Announcement PDF Invion Limited ABN 76 094 730 417 Notice of Extraordinary General Meeting TIME: DATE: PLACE: 12.00pm (Melbourne time) Wednesday, 30 January 2019 The Clarendon Hotel, Clarendon Street, South Melbourne Victoria This Notice of Meeting should be read in its entirety. If Invion Shareholders are in any doubt as to how they should vote, they should seek advice from their accountant, solicitor or other professional adviser prior to voting. Should you wish to discuss the matters in this Notice of Meeting, please do not hesitate to contact the Company Secretary on +61 3 9081 6005. Contents Page Important information 2 Notice of Extraordinary General Meeting to Invion Shareholders 4 Explanatory Memorandum 10 Schedule 1 Glossary 35 Schedule 2 Summary of Respiratory Assets 37 Schedule 3 Structure diagrams 38 Schedule 4 Pro-forma financial information 40 Schedule 5 Summary of the expected Australian tax implications for Invion Shareholders 42 Important information Indicative timetable Event Date Announcement to ASX of Proposed Transaction Wednesday, 5 September 2018 Despatch of Notice of Meeting to Invion Shareholders Friday, 21 December 2018 Cut off for lodging proxy form for Meeting 12.00pm (Melbourne time) on Monday, 28 January 2019 Extraordinary General Meeting 12.00pm (Melbourne time) on Wednesday, 30 January 2019 Record Date for Proposed Transaction 7.00pm (Melbourne time) on Monday, 4 February 2019 Implementation of Proposed Transaction Monday, 11 February 2019 The above timetable is indicative only and the dates may be changed at the discretion of the Directors, subject to the ASX Listing Rules and the Corporations Act. Your vote is important The business of the Meeting affects your shareholding and your vote is important. Voting Eligibility The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the Meeting are those that are registered Invion Shareholders at 7.00pm (Melbourne time) on Monday, 28 January 2019. Voting in person To vote in person, attend the Meeting at the time, date and place set out above. Voting by proxy To vote by proxy, please complete and sign the enclosed Proxy form and return by the time and in accordance with the instructions set out on the Proxy Form. In accordance with section 249L of the Corporations Act, members are advised that: • each member has a right to appoint a proxy; • the proxy need not be a member of the Company; and • a member who is entitled to cast two or more votes may appoint two proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If the members appoints two proxies and the appointment does not specify the proportion or number of the member’s votes, then in accordance with section 249X(3) of the Corporations Act, each proxy may exercise one-half of the votes. 2 Proxy vote if appointment specifies way to vote Section 250BB(1) of the Corporations Act provides that an appointment of a proxy may specify the way the proxy is to vote on a particular resolution and, if it does: • the proxy need not vote on a show of hands, but if the proxy does so, the proxy must vote that way (i.e. as directed); and • if the proxy has two or more appointments that specify different ways to vote on the resolution – the proxy must not vote on a show of hands; and • if the proxy is the chair of the Meeting at which the resolution is voted on – the proxy must vote on a poll, and must vote that way (i.e. as directed); and • if the proxy is not the chair – the proxy need not vote on the poll, but if the proxy does so, the proxy must vote that way (i.e. as directed). Transfer of non-chair proxy to chair in certain circumstances Section 250BC of the Corporations Act provides that, if: • an appointment of a proxy specifies the way the proxy is to vote on a particular resolution at a Meeting of the Company’s members; and • the appointed proxy is not the chair of the Meeting; and • either of the following applies: o the proxy is not recorded as attending the Meeting; o the proxy does not vote on the resolution, the chair of the Meeting is taken, before voting on the resolution closes, to have been appointed as the proxy for the purposes of voting on the resolution at the Meeting. The chair of the Meeting intends to vote all undirected proxies in favour of the resolution. 3 Notice of Extraordinary General Meeting to Invion Shareholders The Extraordinary General Meeting of Invion Shareholders will be held at 12.00pm (Melbourne time) on Wednesday, 30 January 2019. The Explanatory Memorandum that accompanies and forms part of this Notice of Meeting describes in more detail the matters to be considered. Please note terms contained in this Notice of Meeting have the same meaning as set out in Schedule 1 of the Explanatory Memorandum. Resolution 1 – Capital reduction and distribution of Chronic Airway Therapeutics Limited Shares (CAT Shares) To consider, and if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution: “That for the purpose of section 256C of the Corporations Act and for all other purposes: (a) the Company undertake an equal capital reduction, without cancelling any shares, of an amount equivalent to the market value (as set out in the Explanatory Memorandum) of all of the fully paid ordinary shares in the capital of Chronic Airway Therapeutics Limited (CAT Shares); and (b) the reduction be satisfied by the transfer of all of the CAT Shares, or the distribution of proceeds from the sale of CAT Shares, as applicable, to holders of ordinary shares in the Company in the ratio of one CAT Share for every one fully paid ordinary shares held in the Company (Invion Shares) as at 7.00pm (Melbourne time) on [4 February 2019] (Record Date), in accordance with the Corporations Act, the Constitution, the ASX Listing Rules and on the terms and conditions set out in the Explanatory Memorandum.” Board recommendation The Board recommends that Invion Shareholders vote in favour of this resolution. Resolution 2 – Adoption of Employee Share Option Plan To consider, and if thought fit, to pass, with or without amendment, the following as an ordinary resolution: “That for the purposes of ASX Listing Rule 7.2 Exception 9 and for all other purposes, Invion Shareholders approve the Option Plan as described in the Explanatory Memorandum which accompanies and forms part of this Notice of Meeting.” Voting exclusion statement The Company will disregard any votes cast in favour of this resolution by or on behalf of: • a Director (except a Director who is ineligible to participate in any employee incentive scheme in relation to the Company); and • an associate of that person. In accordance with the Corporations Act, a member of the Key Management Personnel (or a closely related party of such member) cannot vote as proxy if their appointment does not specify the way in which the proxy is to vote. 4 However, the Company need not disregard a vote if: • it is cast by the person as proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or • it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, provided that the Proxy Form expressly authorises the Chair to exercise the proxy even if the resolution is connected directly or indirectly with the remuneration of a member of the Key Management Personnel. Board recommendation In the interests of corporate governance, the Directors have abstained from making a recommendation in respect of this resolution. Resolution 3 – Election of Mr Alan Yamashita as a Director To consider, and if thought fit, to pass, with or without amendment, the following as an ordinary resolution: “That subject to the passing of Resolution 1, Mr Alan Yamashita, being eligible, be elected as a Director of the Company.” Note: Information about the candidate appears in the Explanatory Memorandum. Board recommendation The Directors unanimously recommend that Invion Shareholders vote in favour of this resolution. Resolution 4 – Approval to issue Options to Mr Thian Chew To consider, and if thought fit, to pass, with or without amendment, the following as an ordinary resolution: “That for the purpose of ASX Listing Rule 10.14 and for all other purposes, Invion Shareholders approve the issue of 27,257,615 Options to Mr Thian Chew with nil issue price in accordance with the Option Plan and on the terms and conditions described in the Explanatory Memorandum which accompanies and forms part of this Notice of Meeting.” Voting exclusion statement The Company will disregard any votes cast in favour of this resolution by or on behalf of: • a Director (except a Director who is ineligible to participate in the Option Plan); and • an associate of that person. In accordance with the Corporations Act, a member of the Key Management Personnel (or a closely related party of such member) cannot vote as proxy if their appointment does not specify the way in which the proxy is to vote. However, the Company need not disregard a vote if: • it is cast by the person as proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or • it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, provided that the Proxy Form expressly authorises the Chair to exercise the proxy even if the resolution is 5 connected directly or indirectly with the remuneration of a member of the Key Management Personnel. Board recommendation In the interests of corporate governance, the Directors have abstained from making a recommendation in respect of this resolution. Resolution 5 – Approval to issue Options to Dr Greg Collier To consider, and if thought fit, to pass, with or without amendment, the following as an ordinary resolution: “That for the purpose of ASX Listing Rule 10.14 and for all other purposes, Invion Shareholders approve the issue of 136,288,074 Options to Dr Greg Collier with nil issue price in accordance with the Option Plan and on the terms and conditions described in the Explanatory Memorandum which accompanies and forms part of this Notice of Meeting.” Voting exclusion statement The Company will disregard any votes cast in favour of this resolution by or on behalf of: • a Director (except a Director who is ineligible to participate in the Option Plan); and • an associate of that person. In accordance with the Corporations Act, a member of the Key Management Personnel (or a closely related party of such member) cannot vote as proxy if their appointment does not specify the way in which the proxy is to vote. However, the Company need not disregard a vote if: • it is cast by the person as proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or • it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, provided that the Proxy Form expressly authorises the Chair to exercise the proxy even if the resolution is connected directly or indirectly with the remuneration of a member of the Key Management Personnel. Board recommendation In the interests of corporate governance, the Directors have abstained from making a recommendation in respect of this resolution. Resolution 6 – Approval to issue Options to Dr James Campbell To consider, and if thought fit, to pass, with or without amendment, the following as an ordinary resolution: “That for the purpose of ASX Listing Rule 10.14 and for all other purposes, Invion Shareholders approve the issue of 20,433,211 Options to Dr James Campbell with nil issue price in accordance with the Option Plan and on the terms and conditions described in the Explanatory Memorandum which accompanies and forms part of this Notice of Meeting.” Voting exclusion statement The Company will disregard any votes cast in favour of this resolution by or on behalf of: 6 • a Director (except a Director who is ineligible to participate in the Option Plan); and • an associate of that person. In accordance with the Corporations Act, a member of the Key Management Personnel (or a closely related party of such member) cannot vote as proxy if their appointment does not specify the way in which the proxy is to vote. However, the Company need not disregard a vote if: • it is cast by the person as proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or • it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, provided that the Proxy Form expressly authorises the Chair to exercise the proxy even if the resolution is connected directly or indirectly with the remuneration of a member of the Key Management Personnel. Board recommendation In the interests of corporate governance, the Directors have abstained from making a recommendation in respect of this resolution. Resolution 7 – Approval to issue Options to Dr Mitchell Glass To consider, and if thought fit, to pass, with or without amendment, the following as an ordinary resolution: “That for the purpose of ASX Listing Rule 10.14 and for all other purposes, Invion Shareholders approve the issue of 4,088,642 Options to Dr Mitchell Glass with nil issue price in accordance with the Option Plan and on the terms and conditions described in the Explanatory Memorandum which accompanies and forms part of this Notice of Meeting.” Voting exclusion statement The Company will disregard any votes cast in favour of this resolution by or on behalf of: • a Director (except a Director who is ineligible to participate in the Option Plan); and • an associate of that person. In accordance with the Corporations Act, a member of the Key Management Personnel (or a closely related party of such member) cannot vote as proxy if their appointment does not specify the way in which the proxy is to vote. However, the Company need not disregard a vote if: • it is cast by the person as proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or • it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, provided that the Proxy Form expressly authorises the Chair to exercise the proxy even if the resolution is connected directly or indirectly with the remuneration of a member of the Key Management Personnel. 7 Board recommendation In the interests of corporate governance, the Directors have abstained from making a recommendation in respect of this resolution. Resolution 8 – Approval to issue Options to Mr Alan Yamashita To consider, and if thought fit, to pass, with or without amendment, the following as an ordinary resolution: “That, subject to the passing of Resolution 3, for the purpose of ASX Listing Rule 10.14 and for all other purposes, Invion Shareholders approve the issue of 20,443,211 Options to Mr Alan Yamashita with nil issue price in accordance with the Option Plan and on the terms and conditions described in the Explanatory Memorandum which accompanies and forms part of this Notice of Meeting.” Voting exclusion statement The Company will disregard any votes cast in favour of this resolution by or on behalf of: • a Director (except a Director who is ineligible to participate in the Option Plan); and • an associate of that person. In accordance with the Corporations Act, a member of the Key Management Personnel (or a closely related party of such member) cannot vote as proxy if their appointment does not specify the way in which the proxy is to vote. However, the Company need not disregard a vote if: • it is cast by the person as proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or • it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, provided that the Proxy Form expressly authorises the Chair to exercise the proxy even if the resolution is connected directly or indirectly with the remuneration of a member of the Key Management Personnel. Board recommendation In the interests of corporate governance, the Directors have abstained from making a recommendation in respect of this resolution. Resolution 9 – Issue of short term incentives to Dr Greg Collier To consider, and if thought fit, to pass, with or without amendment, the following as an ordinary resolution: “That for the purposes of Listing Rule 10.11, and for all other purposes, Invion Shareholders approve the issue of $150,000 worth of Invion Shares to Dr Greg Collier in accordance with the terms in the Explanatory Memorandum.” Voting exclusion statement The Company will disregard any votes cast in favour of this resolution by or on behalf of: • Dr Greg Collier; and • an associate of Dr Greg Collier. 8 In accordance with the Corporations Act, a member of the Key Management Personnel (or a closely related party of such member) cannot vote as proxy if their appointment does not specify the way in which the proxy is to vote. However, the Company need not disregard a vote if: • it is cast by the person as proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or • it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, provided that the Proxy Form expressly authorises the Chair to exercise the proxy even if the resolution is connected directly or indirectly with the remuneration of a member of the Key Management Personnel. Board recommendation The Directors, with Dr Greg Collier abstaining, recommend that Invion Shareholders vote in favour of this resolution. BY ORDER OF THE BOARD Melanie Farris COMPANY SECRETARY DATED: 21 DECEMBER 2018 9 Explanatory Memorandum Introduction This Explanatory Memorandum has been prepared for the information of Invion Shareholders in relation to business to be conducted at the General Meeting to be held at The Clarendon Hotel, Clarendon Street, South Melbourne, Victoria at 12.00pm (Melbourne time) on Wednesday, 30 January 2019. Purpose of Explanatory Memorandum The purpose of this Explanatory Memorandum is to provide Invion Shareholders with all information known to the Company which is material to a decision on how to vote on the resolutions in the accompanying Notice of Meeting. This Explanatory Memorandum does not take into account the individual investment objectives, financial situation and needs of individual Invion Shareholders or any other person. Accordingly, it should not be relied on solely in determining how to vote on the resolutions and Invion Shareholders should seek their own financial or legal advice. Notice to persons outside of Australia This Explanatory Memorandum has been prepared in accordance with the Corporations Act and the ASX Listing Rules, disclosure requirements and Accounting Standards. These laws, disclosure requirements and accounting standards may be different to those in other countries. Forward looking statements Certain statements in this Explanatory Memorandum relate to the future. These statements reflect views only as of the date of this Explanatory Memorandum. While the Company believes that the expectations reflected in the forward looking statements are reasonable, neither the Company nor any other person gives any representation, assurance or guarantee that the occurrence of an event expressed or implied in any forward looking statements in this Explanatory Memorandum will actually occur. Disclaimer No person is authorised to give any information or make any representation in connection with the subject matter of the resolution which is not contained in this Explanatory Memorandum. Any information which is not contained in this Explanatory Memorandum may not be relied on as having been authorised by the Company or the Board. Responsibility for information The information contained in this Explanatory Memorandum has been prepared by the Company and is the responsibility of the Company. A copy of the Notice of Meeting and Explanatory Memorandum has been provided to the ASX and lodged with ASIC. Neither ASX, ASIC nor any of their respective officers take any responsibility for the contents of the Notice of Meeting and Explanatory Memorandum. Definitions Capitalised terms in this Explanatory Memorandum are defined in Schedule 1. Electronic copy An electronic copy of this Notice of Meeting and accompanying Explanatory Memorandum is available on the ASX website and also on the Company’s website at www.inviongroup.com. 10 Enquiries All enquiries in relation to the contents of the Notice of Meeting or Explanatory Memorandum should be directed to the Company Secretary, Ms Melanie Farris, (telephone: +61 3 9081 6005). 1 Resolution 1 – Capital reduction and distribution of Chronic Airway Therapeutics Limited Shares (CAT Shares) Background 1.1 At the Company’s Annual General Meeting held on 13 November 2018, a resolution was passed by Invion Shareholders approving a capital reduction to be satisfied by the distribution of Chronic Airway Therapeutics Limited Shares (CAT Shares). The resolution was passed by Invion Shareholders on the basis that, as a condition precedent to the demerger, the ATO would issue a draft class ruling confirming that Invion Shareholders will get the benefit of demerger tax relief, in a form satisfactory to Invion. 1.2 As announced to ASX on 29 November 2018, it is understood from ongoing communication between the ATO and the Company’s tax advisors that the ATO will decline to issue the demerger relief class ruling. Invion has applied to obtain an alternate class ruling from the ATO to confirm that the capital reduction will not be treated as a dividend to Invion Shareholders, and the ATO has issued a draft class ruling, with the final class ruling expected to be issued following the approval of Resolution 1. The implications of the alternate class ruling and tax effect of the transaction on Invion Shareholders are set out in Schedule 5. 1.3 As a result of the above, the Board has called this General Meeting to seek approval from Invion Shareholders to proceed with the proposed transaction on the terms set out in this Explanatory Memorandum based on the alternate ATO class ruling. Summary of changes to the Proposed Transaction 1.4 1.5 The key changes to the Proposed Transaction are as follows: (a) the ATO declined to issue the demerger relief class ruling and has instead issued a draft alternate class ruling to confirm that the capital reduction will not be treated as a dividend to Invion Shareholders; and (b) the Proposed Transaction is no longer subject to the ATO issuing a class ruling on demerger relief. Other than the above, the Proposed Transaction is in the same form as set out in Invion’s notice of Annual General Meeting dated 24 September 2018. A summary of the taxation implications to Invion Shareholders who are Australian residents for income tax purposes is set out in Schedule 5. Invion Shareholders are strongly recommended to consult with a professional tax adviser before voting on Resolution 1. The Proposed Transaction 1.6 Invion Limited (Invion or Company) is a life sciences company focused on the development of treatments for cancer, respiratory and autoimmune disease. Invion is a public company admitted to the official list of the Australian Securities Exchange (ASX). 1.7 The majority of Invion’s activities have been directed towards research and development, maintenance and commercial development of Invion’s key assets. 1.8 On 31 August 2012, CBio merged with US Company Inverseon Inc. which resulted in Inverseon Inc. being wholly owned by CBio, acquiring amongst other things the rights to Nadolol and Zafirlukast 11 (Respiratory Assets). Details of the Respiratory Assets are set out in detail in Schedule 2 to this Explanatory Memorandum. 1.9 Invion undertook feasibility, preclinical and Phase II clinical studies on the Respiratory Assets over a three-year period ending in 2015. Since that time, Invion has been searching for a commercial partner to further develop the Respiratory Assets towards commercialisation. 1.10 At the 30 November 2017 Annual General Meeting, a strategic transaction with The Cho Group was approved by Invion Shareholders pursuant to which amongst other things Invion was appointed as the exclusive distributor and licensee of the Photosoft technology for the treatment of cancers (Photosoft) in Australia and New Zealand. Invion is now leading the global clinical development of Photosoft, which is funded by The Cho Group, and holds commercialisation and distribution rights to Photosoft in Australia and New Zealand. 1.11 The Company is proposing to “spin out” the Respiratory Assets. The proposed transaction will be undertaken by: (a) interposing Chronic Airway Therapeutics Limited (CAT) between Invion and Invion Inc., so that CAT will become a wholly owned subsidiary of Invion and Invion Inc. will become a wholly owned subsidiary of CAT; (b) assigning all of the balance Respiratory Assets held by Invion to CAT; and (c) undertake an equal capital reduction by way of an in-specie distribution of CAT Shares to Invion Shareholders as the consideration, (Proposed Transaction). 1.12 The majority of the Respiratory Assets are currently held in Invion Inc., with the balance held in Invion Limited. On completion of the Proposed Transaction, Invion Inc. will be a wholly owned subsidiary of CAT and the balance of the Respiratory Assets held in Invion will be assigned to CAT. This means that on completion all of the Respiratory Assets will be held by either CAT or by Invion Inc. as part of the demerged group. 1.13 Structure diagrams showing the structure of Invion as at the date of this Notice and on completion of the Proposed Transaction are set out in Schedule 3. 1.14 If the Proposed Transaction is approved, each Eligible Shareholder (as defined in paragraph 1.49 below) will receive one CAT Share for each Invion Share they hold as at the Record Date. Rationale for undertaking the Proposed Transaction 1.15 The Directors believe that the Proposed Transaction should be conducted for the following key reasons: (a) separate the Respiratory Assets and clinical development strategy from Invion and the new cancer treatment development strategy, and allow a standalone board and management team to focus on the further development of the Respiratory Assets; (b) enable funds to be raised more effectively in a vehicle separated from Invion’s Photosoft technology assets and only focused on respiratory diseases. The Directors consider that investors interested in the Respiratory Assets would be unlikely to invest in Invion given the Company’s focus is on the Photosoft technology. As at the date of this Notice, there is no current intention for Invion to raise additional capital given that the Photosoft research and development is fully funded by non-dilutive funding from The Cho Group. Invion notes however that it may be more difficult to raise capital in an unlisted company, particularly where the unlisted entity is in the early stages of development and does not expect to generate near term revenues; 12 (c) remove responsibility for maintenance costs associated with the Respiratory Assets which is negatively impacting on Invion’s cash position, including patent renewal fees and attorney costs and costs associated with drug storage and stability testing. It should be noted that shareholders of CAT will still be exposed to the maintenance costs of the Respiratory Assets through their holdings in CAT; (d) allow the Board and management team of Invion to focus on the clinical development of the Photosoft technology and cancer indications; and (e) separate employee reporting functions and accountability. Proposed activities and initial funding of CAT 1.16 As detailed in paragraph 1.8 above, at the 30 November 2017 Annual General Meeting, a strategic transaction with The Cho Group was approved by Invion Shareholders pursuant to which amongst other things Invion was appointed as the exclusive distributor and licensee of the Photosoft technology for the treatment of cancers in Australia and New Zealand. 1.17 The Cho Group has agreed that, following completion of the Proposed Transaction, The Cho Group will provide $200,000 initial working capital (by way of a loan to CAT) in order for CAT to finalise the China-focused clinical strategy described below. The terms of the loan are: (a) loan amount of $200,000 (unsecured with an interest rate of 10% per annum, repayable 18 months from the date of the loan advance); and (b) subject to the requirements of the Corporations Act, the loan will be convertible into CAT Shares. As The Cho Group will (upon completion of the Proposed Transaction) hold a relevant interest in CAT Shares of greater than 20% due to its current holding in Invion, the conversion of the loan will require CAT Shareholders’ approval pursuant to section 611(7) of the Corporations Act unless another exception under section 611 of the Corporations Act applied (such as progressively converting the loan into CAT Shares under the “creep provision” in section 611(9) of the Corporations Act). The Cho Group and its associates currently hold a relevant interest of 66.34% in Invion Shares and is expected to also hold the same relevant interest in CAT Shares on completion of the Proposed Transaction. 1.18 Common with other clinical development-stage life sciences companies, it is anticipated that CAT will seek to raise capital from investors and/or to seek partners to explore opportunities with the Respiratory Assets in Chronic Obstructive Pulmonary Disease (COPD), chronic bronchitis or severe asthma indications, targeted in China. 1.19 It is anticipated that following the completion