AGREEMENT AND PLAN OF MERGER BY AND AMONG YM BIOSCIENCES INC., YM BIOSCIENCES USA INC., YM BIOSCIENCES U.S. OPERATIONS INC., EXIMIAS PHARMACEUTICAL CORPORATION AND ORBIMED ADVISORS, LLC, AS STOCKHOLDER REPRESENTATIVE April 13, 2006
Execution
Version
AGREEMENT
AND PLAN OF MERGER
BY
AND AMONG
YM
BIOSCIENCES USA INC.,
YM
BIOSCIENCES
U.S. OPERATIONS
INC.,
EXIMIAS
PHARMACEUTICAL CORPORATION
AND
ORBIMED
ADVISORS, LLC, AS STOCKHOLDER REPRESENTATIVE
April 13,
2006
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Page
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ARTICLE
1 THE MERGER
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1
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1.1
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The
Merger.
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1
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1.2
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Closing.
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2
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1.3
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Effective
Time.
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2
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ARTICLE
2 THE SURVIVING CORPORATION
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2
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2.1
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Certificate
of Incorporation.
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2
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2.2
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Bylaws.
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2
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2.3
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Directors
and Officers.
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2
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ARTICLE
3 EFFECT ON CAPITAL STOCK
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3
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3.1
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Conversion
of Target Series D Preferred Stock.
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3
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3.2
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Cancellation
of Target Common Stock, Series A, B and C Preferred Stock, Stock
Options
and Warrants.
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5
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3.3
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Capital
Stock of Merger Sub.
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5
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3.4
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Fractional
Shares.
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5
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3.5
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Surrender
of Certificates.
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5
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3.6
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No
Further Ownership Rights in Target Series D Preferred
Stock.
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7
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3.7
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Dissenting
Stockholders.
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7
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3.8
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Further
Action.
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7
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ARTICLE
4 REPRESENTATIONS AND WARRANTIES OF TARGET
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7
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4.1
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Corporate
Existence.
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8
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4.2
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Authorization.
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8
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4.3
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No
Violations; Required Consents.
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8
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4.4
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Governmental
Approvals.
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9
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4.5
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Capitalization.
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9
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4.6
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Financial
Statements.
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9
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4.7
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Title
to Assets.
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9
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4.8
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Real
Property.
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10
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4.9
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Absence
of Undisclosed Liabilities.
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10
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4.10
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Absence
of Changes or Events.
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10
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4.11
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Compliance
with Laws.
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11
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4.12
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Litigation.
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11
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4.13
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Relevant
Contracts.
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11
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4.14
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Taxes.
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12
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4.15
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Employee
Benefit Matters.
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14
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4.16
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Labor
Relations.
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17
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4.17
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Intellectual
Property.
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17
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4.18
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Insurance.
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19
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4.19
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No
Broker.
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19
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4.20
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Books
and Records.
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19
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-i-
TABLE
OF CONTENTS
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Page
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4.21
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U.S.
Securities Law Matters.
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20
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4.22
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No
Other Representations or Warranties.
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20
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4.23
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Stockholders.
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21
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4.24
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Bank
Accounts etc.
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21
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ARTICLE
5 REPRESENTATIONS AND WARRANTIES OF ACQUIROR, YM BIOSCIENCES USA
INC. AND
MERGER SUB
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21
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5.1
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Corporate
Existence.
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21
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5.2
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Authorization.
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21
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5.3
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No
Violation; Required Consents.
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22
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5.4
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Governmental
Approvals.
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22
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5.5
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Capitalization.
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22
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5.6
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Financial
Statements.
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22
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5.7
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No
Broker.
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23
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5.8
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Absence
of Claims; Compliance with Laws.
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23
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5.9
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Merger
Shares.
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23
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5.10
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Compliance
with Securities Laws.
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24
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5.11
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Disclosure.
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24
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5.12
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No
Plan to Liquidate YM BioSciences USA.
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24
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5.13
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No
Active Business in Merger Sub.
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24
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ARTICLE
6 COVENANTS
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24
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6.1
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Confidentiality
and Announcements.
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24
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6.2
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Filings;
Third Party Consents.
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26
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6.3
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Expenses.
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26
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6.4
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Further
Assurances.
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26
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6.5
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Access.
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26
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6.6
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Preservation
of Business.
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26
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6.7
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Supplemental
Disclosure.
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28
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6.8
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Stockholder
Approval.
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28
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6.9
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Employment
Agreements.
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28
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6.10
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Directors
and Officers Insurance.
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29
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6.11
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Tax
Returns, Payments and Related Matters.
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29
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6.12
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Listing
of Additional Shares.
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29
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ARTICLE
7 CONDITIONS TO CLOSING
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29
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7.1
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Conditions
to Acquiror’s Obligations.
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29
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7.2
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Conditions
to Target’s Obligations.
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31
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7.3
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Mutual
Conditions.
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32
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ARTICLE
8 TERMINATION
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33
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8.1
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Termination.
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33
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8.2
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Obligations
upon Termination.
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34
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-ii-
TABLE
OF CONTENTS
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Page
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ARTICLE
9 REMEDIES FOR BREACHES OF THIS AGREEMENT
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34
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9.1
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Limited
Recourse Indemnity.
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34
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9.2
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Matters
Involving Third Parties.
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35
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9.3
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Determination
of Adverse Consequences.
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36
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9.4
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Exclusive
Remedy.
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36
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9.5
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Release
of Hold Back Consideration.
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36
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ARTICLE
10 GENERAL
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36
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10.1
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Amendments;
Extension; Waiver.
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36
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10.2
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Entire
Agreement.
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36
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10.3
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Interpretation.
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36
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10.4
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Severability.
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37
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10.5
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Notices.
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37
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10.6
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Binding
Effect; Persons Benefiting; No Assignment.
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38
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10.7
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Counterparts.
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38
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10.8
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No
Prejudice.
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38
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10.9
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Governing
Law.
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39
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10.10
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Stockholder
Representative.
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39
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10.11
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Arbitration.
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40
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-iii-
TABLE
OF EXHIBITS AND SCHEDULES
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EXHIBITS
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Exhibit
A
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Definitions
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Exhibit
B
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Certificate
of Merger
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Exhibit
C
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Initial
Directors and Officers
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Exhibit
D
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Form
of Escrow Agreement
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Exhibit
E
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Form
of Target Legal Opinion
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Exhibit
F
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Form
of Acquiror Legal Opinion
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SCHEDULES
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Schedule 3.1
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Definition
of Net Cash at Closing
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-iv-
AGREEMENT
AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER
(this
“Agreement”)
is
entered into on April 13, 2006, by and among YM BioSciences Inc., a
corporation existing under the laws of Nova Scotia, Canada (“Acquiror”),
YM
BioSciences USA Inc., a Delaware corporation and wholly-owned subsidiary of
Acquiror, (“YM
BioSciences USA”),
YM
BioSciences U.S. Operations Inc., a Delaware corporation and wholly-owned
subsidiary of YM BioSciences USA (“Merger
Sub”),
Eximias Pharmaceutical Corporation, a Delaware corporation (“Target”),
and
OrbiMed Advisors, LLC on behalf of the Series D Stockholders (in such capacity
referred to as the “Stockholder
Representative”).
Certain capitalized terms used in this Agreement are defined in Exhibit A
hereto.
RECITALS
WHEREAS,
the
respective Boards of Directors of Acquiror, YM BioSciences USA, Merger Sub
and
Target have approved and adopted this Agreement and the transactions
contemplated herein and declared it advisable and in the best interests of
their
respective companies and stockholders to consummate the acquisition of Target
by
Acquiror through the statutory merger of Merger Sub with and into Target subject
to the terms and conditions of this Agreement (the “Merger”);
WHEREAS,
the
Boards of Directors of Acquiror, YM BioSciences USA, Merger Sub and Target
have
determined to recommend that the stockholder of Merger Sub and the Stockholders
of Target adopt and approve the Merger, this Agreement and the transactions
contemplated herein; and
WHEREAS,
the
parties hereto desire to make certain covenants, representations, warranties
and
agreements in connection with the Merger.
AGREEMENT
NOW
THEREFORE,
in
consideration of the foregoing and the mutual covenants, representations,
warranties and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and
intending to be legally bound hereby, the parties agree as follows:
ARTICLE
1
THE
MERGER
1.1 The
Merger. Subject
to and upon the terms and conditions of this Agreement and the applicable
provisions of the Delaware General Corporation Law (the “DGCL”),
at
the Effective Time, Merger Sub shall be merged with and into Target, which
shall
be the surviving corporation (the “Surviving
Corporation”)
in the
Merger, and the separate corporate existence of Merger Sub shall thereupon
cease. The name of the Surviving Corporation shall be “YM BioSciences U.S.
Operations Inc.” Without limiting the generality of the foregoing, at the
Effective Time, the identity, existence, approvals, immunities, assets,
property, rights, powers, privileges and franchises of Target, as the Surviving
Corporation, shall continue unaffected and unimpaired, except as specifically
provided herein. The identity and separate existence of Merger Sub shall cease
and all of the approvals, immunities, assets, property, rights, powers,
privileges and franchises of Merger Sub shall vest in the Surviving Corporation,
all in accordance with the provisions of this Agreement and the applicable
provisions of the DGCL. All shares of capital stock of Merger Sub and Target
shall be converted or cancelled in the manner provided in Article 3.
Immediately following the Effective Time, the Surviving Corporation shall be
an
indirect wholly-owned subsidiary of Acquiror.
1.2 Closing. The
closing ( the “Closing”)
of the
Merger shall take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP located at ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, commencing at 10:00 a.m. local time, on
the
third Business Day after the date on which all of the conditions set forth
in
Article 7
(other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to the satisfaction or waiver of those conditions) shall have been
satisfied or waived or such other location, date and time as Acquiror and Target
may agree upon in writing.
1.3 Effective
Time. In
connection with the Closing, Acquiror shall cause the Merger to be consummated
by duly filing on the Closing Date a properly executed certificate of merger
in
substantially the form attached hereto as Exhibit B
(the
“Certificate
of Merger”)
with
the Secretary of State of the State of Delaware in accordance with the relevant
provisions of the DGCL. The date of the effectiveness of such filing shall
be
the date on which it is filed (the “Effective
Date”)
and
5:00 p.m., Eastern time, on the Effective Date shall be the effective time
of
the Merger (the “Effective
Time”).
ARTICLE
2
THE
SURVIVING CORPORATION
2.1 Certificate
of Incorporation. At
the
Effective Time, the Restated Certificate of Incorporation of Target shall be
amended and restated in its entirety by reason of the Merger, and thereafter
be
the Restated Certificate of Incorporation of the Surviving Corporation. Such
Restated Certificate of Incorporation shall be in the form attached as an
exhibit to the Certificate of Merger.
2.2 Bylaws. From
and
after the Effective Time, the Bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
as
of the Effective Time until thereafter amended.
2.3 Directors
and Officers. At
the
Effective Time, the initial directors and officers of the Surviving Corporation,
as set forth on Exhibit C
hereto,
shall be elected or appointed, as the case may be, by Acquiror.
-2-
ARTICLE
3
EFFECT
ON CAPITAL STOCK
3.1 Conversion
of Target Series D Preferred Stock.
(a) Subject
to the terms and conditions of this Agreement, at the Effective Time by virtue
of the Merger and without any action on the part of Merger Sub, Target,
Acquiror, YM BioSciences USA or the holders of any securities of Target, each
share of Target Series D Preferred Stock issued and outstanding immediately
prior to the Effective Time (“Target
Series D Preferred Stock”),
other
than any Dissenting Shares, shall be converted into the right to receive, at
the
election of the holder of each share of Target Series D Preferred Stock (each,
a
“Series
D Stockholder”
and
collectively, the “Series
D Stockholders”),
either of the following (the “Merger
Consideration”):
(i) that
number (subject to Section 3.4)
of
validly issued, fully paid and nonassessable shares of the common stock, without
par value, of Acquiror (“Acquiror
Common Stock”)
which
equals the quotient of:
(A) an
amount
equal to the quotient of:
(1) the
Net
Cash at Closing as of the Effective Date multiplied by 1.106; divided
by
(2) the
number of shares of Target Series D Preferred Stock issued and outstanding
immediately prior to the Effective Time; divided by
(B) the
Acquiror Stock Value as of the Effective Date (the “Exchange
Ratio”);
or
(ii) subject
to Section 3.1(d),
an
amount of cash (the “Cash
Proceeds”)
equal
to the quotient of (A) the Net Cash at Closing as of the Effective Date, divided
by (B) the number of shares of Target Series D Preferred Stock issued and
outstanding immediately prior to the Effective Time.
(b) Notwithstanding
anything to the contrary contained herein, for purposes of this Agreement,
in no
event shall the Acquiror Stock Value at the Effective Date be deemed to be
greater than an amount equal to 115% of
the
Acquiror Stock Value on the date hereof or less than an amount equal to 85%
of
the Acquiror Stock Value on the date hereof.
(c) Concurrently
with the execution and delivery of this Agreement, Target will deliver to each
Series D Stockholder an election form (the “Election
Form”),
whereby each Series D Stockholder will elect to receive such Series D
Stockholder’s Merger Consideration either in shares of Acquiror Common Stock or
Cash Proceeds. In addition, prior to the date hereof, Target shall have
delivered to each Series D Stockholder a security holder questionnaire.
Notwithstanding anything to the contrary contained herein, in the event that
a
Series D Stockholder does not certify in a security holder questionnaire that
has been executed by such Series D Stockholder and received by Target prior
to
the execution hereof that such Series D Stockholder is an Accredited Investor
or
a Sophisticated Investor, then such Series D Stockholder shall only have the
right to receive the Merger Consideration in cash pursuant to Section 3.1(a)(ii) and
any
election to receive Acquiror Common Stock under Section 3.1(c)
by any
such Series D Shareholder shall not be valid.
-3-
(d) Notwithstanding
anything to the contrary contained herein, not less than $25,000,000 of the
Merger Consideration shall be paid in Acquiror Common Stock under Section 3.1(a)(i)
(the
“Stock
Threshold”).
The
determination of whether the Stock Threshold has been reached will be made
at
Closing by multiplying the aggregate number of shares of Acquiror Common Stock
issuable based on the Series D Stockholders’ valid elections by the Acquiror
Stock Value as of the Effective Date. In the event that the Series D
Stockholders elect to receive an amount of cash such that the Stock Threshold
is
not reached, then each Series D Stockholder, other than any Series D Stockholder
who has not certified in a security holder questionnaire that has been executed
by such Series D Stockholder and received by Target prior to the execution
hereof that such Series D Stockholder is an Accredited Investor or a
Sophisticated Investor, who elects to receive cash shall receive a reduced
amount thereof (the “Reduced
Cash Consideration”)
equal
to the product of:
(i) the
maximum aggregate Cash Proceeds payable that would allow the Stock Threshold
to
be reached, multiplied by
(ii) the
number of shares of Target Series D Preferred Stock held by such Series D
Stockholder immediately prior to the Effective Time divided by the aggregate
number of shares of Target Series D Preferred Stock held by all the Series
D
Stockholders who elect to receive cash pursuant to Section 3.1(a)(ii)
and any
Series D Stockholder who has certified in a security holder questionnaire that
has been executed by such Series D Stockholder and received by Target prior
to
the execution hereof that such Series D Stockholder is an Accredited Investor
or
a Sophisticated Investor.
The
difference between the amount of the Reduced Cash Consideration and the amount
of Cash Proceeds that a Series D Stockholder would have been entitled to receive
pursuant to Section 3.1(a)(ii)
will be
paid in Acquiror Common Stock under Section 3.1(a)(i).
(e) The
Exchange Ratio shall be adjusted to reflect fully the effect of any stock split,
reverse split, stock dividend (including any divided or distribution of
securities convertible into Acquiror Common Stock or Target Series D Preferred
Stock), reorganization, recapitalization or other like change with respect
to
Acquiror Common Stock or Target Series D Preferred Stock occurring after the
date hereof and prior to the Effective Time.
(f) At
the
Effective Time, Acquiror shall cause to be delivered to the Escrow Agent an
amount of the aggregate Cash Proceeds and certificates representing the number
of shares of Acquiror Common Stock (based on the Acquiror Stock Value as of
the
Effective Date) equal to $3,000,000 (the “Hold
Back Consideration”)
in
accordance with, and subject to, the terms of the Escrow Agreement attached
as
Exhibit D
hereto.
The Hold Back Consideration shall be comprised of the same proportion of
Acquiror Common Stock and Cash Proceeds as the aggregate amount of the Merger
Consideration.
-4-
(g) Copies
of
all executed security holder questionnaires received by Target as of the date
hereof shall be delivered to Acquiror concurrently with the execution
hereof.
3.2 Cancellation
of Target Common Stock, Series A, B and C Preferred Stock, Stock Options and
Warrants. At
the
Effective Time, apart from Target Series D Preferred Stock, all Target
Capital Stock and all options, warrants and other rights related thereto,
including, without limitation, each share of Target Capital Stock issued and
outstanding immediately prior to the Effective Time, shall be canceled and
extinguished without any conversion thereof, and no Merger Consideration or
other consideration shall be paid in exchange therefor or in relation thereto.
Without limiting the generality of the foregoing, at the Effective Time, all
options to purchase Target Capital Stock then outstanding, under the Target’s
Amended and Restated 2000 Stock Option Plan dated March 30, 2004 or
otherwise, at the Effective Time shall be cancelled, and no Merger Consideration
or other consideration shall be paid in exchange therefor or in relation thereto
in accordance with the terms of any such option or otherwise. Without limiting
the generality of the foregoing, at the Effective Time, all warrants to purchase
Target Capital Stock then outstanding shall be cancelled, and no Merger
Consideration or other consideration shall be paid in exchange therefor or
in
relation thereto in accordance with the terms of each such warrant.
3.3 Capital
Stock of Merger Sub. At
the
Effective Time, each share of common stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and exchangeable
for one validly issued, fully paid and non-assessable share of common stock
of
the Surviving Corporation. Each stock certificate of Merger Sub evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
3.4 Fractional
Shares. No
fraction of a share of Acquiror Common Stock will be issued, and no cash shall
be paid in lieu thereof.
3.5 Surrender
of Certificates.
(a) Acquiror
to Provide Common Stock and Cash.
Immediately prior to the Effective Time, Acquiror shall cause to be supplied
to
the Merger Sub (i) certificates evidencing the shares of Acquiror Common Stock
issuable pursuant to Section 3.1
in
exchange for shares of Target Series D Preferred Stock outstanding immediately
prior to the Effective Time; and (ii) cash in the amount of the Cash Proceeds
in
either the manner set forth immediately below or any other manner selected
by
Acquiror, provided that it is at least as favorable from a Tax perspective:
Acquiror shall transfer, as a contribution to capital under Section 351 of
the
Code, such certificates (and, consequently, the stock of Acquiror that they
represent) and cash to YM Biosciences USA in exchange for stock of YM
Biosciences USA of equal value. YM Biosciences USA shall credit to the stated
capital account maintained in respect of the stock so issued by it an amount
equal to the total fair market value of the certificates and cash so transferred
to it by Acquiror. YM Biosciences USA shall, immediately after receiving the
certificates and cash from Acquiror, transfer, as a contribution to capital
under Section 351 of the Code, such certificates and cash to Merger Sub in
exchange for stock of Merger Sub of equal value. Merger Sub shall credit to
the
stated capital account maintained in respect of the stock so issued by it an
amount equal to the total fair market value of the certificates and cash so
transferred to it by YM Biosciences USA.
-5-
(b) Exchange
Procedures.
Promptly after the Effective Time, the Surviving Corporation shall cause to
be
mailed to each Series D Stockholder of record of a certificate or certificates
(the “Certificates”)
that
immediately prior to the Effective Time represented outstanding shares of Target
Series D Preferred Stock, whose shares were converted into the right to exchange
them for and receive shares of Acquiror Common Stock or Cash Proceeds pursuant
to Section 3.1,
(i) a
letter of transmittal in the form attached hereto as Exhibit E
(the
“Letter
of Transmittal”),
which
shall specify that delivery shall be effected, and risk of loss and title to
the
Certificates shall pass, only upon receipt of the Certificates by the Merger
Sub; (ii) such other customary documents as may be required pursuant to such
instructions; and (iii) instructions for use in effecting the surrender of
the
Certificates in exchange for certificates representing shares of Acquiror Common
Stock or Cash Proceeds if such holder elected on the Election Form to receive
the Merger Consideration in cash. Upon surrender of a Certificate for
cancellation to the Merger Sub, together with a Letter of Transmittal and other
documents, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
shares of Acquiror Common Stock or Cash Proceeds, as the case may be, determined
under Section 3.1
(and
subject always to the portion thereof provided to the escrow Agent as part
of
the Hold Back Consideration), and the Certificates so surrendered shall
forthwith be canceled. Until so surrendered, each outstanding Certificate that
prior to the Effective Time represented shares of Target Series D Preferred
Stock will be deemed from the Effective Time, for all corporate purposes, to
evidence the right to exchange the same for the number of full shares of
Acquiror Common Stock or a right to the amount of Cash Proceeds into which
such
shares of Target Series D Preferred Stock shall have been so converted under
Section 3.1
(and
subject always to the portion thereof provided to the Escrow Agent as part
of
the Hold Back Consideration).
(c) Lost,
Stolen or Destroyed Certificates.
In the
event any Certificates shall have been lost, stolen or destroyed, Merger Sub
shall issue in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof such Merger
Consideration as may be required pursuant to Section 3.1;
provided,
however,
that
Acquiror may, in its discretion and as a condition precedent to the issuance
thereof, require the registered owner of such lost, stolen or destroyed
Certificates to indemnify Acquiror and the Surviving Corporation against any
claim that may be made with respect to the Certificates alleged to have been
lost, stolen or destroyed.
(d) Transfers
of Ownership.
At the
Effective Time, the stock transfer books of Target shall be closed, and there
shall be no further registration of transfers of Target Series D Preferred
Stock
thereafter on the records of Target. If any certificate for shares of Acquiror
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Acquiror any transfer or other Taxes required by
reason of the issuance of a certificate of shares of Acquiror Common Stock
in
any name other than that of the registered holder of the Certificate
surrendered, or established to the satisfaction of Acquiror that such Tax has
been paid or is not payable.
-6-
(e) No
Liability.
Notwithstanding anything to the contrary in this Section 3.5,
neither
the Surviving Corporation nor any party hereto shall be liable to any person
for
any amount properly paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
3.6 No
Further Ownership Rights in Target Series D Preferred
Stock. The
Merger Consideration delivered upon the surrender for exchange of shares of
Target Series D Preferred Stock in accordance with the terms hereof shall be
deemed to have been issued in full satisfaction of all rights pertaining to
such
shares of Target Series D Preferred Stock, and there shall be no further
registration of transfers on the records of the Surviving Corporation of shares
of Target Series D Preferred Stock which were outstanding immediately prior
to
the Effective Time. If, after the Effective Time, Certificates are presented
to
the Surviving Corporation for any reason, they shall be canceled and exchanged
as provided in this Article 3.
3.7 Dissenting
Stockholders. Notwithstanding
anything to the contrary contained herein, any shares of Target Capital Stock
held by the Stockholders who shall not have voted in favor of the Merger or
consented thereto in writing and who shall have demanded properly in writing
appraisal of such shares of Target Capital Stock in accordance with Section
262
of the DGCL and who shall not withdraw or otherwise lose the right to appraisal
and payment for such shares under the DGCL (collectively, the “Dissenting
Shares”),
shall
not be converted into the Merger Consideration as set forth in Section 3.1,
but
shall instead be converted into the right to receive such consideration as
provided by Subchapter XIII of the DGCL. Notwithstanding the foregoing, if
any holder of Dissenting Shares (a “Dissenting
Stockholder”)
shall
effectively withdraw or lose (through failure to perfect or otherwise) such
dissenters’ appraisal rights under the DGCL, then, as of the later of the
Effective Time and the occurrence of such event, such Dissenting Stockholder’s
shares shall automatically be cancelled, extinguished and represent only the
right to receive that portion of the Merger Consideration as set forth in
Section 3.1(a)(i),
without
interest or dividends thereon, upon surrender of the Certificate representing
such Dissenting Shares. Target shall give Acquiror prompt written notice of
any
written demand for appraisal received by Target pursuant to Section 262 of
the
DGCL and any other notice or instrument served in connection with such
dissenters’ rights.
3.8 Further
Action. If
at any
time after the Effective Time, any further action is necessary or desirable
to
carry out the purposes of this Agreement and to vest the Surviving Corporation
with full right, title, interest and possession to all assets, property, rights,
privileges, powers and franchises of Target, the directors and officers of
Target and Acquiror are fully authorized in the name of their respective
corporations or otherwise to take, and shall take, all such lawful and necessary
or appropriate action.
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES OF TARGET
Except
as
otherwise disclosed in a schedule delivered to Acquiror by Target on the date
hereof in connection with the execution of this Agreement (the “Disclosure
Schedule”),
Target hereby represents and warrants to Acquiror, YM BioSciences USA and Merger
Sub as follows:
-7-
4.1 Corporate
Existence. Target
is
a corporation, duly organized, validly existing and in good standing under
the
laws of the jurisdiction of its incorporation. Target has all requisite
corporate power and authority necessary to enable it to own, operate, lease
or
otherwise hold its Assets and to carry on its business in the places and in
the
manner as presently conducted. Target is duly qualified or licensed to do
business and is in good standing (with respect to jurisdictions which recognize
such concept or in otherwise equivalent standing with respect to other
jurisdictions) as a foreign corporation or other legal entity in each
jurisdiction where the character of the properties owned or leased by it or
the
nature of the business transacted by it requires it to be so qualified, except
where the failure to be so qualified would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
4.2 Authorization. Target
has all requisite corporate power and authority, and has taken all corporate
action necessary, to execute, deliver and perform this Agreement, to consummate
the transactions contemplated hereby and thereby and to perform its obligations
hereunder and thereunder. The execution and delivery of this Agreement by Target
and the consummation by Target of the transactions contemplated hereby have
been
duly approved by the Target Board. Other than the approval of this Agreement
and
the Merger by the Stockholders, including any class or series vote required
under Target’s Restated Certificate of Incorporation, no other corporate
proceedings on the part of Target are necessary to authorize this Agreement
and
the Merger and the other transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by Target and is the valid and
binding obligation of Target enforceable against it in accordance with its
terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting creditors’
rights generally and except insofar as the availability of equitable remedies
may be limited by Applicable Law.
4.3 No
Violations; Required Consents. Except
as
set forth on Schedule 4.3
of the
Disclosure Schedule, neither the execution, delivery, and performance of this
Agreement by Target, nor the consummation of the transactions contemplated
hereby or thereby, will contravene or violate (a) any Applicable Law to which
Target is subject, (b) any judgment, order, writ, injunction, or decree of
any
court, arbitrator, or Governmental Authority or agency that is applicable to
Target, or (c) the charter or organizational documents of Target; nor will
such
execution, delivery, or performance (i) constitute a Default under, or give
rise
to a loss of any benefit to which Target is entitled or require the consent
of
any other party to, any Contract or give any party with rights thereunder the
right to terminate, cancel, or accelerate the rights or obligations of Target
thereunder, (ii) cause any acceleration of any Liability or Indebtedness of
Target or with respect to any instrument or document in which Target is an
obligor or guarantor or (iii) result in the creation or imposition of any
Encumbrance (other than any Permitted Encumbrance) of any kind whatsoever upon
or give to any other Person any interest or right (including any right of
termination or cancellation) in or with respect to any of the Assets or
Contracts of Target.
-8-
4.4 Governmental
Approvals. Except
(a) the filing of the Certificate of Merger with the Secretary of State of
the
State of Delaware or (b) as set forth on Schedule 4.4
of the
Disclosure Schedule, no authorization, approval, or consent of, and no
registration or filing with, any Governmental Authority is required to be made
or obtained by Target in connection with the execution, delivery, and
performance of this Agreement by Target, including without limitation under
the
Antitrust Laws.
4.5 Capitalization. Schedule 4.5 sets
forth the authorized capital stock of Target and other equity interests, the
amount as of the date of this Agreement of Target’s issued and outstanding
capital stock or other securities convertible into or exchangeable or
exercisable for, capital stock and the record owner(s) of Target’s outstanding
capital stock or such other securities. All of the shares of capital stock
of
Target that are issued and outstanding as of the date hereof have been duly
authorized and validly issued and are fully paid and nonassessable and held
of
record by the Persons set forth on Schedule 4.5.
Except
as set forth on Schedule 4.5,
no
shares of capital stock of Target that are issued and outstanding as of the
date
hereof are subject to any restriction on transfer or voting agreement or
arrangement pursuant to a Contract to which Target or, to Target’s Knowledge,
any Series D Stockholder is a party. Except as set forth on Schedule 4.5,
(i)
there are no outstanding options, warrants, rights, calls or other securities
convertible into, or exchangeable or exercisable for, shares of Target Capital
Stock, (ii) there are no other commitments on the part of Target providing
for
the issuance of additional shares of, or the repurchase or redemption of, shares
of Target Capital Stock, and (iii) there are no outstanding stock appreciation
rights, phantom stock or similar plans or rights pursuant to which Target has
any obligations.
4.6 Financial
Statements. Schedule 4.6
sets
forth (i) the audited balance sheets as of December 31, 2003, 2004 and 2005
of
Target (the December 31, 2005 balance sheet being the “ Balance
Sheet”
and
December 31, 2005 being the “Balance
Sheet Date”)
and
the audited consolidated statements of income and cash flows of Target for
the
fiscal years ended December 31, 2003, 2004 and 2005, (collectively, the
“Audited
Financial Statements”),
in
each case together with the related notes and schedules thereto, and (ii) the
unaudited consolidated balance sheet of Target as of February 28, 2006 and
the
consolidated statements of income and cash flows of Target for the two-month
period then ended (the “Unaudited
Financial Statements”)
((i)
and (ii) collectively, the “Financial
Statements”).
The
Financial Statements (A) have been prepared from and are consistent with the
books and records of Target, () have been prepared in conformity with U.S.
GAAP
applied on a consistent basis during the periods covered thereby (subject to
normal year-end adjustments and, in the case of the Unaudited Financial
Statements, the lack of footnotes), and (C) present fairly, in all material
respects, the consolidated financial condition and consolidated results of
operations and cash flows as at the dates thereof, and for the periods
indicated, of Target.
4.7 Title
to Assets. Except
as
set forth on Schedule 4.7,
Target
has good and valid title to all of its tangible assets and properties, real,
personal, and mixed, in each case free and clear of all Encumbrances, except
for
(a) liens for Taxes and assessments not yet due and payable, (b) liens for
Taxes, assessments, and other charges, if any, the validity of which is being
contested in good faith by appropriate action (all of which are identified
on
Schedule 4.7
hereto),
(c) liens of employees for current wages not yet due, and (d) all other matters
specifically identified and quantified on Schedule 4.7
hereto
(collectively, the “Permitted
Encumbrances”).
-9-
4.8 Real
Property.
(a) Target
does not own any Real Property.
(b) Schedule 4.8(b)
of the
Disclosure Schedule sets forth all leases of Real Property, occupancy agreements
or similar agreements (the “Real
Property Leases”)
under
which Target is a lessee, sub-lessee, tenant, licensee or assignee of any real
property owned by any third Person (the “Leased
Real Property”),
such
list setting forth the location of each parcel of such Leased Real Property,
the
landlord thereof, the approximate square footage leased and the nature of the
activities conducted on such Leased Real Property. Target has made available
to
Acquiror true, correct and complete copies of each Real Property Lease. With
respect to the Real Property Leases, (i) there exist no Default under the Real
Property Leases by Target, and Target has not received written notice of any
such Default and (ii) to the Knowledge of Target, there exist no Default by
the
landlord or other party thereto. Each Real Property Lease is a legal, valid
and
binding obligation of Target, and, to the Knowledge of Target, each other party
thereto, enforceable against each such other party thereto in accordance with
its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally
and subject to general principles of equity. Except as set forth on Schedule 4.8(b)
of the
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement will not result in any Default, penalty, increase in the amounts
payable under or modification to any Real Property Lease.
4.9 Absence
of Undisclosed Liabilities. Except
as
set forth on Schedule 4.9
of the
Disclosure Schedule, since
the
Balance Sheet Date, Target has not incurred any liabilities or obligations
of
any nature, whether absolute, accrued, contingent or otherwise, whether known
or
unknown, which would be required to be set forth in the Balance Sheet or a
balance sheet of Target as of the date hereof prepared in accordance with U.S.
GAAP applied in a manner consistent with the Audited Financial Statements,
except for liabilities and obligations (i) reflected on the Financial
Statements and not previously paid or discharged, or (ii) arising or incurred
since the Balance Sheet Date in the Ordinary Course of Business consistent
with
past practice.
4.10 Absence
of Changes or Events. Except
as
set forth on Schedule 4.10 of
the
Disclosure Schedule, since the Balance Sheet Date, Target has been operated
only
in the Ordinary Course of Business and:
(a) there
has
not occurred any event, occurrence, development or state of circumstances or
facts that has or could reasonably be expected to have, individually or in
the
aggregate, a Material Adverse Effect;
(b) Target
has not merged or consolidated with any other Person or acquired a material
amount of assets from any other Person;
(c) Target
has not amended or modified its organizational documents;
(d) Target
has not declared, set aside or paid any dividend or other distribution with
respect to any shares of Target Stock;
(e) Target
has not repurchased, redeemed or otherwise acquired any outstanding shares
of
Target Stock or other securities of, or other ownership interests in,
Target;
-10-
(f) Target
has not incurred, assumed or guaranteed any Indebtedness other than (i) with
respect to bank arrangements existing on the Balance Sheet Date and in the
Ordinary Course of Business, or (ii) trade payables and accrued Liabilities
in
the Ordinary Course of Business;
(g) Target
has not suffered any damage, destruction or loss of any assets, that has or
could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect;
(h) there
have been no changes to Target’s capital structure or concerning issued and
outstanding Target Capital Stock;
(i) Target
has not increased the compensation or benefits of any employee of the Target,
nor amended any Benefit Plans (as defined in Section 4.15(b) hereof), except
in
the Ordinary Course of Business;
and
(j) Target
has not committed to do any of the foregoing.
4.11 Compliance
with Laws. Except
as
set forth on Schedule 4.11
of the
Disclosure Schedule, Target
has complied in all respects with each, and is not in violation of any,
Applicable Law and has not failed in any respect to obtain or adhere to the
requirements of any Permit necessary to the ownership of Target’s Assets or to
the conduct of Target’s businesses, except where such violation of Applicable
Law or failure to obtain or adhere to the requirements of any Permit necessary
to the ownership or operation of Target’s Assets or business would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Target has not received any notice alleging any such violation
or, to the Knowledge of Target is there threatened against Target, any pending
inquiry, investigation or proceedings relating thereto, and Target does not
have
any Knowledge of any threatened inquiry, investigation or proceedings relating
thereto.
4.12 Litigation. Except
as
set forth on Schedule 4.12 of
the
Disclosure Schedule, Target is not a party to any pending or, to the Knowledge
of Target is there threatened against Target, any legal, administrative,
arbitration or other similar proceeding, suit, claim, action or investigation
by
a Governmental Authority of any nature (collectively, “Action”)
of or
before any Governmental Authority. Except as set forth on Schedule 4.12 of
the
Disclosure Schedule, Target is not subject to any order, decree, injunction,
writ, settlement, judgment, or other directive of any Governmental Authority.
There is no pending or, to the Knowledge of Target, threatened, litigation,
arbitration, investigation, or other proceeding involving Target of or before
any Governmental Authority that relates to this Agreement or the transactions
contemplated by this Agreement.
4.13 Relevant
Contracts.
(a) Except
as
set forth on Schedule 4.13 of
the
Disclosure Schedule, Target is not a party to any Contract of the following
types (each a “Relevant
Contract”):
(i) employment
or consulting contracts involving an amount in excess of $50,000;
-11-
(ii) contracts
imposing Liabilities or requiring payment of an amount in excess of $5,000
for
the future purchase of, or payment for, supplies, products or
services;
(iii) contracts
imposing Liabilities or requiring payment of an amount in excess of $5,000
to
sell or supply products;
(iv) partnership
or joint venture agreements;
(v) collective
bargaining agreements with any labor union;
(vi) contracts
limiting or restraining Target from engaging or competing in any lines or
business with any person, firm, corporation or other entity;
(vii) loan
agreements, notes, mortgages, leveraged or capitalized leases, indentures,
security agreements, letters of credit or other contracts of Indebtedness for
the borrowing or lending of money by Target;
(viii) other
contracts imposing Liabilities or requiring payment of amounts in excess of
$5,000 and which cannot be terminated within one year without cost;
and
(ix) any
contract, arrangement or understanding respecting the sale, issuance or grant
of
any securities of Target.
(b) Each
Relevant Contract is a valid and binding obligation of Target and, to the
Knowledge of Target, is a valid and binding obligation of each other party
thereto. Target has duly complied with its material obligations under each
Relevant Contract. To the Knowledge of Target, no event has occurred which
may
be grounds for termination of any Relevant Contract. Target is not a party
to
any Relevant Contract of which it or, to the Knowledge of Target, any other
party is materially in default or, but for the requirements of notice for lapse
of time or both, would be materially in default.
4.14 Taxes. Except
as
set forth on Schedule 4.14:
(a) all
Tax
Returns required to be filed with respect to Target or its business have been
timely filed (taking into account extensions of time to file),
(b) all
Taxes
required to be shown on such Tax Returns or otherwise due have been
paid,
(c) all
such
Tax Returns are true, correct and complete in all material respects,
(d) no
adjustment relating to such Tax Returns has been proposed formally or informally
by any Governmental Authority and, to the Knowledge of Target, no basis exists
for any such adjustment,
-12-
(e) there
are
no pending or, to the Knowledge of Target, threatened actions or proceedings
for
the assessment or collection of Taxes against Target with respect to the
activities or income of Target or of any corporation that was includible in
the
filing of a Tax Return with Target on a consolidated or combined
basis,
(f) no
consent under Section 341(f) of the Code has been filed with respect to
Target,
(g) there
are
no Encumbrances on any Assets of Target with respect to Taxes other than
Permitted Encumbrances,
(h) Target
has withheld and paid all Taxes required to have been withheld and paid in
connection with any amounts paid or owing to any employee, independent
contractor, creditor, shareholder, or other third party, and all Forms W-2
and
1099 required with respect thereto have been properly completed and timely
filed,
(i) Target
has not consented to extend the time in which any Taxes may be assessed or
collected by any taxing authority,
(j) Target
has not requested or been granted an extension of the time for filing any Tax
Return to a date later than the Closing Date,
(k) Target
will not be required:
(i) as
a
result of a change in method of accounting for a taxable period ending on or
prior to the Closing Date, to include any adjustment under Section 481(c) of
the
Code (or any corresponding provision of state, local or foreign law) in taxable
income for any taxable period (or portion thereof) beginning after the Closing
Date or
(ii) as
a
result of any “closing agreement,” as described in Section 7121 of the Code (or
any corresponding provision of state, local or foreign law), to include any
item
of income or exclude any item of deduction from any taxable period (or portion
thereof) beginning after the Closing Date,
(l) Target
is
not a party to or bound by any Tax allocation or Tax sharing agreement and
does
not have any current or potential contractual obligation to indemnify any other
Person with respect to Taxes,
(m) Target
has not made any payments, and is or will not become obligated (under any
agreement or contract entered into on or before the Closing Date) to make any
payments, that will not be deductible under Section 280G of the Code (or any
corresponding provision of state, local or foreign law),
(n) Target
has not been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable period specified
in Section 897(c)(1)(A)(ii) of the Code,
-13-
(o) Target
does not have any permanent establishment in any foreign country as defined
in
the relevant income Tax treaty between the United States and such foreign
county,
(p) no
claim
has ever been made in writing by a taxing authority in a jurisdiction where
Target does not file Tax Returns that Target is or may be subject to Taxes
assessed by such jurisdiction,
(q) to
the
Knowledge of Target, there is no basis for any assessment, deficiency notice,
30
day letter or similar notice with respect to any Tax to be issued to Target
with
respect to any period on or before the Closing Date, and
(r) copies
of
all income Tax Returns filed by or with respect to Target for the past three
(3)
fiscal years have been furnished or made available to Acquiror.
4.15 Employee
Benefit Matters.
(a) Schedule 4.15
sets
forth the name of each employee of Target, including the current annual base
salary, target annual cash incentive bonus opportunity, the amount and terms
of
any payments required to be paid to such employee upon a change-in-control
or a
termination of employment, date of hire, adjusted date of hire, job title and
work location of each such employee.
(b) Schedule 4.15
lists
each employee of Target who is (i) absent from active employment due to short
or
long term disability, (ii) absent from active employment on a leave pursuant
to
the Family and Medical Leave Act or a comparable state law, (iii) absent from
active employment on any other leave or approved absence (together with the
reason for each leave or absence) or (iv) absent from active employment due
to
military service (under conditions that give the employee rights to
re-employment). Target has no re-employment obligation or any liability pursuant
to the Family and Medical Leave Act except as listed on Schedule 4.15.
(c) Except
as
set forth on Schedule 4.15,
Target
does not, and is not required to, maintain, sponsor or contribute to any
pension, retirement, profit-sharing, stock bonus, deferred compensation, bonus,
incentive, performance, stock option, phantom stock, stock purchase, restricted
stock, equity or equity based compensation, voluntary employees’ beneficiary
associations under Section 501(c)(9) of the Code, premium conversion, medical,
hospitalization, vision, dental or other health, life, disability, employment,
severance, termination, change-in-control, retention or other employee benefit
plan (within the meaning of Section 3(3) of ERISA), program, arrangement,
agreement or policy, whether written or unwritten for the benefit of any
employee or former employee of Target (hereinafter “Benefit
Plans”).
(d) Schedule 4.15
lists
the monthly premium costs payable for each active employee of Target (and his
or
her dependents) with respect to each welfare benefit plan (as defined in Section
3(1) of ERISA) maintained by Target, or to which Target contributes, and shows
the percentage of such premiums that is paid by the employee and the percentage
that is paid by Target. Schedule 4.15
lists
those participants in the Eximias Pharmaceutical Corporation 401(k) Profit
Sharing Plan for whom an employer contribution (non-elective safe harbor
contribution) is expected to be required for the 2006 plan year.
-14-
(e) Target
has made available to Acquiror complete and correct copies of each written
Benefit Plan, any related trust or other funding vehicle, any reports or
summaries required under ERISA or the Code (including copies of Forms 5500
as
filed with respect to each Benefit Plan for the most recent three plan years),
the most recent determination letter, if any, received from the Internal Revenue
Service with respect to each Benefit Plan intended to qualify under Section
401
of the Code, insurance contracts, service agreements and all related contracts
pursuant to which the Benefit Plans are maintained, funded or
administered.
(f) Neither
the execution of this Agreement nor the consummation of the transactions
contemplated hereby will cause any insurance contracts, service agreements
or
other contracts with third parties pursuant to which the Benefit Plans are
maintained, funded or administered, to be discontinued or amended, and each
such
contract or agreement will continue in full force and effect (subject to
Acquiror’s ability to terminate such contracts and agreements in accordance with
their terms) notwithstanding the execution of this Agreement nor the
consummation of the transactions contemplated hereby. Except as disclosed on
Schedule 4.15
none of
such contracts or agreements require notice of this Agreement or the
consummation of the transactions contemplated hereby.
(g) Except
as
set forth on Schedule 4.15,
all
Benefit Plans (and their trusts) are in material compliance with all applicable
requirements of ERISA, the Code, and any other Applicable Law. Each Benefit
Plan
which is intended to qualify or operate under a specific statutory provision
of
the Code or any other Applicable Law is in substantial compliance with that
statutory provision.
Except
as set forth on Schedule 4.15,
there
have been no non-exempt “prohibited transactions” (as such term is defined in
Section 4975 of the Code and Section 406 of ERISA) with respect to any Benefit
Plan, and, to Target’s Knowledge, no fiduciary has any liability for breach of
fiduciary duty or other failure to act or comply in connection with the
administration or investment of the assets of any such Benefit
Plan.
(h) No
liability under Title IV or Section 302 of ERISA has been incurred by Target,
and Target has no liability to the Pension Benefit Guaranty Corporation or
otherwise under Title IV of ERISA (including any withdrawal liability as defined
in Section 4201 of ERISA), under the Code with respect to any pension plan
(as
defined in Section 3(2) of ERISA), or any liability for penalties or excise
taxes under Part 6 of Subtitle B of Title 1 of ERISA and Section 4980B of the
Code, or any similar state Law, with respect to any welfare benefit plan (as
defined in Section 3(1) of ERISA). Target has no obligation to contribute to,
or
any liability or potential liability under or with respect to a “multiemployer
pension plan,” as defined in Section 3(37) of ERISA, nor is any Benefit Plan a
plan described in Section 4063(a) of ERISA.
(i) There
are
no pending or, to the Knowledge of Target, threatened claims (other than routine
claims for benefits) asserted or instituted against any Benefit Plan or the
assets of any Benefit Plan, or against Target, or any trustee, administrator,
or
fiduciary of such Benefit Plan, except as set forth on Schedule 4.15.
All
compensation and benefits to which former employees of Target are or were
entitled (including severance and separation pay) have been fully paid to such
former employees, and, to the Knowledge of Target, no former employee has a
claim for compensation or benefits other than claims in the ordinary course
pursuant to the terms of Target’s pension and welfare benefit plans, as those
terms are defined in Sections 3(1) and 3(2) of ERISA.
-15-
(j) Each
Benefit Plan which is intended to be qualified under Code Section 401 has a
current favorable determination or opinion letters from the Internal Revenue
Service. No event has occurred and, to the Knowledge of Target, no facts or
circumstances exist which, if left unaddressed by Target, is likely to cause
or
result in the loss or revocation of such determination.
(k) With
respect to continuation rights (COBRA) arising under federal or state law as
applied to Benefit Plans that are group health plans (as defined in Section
601
et seq. of ERISA), Schedule 4.15
lists
(i) each employee, former employee or qualifying beneficiary who has elected
continuation and (ii) each employee, former employee or qualifying beneficiary
who has not elected continuation coverage but is still within the period in
which such election may be made. Schedule 4.15
also
lists each alternate recipient under a qualified child medical support order
within the meaning of Section 609 of ERISA, with a designation of the Plan
to
which the order relates.
(l) Except
as
provided on Schedule 4.15,
neither
the execution of this Agreement nor the consummation of the transactions
contemplated hereby will (i) entitle any employee of Target, any former employee
of Target, any director of Target or any officer of Target to severance pay,
unemployment compensation (except in the case of employee terminations or
layoffs made at or following Closing by or at the direction of the Surviving
Corporation) or (ii) accelerate the time of payment or vesting, or increase
the
amount of compensation due any such person.
(m) Target
has at all times in the past three years properly classified each of its
employees as employees and each of its independent contractors as independent
contractors, as applicable. There is no action or suit pending and to Target’s
Knowledge, no such action or suit is threatened nor is any investigation pending
by any individual or Governmental Authority challenging or questioning the
classification by Target of any individual as a independent
contractor.
(n) Except
as
provided on Schedule 4.15,
Target
has no obligation to provide post-retirement medical or other health and welfare
benefits to any employee of Target, any former employee of Target or any
survivor, dependent or beneficiary of any employee or of any former employee
of
Target, except as may be required by Section 4980B of the code or Part 6 of
Title I or ERISA (“COBRA”)
or
applicable state medical benefits continuation law.
(o) All
contributions (including employer contributions and employee salary reduction
contributions) required to be made to or with respect to each Benefit Plan
with
respect to the pre-Closing service of the employees and the former employees
of
Target have been made or, if not yet due, will be made or will be accrued in
the
books and records of the Target.
-16-
(p) None
of
the Benefit Plans is a “defined benefit plan” (within the meaning of Section
3(35) of ERISA) or a split dollar life insurance arrangement.
4.16 Labor
Relations. Target
is
not a party to any labor or collective bargaining agreement. There are no
material controversies, strikes, work stoppages, slowdowns, lockouts,
arbitrations or other material labor disputes pending or, to the Knowledge
of
Target, threatened, between Target and any representatives (including unions
and
any bargaining unit) of any of their employees. To the Knowledge of Target,
there are no material organizational efforts presently being made involving
any
of the presently unorganized employees of Target. Except as set forth on
Schedule 4.16
of the
Disclosure Schedule, there are no pending or, to the Knowledge of Target,
threatened, complaints, charges or claims against Target brought or filed with
any Governmental Authority, arbitrator or court based on, arising out of, in
connection with or otherwise relating to the employment or termination of
employment by any of Target or, relating to the employees or other persons
providing services to or on behalf of Target. Target is in compliance in all
material respects with all Applicable Laws applicable to such company or the
employees or other persons providing services to or on behalf of such company,
as the case may be, relating to the employment of labor, including all
Applicable Laws relating to wages, hours, employment standards, WARN Act,
collective bargaining, discrimination, civil rights, safety and health, and
workers’ compensation.
4.17 Intellectual
Property.
(a) Target
owns or has the right to use pursuant to license, sublicense, agreement, or
permission all Intellectual Property necessary for the operation of the
businesses of Target as presently conducted or as was conducted prior to July,
2005. The description of the Intellectual Property set forth in Schedule 4.17(a)
is true,
accurate and complete in all material respects of all material Intellectual
Property (other than Trade Secrets or Off-the-Shelf Software) used by Target
or
which Target has the right to use. Each item of Intellectual Property owned
or
used by Target immediately prior to the Closing will be owned or available
for
use by Target on identical terms and conditions immediately subsequent to the
Closing. Except as set forth in Schedule 4.17(a),
Target
has taken all usual and appropriate actions to maintain and protect each item
of
Intellectual Property that it owns and uses.
(b) To
the
Knowledge of Target, Target has not infringed upon or misappropriated any
Intellectual Property rights of third parties. Target (A) has no Knowledge
that it has infringed upon or misappropriated any Intellectual Property rights
of third parties, or that the Intellectual Property owned by Target will so
infringe or misappropriate, or (B) has never received any charge,
complaint, claim, demand, or notice alleging any such infringement or
misappropriation (including any claim that Target must license or refrain from
using any Intellectual Property rights of any third-party). To the Knowledge
of
Target, no third-party has infringed upon or misappropriated any Intellectual
Property rights of Target.
(c) No
patent
or other registration has been issued to Target with respect to any of its
Intellectual Property, and Target has made no pending application for
registration with respect to any of its Intellectual Property. There are no
licenses, agreements, or other permissions pursuant to which Target has granted
to any third-party any rights with respect to any of its Intellectual Property.
Target has made available to Acquiror correct and complete copies of all such
licenses, agreements permissions and applications and has made available to
Acquiror correct and complete copies of all other written documentation
evidencing ownership and prosecution (if applicable) of each such item. With
respect to each item of Intellectual Property required to be identified in
Schedule 4.17(c):
-17-
(i) Target
possess all right, title, and interest in and to the item, free and clear of
any
Encumbrance, license, or other restriction;
(ii) the
item
is not subject to any outstanding injunction, judgment, order, decree, ruling,
or charge;
(iii) no
Action
is pending or, to the Knowledge of Target, is threatened which challenges the
legality, validity, enforceability, use, or ownership of the item;
and
(iv) except
as
set forth in Schedule 4.17(c),
Target
has never agreed to indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect to the
item.
(d) Schedule 4.17(d)
identifies each item of material Intellectual Property (other than Trade Secrets
or Off-the-Shelf Software) that any third-party owns and that Target uses
pursuant to license, sublicense, agreement, or permission and that is or was
material to the operation of Target’s business. Target has made available to
Acquiror correct and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to each item
of
Intellectual Property required to be identified in Schedule 4.17(d):
(i) to
the
Knowledge of Target the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force and
effect;
(ii) except
as
set forth in Schedule 4.17(d),
the
license, sublicense, agreement, or permission will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby;
(iii) Target
is
not in breach or default of any license, sublicense, agreement or permission,
and no event has occurred which with notice or lapse of time would constitute
a
breach or default or permit termination, modification, or acceleration
thereunder;
(iv) Target
has not repudiated and has no Knowledge of any repudiation of any license,
sublicense, agreement, or permission;
(v) Target
has not granted any sublicense with respect to any item of Intellectual Property
identified in Schedule 4.17(d).
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(vi) to
the
Knowledge of Target, the underlying item of Intellectual Property is not subject
to any outstanding injunction, judgment, order, decree, ruling, or
charge;
(vii) except
for complaints, claims, demands or notices not served on Target, no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
is
pending or, to the Knowledge of Target, is threatened which challenges the
legality, validity, or enforceability of the underlying item of Intellectual
Property; and
(viii) Target
has not granted any sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
(e) Except
as
set forth in Schedule 4.17(e),
all
employees of Target who have contributed to or anticipated in the conception
and/or development of all or any part of Target’s Intellectual Property (which
is not licensed from a third-party) either (i) have been party to a
“work-for-hire” arrangement or agreement with Target, which in accordance with
Applicable Law accords Target full, effective, exclusive, and original ownership
of all tangible and intangible property thereby arising, or (ii) have executed
appropriate instruments of assignment in favor of Target as assignee that have
conveyed full, effective and exclusive ownership of all tangible and intangible
property thereby arising.
4.18 Insurance. Target
has in place insurance policies in amounts and types that are customary in
the
industry for similar companies and sufficient to cover the full value of the
properties and assets of Target, and all such policies are valid and in full
force and effect. Schedule 4.18
sets
forth a complete and accurate list and an accurate summary (including the named
insured, whether occurrence or claims made policy, premiums, coverage,
deductibles and expiration dates, broker and carrier) of all insurance policies
currently maintained relating to Target. All insurance premiums due on such
policies have been paid in full when due, and no notice of cancellation,
termination or nonrenewal has been issued or received by Target and no
disallowance of any claim under any such policy has been received by Target.
Target has complied in all material respects with the provisions of such
policies. No Actions are pending or, to the Knowledge of Target, threatened,
or
during the prior three-year period were instituted or threatened, to revoke,
cancel, limit or otherwise modify such policies and no notice of cancellation
of
any such policies has been received.
4.19 No
Broker. Except
as
set forth on Schedule 4.19,
no
broker or finder has acted directly or indirectly for Target in connection
with
this Agreement or the transactions contemplated hereby, and no broker or finder
is entitled to any brokerage or finder’s fee or other commission in respect
thereof based in any way on agreements, arrangements, or understandings made
by
or on behalf of Target.
4.20 Books
and Records. Target
has made available to Acquiror true and complete copies of the minute books
of
Target. The minute books of Target accurately reflect in all respects all
actions taken at meetings, or by written consent in lieu of meetings, of the
Stockholders, the Target Board, and all committees of the Target
Board.
-19-
4.21 U.S.
Securities Law Matters.
(a) Except
as
set forth on Schedule 4.21,
based
on the security holder questionnaires received by Target, each Series D
Stockholder is (i) an accredited investor” within the meaning of Rule 501(a) of
Regulation D under the U.S. Securities Act (“Accredited
Investor”),
or
(ii) has such knowledge and experience in financial and business matters that
such Series D Stockholder is capable of evaluating the merits and risks of
receiving Acquiror Common Stock pursuant to the Merger within the meaning of
Rule 501(h) of Regulation D under the U.S. Securities Act (“Sophisticated
Investor”).
(b) There
are
fewer than 35 Series D Stockholders who are not Accredited Investors. Series
D
Stockholders who are not Accredited Investors have received and will receive
the
same information regarding the Merger as Series D Stockholders who are
Accredited Investors.
(c) The
Information Statement will state that the Series D Stockholders may ask
questions and receive answers concerning the terms and conditions of the Merger
and may obtain any additional information which the Acquiror possesses or can
acquire without unreasonable effort or expense that is necessary to verify
the
accuracy of information furnished to Series D Stockholders in connection with
the Merger.
(d) Target
and its officers, directors and employees shall use commercially reasonable
efforts to provide, and shall use commercially reasonable efforts to cause
the
Series D Stockholders to provide, to Acquiror any information about the Series
D
Stockholders reasonably required by Acquiror in order to prepare a Form D or
any
other filings required to be made in connection with the Merger pursuant to
the
U.S. Securities Act or applicable state “blue sky” securities laws.
(e) The
Information Statement shall be provided to Acquiror and its counsel prior to
its
distribution and shall not be distributed without the written consent of
Acquiror, which consent shall not be unreasonably withheld.
4.22 No
Other Representations or Warranties. Except
for the representations and warranties contained in this Article 4,
neither
Target nor any other Person makes any representations or warranties, whether
express or implied, oral or written, and Target hereby disclaims any other
representations or warranties, whether express or implied, whether made by
Target, its Affiliates, or any of their respective officers, directors,
employees, agents or representatives, with respect to Target, its Affiliates,
or
their respective businesses, the execution and delivery of this Agreement,
or
the transactions contemplated hereby, notwithstanding the delivery or disclosure
to Acquiror or Merger Sub or its representatives of any documentation or other
information with respect to any one or more of the foregoing. Notwithstanding
the foregoing, no representation or warranty contained in this Article 4
(including, without limitation, any Schedule hereto and thereto), and no
schedule, certificate or other written document or instrument delivered or
to be
delivered by Target pursuant to this Agreement or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact necessary
to
make the statements contained therein not misleading.
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4.23 Stockholders. Schedule 4.23
hereto
contains a complete and accurate list of the Stockholders and their respective
holdings of Target Capital Stock.
4.24 Bank
Accounts etc. Other
than as disclosed in the Schedule
3.1,
Target
does not, directly or indirectly, maintain any bank accounts, brokerage
accounts, money market accounts or similar accounts. Schedule 3.1
contains
a list of checks written but not yet cleared by or on behalf of Target from
the
accounts listed on Schedule 3.1,
transfers that have not yet been completed, and any deposits to such accounts
that have not yet been credited.
ARTICLE
5
REPRESENTATIONS
AND WARRANTIES OF ACQUIROR,
YM
BIOSCIENCES USA INC. AND MERGER SUB
Acquiror,
YM BioSciences USA and Merger Sub hereby represent and warrant to Target and
the
Stockholders as follows:
5.1 Corporate
Existence. Each
of
Acquiror, YM BioSciences USA and Merger Sub is a corporation, duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its
incorporation. Each of Acquiror, YM BioSciences USA and Merger Sub has all
requisite corporate power and authority necessary to enable it to own, operate,
lease or otherwise hold its assets and to carry on its business in the places
and in the manner as presently conducted. or licensed to do business and is
in
good standing (with respect to jurisdictions which recognize such concept)
as a
foreign corporation or other legal entity in each jurisdiction where the
character of the properties owned or leased by it or the nature of the business
transacted by it requires it to be so qualified, except where the failure to
be
so qualified would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. Copies of the charter documents of Acquiror
and of Merger Sub, and all respective amendments thereto, heretofore delivered
or made available to the Target, are accurate and complete as of the date
hereof.
5.2 Authorization.
(a) Each
of
Acquiror, YM BioSciences USA and Merger Sub has all requisite corporate power
and authority, and has taken all corporate action necessary, to execute, deliver
and perform this Agreement, to consummate the transactions contemplated hereby
and thereby and to perform its obligations hereunder. The execution and delivery
of this Agreement by each of Acquiror, YM BioSciences USA and Merger Sub and
the
consummation by each of Acquiror, YM BioSciences USA and Merger Sub of the
transactions contemplated hereby has been duly approved by the board of
directors of each of Acquiror and Merger Sub. No other corporate proceedings
on
the part of Acquiror or Merger Sub are necessary to authorize this Agreement
and
the transactions contemplated hereby. This Agreement has been duly executed
and
delivered by each of Acquiror, YM BioSciences USA and Merger Sub and, assuming
the due authorization, execution and delivery hereof by Target, is the valid
and
binding obligation of each of Acquiror, YM BioSciences USA and Merger Sub
enforceable against it in accordance with its terms, except as enforcement
may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium
and
other laws affecting creditors’ rights generally and except insofar as the
availability of equitable remedies may be limited by Applicable
Law.
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(b) No
person
has the right, contractual or otherwise to cause YM BioSciences USA or Merger
Sub to issue or sell any stock in their respective share capital or other equity
interests in such corporations, no person has any pre-emptive rights, resale
rights, rights of first refusal or other rights to purchase any stock of their
respective share capital or other equity interests in such
corporations.
5.3 No
Violation; Required Consents. Except
for the consent of ▇▇ ▇▇▇▇▇ & Co., which shall be obtained prior to the
Effective Date, neither the execution, delivery, and performance of this
Agreement by each of Acquiror and Merger Sub, nor the consummation of the
transactions contemplated hereby or thereby, will contravene or violate (a)
any
Applicable Law to which Acquiror or Merger Sub is subject, (b) any judgment,
order, writ, injunction, or decree of any court, arbitrator, or Governmental
Authority or agency that is applicable to Acquiror or Merger Sub, or (c) the
charter or organizational documents of Acquiror or Merger Sub; nor will such
execution, delivery, or performance (i) constitute a Default under, or give
rise
to a loss of any benefit to which Acquiror or Merger Sub is entitled or require
the consent of any other party to, any Contract or give any party with rights
thereunder the right to terminate, cancel, or accelerate the rights or
obligations of Acquiror or Merger Sub thereunder, (ii) cause any acceleration
of
the maturity of any note, instrument or other obligation with respect to any
Liability of Acquiror or Merger Sub or with respect to any document in which
Acquiror or Merger Sub is an obligor or guarantor or (iii) result in the
creation or imposition of any Encumbrance (other than any Permitted Encumbrance)
of any kind whatsoever upon or give to any other Person any interest or right
(including any right of termination or cancellation) in or with respect to
any
of the Assets or Contracts of Acquiror or Merger Sub.
5.4 Governmental
Approvals. Except
(a) as may be required pursuant to applicable Antitrust Laws, (b) the
filing of the Certificate of Merger with the Secretary of State of the State
of
Delaware, (c) the conditional listing approval by the TSX in respect of the
Acquiror Common Stock to be issued in the Merger, or (d) the authorization
for
listing of the Acquiror Common Stock to be issued in the Merger on AMEX, no
authorization, approval, or consent of, and no registration or filing with,
any
Governmental Authority is required to be made or obtained by either Acquiror
or
Merger Sub in connection with the execution, delivery, and performance of this
Agreement by each of Acquiror and Merger Sub.
5.5 Capitalization. The
number of shares and type of all authorized, issued and outstanding capital
stock, options and other securities of the Acquiror is as set forth in the
documents publicly filed by Acquiror under the applicable provisions of Canadian
securities laws and applicable United States securities laws. All outstanding
shares of capital stock are duly authorized, validly issued, fully paid and
nonassessable and have been issued in compliance with all applicable securities
laws.
5.6 Financial
Statements. The
audited consolidated financial statements of the Acquiror for its last three
most recently completed fiscal years, together with the related notes and
schedules, present fairly the consolidated financial position of the Acquiror
and the consolidated results of operations and cash flows of the Acquiror for
such periods as have been prepared in conformity with Canadian GAAP applied
on a
consistent basis during the periods involved and the interim financial statement
of the Acquiror for the interim period ended December 31, 2005, together with
the related notes and schedules thereto, present fairly the consolidated
financial position of the Acquiror as of such date and the consolidated results
of operations and cash flows of the Acquiror for such period had been prepared
in conformity with Canadian GAAP applied on a consistent basis. Other than
as
disclosed in Acquiror’s Annual Report on Form 40-F for the fiscal year ended
June 30, 2005, neither Acquiror, YM BioSciences USA nor Merger Sub is a party
to
or otherwise involved in any “off-balance sheet arrangements” (as defined in the
United States Securities and Exchange Commission’s Form 40-F).
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5.7 No
Broker. No
broker
or finder has acted directly or indirectly for Acquiror or Merger Sub in
connection with this Agreement or the transactions contemplated hereby, and
no
broker or finder is entitled to any brokerage or finder’s fee or other
commission in respect thereof based in any way on agreements, arrangements,
or
understandings made by or on behalf of Acquiror or Merger Sub.
5.8 Absence
of Claims; Compliance with Laws. As
of the
date hereof, neither Acquiror nor Merger Sub is a party to any pending or,
to
the Knowledge of Acquiror and Merger Sub, threatened, Actions against or
otherwise affecting Acquiror or Merger Sub, or any of their respective Assets
or
challenging the validity or propriety of the transactions contemplated by this
Agreement.
There is
no Action pending or, to the Knowledge of Acquiror and Merger Sub, threatened
against Acquiror or Merger Sub that would affect their respective abilities
to
perform their respective obligations hereunder or delay the consummation of
the
Merger. Each of Acquiror, YM BioSciences USA and Merger Sub is in compliance
with all Applicable Laws which would affect its ability to perform its
obligations hereunder.
5.9 Merger
Shares.
(a) The
Acquiror Common Stock, when issued in accordance with the provisions of this
Agreement, will be validly issued, fully paid and non-assessable, and not
subject to any Encumbrances or pre-emptive rights except for applicable
restrictions on transfer imposed by applicable securities laws, including those
imposed by the U.S. Securities Act, and applicable “blue sky” state securities
laws, and will be issued in compliance with applicable Canadian securities
laws,
and applicable United States and state securities laws.
(b) The
Acquiror Common Stock will be issued pursuant to and in accordance with Section
2.16 of National Instrument 45-106 – Prospectus and Registration Exemptions
and no prospectus is required to be filed and no filing with, consent or
approval of any securities commission or regulatory authority is required in
connection with the Merger other than the filing of a material change report
by
the Acquiror and a business acquisition report within 75 days of the completion
of the Merger. The Acquiror Common Stock will not be subject to any statutory
or
other resale restrictions or hold periods under applicable Canadian Securities
Laws. No approval of the shareholders of Acquiror is required in connection
with
the Merger.
-23-
5.10 Compliance
with Securities Laws.
(a) The
Acquiror Common Stock is listed for trading on the Toronto Stock Exchange
(“TSX”),
on
the Alternative Investment Market of the London Stock Exchange (“AIM”)
and on
the American Stock Exchange (“AMEX”).
Acquiror has filed all forms, reports, statements and documents required to
be
filed with the TSX, AIM and AMEX, each of which complied in form and all other
applicable requirements of the Canadian securities laws and applicable United
States securities laws, as applicable, each as in effect on the date so filed.
All of Acquiror’s filings with the TSX, AIM and AMEX contained all the material
information required to be contained therein, did not contain a misstatement
of
a material fact and did not omit to state a material fact that was required
to
be stated in order to make the information contained therein not misleading
at
the time such information was filed. Acquiror has not been notified of any
default or alleged default by Acquiror of any requirement of securities and
corporate laws, regulations, orders, notices and policies.
(b) Acquiror
has filed all forms, reports, statements and documents required to be filed
under or in accordance with all Canadian securities laws and United States
securities laws. The documents publicly filed by Acquiror under the applicable
provisions of Canadian securities laws and applicable United States securities
laws contain all the material information required to be contained therein,
do
not contain any misstatement of a material fact or fail to include a material
fact required to be stated therein or necessary in order to make the statements
made therein not misleading at the time such documents were filed. Acquiror
has
not received any material comment letters that remain unresolved from any
applicable securities commissions or stock exchanges with respect to any such
documents or any notice of investigation or similar notice from any such
entities with respect to any such documents or otherwise.
5.11 Disclosure. No
representation or warranty contained in this Article 5
(including, without limitation, any Schedule hereto and thereto), and no
schedule, certificate or other written document or instrument delivered or
to be
delivered by Acquiror or Merger Sub pursuant to this Agreement or in connection
with the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary to make the statements contained therein not misleading.
5.12 No
Plan to Liquidate YM BioSciences USA. Neither
the Acquiror nor YM BioSciences USA has any plan or intention of liquidating
or
dissolving YM BioSciences USA, or of merging YM BioSciences USA with another
entity.
5.13 No
Active Business in Merger Sub. Merger
Sub was formed solely for the purpose of engaging in the Merger, has no Assets
or Liabilities, and has not conducted any business.
ARTICLE
6
COVENANTS
6.1 Confidentiality
and Announcements.
(a) Except
as
provided below in this Section 6.1,
none of
the parties hereto, nor any of their respective Affiliates, shall publicly
disclose the execution, delivery or contents of this Agreement other than (i)
with the prior written consent of the other parties hereto, or (ii) as required
by any Applicable Law, the applicable rules of any stock exchange, or any
Governmental Authority upon prior notice to the other parties hereto. As soon
as
practicable following the execution of this Agreement, Acquiror and Target
shall
agree with each other as to the form, timing and substance of any press release
or public disclosure related to this Agreement or the transactions contemplated
hereby; provided
that (x)
such agreement shall not be unreasonably withheld or delayed, and (y) nothing
contained herein shall prohibit Acquiror or Target, following notification
and
consultation with the other party, from making any such disclosure if required
by any Applicable Law or any Governmental Authority.
-24-
(b) From
and
after the date hereof, each of Acquiror and Merger Sub, on the one hand, and
Target, on the other hand, shall keep confidential all information (whether
in
oral or written form, electronically stored or otherwise) in such party’s
possession that is related in any way to the proposed Merger, this Agreement
and
the other transactions contemplated hereby or to Target or the Surviving
Corporation, or its business, operations or financial condition (collectively,
“Confidential
Information”);
provided
that any
Confidential Information that (i) was or becomes generally available to the
public other than as a result of a disclosure by the party receiving the
Confidential Information in violation of this Agreement, or (ii) was or becomes
available to a party on a non-confidential basis from a source other than the
party disclosing the Confidential Information or its members, managers,
directors, officers, employees, partners, agents or advisors (collectively,
“Representatives”);
provided,
further,
that
such source was not known by the Recipient to be bound by any agreement or
obligation to keep such information confidential, shall not be subject to the
restrictions contained in this Section 6.1(b).
Notwithstanding anything to the contrary contained herein, a party may disclose
the Confidential Information to its Representatives who need to know such
Confidential Information to evaluate the transactions contemplated by this
Agreement, are informed of its confidential nature, and agree to abide by this
Section 6.1(b).
In the
event that a party or any of its Representatives is required by Applicable
Law,
regulation, supervisory authority or other applicable judicial or governmental
order to disclose any of the Confidential Information, the Surviving
Corporation, on the one hand, and the Stockholders, on the other hand, shall
provide the other party with prompt written notice, unless notice is prohibited
by Applicable Law, of any such request or requirement so that the other party
may seek a protective order or other appropriate remedy. If, failing the entry
of a protective order (which the party required to disclose will use its
reasonable commercial efforts to obtain), the party required to disclose the
Confidential Information is, in the opinion of its counsel, compelled to
disclose such Confidential Information, such party may disclose that portion
of
the Confidential Information that counsel advises that such party is compelled
to disclose and will exercise reasonable commercial efforts to obtain assurance
to the extent possible that confidential treatment will be accorded to that
portion of the Confidential Information that is being disclosed. In any event,
the party required to disclose the Confidential Information will use its
reasonable commercial efforts to, and will not oppose action by the other party
to, obtain an appropriate protective order or other reliable assurance that
confidential treatment will be accorded the Confidential Information. The
parties’ obligations under this Section 6.1
shall
survive the termination of this Agreement.
-25-
6.2 Filings;
Third Party Consents.
(a) Upon
the
terms and subject to the conditions of this Agreement, each of the parties
hereto shall use its reasonable commercial efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary, proper
or advisable under Applicable Law to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable,
including, without limitation, Acquiror shall file the Certificate of Merger
when all of the conditions set forth in Article 7
(other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to the satisfaction or waiver of those conditions) shall have been
satisfied or waived.
(b) Acquiror
and Target shall cooperate with each other and (i) shall use their reasonable
commercial efforts promptly to prepare and to file all necessary documentation,
and to effect all registrations, applications, notices, petitions and filings,
with each third party (other than a Governmental Authority) that are necessary
or advisable to consummate the transactions contemplated by this Agreement,
and
(ii) shall use their reasonable commercial efforts to obtain as promptly as
practicable any Permit of such third party that is necessary or advisable to
consummate the transactions contemplated by this Agreement.
6.3 Expenses. Except
as
otherwise expressly provided herein, Acquiror and Target shall each bear their
respective direct and indirect expenses incurred in connection with the
negotiation and preparation of this Agreement and the consummation of the
transactions contemplated hereby, including legal, accounting, brokerage and
other fees and expenses.
6.4 Further
Assurances. From
time
to time after the Closing, without additional consideration, each party hereto
will (or, if appropriate, cause its Affiliates to) execute and deliver such
further instruments and take such other action as may be necessary or reasonably
requested by the other party or otherwise required to make effective the
transactions contemplated by this Agreement and to provide the other party
with
the intended benefits of this Agreement.
6.5 Access. Until
the
earlier of the Closing or the termination of this Agreement, Target shall
promptly furnish such information concerning its business, properties, financial
condition, operations and personnel as Acquiror may from time to time reasonably
request, and Target shall afford to Acquiror and to the officers, employees
and
other representatives of Acquiror for purposes of transition planning,
reasonable access upon reasonable notice during normal business hours during
the
period prior to the Effective Date to all of Target’s Assets, properties, books,
Contracts, commitments, officers, directors, consultants or agents and records
during such period.
6.6 Preservation
of Business.
(a) Except
as
expressly contemplated or permitted by this Agreement, from the date of this
Agreement through and including the Closing, Target shall conduct its business
only in the Ordinary Course of Business and use reasonable commercial efforts
to
preserve intact its current business organizations and its material
relationships with resellers, customers, suppliers and others having business
dealings with it, keep available the services of its current employees and
maintain its material rights and franchises.
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(b) Without
limiting the generality of the foregoing, from the date of this Agreement
through and including the Closing, except as set forth on Schedule 6.6(b)
of the
Disclosure Schedule or as expressly contemplated or permitted by this Agreement,
Target shall not without the prior consent of Acquiror:
(i) merge
with or into, enter into a consolidation with or acquire an interest in any
Person or acquire a substantial portion of the assets or business of any Person
or any division or line of business thereof, or otherwise acquire any
assets;
(ii) sell,
lease or otherwise transfer any property or assets to, or purchase, lease or
otherwise acquire any Assets from, or otherwise engage in any transactions
with,
any of its Affiliates;
(iii) make
any
capital expenditure or commitment for any capital expenditure;
(iv) incur
Indebtedness for money borrowed or guarantee or otherwise become responsible
for
any Indebtedness for money borrowed of, or otherwise incur such Indebtedness
on
behalf of, any Person (other than accruing interest in connection with existing
Indebtedness) or pay any Indebtedness that is not otherwise due and
payable;
(v) make
any
loan, advance or capital contribution to, or investment in, any other Person;
(vi) amend,
restate or modify its organizational documents;
(vii) make
any
change in accounting methods, principles or practices used by Target, except
insofar as may be contemplated by this Agreement or required by Applicable
Law
or regulation or by a change in applicable accounting principles;
(viii) a
other
than as previously disclosed to Acquiror, adopt or amend any employment, bonus,
severance or similar agreement or arrangement or adopt or amend any employee
benefit plan, fringe benefit or equity or incentive compensation plan, program
or arrangement;
(ix) grant
to
any officer or employee any increase in compensation or benefits, except as
may
be required under agreements existing on the date hereof;
(x) cancel
any Indebtedness for borrowed money owed to Target or waive any claims or rights
of substantial value;
(xi) settle
any Action in excess of $5,000 individually;
(xii) declare
or pay any dividend or other distribution on its capital stock or make any
payment to holders of Target Capital Stock;
(xiii) split,
combine, redeem, repurchase or reclassify any shares of Target Capital
Stock;
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(xiv) incur
any
cash expenses, or accrue any accounts payable, advance ▇▇▇▇▇▇▇▇ or accrued
expenses, except in the Ordinary Course of Business;
(xv) issue
any
securities or grant any options to purchase capital stock of Target;
or
(xvi) take,
or
agree to take, any of the foregoing actions.
6.7 Supplemental
Disclosure. Target
shall have the right from time to time prior to the Closing to supplement or
amend any exhibit or schedule provided to Acquiror with respect to any matter
hereafter arising or discovered which, if existing or known at the date of
this
Agreement, would have been required to be set forth or described in such exhibit
or schedule; provided
that no
such supplemental or amended disclosure shall be deemed to cure any inaccuracy
of any representation or warranty made in this Agreement for purposes of
determining whether or not the condition set forth in Section 7.1(a)
has been
satisfied.
6.8 Stockholder
Approval. Promptly
following the execution and delivery of this Agreement, Target shall submit
this
Agreement and a form of written consent to its Stockholders for their written
consent and approval of the Agreement and the consummation of the transactions
contemplated hereby.
A copy
of the duly executed written consents shall be delivered to Acquiror promptly
upon execution thereof by Stockholders holding the requisite number of shares
of
Target Capital Stock as set forth in Section 7.3(c).
At such
time, Target shall deliver the Information Statement to all Stockholders.
Acquiror hereby agrees and consents to the inclusion in the Information
Statement of Acquiror’s Annual Report on Form 40-F for the fiscal year ended
June 30, 2005, as amended, Acquiror’s financial statements (including the
reconciliation to U.S. GAAP related thereto) and Management’s Decision and
Analysis for the interim period ended December 31, 2005, Acquiror’s short-form
prospectus dated February 6, 2006, Acquiror’s revised annual information form
dated September 8, 2005 and Acquiror’s audited financial statements (including
the reconciliation to U.S. GAAP related thereto) and Management’s Decision and
Analysis for the periods ended September 8, 2005, September 8, 2004 and
September 8, 2003 as well as the Management Information Circular of the Acquiror
in connection with its annual and special meeting of shareholders held on
November 17, 2005.
6.9 Employment
Agreements.
(a) Immediately
prior to, and conditioned on the consummation of, the Closing, Target shall
cause to be terminated the employment agreements between Target and ▇▇▇▇ ▇▇▇▇▇▇▇
and Target and ▇. ▇. ▇▇▇▇▇▇▇.
(b) Immediately
prior to, and conditioned on the consummation of, the Closing, Target shall
enter into an employment agreement with ▇▇▇▇ ▇▇▇▇▇▇▇, dated as of the Closing
Date, in a form agreed to by Acquiror and ▇▇▇▇ ▇▇▇▇▇▇▇.
(c) Except
as
provided in Section
6.9(a),
all
employment agreements of Target existing and in full force prior to the
execution of this Agreement shall remain in full force after the Closing and
shall be binding on and inure to the Surviving Corporation.
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(d) At
the
Effective Time, Acquiror shall issue options to purchase an aggregate of 905,000
shares of Acquiror’s Stock to employees of the Surviving Corporation (the
“Employee
Options”).
6.10 Directors
and Officers Insurance. Acquiror
shall not take, for the period commencing on the Effective Date and ending
on
the sixth anniversary thereof, any steps to prospectively or retrospectively
cancel, buy out or remove as an insured Person any Person who is or was a
director or officer of Target at or prior to the Effective Time (the
“Directors
and Officers”)
from a
directors’ and officers’ liability insurance policy providing coverage to such
Directors and Officers.
6.11 Tax
Returns, Payments and Related Matters.
(a) Acquiror
shall prepare or cause to be prepared and file or cause to be filed all Tax
Returns of Target for all Tax periods (x) ending on or prior to the Closing
Date
which are due (taking into account extensions for time to file) after the
Closing Date and (y) which begin on or before the Closing Date and end after
the
Closing Date. Acquiror shall pay all Taxes due, if any, with respect to such
Tax
Returns.
(b) All
transfer, documentary, sales, use, real property transfer, stock transfer,
recording, stamp, registration and other similar Taxes and fees (including
penalties and interest) incurred in connection with the transactions
contemplated by this Agreement shall be paid by Acquiror when due. Acquiror
will, at its expense, file all necessary Tax Returns and other documentation
with respect to all such transfer, documentary, sales, use, real property
transfer, stock transfer, recording, stamp, registration and other similar
Taxes
and fees.
(c) Prior
to
the expiration of the period ending one year after the Effective Date, neither
Acquiror nor YM BioSciences USA shall take any action, fail to take any action,
or agree to any action that may result in the liquidation, dissolution or merger
of YM BioSciences USA.
6.12 Listing
of Additional Shares. Promptly
following execution of this Agreement and prior to the Effective Time, Acquiror
shall file with TSX, AIM and AMEX an application to list, or a notification
form
of listing of, as the case may be, additional shares with respect to the shares
of Acquiror Common Stock issuable upon acquisition of the Target Series D
Preferred Stock in the Merger.
ARTICLE
7
CONDITIONS
TO CLOSING
7.1 Conditions
to Acquiror’s Obligations. In
addition to the conditions set forth in Section 7.3,
the
obligations of Acquiror, YM BioSciences USA and Merger Sub to effect the Closing
shall be subject to the following conditions, any one or more of which may
be
waived in writing by Acquiror:
(a) The
representations and warranties of Target set forth in this Agreement and in
any
certificate or instrument delivered by Target in connection with this Agreement
shall be true and correct as of the date of this Agreement and at and as of
the
Closing Date with the same effect as though such representations and warranties
have been made at and as of such time, other than representations and warranties
that speak as of a specific date or time (which need only be true and correct
only as of such date or time), except where the failure of the representations
and warranties to be true and correct would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect;
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(b) Target
shall have performed and complied in all material respects with all agreements,
covenants, obligations and conditions required by this Agreement to be performed
or complied with by Target on or prior to the Closing Date;
(c) Target
shall have caused to be delivered to Acquiror a certificate executed by Target’s
President and Chief Financial Officer certifying that each of the conditions
set
forth in Section 7.1(a), (b),
(d), (g), (h) and (k)
have
been satisfied;
(d) Target
shall have filed all documentation and effected all applications, notices,
petitions and filings with each third party that are necessary to consummate
the
transactions contemplated by this Agreement;
(e) Target
shall have delivered a legal opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in the form contained
in
Exhibit E
hereto,
which shall be limited to matters of due authorization and enforceability of
the
Merger and Agreement, including without limitation the enforceability against
all Series D Stockholders of the indemnity and escrow provisions of this
Agreement and Section 10.10
hereof,
such opinion to be dated the Closing Date;
(f) The
employment agreement referred to in Section 6.9
shall
have been executed and delivered by ▇▇▇▇ ▇▇▇▇▇▇▇ to Acquiror and Merger
Sub;
(g) Between
the date of this Agreement and the Effective Time, Target shall not have
experienced any occurrence, event or condition that has, or would reasonably
be
expected to have, a Material Adverse Effect;
(h) All
agreements among Target and Stockholders to the extent that such agreements
are
still in effect shall have been terminated and any and all rights of first
refusal or similar rights granted pursuant to such agreements shall have been
waived;
(i) Each
of
the documents and instruments required to be delivered by Target on or before
the Closing Date in connection therewith shall have been duly authorized and
executed by Target substantially in the forms attached hereto and delivered
by
all of the parties thereto and shall be in full force and effect;
(j) Net
Cash
at Closing shall be at least $25,000,000. Target shall have caused to be
delivered to Acquiror, dated no greater than three days prior to the Closing
Date and no fewer than two days prior to the Closing Date, a certificate
executed by a duly authorized officer of Target disclosing the Net Cash at
Closing, including an itemized, line item description of the amounts comprising
such Net Cash at Closing;
(k) The
time
period during which a Stockholder is entitled to exercise appraisal rights
with
respect to the Merger pursuant to Section 262 of the DGCL shall have expired,
and no Target Stockholder shall have exercised and not withdrawn the exercise
of
such appraisal right;
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(l) Target
shall have delivered to Acquiror a Certificate of Insurance satisfactorily
evidencing, in Acquiror’s sole discretion, acting reasonably, that Target’s
current insurance policy relating to Target’s clinical drug trials has been
extended and amended, if necessary, (or equivalent insurance procured) to
provide indefinite “tail” or “run out” coverage on a claims arising basis, name
Acquiror and YM Biosciences USA Inc. as additional named insureds, be
non-cancelable and require no further premium. At Closing such insurance policy
shall be: (A) legal, valid, binding, enforceable, and in full force and effect
in all respects; and (B) the policy will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby;
(m) Target
shall have delivered to Acquiror a Certificate of Insurance evidencing that
Target’s current directors’ and officers’ liability insurance policy has been
extended for the period commencing on the Effective Date and ending on the
sixth
anniversary thereof to provide coverage to the Directors and Officers at the
same levels as currently maintained by Target and to add Acquiror and YM
BioSciences Inc. as additional named insureds, be non-cancelable and require
no
further premiums. At Closing, such insurance policy shall be: (A) legal, valid,
binding, enforceable, and in full force and effect in all respects; and (B)
the
policy will continue to be legal, valid, binding, enforceable, and in full
force
and effect on identical terms following the consummation of the transactions
contemplated hereby;
(n) Target
shall deliver to Acquiror either (i) a notice from the Target, also delivered
to
the Internal Revenue Service, that the shares of the Target Capital Stock are
not a “U.S. real property interest” in accordance with the Treasury Regulations
under Section 897 and 1445 of the Code, or (ii) certifications from all of
the
Target Shareholders that they are not “foreign persons” in accordance with
Treasury Regulations under Section 1445 of the Code. If the Acquiror does not
receive either the notice or certifications described above on or before the
Closing Date, the Acquiror shall be permitted to withhold from the Merger
Consideration any required withholding tax under Section 1445 of the Code;
and
(o) All
consents or approvals required to be obtained by a third party in connection
with the Merger and other transactions contemplated by this Agreement shall
have
been obtained and shall be in full force and effect;
7.2 Conditions
to Target’s Obligations. In
addition to the conditions set forth in Section 7.3,
the
obligations of Target to effect the Closing shall be subject to the following
conditions, any one or more of which may be waived in writing by
Target:
(a) The
representations and warranties of Acquiror, YM BioSciences USA and Merger Sub
set forth in this Agreement shall be true and correct as of the date of this
Agreement and at and as of the Closing Date, with the same effect as though
such
representations and warranties have been made at and as of such time, other
than
representations and warranties that speak as of a specific date or time (which
need only be true and correct only as of such date or time), except where the
failure of the representations and warranties to be true and correct would
not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect;
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(b) Acquiror,
YM BioSciences USA and Merger Sub shall have performed and complied in all
material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by Acquiror on
or
prior to the Closing Date;
(c) Acquiror
shall have caused to be delivered to Target a certificate executed by a duly
authorized officer of Acquiror certifying that each of the conditions set forth
in Section 7.2(a)
and
(b)
has been
satisfied;
(d) The
Acquiror Common Stock to be issued in the Merger shall have been authorized
for
listing on TSX and AMEX;
(e) All
consents or approvals required to be obtained by a third party, including
without limitation ▇▇ ▇▇▇▇▇ & Co., in connection with the Merger and other
transactions contemplated by this Agreement shall have been obtained and shall
be in full force and effect;
(f) Acquiror
shall have received conditional listing approval from the TSX, subject only
to
the usual post-closing listing requirements;
(g) Acquiror
shall have delivered one or more legal opinions substantially in the form
provided in Exhibit F
hereto,
which shall be limited to matters of due authorization and enforceability of
the
Merger and this Agreement, and that the issuance of shares of Acquiror Common
Stock is exempt from the prospectus and registration requirements under Canadian
securities law, that the issuance of shares of Acquiror Common Stock shall
be
free of any hold period and that the shares of Acquiror Common Stock have been
validly issued as fully paid and non-assessable, such opinion to be dated the
Closing Date; and
(h) Each
of
the documents and instruments required to be delivered by Acquiror or Merger
Sub
on or before the Closing Date in connection therewith shall have been duly
authorized and executed by Acquiror and Merger Sub, as applicable, substantially
in the forms attached hereto and delivered by all of the parties thereto and
shall be in full force and effect.
7.3 Mutual
Conditions. The
obligations of each of Acquiror, Merger Sub and Target to effect the Closing
shall be subject to the following conditions, any one or more of which may
be
waived in writing, as to itself, by either party:
(a) No
order
issued by any Governmental Authority of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the transactions
contemplated by this Agreement shall be in effect; no proceeding initiated
by
any Governmental Authority seeking an injunction against the transactions
contemplated by this Agreement shall be pending; no statute, rule, regulation,
order, injunction or decree shall have been enacted, entered, promulgated or
enforced by any Governmental Authority that prohibits, restricts or makes
illegal consummation of the transactions contemplated hereby;
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(b) Other
than the filing of the Certificate of Merger, all approvals, authorizations,
consents or orders of, or notices to, Governmental Authorities required to
consummate the transactions contemplated hereby, including such approvals,
waivers and consents as may be required under the U.S. Securities Act, shall
have been obtained or requested, and shall remain in full force and effect;
and
(c) This
Agreement and the transactions contemplated hereby shall have been approved
and
adopted by the requisite vote of Stockholders holding not less than sixty
percent (60%) of the shares of Series D Preferred Stock and fifty percent (50%)
of all shares of Target Capital Stock in accordance with the DGCL and the
Restated Certificate of Incorporation and Bylaws of Target.
ARTICLE
8
TERMINATION
8.1 Termination.
(a) This
Agreement may be terminated on or prior to the Effective Date only as
follows:
(i) by
mutual
written consent of Acquiror and Target;
(ii) at
the
election of either Acquiror or Target, if the Effective Date shall not have
occurred on or before 5:00 P.M. Eastern time on the 30th
day
following the execution of this Agreement (the “Termination
Date”);
provided
that no
party shall be entitled to terminate this Agreement pursuant to this
Section 8.1(a)(ii)
if such
party’s failure to fulfill any obligation under this Agreement has been the
primary cause of the failure of the Closing to occur on or before such
date;
(iii) by
either
Acquiror or Target if a court of competent jurisdiction shall have issued an
order, decree or ruling permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, and such order,
decree, ruling or other Action shall have become final and
nonappealable;
(iv) by
either
Acquiror or Target if a material condition to its obligation to perform becomes
incapable of fulfillment. Notwithstanding the foregoing, the right to terminate
this Agreement pursuant to this Section 8.1(a)(iv)
shall
not be available to any party if its condition to perform became incapable
of
fulfillment due to its failure to fulfill any obligation under this
Agreement;
(v) by
Acquiror, (i) if Acquiror is not in material breach of its obligations under
this Agreement and there has been a material breach of any representation,
warranty, covenant, or agreement of Target contained in this Agreement such
that
the conditions set forth in Section 7.1(a),
or Section 7.1(b)
would
not be satisfied and such breach has not been cured within 15 calendar days
after written notice thereof to Target and the Stockholders; provided
that no
cure period shall be required for a breach which by its nature cannot be cured;
or
(ii) if
any Stockholder exercises their dissenters’ rights under the
DGCL;
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(vi) by
Acquiror if, between the date of this Agreement and the Closing Date, Target
shall have experienced any occurrence, event or condition that has, or would
reasonably be expected to have, a Material Adverse Effect;
(vii) by
Target
if, between the date of this Agreement and the Closing Date, Acquiror shall
have
experienced any occurrence, event or condition that has, or would reasonably
be
expected to have, a Material Adverse Effect; or
(viii) by
Target
if Target is not in material breach of its obligations under this Agreement
and
there has been a material breach of any representation, warranty, covenant,
or
agreement of Acquiror contained in this Agreement such that the conditions
set
forth in Section 7.2(a),
or Section 7.2(b)
would
not be satisfied and such breach has not been cured within 15 calendar days
after written notice thereof to Acquiror; provided
that no
cure period shall be required for a breach which by its nature cannot be
cured.
(b) The
termination of this Agreement shall be effectuated by the delivery of a written
notice of such termination from the party terminating this Agreement to the
other party.
8.2 Obligations
upon Termination. Except
in
the event of a termination pursuant to Section 8.1(v)
or
Section 8.1(vii),
in the
event that this Agreement shall be terminated pursuant to Section 8.1,
all
obligations of the parties hereto under this Agreement shall terminate and
there
shall be no liability of any party hereto to any other party except (a) as
set
forth in Sections 6.1
and
6.3,
and (b)
that nothing herein will relieve any party from liability for any breach of
this
Agreement.
ARTICLE
9
REMEDIES
FOR BREACHES OF THIS AGREEMENT
9.1 Limited
Recourse Indemnity. All
of
the representations, warranties and covenants of the Target contained in
Articles 4
and
6
shall
survive the Closing and continue in full force and effect for a period of one
year thereafter (the “Survival
Period”).
If
any of such representations, warranties and covenants of Target are breached
and
Acquiror, YM BioSciences USA or Merger Sub (together the “Indemnified
Parties”
and
each an “Indemnified
Party”)
suffers or incurs any claim (including any Third Party Claim, as defined below),
loss, liability, expense or other damage resulting from, arising out of,
relating to, in the nature of, or caused by the breach (“Adverse
Consequences”),
then
the Series D Stockholders, jointly and severally, agree (by the Stockholder
Representative’s execution of this Agreement on their behalf) to indemnify the
Indemnified Parties from and against the entirety of any Adverse Consequences
the Indemnified Parties have suffered; provided, however, that (A) the Series
D
Stockholders shall not have any obligation to indemnify the Indemnified Parties
from and against any Adverse Consequences until the Adverse Consequences by
reason of all such breaches are in excess of a $150,000 aggregate deductible,
(B) the maximum aggregate liability of the Series D Stockholders for all claims
under this Article 9
shall be
limited to $3,000,000, and (C) the Indemnified Parties’ recovery pursuant to
this Section 9.1
shall be
limited to the Hold Back Consideration, and the Indemnified Parties shall have
no recourse to the Series D Stockholders personally. In the event of any claim
under this Article 9,
the
Acquiror, on behalf of any of the Indemnified Parties, shall make a written
claim for indemnification against the Series D Stockholders by sending a notice
of claim to the Stockholder Representative within the Survival Period. For
all
purposes under this Article 9,
the
portion of the Hold Back Consideration comprised of Acquiror Common Stock shall
be valued based on the Acquiror Stock Value at the Effective Date,
notwithstanding any increase or decrease in the value of any shares of Acquiror
Common Stock comprising the Hold Back Consideration. All claims under this
Article 9
will be
paid solely from the Hold Back Consideration in cash and in shares of Acquiror
Common Stock based on the proportion of cash and Acquiror Common Stock
comprising the Hold Back Consideration on the Effective Date, which shall be
the
sole and exclusive remedy of the Indemnified Parties in connection with any
such
claim.
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9.2 Matters
Involving Third Parties.
(a) If
any
third party shall notify any Indemnified Party with respect to any matter (a
“Third
Party Claim”)
which
may give rise to a claim for indemnification against the Series D Stockholders
under this Article 9,
then
Acquiror, on behalf of the Indemnified Party, shall promptly notify the
Stockholder Representative in writing.
(b) The
Stockholder Representative, on behalf of the Series D Stockholders, will have
the right to assume the defense of the Third Party Claim with counsel chosen
by
the Stockholder Representative reasonably satisfactory to the Indemnified Party
at any time within 15 days after the Indemnified Party has given notice of
the
Third Party Claim; provided,
however,
that
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim.
(c) So
long
as the Stockholder Representative has assumed and are conducting the defense
of
the Third Party Claim in accordance with Section 9.2(b),
(A) the
Stockholder Representative and the Series D Stockholders will not consent to
the
entry of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party (not
to
be unreasonably withheld, conditioned or delayed) unless the judgment or
proposed settlement involves only the payment of money damages by one or more
of
the Indemnifying Parties and does not impose an injunction or other equitable
relief upon the Indemnified Party and (B) the Indemnified Party will not consent
to the entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Stockholder
Representative on behalf of the Series D Stockholders (not to be withheld
unreasonably).
(d) In
the
event the Stockholder Representative does not assume the defense of the Third
Party Claim in accordance with Section 9.2(b),
however, (A) the Indemnified Party may defend against, and consent to the entry
of any judgment or enter into any settlement with respect to, the Third Party
Claim in any manner he or it reasonably may deem appropriate (after consultation
with, and consent from, the Stockholder Representative in connection therewith,
which consent shall not to be unreasonably withheld, conditioned or delayed)
and
(B) the Series D Stockholders (by virtue of the Stockholder Representative’s
execution of this Agreement on their behalf) will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim to
the
fullest extent provided in this Article 9.
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9.3 Determination
of Adverse Consequences. All
indemnification payments under this Article 9
shall be
deemed adjustments to the Merger Consideration.
9.4 Exclusive
Remedy. The
Indemnified Parties and the Stockholder Representative on behalf of the Series
D
Stockholders acknowledge and agree that the foregoing indemnification provisions
in this Article 9
shall be
the exclusive remedy with respect to breaches of the representations, warranties
and covenants in Articles 4
and
6.
9.5 Release
of Hold Back Consideration. At
the
expiration of the Survival Period and in accordance with the terms and
conditions of the Escrow Agreement, Acquiror and the Stockholder Representative
shall provide joint written instructions to the Escrow Agent in accordance
with
the Escrow Agreement to release any remaining portion of the Hold Back
Consideration, minus any amounts subject to pending claims, to Acquiror.
Simultaneously with the release of such amount (the “Released
Amount”),
the
Escrow Agent shall deliver to the Stockholder Representative cash and shares
of
Acquiror Common Stock in an aggregate amount equal to the Released Amount,
for
disbursement to the Series D Stockholders. The proportion of cash and shares
of
Acquiror Common Stock delivered at such time will be the same as the proportion
of cash and Acquiror Common Stock comprising the Hold Back Consideration on
the
Effective Date. Promptly upon resolution of any pending claim, any remaining
portion of the Hold Back Consideration that is not otherwise payable to Acquiror
with respect to such resolved claim, or subject to any other pending claim,
shall be disbursed to the Series D Stockholders in accordance with the preceding
provisions of this Section 9.5
and the
Escrow Agreement.
All
disbursements by the Stockholder Representative shall be made to the Series
D
Stockholders in the proportions of cash and Acquiror Common Stock establish
under Section 3.1 such
that
no Acquiror Common Stock will be disbursed to any Series D Stockholder who
has
not certified in a security holder questionnaire that such Series D Stockholder
is an Accredited Investor or a Sophisticated Investor.
ARTICLE
10
GENERAL
10.1 Amendments;
Extension; Waiver. This
Agreement may not be amended, altered or modified except by written instrument
executed by Acquiror, the Stockholder Representative, and Target.
10.2 Entire
Agreement. This
Agreement constitutes the entire understanding of the parties hereto with
respect to the transactions contemplated hereby, and supersedes all prior
agreements and understandings, written and oral, among the parties with respect
to the subject matter hereof.
10.3 Interpretation. When
reference is made in this Agreement to any Article, Section, Exhibit or
Schedule, such reference is to an Article or Section of, or an Exhibit or
Schedule to, this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words “include,” “includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without
limitation.” The phrases “the date of this Agreement,” “the date hereof” and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to the date set forth in the preamble of this Agreement. The words
“hereof,” “herein,” “hereby” and other words of similar import refer to this
Agreement as a whole unless otherwise indicated. Whenever the singular is used
herein, the same shall include the plural, and whenever the plural is used
herein, the same shall include the singular, where appropriate.
-36-
10.4 Severability. Any
term
or provision of this Agreement that is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, that provision shall be interpreted to be only so broad as is
enforceable.
10.5 Notices. All
notices and other communications hereunder shall be in writing and shall be
deemed given if they are: (a) delivered in person, (b) transmitted by facsimile
(with confirmation), (c) mailed by certified or registered mail (return receipt
requested), or (d) delivered by an express courier (with confirmation) to a
party at its address listed below (or at such other address as such party shall
deliver to the other party by like notice):
|
To
Target prior to the Closing:
|
Eximias
Pharmaceutical Corporation
▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
Attention:
▇▇▇▇ ▇▇▇▇▇▇▇
|
|
With
a concurrent copy
(which
shall not constitute
notice)
to:
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
|
|
To
Stockholder
Representative:
|
OrbiMed
Advisors, LLC
▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and
▇▇▇▇
▇▇▇▇▇▇▇▇▇
Facsimile:
_______________
|
-37-
|
To
Acquiror:
|
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention:
▇▇▇▇▇ ▇.▇. ▇▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
|
|
With
concurrent copies
(which
shall not constitute
notice)
to:
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention:
▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇
& Whitney LLP
▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇.
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇.▇. ▇▇▇ ▇▇▇
Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
|
10.6 Binding
Effect; Persons Benefiting; No Assignment. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns. Except as expressly
provided in Section 6.10,
nothing
in this Agreement is intended or shall be construed to confer upon any entity
or
Person other than the parties hereto and their respective successors and
permitted assigns any right, remedy or claim under or by reason of this
Agreement or any part hereof. This Agreement may not be assigned by any party
hereto without the prior written consent of Acquiror (in the case of an
assignment by Target) or Target (in the case of an assignment by
Acquiror).
10.7 Counterparts. This
Agreement may be executed in two or more counterparts (delivery of which may
occur via facsimile), each of which shall be binding as of the date first
written above, and, when delivered, all of which shall constitute one and the
same instrument. A facsimile signature or electronically scanned copy of a
signature shall constitute and shall be deemed to be sufficient evidence of
a
party’s execution of this Agreement, without necessity of further proof. Each
such copy shall be deemed an original, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
10.8 No
Prejudice. The
parties hereto acknowledge that the terms and language of this Agreement were
the result of negotiations among the parties and, as a result, there shall
be no
presumption that any ambiguities in this Agreement shall be resolved against
any
particular party. Any controversy over construction of this Agreement shall
be
decided without regard to events of authorship or negotiation.
-38-
10.9 Governing
Law. This
Agreement and all matters arising out of or relating hereto, including its
validity, construction and interpretation, shall be governed by the laws of
the
State of Delaware, without regard to the laws as to choice or conflict of laws,
except to the extent that the laws of the jurisdiction of incorporation of
a
party shall govern its internal corporate affairs.
10.10 Stockholder
Representative.
(a) OrbiMed
Advisors, LLC is hereby appointed as the Stockholder Representative for and
on
behalf of the Series D Stockholders solely with respect to matters involving
the
Hold Back Consideration and the Escrow Agreement. The Stockholder Representative
shall have the authority to take the following actions with respect to such
matters:
(i) to
give
and receive notices and communications,
(ii) to
receive funds and give receipts therefor,
(iii) to
receive service of process with respect to any claim under this
Agreement,
(iv) to
agree
to, negotiate, execute and deliver agreements, documents and
instruments,
(v) to
authorize payments of amounts from the Hold Back Consideration pursuant to
the
terms of this Agreement and the Escrow Agreement,
(vi) to
agree
to, negotiate, enter into settlements and compromises of, and demand arbitration
and comply with orders of courts and awards of arbitrators with respect to
such
claims, and
(vii) to
take
or refrain from taking all other action, and execute and deliver all additional
agreements, documents, certificates and instruments as the Stockholder
Representative may deem necessary or appropriate in connection with the Hold
Back Consideration and the Escrow Agreement.
The
Stockholder Representative may not be removed unless two-thirds interest of
the
Series D Stockholders agree to such removal and to the identity of the
substituted agent. A vacancy in the position of Stockholder Representative
may
be filled by the affirmative vote of two-thirds interest of the Series D
Stockholders. No bond shall be required of the Stockholder Representative,
and
the Stockholder Representative shall not receive any compensation for its
services. Notices or communications to or from the Stockholder Representative
shall constitute notice to or from the Series D Stockholders with respect to
matters involving the Hold Back Consideration and the Escrow
Agreement.
-39-
(b) The
Stockholder Representative shall not be liable to the Series D Stockholders
for
any act done or omitted hereunder as Stockholder Representative while acting
in
good faith and in the absence of gross negligence or willful misconduct. A
decision, act, consent or instruction of the Stockholder Representative,
including to an amendment, extension or waiver of this Agreement pursuant to
Section 10.1
hereof
regarding the Hold Back Consideration shall be final, binding and conclusive
upon the Series D Stockholders as beneficiaries of the Hold Back Consideration;
and Acquiror may conclusively and absolutely, rely, without any inquiry, upon
any such decision, act, consent or instruction of the Stockholder Representative
without further consent or instruction of the Series D Stockholders. Acquiror
is
hereby relieved from any liability to any Person, including any Series D
Stockholder, for any acts done by it in accordance with or reliance on such
decision, act, consent or instruction of the Stockholder
Representative.
(c) All
notices or other communications required to be made or delivered by Acquiror
to
the Series D Stockholders with respect to the Hold Back Consideration or the
Escrow Agreement shall be made to the Stockholder Representative for the benefit
of the Series D Stockholders and any notices so made shall discharge in full
all
notice requirements of Acquiror to the Series D Stockholders with respect
thereto.
(d) Notwithstanding
anything to the contrary contained herein, at the Effective Time, the Surviving
Corporation shall cause to be delivered to the Stockholder Representative an
amount in cash equal to $100,000 (the “Expense
Fund”)
to be
held in a bank account controlled by the Stockholder Representative. Such
account shall be established with a reputable bank with regional or national
standing. Upon the final release of all amounts included in the Hold Back
Consideration, the remaining amount in the Expense Fund, if any, shall be
distributed to the Series D Stockholders pro rata based upon the value of the
Acquiror Common Stock or cash comprising the Hold Back Consideration in respect
of each such holder on the Effective Date. The Stockholder Representative shall
be entitled to be reimbursed from the Expense Fund for any expense or liability
reasonably incurred by the Stockholder Representative in connection with the
administration of the Stockholder Representative’s duties under this Agreement
and the Escrow Agreement, including, but not limited to, the reasonable fees
and
expenses of any legal counsel or accountant retained by the Stockholder
Representative. To the extent that the amount of any such expenses or
liabilities of the Stockholder Representative exceed the amount of the Expense
Fund, the Stockholder Representative shall be entitled to be reimbursed out
of
any portion of the Hold Back Consideration to be released to the Series D
Stockholders.
10.11 Arbitration. All
disputes, controversies and claims arising out of or related to this Agreement
or in respect of any defined legal relationship associated with or derived
from
this Agreement shall be referred to and finally resolved by arbitration under
the International Arbitration Rules of the American Arbitration Association.
There shall be one arbitrator who shall be a U.S. lawyer. The arbitrator shall
not be a resident of Pennsylvania or any state contiguous with Pennsylvania.
The
place of arbitration shall be the arbitrators’ city of residence. The IBA Rules
of Evidence shall apply together with the general rules governing any submission
to arbitration specified above, except that where such rules are inconsistent
the IBA Rules of Evidence shall apply. Judgment upon the award rendered by
the
arbitrator may be entered in any court having jurisdiction
thereof.
-40-
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan of
Merger to be executed as of the date first set forth above.
|
By:
|
“▇▇▇▇▇
▇.▇. ▇▇▇▇▇”
|
|
Name:
▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇
|
|
|
Title:
Chairman, CEO and President
|
|
|
YM
BIOSCIENCES USA INC.
|
|
|
By:
|
“▇▇▇▇▇
▇.▇. ▇▇▇▇▇”
|
|
Name:
▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇
|
|
|
Title:
Chairman, CEO and President
|
|
|
YM
BIOSCIENCES U.S. OPERATIONS INC.
|
|
|
By:
|
“▇▇▇▇▇
▇.▇. ▇▇▇▇▇”
|
|
Name:
▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇
|
|
|
Title:
Chairman, CEO and President
|
|
|
EXIMIAS
PHARMACEUTICAL CORPORATION
|
|
|
By:
|
“▇▇▇▇
▇▇▇▇▇▇▇”
|
|
Name:
▇▇▇▇ ▇▇▇▇▇▇▇
|
|
|
Title:
President and CEO
|
|
|
ORBIMED
ADVISORS, LLC, AS STOCKHOLDER REPRESENTATIVE
|
|
|
By:
|
“▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇”
|
|
Name:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
|
|
|
Title:
General Partner
|
|
[Signature
Page to Agreement and Plan of Merger]
Exhibit
A
DEFINITIONS
For
all
purposes of the Agreement, the following terms shall have the respective
meanings set forth in this Exhibit (such definitions to be equally applicable
to
both the singular and plural forms of the terms herein defined).
“Accredited
Investor”
has
the
meaning set forth in Section 4.21(a).
“Acquiror”
has
the
meaning set forth in the first paragraph of this Agreement.
“Acquiror
Common Stock”
has
the
meaning set forth in Section 3.1(a).
“Acquiror
Stock Value”
means
the daily volume-weighted average sale price for each share of Acquiror Common
Stock traded on AMEX for the five (5) day trading period ending immediately
prior to the date in question.
“Action”
has
the
meaning set forth in Section 4.12.
“Adverse
Consequences”
has
the
meaning set forth in Section 9.1.
“Affiliate”
means,
with respect to any Person, any other Person who directly or indirectly
controls, is controlled by or is under common control with such Person. The
term
“control,” for the purposes of this definition, means the power to direct or
cause the direction of the management or policies of the controlled
Person.
“Agreement”
means
this Agreement, as such may hereafter be amended from time to time.
“AIM”
has
the
meaning set forth in Section 5.10(a).
“AMEX”
has
the
meaning set forth in Section 5.10(a).
“Antitrust
Laws”
means
the ▇▇▇▇▇▇▇ Act, as amended, the ▇▇▇▇▇▇▇ Act, as amended, the Federal Trade
Commission Act, as amended, the Competition Act (Canada), as amended, and any
other federal, state or foreign statutes, rules, regulations, orders or decrees
that are designed to prohibit, restrict or regulate actions having the purpose
or effect of monopolization or restraint of trade.
“Applicable
Law”
means
with respect to any Person, any United States, Canadian, foreign, state,
provincial or local statute, law, ordinance, rule, notice, policy, regulation,
order, writ, injunction, judgment or decree of any governmental agency or agent
or self regulatory organization or stock exchange applicable to such Person
or
any such Person’s Affiliates, properties, assets, officers, directors, employees
or agents.
“Assets”
means
all property and assets of a Person (whether real, personal, tangible or
intangible).
A-1
“Audited
Financial Statements”
has
the
meaning set forth in Section 4.6.
“Balance
Sheet”
has
the
meaning set forth in Section 4.6.
“Balance
Sheet Date”
has
the
meaning set forth in Section 4.6.
“Benefit
Plans”
has
the
meaning set forth in Section 4.15.
“Business
Day”
means
any day other than Saturday, a Sunday or a day on which banks in Philadelphia,
Pennsylvania or ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ are authorized or required to be closed
for regular banking business.
“Canadian
GAAP”
means
GAAP as in effect in Canada from time to time.
“Canadian
Securities Laws”
means
the securities laws of the Provinces and Territories of Canada, the rules,
their
respective regulations, prescribed forms, notices, policies, orders and rulings
made thereunder and the policy statements issued by the securities commissions
or other applicable securities regulatory authorities.
“Cash
Proceeds”
has
the
meaning set forth in Section 3.1(a).
“Certificate
of Merger”
has
the
meaning set forth in Section 1.3.
“Certificates”
has
the
meaning set forth in Section 3.5(c).
“Closing”
has
the
meaning set forth in Section 1.2.
“Code”
means
the Internal Revenue Code of 1986, as amended from time to time, or any
successor statute.
“Common
Stock”
means
the Common Stock, $0.001 par value, of Target.
“Confidential
Information”
has
the
meaning set forth in Section 6.1(b).
“Contract”
means
any written or oral contract, agreement, lease (including Real Property Leases),
license, instrument, or other document or commitment, arrangement, undertaking,
practice or authorization that is binding on any Person or its
Assets.
“Copyrights”
means
rights arising from or in respect to copyrights and copyrightable works and
registrations, applications and renewals for registration thereof, mask works
and registrations and applications for registration or renewals thereof, created
or arising under the laws of the United States or any other
jurisdiction.
“Custom
Software”
means
any computer software that has been developed or designed for use in the
business of Target.
“Default”
means
(a) any violation, breach or default of a Contract, (b) the occurrence of an
event that, with the passage of time, the giving of notice or both, would
constitute a violation, breach or default of a Contract, or (c) the occurrence
of an event that, with or without the passage of time, the giving of notice
or
both, would give rise to a right of termination, renegotiation or acceleration
of, or pursuant to, a Contract.
A-2
“DGCL”
has
the
meaning set forth in Section 1.1.
“Directors
and Officers”
has
the
meaning set forth in Section 6.10.
“Disclosure
Schedule”
has
the
meaning set forth in the introductory paragraph to Article 4.
“Dissenting
Shares”
has
the
meaning set forth in Section 3.7.
“Dissenting
Stockholder”
has
the
meaning set forth in Section 3.7.
“Dollars”
or
“$”
means
the lawful currency of the United States.
“Effective
Date”
has
the
meaning set forth in Section 1.3.
“Effective
Time”
has
the
meaning set forth in Section 1.3.
“Election
Form”
has
the
meaning set forth in Section 3.1(c).
“Employee
Options”
has
the
meaning set forth in Section 6.9.
“Encumbrance”
(a)
any
encumbrance, mortgage, hypothec, pledge, lien, charge or other security interest
of any kind upon any property or assets of any character, or upon the income,
profits or proceeds therefrom; (b) any acquisition of or agreement to have
an
option to acquire any property or assets upon conditional sale or other title
retention agreement, device or arrangement (including a capitalized lease);
or
(c) any sale, assignment, pledge or other transfer for security of any accounts,
general intangibles or chattel paper, with or without recourse.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended.
“Escrow
Agent”
means
▇.▇. ▇▇▇▇▇▇ Chase Bank, National Association.
“Exchange
Ratio”
has
the
meaning set forth in Section 3.1(a).
“Expense
Fund”
has
the
meaning set forth in Section 10.10(d).
“Financial
Statements”
has
the
meaning set forth in Section 4.6.
“GAAP”
means
generally accepted accounting principles, consistently applied, as in effect
at
the time any applicable financial statements were prepared.
“Governmental
Authority”
means,
with respect to any Person, any United States, Canadian, country, state,
provincial, municipal, local or other political subdivision, agency or
instrumentality thereof, or any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
A-3
“Hold
Back Consideration”
has
the
meaning set forth in Section 3.1(f).
“Indebtedness”
means:
(a) any obligation of Target for borrowed money or issued in substitution for
or
exchange of indebtedness of Target for borrowed money, (b) any obligation
evidenced by any note, bond, debenture or other debt security or instrument
issued by Target, (c) any obligation for the deferred purchase price of property
or services of Target (other than accounts payable, advance ▇▇▇▇▇▇▇▇ and accrued
expenses incurred in the Ordinary Course of Business), (d) any obligations
under
capitalized leases of Target; (e) any obligation secured by an Encumbrance
on
the Assets of Target, (f) any obligation of the type in clauses (a)-(e)
guaranteed or supported by surety or assurance in any manner by Target
(including performance bonds, guarantees in the form of an agreement to
repurchase or reimburse), and (g) any interest, principal, prepayment penalty,
fees or expenses to the extent paid, due or owing in respect of those items
listed in clauses (a) through (f) of this defined term.
“Indemnified
Party”
or
“Indemnified
Parties”
has
the
meaning set forth in Section 9.1.
“Information
Statement”
means
an information statement including all information with respect to this
Agreement and the transactions contemplated hereby that is required pursuant
to
Applicable Law.
“Intellectual
Property”
means
any Copyrights, Patents, Trademarks, Internet domain names and Trade
Secrets.
“Knowledge”
means:
(a) with respect to an individual, such individual shall be deemed to have
knowledge of a particular fact or other matter if (i) that individual is
actually aware of that fact or matter or (ii) a prudent individual would
reasonably be expected to have actual knowledge of that fact or matter after
conducting a reasonable investigation; and (b) with respect to a Person other
than an individual, such Person shall be deemed to have Knowledge of a
particular fact or other matter if any individual who is serving as an executive
officer of such Person has actual knowledge of that fact or matter, or would
reasonably be expected to have actual knowledge of that fact or matter after
conducting a reasonable investigation.
“Leased
Real Property”
has
the
meaning set forth in Section 4.8(b).
“Letter
of Transmittal”
has
the
meaning set forth in Section 3.5(b).
“Liability”
means
any direct or indirect liability, indebtedness, obligation, interest, penalty,
commitment, expense, claim, deficiency, guaranty or endorsement of or by any
Person of any type, known or unknown, asserted or unasserted and whether
accrued, absolute, contingent, matured or unmatured.
“Loss”
means
any and all claims, losses, liabilities, damages, costs and expenses (including
reasonable attorney’s, accountant’s, consultant’s and expert’s fees and
expenses) that are actually incurred by the relevant party without giving effect
to any multiplier that may be alleged by Acquiror to have been used in the
computation of Merger Consideration.
A-4
“Material
Adverse Effect”
means
any change, effect, event, occurrence, state of facts or development that is
materially adverse to the financial condition, results of operations, business
or Assets of any Person, taken as a whole.
“Merger”
has
the
meaning set forth in the Recitals of this Agreement.
“Merger
Consideration”
has
the
meaning set forth in Section 3.1(a).
“Merger
Sub”
has
the
meaning set forth in the first paragraph of this Agreement.
“Net
Cash at Closing”
has
the
meaning set forth on Schedule 3.1.
“Off-the-Shelf
Software”
means
any applications software that is licensed to Target by a third party in its
standard, unmodified condition pursuant to a “shrinkwrap,” “clickwrap” or other
standard license agreement.
“Ordinary
Course of Business”
means
an action taken by Target that is consistent with the past practices of Target
during the six months immediately prior to the date hereof and is taken in
the
ordinary course of the normal day-to-day operations of Target during the six
months immediately prior to the date hereof; for the avoidance of doubt,
“Ordinary Course of Business” never includes an action that requires
authorization by the Target Board or the Stockholders.
“Patents”
means
rights arising from or in respect to patents and patent applications, including
continuation, divisional, continuation-in-part, reissue or reexamination patent
applications and patents issuing therefrom, patent disclosures and inventions,
and foreign versions of the foregoing whether protected, created or arising
under the laws of the United States or any other jurisdiction.
“Permit”
means
all permits, licenses, consents, clearances, registrations, approvals, waivers,
franchises, notices, authorizations and provider and supplier agreements issued
by any Governmental Authority.
“Permitted
Encumbrances”
has
the
meaning set forth in Section 4.7.
“Person”
means
any individual, corporation, company, partnership (limited or general), joint
venture, limited liability company, association, trust or other
entity.
“Real
Property”
means
all interests in land and buildings, structures and other improvements
thereon.
“Real
Property Leases”
has
the
meaning set forth in Section 4.8(b).
“Reduced
Cash Consideration”
has
the
meaning set forth in Section 3.1(d).
“Released
Amount”
has
the
meaning set forth in Section 9.5.
“Relevant
Contract”
has
the
meaning set forth in Section 4.13.
A-5
“Representatives”
has
the
meaning set forth in Section 6.1(b).
“Series
D Stockholder”
has
the
meaning set forth in Section 3.1(a).
“Sophisticated
Investor”
has
the
meaning set forth in Section 4.21(a).
“Stock
Threshold”
has
the
meaning set forth in Section 3.1(d).
“Stockholder”
or
“Stockholders”
means
the holder(s) of Target Capital Stock.
“Stockholder
Representative”
has
the
meaning set forth in the first paragraph of this Agreement.
“Software”
means
any computer software of any nature whatsoever, including all systems software,
all applications software, whether for general business usage (e.g., accounting,
finance, word processing, graphics, spreadsheet analysis, etc.) or specific,
unique-to-the-business usage (e.g., purchase or service order processing, etc.),
all computer operating, security or programming software, and any and all
written documentation and object and source codes related thereto, including
Custom Software and Off-the-Shelf Software.
“Survival
Period”
has
the
meaning set forth in Section 9.1.
“Surviving
Corporation”
has
the
meaning set forth in Section 1.1.
“Target”
has
the
meaning set forth in the first paragraph of this Agreement.
“Target
Board”
means
the Board of Directors of Target.
“Target
Series A Preferred Stock”
means
the Preferred Series A Stock, $0.001 par value, of Target.
“Target
Series B Preferred Stock”
means
the Preferred Series B Stock, $0.001 par value, of Target.
“Target
Series C Preferred Stock”
means
the Preferred Series C Stock, $0.001 par value, of Target.
“Target
Series D Preferred Stock”
means
the Preferred Series D Stock, $0.001 par value, of Target.
“Target
Capital Stock”
means
all of the shares of Target common stock, Target Series A Preferred Stock,
Target Series B Preferred Stock, Target Series C Preferred Stock and Target
Series D Preferred Stock, which are issued and outstanding immediately prior
to
the Effective Time.
“Taxes”
or
“Tax”
means
all federal, state, provincial, local or foreign net or gross income, gross
receipts, net proceeds, sales, use, ad valorem, value added, franchise,
withholding, payroll, employment, excise, property, deed, stamp, alternative
or
add-on minimum, profits, windfall profits, transaction, license, lease, service,
occupation, severance, unemployment, social security, worker’s compensation,
capital, premium, or other taxes, together with any interest, penalties, and
additions to tax.
A-6
“Tax
Return”
means
any return or report relating to Taxes made to a Governmental
Authority.
“Termination
Date”
has
the
meaning set forth in Section 8.1(a)(ii).
“Third
Party Claim”
has
the
meaning set forth in Section 9.2(a).
“Trademarks”
means
rights arising from or in respect to trademarks, service marks, trade names,
logos and internet domain names (whether registered or unregistered, including
any applications for registration of the foregoing), trade dress rights and
general intangibles of a like nature, industrial or product designs together
with all of the goodwill associated therewith, and foreign versions of the
foregoing whether protected, created or arising under the laws of the United
States or any other jurisdiction.
“Trade
Secrets”
means
rights arising from or in respect to trade secrets and other confidential
information (including, without limitation, ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, concepts, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, financial and marketing plans and
customer and supplier lists and information whether protected, created or
arising under the laws of the United States or any other
jurisdiction.
“TSX”
has
the
meaning set forth in Section 5.10(a).
“Unaudited
Financial Statements”
has
the
meaning set forth in Section 4.6.
“U.S.
GAAP”
means
GAAP as in effect in the United States from time to time.
“U.S.
Securities Act”
means
the United States Securities Act of 1933, as amended.
“YM
BioSciences USA”
has
the
meaning set forth in the first paragraph of this Agreement.
A-7
Exhibit
B
Certificate
of Merger
B-1
Exhibit
C
Initial
Directors and Officers
Directors:
▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇
Officers:
▇▇▇▇▇
▇▇▇▇▇, Chairman
▇▇▇▇
▇▇▇▇▇▇▇, CEO
▇▇▇
▇▇▇▇▇▇, Director, Finance and Administration
C-1
Exhibit
D
Form
of Escrow Agreement
-1-
ESCROW
AGREEMENT
THIS
ESCROW AGREEMENT,
dated
_____________, 2006 (“Escrow
Agreement”),
is by
and among YM BioSciences Inc., a corporation existing under the laws of Nova
Scotia, Canada (“Acquiror”),
OrbiMed Advisors, LLC, in the capacity as the Stockholder Representative under
the Merger Agreement (the “Stockholder
Representative”),
and
▇.▇. ▇▇▇▇▇▇ Chase Bank, National Association (the “Escrow
Agent”).
BACKGROUND
Acquiror,
YM BioSciences USA Inc., a Delaware corporation and wholly-owned subsidiary
of
Acquiror (“YM
BioSciences USA”),
YM
BioSciences U.S. Operations Inc., a Delaware corporation and wholly-owned
subsidiary of YM BioSciences USA (“Merger
Sub”),
Eximias Pharmaceutical Corporation, a Delaware corporation (“Target”),
and
the Stockholder Representative are parties to an Agreement and Plan of Merger,
dated April 12, 2006 (the “Merger
Agreement”),
providing for the merger of Merger Sub with and into Target. This Escrow
Agreement is being executed and delivered pursuant to the terms of the Merger
Agreement.
TERMS
NOW,
THEREFORE,
in
consideration of the foregoing premises, the agreements herein contained, and
other good and valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
4. Definitions.
Capitalized
terms used in this Escrow Agreement but not defined herein shall have the
meanings ascribed to such terms in the Merger Agreement.
4. Appointment
of and Acceptance by Escrow Agent. Acquiror
and the Stockholder Representative hereby appoint Escrow Agent to serve as
escrow agent hereunder. Escrow Agent hereby accepts such appointment and, upon
receipt of the Hold Back Consideration (as defined below) in accordance with
Section 3
below,
agrees to hold, invest and disburse the Hold Back Consideration in strict
accordance with this Escrow Agreement.
4. Creation
of Hold Back Account. On
the
date hereof, in accordance with Section 3.1(d)
of the
Merger Agreement, Acquiror shall deliver or cause to be delivered an amount
of
the aggregate Cash Proceeds and certificates representing the number of shares
of Acquiror Common Stock (based on the Acquiror Stock Value as of the Effective
Date, or the deemed Acquiror Stock Value should Section 3.1(b) of the
Merger Agreement apply) equal to $3,000,000 (the “Hold
Back Consideration”)
in the
account described below (the “Hold
Back Account”),
to be
held by Escrow Agent in accordance with the terms of this Escrow Agreement.
The
Hold Back Consideration shall be available, in accordance with the terms and
conditions of this Escrow Agreement, solely for payments to be made to the
Indemnified Parties pursuant to the Series D Stockholders’ indemnification
obligations under Section 9.1 of
the
Merger Agreement. During the term of this Agreement, the Hold Back Account
shall
consist of both (i) shares of Acquiror Common Stock (the “Hold
Back Shares”)
and
(ii) the Cash Proceeds (the “Hold
Back Cash”).
The
identities of the Series D Stockholders and the number of Hold Back Shares
or
Hold Back Cash deposited in the Hold Back Account in respect of each of them
(the “Allocation
Percentage”)
are
set forth in Exhibit A
attached
hereto. The securities to be held by the Escrow Agent pursuant to this Escrow
Agreement are set forth in Exhibit C
attached
hereto.
-2-
.22.
The
Escrow Agent shall maintain on the Hold Back Account a ledger containing the
name, balance and Allocation Percentage for each Series D Stockholder (for
purposes of this Escrow Agreement, a “Sub-Account”),
which
balance shall be the amount of such Series D Stockholder’s Hold Back
Consideration held in the Hold Back Account.
4. Procedure
with Respect to Claims Generally.
.21.
Escrow
Agent shall release from the Hold Back Account and distribute the Hold Back
Consideration (or any portion thereof) only as follows:
(a) Escrow
Agent shall disburse the Hold Back Consideration at any time and from time
to
time, in accordance with a written direction executed by Acquiror and the
Stockholder Representative, in substantially the form attached hereto as
Exhibit B
(a
“Hold
Back Joint Written Direction”).
(b) If
the
Escrow Agent receives (i) a notice, signed by the Acquiror and the Stockholder
Representative, of final determination of liability pursuant to Section 9.1
of the
Merger Agreement (a “Final
Determination Notice”)
or
(ii) a copy of a written claim notice pursuant to Section 9.1 of the Merger
Agreement (a “Claim
Notice”),
together with a certificate signed by an executive officer of the Acquiror
certifying that the Acquiror has given the Stockholder Representative notice
of
such claim for indemnification in accordance with the Merger Agreement, and
the
Stockholder Representative has not disputed such claim within thirty days of
receipt of such notice (a “Notice
Period Expiration Certificate”),
then
the Escrow Agent shall distribute from the Hold Back Consideration the amount
specified in the Final Determination Notice or Claim Notice, as the case may
be
(the “Claim
Amount”),
in
accordance with Section 4.2
below.
.22.
Within
10
days after receipt of a Final Determination Notice or the Notice Period
Expiration Certificate, as the case may be (a “Distribution
Date”),
in
accordance with Section 4.1
above,
the Escrow Agent shall pursuant to written instructions distribute to Acquiror
from the Hold Back Account that amount of the Hold Back Consideration sufficient
to satisfy the Claim Amount and each Series D Stockholder’s Sub-Account shall be
reduced by (x) the product of (A) such Series D Stockholder’s Allocation
Percentage times (B) the Claim Amount. Notwithstanding anything to the contrary
contained herein, the maximum aggregate liability for all claims paid pursuant
to Section 9.1
of the
Merger Agreement with respect to the Series D Stockholders shall be limited
to
$3,000,000 (based on the Acquiror Common Stock being valued based on the
Acquiror Stock Value at the Effective Date), notwithstanding any increase or
decrease in the value of the Hold Back Shares.
.23.
For
purposes of any distribution of the Hold Back Consideration pursuant to this
Section 4,
the
Hold Back Shares shall be valued based on the Acquiror Stock Value at the
Effective Date, notwithstanding any increase or decrease in the actual price
of
Acquiror Common Stock as of the Distribution Date.
-3-
.24.
All
claims will be satisfied from the Hold Back Consideration in cash and shares
of
Acquiror Common Stock based on the proportion of cash and Acquiror Common Stock
comprising the Hold Back Consideration on the Effective Date.
.25.
In
no
event will fractional shares of Acquiror Common Stock be delivered from the
Hold
Back Account, and any calculation that would result in delivery of a fractional
share to Acquiror shall be rounded downward to the next whole
share.
.26.
All
disbursements of the Hold Back Cash shall be made by federal funds wire transfer
or by cashier’s check, as set forth in the Hold Back Joint Written Direction, or
as otherwise elected by the party receiving the funds.
.27.
All
necessary calculations pursuant to this Section 4
shall be
performed by the parties and included in the written instructions given to
the
Escrow Agent.
4. Escrow
Period; Termination of Escrow.
.21.
The
period during which the Hold Back Consideration shall be held in escrow
hereunder (the “Escrow
Period”)
shall
commence on the date hereof and, subject to the provisions of Section 5.3
below,
shall end on the earlier of (i) the date on which all of the Hold Back
Consideration have been delivered to Acquiror pursuant to Section 4.2
hereof
or (ii) the expiration of the Survival Period (the “Scheduled
Final Disbursement Date”).
.22.
On
the
Scheduled Final Disbursement Date, Acquiror and the Stockholder Representative
shall deliver a Hold Back Joint Written Direction to the Escrow Agent to release
any remaining portion of the Hold Back Consideration, minus any amounts subject
to a Pending Claim (as defined in Section 5.3,
below),
to Acquiror. Simultaneously with the release of such amount (the “Released
Amount”),
Acquiror shall deliver to the Stockholder Representative the Hold Back
Consideration in an aggregate amount equal to the Released Amount, for
disbursement to the Series D Stockholders in accordance with their respective
Allocation Percentages.
.23.
If
a
claim is unresolved on the Scheduled Final Disbursement Date (a “Pending
Claim”),
the
Escrow Agent shall hold back and not distribute a portion of the then remaining
Hold Back Consideration in an amount equal to such unresolved claim as set
forth
in a copy of the Claim Notice delivered by Acquiror to the Escrow Agent. The
funds held back shall continue to be held by the Escrow Agent and invested
in
accordance with Section 6
below.
After final determination and payment of all Pending Claims, the balance of
the
Hold Back Consideration shall be delivered to the Stockholder Representative
for
distribution to the Series D Stockholders in accordance with their respective
Allocation Percentages.
.24.
For
purposes of any distribution of the Hold Back Consideration to the Stockholder
Representative pursuant to this Section 5,
the
Hold Back Shares shall be valued based on the Acquiror Stock Value as of the
Scheduled Final Disbursement Date or, in the event of a Pending Claim, as of
the
date the Hold Back Shares are released by the Escrow Agent.
-4-
.25.
Any
distributions of Hold Back Consideration to the Stockholder Representative
pursuant to this Section 5
shall be
made by the Escrow Agent to the Stockholder Representative at the address set
forth in Section 15
hereof
or such other address as may be furnished in writing to the Escrow
Agent.
4. Rights
of
the Series D Stockholders to Hold Back Consideration.
.21.
As
long
as the Hold Back Shares are held by the Escrow Agent, the Hold Back Shares
shall
remain registered in the name of the respective Series D Stockholders, and
the
respective Series D Stockholders shall be entitled to vote the Hold Back Shares
and to receive all cash dividends and other distributions paid on the Hold
Back
Shares. Any securities issued or other distributions made in respect to the
Hold
Back Shares as a result of a stock dividend, stock split, spin-off, merger,
consolidation, reorganization or other similar transaction shall be deposited
with the Escrow Agent and shall become part of the Hold Back Account under
this
Escrow Agreement.
.22.
Until
released in accordance with this Escrow Agreement, Escrow Agent shall invest
and
reinvest the Hold Back Cash as
set
forth on Schedule A.
Escrow
Agent shall receive and collect all dividends, interest, gains and other
distributions received by Escrow Agent as a result of such investments
(collectively, “Earnings”)
in
respect of such investments. All Earnings shall be held by Escrow Agent in
the
Hold Back Account and reinvested. Upon the final release of all Hold Back
Consideration, the Earnings shall be paid to Acquiror and the Stockholder
Representative in the same proportion as the aggregate Hold Back Cash was
disbursed among Acquiror and the Stockholder Representative. The Stockholder
Representative shall provide the Escrow Agent with Form W-9 and/or W-8 of all
Series D Stockholders. The Escrow Agent will be provided with a Schedule showing
the allocation of the Series D Stockholders earnings. The Stockholder
Representative shall be responsible for paying the Series D Stockholders their
allocable share pursuant to this Schedule. The Escrow Agent shall be responsible
for reporting the earnings for this account and any necessary withholding if
applicable.
.23.
If
Escrow
Agent has not received instruction as to an investment decision, Escrow Agent
shall invest the Hold Back Cash, or such portion thereof as to which no
investment instruction has been received, in investments described in
Section 6.2
above.
Each of the foregoing investments shall be made in the name of Escrow Agent;
provided, however, that the Hold Back Cash shall be for the exclusive benefit
of
Acquiror and the Series D Stockholders and their respective successors and
assigns, and no other person or entity shall have any right, title, interest
or
lien therein. No investment shall be made in any instrument or security that
has
a maturity of greater than sixty days. Notwithstanding anything to the contrary
contained herein, Escrow Agent may, without notice to Acquiror or the
Stockholder Representative, sell or liquidate any of the foregoing investments
at any time if the proceeds thereof are required for any release of funds
permitted or required hereunder, and Escrow Agent shall not be liable or
responsible for any loss, cost or penalty resulting from any such sale or
liquidation. With respect to any Hold Back Cash received by Escrow Agent for
deposit into the Hold Back Account or any joint written direction received
by
Escrow Agent with respect to investment of any Hold Back Cash after 1:00 P.M.
New York time, Escrow Agent shall not be required to invest such funds or to
effect such investment instruction until the next day upon which banks in New
York, New York are open for business.
-5-
4. Reports.
.21.
As
soon
as practicable after the end of each calendar month during the term of this
Escrow Agreement, Escrow Agent shall deliver to Acquiror and the Stockholder
Representative a written statement setting forth (x) the assets and value of
the
Hold Back Consideration as of the end of such month and (y) the amount of all
Earnings on the Hold Back Accounts earned during such month.
.22.
Receipt,
investment and reinvestment of the Hold Back Consideration shall be confirmed
by
Escrow Agent as soon as practicable by account statement, and any discrepancies
in any such account statement shall be noted by the parties to Escrow Agent
within 30 calendar days after receipt thereof. Failure to inform Escrow Agent
in
writing of any discrepancies in any such account statement within said 30-day
period shall conclusively be deemed confirmation of such account statement
in
its entirety.
4. Disbursement
Into Court. If:
(i)
at any time there shall exist any dispute among Acquiror and the
Stockholder Representative
with respect to the holding or disposition of any portion of the Hold Back
Consideration or any other obligations of Escrow Agent hereunder, (ii) if at
any
time Escrow Agent is unable to determine, to Escrow Agent’s sole satisfaction,
the proper disposition of any portion of Acquiror’s or the
Stockholder Representative’s
proper actions with respect to its obligations hereunder or (iii) if Acquiror
and the Stockholder Representative have not within ninety (90) days of the
furnishing by Escrow Agent of a notice of resignation pursuant to Section 10
hereof,
appointed a successor Escrow Agent to act hereunder, then Escrow Agent may,
in
its sole discretion, take either or both of the following actions:
(a) suspend
the performance of any of its obligations (including without limitation any
disbursement obligations) under this Escrow Agreement until such dispute or
uncertainty shall be resolved to the sole satisfaction of Escrow Agent or until
a successor Escrow Agent shall have been appointed (as the case may be);
provided,
however,
that
Escrow Agent shall continue to invest the Hold Back Cash in accordance with
Section 6.2
hereof;
and/or
(b) petition
(by means of an interpleader action or any other appropriate method) any court
of competent jurisdiction in the State of Delaware for instructions with respect
to such dispute or uncertainty, and to the extent required by law, pay into
such
court for holding and disposition in accordance with the instructions of such
court, all funds held by it in the Hold Back Account, after deduction and
payment to Escrow Agent of all fees and expenses (including court costs and
reasonable attorneys’ fees) payable to Escrow Agent in connection with the
performance of its duties hereunder.
4. Stockholder
Representative.
.21.
In
accordance with Section 10.10
of the
Merger Agreement, the Series D Stockholders shall be bound by any and all
actions taken by the Stockholder Representative on their
behalf.
-6-
.22.
Acquiror
shall be entitled to rely upon any communication or writing given or executed
by
the Stockholder Representative. All communications or writings to be sent to
the
Series D Stockholders generally pursuant to this Escrow Agreement shall be
addressed to the Stockholder Representative and any communication or writing
so
sent shall be deemed notice to all of the Series D Stockholders
hereunder.
.23.
The
Stockholder Representative shall have full power to act in each Series D
Stockholder’s name and on each Series D Stockholder’s behalf according to the
terms of this Escrow Agreement in the absolute discretion of the Stockholder
Representative, and in general to do all things and to perform all acts
including, without limitation, executing and delivering all agreements,
certificates, receipts, instructions and other instruments contemplated by
or
deemed advisable in connection with this Escrow Agreement.
4. Resignation
and Removal of Escrow Agent. Escrow
Agent may resign from the performance of its duties hereunder at any time by
giving thirty (30) days’ prior written notice to Acquiror and the Stockholder
Representative or may be removed, with or without cause, by Acquiror and the
Stockholder Representative, acting jointly by furnishing a joint written
instruction to Escrow Agent, at any time by the giving of thirty (30) days’
prior written notice to Escrow Agent. Such resignation or removal shall take
effect upon the appointment of a successor Escrow Agent as provided below.
Upon
any such notice of resignation or removal, the Acquiror and the Stockholder
Representative jointly shall appoint a successor Escrow Agent hereunder, which
shall be a commercial bank, trust company or other financial institution with
a
combined deposits in excess of $100,000,000. Upon the acceptance in writing
of
any appointment as Escrow Agent hereunder by a successor Escrow Agent, such
successor Escrow Agent shall thereupon succeed to and become vested with all
the
rights, powers, privileges and duties of the retiring Escrow Agent, and the
retiring Escrow Agent shall be discharged from its duties and obligations under
this Escrow Agreement, but shall not be discharged from any liability for
actions taken as Escrow Agent hereunder prior to such succession. After any
retiring Escrow Agent’s resignation or removal, the provisions of this Escrow
Agreement shall inure to its benefit as to any actions taken or omitted to
be
taken by it while it was Escrow Agent under this Escrow Agreement. The retiring
Escrow Agent shall transmit all records pertaining to the Hold Back
Consideration and shall pay all funds held by it in the Hold Back Account to
the
successor Escrow Agent, after making copies of such records as the retiring
Escrow Agent deems advisable and after deduction and payment of the retiring
Escrow Agent of all fees and expenses (including court costs and reasonable
attorneys’ fees) payable to Escrow Agent in connection with the performance of
its duties hereunder.
If a
successor Escrow Agent has not been appointed within thirty (30) days after
the
giving of such notice of resignation, then the resigning Escrow Agent may,
may,
at the shared expense of Acquiror, on the one hand, and the Stockholder
Representative, on the other, petition any court of competent jurisdiction
for
the appointment of a successor Escrow Agent.
-7-
4. Liability
of Escrow Agent.
.21.
Escrow
Agent shall have no liability or obligation with respect to the Hold Back
Consideration for any action taken or omitted by it in good faith except to
the
extent that a court of competent jurisdiction determines that Escrow Agent’s
gross negligence or willful misconduct was the primary cause of any loss to
Acquiror or the Series D Stockholders. Escrow Agent’s sole responsibility shall
be for the safekeeping, investment, and disbursement of the Hold Back
Consideration in accordance with the terms of this Escrow Agreement and shall
neither be responsible for, nor chargeable with, knowledge of the terms and
conditions of any other agreement, instrument or document between the other
parties hereto, in connection herewith including, without limitation, the Merger
Agreement. Escrow Agent shall have no implied duties or obligations and shall
not be charged with knowledge or notice of any fact or circumstance not
specifically set forth herein. Escrow Agent shall have no liability and no
duty
to inquire as to the provisions of any agreement other than this Escrow
Agreement and the Merger Agreement. Escrow Agent may rely upon any instrument,
not only as to its due execution, validity and effectiveness, but also as to
the
truth and accuracy of any information contained therein, which Escrow Agent
shall in good faith believe to be genuine, to have been signed or presented
by
the person or parties purporting to sign the same and to conform to the
provisions of this Escrow Agreement. Escrow Agent shall not be obligated to
take
any legal action or commence any proceeding in connection with the Hold Back
Consideration, any account in which Hold Back Consideration are deposited,
this
Escrow Agreement or the Merger
Agreement,
or to
appear in, prosecute or defend any such legal action or proceeding. Escrow
Agent
may consult legal counsel selected by it in the event of any dispute or question
as to the construction of any of the provisions hereof or of any other agreement
or of its duties hereunder, or relating to any dispute involving any party
hereto, and shall incur no liability and shall be fully indemnified from any
liability whatsoever in acting in accordance with the opinion or instruction
of
such counsel.
.22.
Escrow
Agent is authorized, in its sole discretion, to comply with orders issued or
process entered by any court with respect to the Hold Back Consideration,
without determination by Escrow Agent of such court’s jurisdiction in the
matter. If any portion of the Hold Back Consideration is at any time attached,
garnished or levied upon under any court order, or in case the payment,
assignment, transfer, conveyance or delivery of any such property shall be
stayed or enjoined by any court order, or in case any order, judgment or decree
shall be made or entered by any court affecting such property or any part
thereof, then and in any such event, Escrow Agent is authorized, in its sole
discretion, to rely upon and comply with any such order, writ, judgment or
decree which it is advised by legal counsel selected by it is binding upon
it
without the need for appeal or other action; and if Escrow Agent complies with
any such order, writ, judgment or decree, it shall not be liable to any of
the
parties hereto or to any other person or entity by reason of such compliance
even though such order, writ, judgment or decree may be subsequently reversed,
modified, annulled, set aside or vacated. Notwithstanding anything in this
Escrow Agreement to the contrary, in no event shall Escrow Agent be liable
for
any special, indirect or consequential loss or damage of any kind whatsoever
(including, but not limited to, lost profits), even if Escrow Agent has been
advised of the likelihood of such loss or damage and regardless of the form
of
action.
-8-
4. Indemnification
of Escrow Agent. From
and
at all times after the date of this Escrow Agreement, Acquiror and the
Stockholder Representative (on behalf of the Series D Stockholders), jointly
and
severally, shall, to the fullest extent permitted by law and to the extent
provided herein, indemnify and hold harmless Escrow Agent and each director,
officer, employee, attorney, agent and affiliate of Escrow Agent (collectively,
the “Indemnified
Escrow Agent Parties”)
against any and all actions, claims, losses, damages, liabilities, costs and
expenses of any kind or nature whatsoever (including without limitation
reasonable attorneys’ fees, costs and expenses) incurred by or asserted against
any of the Indemnified Escrow Agent Parties from and after the date hereof,
whether direct, indirect or consequential, as a result of or arising from or
in
any way relating to any claim, demand, suit, action or proceeding (including
any
inquiry or investigation) by any person, whether threatened or initiated,
asserting a claim for any legal or equitable remedy against any person under
any
statute or regulation, including, but not limited to, any federal or state
securities laws, or under any common law or equitable cause or otherwise,
arising from or in connection with the negotiation, preparation, execution,
performance or failure of performance of this Escrow Agreement or any
transactions contemplated herein, whether or not any such Indemnified Escrow
Agent Party is a party to any such action, proceeding, suit or the target of
any
such inquiry or investigation;
provided, however,
that no
Indemnified Escrow Agent Party shall have the right to be indemnified hereunder
for any liability finally determined by a court of competent jurisdiction,
subject to no further appeal, to have resulted from the gross negligence or
willful misconduct of such Indemnified Escrow Agent Party. If any such action
or
claim shall be brought or asserted against any Indemnified Escrow Agent Party,
such Indemnified Escrow Agent Party shall promptly notify Acquiror and the
Stockholder Representative in writing, and Acquiror and the Stockholder
Representative (on behalf of the Series D Stockholders) shall assume the defense
thereof, including the employment of counsel and the payment of all expenses.
Such Indemnified Escrow Agent Party shall have the right to employ separate
counsel (who may be selected by such Indemnified Escrow Agent Party in its
sole
discretion) in any such action and to participate in the defense thereof, and
the fees and expenses of such counsel shall be paid by such Indemnified Escrow
Agent Party. All of the foregoing losses, damages, costs and expenses of the
Indemnified Escrow Agent Parties shall be payable by Acquiror and the
Stockholder Representative (on behalf of the Series D Stockholders), jointly
and
severally, to the extent of the Hold Back Consideration upon demand by such
Indemnified Escrow Agent Party. The obligations of Acquiror and the Stockholder
Representative under this Section 12
shall
survive any termination of this Escrow Agreement and the resignation or removal
of Escrow Agent shall be independent of any obligation of Escrow
Agent.
The
parties agree that neither the payment by Acquiror and the Stockholder
Representative (on behalf of the Series D Stockholders) of any claim by Escrow
Agent for indemnification hereunder nor the disbursement of any amounts to
Escrow Agent from the Hold Back Account in respect of a claim by Escrow Agent
for indemnification shall impair, limit, modify, or affect, as among Acquiror
and the Stockholder Representative, the respective rights and obligations of
Acquiror and the Stockholder Representative under the Merger
Agreement.
4. Fees
and
Expenses of Escrow Agent. Escrow
Agent shall be compensated for its services hereunder in accordance with
Schedule B
attached
hereto. All of the compensation and reimbursement obligations set forth in
this
Section 13
shall be
split equally between Acquiror
and the Stockholder Representative (on behalf of the Series D
Stockholders).
4. Consent
to Jurisdiction and Venue. Each
party hereto irrevocably submits to the exclusive jurisdiction of the federal
and state courts located in the State of New York for purposes of any suit,
action or other proceeding arising out of this Escrow Agreement (and agrees
not
to commence any action, suit or proceeding relating hereto except in such
courts). Each party further agrees that service of any process, summons, notice
or document by U.S. registered mail to such party’s respective address set forth
in Section 15
shall be
effective service of process for any action, suit or proceeding with respect
to
any matters to which it has submitted to jurisdiction as set forth in the
immediately preceding sentence. Each party irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding
arising out of this Escrow Agreement in the federal or state courts located
in
the State of New York and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such action, suit
or
proceeding brought in any such court has been brought in an inconvenient
forum.
-9-
4. Notices.
All
notices and other communications hereunder shall be in writing and shall be
deemed given if they are: (a) delivered in person, (b) transmitted by facsimile
(with confirmation), (c) transmitted by email (with confirmation) (d) mailed
by
certified or registered mail (return receipt requested), or (e) delivered by
an
express courier (with confirmation) to a party at its address listed below
(or
at such other address as such party shall deliver to the other party by like
notice):
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If
to Acquiror:
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▇▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
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Attention:
▇▇▇▇▇ ▇.▇. ▇▇▇▇▇
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Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
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with
copies (which shall not constitute notice) to:
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▇▇▇▇▇▇▇ ▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
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Attention:
▇▇▇▇▇ ▇. ▇▇▇▇
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Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
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and
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▇▇▇▇▇▇
& Whitney LLP
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▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇.▇.
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇,
▇.▇. ▇▇▇ ▇▇▇
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Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
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If
to Stockholder
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OrbiMed
Advisors, LLC
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Representative:
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▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇, ▇▇ ▇▇▇▇▇
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Attention:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and
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Facsimile:
_______________
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-10-
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If to Escrow Agent:
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JPMorgan
Chase Bank, National Association
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▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ – ▇▇▇▇ ▇▇▇▇▇
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▇▇,
▇▇ ▇▇▇▇▇
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Facsimile:
212.623.6168
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Email:
▇▇▇▇▇▇.▇.▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
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Attn:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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4. Amendment,
Parties in Interest, Assignment, Etc. This
Agreement may be amended, modified or supplemented only by a written instrument
duly executed by each of the parties hereto. If any provision of this Agreement
shall for any reason be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall not affect
any
other provision hereof, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective heirs, legal representatives, successors and
permitted assigns of the parties hereto. No party hereto shall assign this
Agreement or any right, benefit or obligation hereunder.
4. Governing
Law. This
Agreement shall be governed by and construed in accordance with the laws of
the
state of New York, without giving effect to the conflicts of laws principles
thereof.
4. Counterparts.
This
Agreement may be executed in two or more counterparts (delivery of which may
occur via facsimile), each of which shall be binding as of the date first
written above, and, when delivered, all of which shall constitute one and the
same instrument. A facsimile signature or electronically scanned copy of a
signature shall constitute and shall be deemed to be sufficient evidence of
a
party’s execution of this Agreement, without necessity of further proof. Each
such copy shall be deemed an original, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
4. Account
Opening Information/TINs. To
help
the government fight the funding of terrorism and money laundering activities,
Federal law requires all financial institutions to obtain, verify, and record
information that identifies each person who opens an account. When the Hold Back
Account is opened, Escrow Agent shall request for information that will allow
Escrow Agent to identify each party’s relevant Taxpayer Identification Number
(“TIN”).
Acquiror, and the Stockholder Representative as to each Series D Stockholder,
shall represent that the correct TIN assigned by the Internal Revenue Service
(“IRS”)
or any
other taxing authority to it, or in the case of the Stockholder Representative
to each Series D Stockholder, will be forwarded to Escrow Agent. In addition,
all Earnings earned under this Escrow Agreement shall be allocated in accordance
with Section 6.
Notwithstanding anything else in this Escrow Agreement, Escrow Agent shall
report and, as required, withhold any taxes as it determines may be required
by
any law or regulation in effect at the time of the distribution. Except as
otherwise provided in this Escrow Agreement, in the absence of timely direction,
all proceeds of the Hold Back Consideration shall be retained in the Hold Back
Account and reinvested from time to time by Escrow Agent as provided in
Section 6.
-11-
4. Security
Procedures. In
the
event funds transfer instructions are given (other than in writing at the time
of execution of this Escrow Agreement), whether in writing, by telecopier,
Escrow Agent is authorized to seek confirmation of such instructions by
telephone call-back to the person or persons designated on Schedule C
hereto,
and Escrow Agent may rely upon the confirmation of anyone purporting to be
the
person or persons so designated. Each funds transfer instruction shall be
executed by an authorized signatory, a list of such authorized signatories
is
set forth on Schedule C.
The
undersigned is authorized to certify that the signatories on Schedule C
are
authorized signatories. The persons and telephone numbers for call-backs may
be
changed only in a writing actually received and acknowledged by Escrow Agent.
If
Escrow Agent is unable to contact any of the authorized representatives
identified on Schedule C,
Escrow
Agent is hereby authorized to seek confirmation of such instructions by
telephone call-back to the Stockholder Representative and any one or more of
Acquiror’s executive officers (“Executive
Officers”),
as
Escrow Agent may select. Such Executive Officer shall deliver to Escrow Agent
a
fully executed Incumbency Certificate, and Escrow Agent may rely upon the
confirmation of anyone purporting to be any such officer. Escrow Agent and
the
beneficiary’s bank in any funds transfer may rely solely upon any account
numbers or similar identifying numbers provided by Acquiror or the Stockholder
Representative to identify (a) the beneficiary, (b) the beneficiary’s bank, or
(c) an intermediary bank. Escrow Agent may apply any of the escrowed funds
for
any payment order it executes using any such identifying number, even when
its
use may result in a person other than the beneficiary being paid, or the
transfer of funds to a bank other than the beneficiary’s bank or an intermediary
bank designated. The parties to this Escrow Agreement acknowledge that these
security procedures are commercially reasonable.
[Signatures
appear on next page]
-12-
IN
WITNESS WHEREOF,
the
parties hereto have caused this Escrow Agreement to be executed under seal
as of
the date first above written.
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ACQUIROR:
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YM
BIOSCIENCES, INC.
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By:
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Name:
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Title:
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STOCKHOLDER
REPRESENTATIVE:
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ORBIMED
ADVISORS, LLC
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By:
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Name:
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Title:
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ESCROW
AGENT:
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JPMORGAN
CHASE BANK, NATIONAL ASSOCIATION
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By:
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Name:
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▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
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Title:
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Vice
President
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[Signature
Page to Escrow Agreement]
SCHEDULE
A
Permitted
Investment of Hold Back Consideration
¨ JPMorgan
Chase Bank, N.A. Money Market Account;
¨ A
trust
account with JPMorgan Chase Bank, N.A.;
¨ A
money
market mutual fund, including without limitation the JPMorgan Fund or any other
mutual fund for which the Depository Agent or any affiliate of the Depository
Agent serves as investment manager, administrator, shareholder servicing agent
and/or custodian or subcustodian, notwithstanding that (i) the Depository Agent
or an affiliate of the Depository Agent receives fees from such funds for
services rendered, (ii) the Depository Agent charges and collects fees for
services rendered pursuant to this Depository Agreement, which fees are separate
from the fees received from such funds, and (iii) services performed for such
funds and pursuant to this Depository Agreement may at times duplicate those
provided to such funds by the Depository Agent or its affiliates.
SCHEDULE
B
Fees
Payable to Escrow Agent
$3,
000
Payable
Upon Account Opening and in Advance each year in which Escrow Agent acts as
Escrow Agent. Annual fees are non pro-rated for partial years. There shall
be no
additional charges, subject to Sections 8(b), 10 and 12 of this Escrow
Agreement.
SCHEDULE
C
Telephone
Number(s) and signature(s) for
Person(s)
Designated to give and confirm Funds Transfer Instructions
Telephone
call backs shall be made to both Acquiror and the Stockholder Representative
if
joint instructions are required pursuant to the agreement. All funds transfer
instructions must include the signature of the person(s) authorizing said funds
transfer and must not be the same person confirming said transfer.
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If
to Acquiror:
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||||
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Name
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Telephone
Number
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Signature
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||||
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If
to Stockholder Representative:
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||||
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Name
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Telephone
Number
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Signature
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EXHIBIT
A
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Series
D Stockholders
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||||||
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Name
and Address of
Series
D Stockholders
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Amount
of Hold
Back
Cash
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Number
of Hold
Back
Shares
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TIN
Number
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EXHIBIT
B
FORM
OF JOINT WRITTEN DIRECTION
(Hold
Back Account)
[Date]
VIA
[describe permitted delivery method]
[ESCROW
AGENT]
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Re:
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YM
BioSciences Inc. Escrow Agreement dated as of _______ __, 2006 Hold
Back
Account (the “Hold Back
Account”)
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Gentlemen:
Reference
is made to the above referenced Hold Back Account. Pursuant to that certain
Escrow Agreement (the “Escrow
Agreement”)
dated
____________, 2006, by and YM Biosciences Inc., a corporation existing under
the
laws of Nova Scotia, Canada (“Acquiror”),
OrbiMed Advisors, LLC (the “Stockholder
Representative”),
and
▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇ Bank, National Association (the “Escrow
Agent”),
we
hereby instruct you to make the following disbursements:
Pay
the
amount of $___________ from the Hold Back Account to the Escrow Agent as
follows:
[insert
address or wire instructions]
Such
Payment is being made pursuant to Section 9.1 of the Merger
Agreement.
Pay
the
amount of $___________ from the Hold Back Account to Acquiror as
follows:
[insert
address or wire instructions]
Such
Payment is being made pursuant to Section 9.1 of the Merger
Agreement.
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Very
truly yours,
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ORBIMED
ADVISORS, LLC
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Authorized
Officer
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By:
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Authorized
Officer
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EXHIBIT
C
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Certificate
No.
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No.
of Shares
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Date
Issued
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Registration
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|||
Exhibit
E
Form
of Target Legal Opinion
April
_____, 2006
YM
BioSciences Inc.
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
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Re:
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Agreement
and Plan of Merger by and among YM BioSciences Inc.,
|
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YM
BioSciences USA Inc., YM Merger Sub, Inc.. Eximias
|
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Pharmaceutical
Corporation and OrbiMed Advisors. LLC, as
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Stockholder
Representative
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Ladies
and Gentlemen:
We
have
acted as counsel to Eximias Pharmaceutical Corporation, a Delaware corporation
(“Target”), in connection with that certain Agreement and Plan of Merger, dated
April ______, 2006, by and among Target, YM BioSciences Inc., a corporation
existing under the laws of Nova Scotia, Canada (“Acquiror”), YM BioSciences USA
Inc., a Delaware corporation and wholly-owned subsidiary of Acquiror (“YM
BioSciences USA”), YM Merger Sub, Inc., a Delaware corporation and wholly-owned
subsidiary of YM BioSciences USA (“Merger Sub”), and OrbiMed Advisors, LLC, as
Stockholder Representative (the “Merger Agreement”). This opinion is delivered
to you pursuant to Section 7.1(e) of the Merger Agreement. All capitalized
terms
used but not defined herein have the meanings assigned thereto in the Merger
Agreement.
In
rendering this opinion, we have examined the Merger Agreement, including all
schedules thereto, the Escrow Agreement and the Certificate of Merger
(collectively, the “Transaction Documents”), We have also examined: (i)
originals or certified, conformed or photostatic copies of the restated
certificate of incorporation of Target, (ii) the bylaws Target, (iii) certain
resolutions of the board of directors and stockholders of Target, and (iv)
such
other documents, records and instruments as we have deemed necessary and
appropriate to form a basis for the opinions expressly set forth herein. We
have
also made such examinations of laws, certificates of public officials,
instruments, documents and corporate records and have made such other
investigations as we have deemed necessary in connection with the opinions
hereinafter set forth. In making such examination, we have assumed: (i) the
genuineness of all signatures (other than those of Target on the Transaction
Documents), (ii) the legal capacity of natural persons, (iii) the accuracy,
completeness and authenticity of all records and documents submitted to us
as
originals, (iv) the conformity to original documents of all documents submitted
to us as certified. conformed, photostatic or facsimile copies, (v) the
authenticity of the originals of such latter documents, (vi) as to factual
matters, the accuracy and continuing validity of all certificates,
representations, warranties and covenants of Target, whether set forth in the
Transaction Documents or otherwise supplied to us, (vii) each certificate issued
by any government official, office or agency concerning a party’s property or
status is accurate, complete and authentic and that all official public records
are accurate and complete, and (viii) the accuracy and completeness of the
corporate records of Target.
As
to
certain matters of fact relevant to the opinions expressly set forth herein,
we
have relied solely upon, without investigation, and assumed the accuracy of:
(i)
the representations and warranties of Target set forth in any of the Transaction
Documents, (ii) the restated certification of incorporation of Target, (iii)
certificates of the respective officers of Target and (iv) certificates of
public officials. To the extent that our opinion is based on matters known
to us
or of which we have knowledge, such knowledge is limited to the conscious
awareness, without investigation, of the current attorneys of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP who have devoted substantive attention to the representation of Target
in
connection with the Merger Agreement. No inference of our knowledge may be
drawn
merely by our representation of Target, Additionally, we have not undertaken
a
search of any records of any court, administrative agency or governmental
authority. With respect to the opinions set forth in Paragraph 1 below as to
good standing, we have relied solely upon certificates of public
officials.
This
opinion is limited to the laws and regulations of the United States, the
Delaware General Corporation Law and the other laws of the State of Delaware.
We
render no opinion with respect to the laws of any other jurisdiction. We express
no opinion, implicitly or otherwise, on any matter not expressly set forth
herein.
Based
upon the foregoing and subject to the qualifications, exceptions and limitations
stated herein, we are of the opinion that:
1. Target
is
a corporation, duly organized, validly existing and in good standing under
the
laws of the jurisdiction of its incorporation. Target has all requisite
corporate power and authority necessary to enable it to own, operate, lease
or
otherwise hold its Assets and to carry on its business in the places and in
the
manner as presently conducted.
2. Target
has full power and authority, and has taken all corporate action necessary,
to
execute, deliver and perform the Merger Agreement, to consummate the
transactions contemplated thereby and to perform its obligations thereunder.
The
execution and delivery of the Merger Agreement by Target and the consummation
by
Target of the transactions contemplated thereby have been duly approved by
the
Target Board and the Stockholders. The Merger Agreement has been duly executed
and delivered by Target and, assuming the due authorization, execution and
delivery thereof by Acquiror, YM BioSciences USA and Merger Sub, is the valid
and binding obligation of Target, enforceable against it and all of the Series
D
Stockholders (including, without limitation, as to Section 3.1(f), Article
9 and
Section 10.10 of the Merger Agreement even though the Series D Stockholders
are
not parties to the Merger Agreement) in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting creditors’ rights generally and except
insofar as the availability of equitable remedies may be limited by Applicable
Law.
3. The
Escrow Agreement is valid and binding on the Series D Stockholders, enforceable
against them in accordance with its terms, except as enforcement may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other
laws
affecting creditors’ rights generally and except insofar as the availability of
equitable remedies may be limited by Applicable Law.
The
opinions herein expressed are subject to the following assumptions, limitations,
qualifications and exceptions:
a. We
have
assumed that there has not been any mutual mistake of fact or misunderstanding,
fraud, duress or undue influence in connection with the transactions
contemplated by the Transaction Documents.
b. No
opinion is given with respect to the validity or enforceability of any
provisions of the Transaction Documents under which any party thereto waives
any
rights afforded to any party under any provisions of the U.S.
Constitution.
c. We
express no opinion as to the effect of other agreements or understandings among
the parties, written or oral, or any usage of trade or course of prior dealing
among the parties or whether, in either case, any of the foregoing would define,
supplement or qualify the terms of the Transaction Documents.
d. No
opinion is given as to any provision in the Transaction Documents that purports
to:
(1) require
the payment or reimbursement of any fee, cost, expense or other item that is
unreasonable in nature or amount;
(2) preclude
modification of any of the Transaction Documents through conduct, custom or
course of performance, action or dealing;
(3) define,
waive or set standards for good faith, reasonableness, commercial
reasonableness, fair dealing, diligence or the like;
(4) govern
the election of remedies or provide that remedies are cumulative;
or
(5) waive
or
restrict the right to a jury trial, or relate to jurisdiction, service of
process or governing law.
e. No
opinion is given to the enforceability of the Transaction Documents in
accordance with terms and conditions of the Transaction Documents to the extent,
if any, that any provision of the Transaction Documents provides for
indemnification, contribution, waiver or release by a party under circumstances
in which such term and condition of such Transaction Documents may be limited
or
rendered unenforceable, in whole or in part, by applicable federal or state
securities laws, criminal statutes, the policies underlying such laws or public
policy generally. No opinion is given herein with respect to the remedy of
specific performance.
f. No
opinion is given as to:
(1) the
right
to exercise remedies upon the happening of a non- material breach of any of
the
Transaction Documents (including material breaches of non- material
provisions);
(2) the
effect of applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws of general application relating
to or
affecting the enforcement of the rights of creditors on the enforceability
of
the Transaction Documents; or
(3) the
effect of general principles of equity, including without limitation, concepts
of materiality, reasonableness, good faith and fair dealing, the availability
of
specific performance and injunctive relief; regardless of whether considered
in
a proceeding at law or in equity or the enforceability of covenants not to
compete.
g. No
opinion is rendered as to matters not specifically referred to herein and under
no circumstances are you to infer from anything stated or not stated herein
any
opinion with respect to which such reference is not made. In furtherance and
not
in limitation of the foregoing, except as otherwise expressly set forth in
this
opinion letter, no opinion is expressed herein as to any of the topics listed
under Section 19 “Specific Legal Issues” of the Third-Party Legal Opinion
Report, published in 1991 by the Section of Business Law of the American Bar
Association.
This
opinion is rendered as of the date hereof and we assume no obligation to modify,
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention, or any changes in laws which may hereafter
occur. The opinions expressed herein have been delivered to you in connection
with the execution and delivery of the Merger Agreement and may be relied upon
solely by you in connection therewith. This opinion may not be quoted by you
or
any other person in whole or in part or otherwise referred to, filed with,
or
furnished to any person or entity, and may not be relied upon by any such person
or entity, without our prior written consent in each instance (which may be
withheld for any reason).
|
Very
truly yours,
|
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP
|
Exhibit
F
Form
of Acquiror Legal Opinion
I-1
●,
2006
Eximias
Pharmaceutical Corporation
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Dear
Sirs/Mesdames:
Re: Acquisition
of Eximias Pharmaceutical Corporation by
YM BioSciences Inc.
We
have
acted as counsel to YM BioSciences Inc. (the “Corporation”)
in
connection with the acquisition (the “Acquisition”)
of
Eximias Pharmaceutical Corporation (the “Target”)
by way
of merger under applicable Delaware laws of YM Merger Sub (“Merger Sub”)
and
the Target pursuant to a merger agreement dated April 13, 2006, (the
“Merger Agreement”)
among
the Corporation, YM BioSciences USA Inc. (“YM
USA”),
Merger Sub and Target.
Pursuant
to the Acquisition, the Corporation has issued an aggregate of ● common shares
in the capital of the Corporation (“Common
Shares”)
to
former holders of Series D shares of common stock of the Target.
This
opinion is being delivered to you pursuant to Section ● of the Merger Agreement.
Capitalized terms used and not otherwise defined shall have the meanings
ascribed thereto in the Merger Agreement.
For
the
purposes of our opinions expressed herein, the term “Canadian
Securities Laws”
means,
collectively, all applicable securities laws in each of the provinces of Ontario
and Québec and the respective regulations, instruments, notices and rules under
such laws together with applicable published policy statements, notices and
orders of the Ontario Securities Commission (the “OSC”)
and
the Autorité des marchés financiers (“AMF”),
respectively.
A. Documentation
As
Canadian counsel to the Corporation, we have participated, together with ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, counsel to the Target in the
preparation of:
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(a)
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the
Merger Agreement;
and
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(b)
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the
escrow agreement dated ●, 2006 (the “Escrow
Agreement”)
among the Corporation, OrbiMed Advisors LLC, in its capacity as the
Stockholder Representative under the Merger Agreement, and ▇.▇. ▇▇▇▇▇▇
Chase Bank, National Association.
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B. Jurisdiction
We
are
solicitors qualified to practice law in the provinces of Ontario and Québec and
we express no opinion as to any laws or any matters governed by any laws other
than the laws of such provinces and the federal laws of Canada applicable
therein. Insofar as the opinions in paragraphs 1 to 6, inclusive, relate to
matters governed by laws other than the laws of such provinces or the federal
laws of Canada applicable therein, we have relied upon the opinions of the
following local counsel:
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(i)
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with
respect to matters of law in the Province of Nova Scotia, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
Stirling Scales (“Nova
Scotia Counsel”),
and
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(ii)
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with
respect to matters of law in the United States, ▇▇▇▇▇▇ & Whitney LLP
(“U.S.
Counsel”),
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(collectively,
the “Local
Opinions”)
dated
the date hereof, copies of which have been delivered to you concurrently
herewith. To the extent that any Local Opinion on which we are relying is based
on any assumption or is made subject to any limitation or qualification, our
opinion given in reliance on any such opinion is based on the same assumption
and is subject to the same limitation or qualification.
C. Scope
of Examinations
The
opinions expressed herein are based upon and subject to legislation,
regulations, rules, policies, procedures and administrative practices of the
applicable securities regulatory authorities in effect on the date hereof,
and
we assume no obligation to update the opinions set forth herein after the date
hereof.
In
connection with the opinions expressed in this letter, we have considered such
questions of law and examined such statutes, public and corporate records,
certificates of governmental authorities and officers of the Corporation, other
documents and conducted such other examinations as we have considered necessary
for the purpose of our opinion.
D. Assumptions
and Reliances
We
have
assumed the legal capacity of all individuals, the veracity of the information
contained in the documents, the genuineness of all signatures, the authenticity
of all documents submitted to us as originals and the conformity to authentic
original documents of all documents submitted to us as certified, conformed,
photostatic or facsimile copies.
The
opinions with respect to the Corporation set out in paragraphs 1 through 5
inclusive (except as it relates to YM USA and Merger Sub) relate to the laws
of
the Province of Nova Scotia and, in expressing such opinions, we have relied
solely upon the Local Opinion of Nova Scotia Counsel.
The
opinions set out in paragraphs 3 and 4 relate to the laws of Delaware and the
federal laws of the United States and, in expressing such opinions, we have
relied solely upon the Local Opinion of U.S. Counsel.
In
expressing the opinion in paragraph 7 as to the Corporation’s status as a
reporting issuer not in default in the provinces of Ontario and Québec, we have
relied solely upon certificates dated ●, 2006 and ●, 2006 issued by the OSC and
the AMF, respectively, copies of which has been delivered to you. We have
assumed that these certificates continue to be accurate on the date
hereof.
In
rendering our opinion set forth in paragraph 10 below, we have relied solely
on
the conditional approval letter (the "TSX Letter") of the Toronto Stock Exchange
(the "TSX") addressed to the Corporation dated ●, 2006, a copy of which has been
provided to you.
2
We
have
also relied, as to certain factual matters, upon a certificate of an officer
(the "Officer’s Certificate") of the Corporation dated the date hereof, a copy
of which has been delivered to you.
We
have
assumed that each of the parties to the Agreements other than the Corporation,
YM USA and Merger Sub, as applicable, has all requisite power and authority
to
enter into, execute, deliver and perform its obligations thereunder and to
carry
out the transactions contemplated thereby and that each of such documents
constitutes a legal, valid and binding obligation of each of such parties
enforceable against such other parties in accordance with its terms.
We
have
also assumed that there has been no advertising in connection with the issue
and
sale of the Common Shares or any other securities of the Corporation in the
printed public media, on radio, television or telecommunications, including
electronic display.
On
the
basis of the foregoing and subject to the qualifications hereinafter expressed,
we are of the opinion that:
1. Each
of
the Corporation, YM USA,
and
Merger Sub is a corporation continued or incorporated, as the case may be,
and
validly existing under the laws of its governing jurisdiction. The Corporation
has the corporate power and authority to carry on its business, and has the
corporate power and authority to own, lease and operate its properties and
assets. YM USA and Merger Sub each are in good standing under the laws of the
State of Delaware with corporate power to conduct any lawful business
activity.
2. The
Corporation has the corporate power and capacity to enter into and to carry
out
its obligations under the Merger Agreement and the Escrow Agreement
(collectively, the “Agreements”),
including without limitation to allot and issue the Common Shares. YM USA and
Merger Sub each have the corporate power to execute, deliver and perform the
Merger Agreement.
3. All
necessary corporate action has been taken to authorize the execution and
delivery by the Corporation of the Agreements and the performance by the
Corporation of its obligations thereunder, including the allotment and issuance
of the Common Shares.
4. Each
of
the Agreements has been duly executed and delivered by the
Corporation.
5. The
Merger Agreement has been duly authorized by all requisite corporate action,
executed and delivered by each of YM USA and Merger Sub.
6. The
Common Shares have been validly authorized and issued as fully paid and
non-assessable shares in the capital of the Corporation.
7. The
Corporation is a “reporting issuer” in the provinces of Ontario and Québec
pursuant to applicable securities laws of such provinces and is not included
in
the list of defaulting reporting issuers maintained by the OSC and AMF,
respectively, pursuant to Canadian Securities Laws.
8. The
issue
of the Common Shares is exempt from the prospectus and registration requirements
of Canadian Securities Laws and no filing, proceeding, approval, permit, consent
or authorization is required to be made, taken or obtained by the Corporation
under Canadian Securities Laws in connection with such issue.
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9. No
prospectus will be required to be filed, and no other filing, proceeding,
approval, consent or authorization is required to be made, taken or obtained
pursuant to Canadian Securities Laws to permit the first trade of the Common
Shares in the provinces of Ontario or Québec, as the case may be, through
registrants registered under the Canadian Securities Laws of such province
who
comply with such Canadian Securities Laws, or in circumstances in which there
is
an exemption from the registration requirements of Canadian Securities Laws
of
such province, provided that:
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(a)
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the
Corporation is and has been a “reporting issuer”, as such term is defined
by Securities Laws, in a jurisdiction of Canada, for the four months
immediately preceding the first
trade;
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(b)
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such
trade is not a “control distribution” as defined in National Instrument
45-102 – Resale
of Securities;
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(c)
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no
unusual effort is made to prepare the market or create a demand for
the
securities that are the subject of the
trade;
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(d)
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no
extraordinary commission or other consideration is paid to a person
or
company in respect of the trade;
and
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(e)
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if
the selling security holder is an “insider” or “officer” of the
Corporation, as such terms are defined under Canadian Securities
Laws, the
selling security holder has no reasonable grounds to believe that
the
Corporation is in default of “securities legislation”, as defined in
National Instrument 14-101.
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10. The
Common Shares have been conditionally approved for listing by the TSX, subject
to compliance with all requirements of the TSX as described in the TSX
Letter.
The
opinions in this letter are given solely for the benefit of the addressees
hereof in connection with the transactions referred to herein and may not,
in
whole or in part, be relied upon by any other person.
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Schedule 3.1
Net
Cash at Closing
“Net
Cash at Closing”
shall
be defined, as of the Effective Date, as:
1. The
account balance of all of Target’s accounts with PNC Bank (Account No. ●,
Certificate No. ●, Certificate No. ●), less any outstanding checks written by or
on behalf of Target from such accounts that have not yet cleared, transfers
from
such accounts that have not yet been completed and plus any deposits into such
accounts not yet credited, plus
2. The
value, marked to market on the day prior to the Effective Date, of all funds
and
securities held for the account of Target by BlackRock, including accrued
interest and all investment gains and losses, whether or not realized,
plus
3. The
value
of all certificates of deposit held by PNC Bank as collateral for standby
letters of credit guaranteeing lease obligations of Target, including interest
paid or payable through the Closing Date, minus
4. Amounts
recorded in Target’s books as accounts payable, minus
5. The
total
amount owed to employees and former employees of Target terminated at or prior
to Closing for salary, fringe benefits and vacation benefits as of the Closing
Date, minus
6. The
total
amounts due to ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ under employment agreements with Target as a result of a
“Change of Control” or termination event, minus
7. Amounts
due to Susquehanna Investment Group, minus
8. Amounts
estimated to become payable by Target to trade creditors or other persons
incurred prior to the Closing Date, excluding any estimated obligation to Chiron
Corporation for minimum development expenditures for MACROTAQ or any estimated
obligation to Pfizer (Agouron or ▇▇▇▇▇▇-▇▇▇▇▇▇▇) for Intellectual Property
maintenance costs related to THYMITAQ, minus
9. Amounts
due to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP and Davies ▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP in
connection with the transactions hereunder, whether paid prior to the Closing
or
payable as of immediately prior to the Closing Date, minus
10. Costs
of
maintaining indefinite “tail” or “run out” coverage for Directors and Officers
liability for six years and for product liability relating to clinical trials
indefinitely unless premiums for such coverages shall have already been paid,
minus
11. The
amount of the Expense Fund, equal to $100,000, to be held by the Stockholder
Representative pursuant to this Agreement.
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