PGNX

Overview

The Corporation (an Alberta corporation listed on the NEX Board of the TSXV) sold substantially all its assets to Shoppers Drug Mart Inc. on May 22, 2012 for gross proceeds of $73.5M, and has or will distribute the net proceeds in three tranches: a stated capital distribution; a distribution that will only partly be a stated capital distribution; and a distribution pursuant to liquidation proceedings.

PUC distribution

On November 15, 2013, the Corporation made a $0.45 per share distribution as a return of capital pursuant to a special resolution to reduce the Corporation's stated capital.

Mixed distribution

On November 21, 2013, the Corporation's Board approved a distribution to the shareholders of $0.17 per share (the "Cash Distribution"). The shareholders are being asked to pass a special resolution (the "Capital Reduction Resolution") to authorize the Corporation to reduce its stated capital by the equivalent of $0.095 per share. This resolution "is intended to establish a portion of the Cash Distribution…as a return of capital." "Due bills" (see explanation on p. 4) will attach to the shares from two days before the record date (expected to be December 11, 2013) until the end of the payment date (expected to be December 19, 2013).

Liquidation Distribution

. A "Liquidation Resolution" would authorize a delisting of the shares from the NEX, the payment of remaining obligations, the distribution of remaining cash (the "Liquidation Distribution") of approximately $0.02 to $0.04 per share dependent inter alia on obtaining a CRA clearance certificate, and the Corporation's voluntary dissolution.

Canadian tax consequences

. Capital Reduction Resolution. If the Capital Reduction Resolution is approved by the shareholders, the distribution is anticipated to result in a deemed dividend of $0.075 per share ($0.17 -$0.095). Depending on a shareholder's adjusted cost base, the paid-up capital distribution of $0.095 could result in a (negative ACB) s. 40(3) gain. If the Capital Reduction Resolution is not approved, s. 84(4.1) may deem the entire distribution to be a dividend. Alternatively, "it is also possible, but there can be no certainty" that s. 84(2) will still apply to deem the applicable portion ($0.095 per share, being the estimated remaining PUC per share) to be a capital reduction.

Liquidation

Assuming that the Capital Reduction Resolution is approved, there is anticipated to be no remaining PUC at the time of the Liquidation Distribution, so that all of it would be a deemed dividend. There will be a disposition on the cancellation of shares on the final dissolution of the Corporation.