EXHIBIT 99.2
MERGER AGREEMENT
among
YM BIOSCIENCES INC.
- and -
2069044 ONTARIO LIMITED
- and -
DELEX THERAPEUTICS INC.
- and -
BUSINESS DEVELOPMENT BANK OF CANADA
- and -
NEW GENERATION BIOTECH (EQUITY) FUND INC.
- and -
EASTERN TECHNOLOGY SEED INVESTMENT FUND LIMITED PARTNERSHIP
APRIL 12, 2005
TABLE OF CONTENTS
Page
ARTICLE 1
INTERPRETATION........................................................2
1.1 Definitions..................................................2
1.2 Knowledge...................................................10
1.3 Schedules...................................................10
1.4 Governing Law...............................................10
1.5 Currency....................................................10
1.6 Interpretation Not Affected by Headings or Party Drafting...10
1.7 Number and Gender...........................................11
1.8 Statutory Instruments.......................................11
1.9 Time of Essence.............................................11
1.10 Not Joint and Several Obligations...........................11
ARTICLE 2
THE TRANSACTION......................................................11
2.1 The Transaction.............................................11
2.2 Issuance of Consideration Shares at Effective Time..........12
2.3 Escrow of Consideration Shares..............................13
2.4 Delivery of Reconciliation Date Working Capital Statement...14
2.5 Net Working Capital Adjustment..............................14
2.6 Objection to Reconciliation Date Working Capital Statement..14
ARTICLE 3
REPRESENTATIONS AND WARRANTIES.......................................15
3.1 Representations and Warranties by the Major Shareholders....15
3.2 Representations and Warranties by YM and Subco..............29
ARTICLE 4
COVENANTS............................................................33
4.1 Covenants by the Major Shareholders.........................33
4.2 Covenants by YM.............................................33
ARTICLE 5
CONDITIONS...........................................................36
5.1 Conditions Precedent........................................36
5.2 Conditions to the Obligations of YM.........................36
5.3 Waiver by YM................................................38
5.4 Conditions to the Obligations of the Corporation
and the Major Shareholders................................39
5.5 Waiver by Major Shareholders................................39
5.6 Notice and Cure Provisions..................................39
5.7 Satisfaction of Conditions..................................40
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TABLE OF CONTENTS
(continued)
Page
ARTICLE 6
CLOSING..............................................................40
6.1 Closing Arrangements........................................40
6.2 Assignment of Working Capital Financing.....................40
6.3 Documents to be Delivered...................................40
ARTICLE 7
SURVIVAL OF WARRANTIES, INDEMNIFICATION AND SET-OFF..................40
7.1 Survival of Warranties by the Major Shareholders............40
7.2 Survival of Warranties by YM................................41
7.3 Indemnity by Major Shareholders.............................41
7.4 Indemnity by YM.............................................42
7.5 Provisions Relating to Indemnity Claims.....................43
7.6 One Recovery................................................45
7.7 Right of Set-Off............................................46
7.8 Mitigation and Exclusive Remedy.............................46
ARTICLE 8
TERM AND TERMINATION.................................................46
8.1 General.....................................................46
8.2 Termination.................................................46
8.3 Effect of Termination.......................................48
8.4 Waiver......................................................48
ARTICLE 9
GENERAL PROVISIONS...................................................48
9.1 Further Assurances..........................................48
9.2 Remedies Cumulative.........................................48
9.3 Notices.....................................................48
9.4 Brokerage and Finder's Fees.................................51
9.5 Fees........................................................52
9.6 Announcements...............................................52
9.7 Assignment..................................................52
9.8 Successors and Assigns......................................52
9.9 Entire Agreement............................................52
9.10 Waiver......................................................53
9.11 Amendments..................................................53
9.12 Counterparts................................................53
9.13 Transmission by Facsimile...................................53
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EXHIBITS
Exhibit 1 Form of Amalgamation Agreement
Exhibit 2 Form of Merger Support Agreement
Exhibit 3 Form of Escrow Agreement
MERGER AGREEMENT
THIS AGREEMENT made as of the 12th day of April, 2005,
AMONG:
YM BIOSCIENCES INC., a corporation existing under the laws of the
Province of Nova Scotia ("YM")
- and -
2069044 ONTARIO LIMITED, a corporation existing under the laws of the
Province of Ontario ("Subco")
- and -
DELEX THERAPEUTICS INC., a corporation continued under the laws of the
Province of Ontario (the "Corporation")
- and -
NEW GENERATION BIOTECH (EQUITY) FUND INC., a registered labour
sponsored investment fund corporation existing under the laws of the
Province of Ontario ("NewGen")
- and -
BUSINESS DEVELOPMENT BANK OF CANADA, a bank formed by a special act of
the Parliament of Canada ("BDC"),
- and -
EASTERN TECHNOLOGY SEED INVESTMENT FUND LIMITED PARTNERSHIP, a limited
partnership formed under the laws of the Province of Ontario ("ETSIF")
WHEREAS the Corporation is a biopharmaceutical company engaged in the business
of research and development of proprietary products that enhance efficacy and
safety for patients and use the lung as the portal for delivery;
AND WHEREAS YM and the Corporation wish to enter into a transaction the result
of which will be the acquisition of all of the shares of the Corporation by a
directly owned subsidiary of YM, to be carried out by means of an amalgamation
involving the Corporation, the Delex Shareholders and Subco, a subsidiary of YM
(the "Transaction");
AND WHEREAS certain shareholders of the Corporation have entered into a Merger
Support Agreement dated the date hereof;
NOW THEREFORE, in consideration of the premises and the mutual agreements and
covenants herein contained, the parties hereto hereby covenant and agree as
follows:
ARTICLE 1
INTERPRETATION
1.1 Definitions
In this Agreement and in the Schedules hereto, unless there is something
in the subject matter or context inconsistent therewith, the following
terms and expressions will have the following meanings:
"Accounts Payable" means amounts due and owing by the Corporation to
traders, suppliers and other Persons in the ordinary course of operation
of the Business;
"Accounts Receivable" means accounts receivable, tax credits receivable,
bills receivable, trade accounts, book debts and insurance claims recorded
as receivable in the Books and Records and any other amount due to the
Corporation including any refunds and rebates and the benefit of all
security (including cash deposits), guarantees and other collateral held
by the Corporation;
"Accrued Liabilities" means accrued liabilities of the Corporation
including accruals for vacation pay, accrued legal expenses and brokerage
fees, accrued payroll and expenses incurred but not yet invoiced and the
aggregate amount of any indebtedness (including any interest accrued
thereon) payable on or prior to December 31, 2005 (but for greater
certainty shall not include any amounts owing, as at the Effective Time,
under the Working Capital Financing);
"Additional Payment" has the meaning ascribed thereto in Section 4.2(2);
"Adjustment Shares" has the meaning ascribed thereto in Section 6.2;
"AeroLEF" is a trademarked name for aerosolized liposome encapsulated
fentanyl for delivery via inhalation;
"Affiliate" means affiliates as defined in the OBCA;
"Agreement" or "Merger Agreement" means this agreement and all schedules
and exhibits attached hereto;
"AIM" means the Alternative Investment Market of the London Stock
Exchange;
"Amalco" means the amalgamated company formed by the amalgamation of the
Corporation and Subco;
"Amalco Common Shares" means the common shares in the capital of Amalco;
"Amalgamation" means the amalgamation of the Corporation and Subco
pursuant to Section 174 of the OBCA on the terms and conditions set out in
the Amalgamation Agreement, subject to any amendments or variations
thereto made in accordance with this Agreement;
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"Amalgamation Agreement" means the agreement, substantially in the form of
Exhibit 1 attached hereto, to be dated the Effective Date between the
Corporation and Subco with respect to the amalgamation of the Corporation
and Subco;
"AMEX" means the American Stock Exchange;
"Ancillary Agreements" means the Merger Support Agreement, the
Amalgamation Agreement and the Escrow Agreement;
"Articles of Amalgamation" means the articles of amalgamation of Amalco
required to be sent to the Director pursuant to Section 178 of the OBCA;
"Assets" means all of the undertaking, property and assets of the
Corporation of any kind whatsoever;
"Authorization" means, with respect to any Person, any authorization,
order, permit, approval, grant, licence, consent, right, franchise,
privilege, certificate, judgment, writ, injunction, award, determination,
direction, decree, or by-law, rule or regulation of any government entity,
whether or not having the force of law, having jurisdiction over such
person;
"Benefit Plans" has the meaning ascribed thereto in Section 3.1(31);
"Books and Records" means all books of account, accounting records, files,
data and other financial information and writings; lists and files of
past, present and prospective clients and contacts, purchasing and
marketing records and personnel and payroll records; and all data stored
on computer support devices relating to any of the foregoing;
"Business" means the business carried on by the Corporation which, as of
the date hereof, is comprised primarily of the research and development of
proprietary products that enhance efficacy and safety for patients and use
the lung as the portal for delivery;
"Business Day" means any day other than a day which is a Saturday, a
Sunday or a statutory holiday in the City of Toronto, Ontario;
"Certificate of Amalgamation" means the certificate of amalgamation issued
by the Director in accordance with Section 178 of the OBCA;
"Commercially Reasonable Efforts" has the meaning ascribed thereto in
Section 4.2(1);
"Common Shares" means the common shares in the capital of the Corporation;
"Compensation Commitments" has the meaning ascribed thereto in Section
3.1(31);
"Condition" of the Corporation means the condition of the assets,
liabilities, operations, activities, earnings, prospects, affairs or
financial position of the Corporation;
"Consideration Shares" has the meaning ascribed thereto in Section 2.2(1);
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"Control" means, with respect to any corporation, the ownership of more
than 50% of the voting shares of that corporation, including any shares
which are voting only upon the occurrence of a contingency where such
contingency has occurred and is continuing;
"Convertible Debentures" means the secured convertible debentures issued
by the Corporation to ETSIF, BDC and NewGen on December 6, 2004 and March
29, 2005, respectively, in aggregate principal amount of $1,400,000;
"Delex Information Circular" means the notice of the Delex Meeting and the
information circular and proxy to be sent to Delex Shareholders in
connection with the solicitation of proxies by management of the
Corporation for use at the Delex Meeting;
"Delex Meeting" means the special meeting of Delex Shareholders to
consider the Merger;
"Delex Options" means outstanding options to purchase Common Shares
pursuant to the Delex Plan;
"Delex Plan" means the Corporation's June 12, 2001 stock option plan, as
amended June 14, 2002;
"Delex Optionholders" means Persons who hold Delex Options;
"Delex Shareholder" means any Person who owns Delex Shares immediately
prior to the Effective Date;
"Delex Shares" means all of the issued and outstanding shares of the
Corporation, including any and all classes of shares;
"Delex Special Resolution" means the special resolution to effect the
Amalgamation to be considered and, if approved, passed by Delex
Shareholders;
"DELEX Technology" means the technology developed by the Corporation prior
to the Effective Date, as more particularly set out in Schedule 3.1(27);
"Director" means the Director appointed under Section 278 of the OBCA;
"Disclosure Letter" means the disclosure letter delivered by the Major
Shareholders to YM dated the date hereof;
"Dissent Rights" means the rights of dissent to be provided to Delex
Shareholders under Section 185 of the OBCA in respect of the Amalgamation;
"Effective Date" means the date shown on the Certificate of Amalgamation
to be issued under the OBCA giving effect to the Transaction, which date
shall be determined in accordance with Section 6.1;
"Effective Time" has the meaning ascribed thereto in Section 6.1;
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"Encumbrances" means mortgages, charges, pledges, security interests,
liens, encumbrances, actions, claims, demands and equities of any nature
whatsoever or howsoever arising and any rights or privileges capable of
becoming any of the foregoing;
"Environmental Laws" means all applicable federal, provincial, state,
municipal or local laws, statutes, regulations or ordinances relating to
the environment, occupational safety and health;
"Escrow Agent" has the meaning ascribed thereto in Section 2.3(2);
"Escrow Agreement" has the meaning ascribed thereto in Section 2.3(2);
"Expenditures" means the reduction in Net Working Capital (as incurred in
the ordinary course of the Business) during the period of time commencing
on February 1, 2005 and ending on the Effective Date, including expenses
incurred in connection with the issuance of convertible debentures in
aggregate principal amount of $1,400,000.00 and the accrual of interest on
such debentures;
"FDA" means the United States Food and Drug Administration and any
successor entity thereto;
"Financial Statements" means the audited financial statements of the
Corporation as at and for each of the fiscal years ended December 31, 2004
and December 31, 2003, each consisting of a balance sheet, a statement of
operations and deficit and a statement of cash flows, together with notes
thereto, a copy of each of which has been delivered to YM;
"generally accepted accounting principles" means the accounting principles
so described and promulgated by the Canadian Institute of Chartered
Accountants which are applicable as at the date on which any calculation
made hereunder is to be effective or as at the date of any financial
statements referred to herein, as the case may be;
"Governmental Body" means (i) any domestic or foreign national, federal,
provincial, state, county, local, municipal or regional government or
body, (ii) any multinational, multilateral or international body, (iii)
any subdivision, agency, commission, board, instrumentality or authority
of any of the foregoing governments or bodies, (iv) any quasi-governmental
or private body exercising any regulatory, expropriation or taxing
authority under or for the account of any of the foregoing governments or
bodies, (v) any domestic, foreign, international, multilateral or
multinational judicial, quasi-judicial, arbitration or administrative
court, tribunal, commission, board or panel, or (vi) any person employed
by, acting for, or on behalf of, any of the foregoing bodies;
"Hazardous Substance" means any liquid, gaseous or solid matter,
vibration, ray, heat, odour, radiation or energy which is or is deemed by
law to be, alone or in any combination, hazardous, hazardous waste, toxic,
a pollutant, a deleterious substance, a contaminant or a source of
contaminant;
"Health Regulatory Authority" means Health Canada;
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"including" means "including without limitation";
"IND" means an Investigational New Drug Application (of any category or
type) issued by the FDA;
"Indemnity Claim" has the meaning ascribed thereto in Section 7.5;
"Independent Auditor" means such auditing firm as the parties may agree
(and which does not act for one of such parties in connection with the
subject matter of the dispute);
"Intellectual Property" means:
(a) all inventions (whether patentable or unpatentable and whether
or not reduced to practice) and all patents, patent
applications and patent and invention disclosures owned,
licensed, or otherwise used by the Corporation, and all other
rights of inventorship, together with all reissuances,
continuations, continuations-in-part, divisions, revisions,
supplementary protection certificates, extensions and
re-examinations thereof ("Patents");
(b) all trade-marks, service marks, trade names, brands, trade
dress, logos, business, corporate and product names, slogans,
domain names, and other commercial symbols and indicia of
origin, and registrations and applications for registration
thereof, owned, licensed, or otherwise used by the Corporation
("Trade-marks");
(c) all copyrights and all other rights of authorship owned,
licensed, or otherwise used by the Corporation, other than
those described in subsection (f) below, and all applications,
registrations and renewals in connection therewith
("Copyright");
(d) all industrial designs or design patents or similar rights
owned, licensed, or otherwise used by the Corporation, and all
applications, registrations and renewals in connection
therewith ("Industrial Designs");
(e) all trade secrets and confidential business, scientific and
technical information owned, licensed, or otherwise used by
the Corporation, other than those described in subsection (f)
below (including ideas, research and development, clinical
research, plans for research, know-how, formulas,
compositions, manufacturing and production processes and
techniques, technical data, engineering, production and other
designs, plans, drawings, engineering, scientific and/or
laboratory notebooks, industrial models, specifications,
financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and
supplier lists and information) ("Know-How");
(f) all computer and electronic data, data processing programs,
documentation and software, both source code and object code
(including flow charts, diagrams, descriptive texts and
programs, computer databases and similar items), computer
applications and operating programs, used by the Corporation
in connection with the Business save and except for third
party programs that are: (A) licensed pursuant to
"shrink-wrap", "web-wrap" or similar agreements and licensed
without customization; or (B) not material to the Business of
the Corporation; and
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all copies and tangible embodiments of any or all of the foregoing (in
whatever form or medium, including electronic media);
"Laws" means all laws, statutes, codes, ordinances, decrees, rules,
regulations, by-laws, statutory rules, judicial or arbitral or
administrative or ministerial or departmental or regulatory judgments,
orders, decisions, rulings or awards, including general principles of
common and civil law, and terms and conditions of any grant of approval,
permission, authority or licence of any Governmental Body, statutory body
or self-regulatory authority, and the term "applicable" with respect to
such Laws and in the context that refers to one or more Persons, means
that such Laws apply to such Person or Persons or its or their business,
undertaking, property or securities and emanate from a Governmental Body
having jurisdiction over the Person or Persons or its or their business,
undertaking or securities;
"Licences" means all of the licences, registrations and qualifications to
do business held by the Corporation;
"Licensed Intellectual Property" means Intellectual Property that is
licensed to the Corporation, or used with the consent of the owner of the
Intellectual Property by the Corporation, and does not include Owned
Intellectual Property;
"Major Shareholders" means, collectively, ETSIF, BDC and NewGen and "Major
Shareholder" means any one of them;
"Material Adverse Change" means any material adverse effect on or change
in the business, affairs, prospects, operations, assets (whether tangible
or intangible, including Licences, permits, rights, privileges or other
Intellectual Property Rights, whether contractual or otherwise),
capitalization, or financial condition, of the specified entity or in the
ability of such entity to consummate the transactions contemplated by this
Agreement and the Ancillary Agreements; provided, however, none of the
following shall be deemed, either alone or in combination, to constitute
and none of the following shall be taken into account in determining
whether there has been or will be, a Material Adverse Change on an entity:
(a) any change in the market price or trading volume of such
entity's stock other than such change that can reasonably be
attributed to an event or fact that would constitute a
Material Adverse Change;
(b) any failure by such entity to meet internal projections,
budgets or forecasts;
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(c) any adverse change, event or effect attributable or relating
to the announcement or pendency of this Agreement or the
Merger; other than with respect to Intellectual Property
Rights;
(d) any adverse change, event or effect attributable or relating
to conditions affecting the industry or industry sector in
which such entity participates, or the United States or
Canadian economy as a whole;
(e) any adverse change, event or effect attributable or relating
to customary and usual out of pocket fees and expenses
(including legal, accounting, investment banking and other
fees and expenses, incurred in connection with the transaction
contemplated by this Agreement); or
(f) any adverse change, event or effect attributable or relating
to compliance with the terms of, or taking of any action
required by, this Agreement or the taking of any action
consented to in writing by the other parties to this
Agreement; or
(g) any adverse change, event or effect attributable or relating
to actions required to be taken under applicable Laws
applicable as of the date hereof;
"Merger Support Agreement" means the merger support agreement
substantially in the form attached hereto as Exhibit 2 made and entered
into by YM and the Principal Shareholders;
"NDA" means a New Drug Application (under the United States Food, Drug and
Cosmetic Act);
"Net Working Capital" means: (a) the value of all Accounts Receivable plus
(b) the value of all of the Corporation's prepaid expenses plus (c) cash
balances in all accounts and (d) ▇▇▇▇▇ cash less the aggregate value of
all Accounts Payable and Accrued Liabilities;
"OBCA" means the Business Corporations Act (Ontario), as amended;
"Outside Date" means May 2, 2005 or such later date as the parties may
agree;
"Owned Intellectual Property" means Intellectual Property in which the
Corporation owns the intellectual property rights;
"Person" means and includes any individual, corporation, partnership,
firm, joint venture, syndicate, association, trust, government,
governmental agency or board or commission or authority, and any other
form of entity or organization;
"Principal Shareholders" means each shareholder of the Corporation that
has entered into the Merger Support Agreement;
"Product Authorizations" means approvals or registrations required for the
possession, investigation, sale, distribution, marketing and/or storage of
a drug product by the Food and Drugs Act, the Controlled Drugs and
Substances Act, and the Health Regulatory Authority;
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"Reconciliation Date" has the meaning ascribed thereto in Section 2.4;
"Reconciliation Date Working Capital Statement" means a statement of the
auditor of YM, prepared in connection with its audit of the annual
financial statements of YM for the first full fiscal year of YM completed
following the Effective Date, which shows, to the extent permitted in
accordance with generally accepted accounting principles, the Net Working
Capital as at the Effective Date, with adjustments for experience with
respect to Accounts Receivables, Accounts Payable and Accrued Liabilities;
"Reconciliation Date Net Working Capital" means the amount of Net Working
Capital, as at the Effective Date, but as determined as at the
Reconciliation Date, as shown on the Reconciliation Date Working Capital
Statement;
"Target Net Working Capital" has the meaning ascribed thereto in Section
2.5;
"Tax Returns" has the meaning ascribed thereto in subsection 3.1(14);
"Taxes" means and includes all taxes, fees, levies, duties, tariffs,
imposts, premiums and governmental impositions or charges of any kind
payable to any federal, provincial, state, local or foreign taxing
authority including: (i) income, capital, business, franchise, profits,
gross receipts, ad valorem, goods and services, customs, net worth, value
added, sales, use, service, real or personal property, special
assessments, capital stock, licence, payroll, withholding, employment,
social security, Workplace Safety and Insurance, Canada Pension Plan,
employment insurance or compensation, utility, severance, production,
excise, stamp, occupation, premiums, environmental, recapture, windfall
profits, transfer and gains taxes, fees, levies, duties, tariffs, imposts,
premiums and governmental impositions; and (ii) interest, penalties,
additional taxes, and additions to tax imposed with respect thereto; and
"Tax Returns" shall mean returns, reports, declarations, and information
statements with respect to Taxes required to be filed with any authority,
domestic or foreign.;
"TSX" means the Toronto Stock Exchange;
"Third Party Liability" has the meaning ascribed thereto in Section
7.5(6);
"Warranty Claim" means a claim made by either YM or any of the Major
Shareholders based on or with respect to the inaccuracy or breach of any
representation or warranty made by the other party contained in this
Agreement or contained in any document or certificate given in order to
carry out the transactions contemplated hereby;
"weighted average closing price" means, at any date, the weighted average
closing price at which the relevant shares have traded on the TSX (or, if
the shares are not so listed, then on AMEX, or if the shares are not so
listed, then on AIM, or if the shares are not so listed, then on the
recognized stock exchange on which such shares are listed on which the
greatest volume of them were traded during the period referenced below or,
if such shares are not so listed on any recognized stock exchange, then on
the over-the-counter market on which they are traded as selected by action
of the directors acting reasonably for such purpose), during the five most
recent trading days ending on the last trading day immediately before such
date on which there has occurred at least one trade of at least one board
lot of such shares prior to such date, such weighted average closing price
to be determined by dividing the aggregate sale price of all such shares
sold in board lots on such exchange or market, as the case may be, during
the said five trading days, by the number of such shares so sold;
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"Working Capital Financing" means an unsecured loan, in the aggregate
principal amount of approximately $4,640,000.00 to the Corporation, such
amount to be confirmed by the parties hereto on the Effective Date;
"Working Capital Shares" has the meaning ascribed thereto in Section 6.2;
"YM Common Shares" means the common shares in the capital of YM, as
currently constituted;
"YM Material Adverse Change" means a Material Adverse Change affecting YM;
and
"YM Option Plan" means the YM share option plan.
1.2 Knowledge
Any reference herein to "to the knowledge of" means (a) with respect to matters
relating directly to the Corporation and its operations, the actual knowledge of
any person referred to and the knowledge which they would have had if they had
made inquiry within the Corporation into the relevant subject matter and (b)
with respect to external events or conditions, actual knowledge.
1.3 Schedules
The Schedules which are contained in the Disclosure Letter are incorporated into
this Agreement by reference and are deemed to be part hereof.
1.4 Governing Law
This Agreement shall be governed by and construed in accordance with the laws of
the Province of Ontario and the laws of Canada applicable in the Province of
Ontario, and shall be treated, in all respects, as an Ontario contract. Each
Party to this Agreement irrevocably attorns to and submits to the jurisdiction
of the Courts of Ontario with respect to any matter arising under or relating to
this Agreement.
1.5 Currency
Unless otherwise indicated, all dollar amounts referred to in this agreement are
in lawful money of Canada.
1.6 Interpretation Not Affected by Headings or Party Drafting
The division of this Agreement into articles, sections, paragraphs, subsections
and clauses and the insertion of headings are for convenience of reference only
and shall not affect the construction or interpretation of this Agreement. The
terms "this Agreement", "hereof", "herein", "hereunder" and similar expressions
refer to this Agreement and the Schedules hereto and not to any particular
article, section, paragraph, clause or other portion hereof and include any
agreement or instrument supplementary or ancillary hereto. Each party hereto
acknowledges that it and its legal counsel have reviewed and participated in
settling the terms of this Agreement, and the parties hereby agree that any rule
of construction to the effect that any ambiguity is to be resolved against the
drafting party shall not be applicable in the interpretation of this Agreement.
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1.7 Number and Gender
In this Agreement, unless there is something in the subject matter or context
inconsistent therewith:
(a) words in the singular number include the plural and such words
shall be construed as if the plural had been used,
(b) words in the plural include the singular and such words shall
be construed as if the singular had been used, and
(c) words importing the use of any gender shall include all
genders where the context or party referred to so requires,
and the rest of the sentence shall be construed as if the
necessary grammatical and terminological changes had been
made.
1.8 Statutory Instruments
Unless otherwise specifically provided in this Agreement any reference in this
Agreement to any law, by-law, rule, regulation, order, act or statute of any
government, governmental body or other regulatory body shall be construed as a
reference to those as amended, re-enacted or succeeded from time to time up to
the date of execution of this Agreement.
1.9 Time of Essence
Time shall be of the essence hereof.
1.10 Not Joint and Several Obligations
The obligations of the Major Shareholders hereunder shall be several and shall
not be joint and several.
ARTICLE 2
THE TRANSACTION
2.1 The Transaction
(1) The Transaction will be effected by way of the Amalgamation. The
name of Amalco, its directors, officers and bylaw will be as set out
in the Amalgamation Agreement.
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(2) Pursuant to the Transaction, Delex Shareholders shall receive (i)
Consideration Shares in accordance with Section 2.2, (ii) Adjustment
Shares in accordance with Section 6.2 and (iii) subject to Section
4.2(2), Additional Payment Shares, in each case in such amounts as
are more particularly set forth in Schedules 2.2(2), 4.2(2) and 6.2
to the Disclosure Letter.
(3) Subject to the terms and conditions hereof, the Corporation and
Subco will execute and deliver the Amalgamation Agreement
substantially in the form attached as Exhibit 1, to be filed with
the Articles of Amalgamation. The parties hereto shall use their
respective reasonable commercial efforts to consummate the
Transaction, subject only to the terms and conditions of this
Agreement. Each party hereto shall use its respective reasonable
commercial efforts to obtain any applicable regulatory approvals,
waivers and consents required for consummation of the Transaction
and to satisfy the conditions precedent to the Transaction to the
extent they are within such party's power.
(4) The Corporation shall, as at the Effective Time, cancel all Delex
Options then outstanding and terminate the Delex Plan. Delex
Optionholders who choose to continue their employment with Amalco
will be granted options to acquire YM Common Shares pursuant to the
YM Option Plan and in accordance with YM's employee policies.
(5) The matters described in this Agreement shall be initiated on an
expeditious basis and each party shall, and shall use all reasonable
commercial efforts to cause third parties to, meet the schedules and
time frames set out herein. Each of the parties hereto shall use all
reasonable commercial efforts to cause the conditions specified in
Article 5 to be satisfied within the time required thereby, and all
matters described herein will be carried out in a cooperative basis
and the parties will keep each other informed as to progress.
(6) Subject to the terms and conditions of this Agreement, the
Corporation will take all action necessary in connection with the
OBCA and the articles and by-laws of the Corporation to convene and
hold the Delex Meeting as soon as reasonably practicable after the
date hereof. The Corporation shall, in consultation with YM, prepare
the Delex Information Circular to be sent to the Delex Shareholders
in connection with the Delex Meeting, to ensure that it contains all
information that is required to be included therein in accordance
with all applicable corporate Laws and all applicable securities
Laws and, without limiting the generality of the foregoing, provides
the Delex Shareholders with information in sufficient detail to
permit them to form a reasoned judgment concerning the Transaction.
(7) Each of the Corporation and YM will, in a timely and expeditious
manner, provide to the other all information as may be reasonably
requested by the other or required by applicable Law with respect to
such party and its businesses and properties for inclusion in any
information circular or similar document sent to the other's
shareholders, including the Delex Information Circular or in any
amendments or supplements to any such information circular complying
in all material respects with all applicable legal requirements on
the date of mailing thereof and not containing any misrepresentation
and the parties supplying such information will indemnify and save
harmless the other party and the directors and other officers of the
other from and against any and all claims, suits, actions, causes of
actions, liabilities, damages, costs, charges and expenses of every
nature and kind whatsoever for which the directors or officers of
the other party may become liable by virtue of such information
containing a misrepresentation, provided that such information is
included in any information circular in the form approved by the
supplying party. This indemnity shall terminate at the time of the
filing of the Articles of Amalgamation.
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2.2 Issuance of Consideration Shares at Effective Time
(1) YM will, at the Effective Time but subject to Section 2.3, issue to
the Delex Shareholders, and deliver certificates representing that
number of YM Common Shares (the "Consideration Shares") as are equal
in value to $14,500,000, at an issue price per Consideration Share
equal to the greater of (i) 90% of the weighted average closing
price of the YM Common Shares prior to the Effective Date, and (ii)
$3.15 per Consideration Share and, in addition, such number of
Adjustment Shares, if any, as is set out in Section 6.2.
(2) The Consideration Shares and the Adjustment Shares, if any, shall be
issued to Delex Shareholders at the Effective Time in such amounts
as are more particularly set forth in Schedule 2.2(2) and Schedule
6.2, respectively, to the Disclosure Letter.
2.3 Escrow of Consideration Shares
(1) Notwithstanding Section 2.2, YM will deliver the certificates
representing the Consideration Shares to the Escrow Agent to hold
the Consideration Shares in escrow to be released as follows:
(a) that number of Consideration Shares as has a value (as
determined in accordance with Section 2.2(1) as at the
Effective Date) of $1,437,500 on each date which is six, 12,
18 and 24 months following the Effective Date, respectively;
(b) that number of Consideration Shares as has a value (as
determined in accordance with Section 2.2(1) as at the
Effective Date) of $1,250,000 upon receipt of approval of the
first IND submission (or, in Canada, a clinical trial
authorization for a Phase II trial) for AeroLEF (or any other
product utilizing the DELEX Technology) from the applicable
regulatory authorities in the United States or Canada;
(c) that number of Consideration Shares as has a value (as
determined in accordance with Section 2.2(1) as at the
Effective Date) of $2,000,000 upon YM entering into a
strategic partnership, joint venture, collaboration or other
licensing arrangement (whether or not pursuant to a formal
written agreement) with any third party with respect to the
ongoing development and/or commercialization for AeroLEF (or
any other product utilizing the DELEX Technology) (whether in
Canada or anywhere else in the world);
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(d) that number of Consideration Shares as has a value (as
determined in accordance with Section 2.2(1) as at the
Effective Date) of $3,500,000 upon initiation of the first
Phase III clinical trial for AeroLEF (or any other product
utilizing the DELEX Technology) (whether in Canada or anywhere
else in the world); and
(e) that number of Consideration Shares as has a value (as
determined in accordance with Section 2.2(1) as at the
Effective Date) of $2,000,000 upon initiation of the second
Phase III clinical trial for AeroLEF (or any other product
utilizing the DELEX Technology) (whether in Canada or anywhere
else in the world),
provided that if the milestones set forth in paragraphs (b) to (e)
above have not been met prior to the date which is five years from
the Effective Date, any Consideration Shares remaining in escrow
shall be returned to YM for cancellation. If: (i) an NDA (or the
corresponding regulatory marketing authorization) is issued in any
of the United States, Canada, Western Europe or Japan in connection
with any product utilizing the DELEX Technology within the five
years following the Effective Date; or (ii) YM breaches any of its
covenants as set out at Sections 4.2(1) or 4.2(3) (but subject to
Sections 4.2(4) and 4.2(5), then in each case all of the
Consideration Shares that are at such time subject to the escrow
arrangements contemplated in this Section 2.3 shall be released from
such escrow and distributed to the Delex Shareholders in such
amounts as set forth in Schedule 2.2(2) to the Disclosure Letter.
(2) Such Consideration Shares shall be held in escrow by Equity Transfer
Services Inc. (the "Escrow Agent"), as escrow agent, pursuant to an
escrow agreement (the "Escrow Agreement"), substantially in the form
attached as Exhibit 3.
2.4 Delivery of Reconciliation Date Working Capital Statement
YM shall prepare and deliver to each of the Delex Shareholders the
Reconciliation Date Working Capital Statement on the date (the "Reconciliation
Date") that is on or before the later of: (i) the date that is as soon as
reasonably practicable following completion of the first fiscal year of Amalco
(or its successor) that commences immediately following the Effective Date and
(ii) the date by which the Canada Revenue Agency and the Province of Ontario
shall have remitted to (or to the credit of) Amalco substantially all of the
scientific research and experimental development tax credits in respect of the
Corporation's operations up to the Effective Date. YM, Amalco and the Major
Shareholders shall cooperate fully in the preparation of the Reconciliation Date
Working Capital Statement.
2.5 Net Working Capital Adjustment
Subject to Section 2.6, within ten (10) days after delivery by YM to the Major
Shareholders of the Reconciliation Date Working Capital Statement:
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(1) if the Reconciliation Date Net Working Capital, as indicated on the
Reconciliation Date Working Capital Statement, is less than the
amount (the "Target Net Working Capital") that is the result of
subtracting the Expenditures from $5 million, then that number of
Consideration Shares (held in escrow for the benefit of the Delex
Shareholders) as is equal in value to such difference, at an issue
price per Consideration Share equal to the weighted average closing
price of the YM Common Shares as at the Reconciliation Date, shall
be released from escrow and delivered to YM for cancellation and the
amount of Consideration Shares released from escrow to the Delex
Shareholders (allocated proportionately between them in accordance
with Schedule 2.2(2) to the Disclosure Letter) pursuant to Section
2.3(1)(a) shall be reduced accordingly (or, at the option of the
relevant Shareholder, it may pay to YM the cash amount of such
difference); or
(2) if the Reconciliation Date Net Working Capital is greater than the
Target Net Working Capital, then YM shall issue to the Delex
Shareholders, and deliver certificates representing, in such
proportionate amounts as between the Delex Shareholders as is more
particularly set forth in Schedule 2.2(2) to the Disclosure Letter,
that number of YM Common Shares (the "Reconciliation Shares") as has
a value equal to such difference, at an issue price per YM Common
Share equal to the weighted average closing price of the YM Common
Shares as at the Reconciliation Date.
2.6 Objection to Reconciliation Date Working Capital Statement
(1) Delivery of Objection Notice - If the Major Shareholders (acting
together) each object to any item of the Reconciliation Date Working
Capital Statement (provided that such item relates to the amount of
Net Working Capital), they shall so advise YM by delivery to YM of a
written notice (the "Objection Notice") within thirty (30) days
after the delivery to the Delex Shareholders of the Reconciliation
Date Working Capital Statement. The Objection Notice shall set out
the reasons for the objection as well as the amount in dispute and
reasonable details of the calculation of such amount.
(2) Resolution of Disputes - YM shall give the Major Shareholders and
their respective accountants sufficient access to the Books and
Records and working papers of Amalco or its successor used in the
preparation of the Reconciliation Date Working Capital Statement to
enable them to exercise their rights under this Section 2.6. The
Major Shareholders and YM shall attempt to resolve all of the items
in dispute set out in any Objection Notice within thirty (30) days
of receipt of the Objection Notice by YM. Any items in dispute not
resolved within such thirty (30) day period shall be referred as
soon as possible thereafter by the Major Shareholders and YM to the
Independent Auditor. The Independent Auditor shall act as expert and
not as arbitrator and shall be required to determine the items in
dispute that have been referred to it as soon as reasonably
practicable but in any event not later than thirty (30) days after
the date of referral of the dispute to it. In making its
determination, the Independent Auditor will only consider the issues
in dispute placed before it. The Major Shareholders and YM shall
provide or make available all documents and information as are
reasonably required by the Independent Auditor to make its
determination. The determination of the Independent Auditor shall be
final and binding on the parties and the Reconciliation Date Working
Capital Statement shall be (or not be) adjusted in accordance with
such determination.
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(3) Audit Expenses - The fees and expenses of the Independent Auditor in
acting in accordance with this Section 2.6 shall be borne by the
Major Shareholders unless the determination of the Independent
Auditor concludes that the amount of Net Working Capital is at least
10% greater than that as shown on the Reconciliation Date Working
Capital Statement, in which case such fees and expenses shall be
borne by YM.
(4) Payment in Accordance with Determination - Within five (5) days
after resolution, by agreement of the parties, of the dispute which
was the subject of the Objection Notice or, failing such resolution,
within five (5) days after the final determination of the
Independent Auditor, the Major Shareholders or YM, as the case may
be, shall pay to the other the amount owing as a result of such
resolution or final determination, such payment to be made in
accordance with Section 2.5.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties by the Major Shareholders
The Major Shareholders hereby severally (and not jointly and severally)
represent and warrant to YM as follows, and confirm that YM is relying upon the
accuracy of each of such representations and warranties in connection with the
completion of the Transaction:
(1) Status, Constating Documents and Licences.
(a) The Corporation is a corporation continued and validly
subsisting under the laws of the Province of Ontario. The
Corporation has all necessary corporate power to own its
properties and to carry on the Business.
(b) The articles, by-laws and other constating documents of the
Corporation, as amended to the date hereof, are listed in
Schedule 3.1(1)(b) to the Disclosure Letter, and complete and
correct copies of each of those documents have been delivered
or made available to YM.
(c) The Corporation is not a "reporting issuer" (as such term is
defined under s.1(1) of the Securities Act (Ontario)), there
is not a published market in respect of the Delex Shares and
the number of registered holders of Delex Shares is not more
than 50 (excluding employees or former employees of the
Corporation);
(d) The Corporation is duly licensed, registered and qualified as
a corporation to do business, is up-to-date in the filing of
all required corporate returns and other notices and filings
and is otherwise in good standing in all respects, in each
jurisdiction in which:
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(i) it owns or leases property, or
(ii) the nature or conduct of the Business or any part
thereof, or the nature of the property of the
Corporation or any part thereof, makes such
qualification necessary or desirable to enable the
Business to be carried on as now conducted or to enable
the property and assets of the Corporation to be owned,
leased and operated by it.
(e) To the knowledge of the Major Shareholders, all of the
Corporation's Licences are listed in Schedule 3.1(1)(e) to the
Disclosure Letter and are valid and subsisting. Complete and correct
copies of the Licences have been delivered or made available to YM.
The Corporation is in compliance with all terms and conditions of
the Licences. There are no proceedings in progress, pending or, to
the knowledge of any of the Major Shareholders, threatened, which
could result in the revocation, cancellation or suspension of any of
the Licences.
(2) Compliance with Constating Documents, Agreements and Laws. The
execution, delivery and performance of this Agreement and each of
the other agreements contemplated or referred to herein by each of
the Major Shareholders, and the completion of the transactions
contemplated hereby, will not constitute or result in a violation or
breach of or default under, or cause the acceleration of any
obligations of the Corporation under:
(a) any term or provision of any of the articles, by-laws or other
constating documents of the Corporation, or
(b) the terms of any agreement (written or oral), indenture,
instrument or understanding or other obligation or restriction
to which the Corporation is a party or by which it is bound,
or
(c) to the knowledge of the Major Shareholders, any term or
provision of any of the Licences or any order of any court,
governmental authority or regulatory body or any law or
regulation of any jurisdiction in which the Business is
carried on.
(3) No Other Purchase Agreements. No person has any agreement, option,
understanding or commitment, or any right or privilege (whether by
law, pre-emptive or contractual) capable of becoming an agreement,
option or commitment, including convertible securities, warrants or
convertible obligations of any nature, for
(a) the purchase, subscription, allotment or issuance of, or
conversion into, any of the unissued shares in the capital of
the Corporation or any securities of the Corporation, or
- 17 -
(b) the purchase or other acquisition from the Corporation of any
of its undertaking, property or assets, other than in the
ordinary course of the Business.
(4) Insolvency. No bankruptcy, insolvency or receivership proceedings
have been instituted or are pending against the Corporation.
(5) Corporate Records. The corporate records and minute books of the
Corporation, all of which have been provided or made available to
YM, contain complete and accurate minutes of all meetings of the
directors and Delex Shareholders held since its incorporation in all
material respects, and signed copies of all resolutions and by-laws
duly passed or confirmed by the directors or Delex Shareholders
other than at a meeting. All such meetings were duly called and
held. The share certificate books, register of security holders,
register of transfers and register of directors and any similar
corporate records of the Corporation are complete and accurate in
all material respects. All exigible security transfer tax or similar
tax payable in connection with the transfer of any securities of the
Corporation has been duly paid.
(6) Authorized and Issued Capital. The authorized capital of the
Corporation consists of an unlimited number of common shares, an
unlimited number of Class A preference shares, an unlimited number
of Class B preference shares and an unlimited number of special
preference shares of which 1,215,000 common shares, 900,000 Class A
preference shares, 3,287,135 Class B preference shares and 3,068,676
special preference shares have been duly issued and are outstanding
as fully paid and non-assessable shares.
(7) Options, Warrants and other Convertible Securities. Except as set
forth in Schedule 3.1(7) to the Disclosure Letter, no person, firm
or company, as of the date hereof, has any agreement or option, or
any right or privilege (whether pre-emptive or contractual) capable
of becoming an agreement or option, for the purchase, subscription
or issuance of any equity securities of the Corporation or for any
securities convertible into or exchangeable for equity securities of
the Corporation.
(8) Shareholders' Agreements, etc. To the knowledge of the Major
Shareholders, other than the amended and restated shareholders'
agreement with respect to the Corporation dated December 6, 2002,
there are no shareholders' agreements, pooling agreements, voting
trusts or other similar agreements with respect to the ownership or
voting of any of the shares of the Corporation.
(9) Financial Statements.
(a) The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a basis
consistent with that of the previous fiscal years, are true,
correct and complete in all material respects and present
fairly the financial condition of the Corporation as of the
respective dates of such Financial Statements, including the
assets and liabilities (whether accrued, absolute or
contingent) of the Corporation as of such dates, and the
revenues, expenses and results of the operations of the
Corporation for the periods ended on such dates.
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(b) All material financial transactions of the Corporation have
been recorded in the financial books and records of the
Corporation in accordance with good business practice, and
such financial books and records, together with all
disclosures made in this Agreement or in the Schedules hereto,
present fairly the financial condition and the revenues,
expenses and results of the operations of the Corporation as
of and to the date hereof.
(10) Liabilities of the Corporation. Other than as disclosed in Schedule
3.1(10) to the Disclosure Letter, as of the Effective Date, there
are no liabilities (contingent or otherwise) of the Corporation of
any kind whatsoever that are not disclosed in the Financial
Statements, and there is no basis for assertion against the
Corporation of any liabilities of any kind whatsoever. Without
limiting the generality of the foregoing, other than as disclosed in
Schedule 3.1(10) to the Disclosure Letter, (i) the Corporation has
no bonds, debentures, mortgages, promissory notes or other
indebtedness, nor any obligation to create or issue any bonds,
debentures, mortgages, promissory notes or other indebtedness, and
(ii) the Corporation is not a party to or bound by any agreement of
guarantee, indemnification, assumption or endorsement or any other
like commitment of the obligations, liabilities (contingent or
otherwise) or indebtedness of any person, including any unfunded
obligation any employee benefit or pension plans.
(11) Guarantees. The Corporation is not a party to or bound by any
agreement of guarantee, indemnification, assumption or endorsement
or any like commitment of the obligations, liabilities or
indebtedness of any other person.
(12) Commitments for Capital Expenditures. Other than as disclosed in
Schedule 3.1(12) to the Disclosure Letter or as disclosed to YM, the
Corporation is not committed to make any capital expenditures, nor
have any capital expenditures been authorized by the Corporation at
any time since December 31, 2004.
(13) Dividends and Distributions. Since December 31, 2004, the
Corporation has not declared or paid any dividend or made any other
distribution on any of its shares of any class, or redeemed or
purchased or otherwise acquired any of its shares of any class, or
reduced its authorized capital or issued capital, or agreed to do
any of the foregoing.
(14) Tax Matters.
(a) The Corporation has duly and on a timely basis prepared and
filed all Tax Returns and other documents required to be filed
by it in respect of all Taxes and such Tax Returns and
documents are complete and correct. Complete and correct
copies of all such returns and other documents filed in
respect of all fiscal years of the Corporation ending prior to
the date hereof in respect of which reassessment by the Canada
Revenue Agency is not statute barred have been provided to YM.
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(b) The Corporation does not have any material liability,
obligation or commitment for the payment of income taxes,
corporate taxes or any other taxes or duties not yet due other
than those that have arisen since December 31, 2004 in the
usual and ordinary course of business and for which adequate
provisions in the accounts of the Corporation have been made,
and the Corporation is not in arrears with respect to any
required withholdings or instalment payments of any kind.
(c) All Taxes payable by the Corporation and in respect of all
taxation periods, whether or not shown on any Tax Returns, for
which the Corporation is liable have been paid or accrued and
adequately reserved on its Books and Records and Financial
Statements.
(d) Copies of all Tax Returns, deficiencies, assessments and
notices from all taxing authorities relating to the
Corporation have been delivered or made available to YM.
(e) There are no actions, suits, proceedings, investigations or
claims now pending or made or, to the best of the knowledge of
the Major Shareholders, threatened against the Corporation in
respect of Taxes.
(f) Other than as set out in Schedule 3.1(14) to the Disclosure
Letter, the Corporation has withheld from each amount paid or
credited to any person the amount of Taxes required to be
withheld therefrom and, to the knowledge of the Major
Shareholders, has remitted such Taxes to the proper tax or
other receiving authorities within the time required under
applicable legislation.
(g) The Corporation has not acquired property or services from, or
disposed of property or provided services to, a person with
whom it does not deal at arm's length (within the meaning of
the Income Tax Act (Canada)) for an amount that is other than
the fair market value of such property or services, or has
been deemed to have done so for purposes of the Income Tax Act
(Canada).
(h) The Corporation has never filed or been party to any election
pursuant to Section 83 or 85 of the Income Tax Act (Canada) or
the relevant provincial and foreign legislation. The paid up
capital (as such expression is used in the Income Tax Act
(Canada) and the relevant provincial and foreign legislation)
of the issued and outstanding shares of the Corporation is
identical to its stated capital under applicable corporate
legislation.
(i) The Corporation is registered under the Excise Tax Act
(Canada).
(j) Other than with respect to investment tax credits or
scientific research and experimental development credits, the
Corporation has not requested or received a ruling from any
Governmental Body in respect of Taxes or signed an agreement
or waiver with any Governmental Body in respect of Taxes.
- 20 -
(15) Litigation. Except as set out in Schedule 3.1(15) to the Disclosure
Letter, there are no actions, suits, proceedings, arbitrations or
investigations pending or, to the knowledge of the Major
Shareholders, threatened against or adversely affecting, or which
could adversely affect the Corporation, the Intellectual Property,
the Product Authorizations or other Assets or before or by any
federal, provincial, state, municipal or other governmental court,
department, commission, board, bureau, agency or instrumentality,
domestic or foreign and the Major Shareholders do not know of any
valid basis for such an action, suit, proceeding, arbitration or
investigation. Except as set out in Schedule 3.1(15) to the
Disclosure Letter, the Corporation is not subject to any judgment,
order or decree entered in any lawsuit or proceeding.
(16) Environmental Compliance. To the knowledge of the Major
Shareholders, the Corporation has at all times received, handled,
generated, used, stored, deposited, labelled, handled, treated,
documented, transported and disposed of any Hazardous Substances in
material compliance with all Environmental Laws or applicable
Authorizations having the force of law.
(17) Assets. Schedule 3.1(17) to the Disclosure Letter contains a list of
all Assets owned by the Corporation or used in the operation of the
Business and the location of such Assets, all of which (except for
any Assets not currently in active use in, or required for, the
Business) are in a good and reasonable state of repair and in good
working order, save and except for reasonable wear and tear.
(18) No Option on Assets. Except as set out in Schedule 3.1(18) to the
Disclosure Letter or in this Agreement, there is no contract, option
or any other similar right binding upon, or which at any time in the
future may become binding upon, the Corporation to sell, transfer,
assign, pledge, charge, mortgage or in any other way dispose of or
encumber any of the Assets, except pursuant to purchase orders
accepted by the Corporation in the usual and ordinary course of its
business.
(19) Deposit Accounts and Safe Deposit Boxes of the Corporation. The name
and address of each bank, trust company or similar institution with
which the Corporation has one or more accounts or one or more safe
deposit boxes, the number of each such account and safe deposit box
and the names of all persons authorized to draw thereon or to have
access thereto have been provided or made available to YM.
(20) Contracts. The Corporation is not in material default or material
breach of any contract or commitment to which it is a party and
there exists no condition, event or act which, with the giving of
notice or lapse of time or both, would constitute such a default or
breach and all such contracts and commitments are in good standing
and in full force and effect without amendment thereto and the
Corporation is entitled to all benefits thereunder. To the knowledge
of the Major Shareholders, no other party to a contract or agreement
with the Corporation has materially breached or is in material
default thereunder.
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(21) Accounts Receivable. The Corporation has no Accounts Receivable
other than as set out in the Financial Statements and in Schedule
3.1(21) to the Disclosure Letter.
(22) Inventory. The Corporation has no inventory.
(23) Real Properties and Leased Premises. Except as set out in Schedule
3.1(23) to the Disclosure Letter, the Corporation does not hold
legal or beneficial title to any real property. Except as disclosed
in Schedule 3.1(23) to the Disclosure Letter, the Corporation is not
a party to, or under any agreement or option to become a party to,
any lease with respect to real property used or to be used in the
Business.
(24) Leases of Personal Property. There are no leases by the Corporation
of any equipment, furniture, fixtures or other tangible or
intangible personal property that requires payment by the
Corporation of $5,000 or more during any financial year and which is
not terminable within 30 days of the date hereof.
(25) Products and Services. To the knowledge of the Major Shareholders,
there exists no set of facts as at the Effective Date with respect
to the Corporation's ordinary course business operations (a) which
could furnish a basis for the withdrawal, suspension or cancellation
of any registration, license, permit or other governmental approval
or consent of any governmental or regulatory agency issued to the
Corporation with respect to any component of any product being
developed by, or that is material to and used by, the Corporation,
or (b) which could have a material adverse effect on the continued
development of any product candidate of the Corporation or which
could otherwise cause the Corporation to withdraw, suspend or cancel
development of any such product, it being understood that the
Corporation is not presently offering any product or service for
sale and has never in the past offered any product or service for
sale, and that the Corporation's product candidates will require,
before they can be offered for commercial sale, certain governmental
or regulatory licenses, permits or approvals which have not been
issued.
(26) Licenses; Compliance With Regulatory Requirements.
(a) Schedule 3.1(26) to the Disclosure Letter sets out a complete
and correct list of all Product Authorizations applied for and/or
received by the Corporation. The Corporation is the holder of all
rights under the Product Authorizations.
(b) To the knowledge of the Major Shareholders, the Corporation has
conducted the Business in material compliance with all rules,
policies and guidelines of the Health Regulatory Authority. To the
knowledge of the Major Shareholders, all material current Product
Authorizations and other governmental licenses, permits,
registrations, approvals or authorizations employed in or necessary
for the conduct of the Business are in full force and effect.
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(c) To the knowledge of the Major Shareholders, all clinical trials
involving human subjects conducted by or on behalf of the
Corporation have been and are being conducted: (A) in compliance
with the applicable requirements of current good clinical practices,
informed consent, and all other requirements relating to the
protection of human subjects participating in clinical trials under
the Canadian Food and Drugs Act; and (B) in material compliance with
the rules, policies and guidelines of the Health Regulatory
Authority.
(27) Intellectual Property.
(a) Schedule 3.1(27) to the Disclosure Letter sets out a complete
and correct description of: (A) all patents, patent
applications and patent and invention disclosures owned,
licensed, or otherwise used with the consent of the owner by
the Corporation and required to operate the Business as it is
being operated on the Effective Date or invented through the
operation of the Business as of the Effective Date; (B) all
registered Trade-Marks and applications for registration of
Trade-Marks, owned by the Corporation and required to operate
the Business as it is being operated on the Effective Date;
(C) all agreements wherein any rights in any Licensed
Intellectual Property have been licensed or granted to the
Corporation wherein such Licensed Intellectual Property is
required to operate the Business as it is operated on the
Effective Date in a material respect; and (D) all agreements
wherein any rights in any Owned Intellectual Property have
been licensed by the Corporation to any third party.
(b) Except as disclosed in Schedule 3.1(27) to the Disclosure
Letter:
(i) the Corporation has not conveyed, licensed, assigned or
encumbered any of its Owned Intellectual Property or the
Licensed Intellectual Property;
(ii) the Corporation is the exclusive owner of the Owned
Intellectual Property;
(iii) all consents and licenses for the Licensed Intellectual
Property are in full force and effect and no material
default exists on the part of the Corporation;
(iv) the Owned Intellectual Property and the Licensed
Intellectual Property are all the Intellectual Property
which is being used by the Corporation to operate the
Business and are all the Intellectual Property which is
necessary to operate the Business, as it is operated on
the date hereof in all material respects;
(v) the Owned Intellectual Property is in full force and
effect and has not been used or enforced or failed to be
used or enforced in a manner that would result in the
abandonment, cancellation or unenforceability of any of
the Owned Intellectual Property;
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(vi) the Corporation has received no notice and has no reason
to suspect that the Licensed Intellectual Property is
not in full force and effect or has been used or
enforced or failed to be used or enforced in a manner
that would result in the abandonment, cancellation or
unenforceability of any of the Licensed Intellectual
Property, nor are the Major Shareholders aware of any
basis therefor;
(vii) to the knowledge of the Major Shareholders, there has
been no claim of adverse ownership, invalidity or other
opposition to or conflict with any Owned Intellectual
Property nor, to the knowledge of the Major
Shareholders, is there any impending or threatened suit,
proceeding, claim, demand or action against the
Corporation (nor are the Major Shareholders aware of any
basis therefor) alleging that any Owned Intellectual
Property is invalid or violates or infringes the
intellectual property rights of a third party;
(viii)the Corporation has received no notice and the Major
Shareholders have no reason to suspect that there has
been a claim of adverse ownership, invalidity or other
opposition to or conflict with any Licensed Intellectual
Property nor, to the knowledge of the Major
Shareholders, is there any impending or threatened suit,
proceeding, claim, demand or action against the
Corporation alleging that any Licensed Intellectual
Property is invalid or that its use in the operation of
the Business as it is operated on the date hereof
violates or infringes the intellectual property rights
of a third party;
(ix) the Corporation is not required to pay any royalty,
license or fee to any third party in connection with the
Corporation's use of the Owned Intellectual Property,
except as required by law to maintain or register the
Owned Intellectual Property;
(x) to the knowledge of the Major Shareholders, no use by
the Corporation of the Owned Intellectual Property
violates or infringes the intellectual property rights
of any third party;
(xi) the Corporation has taken commercially reasonable steps
(including measures to protect secrecy and
confidentiality, where appropriate) to protect the
Corporation's right, title and interest in and to all
Intellectual Property. All current and former employees,
agents, consultants, third party contractors and other
representatives of the Corporation who have material
access to confidential information of the Corporation
have a legal and, in the case of the employees, a
contractual, obligation of confidentiality to the
Corporation with respect to such information;
- 24 -
(xii) all current and former, employees, agents, consultants
and third party contractors of the Corporation have duly
executed and delivered agreements to the Corporation
pertaining to the assignment to the Corporation of all
Owned Intellectual Property invented or conceived during
the course of their employment or engagement by the
Corporation, and such employees, agents, consultants and
third party contractors have waived in favour of the
Corporation, its licensees, successors and assigns all
their non-assignable rights (including moral rights,
where applicable) therein;
(xiii)to the knowledge of the Major Shareholders, no third
party has claimed that any current or former employee,
agent, consultant or third party contractors of the
Corporation that contributed to the development of the
Owned Intellectual Property has, as a result of such
contribution, violated the terms and conditions of his
or her employment, non-competition, nondisclosure or
inventions agreement with such third party or disclosed
or used any trade secret of such third party;
(xiv) to the knowledge of the Major Shareholders, there has
been no public disclosure, sale or offer for sale of any
invention, forming a part of the Owned Intellectual
Property (such as a non-confidential publication or
presentation by an inventor, employee, officer,
director, other representative of the Corporation or any
third party) that may affect the Corporation obtaining
or sustaining valid patent rights to such invention;
(xv) the Corporation has not conducted or requested a full
"freedom to operate" opinion on all patent applications
referred to in Section 3.1(27)(a)(A) but, to the
knowledge of the Major Shareholders, there is no
publication, such as a patent, published or laid-open
patent application, journal article, catalogue,
promotion, or specification, of a third party which may
prevent the Corporation from obtaining or sustaining
valid patent rights to an invention forming part of the
Owned Intellectual Property; and
(xvi) in relation to each patent application (in preparation
or filed) or registered patent for an invention forming
part of the Owned Intellectual Property, the Major
Shareholders are not aware of any professional opinion,
such as the opinion of a patent agent or patent
attorney, whether preliminary in nature or in any other
manner qualified, to the effect that the chances of
obtaining or sustaining valid patent rights to the
invention are considered to be unlikely, or less than
even.
(28) Subsidiaries and Other Interests. The Corporation has no
subsidiaries and does not own any securities issued by, or any
equity or ownership interest in, any other person. The Corporation
is not subject to any obligation to make any investment in or to
provide funds by way of loan, capital contribution or otherwise to
any person.
- 25 -
(29) Partnerships or Joint Ventures. Other than as set out in Schedule
3.1(29) to the Disclosure Letter, the Corporation is not a partner
or participant in any partnership, joint venture, profit-sharing
arrangement or other association of any kind and is not party to any
agreement under which the Corporation agrees to carry on any part of
the Business or any other activity in such manner or by which the
Corporation agrees to share any revenue or profit with any other
person.
(30) Restrictions on Doing Business. To the knowledge of the Major
Shareholders, the Corporation is not a party to or bound by any
agreement which would restrict or limit its right to carry on any
business or activity or to solicit business from any person or in
any geographical area or otherwise to conduct the Business as the
Corporation may determine.
(31) Employee Compensation.
(a) Attached hereto as Schedule 3.1(31) to the Disclosure Letter is
a true, accurate and complete list of all employees of the
Corporation, as of the date hereof together with the title or
position of each, length of service, the basis of compensation
(full-time vs. part time) and the location of their employment. No
claims have been asserted or are held by any current or former
employee of the Corporation alleging wrongful dismissal or claiming
severance or other damages against the Corporation and which have
not been dealt with in a final manner and the Major Shareholders are
not aware of any basis for such a claim. At the Effective Date, the
Corporation will not have any outstanding liabilities for payment of
wages, vacation pay, salaries, bonuses, pensions, contributions
under any employee benefit plan or other compensation, current or
deferred, under any labour or employment contract, whether oral or
written, other than normal accruals in respect thereto or as set out
in Schedule 3.1(31) to the Disclosure Letter. Also set forth on
Schedule 3.1(31) to the Disclosure Letter is a true and complete
list of:
(i) each pension, profit-sharing, thrift, deferred
compensation, stock ownership, stock purchase, stock option,
performance, bonus, incentive, retirement, severance, welfare,
hospitalization or other medical, disability, life or other
insurance, or other employee benefit plan or arrangement of
any kind, whether written or oral, which the Corporation
maintains in respect of the Business, has in effect or is
required to make contributions to (collectively "Benefit
Plans");
(ii) each agreement, arrangement, commitment and understanding
of any kind, whether written or oral, with any current or
former officer, director, employee or consultant of the
Corporation pursuant to which payments may be required to be
made at any time following the date hereof (including any
employment, deferred compensation, severance, termination and
consulting agreements) by the Corporation or in the Business;
- 26 -
(iii) any other plan, agreement, arrangement, policy or
understanding, whether written or oral, relating to any other
compensation, remuneration or benefits of any nature
whatsoever (including bonuses, incentives, vacation pay,
holiday pay, insurance, severance or retirement), in which any
employee of the Corporation or the Business participates or
has participated (all of the foregoing in clauses (ii) and
(iii) being referred to herein collectively as "Compensation
Commitments").
Neither the Major Shareholders nor the Corporation have made
any express commitment nor have any formal plan, whether
legally binding or not, to create an additional Benefit Plan
or Compensation Commitment or to modify or change any existing
Benefit Plan or Compensation Commitment, except as described
on Schedule 3.1(31) to the Disclosure Letter. Except as set
out in the said schedule and except for the payments referred
to herein, there are no bonuses, severances or termination
payments, or any dividends, or any other payments, of any kind
or in any manner, paid, due or payable to the Major
Shareholders as a consequence or upon the completion of, or
resulting from, this Agreement and the transactions
contemplated hereunder.
(b) The Corporation is in compliance in all material respects with
and is in good standing under all applicable laws, rules,
regulations, codes and policies relating to its employees and their
employment, including, workers' compensation, health, safety,
training, human rights, equal opportunity or similar laws, rules,
regulations, codes and policies and has properly completed and filed
all reports required by such laws, rules, regulations, codes and
policies.
(32) Employee Relations. None of the Corporation's employees are
unionized and there are no collective agreements in place with any
trade union or other similar organization representing employees.
Each current employee has an employment contract in place copies of
which were provided or made available to YM. To the knowledge of the
Major Shareholders, there are no labour disputes or strikes of such
employees in progress, pending or threatened or anticipated. The
Corporation is not aware of and does not anticipate any organization
drive or other attempt to unionize any employees of the Corporation.
(33) Accident History and Workers Compensation. To the knowledge of the
Major Shareholders, the Corporation does not now have, nor for the
past three years has it had, any accident history which has resulted
or which is likely to result in an increased assessment under any
workers compensation or similar type legislation or which would give
rise to any claim against the Corporation in respect thereto. All
levies under any workplace safety and insurance legislation to which
the Corporation is subject have been paid by the Corporation.
- 27 -
(34) Insurance. The Corporation currently has in force the policies of
insurance set out in Schedule 3.1(34) to the Disclosure Letter. Such
policies are issued by responsible insurers and, to the knowledge of
the Major Shareholders, are appropriate to the Business and Assets,
in such amounts and against such risks as are customarily carried
and insured against by owners of comparable businesses, properties
and assets. All such policies of insurance are in full force and
effect and the Corporation is not in default, whether as to the
payment of premium or otherwise, under the terms of any such policy
and the Corporation has not failed to give any notice or present any
claim under any such insurance policy, in due and timely fashion.
(35) Non-Arm's Length Matters. Other than as disclosed in the Financial
Statements or otherwise disclosed to YM in writing, the Corporation
is not a party to or bound by any agreement with, is not indebted
to, and no amount is owing to the Corporation by, any of the Major
Shareholders or any of the Major Shareholders' respective Affiliates
or any officers, former officers, directors, former directors,
shareholders, former shareholders, employees (except for oral
employment agreements with employees) or former employees of the
Corporation or any person not dealing at arm's length with any of
the foregoing. The Corporation has not made or authorized any
payments to any of the Major Shareholders or any of the Major
Shareholders' respective Affiliates or any officers, former
officers, directors, former directors, shareholders, former
shareholders, employees or former employees of the Corporation or to
any person not dealing at arm's length with any of the foregoing.
(36) Compliance with Laws. The Corporation is not in violation of any
federal, provincial, municipal or other law, regulation or order of
any government or governmental or regulatory authority, domestic or
foreign, including, without limitation, any law, regulation or order
relating to the Business.
(37) Conduct of Business. Since December 31, 2004, except as disclosed in
this Agreement or as disclosed in Schedule 3.1(37) to the Disclosure
Letter:
(a) the Corporation has only carried on the Business or entered or
agreed to enter into any agreement or arrangement in the
ordinary course of the Business;
(b) the Corporation has not discharged or satisfied any lien or
encumbrance, or paid any obligation or liability other than
current liabilities incurred in the ordinary and normal course
of business consistent with past practice;
(c) the Corporation has not issued or sold any shares in its
capital stock or any warrants, bonds, debentures or other
securities or issued, granted or delivered any right, option
or other commitment for the issuance of any securities;
(d) the Corporation has not mortgaged, pledged, subjected to lien,
hypothecated, granted a security interest in or otherwise
encumbered any of its Assets, whether tangible or intangible;
- 28 -
(e) the Corporation has not paid any dividends or other
distribution in respect of the Delex Shares;
(f) there has been no change in the condition of the Business,
financial or otherwise, the Assets or the liabilities, income,
business or prospects of the Corporation, except changes in
the ordinary course of business which were not, whether
separately or in the aggregate, adverse;
(g) there has been no change in accounting methods or policies of
the Corporation;
(h) the Corporation has diligently endeavoured to preserve
relationships with all third parties having business dealings
with the Corporation;
(i) the Corporation has not entered or agreed to enter into any
line of business other than the Business as conducted by it at
and prior to December 31, 2004;
(j) there has not been any loss of employees which might result in
an adverse effect on the Business or the financial condition
of the Corporation or the Business;
(k) there has not been any damage to, destruction of or loss of
any physical assets of the Corporation whether or not covered
by insurance which has resulted in diminution of value of any
asset of greater than $10,000;
(l) the Corporation has not received any written notice of or
agreed to the termination of any contract in excess of $5,000
annually;
(m) there has not been any governmental or like investigation
relating to the Corporation, any of the Assets or the
Business; and
(n) the Corporation has not transferred or granted any rights
under or entered into any settlement regarding the breach or
infringement of any trademark, patent, copyright or similar
rights, or any licence thereto or modified any existing rights
with respect thereto.
(38) Expenditures. As at the Effective Date, other than as disclosed on
Schedule 3.1(38) to the Disclosure Letter, since December 31, 2004,
the Corporation has not made or agreed to make any capital
expenditure nor has the Corporation sold or disposed of any Assets
having a fair market value in excess of $5,000.
(39) Approvals and Consents. Except as described in Schedule 3.1(39) to
the Disclosure Letter, there are no approvals, consents or waivers
required to be obtained of any kind, including pursuant to any
leases or contracts containing prohibitions or pre-consent
provisions to the transaction in order to permit the transaction
contemplated herein or to preserve the Business and Assets of the
Corporation.
- 29 -
(40) Commission. Other than Orion Securities Inc. (and any Person engaged
by YM or Subco), no person is entitled to a brokerage commission,
finder's fee or other like payment in connection with the
transaction contemplated by this Agreement.
(41) Copies of Documents. Complete and correct copies (including all
amendments) of all contracts, leases and other documents referred to
in this Agreement or any Schedule hereto or required to be disclosed
hereby have been made available to YM.
(42) Authority and Capacity.
(a) If a corporation, such Major Shareholder is duly incorporated
and is validly subsisting under the laws of its jurisdiction
of incorporation and has good right, full corporate power and
absolute authority to enter into this Agreement and the Merger
Support Agreement and to perform all of such Major
Shareholder's obligations under this Agreement and the Merger
Support Agreement. Such Major Shareholder, its shareholders
and board of directors have taken all necessary or desirable
actions, steps and corporate and other proceedings to approve
or authorize, validly and effectively, the entering into of,
and the execution, delivery and performance of, this Agreement
and the Merger Support Agreement.
(b) If a partnership, limited partnership, syndication or other
form of unincorporated organization, such Major Shareholder
has the necessary legal capacity, good right, full power and
absolute authority to enter into this Agreement and the Merger
Support Agreement and to perform all of such Major
Shareholder's obligations under this Agreement and the Merger
Support Agreement. Such Major Shareholder has taken all
necessary or desirable actions, steps and other proceedings to
approve or authorize, validly and effectively, the entering
into of, and the execution, delivery and performance of, this
Agreement and the Merger Support Agreement.
(43) Compliance with Constating Documents, Agreements and Laws. The
execution, delivery and performance of this Agreement and the Merger
Support Agreement and each of the other agreements contemplated or
referred to herein by such Major Shareholder, and the completion of
the transactions contemplated hereby and thereby, will not
constitute or result in a violation or breach of or default under,
or cause the acceleration of any obligations of such Major
Shareholder under:
(a) any term or provision of any of the articles, by-laws or other
constating documents of such Major Shareholder, if applicable,
or
(b) the terms of any agreement (written or oral), indenture,
instrument or understanding or other obligation or restriction
to which such Major Shareholder.
- 30 -
(44) No Other Purchase Agreements. No Person has any agreement, option,
understanding or commitment, or any right or privilege (whether by
law, pre-emptive or contractual) capable of becoming an agreement,
option or commitment, including convertible securities, warrants or
convertible obligations of any nature, for the purchase from such
Major Shareholder of any of the Delex Shares held by such Major
Shareholder.
(45) Contractual and Regulatory Approvals. Such Major Shareholder is not
under any obligation, contractual or otherwise, to request or obtain
the consent of any person, and no permits, licences, certifications,
authorizations or approvals of, or notifications to, any federal,
provincial, municipal or local government or governmental agency,
board, commission or authority are required to be obtained by such
Major Shareholder in connection with the execution, delivery or
performance by such Major Shareholder of this Agreement or the
completion of any of transactions contemplated hereunder.
(46) Ownership.
(a) If such Major Shareholder is not New Generation Biotech
(Equity) Fund Inc., such Major Shareholder is the registered
and beneficial owner of the Delex Shares as is indicated
opposite his, her or its respective name in Schedule A to the
Merger Support Agreement, with good and marketable title
thereto, free and clear of any and all Encumbrances.
(b) If such Major Shareholder is New Generation Biotech (Equity)
Fund Inc., such Major Shareholder is the beneficial owner of
the Delex Shares as is indicated opposite its name in Schedule
A to the Merger Support Agreement (such Delex Shares being
registered in the name of ▇▇▇▇▇ Investments Limited A/C
554-104072-16), with good and marketable title thereto, free
and clear of any and all Encumbrances.
(47) Enforceability of Obligations. Each of this Agreement and the Merger
Support Agreement is a legal, valid and binding obligation of such
Major Shareholder, enforceable against such Major Shareholder in
accordance with its terms subject to (i) bankruptcy, insolvency,
moratorium, reorganization and other laws relating to or affecting
the enforcement of creditors' rights generally and (ii) the fact
that equitable remedies, including the remedies of specific
performance and injunction, may only be granted in the discretion of
a court.
(48) Insolvency. No bankruptcy, insolvency or receivership proceedings
have been instituted or are pending against such Major Shareholder.
(49) Residency. Such Major Shareholder is not a non-resident of Canada
within the meaning of the Income Tax Act (Canada).
(50) Accredited Investor. Such Major Shareholder is an "accredited
investor", as such term is defined in Ontario Securities Commission
Rule 45-501 - Exempt Distributions.
- 31 -
(51) No Claim. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any
Governmental Body or, to the knowledge of such Major Shareholder,
threatened against such Major Shareholder or any of his, her or its
properties that, individually or in the aggregate, could impair the
ability of such Major Shareholder's to perform its obligations under
this Agreement or the Merger Support Agreement or otherwise delay
such Major Shareholder in performing such obligations. There is no
judgment, decree or order against such Major Shareholder that could
prevent, enjoin, alter or delay any of the transactions contemplated
by this Agreement or the Merger Support Agreement, or that could
impair the ability of such Major Shareholder to perform its
obligations under this Agreement or the Merger Support Agreement;
and
(52) No Other Proxy Granted. Such Major Shareholder has not previously
granted or agreed to grant any proxy or other right to vote in
respect of such Major Shareholder's Delex Shares or entered into any
voting trust, nor pooling or other agreement with respect to the
right to vote, call meetings of Delex Shareholders or give consents
or approvals of any kind as to such Delex Shares except the amended
and statement shareholders' agreement with respect to the
Corporation dated December 6, 2002 and those agreements which are no
longer of any force or effect.
(53) Disclosure. No representation or warranty of the Major Shareholders
contained in this Section 3.1, and no statement contained in the
Disclosure Letter or any certificate, list, summary or other
disclosure document provided or to be provided to YM pursuant hereto
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 which is necessary in order to
make the statements contained therein not misleading.
3.2 Representations and Warranties by YM and Subco
YM and Subco hereby represent and warrant to the Corporation and the Major
Shareholders as follows, and confirm that the Corporation and the Major
Shareholders are relying upon the accuracy of each of such representations and
warranties in connection with the completion of the other transactions
hereunder:
(1) Corporate Authority and Binding Obligation. YM is a corporation duly
continued and validly subsisting in all respects under the laws of
its jurisdiction of continuation. Subco is a corporation duly
incorporated and validly subsisting in all respects under the laws
of the Province of Ontario. Each of YM and Subco has good right,
full corporate power and absolute authority to enter into this
Agreement and, in the case of YM, the Ancillary Agreements, and to
perform all of YM's and Subco's respective obligations under this
Agreement and, in the case of YM, the Ancillary Agreements. Each of
YM and Subco and their respective boards of directors (and
shareholders, if necessary) have taken all necessary or desirable
actions, steps and corporate and other proceedings to approve or
authorize, validly and effectively, the entering into of, and the
execution, delivery and performance of, this Agreement and, in the
case of YM, the Ancillary Agreements. This Agreement is a legal,
valid and binding obligation of each of YM and Subco, enforceable
against each of them, and each of the Ancillary Agreements is a
legal, valid and binding obligation of YM, enforceable against YM,
in accordance with their respective terms subject to::
- 32 -
(a) bankruptcy, insolvency, moratorium, reorganization and other
laws relating to or affecting the enforcement of creditors'
rights generally; and
(b) the fact that equitable remedies, including the remedies of
specific performance and injunction, may only be granted in
the discretion of a court.
(2) Compliance with Constating Documents, Agreements and Laws. The
execution, delivery and performance of this Agreement and each of
the Ancillary Agreements contemplated or referred to herein by YM or
Subco, and the completion of the transactions contemplated hereby,
will not constitute or result in a violation or breach of or default
under:
(a) any term or provision of any of the articles, by-laws or other
constating documents of YM or Subco, or
(b) the terms of any indenture, agreement (written or oral),
instrument or understanding or other obligation or restriction
to which YM or Subco is a party or by which it is bound, or
(c) any term or provision of any licences, registrations or
qualification of YM or Subco or any order of any court,
governmental authority or regulatory body or any applicable
law or regulation of any jurisdiction.
(3) Regulatory Compliance
(a) YM is a "reporting issuer" (as such term is defined under
s.1(1) of the Securities Act (Ontario)) in good standing in
each of the Provinces of British Columbia, Ontario and Nova
Scotia.
(b) Each of the TSX, AMEX and AIM has given its conditional
approval, as applicable, for the transaction of purchase and
sale contemplated herein and the listing of the Consideration
Shares, the Adjustment Shares, the Working Capital Shares, the
Reconciliation Shares and the Additional Payment Shares.
(c) Since June 30, 2004, and except as specified in the
information filed by YM under applicable securities Laws,
there has not occurred any YM Material Adverse Change.
(d) YM has filed with the Ontario Securities Commission by posting
on the SEDAR system true and complete copies of all forms,
reports, schedules, statements and other documents required in
accordance with applicable Laws to be filed by it since March
31, 2004. Such documents, at the time filed, (i) did not
contain any misrepresentation of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and
(ii) complied in all material respects with the requirements
of applicable securities Laws. YM has not filed any
confidential material change report with any securities
authority or regulator or any stock exchange or other
self-regulatory authority which at the date hereof remains
confidential.
- 33 -
(4) Issued Shares
(a) The authorized capital of YM consists of an unlimited number
of common shares, an unlimited number of non-voting preference
shares, and an unlimited amount of voting special shares, of
which 35,150,590 YM Common Shares are issued and outstanding
as at the date hereof.
(b) The authorized capital of Subco consists of an unlimited
number of common shares, of which one common share is issued
and outstanding as at the date hereof.
(c) The currently issued and outstanding YM Common Shares are
quoted and traded on the TSX, AMEX and AIM and no order
ceasing or suspending quotation or trading in any securities
of YM has been issued and no proceedings for such purpose are
pending, or to the knowledge of YM, threatened.
(5) Ownership of Subco; No Prior Activities. As of the Effective Date,
all of the outstanding shares of Subco are owned by YM. As of the
Effective Date, except for obligations and liabilities incurred in
connection with its incorporation or organization and transactions
contemplated by this Agreement or the Ancillary Agreements, and any
other agreements or arrangements contemplated by this Agreement,
Subco has not and will not have incurred, directly or indirectly,
through any subsidiary or Affiliate, any obligations or liabilities
or engaged in any business activities of any type or kind whatsoever
or entered into any agreements or arrangements with any Person.
(6) Consideration Shares and Working Capital Shares. As at the Effective
Date, the Consideration Shares to be issued to or to the order of
each Delex Shareholder pursuant to Section 2.1, the Adjustment
Shares and the Working Capital Shares will be validly issued as
fully paid and non-assessable shares in the capital of YM under a
validly issued certificate or certificates complying with corporate
and securities legislation and regulatory authority applicable to
YM, and the issuance of such shares shall be effected in compliance
with all securities Laws and other regulatory authority applicable
to YM.
(7) Restrictions on Trading. The Consideration Shares, the Working
Capital Shares issuable pursuant to Section 6.2, the Reconciliation
Shares issuable pursuant to Section 2.5 and Additional Payment
Shares issuable pursuant to Section 4.2(2) will be freely tradeable
in the provinces of Ontario, Nova Scotia and British Columbia,
subject to restrictions as to Persons who are "Affiliates" of YM and
as to Persons who are "control block" holders under applicable
securities legislation. The Working Capital Shares and the
Adjustment Shares will be subject to a hold period of not more than
four months and one day from the Effective Date. The certificates
representing the Working Capital Shares and the Adjustment Shares
will bear a legend in substantially the following form and with the
necessary information inserted:
- 34 -
"UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF
THIS SECURITY SHALL NOT TRADE THE SECURITY BEFORE [insert date
that is four (4) months and one (1) day after the Effective
Date]."
To the extent required by the TSX, such certificates shall
also bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON
THE TORONTO STOCK EXCHANGE, HOWEVER, THE SAID SECURITIES
CANNOT BE TRADED THROUGH THE FACILITIES OF SUCH EXCHANGE SINCE
THEY ARE NOT FREELY TRANSFERABLE AND CONSEQUENTLY ANY
CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT "GOOD
DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON THE TORONTO STOCK
EXCHANGE."
(8) Residency. Each of YM and Subco is "Canadian" within the meaning of
the Investment Canada Act (Canada).
(9) No Claims, etc. There are no claims, investigations or other
proceedings, including appeals and applications for review, in
progress or, to the knowledge of YM or Subco, pending or threatened
against or relating to YM or Subco, before any Governmental Body,
which, if determined adversely to YM or Subco, would,
(a) prevent YM from issuing the Consideration Shares, the
Adjustment Shares, the Reconciliation Shares, the Additional
Payment Shares or the Working Capital Shares as contemplated
hereunder;
(b) enjoin, restrict or prohibit the transfer of all or any part
of the Consideration Shares, the Adjustment Shares, the
Reconciliation Shares, the Additional Payment Shares or the
Working Capital Shares or materially delay completion of the
Transaction, all as contemplated by this Agreement; or
(c) delay, restrict or prevent YM or Subco from fulfilling any of
its obligations set out in or arising from this Agreement,
and neither YM nor Subco has any knowledge of any existing ground on
which any such action, suit, litigation or proceeding might be
commenced with any reasonable likelihood of success.
- 35 -
(10) Compliance with Laws. Except as publicly disclosed by YM, YM and
Subco have complied with and are not in violation of any applicable
Laws, other than non-compliance or violations which would not,
individually or in the aggregate, reasonably be expected to have a
YM Material Adverse Effect.
(11) Sophisticated Purchaser; Access. YM is knowledgeable, sophisticated
and experienced in business and financial matters and has had access
to management of the Corporation and its records for the purpose of
conducting its due diligence.
(12) No Broker, etc. No finder, broker, agent, or other intermediary has
acted for or on behalf of YM or Subco in connection with the
negotiation or consummation of the transactions contemplated hereby,
and no fee will be payable by YM or Subco to any such person in
connection with such transactions.
ARTICLE 4
COVENANTS
4.1 Covenants by the Major Shareholders
Each Major Shareholder covenants to YM that it will do or cause to be done the
following:
(1) Resignation of Officers and Directors. At or before the Effective
Time, it will take all steps as are within its power to cause each
Person who is a director or officer of the Corporation, other than
such persons as may be designated in writing by YM, to submit his or
her written resignation as a director or officer to the Corporation
which will be effective at the Effective Time.
(2) Delex Stock Options. At or before the Effective Time it shall cause
the board of directors of the Corporation to terminate the Delex
Plan and cancel all Delex Options issued thereunder.
(3) Releases by Officers and Directors. At the Effective Time, it will,
and will cause each Person who is a director or officer of the
Corporation to execute and deliver to the Corporation a release in
such form as YM finds acceptable, acting reasonably.
(4) Change of Control Tax Return. It covenants and agrees that YM shall
be entitled to prepare and file the Tax Return for the Corporation
in respect of the fiscal year ending as of the Effective Date and
will co-operate fully with YM in connection with the preparation of
such Tax Return, provided that, prior to filing such Tax Return,
such Tax Return shall be reviewed by the Major Shareholders and
their financial advisors and the Major Shareholders approval
obtained in respect of the filing thereof, such consent not to be
unreasonably withheld.
- 36 -
4.2 Covenants by YM
(1) Subject to Sections 4.2(4) and 4.2(5), YM shall use Commercially
Reasonable Efforts to complete the development (including gaining
FDA approval to market such product) of at least one product
utilizing the DELEX Technology. The parties agree that, for all
purposes of this Agreement, a product shall be deemed to utilize the
DELEX Technology if YM, any licensee, affiliate or successor
corporation thereof or thereto has used any of the DELEX Technology
in connection with research and development efforts with respect to
such product or if such product includes, incorporates, uses, is
based on or relies upon, in any manner, the DELEX Technology. As
used in this Agreement, "Commercially Reasonable Efforts" shall mean
that YM is performing its obligations in a good faith, timely and
sustained manner (including the application of financial, human and
material resources) consistent with the efforts that a reasonably
prudent and diligent company within the biopharmaceutical industry
would devote to a significant general practice product of similar
market potential, and provided that YM shall continue to perform its
obligations in such manner until and unless there exist bona fide
scientific reasons to discontinue such efforts.
(2) The first time that YM or any licensee, Affiliate or successor of YM
or of any licensee or Affiliate thereof receives United States
regulatory approval to market a product utilizing the DELEX
Technology, YM shall pay to each Person identified on Schedule
2.2(2) to the Disclosure Letter, as additional consideration in
connection with this Merger Agreement, within five Business Days
after such regulatory approval being announced, an amount equal to
$4,750,000 (the "Additional Payment"), such payment to be made by
way of YM Common Shares (or their equivalent) ("Additional Payment
Shares"), cash or a combination of both at YM's option, provided
that after March 23, 2014, YM shall no longer be obliged to pay the
Additional Payment to the Persons identified in Schedule 2.2(2) to
the Disclosure Letter. The Additional Payment shall be paid to each
Person in such amounts as are more particularly set forth in
Schedule 4.2(2) to the Disclosure Letter.
(3) Subject to Sections 4.2(4) and 4.2(5), YM shall use Commercially
Reasonable Efforts to:
(a) prepare and submit to the FDA an IND submission (or prepare
and submit to the Health Regulatory Authority the
corresponding clinical trial application) in respect of
approval to initiate a Phase II trial (whether in Canada or
the US) for AeroLEF (or any other product utilizing the DELEX
Technology) and;
(b) enter into a strategic partnership, joint venture,
collaboration or other licensing arrangement with any third
party with respect to the ongoing development and/or
commercialization of AeroLEF (or any other product utilizing
the DELEX Technology), whether in Canada or anywhere else in
the world; and
(c) initiate a Phase III clinical trial (whether in Canada or
anywhere else in the world) for AeroLEF (or any other product
utilizing the DELEX Technology); and
- 37 -
(d) initiate a subsequent Phase III clinical trial (whether in
Canada or anywhere else in the world) for AeroLEF (or any
other product utilizing the DELEX Technology);
(4) If, notwithstanding the covenants of YM described in this Section
4.2, YM determines (the "YM Determination") not to complete the
development (including gaining FDA approval to market such product)
of at least one product utilizing the DELEX Technology, YM shall
promptly (but in any event within two Business Days of the date of
the YM Determination) notify (the "YM Notice") each Major
Shareholder (in writing) of such determination. The YM Notice shall
state whether YM has elected to terminate such efforts in connection
with a bona fide scientific reason or otherwise. If termination is
in connection with a bona fide scientific reason, then any of the
Consideration Shares that are subject to the escrow arrangements
contemplated in Section 2.3 shall immediately be returned to YM for
cancellation. If termination is not in connection with a bona fide
scientific reason and the Major Shareholders (acting unanimously) do
not, within the ten (10) Business Days following the date of their
receipt of the YM Notice, request the appointment of an expert (as
described in Section 4.2(5) below), then any of the Consideration
Shares that are subject to the escrow arrangements contemplated in
Section 2.3 shall be returned to YM for cancellation on the date
following expiry of such ten Business Day period. In either
instance, YM shall have no further obligation to make the Additional
Payment contemplated in Section 4.2(2) above.
(5) If termination of such efforts was not in connection with a bona
fide scientific reason, then the Major Shareholders (acting
unanimously) may initiate an arbitration process, as set out in this
Section 4.2(5) and Section 4.2(6), by providing written notice to
YM, within ten (10) Business Days of their receipt of the YM Notice,
to such effect together with a list of at least 2 potential experts
(who are either analysts who have published research with respect to
publicly traded companies that are active in the pharmaceuticals and
biopharmaceuticals sector or who are certified business valuators
and who are generally accepted as being knowledgeable in the
pharmaceuticals and biopharmaceuticals sector). YM shall provide to
the Major Shareholders, within ten (10) Business Days of its receipt
of such written notice from the Major Shareholders, the names of at
least two potential experts (who are either analysts who have
published research with respect to publicly traded companies that
are active in the pharmaceuticals and biopharmaceuticals sector or
who are certified business valuators and who are generally accepted
as being knowledgeable in the pharmaceuticals and biopharmaceuticals
sector). If YM and the Major Shareholders (acting unanimously) are
not able to agree on one expert from the lists provided by each to
the other within fifteen (15) Business Days of the end of the ten
day period in which YM was to provide a list of acceptable experts,
then such expert (having the background noted above) shall be
appointed by a Judge of the Ontario Superior Court of Justice
sitting in the Judicial District of Toronto Region, upon the
application of either YM or the Major Shareholders (acting
unanimously).
- 38 -
(6) The expert selected by the parties (or by the Judge of the Ontario
Superior Court of Justice) shall determine, as soon as reasonably
practicable following selection, whether AeroLEF (or, if at the
relevant date there is another product more advanced than AeroLEF in
such regard, then such other product utilizing the DELEX Technology)
has a net present value ("NPV") that is, as at the date of the YM
Election, greater than zero. The expert shall consider in connection
with determination of the NPV of AeroLEF (or such other product),
such factors as, among others, reasonable costs of development,
reasonable costs of marketing, potential sales of such product,
disease prevalence, existence of any competitive products and
product pricing, with all such factors considered with respect to a
reasonably prudent and diligent company within the biopharmaceutical
industry. If the expert determines that the NPV is greater than
zero, then any of the Consideration Shares that are subject to the
escrow arrangements contemplated in Section 2.3 shall be immediately
released from such escrow and distributed to the Delex Shareholders
in such amounts as set forth in Schedule 2.2(2) to the Disclosure
Letter. If the expert determines that the NPV is equal to or less
than zero, then any of the Consideration Shares that are subject to
the escrow arrangements contemplated in Section 2.3 shall
immediately be returned to YM for cancellation. All costs of the
arbitration process described in this Section 4.2 shall be for the
account of, and payable by, the Major Shareholders, unless the
expert determines that the NPV is greater than zero, in which case
all costs of the arbitration process shall be for the account of,
and payable by, YM. The expert shall have the power to proceed with
the determination of NPV and to deliver his or her determination
notwithstanding the default of any party in respect of any
procedural order made by the expert. The determination of the expert
shall be final and binding and no appeal shall lie therefrom.
Judgment upon such determination may be entered in any court having
jurisdiction.
(7) YM shall permit a representative of the Major Shareholders to have
reasonable access (once annually, during YM's normal business hours
and on not less than 10 business days prior request) to the senior
management of YM (or any successor corporation of YM) until the
earlier of: (i) the date that each of the milestones referred to in
this Article 4 has been achieved; (ii) the date of the YM
Determination; and (iii) the date that is five years from the
Effective Date. The parties agree that no breach shall be deemed to
have occurred under Sections 4.2(1) or 4.2(3) unless and until the
Major Shareholders shall each have given written notice to YM of
such alleged breach and YM shall have had a reasonable period of
time (not to exceed 30 days in each instance and 90 days in
aggregate over the term of this Agreement) after receipt of such
notice to cure such breach; provided that all time periods used for
determining whether any of the milestones set forth in paragraphs
(b) to (e) of Section 2.3(1) shall be tolled during each such cure
period.
(8) If YM elects to make any portion of any applicable Additional
Payment in Additional Payment Shares, the price per Additional
Payment Share for purposes of calculating the number of Additional
Payment Shares necessary in connection with such payment shall be
equal to the weighted average closing price of the Additional
Payment Shares as at the date of the announcement of such United
States regulatory approval. YM shall ensure that: (a) upon issuance,
such Additional Payment Shares will be validly issued as fully paid
and non-assessable shares in the capital of YM; (b) the issuance of
such Additional Payment Shares shall be effected in compliance with
applicable securities legislation and free of pre-emptive rights;
and (c) such Additional Payment Shares shall have been approved for
listing on the TSX, AMEX and AIM (or such exchanges as the common
shares of YM are then listed), subject only to official notices of
issuance and fulfilment of such other conditions as set out in any
conditional listing correspondence with relevant exchanges.
- 39 -
(9) From and after the Effective Time, YM shall (i) indemnify and hold
harmless, and provide advancement of expenses to, all past and
present directors, officers and employees of the Corporation (in all
of their capacities) (a) to the same extent such persons are
indemnified or have the right to advancement of expenses as of the
date of this Agreement by the Corporation pursuant to its articles
of incorporation, bylaws and indemnification agreements, if any, in
existence on the date hereof with any of its directors, officers and
employees and (b) without limitation to clause (a), to the fullest
extent permitted by Law, in each case for acts or omissions
(excluding acts or omissions which constitute gross negligence or
fraud) occurring at or prior to the Effective Time (including for
acts or omissions occurring in connection with the approval of this
Agreement and the consummation of the transactions contemplated by
this Agreement) and (ii) cause to be maintained for a period of two
years after the Effective Time the current policies of directors'
and officers' liability insurance and fiduciary liability insurance
maintained by the Corporation (provided that YM may provide for
coverage and amounts on terms and conditions which are, in the
aggregate, no less advantageous to the insured) with respect to
claims arising from facts or events that occurred on or before the
Effective Time. The obligations of YM under this Section 4.2(9)
shall not be terminated or modified in such a manner as to adversely
affect any indemnitee to whom this Section 4.2(9) applies without
the consent of such affected indemnitee (it being expressly agreed
that the indemnitees to whom this Section 4.2(9) applies shall be
third party beneficiaries of, and entitled to directly enforce, this
Section 4.2(9)). YM shall, in addition to the foregoing, provide
direct confirmation of these obligations to the directors and senior
officers as part of the closing of the Transaction.
ARTICLE 5
CONDITIONS
5.1 Conditions Precedent
(1) The respective obligations of the Corporation and YM to complete the
Transaction shall be subject to the satisfaction, on or before the
Effective Time, of the following conditions precedent, each of which
may be waived by the mutual consent of YM, the Corporation and the
Major Shareholders:
(a) the Delex Special Resolution shall have been approved at the
Delex Meeting by the requisite percentage (under the OBCA) of
the holders of the Delex Shares who are represented at the
Delex Meeting;
- 40 -
(b) the Amalgamation Agreement and the Articles of Amalgamation
shall be in content consistent with this Agreement and in form
satisfactory to the parties hereto, acting reasonably in that
context;
(c) no event will have occurred or circumstance exist which would
make it impossible or impracticable to satisfy one or more of
the conditions with respect to the Transaction as set out
herein;
(d) this Agreement shall not have been terminated pursuant to
Article 8; and
(e) the parties shall have obtained all applicable regulatory
approvals.
5.2 Conditions to the Obligations of YM
Notwithstanding anything herein contained, the obligation of YM to complete the
Transaction will be subject to the fulfilment of the following conditions at or
prior to the Effective Time:
(1) Due Diligence. YM shall have conducted all due diligence inquiries
and investigations to its satisfaction, including a review of the
books and accounts of the Corporation to verify the amount of
Expenditures.
(2) "Freedom to Operate" Opinion. YM shall have received a "freedom to
operate" opinion in respect of the patent applications referred to
in Section 3.1(27)(a)(A) which is satisfactory in form and substance
to YM in its sole discretion.
(3) No Restraining Proceedings. No order, decision or ruling of any
court, tribunal or regulatory authority having jurisdiction shall
have been made, and no action or proceeding shall be pending or
threatened which, in the opinion of counsel to YM, is likely to
result in an order, decision or ruling,
(a) to disallow, enjoin, prohibit or impose any limitations or
conditions on the Transaction; or
(b) to impose any limitations or conditions which may have an
adverse affect on the Business or the Condition of the
Corporation.
(4) Withholding. At or prior to the Effective Date, YM will have
received with respect to each Major Shareholder (i) evidence
satisfactory to YM's counsel that such Major Shareholder is not a
non-resident of Canada within the meaning of the Income Tax Act
(Canada), or (ii) a Section 116 Certificate for such Major
Shareholder.
(5) Major Shareholder Closing Documents. YM shall have received at or
before the Effective Time duly executed original copies of the
following:
(a) a certified copy of the constating documents and by-laws of
each Major Shareholder;
(b) a certificate of incumbency of the signing authorities for
each Major Shareholder;
- 41 -
(c) certified copies of resolutions of the board of directors (or
such other authority having corporate or equivalent power) of
or with respect to each of the Major Shareholders and the
Corporation approving the Transaction, this Agreement and the
Merger Support Agreement;
(d) evidence of the assignment of the Working Capital Financing to
YM (including the consent of the Corporation to such transfer)
and release of all security in connection therewith in a form
satisfactory to YM in its sole discretion;
(e) all books and records of the Corporation whether situated at
the Corporation's principal office or otherwise; and
(f) such other instruments of conveyance, documentation and
assurances relating to the sale and purchase of the Working
Capital Financing as YM's solicitors in consultation with the
Major Shareholders' and the Corporation's solicitors, each
acting reasonably, may require in connection with the
assignment of the Working Capital Financing, as contemplated
at Section 6.2.
(6) Representations and Warranties. The representations and warranties
of each Major Shareholder set forth in this Agreement shall be true
and correct on the Effective Date as of the Effective Time as though
made on the Effective Date. Such Major Shareholder shall have
delivered to YM a written reaffirmation of the representations and
warranties set out in this Agreement dated the Effective Date.
(7) Consents. All consents or waivers required in connection with the
consummation of the Transaction contemplated herein, including the
consents required in connection with any contracts, the Licences and
in connection with any leased premises occupied by the Corporation,
shall have been obtained.
(8) Opinion. An opinion of counsel to the Major Shareholders, in form
and substance satisfactory to YM and its counsel, acting reasonably,
shall have been delivered to YM.
(9) Releases of the Major Shareholders. There shall have been delivered
to YM on or before the Effective Time, a release from each Major
Shareholder, in a form acceptable to YM, acting reasonably.
(10) Certain Obligations. Any liability or other obligation of the
Corporation to any of the Major Shareholders or to any person
related in any way to any of the Major Shareholders (other than the
Working Capital Financing) shall be satisfied or released absolutely
prior to the Effective Time. Any liability or other obligation of
the Corporation to any Person arising in connection with anything or
matter not directly related to the Business shall be paid, satisfied
or released absolutely prior to the Effective Time.
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(11) Delivery of Financial Statements. The Corporation shall have
delivered to YM (i) the Financial Statements and (ii) unaudited
monthly financial statements of the Corporation as at and for the
period ended January 31, 2005.
5.3 Waiver by YM
The conditions contained in Section 5.2 hereof are inserted for the exclusive
benefit of YM and may be waived in whole or in part by YM at any time. The Major
Shareholders acknowledge that the waiver by YM of any condition or any part of
any condition shall constitute a waiver only of such condition or such part of
such condition, as the case may be, and shall not constitute a waiver of any
covenant, agreement, representation or warranty made by the Major Shareholders
herein that corresponds or is related to such condition or such part of such
condition, as the case may be.
5.4 Conditions to the Obligations of the Corporation and the Major
Shareholders
Notwithstanding anything herein contained, the obligations of the Corporation
and the Major Shareholders to complete the transactions provided for herein will
be subject to the fulfilment of the following conditions at or prior to the
Effective Date.
(1) No Restraining Proceedings. No order, decision or ruling of any
court, tribunal or regulatory authority having jurisdiction shall
have been made, and no action or proceeding shall be pending or
threatened which, in the opinion of counsel to the Major
Shareholders, is likely to result in an order, decision or ruling,
to disallow, enjoin, prohibit or impose any limitations or
conditions on the Transaction.
(2) Stock Exchange Approval. The Consideration Shares, the Adjustment
Shares, the Additional Payment Shares, the Reconciliation Shares and
the Working Capital Shares shall have been approved for listing on
the TSX, AMEX and AIM, subject only to official notices of issuances
and fulfillment of such other conditions as set out in any
conditional listing correspondence.
(3) Representations and Warranties. The representations and warranties
of YM set forth in this Agreement shall be true and correct on the
Effective Date as of the Effective Time as though made on the
Effective Date. YM shall have delivered to the Major Shareholders a
written reaffirmation of the representations and warranties set out
in this Agreement dated the Effective Date.
(4) Opinion. An opinion of counsel to YM, in form and substance
satisfactory to the Major Shareholders and their respective counsel,
acting reasonably, shall have been delivered to the Major
Shareholders.
5.5 Waiver by Major Shareholders
The conditions contained in Section 5.4 hereof are inserted for the exclusive
benefit of the Major Shareholders and may be waived in whole or in part by the
Major Shareholders at any time. YM acknowledges that the waiver by the Major
Shareholders of any condition or any part of any condition shall constitute a
waiver only of such condition or such part of such condition, as the case may
be, and shall not constitute a waiver of any covenant, agreement, representation
or warranty made by YM herein that corresponds or is related to such condition
or such part of such condition, as the case may be.
- 43 -
5.6 Notice and Cure Provisions
No party may seek to rely upon any condition precedent contained in Sections
5.1, 5.2 or 5.4 (as applicable), or exercise any termination right pursuant to
Section 8.2, unless forthwith and in any event prior to the filing of the
Articles of Amalgamation for acceptance by the Director, the terminating party
has delivered a written notice to the other parties hereto specifying in
reasonable detail all breaches of covenants, representations and warranties or
other matters which such party is asserting as the basis for the exercise of the
termination right, as the case may be. If any such notice is delivered, provided
that the party (or parties) receiving the notice of termination is (or are)
proceeding diligently to cure such matter, if such matter is susceptible to
being cured, the other parties hereto may not terminate this Agreement as a
result thereof until the earlier of the Outside Date, and the expiration of a
period of fifteen (15) days from such notice.
5.7 Satisfaction of Conditions
The conditions precedent set out in Sections 5.1, 5.2 and 5.4 shall be
conclusively deemed to have been satisfied, waived or released when, with the
agreement of the parties, a Certificate of Amalgamation in respect of the
Transaction is issued by the Director.
ARTICLE 6
CLOSING
6.1 Closing Arrangements
The Effective Date shall be the fifth (5th) Business Day following the date of
the Delex Meeting. Closing shall take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ Bank Plaza, ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ at 10:00 a.m. (Toronto time) on the Effective Date or at such other
place, date and time as may be mutually agreed upon by the Major Shareholders
and YM (the "Effective Time").
6.2 Assignment of Working Capital Financing
The Major Shareholders shall assign to YM, on the Effective Date, and the
Corporation shall deliver to YM a consent to such assignment, of the Working
Capital Financing. YM shall pay for such assignment by issuing to the Major
Shareholders, and shall deliver certificates on the Effective Date, that
represent that number of YM Common Shares (the "Working Capital Shares") as is
determined by dividing the principal amount of the Working Capital Financing by
$3.15 (and in amounts per Major Shareholder as is set out in Schedule 6.2 to the
Disclosure Letter). YM shall issue to the Delex Shareholders, and deliver
certificates on the Effective Date, that represent that number of YM Common
Shares (the "Adjustment Shares") as is determined by dividing the amount of the
Net Working Capital (as at January 31, 2005, as set out on Schedule 6.2 to the
Disclosure Letter) by $3.15. YM and the Major Shareholders hereby agree that
Schedule 6.2 to the Disclosure Letter represents their agreement as to the
amount of such Net Working Capital as at such date (which amount is equal to the
amount of the Expenditures). For greater certainty, the parties agree that the
total value of the Working Capital Shares and the Adjustment Shares (to be
issued as at the Effective Date) is $5 million.
- 44 -
6.3 Documents to be Delivered
At or before the Effective Date, each of the Corporation and YM shall execute,
or cause to be executed, and shall deliver, or cause to be delivered, such
documents, instruments and things which are to be delivered by each of them
pursuant hereto.
ARTICLE 7
SURVIVAL OF WARRANTIES, INDEMNIFICATION AND SET-OFF
7.1 Survival of Warranties by the Major Shareholders
The representations, warranties and covenants made by the Major Shareholders and
contained in this Agreement, or contained in any document or certificate given
in order to carry out the transactions contemplated hereby, will survive the
closing of the Transaction provided for herein and, notwithstanding such closing
or any investigation made by or on behalf of YM or any other person or any
knowledge of YM or any other person, shall continue in full force and effect for
the benefit of YM, subject to the following provisions of this section:
(a) except as provided in paragraphs (b) and (c) of this section, no
Warranty Claim may be made or brought by YM after the date which is
eighteen (18) months following the Effective Date;
(b) any Warranty Claim which is based upon or relates to the tax
liability of the Corporation for a particular taxation year may be
made or brought by YM at any time prior to the expiration of the
period (if any) during which an assessment, reassessment or other
form of recognized document assessing liability for tax, interest or
penalties in respect of such taxation year under applicable tax
legislation could be issued; and
(c) any Warranty Claim which is based upon or relates to title to
the Delex Shares or which is based upon intentional or grossly
negligent misrepresentation or fraud by any of the Major
Shareholders may be made or brought by YM at any time.
After the expiration of the time period referred to in paragraph (a) of this
Section 7.1, each of the Major Shareholders will be released from all
obligations and liabilities in respect of the representations and warranties
made by the Major Shareholders and contained in this Agreement or in any
document or certificate given in order to carry out the transactions
contemplated hereby, except with respect to any Warranty Claims made by YM in
writing prior to the expiration of such period and subject to the rights of YM
to make any claim permitted by paragraph (b) and paragraph (c) of this Section
7.1.
- 45 -
7.2 Survival of Warranties by YM
The representations, warranties and covenants made by YM and contained in this
Agreement or contained in any document or certificate given in order to carry
out the transactions contemplated hereby will survive the closing of the
Transaction and, notwithstanding such closing or any investigation made by or on
behalf of any of the Major Shareholders or any other person or any knowledge of
any of the Major Shareholders or any other person, shall continue in full force
and effect for the benefit of the Major Shareholders; provided that no Warranty
Claim may be made or brought by any of the Major Shareholders after the date
which is eighteen (18) months following the Effective Date but further provided
that such time limit shall not affect any rights of the Major Shareholders with
respect to the covenants of YM as set out in Section 2.4, Section 2.5, all of
the subsections of Section 4.2 and Section 6.2.
7.3 Indemnity by Major Shareholders
(1) Each of the Major Shareholders shall indemnify and save harmless on
a several (and not joint and several) basis YM from and against any
claims, demands, actions, causes of action, damage, loss (other than
loss of profits), deficiency, cost, liability and expense which may
be made or brought against YM or which YM may suffer or incur as a
result of, in respect of or arising out of:
(a) any non-performance or non-fulfilment of any covenant or
agreement on the part of such Major Shareholder contained in
this Agreement or in any document given in order to carry out
the transactions contemplated hereby;
(b) any misrepresentation, inaccuracy, incorrectness or breach of
any representation or warranty made by such Major Shareholder
contained in Section 3.1 of this Agreement; and
(c) all costs and expenses, including legal fees on a solicitor
and client basis, incidental to or in respect of the
foregoing.
(2) The obligations of indemnification under this Article 7 will be:
(a) subject to the limitations referred to in Section 7.1 with
respect to the survival of the representations and warranties
by the Major Shareholders;
(b) subject to the limitation that, with respect to
indemnification obligations of the Major Shareholders, (i) no
Major Shareholder shall be required to pay any amount in
respect of any such claim in excess of such Major
Shareholder's proportionate share (as between the Major
Shareholders) of the total number of Consideration Shares
actually issued to the Major Shareholders in connection with
the Transaction and (ii) the obligations of each Major
Shareholder shall be limited to the value of the Consideration
Shares actually received by such Major Shareholder in
connection with the Transaction and shall be effected by the
release from escrow (and delivery to YM for cancellation) of
the relevant number of Consideration Shares;
- 46 -
(c) subject to the limitation that, for claims made in connection
with any representation or warranty, the Indemnifying Party
shall not be required to pay any such amount until the
aggregate of all such claims exceeds $100,000 and, upon the
aggregate of such claims exceeding such amount, then the
Indemnifying Party shall be required to pay the amount owing
in respect of all claims, including the $100,000, provided
that this limitation shall not apply to wilful breaches of
this Agreement or to fraud and further provided that claims
made in connection with the Net Working Capital adjustment
described in Section 2.5 shall not be counted towards the
calculation of the aggregate of claims for the purposes of
this Section 7.3(2)(c); and
(d) subject to the provisions of Section 7.5.
For purposes of this Section 7.3, the value of the Consideration Shares
shall be the price at which such shares were issued at the Effective Date
(and delivered into escrow pursuant to Section 2.3);
7.4 Indemnity by YM
(1) YM hereby agrees to indemnify and save the Major Shareholders
harmless from and against any claims, demands, actions, causes of
action, damage, loss (other than loss of profits), deficiency, cost,
liability and expense which may be made or brought against the Major
Shareholders or which the Major Shareholders may suffer or incur as
a result of, in respect of or arising out of:
(a) any non-performance or non-fulfilment of any covenant or
agreement on the part of YM contained in this Agreement or in
any document given in order to carry out the transactions
contemplated hereby;
(b) any misrepresentation, inaccuracy, incorrectness or breach of
any representation or warranty made by YM contained in this
Agreement or contained in any document or certificate given in
order to carry out the transactions contemplated hereby; and
(c) all costs and expenses including, without limitation, legal
fees on a solicitor and client basis, incidental to or in
respect of the foregoing.
(2) The obligations of indemnification by YM in respect of any
particular Major Shareholder pursuant to paragraph (1) of this
Section 7.4 will be:
(a) subject to the limitations referred to in Section 7.2 with
respect to the survival of the representations and warranties
by YM;
(b) subject to Section 2.3, limited to an amount equal to the
value of the Consideration Shares issued to such Major
Shareholder; and
(c) subject to the provisions of Section 7.5.
For purposes of this Section 7.4, the value of the Consideration Shares
shall be the price at which such shares were issued at the Effective Date
(and delivered into escrow pursuant to Section 2.3).
- 47 -
7.5 Provisions Relating to Indemnity Claims
Subject to Section 4.2(7), the following provisions will apply to any claim by
YM or a Major Shareholder, as the case may be (each an "Indemnified Party"), for
indemnification by the Major Shareholders or YM, as the case may be (each an
"Indemnifying Party"), pursuant to Sections 7.3 and 7.4 (hereinafter, in this
section, an "Indemnity Claim").
(1) Promptly after becoming aware of any matter that may give rise to an
Indemnity Claim, the Indemnified Party will provide to the
Indemnifying Party written notice of the Indemnity Claim specifying
(to the extent that information is available) the factual basis for
the Indemnity Claim and the amount of the Indemnity Claim or, if an
amount is not then determinable, an estimate of the amount of the
Indemnity Claim, if an estimate is feasible in the circumstances.
(2) The Indemnified Party shall not, without the prior written consent
of the Indemnifying Party, which shall not be unreasonably withheld,
settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect
of which indemnification may be sought hereunder unless such
settlement, compromise or consent includes an unconditional release
of the Indemnified Party from all liability arising out of such
claim, action, suit or proceeding.
(3) Notwithstanding the foregoing, an Indemnifying Party shall not be
liable for the settlement of any claim or action in respect of which
indemnity may be sought hereunder that is effected without its
written consent, which consent shall not be unreasonably withheld.
(4) An Indemnifying Party shall be entitled (but not required) to assume
the defence of any suit brought to enforce a claim against the
Indemnified Party; provided, however, that the defence shall be
through legal counsel acceptable to the Indemnified Party and the
Indemnifying Party, acting reasonably, and that no settlement may be
made by the Indemnified Party or the Indemnifying Party without the
prior written consent of the other.
(5) In any such claim, the Indemnified Party shall have the right to
retain other counsel to act on the Indemnified Party's behalf,
provided that the fees and disbursements of such other counsel shall
be paid by the Indemnified Party, unless (i) the Indemnified Party
and the Indemnifying Party mutually agree to retain such other
counsel or (ii) the named parties to any such claim (including any
third or implicated party) include both the Indemnified Party on the
one hand and the Indemnifying Party, on the other hand, and the
representation of the Indemnifying Party and the Indemnified Party
by the same counsel would be inappropriate due to actual or
potential conflicting interests, in which event such fees and
disbursements shall be paid by the Indemnifying Party to the extent
that they have been reasonably incurred.
- 48 -
(6) If an Indemnity Claim relates to an alleged liability of the
Corporation to any other person (hereinafter in this section, a
"Third Party Liability"), including any governmental or regulatory
body or any taxing authority, which is of a nature such that the
Corporation is required by applicable law to make a payment to a
third party before the relevant procedure for challenging the
existence or quantum of the alleged liability can be implemented or
completed, then the Corporation or YM may, notwithstanding the
provisions of paragraphs (7) and (8) of this Section 7.5, make such
payment or cause the Corporation to make such payment and forthwith
demand reimbursement for such payment from the Major Shareholders in
accordance with this Agreement; provided that, if the alleged
liability to the third party as finally determined upon completion
of settlement negotiations or related legal proceedings is less than
the amount which is paid by the Major Shareholders in respect of the
related Indemnity Claim, then the Corporation or YM, as the case may
be, shall forthwith following the final determination pay to the
Major Shareholders the amount by which the amount of the liability
as finally determined is less than the amount which is so paid by
the Major Shareholders.
(7) YM shall not negotiate, settle, compromise or pay (except in the
case of payment of a judgement) any Third Party Liability as to
which it proposes to assert an Indemnity Claim, except with the
prior consent of the Major Shareholders (which consent shall not be
unreasonably withheld or delayed), unless there is a reasonable
possibility that such Third Party Liability may materially and
adversely affect the Business, the Condition of the Corporation or
YM, in which case YM shall have the right, after notifying the Major
Shareholders, to negotiate, settle, compromise or pay such Third
Party Liability without prejudice to its rights of indemnification
hereunder.
(8) With respect to any Third Party Liability, provided the Major
Shareholders first admit YM's right to indemnification for the
amount of such Third Party Liability which may at any time be
determined or settled, then in any legal, administrative or other
proceedings in connection with the matters forming the basis of the
Third Party Liability, the following procedures will apply:
(a) except as contemplated by subparagraph (iii) of this
paragraph, the Major Shareholders will have the right to
assume carriage of the compromise or settlement of the Third
Party Liability and the conduct of any related legal,
administrative or other proceedings, but YM and the
Corporation shall have the right and shall be given the
opportunity to participate in the defence of the Third Party
Liability, to consult with the Major Shareholders in the
settlement of the Third Party Liability and the conduct of
related legal, administrative and other proceedings (including
consultation with counsel) and to disagree on reasonable
grounds with the selection and retention of counsel, in which
case counsel satisfactory to the Major Shareholders, and YM
shall be retained by the Major Shareholders;
(b) the Major Shareholders will co-operate with YM in relation to
the Third Party Liability, will keep it fully informed with
respect thereto, will provide it with copies of all relevant
documentation as it becomes available, will provide it with
access to all records and files relating to the defence of the
Third Party Liability and will meet with representatives of YM
at all reasonable times to discuss the Third Party Liability;
and
- 49 -
(c) notwithstanding subparagraphs (i) and (ii) of this paragraph,
the Major Shareholders will not settle the Third Party
Liability or conduct any legal, administrative or other
proceedings in any manner which could, in the reasonable
opinion of YM, have a material adverse affect on the Business
or YM, except with the prior written consent of YM.
(9) If, with respect to any Third Party Liability, the Major
Shareholders do not admit YM's right to indemnification or decline
to assume carriage of the settlement or of any legal, administrative
or other proceedings relating to the Third Party Liability, then the
following provisions will apply:
(a) YM, at its discretion, may assume carriage of the settlement
or of any legal, administrative or other proceedings relating
to the Third Party Liability and may defend or settle the
Third Party Liability on such terms as YM, acting in good
faith, considers advisable; and
(b) any cost, loss, damage or expense incurred or suffered by YM
and the Corporation in the settlement of such Third Party
Liability or the conduct of any legal, administrative or other
proceedings shall be added to the amount of the Indemnity
Claim.
7.6 One Recovery
Any Indemnified Party shall not be entitled to double recovery for any claims
even though they may have resulted from the breach of more than one of the
representations, warranties, agreements and covenants made by the Indemnifying
Party in this Agreement.
7.7 Right of Set-Off
YM shall have the right to satisfy any amount from time to time owing by YM to a
Major Shareholder by way of set-off against any amount from time to time owing
by such Major Shareholder to YM, including any amount owing to YM by such Major
Shareholder pursuant to the Major Shareholders' indemnification pursuant to
Section 7.1 hereof.
7.8 Mitigation and Exclusive Remedy
Nothing contained in this Agreement shall affect the obligation of a Party
seeking indemnification to take commercially reasonable steps to mitigate its
losses. The provisions of this Article 7 shall apply to any Claim for breach of
covenant, representation, warranty or other provision of this Agreement (other
than a Claim for specific performance or injunctive relief) and all such Claims
and recourses shall be subject to the limitations and other provisions
applicable thereto under this Article 7.
ARTICLE 8
TERM AND TERMINATION
8.1 General
This Agreement shall be effective from the date hereof until the termination of
this Agreement pursuant to Section 8.2.
- 50 -
8.2 Termination
(1) If any condition contained in Sections 5.1 or 5.2 is not satisfied
at or before the Effective Time, then YM may, subject to Section
5.6, by written notice to the Corporation and the Major
Shareholders, terminate this Agreement and the obligations of the
parties hereunder (except as otherwise herein provided) but without
detracting from the rights of YM arising from any breach by the
Corporation or the Major Shareholders but for which the condition
would have been satisfied. For the avoidance of doubt, if the matter
which YM is asserting as the basis for exercise of a termination
right is cured within the time period referred to in Section 5.6,
this Agreement may not be terminated pursuant to this Section 8.2(1)
as a result of the breach identified in the relevant notice.
(2) If any condition contained in Sections 5.1 or 5.4 is not satisfied
at or before the Effective Date, then the Corporation and/or all of
the Major Shareholders may, subject to Section 5.6, by written
notice to YM, terminate this Agreement and the obligations of the
parties hereunder (except as otherwise herein provided) but without
detracting from the rights of the Corporation or the Major
Shareholders arising from any breach by YM but for which the
condition would have been satisfied. For the avoidance of doubt, if
the matter which the Corporation or all of the Major Shareholders is
asserting as the basis for exercise of a termination right is cured
within the time period referred to in Section 5.6, this Agreement
may not be terminated pursuant to this Section 8.2(2) as a result of
the breach identified in the relevant notice.
(3) This Agreement may:
(a) be terminated by the mutual agreement of the parties (and for
greater certainty, without any further action needed by the
Delex Shareholders if terminated after the holding of the
Delex Meeting);
(b) be terminated by either YM, the Corporation or by all of the
Major Shareholders if there shall be passed any law that makes
consummation of the Transaction illegal or otherwise
prohibited;
(c) be terminated by either YM, the Corporation or all of the
Major Shareholders if the Delex Special Resolution shall not
have been passed (by the requisite margin) at the Delex
Meeting:
(d) be terminated by either YM or all of the Major Shareholders if
either YM or any of the Major Shareholders, as the case may be
(having reference to the party seeking to assert a termination
right), shall not have complied with or performed, in all
material respects, its respective covenants and obligations
under this Agreement to be complied with or performed at or
prior to the Effective Date, or if any of the representations
and warranties of the other of them under this Agreement is
not true and correct in all material respects at or
immediately prior to the Effective Date;
- 51 -
(e) be terminated by YM if the Principal Shareholders have not
complied with or performed, in all material respects, their
respective covenants and obligations under the Merger Support
Agreement to be complied with or performed at or immediately
prior to the Effective Date, or if any of the representations
and warranties of the Principal Shareholders under the Merger
Support Agreement are not true and correct in all material
respects at or immediately prior to the Effective Date; and
(f) be terminated by the Corporation or by all of the Major
Shareholders if any YM Material Adverse Change shall have
occurred subsequent to the date hereof and prior to the
Effective Date.
(4) If the Effective Date has not occurred on or prior to the Outside
Date, then, unless otherwise agreed in writing by the parties, this
Agreement shall terminate, provided that no party may exercise this
right to terminate the Agreement if any action of such party (or the
failure of such party to perform any of its obligations under this
Agreement required to be performed at or prior to the Effective
Time) shall have resulted in any of the conditions contained in
Sections 5.1, 5.2 or 5.4 (as applicable, having reference to the
party seeking to assert a termination right under this Section
8.2(4)) not having been satisfied prior to the Outside Date.
8.3 Effect of Termination
If this Agreement is terminated in accordance with the foregoing provisions of
this Article 8, no Party shall have any further liability to perform its
obligations under this Agreement except as otherwise expressly contemplated by
this Agreement, and provided that neither the termination of this Agreement nor
anything contained in this Article 8 shall relieve any Party from any liability
for any breach by it of this Agreement, including from any inaccuracy in its
representations and warranties and any non-performance by it of its covenants
made herein.
8.4 Waiver
Each party may (a) extend the time for the performance of any of the obligations
or other acts of the other, (b) waive compliance with any of the other's
agreements or the fulfilment of any conditions to its own obligations contained
herein, or (c) waive inaccuracies in any of the other's representations or
warranties contained herein or in any document delivered by the other party
hereto; provided, however, that any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
ARTICLE 9
GENERAL PROVISIONS
9.1 Third Party Beneficiaries
The parties confirm and agree that those Persons identified in Schedule 2.2(2)
to the Disclosure Letter, which are not parties to this Agreement, are intended
to be third party beneficiaries of Sections 2.2, 2.3, 2.4, 3.2 and 4.2 and are
directly entitled to rely upon and to enforce the provisions of such Sections in
any action, suit, proceeding, hearing or other forum.
- 52 -
9.2 Further Assurances
Each of the Major Shareholders and YM hereby covenants and agrees that at any
time and from time to time after the Effective Date it will, upon the request of
the others, do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged and delivered all such further acts, deeds, assignments, transfers,
conveyances and assurances as may be required for the better carrying out and
performance of all the terms of this Agreement.
9.3 Remedies Cumulative
The rights and remedies of the parties under this Agreement are cumulative and
in addition to and not in substitution for any rights or remedies provided by
law. Any single or partial exercise by any party hereto of any right or remedy
for default or breach of any term, covenant or condition of this Agreement does
not waive, alter, affect or prejudice any other right or remedy to which such
party may be lawfully entitled for the same default or breach.
9.4 Notices
(1) Any notice, designation, communication, request, demand or other
document, required or permitted to be given or sent or delivered
hereunder to any party hereto shall be in writing and shall be
sufficiently given or sent or delivered if it is:
(a) delivered personally to an officer or director of such party,
or
(b) sent to the party entitled to receive it by registered mail,
postage prepaid, mailed in Canada, or
(c) sent by telecopy machine.
(2) Notices shall be sent to the following addresses or telecopy
numbers:
(a) in the case of the Corporation,
DELEX Therapeutics Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which does not constitute notice) to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
Toronto Dominion ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
- 53 -
(b) in the case of BDC,
Business Development Bank of Canada
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: Mr. ▇▇▇ ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which does not constitute notice) to:
Osler, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇
▇.▇. ▇▇▇ ▇▇, 1 First ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) in the case of ETSIF,
Eastern Technology Seed Investment Fund Limited Partnership
c/o Ventures West Management Inc.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which does not constitute notice) to:
Osler, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇
▇.▇. ▇▇▇ ▇▇, 1 First ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
- 54 -
(d) in the case of NewGen,
New Generation Biotech (Equity) Fund Inc.
c/o Genesys Capital Partners Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which does not constitute notice) to:
Osler, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇
▇.▇. ▇▇▇ ▇▇, 1 First ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(e) in the case of YM or Subco,
YM BioSciences Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇, Chairman and Chief Executive Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which does not constitute notice) to:
▇▇▇▇▇▇ Blaikie LLP
Barristers and Solicitors
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or telecopier number as the party entitled
to or receiving such notice, designation, communication, request,
demand or other document shall, by a notice given in accordance with
this section, have communicated to the party giving or sending or
delivering such notice, designation, communication, request, demand
or other document.
- 55 -
(3) Any notice, designation, communication, request, demand or other
document given or sent or delivered as aforesaid shall:
(a) if delivered as aforesaid, be deemed to have been given, sent,
delivered and received on the date of delivery;
(b) if sent by mail as aforesaid, be deemed to have been given,
sent, delivered and received (but not actually received) on
the fourth Business Day following the date of mailing, unless
at any time between the date of mailing and the fourth
Business Day thereafter there is a discontinuance or
interruption of regular postal service, whether due to strike
or lockout or work slowdown, affecting postal service at the
point of dispatch or delivery or any intermediate point, in
which case the same shall be deemed to have been given, sent,
delivered and received in the ordinary course of the mails,
allowing for such discontinuance or interruption of regular
postal service; and
(c) If sent by telecopy machine, be deemed to have been given,
sent, delivered and received on the date the sender receives
the telecopy answer back confirming receipt by the recipient.
9.5 Brokerage and Finder's Fees
The Major Shareholders jointly and severally agree to indemnify YM and Subco and
hold each of them harmless in respect of any claim for brokerage or other
commissions relating to this Agreement or the transactions contemplated hereby
which is caused by actions of any of the Major Shareholders or any of their
respective Affiliates. YM and Subco will jointly and severally indemnify the
Major Shareholders and hold them harmless in respect of any claim for brokerage
or other commissions relative to this Agreement or to the transactions
contemplated hereby which is caused by actions of YM or any of its Affiliates.
9.6 Fees
(1) All fees, costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby will be paid:
(a) in the case of YM and Subco, by YM;
(b) in the case of the Major Shareholders, by Amalco or, if the
Transaction is not completed, by the Major Shareholders; and
(c) in the case of the Corporation and Delex Shareholders, other
than the Major Shareholders, by Amalco or, if the Transaction
is not completed, by the Corporation.
9.7 Announcements
No public announcement or other disclosure with respect to this Agreement will
be made by any party hereto without the prior approval of the other parties. The
foregoing will not apply to any announcement by any party required in order to
comply with laws pertaining to timely disclosure, provided that such party
consults with the other parties before making any such announcement.
- 56 -
9.8 Assignment
The rights of the Major Shareholders hereunder shall not be assignable without
the written consent of YM. YM shall be entitled to assign its rights hereunder
to any of its Affiliates, provided that YM shall continue to be bound by the
provisions of this Agreement notwithstanding such assignment.
9.9 Successors and Assigns
This Agreement shall be binding upon and enure to the benefit of the parties
hereto and their respective successors, heirs, legal personal representatives
and permitted assigns. Nothing herein, express or implied, is intended to confer
upon any person, other than the parties hereto and their respective successors,
heirs, legal personal representatives and permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
9.10 Entire Agreement
This Agreement and the Schedules referred to herein constitute the entire
agreement between the parties hereto and supersede all prior agreements,
representations, warranties, statements, promises, information, arrangements and
understandings, whether oral or written, express or implied, with respect to the
subject matter hereof. None of the parties hereto shall be bound or charged with
any oral or written agreements, representations, warranties, statements,
promises, information, arrangements or understandings not specifically set forth
in this Agreement or in the Schedules, documents and instruments to be delivered
on or before the Effective Date pursuant to this Agreement. The parties hereto
further acknowledge and agree that, in entering into this Agreement and in
delivering the Schedules, documents and instruments to be delivered on or before
the Effective Date, they have not in any way relied, and will not in any way
rely, upon any oral or written agreements, representations, warranties,
statements, promises, information, arrangements or understandings, express or
implied, not specifically set forth in this Agreement or in such Schedules,
documents or instruments.
9.11 Waiver
Any party hereto which is entitled to the benefits of this Agreement may, and
has the right to, waive any term or condition hereof at any time on or prior to
the Effective Time; provided, however, that such waiver shall be evidenced by
written instrument duly executed on behalf of such party.
9.12 Amendments
No modification or amendment to this Agreement may be made unless agreed to by
the parties hereto in writing.
9.13 Counterparts
This Agreement may be executed in several counterparts, each of which so
executed shall be deemed to be an original and such counterparts together shall
constitute one and the same agreement and notwithstanding their date of
execution shall be deemed to be executed on the date first above written.
- 57 -
9.14 Transmission by Facsimile
The parties agree that this Agreement may be transmitted by facsimile on such
other similar device and that the reproduction of signatures by facsimile or
such similar device will be treated as binding as if original and each party
hereto so transmitting this Agreement undertakes to provide each other party
hereto a copy of the Agreement bearing original signatures forthwith upon
demand.
IN WITNESS WHEREOF, the parties hereto have duly executed this agreement as of
the date first above written.
[counterpart pages to follow]
YM BIOSCIENCES INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Chairman and Chief
Executive Officer
COUNTERPART PAGE TO MERGER AGREEMENT
- S1 -
2069044 ONTARIO LIMITED
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President & Secretary
COUNTERPART PAGE TO MERGER AGREEMENT
- S2 -
DELEX THERAPEUTICS INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President & CEO
COUNTERPART PAGE TO MERGER AGREEMENT
- S3 -
BUSINESS DEVELOPMENT BANK OF
CANADA
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: Director, Venture
Capital Division
COUNTERPART PAGE TO MERGER AGREEMENT
- S4 -
EASTERN TECHNOLOGY SEED
INVESTMENT FUND, by its general
partner Eastern Technology Seed
Fund Management Ltd.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: Authorized Signatory
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
COUNTERPART PAGE TO MERGER AGREEMENT
- S5 -
NEW GENERATION BIOTECH (EQUITY)
FUND INC., by its agent
NGB Management Inc.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: Authorized Signatory
COUNTERPART PAGE TO MERGER AGREEMENT
- S6 -