
similar conditions within a specified period is awarded, earned, paid or payable, and does not expect to put any such plans in
place.

 

Pension
Plan Benefits

 

Delaware
Subco does not have a pension plan that provides for payments or benefits to the Named Executive Officers at, following, or in
connection with retirement.

 

Termination
of Employment, Change in Responsibilities and Employment Contracts

 

Delaware
Subco has no employment contracts between it and any director or officer.

 

Defined
Benefit or Actuarial Plan Disclosure

 

Delaware Subco has no defined benefit or actuarial plans.

 

Director Compensation

 

Delaware
Subco currently has no arrangements, standard or otherwise, pursuant to which directors are compensated by Delaware Subco for
their services in their capacity as directors, or for committee participation, involvement in special assignments or for services
as a consultant or expert since its incorporation on September 26, 2019 and up to and including the date of this Circular.

 

Aggregate
Options Exercised and Option Values

 

No
stock options have been granted by Delaware Subco or exercised since the date of its incorporation on September 26, 2019.

     

    - L- 5 -

    

Audit
Committee

 

Delaware
Subco does not have an audit committee and does not expect to establish one, as it was incorporated for the sole purpose of completing
the Merger with MindMed. To date, Delaware Subco has paid no fees to its external auditor.

 

Promoter

 

Broadway
took the initiative in Delaware Subco’s organization and, accordingly, may be considered to be the promoter of Delaware
Subco within the meaning of applicable Securities Legislation. During the period from incorporation to and including the closing
of the Arrangement, the only material thing of value which Broadway has or will receive from Delaware Subco is the Delaware Subco
Common Share issued to Broadway on incorporation of Delaware Subco on September 26, 2019, which will be cancelled on completion
of the Merger.

 

Legal
Proceedings

 

To
the best of Delaware Subco’s knowledge, following due enquiry, Delaware Subco is not a party to any material legal proceedings
and Delaware Subco is not aware of any such proceedings known to be contemplated.

 

To
the best of Delaware Subco’s knowledge, following due enquiry, there have been no penalties or sanctions imposed against
Delaware Subco by a court relating to federal, state, provincial and territorial securities legislation or by a securities regulatory
authority since incorporation, nor have there been any other penalties or sanctions imposed by a court or regulatory body against
Delaware Subco and it has not entered into any settlement agreements before a court relating to provincial and territorial securities
legislation or with a securities regulatory authority.

 

Interest
of Management and Others in Material Transactions

 

No
director, executive officer or greater than 10% shareholder of Delaware Subco, other than Broadway, and no associate or affiliate
of the foregoing persons has or had any material interest, direct or indirect, in any transaction since incorporation or in any
proposed transaction which in either such case has materially affected or will materially affect Delaware Subco save as described
herein.

 

Auditors

 

The
auditors of Delaware Subco are MNP LLP. The auditors of Delaware Subco will be present at the Meeting, and will be able to respond
to questions with respect to the financial statements of Delaware Subco included with this Circular.

 

Registrar
and Transfer Agent

 

Delaware
Subco does not have a registrar and transfer agent as it only has one common share outstanding, which is expected to be cancelled
on completion of the Merger in accordance with the Plan of Arrangement. Upon completion of the Arrangement, the separate existence
of Delaware Subco will cease.

 

Material
Contracts

 

The
only agreement or contract that Delaware Subco has entered into since its incorporation or will enter into as part of the Arrangement
which may be reasonably regarded as being material is the Arrangement Agreement, a copy of which may be found under Broadway’s
profile on the SEDAR website at www.SEDAR.com.

     

    - L-1-1 -

    

SCHEDULE
1 TO APPENDIX L - FINANCIAL STATEMENTS OF DELAWARE SUBCO

 

Audited
financial statements of Delaware Subco from the date of incorporation to a date not more than 90 days before the date of the circular
comprised of:

 

		•	statement
                                         of changes in equity;

		•	statement
                                         of cash flows;

		•	statement
                                         of financial position.

 

(begins
on following page)

     

    - L-1-2 -

    

 

 

 

BROADWAY DELAWARE SUBCO INC.

 FINANCIAL STATEMENTS

PERIOD FROM INCORPORATION (SEPTEMBER 26, 2019) TO NOVEMBER 30, 2019

(EXPRESSED IN CANADIAN DOLLARS)

 

 

 

     

    - L-1-3 -

    

 

 

Independent Auditor’s Report

 

 

To the Shareholder of Broadway Delaware Subco Inc.:

 

Opinion

 

We have audited the financial statements of Broadway Delaware Subco Inc. (the “Company”), which comprise the statement of financial position as at November 30, 2019, the statement of changes in equity and cash flows for the period from incorporation on September 26, 2019 to November 30, 2019, and notes to the financial statements, including a summary of significant accounting policies.

 

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at November 30, 2019, and its financial performance and its cash flows for the period from incorporation on September 26, 2019 to November 30, 2019 in accordance with International Financial Reporting Standards.

 

Basis for Opinion

 

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Other Information

 

Management is responsible for the other information. The other information comprises Management’s Discussion and Analysis.

 

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

 

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

 

Responsibilities of Management and Those Charged with Governance for the Financial Statements

 

Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

 

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

 

	
 

	
 

	
ACCOUNTING
 > CONSUTLING > TAX

	
SUITE
2200, MNP TOWER, 1021 WEST HASTINGS STREET, VANCOUNVER B.C., V6E 0C3

	
1.877.688.8408 T: 604.685.8408 F: 604.685.8594 MNP.ca

 

     

    - L-1-4 -

    

 

Auditor’s Responsibilities for the Audit of the Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.

 

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

 

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

 

	
 

	
☐

	
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

	
 

	
☐

	
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

	
 

	
☐

	
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

	
 

	
☐

	
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

	
 

	
☐

	
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

 

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

 

The engagement partner on the audit resulting in this independent auditor’s report is Jian-Kun Xu.

 

	Vancouver,
British Columbia 

	
	January 10,
2020

	Chartered
Professional Accountants

 

	
 

	
 

	
ACCOUNTING
 > CONSUTLING > TAX

	
SUITE
2200, MNP TOWER, 1021 WEST HASTINGS STREET, VANCOUNVER B.C., V6E 0C3

	
1.877.688.8408 T: 604.685.8408 F: 604.685.8594 MNP.ca

     

    - L-1-5 -

    

 

 

Broadway Delaware Subco Inc.

Statement of Financial Position
(Expressed in Canadian Dollars)

 

 

 

	
 

	
 

	
As at 

November
30,
2019

	
 

	
 

	
 

	
 

	
 

	
 

	
ASSETS

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Current assets

	
 

	
 

	
 

	
 

	
Amounts receivable

	
 

	
$

	
1

	
 

	
Total assets

	
 

	
$

	
1

	
 

	
 

	
 

	
 

	
 

	
 

	
EQUITY

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Share capital

	
 

	
$

	
1

	
 

	
Deficit

	
 

	
 

	
—

	
 

	
Total equity

	
 

	
$

	
1

	
 

 

The accompanying notes to the financial statements are an integral part of these statements.

 

Nature of operations (note 1)

 

Approved on behalf of the Board:

 

	
(Signed) "Duane Parnham"

	
Director

 

-
1 -

     

    - L-1-6 -

    

 

 

Broadway Delaware Subco Inc.

Statement of Changes in Equity

(Expressed in Canadian Dollars)

 

 

 

	 	 	Share capital	 	 	Deficit	 	 	Total	 
	Balance, September 26, 2019	 	$	-	 	 	$	-	 	 	$	-	 
	Incorporation share issued (note 4)	 	 	1	 	 	 	-	 	 	 	1	 
	Net loss for the period	 	 	-	 	 	 	-	 	 	 	-	 
	Balance, November 30, 2019	 	$	1	 	 	$	-	 	 	$	1	 

 

The accompanying notes to the financial statements are an integral part of these statements.

 

-
2 -

     

    - L-1-7 -

    

 

Broadway Delaware Subco Inc.

Notes to Financial Statements

Period from Incorporation (September 26, 2019) to November 30, 2019 

(Expressed in Canadian Dollars)

 

 

 

	
1.

	
Nature of operations

 

Broadway Delaware Subco Inc. (“Delaware Subco” or the “Company”) is a private company incorporated under the provisions of the Delaware General Corporation Law on September 26, 2019 in order to complete the Arrangement (as defined in note 7). Delaware Subco is a wholly owned subsidiary of Broadway Gold Mining Ltd. (“Broadway”), a TSX-V listed entity. Its registered and head office is located at c/o Cogency Global Inc., 850 New Burton Rd., Suite 201, Dover, County of Kent, Delaware 19904.

 

	
2.

	
Significant accounting policies

 

The Company applies International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”).

 

The policies applied in these financial statements are based on IFRSs issued and outstanding as of November 30, 2019. These financial statements were approved by the Board of Directors on January 10, 2020.

 

Basis of presentation

 

These financial statements have been prepared on a historical cost basis, with the exception of certain financial instruments, which are measured at fair value. The Company’s functional and presentation currency is Canadian dollars.

 

These financial statements do not include the statement of income and comprehensive income and the statement of cash flows as there were no activities during the period from September 26, 2019 (date of incorporation) to November 30, 2019.

 

Cash

 

Cash is comprised of cash on hand. As of November 30, 2019, there were no cash equivalents held by the Company.

 

Share capital

 

The Company records proceeds from share issuances net of issue costs and any tax effects. Common shares issued for consideration other than cash are valued based on their market value at the date the agreement to issue shares was concluded.

 

-
3 -

     

    - L-1-8 -

    

 

Broadway Delaware Subco Inc.

Notes to Financial Statements

Period from Incorporation (September 26, 2019) to November 30, 2019 

(Expressed in Canadian Dollars)

 

 

 

	
2.

	
Significant accounting policies (continued) 

 

Financial instruments

 

Recognition

 

The Company recognizes a financial asset or financial liability on the statement of financial position when it becomes party to the contractual provisions of the financial instrument. Financial assets are initially measured at fair value, and are derecognized either when the Company has transferred substantially all the risks and rewards of ownership of the financial asset, or when cash flows expire. Financial liabilities are initially measured at fair value and are derecognized when the obligation specified in the contract is discharged, cancelled or expired.

 

A write-off of a financial asset (or a portion thereof) constitutes a derecognition event. Write-off occurs when the Company has no reasonable expectations of recovering the contractual cash flows on a financial asset.

 

Classification and measurement

 

The Company determines the classification of its financial instruments at initial recognition. Financial assets and financial liabilities are classified according to the following measurement categories:

 

	
•

	
those to be measured subsequently at fair value, either through profit or loss (“FVTPL”) or through other comprehensive income (“FVTOCI”); and

	
•

	
those to be measured subsequently at amortized cost.

 

The classification and measurement of financial assets after initial recognition at fair value depends on the business model for managing the financial asset and the contractual terms of the cash flows. Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding, are generally measured at amortized cost at each subsequent reporting period. All other financial assets are measured at their fair values at each subsequent reporting period, with any changes recorded through profit or loss or through other comprehensive income (which designation is made as an irrevocable election at the time of recognition).

 

After initial recognition at fair value, financial liabilities are classified and measured at either:

 

	
•

	
amortized cost;

	
•

	
FVTPL, if the Company has made an irrevocable election at the time of recognition, or when required (for items such as instruments held for trading or derivatives); or,

	
•

	
FVTOCI, when the change in fair value is attributable to changes in the Company’s credit risk.

 

The Company reclassifies financial assets when and only when its business model for managing those assets changes. Financial liabilities are not reclassified.

 

Transaction costs that are directly attributable to the acquisition or issuance of a financial asset or financial liability classified as subsequently measured at amortized cost are included in the fair value of the instrument on initial recognition. Transaction costs for financial assets and financial liabilities classified at fair value through profit or loss are expensed in profit or loss.

 

The Company’s financial asset consists of amounts receivable, which are classified and measured at FVTPL, with realized and unrealized gains or losses related to changes in fair value reported in net profit and loss.

 

-
4 -

     

    - L-1-9 -

    

 

Broadway Delaware Subco Inc.

Notes to Financial Statements

Period from Incorporation (September 26, 2019) to November 30, 2019

 (Expressed in Canadian Dollars)

 

 

 

	
3.

	
Capital management

 

The Company manages its capital structure and makes adjustment to it based on the funds available to the Company in order to support the acquisition and exploration of mineral properties. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business. The Company defines capital that it manages as share capital and cash.

 

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There were no changes in the Company’s approach to capital management during the period ended November 30, 2019.

 

	
4.

	
Share capital Authorized share capital

 

Authorized to issue 5,000 common shares with par value of $0.001, voting and participating

 

Issued

 

	 	 	Number of
 shares	 	 	Share capital	 
	Balance, September 26, 2019	 	 	-	 	 	$	-	 
	Issued (i)	 	 	1	 	 	 	1	 
	Balance, November 30, 2019	 	 	1	 	 	$	1	 

 

(i) The Company was incorporated on September 26, 2019 issuing a single share for $1 per share.

 

	
5.

	
Related party transactions

 

The Company did not have any related party transactions during the period from incorporation September 26, 2019 to November 30, 2019.

 

	
6.

	
Income tax

 

The relationship between the expected tax recovery based on the combined federal and provincial income tax rate in Canada and the reported tax expense can be reconciled as follows:

 

	
 

	
 

	
Period from 

incorporation

September 26,
2019 to
November 30,
2019

	
 

	
Income (loss) before income taxes

	
 

	
$

	
-

	
 

	
Expected tax payable (recovery) at 27%

	
 

	
 

	
-

	
 

	
Expected income tax (recovery)

	
 

	
$

	
-

	
 

 

-
5 -

     

    - L-1-10 -

    

 

Broadway Delaware Subco Inc.

Notes to Financial Statements

Period from Incorporation (September 26, 2019) to November 30, 2019 

(Expressed in Canadian Dollars)

 

 

	
7.

	
Proposed transaction

 

On October 15, 2019, Broadway entered into a definitive arrangement agreement (“Arrange Agreement”) with Mind Medicine, Inc., a privately held issuer incorporated under the laws of Delaware (“MindMed”), which will result in a reverse take-over (“RTO”) of Broadway by the current shareholders of MindMed by way of plan of arrangement (“Plan of Arrangement”) under the Business Corporations Act (British Columbia) (“Arrangement”).

 

Pursuant to the terms of the Arrangement Agreement, Delaware Subco will merge with MindMed. In accordance with the Arrangement and the articles of MindMed, all outstanding Class B common shares (“Class B Shares”), Class C common shares (“Class C Shares”) and Class D common shares (“Class D Shares”) of MindMed will be exchanged for Class A common shares (“Class A Shares”), immediately following which all Class A Shares of MindMed will be exchanged, on a one-for-one basis (the “Exchange Ratio”), for securities of Broadway on a Consolidated (as defined below) basis (Broadway following the completion of the Arrangement herein referred to as the “Resulting Issuer”). Any outstanding convertible securities of MindMed, including any convertible securities issued in connection with the MindMed Financing (as defined below), will be exchanged for convertible securities of the Resulting Issuer on the basis of the Exchange Ratio.

 

As part of the Arrangement and subject to the receipt of all required approvals, Broadway will consolidate its outstanding shares, warrants and options on an eight (8) old common shares for one (1) new common share basis (the “Consolidation”) and change its name to “Mind Medicine (MindMed), Inc.” (or such other name as MindMed may determine) (the “Name Change”). It will also amend its capital structure (the “Capital Structure Amendment”) by creating a new class of multiple voting shares that will each carry 100 votes per share (the “Multiple Voting Shares”), and change the name of its common shares to “subordinate voting shares” (with all other terms of the common shares remaining unchanged). The Multiple Voting Shares will be issued to certain U.S. resident holders of MindMed shares in connection with the Arrangement.

 

Broadway has a 100% interest in 6 patented and 35 unpatented claims in the Madison Property located in Montana, USA. The Plan of Arrangement also includes the transfer of all of Broadway’s right, title and interest, and all associated liabilities, in the Madison Property. The Spin-Out Transaction will consist of the transfer of all of the shares of Broadway and any related assets and liabilities in connection with the Madison Property to Madison Metals Inc. (“Madison Metals”), a wholly owned subsidiary of Broadway (“Transferred Assets”). Madison Metals will also assume all liabilities associated with Broadway’s mineral exploration and development business as conducted prior to the completion of the Arrangement. Pursuant to the Plan of Arrangement, Madison Metals will issue common shares to Broadway as consideration for the Transferred Assets, which will be distributed to the holders of record of the Company’s shares immediately before completion of the RTO on a pro-rata basis. Broadway shareholders will be entitled to receive one Madison Metals share for every common share of Broadway on a pre-Consolidation basis held by such shareholder.

 

In connection
with the Arrangement, MindMed has agreed to make a bridge loan available to Broadway (“Bridge Loan”) as provided
in the Arrangement Agreement. The terms of the Bridge Loan provide that MindMed will lend to Broadway (i)  $15,000 on
execution of the Agreement; (ii) a maximum of $30,000 per month, starting on the later of the date of execution of the
Arrangement Agreement and October 1, 2019 and ending on the earlier of the Closing Date (as defined in the Arrangement
Agreement) or January 1, 2020, to cover the costs and expenses necessary to maintain Broadway’s and the Broadway
Montana’s business, and (iii) no more than $170,000 to pay down the aggregate accounts payable currently owed by
Broadway and the Broadway Montana, which amounts will be forgiven or assumed by MindMed upon completion of the
Arrangement.

 

-
6 -

     

    - L-2-1 -

    

SCHEDULE 2 TO APPENDIX L – DELAWARE SUBCO MANAGEMENT DISCUSSION AND ANALYSIS

 

FORWARD LOOKING STATEMENTS

 

This Management’s Discussion and Analysis (“MD&A”) contains certain statements that may be deemed “forward- looking statements,” within the meaning of certain securities laws. Forward-looking statements relate to management’s expectations or beliefs about future performance, events, or circumstances that include, but are not limited to, future production, costs of production, prices of gold, reserve or resource potential, exploration and operational activities, and events or developments that Delaware Subco expects or targets. Forward-looking statements can usually be identified by words such as: “future”, “plans”, “scheduled”, “expects”, “intends”, “estimates”, “forecasts”, “will”, “may”, “could”, “would”, and variations thereof. Although Delaware Subco believes that these statements are based on reasonable assumptions, all forward-looking statements involve known and unknown risks and uncertainties that may cause the actual performance, events, or circumstances of Delaware Subco to be materially different than anticipated. The forward-looking information in this MD&A describes Delaware Subco’ expectations as of the date of this MD&A.

 

Delaware Subco cautions that the foregoing list of material factors is not exhaustive. When relying on Delaware Subco’ forward-looking information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Delaware Subco has assumed a certain progression, which may not be realized. It has also assumed that the material factors referred to in the previous paragraph will not cause such forward-looking information to differ materially from actual results or events. However, the list of these factors is not exhaustive and is subject to change and there can be no assurance that such assumptions will reflect the actual outcome of such items or factors.

 

Forward-looking statements are based on management’s current plans, estimates, projections, beliefs, and opinions and we do not undertake any obligation to update forward-looking statements should the assumptions related to these plans, estimates, projections, beliefs and opinions change, except as required by law.

 

Date

The following management’s discussion and analysis (“MD&A”), which is dated of January 10, 2020, provides a review of the activities, results of operations and financial condition of Delaware Subco as at and for the sixty-five day period beginning on the date of incorporation of Delaware Subco on September 26, 2019 and ended November 30, 2019 as well as future prospects of Delaware Subco. This MD&A should be read in conjunction with the audited financial statements of Delaware Subco as at and for the sixty-five day period ended November 30, 2019 (the “Audited Financial Statements”).

 

All dollar amounts in this MD&A are expressed in Canadian dollars unless otherwise specified (the Delaware Subco’ financial statements are prepared in Canadian dollars).

 

Overall Performance

General

Delaware Subco is a private company incorporated under the provisions of the Delaware General Corporation Law on September 26, 2019 in order to complete the Arrangement. Delaware Subco is a wholly owned subsidiary of Broadway Gold Mining Ltd. (“Broadway”), a TSX-V listed entity. Its registered and head office is located at c/o Cogency Global Inc., 850 New Burton Rd., Suite 201, Dover, County of Kent, Delaware 19904.

 

Stated Business Objectives

Delaware Subco intends to complete the Merger with MindMed.

     

    - L-2-2 -

    

Property Holdings

As at the date of this MD&A, Delaware Subco does not hold any property. Upon the effectiveness of the Arrangement, Delaware Subco will merge with MindMed, which will be the surviving corporation in the Merger.

 

Selected Annual Financial Information

Delaware Subco has not completed a financial year since its incorporation.

 

Results of Operations

For the period from incorporation (September
26, 2019) to November 30, 2019 Delaware Subco reported a net loss of $nil.

 

Summary of Quarterly Results

Delaware Subco was incorporated on September 26, 2019 and has not had operation activities for the last eight quarters to report.

 

Liquidity

Delaware Subco is a private company formed for the purpose of completing the Merger with MindMed, and consequently does not generate operating income or cash flow. At November 30, 2019, Delaware Subco had $nil in cash.

 

Capital Resources

Delaware Subco’ working capital at November 30, 2019 was $1.

 

Fourth Quarter

Not applicable.

 

Proposed Transaction

The details of the proposed Arrangement are discussed in the Audited Financial Statement note 7.

 

Critical Accounting Estimates

Delaware Subco’ significant accounting policies are contained in Note 3 to the Audited Financial Statements for the period from incorporation (September 26, 2019) to November 30, 2019. The preparation of the Audited Financial Statements in conformity with International Financial Reporting Standards (“IFRS”) requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Estimates and underlying assumptions are reviewed on an ongoing basis.

 

Changes in Accounting Policies including Initial Adoption of IFRS

Delaware Subco adopted IFRS for the period ending November 30, 2019. There were no changes in accounting policies for the period ending November 30, 2019.

 

Future Accounting Pronouncements

A number of other new standards and issued amendments to standards and interpretations are not yet effective for the year ending November 30, 2019 and have not been applied when preparing Delaware Subco’ financial statements. Management does not currently expect the implementation of these new standards and amendments will have a significant effect on the financial statements of Delaware Subco.

 

Fair value

Delaware Subco classifies its financial assets as fair value through profit or loss (“FVTPL”). The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of financial assets at recognition.

     

    - L-2-3 -

    

Fair value through profit or loss

Financial assets are classified as FVTPL when the financial asset is held-for-trading or it is designated as FVTPL. A financial asset is classified as FVTPL when it has been acquired principally for the purpose of selling in the near future; it is a part of an identified portfolio of financial instruments that Delaware Subco manages and has an actual pattern of short-term profit-taking or if it is a derivative that is not designated and effective as a hedging instrument. Upon initial recognition, attributable transaction costs are recognized in profit or loss when incurred. Financial instruments at FVTPL are measured at fair value, and changes therein are recognized in profit or loss. Cash is included in this category of financial assets.

 

Fair value hierarchy

Determination of Fair Value:

 

Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

 

The Statement of Financial Position carrying amounts for cash and cash equivalents, amounts receivable, trade and other payables, and due to related parties approximate fair value due to their short-term nature. Due to the use of subjective judgments and uncertainties in the determination of fair values these values should not be interpreted as being realizable in an immediate settlement of the financial instruments.

 

Fair Value Hierarchy:

 

Financial instruments that are measured subsequent to initial recognition at fair value are grouped in Levels 1 to 3 based on the degree to which the fair value is observable:

 

■    Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; and

 

■    Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

 

■    Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable marker data (unobservable inputs).

 

Delaware Subco has no financial instruments subject to level 1, 2 or level 3 fair value measurements.

 

Financial risk management

Delaware Subco is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:

 

Credit Risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Delaware Subco is not exposed to significant credit risk.

 

Foreign Exchange Risk

Foreign currency risk is the risk that the fair values or future cash flows of a financial instrument will fluctuate as they are denominated in currencies that differ from the respective functional currency. Delaware Subco is not exposed to significant foreign currency risk.

 

     

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Liquidity Risk

Liquidity risk is the risk that Delaware Subco will encounter difficulty in satisfying financial obligations as they become due. Delaware Subco manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities. Delaware Subco’ objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet its liquidity requirements. Delaware Subco is not exposed to significant liquidity risk.

 

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. Delaware Subco manages interest rate risk by maintaining an investment policy that focuses primarily on preservation of capital and liquidity. There were no changes in Delaware Subco’ approach to risk management during the reporting period.

 

Capital Management

Delaware Subco does not generate cash flows from operations. Delaware Subco’ primary source of funds comes from the issuance of capital stock. Delaware Subco does not use other sources of financing that require fixed payments of interest and principal due to lack of cash flow from current operations, and is not subject to any externally imposed capital requirements. Delaware Subco’ objective when managing capital is to safeguard Delaware Subco’ ability to continue as a going concern. Delaware Subco defines its capital as equity. Capital requirements are driven by Delaware Subco’ general operations. To effectively manage Delaware Subco’ capital requirements, Delaware Subco monitors expenses and overhead to ensure costs and commitments are being paid.

 

Other MD&A Requirements

 

Disclosure of Outstanding Share Data

At November 30, 2019 there was one (1) outstanding Delaware Subco Common Share.

 

Risks and uncertainties

Delaware Subco does not have any active business operations. It was incorporated for the purpose of completing the Merger with MindMed. Pursuant to the Merger, MindMed shall be the surviving corporation.

 

Limited Operating History

Delaware Subco was incorporated on September 26, 2019 for the purpose of completing the Merger. Upon completion of the Arrangement, the separate existence of Delaware Subco shall cease and MindMed shall be the surviving corporation.

 

Management

At this date there are no indications that any change in management cannot be maintained at the current structure.

 

Additional Funding Requirements

From time to time, Delaware Subco may require additional financing in order to carry out its purpose of completing the Merger with Mindmed. There can be no assurance that additional debt or equity financing will be available to meet these requirements or be available on favourable terms.

 

     

    - L-2-5 -

    

Subsequent Events

Delaware
Subco plans to complete the terms of the Merger with MindMed, and the Arrangement with MindMed, Spinco and Broadway, an exploration
stage public company whose common shares are listed for trading on the TSX Venture Exchange (“TSX-V”). Broadway’s
primary business has been the development of the Madison Project. Following completion of the Arrangement, Broadway’s principal
operations will be operating the MindMed business upon completion of the Merger and the Arrangement. Completion of the Arrangement
is subject to a number of conditions, including, but not limited to, approval of the shareholders of Broadway and the Supreme
Court of British Columbia. Such approvals, if granted, are expected to be received subsequent to the date of approval of the financial
statements.

 

     

    - M-1 -

    

APPENDIX M

BROADWAY AUDIT COMMITTEE CHARTER

 

(begins on following page)

 

     

    - M-2 -

    

AUDIT COMMITTEE CHARTER

 

	
A.

	
 ROLE

 

The overall purpose of the Audit Committee (the “Committee”) is to assist the Board in fulfilling its responsibility to ensure that the Corporation’s management has designed and implemented an effective system of internal financial control, to review and report on the integrity of the financial statements and related financial disclosure of the Corporation and to review the Corporation’s compliance with regulatory and statutory requirements as they relate to financial statements, taxation matters and disclosure of financial information.

 

	
B.

	
COMPOSITION, PROCEDURES AND ORGANIZATION

 

	
1.

	
The Committee shall consist of at least three members of the Board of Directors (the “Board”).

 

	
2.

	
The Board, at its organizational meeting held in conjunction with each annual general meeting of the shareholders, shall appoint the members of the Committee for the ensuing year. The Board may at any time remove or replace any member of the Committee and may fill any vacancy in the Committee.

 

	
3.

	
Unless the Board shall have appointed a chair of the Committee, the members of the Committee shall elect a chair and a secretary from among their number.

 

	
4.

	
The quorum for meetings shall be a majority of the members of the Committee, present in person or by telephone or other telecommunication device that permits all persons participating in the meeting to speak and to hear each other.

 

	
5.

	
The Committee shall have access to such officers and employees of the Corporation and to the Corporation’s external auditors, and to such information respecting the Corporation, as it considers to be necessary or advisable in order to perform its duties and responsibilities.

 

	
6.

	
Meetings of the Committee shall be conducted as follows:

 

	
 

	
(a)

	
the Committee shall meet at least twice annually (before and after the annual audit) at such times and at such locations as may be requested by the chair of the Committee. The external auditors or any member of the Committee may request a meeting of the Committee;

 

	
 

	
(b)

	
the external auditors shall receive notice of and have the right to attend all meetings of the Committee; and

 

	
 

	
(c)

	
management representatives may be invited to attend all meetings except private sessions with the external auditors.

 

	
7.

	
The external auditors shall have a direct line of communication to the Committee through its chair and may bypass management if deemed necessary. The Committee, through its chair, may contact directly any employee in the Corporation as it deems necessary, and any employee may bring before the Committee any matter involving questionable, illegal or improper financial practices or transactions.

 

     

    - M-3 -

    

	
C.

	
RESPONSIBILITIES AND PROCESSES

 

	
1.

	
The Committee’s primary responsibilities are as follows:

 

	
 

	
(a)

	
to assist the Board in the discharge of its responsibilities relating to the Corporation’s accounting principles, reporting practices and internal controls and its approval of the Corporation’s annual and quarterly consolidated financial statements and related financial disclosure;

 

	
 

	
(b)

	
to establish and maintain a direct line of communication with the Corporation’s internal and external auditors and assess their performance;

 

	
 

	
(c)

	
pre-approve all audit services and permissible non-audit services as may be amended from time to time;

 

	
 

	
(d)

	
to ensure that the management of the Corporation has designed, implemented and is maintaining an effective system of internal financial control; and

 

	
 

	
(e)

	
to report regularly to the Board on the fulfillment of its duties and responsibilities.

 

	
2.

	
The duties of the Committee relating to its oversight responsibilities are:

 

	
 

	
(a)

	
to recommend to the Board a firm of external auditors to be engaged by the Corporation, and to verify the independence of such external auditors;

 

	
 

	
(b)

	
to review and approve the fee, scope and timing of the audit and other related services rendered by the external auditors;

 

	
 

	
(c)

	
review the audit plan of the external auditors prior to the commencement of the audit;

 

	
 

	
(d)

	
to discuss with the independent auditor and CFO’s financial and accounting personnel, both together and separately, the adequacy and effectiveness of the internal controls over financial reporting ; whereby eliciting recommendations for the improvement of such internal control procedures or specific areas where new or more detailed controls may be desirable;

 

	
 

	
(e)

	
to provide sufficient opportunity for the independent auditor to meet with members of the Committee without members of management present, to perform an evaluation of the CFO’s financial and accounting personnel and the cooperation that the independent auditor received during the course of the audit;

 

	
 

	
(f)

	
to discuss with the external auditors the quality and not just the acceptability of the Corporation’s accounting principles; and

 

	
 

	
(g)

	
to implement structures and procedures to ensure that the Committee meets the external auditors on a regular basis in the absence of management.

 

     

    - M-4 -

    

	
3.

	
The duties and responsibilities of the Committee as they relate to the internal control procedures of the Corporation are to:

 

	
 

	
(a)

	
review the appropriateness and effectiveness of the Corporation’s policies and business practices which impact on the financial integrity of the Corporation, including those relating to internal auditing, insurance, accounting, information services and systems and financial controls, management reporting and risk management;

 

	
 

	
(b)

	
review compliance under the Corporation’s business conduct and ethics policies and to periodically review these policies and recommend to the Board changes which the Committee may deem appropriate;

 

	
 

	
(c)

	
review any unresolved issues between management and the external auditors that could affect the financial reporting or internal controls of the Corporation; and

 

	
 

	
(d)

	
periodically review the Corporation’s financial and auditing procedures and the extent to which recommendations made by the external auditors have been implemented.

 

	
4.

	
The Committee is also charged with the responsibility to:

 

	
 

	
(a)

	
review the Corporation’s quarterly statements of earnings, including the impact of unusual items and changes in accounting principles and estimates and report to the Board with respect thereto;

 

	
 

	
(b)

	
review and approve the financial sections of the annual report to shareholders; annual and interim MD&A; prospectuses; news releases discussing financial results of the Corporation; and any other public reports of a financial nature requiring approval by the Board, and report to the Board with respect thereto;

 

	
 

	
(c)

	
review regulatory filings and decisions as they relate to the Corporation’s financial statements;

 

	
 

	
(d)

	
review the appropriateness of the policies and procedures used in the preparation of the Corporation’s financial statements and other required disclosure documents, and consider recommendations for any material change to such policies;

 

	
 

	
(e)

	
review and report on the integrity of the Corporation’s financial statements;

 

	
 

	
(f)

	
review the minutes of any audit committee meeting of subsidiary companies (if applicable);

 

	
 

	
(g)

	
review with management, the external auditors and, if necessary, with legal counsel, any litigation, claim or other contingency, including tax assessments that could have a material effect upon the financial position or operating results of the Corporation and the manner in which such matters have been disclosed in the consolidated financial statements;

 

	
 

	
(h)

	
review the Corporation’s compliance with regulatory and statutory requirements as they relate to financial statements, tax matters and disclosure of financial information; and

 

	
 

	
(i)

	
develop a calendar of activities to be undertaken by the Committee for each ensuing year and to submit the calendar in the appropriate format to the Board of Directors following each annual general meeting of shareholders.

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