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Audit Committee Charter

As Adopted by the Board of Directors on October 29, 2020

I. Purpose

The main objective of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of Pretivm is to assist the Board in fulfilling its oversight responsibilities with respect to:

  • the integrity of the Company’s financial statements;
  • the independent auditor’s qualifications and independence;
  • the performance of the Company’s independent auditor and internal audit function;
  • the Company’s systems of disclosure controls and procedures and internal controls over financial reporting;
  • financial risk management; and
  • the Company’s compliance with legal and regulatory requirements.

The Committee should encourage continuous improvement, and should foster adherence to the Company’s policies, procedures, and practices at all levels. The Committee shall maintain free and open communication between itself, and each of the independent auditor, financial and senior management, the internal audit function and the Board.

The Committee’s principal responsibility is one of oversight. The primary responsibility for financial and other reporting, internal controls, and compliance with laws and regulations, and ethics rests with the management of the Company.

II. Organization

The Committee shall consist of three or more directors as the Board may determine from time to time. The members of the Committee shall meet the independence, experience and other requirements under applicable securities laws and stock exchange rules, as determined by the Board. The determination of independence will be made by the Board in accordance with applicable securities laws and stock exchange rules. All members must comply with all financial literacy requirements of applicable securities laws and stock exchange rules. At least one member must qualify as an “audit committee financial expert” as defined by the Securities and Exchange Commission and determined by the Board, and appropriate disclosure will be made. The Board will determine whether a director’s simultaneous service on multiple audit committees will not impair the ability of such member to serve on the Committee. The Committee may form and delegate authority to subcommittees when appropriate.

The Committee, in carrying out its activities and discharging its duties shall be supported by a management coordinating officer (the “Coordinating Officer”), which shall be the Chief Financial Officer of the Company (the “CFO”) or another individual designated by the Chief Executive Officer of the Company (the “CEO”) from time to time.

III. Chair of the Committee

The Chair of the Committee is responsible for overseeing the Committee in its responsibilities. The Board, or if the Board fails to do so, the Committee members, must appoint a Chair from among the members of the Committee. If the Chair of the Committee is not present at any meeting of the Committee, an acting Chair for the meeting shall be chosen by majority vote of the Committee from among the members present.

The Chair’s duties and responsibilities include:

  1. providing leadership to enable the Committee to act effectively in carrying out its responsibilities;
  2. ensuring an effective relationship exists between management and members of the Committee through consultation with the CEO and the Coordinating Officer and, to the extent that the CFO is not the Coordinating Officer, the CFO;
  3. presiding at each meeting of the Committee;
  4. working with the Coordinating Officer to set the frequency and length of each meeting, and reviewing and finalizing the agenda (as prepared by the Coordinating Officer) of items to be addressed at each meeting, in consultation with the Board Chair, the CEO, the Coordinating Officer and, to the extent that the CFO is not the Coordinating Officer, the CFO, and the other members of the Committee;
  5. ensuring that the agenda for each upcoming meeting of the Committee is circulated to each member of the Committee, as well as each other director, in advance of such meeting to allow for sufficient time for each member to prepare for the meeting;
  6. leading the Committee in discharging each of the tasks assigned to it under this Charter;
  7. reviewing the Committee’s annual work plan with the Board Chair, the CEO, the Coordinating Officer and, to the extent that the CFO is not the Coordinating Officer, the CFO; and
  8. ensuring there is proper flow of information to the Committee and reporting to the Board on the activities of the Committee following any meeting of the Committee.

IV. Meetings

The Committee shall meet as many times as the Committee deems necessary to carry out its duties effectively, but not less frequently than four times per year. A majority of the members of the Committee shall constitute a quorum and shall be empowered to act on behalf of the Committee. The Board Chair, the CEO, the CFO, the Coordinating Officer and the independent auditor may attend meetings of the Committee. Further, the Committee may invite other members of management, advisors and such other persons as it deems advisable to attend meetings. As part of its responsibility to foster open communication, the Committee will hold (i) executive sessions with the CEO but absent other management, (ii) executive sessions with only independent directors and the head of the internal audit function; (iii) executive sessions with only independent directors and the independent auditor and (iv) executive sessions with only independent directors, in each case as the Committee deems appropriate.

The Committee Chair will present the agenda for the Committee’s meetings and any member may suggest items for consideration. Briefing materials will be provided to the Committee as far in advance of meetings as practicable; generally, one week. Minutes will be recorded at each meeting and approved at the following Committee meeting. Copies of minutes will be provided to the independent auditor whether or not they attended any meeting.

V. Authority and Responsibilities

To fulfill its responsibilities and duties, the Committee shall:

Documents / Reports / Accounting Information Review

  1. Meet with management and the independent auditor to review and recommend to the Board for approval the Company’s annual financial statements and Management’s Discussion and Analysis prior to the Company’s filings or release of annual earnings. Meet with management and the independent auditor to review and approve the Company’s interim financial statements and Management’s Discussion and Analysis prior to the Company’s filings or release of interim earnings and review the foregoing matters with the Board. Review internal control reports (or summaries thereof), other relevant reports or financial information submitted by the Company to any governmental body or the public, including management certifications as required and relevant reports rendered by the independent auditor (or summaries thereof).
  2. Review and discuss with management earnings press releases prior to the Company’s filing or release thereof, including the type and presentation of information, paying particular attention to any forward-looking guidance, pro forma or non-IFRS measures. Such discussions may be in general terms (i.e., discussion of the type of information to be disclosed and the type of presentations to be made). The Committee shall recommend to the Board the approval of the annual earnings releases. The Committee shall have the authority to approve the interim earnings releases and shall review matters related to the interim earnings releases with the Board.
  3. Review and discuss with management and, as applicable, recommend to the Board for approval all other public disclosure documents containing audited or unaudited financial information before release, including any prospectus, offering memorandum, annual report, annual information form (AIF) or financial regulatory reports filed on SEDAR and EDGAR, as well as the report of the Committee, which contains certain required disclosures, in the Company’s annual proxy circular.
  4. Review and discuss with management financial information and earnings guidance provided to analysts and ratings agencies. Such discussions may be in general terms (i.e., discussion of the types of information to be disclosed and the type of presentations to be made).
Independent Auditor
  1. Recommend to the Board the appointment or reappointment as well as compensation of the independent auditor, to be voted upon at the annual general meeting of shareholders.
  2. Approve the annual audit plan and, subject to prior authorization from the Company’s shareholders, compensation of the independent auditor.
  3. Oversee the work performed by the independent auditor for the purpose of preparing or issuing an audit report or related work. The independent auditor will report directly to the Committee and the Committee will oversee the resolution of disagreements between management and the independent auditor, if they arise.
  4. Annually evaluate the independent auditor’s qualifications, performance and independence and recommend to the Board the removal of the independent auditor if circumstances warrant.
  5. Actively engage in dialogue with the independent auditor with respect to any disclosed relationships or services that may affect the independence and objectivity of the independent auditor and take appropriate actions to oversee the independence of the independent auditor.
  6. Review and preapprove (which may be pursuant to preapproval policies and procedures) both audit and non-audit services to be provided by the independent auditor. The authority to grant preapprovals may be delegated to one or more designated members of the Committee, whose decisions will be presented to the full Committee at its next scheduled meeting following such preapproval.
  7. Consider whether the independent auditor’s provision of permissible non-audit services is compatible with the independent auditor’s independence.
  8. Review and discuss any other material written communication between the independent auditor and management and any other matters required to be communicated to the Committee by the independent auditor under applicable rules and regulations (including under standards of the Public Company Accounting Oversight Board (“PCAOB”)), including in connection with any fraud or illegal acts.
  9. Hold timely discussions with the independent auditor regarding the following:
    • All critical accounting policies and practices.
    • All alternative treatments of financial information within generally accepted accounting principles related to material items that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor.
    • Any audit problems or difficulties and management’s response.
    • Other material written communications between the independent auditor and management, including, but not limited to, the management letter and schedule of unadjusted differences.
  10. At least annually, obtain and review a report by the independent auditor describing:
    • The independent auditor’s internal quality control procedures.
    • Any material issues raised by the most recent internal quality control review or peer review, or by any inquiry or investigation by governmental or professional authorities (including the Canadian Public Accountability Board and PCAOB) within the preceding five years with respect to independent audits carried out by the independent auditor, and any steps taken to deal with such issues.
    • All relationships between the independent auditor and the Company addressing matters set forth in in PCAOB Rule 3526.
  11. The Committee will review the experience and qualifications of the lead audit partner each year and determine whether all partner rotation requirements, as promulgated by applicable laws and regulations, are executed. The Committee will also consider whether there should be rotation of the independent auditor itself.
  12. Set policies, consistent with governing laws and regulations, for hiring personnel of present and former (if any) independent auditor.
Financial Reporting Processes, Accounting Policies and Internal Controls Structure
  1. In consultation with the independent auditor and the internal audit function, review the integrity of the Company’s internal and external financial reporting processes.
  2. Periodically review the adequacy and effectiveness of the Company’s disclosure controls and procedures, and the Company’s internal control over financial reporting, including any significant deficiencies and significant changes in internal controls.
  3. Understand the scope of the internal and independent auditors’ audit plan of internal control over financial reporting and obtain reports on significant findings and recommendations, together with management responses.
  4. In connection with the CEO’s and CFO’s certification of the Company’s quarterly and annual regulatory reports, review and discuss with management:
    • significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial data; and
    • any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls.
  5. Review major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company’s selection or application of accounting principles; major issues as to the adequacy of the Company’s internal controls; and any special audit steps adopted in light of material control deficiencies.
  6. Review analyses prepared by management and the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative IFRS methods on the financial statements.
  7. Review the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company.
  8. Management will provide to the Committee, immediately upon receipt, any correspondence from regulators or governmental authorities. The Committee will oversee management’s response to any such matters.
  9. Review with management disclosure of all related-party transactions. Discuss with the independent auditor its evaluation of the Company’s identification of, accounting for and disclosure of its relationships with related parties as set forth under IFRS.
  10. Establish and oversee procedures for the receipt, retention, treatment of complaints regarding accounting, internal accounting controls, or auditing matters, including procedures for confidential, anonymous submissions by employees of the Company or its subsidiaries of concerns regarding questionable accounting or auditing matters.
Internal Audit
  1. Review and advise on the selection and removal of the internal audit manager.
  2. Review the activities and organizational structure of the internal audit function, as well as the qualifications of its personnel.
  3. Annually, review, recommend changes (if any) and approve the internal audit charter.
  4. Annually, review and approve the internal audit plan, budget and staffing.
  5. Periodically review, with the internal audit manager, any significant difficulties, disagreements with management, or scope restrictions encountered in the course of the function’s work.
  6. Periodically review, with the independent auditor, the internal audit function’s responsibility, budget, and staffing, and any recommended changes in the planned scope of the internal audit.
  7. Review the regular internal reports to management (or summaries thereof) prepared by the internal audit function, as well as management’s response.
Compliance and Financial Risk Management
  1. Review with management compliance with all material credit or debt agreement covenants, including compliance by counterparties to such agreements.
  2. Review with management the Company’s cash flow forecasts and the adequacy of liquidity to meet operating and capital plans.
  3. Review, and recommend to the Board for approval, policies for managing financial risk associated with currency, commodities, interest rates exposures and off-balance sheet arrangements and monitor performance and compliance to such policies.
  4. Review the annual renewal of insurance policies (other than the Company’s directors and officers insurance and indemnities), considering the adequacy of such coverage and making recommendations to the Board with respect thereto, as well as assess risks associated with uninsured or uninsurable events.
  5. Review with management, at least annually, the Company’s tax strategy and compliance.
  6. Quarterly, review with Company’s legal counsel, compliance with legal, financial, taxation and other statutory or regulatory matters that could have a significant impact on the Company’s financial statements or legal compliance.
  7. Consider the risks associated with failure to maintain adequate internal controls over financial reporting as well as management’s ability to override internal controls.
  8. At least annually, review and discuss with management the Company’s major financial risk exposures and such other financial risks as the Committee or the Board deems appropriate, and the steps management has undertaken to control them.
Other Responsibilities
  1. Review, with management, the Company’s finance function, including its budget, organization and quality of personnel and succession planning.
  2. Review the appointment of senior financial positions, including the CFO.
  1. Prepare any report as may be required under applicable securities laws, stock exchange rules and any other regulatory requirements.
  2. Review and assess the adequacy of this Charter annually and recommend to the Board any changes deemed appropriate by the Committee.
  3. Perform any other activities consistent with this Charter, the Company’s Articles and governing law, as the Committee or the Board deems necessary or appropriate.
  4. Review its own performance annually relative to the Committee’s purpose, duties and responsibilities outlined herein.
  5. Report regularly to the Board regarding the execution of the Committee’s duties, responsibilities and activities, as well as any issues encountered and related recommendations.

VI. Resources

The Committee will be granted unrestricted access to all information regarding Pretivm that is necessary or desirable to fulfill its duties and responsibilities, and all directors, officers and employees will be directed to cooperate as requested by Committee members. The Committee has the authority to retain, at Pretivm’s expense, independent legal, financial and other advisors, consultants and experts, to assist the Committee in fulfilling its duties and responsibilities. The Committee also has the authority to communicate directly with internal and external auditors.