ARRANGEMENT AGREEMENT between LORUS THERAPEUTICS INC. and NUCHEM PHARMACEUTICALS INC. and GENESENSE TECHNOLOGIES INC. and 6650309 CANADA INC. and PINNACLE INTERNATIONAL LANDS, INC. and 6707157 CANADA INC.
Exhibit
99.1
Execution
copy
ARRANGEMENT
AGREEMENT
between
and
XXXXXX
PHARMACEUTICALS INC.
and
GENESENSE
TECHNOLOGIES INC.
and
6650309
CANADA INC.
and
PINNACLE
INTERNATIONAL LANDS, INC.
and
6707157
CANADA INC.
Dated
as of May 1, 2007
TABLE
OF CONTENTS
ARTICLE
1 INTERPRETATION
|
2
|
|
1.1
|
Definitions
|
2
|
1.2
|
Extended
Meanings
|
9
|
1.3
|
Deemed
Currency
|
9
|
1.4
|
Interpretation
|
9
|
1.5
|
Article
References
|
9
|
1.6
|
Date
for any Action
|
9
|
1.7
|
Governing
Law
|
9
|
1.8
|
Accounting
Matters
|
9
|
1.9
|
Material
|
9
|
1.10
|
Incorporation
of Schedules
|
10
|
ARTICLE
2 THE ARRANGEMENT
|
10
|
|
2.1
|
General
|
10
|
2.2
|
Steps
to be taken by Old Lorus
|
10
|
2.3
|
Interim
Order
|
10
|
2.4
|
Information
Circular
|
11
|
2.5
|
Old
Lorus Board Recommendation and Fairness Opinion
|
11
|
2.6
|
Final
Order
|
12
|
ARTICLE
3 PUBLICITY
|
12
|
|
3.1
|
Publicity
|
12
|
ARTICLE
4 REPRESENTATIONS AND WARRANTIES OF OLD LORUS
|
12
|
|
4.1
|
Representations
and Warranties of Old Lorus
|
12
|
4.2
|
Investigation
|
12
|
4.3
|
No
Other Representations or Warranties
|
18
|
ARTICLE
5 REPRESENTATIONS AND WARRANTIES OF NEW LORUS
|
19
|
|
5.1
|
Representations
and Warranties of New Lorus
|
19
|
5.2
|
Investigation
|
19
|
5.3
|
No
Other Representations or Warranties
|
20
|
ARTICLE
6 REPRESENTATIONS AND WARRANTIES OF INVESTOR
|
20
|
|
6.1
|
Representations
and Warranties of Investor
|
20
|
6.2
|
Investigation
|
22
|
6.3
|
No
Other Representations or Warranties
|
22
|
ARTICLE
7 REPRESENTATIONS AND WARRANTIES OF PINNACLE
|
22
|
|
7.1
|
Representations
and Warranties of Pinnacle
|
22
|
7.2
|
Investigation
|
23
|
7.3
|
No
Other Representations or Warranties
|
23
|
ARTICLE
8 COVENANTS OF OLD LORUS
|
23
|
|
8.1
|
Covenants
of Old Lorus
|
23
|
8.2
|
Recommendation
of the Old Lorus Board of Directors
|
27
|
8.3
|
Old
Lorus Covenant Regarding Non-Solicitation
|
27
|
8.4
|
Notice
of Superior Proposal Determination
|
28
|
8.5
|
Access
to Information
|
29
|
ARTICLE
9 COVENANTS OF INVESTOR
|
29
|
|
9.1
|
Covenants
of Investor
|
29
|
ARTICLE
10 COVENANTS OF PINNACLE
|
30
|
|
10.1
|
Covenants
of Pinnacle
|
30
|
ARTICLE
11 CONDITIONS PRECEDENT
|
31
|
|
11.1
|
Mutual
Conditions Precedent
|
31
|
11.2
|
Conditions
to Obligations of Old Lorus
|
32
|
11.3
|
Conditions
to Obligations of Pinnacle and Investor
|
33
|
11.4
|
Notice
and Cure Provisions and Effect of Failure to Comply with
Conditions
|
34
|
11.5
|
Satisfaction
of Conditions
|
35
|
ARTICLE
12 AGREEMENT AS TO NON-COMPLETION FEE
|
35
|
|
12.1
|
Lorus
Non-Completion Fee
|
35
|
12.2
|
Pinnacle
Non-Completion Fee
|
36
|
12.3
|
Liquidated
Damages
|
36
|
12.4
|
Limited
Remedy
|
36
|
ARTICLE
13 INDEMNIFICATION
|
36
|
|
13.1
|
Indemnification
by Old Lorus and New Lorus
|
36
|
13.2
|
Limitation
on Indemnification by Old Lorus and New Lorus
|
37
|
13.3
|
Indemnification
by Pinnacle and Investor
|
38
|
13.4
|
Limitation
on Indemnification by Pinnacle and Investor
|
38
|
13.5
|
Exclusive
Remedy
|
38
|
13.6
|
Survival
|
39
|
ARTICLE
14 TERMINATION, AMENDMENT AND WAIVER
|
39
|
|
14.1
|
Termination
|
39
|
14.2
|
Effect
of Termination
|
39
|
14.3
|
Amendment
|
39
|
14.4
|
Waiver
|
39
|
ARTICLE
15 CLOSING
|
40
|
|
15.1
|
Closing
Date
|
40
|
15.2
|
Effect
of Closing
|
40
|
15.3
|
Place
of Closing
|
40
|
15.4
|
Other
Closing Matters
|
40
|
ARTICLE
16 GENERAL PROVISIONS
|
40
|
|
16.1
|
Notices
|
40
|
16.2
|
Fees
and Expenses
|
41
|
16.3
|
Time
of Essence
|
41
|
16.4
|
Entire
Agreement
|
41
|
16.5
|
Assignment
|
41
|
16.6
|
Binding
Effect
|
41
|
16.7
|
Further
Assurances
|
41
|
16.8
|
Severability
|
42
|
16.9
|
Counterpart
Execution
|
42
|
SCHEDULE
A Plan of Arrangement
|
A-l
|
|
SCHEDULE
B PPSA Registrations
|
X-x
|
|
SCHEDULE
C Antisense Patent Assets Transfer Agreement
|
C-l
|
|
SCHEDULE
D Virulizin and Small Molecule Patent Assets Transfer Agreement
|
D-l
|
|
SCHEDULE
E Tangible Business Assets Transfer Agreement
|
E-l
|
|
SCHEDULE
F Prepaid Expenses and Receivables Transfer Agreement
|
F-l
|
|
SCHEDULE
G GeneSense Share Purchase Agreement
|
G-l
|
|
SCHEDULE
H XxXxxx Share Purchase Agreement
|
H-l
|
|
SCHEDULE
I Pinnacle Share Purchase Agreement
|
1-1
|
|
SCHEDULE
J Indemnification Agreement
|
X-x
|
ARRANGEMENT
AGREEMENT
THIS
AGREEMENT is made as of May 1, 2007,
BETWEEN:
LORUS
THERAPEUTICS INC., a corporation existing under the laws of Canada
(hereinafter referred to as“Old Lorus”),
AND
XXXXXX
PHARMACEUTICALS INC., a corporation existing under the laws of Ontario
(hereinafter referred to as “XxXxxx”),
AND
GENESENSE
TECHNOLOGIES INC., a corporation existing under the laws of Canada
(hereinafter referred to as“GeneSense”),
AND
6650309
CANADA INC., a corporation existing under the laws of Canada
(hereinafter referred to as“New Lorus”),
AND
PINNACLE
INTERNATIONAL LANDS, INC., a corporation existing under the laws of
British Columbia (hereinafter referred to
as“Pinnacle”),
AND
6707157
CANADA INC., a corporation existing under the laws of Canada
(hereinafter referred to as“Investor”).
WHEREAS
upon the terms and subject to the conditions set out in this Agreement, the
parties hereto intend to effect a business reorganization pursuant to which,
or
in connection with, Investor will acquire approximately 41% of the voting and
all of the non-voting shares of Old Lorus;
AND
WHEREAS GeneSense and New Lorus are wholly-owned subsidiaries of Old
Lorus;
AND
WHEREAS Old Lorus holds 80% of the issued and outstanding voting shares
and 100% of the issued and outstanding non-voting preference shares of
XxXxxx;
AND
WHEREAS New Lorus is a wholly-owned subsidiary of Old Lorus and has not
carried on any active business;
AND
WHEREAS all members of the board of directors of Old Lorus entitled to
vote thereon have, after having received a preliminary fairness opinion from
Deloitte & Touche LLP, unanimously: (i) determined that the
transactions contemplated by this Agreement are fair and in the best interests
of Old Lorus and the Old Lorus Securityholders; (ii) approved this
Agreement and the transactions contemplated hereby; and (iii) determined to
recommend that the Old Lorus Securityholders vote in favour of the transactions
contemplated by this Agreement;
AND
WHEREAS in furtherance of the transactions contemplated by this
Agreement, the board of directors of Old Lorus has resolved to submit the Plan
of Arrangement to the Old Lorus Securityholders at the Old Lorus
Securityholders’ Meeting and to the Court;
AND
WHEREAS it is intended that the Arrangement be effected under Section
192 of the CBCA pursuant to the Plan of Arrangement and upon the terms and
subject to the conditions set forth herein;
NOW
THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the
respective covenants and agreements herein contained and other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties hereto covenant and agree as follows:
ARTICLE 1
INTERPRETATION
INTERPRETATION
1.1
Definitions
In
this
Agreement, including the recitals hereto, unless there is something in the
subject matter or context inconsistent therewith, the following terms will
have
the following meanings, respectively:
“Acquisition
Proposal” means any proposal by a third party or third parties that may
reasonably be expected to lead to a transaction substantially similar to that
contemplated by this Agreement or with respect to any asset purchase,
merger, amalgamation, arrangement, share exchange, take-over bid, tender offer,
recapitalization, consolidation or business combination involving Old Lorus
existing prior to the Effective Date, excluding the transactions contemplated
by
this Agreement and the Plan of Arrangement;
“Affiliate”
has the meaning ascribed thereto in the CBCA;
“Agreement”,
“this Agreement”, “herein”,
“hereto”, and “hereof”
and
similar expressions
refer to this Agreement, as the same may be amended or supplemented from time
to
time, and where applicable, to the appropriate Schedule hereto;
“AMEX”
means the American Stock Exchange;
“AMEX
Rules” means collectively, all rules, requirements and policies of the
AMEX applicable to Old Lorus, including such as are contained in the Rules
of
the AMEX and the AMEX Company Guide;
“Antisense
Patent Assets” means those assets set out in the disclosure letter to
the Antisense Patent Assets Transfer Agreement;
“Antisense
Patent Assets Transfer Agreement” means the asset purchase agreement to
be entered into between GeneSense and New Lorus pursuant to which GeneSense
will
transfer the Antisense Patent Assets to New Lorus, as contemplated in the Plan
of Arrangement and substantially in the form attached hereto as
Schedule C;
“Applicable
Laws” means, in relation to any Person, Property, transaction or event,
all applicable provisions in effect at the relevant time (or mandatory
applicable provisions) of federal, provincial, territorial, state, local or
foreign laws, statutes, rules, regulations, directives and orders of all
Governmental Authorities, and all judgments, orders, decrees, decisions, rulings
or awards of all Governmental Authorities to which the Person in question is
a
party or by which it is bound or having application to the Person, Property,
transaction or event, including the Securities Laws;
“Arrangement”
means an arrangement under Section 192 of the CBCA on the terms and subject
to
the conditions set out in the Plan of Arrangement, subject to any amendments
or
variations thereto made in accordance with the terms hereof and/or of the Plan
of Arrangement or made at the direction of the Court in the Final
Order;
“Arrangement
Resolution” means the special resolution of Old Lorus Securityholders
approving the Plan of Arrangement, as required by the Interim Order and
Applicable Laws;
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2
-
“Articles
of Arrangement” means Old Lorus’ articles of arrangement giving effect
to the Arrangement which, pursuant to the CBCA, will be filed with the Director
after the Final Order has been issued;
“Assessment”
has the meaning ascribed thereto in Section 8.1(j);
“Asset
Transfer Agreements” means, collectively, the Tangible Business Assets
Transfer Agreement, the Antisense Patent Assets Transfer Agreement, the
Virulizin and Small Molecule Patent Assets Transfer Agreement and the Prepaid
Expenses and Receivables Transfer Agreement;
“Benefit
Plans” has the meaning ascribed thereto in Section 4.1(l);
“Business
Day” means a day, other than a Saturday, Sunday or other day when banks
in Toronto, Ontario or Vancouver, British Columbia are not generally open for
business;
“Canadian
Securities Legislation” has the meaning attributed to such term in NI
14-101 and includes published policies promulgated thereunder from time to
time
by any of the Canadian Securities Regulatory Authorities and the TSX Company
Manual;
“Canadian
Securities Regulatory Authorities” has the meaning ascribed to such
term in NI 14-101;
“CBCA”
means the Canada Business Corporations Act;
“Claim”
has the meaning ascribed thereto in Section 13.1;
“Closing”
means the closing of the Arrangement;
“Closing
Date” has the meaning ascribed thereto in
Section 15.1;
“Closing
Time” means 1:00 p.m. (Toronto time) on the Closing Date unless
otherwise agreed in writing by the Parties;
“Confidentiality
Agreement” means the confidentiality agreement dated March 3, 2006
between Old Lorus and Pinnacle;
“Continuous
Disclosure Reports” has the meaning ascribed thereto in Section
4.1(h);
“Corporate
Laws” means all applicable corporate laws, including the
CBCA;
“Court”
means the Ontario Superior Court of Justice;
“Default”
has the meaning ascribed thereto in Section 16.2(b);
“Defaulting
Party” has the meaning ascribed thereto in Section
16.2(b);
“Depository”
means Computershare Trust Company of Canada, the duly appointed depository
in
respect of the Arrangement at its principal transfer office in Toronto,
Ontario;
“Director”
means the Director appointed under section 260 of the CBCA;
“Disclosure
Letter” means the disclosure letter of Old Lorus delivered to Investor
concurrently herewith and signed by Old Lorus with receipt acknowledged thereon
by Investor;
“Dissent
Rights” means the rights of dissent in respect of the Arrangement
described in the Plan of Arrangement;
-
3
-
“Effective
Date” has the meaning ascribed thereto in the Plan of
Arrangement;
“Effective
Time” means 12:01 a.m. (Toronto time) on the Effective
Date;
“Escrow
Agreement” means the escrow agreement to be entered into on the
Effective Date between Investor, New Lorus and an escrow agent as contemplated
by the Pinnacle Share Purchase Agreement;
“Evaluation
Date” has the meaning ascribed thereto in Section 4.1(t);
“Exchange
Act” means the United States Securities Exchange Act of 1934, as
amended, and any successor thereto, and the rules and regulations promulgated
thereunder, all as the same will be in effect from time to time;
“Final
Order” means the final order of the Court issued in connection with the
approval of the Arrangement, providing, among other matters, for the Arrangement
to be sanctioned and to take effect, as such order may be affirmed, amended
or
modified by any court of competent jurisdiction;
“GAAP”
has the meaning ascribed thereto in Section 4.1(h);
“GeneSense
Share Purchase Agreement” means the share purchase agreement to be
entered into between Old Lorus and New Lorus pursuant to which Old Lorus
will transfer all of the GeneSense Shares to New Lorus, as contemplated by
the
Plan of Arrangement and substantially in the form attached hereto as
Schedule G;
“GeneSense
Shares” means common shares in the capital of GeneSense;
“Governmental
Authority” means any federal, provincial, territorial, state, local or
foreign government or any department, agency, board, tribunal (judicial,
quasi-judicial, administrative, quasi-administrative or arbitral) or authority
thereof or other political subdivision thereof and any Person exercising
executive, legislative, judicial, regulatory or administrative functions of,
or
pertaining thereto or the operation thereof, including the Canadian Securities
Regulatory Authorities, SEC, TSX and AMEX;
“Indebtedness”
has the meaning ascribed thereto in Section 4.1(x);
“Indemnification
Agreement” means the indemnification agreement to be entered into on
the Effective Date between Old Lorus, New Lorus, XxXxxx and GeneSense as
contemplated by the Plan of Arrangement and substantially in the form attached
hereto as Schedule J;
“Indemnified
Party” has the meaning ascribed thereto in Section 13.1 and Section
13.3;
“Information
Circular” has the meaning ascribed thereto in
Section 2.4;
“Interim
Order” means the interim order of the Court concerning the Arrangement
under subsection 192(4) of the CBCA, containing declarations and directions
with respect to the Arrangement and the holding of the Old Lorus
Securityholders’ Meeting, as such order may be affirmed, amended or modified by
any court of competent jurisdiction;
“Intellectual
Property Rights” has the meaning ascribed thereto in Section
4.1(q);
“knowledge”
and similar expressions when used in relation to:
(i)
Old
Lorus, means the knowledge of Xxxxxx X. Xxxxx, President and Chief Executive
Officer of Old Lorus, Xxxxxxxxx Xxxxxxxx, Director of Finance and Controller
of
Old Lorus, or Xxxx Xxxxxxx, Acting Controller of Old Lorus, respectively;
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4
-
(ii)
New
Lorus, means the knowledge of Xxxxxx X. Xxxxx, President and Chief Executive
Officer of New Lorus, Xxxxxxxxx Xxxxxxxx, Director of Finance and Controller
of
New Lorus, or Xxxx Xxxxxxx, Acting Controller of New Lorus,
respectively;
(iii)
Investor,
means the knowledge of Xxxxxxx Xx Xxxxxx, President of Investor;
and
(iv)
Pinnacle,
means the knowledge of Xxxxxxx Xx Xxxxxx, President of Pinnacle, or Les Fovenyi,
Chief Financial Officer of Pinnacle.
after
reasonable enquiry and review with the relevant directors, officers and
employees of Old Lorus, New Lorus, Investor or Pinnacle, as
applicable;
“Liens”
means a lien, prior claim, security interest, hypothec, right of first refusal,
pre-emptive right or any other encumbrance, charge or restriction;
“Lock-Up
Holders” means, collectively, High Tech Beteilingungen GmbH & Co.
KG, Technifund Inc., and Xxxxxxx Xxxxxxxx;
“Lorus
Payment Event” has the meaning ascribed thereto in Section
12.1;
“Material
Adverse Change” or “Material Adverse Effect” means,
when used in connection with Old Lorus, any change, effect, event, occurrence
or
change in a state of facts that is, or would reasonably be expected to be,
material and adverse to the business, operations, assets, capitalization,
liabilities or condition (financial or otherwise) of Old Lorus or any Subsidiary
other than (i) any change in the trading price or trading volume of Old Lorus
Shares, (ii) any change affecting economic or financial conditions generally
(global, national or regional, as applicable) that does not have a
disproportionate effect on such Party, (iii) any failure by Old Lorus to meet
analysts’ or internal earnings estimates, milestones or business plans, (iv) any
action contemplated by the Old Lorus Debentures or taken by Old Lorus, at
Investor’s request, (v) any action required by Applicable Laws, or (vi) the
results of any of Old Lorus’ clinical trials for any product candidates;
“Material
Contracts” means, collectively, the Old Lorus Debentures, the NCI
Agreement and the University of Manitoba Agreement;
“Material
Permits” has the meaning ascribed thereto in Section
4.1(o);
“XxXxxxxx”
means XxXxxxxx Xxxxxxxx LLP;
“MI
52-109” means Multilateral Instrument 52-109 - Certification of
Disclosure in Issuers’ Annual and Interim Filings, of the Canadian Securities
Administrators, as such Instrument may be amended from time to time, or any
similar instrument, rule or regulation hereafter adopted by any of the Canadian
Securities Regulatory Authorities having substantially the same effect as such
instrument;
“misrepresentation”
has the meaning ascribed thereto in the Securities Act
(Ontario);
“NCI
Agreement” means the agreement entered into between Old Lorus and its
Affiliates and the National Cancer Institute dated October 25, 2002 in
connection with the co-development by such parties of GTI-2040;
“NI
14-101” means National Instrument 14-101 - Definitions, of the Canadian
Securities Administrators, as such instrument may be amended or supplemented
from time to time, or any similar instrument, rule or regulation hereafter
adopted by any of the Canadian Securities Regulatory Authorities having
substantially the same effect as such instrument;
“Notice
Period” has the meaning ascribed thereto in Section 8.4;
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5
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“XxXxxx
Share Purchase Agreement” means the share purchase agreement to be
entered into between Old Lorus and New Lorus pursuant to which Old Lorus
will transfer all of the XxXxxx Shares held by it to New Lorus, as contemplated
by the Plan of Arrangement and substantially in the form attached hereto as
Schedule H;
“XxXxxx
Shares” means common shares in the capital of XxXxxx;
“Officer
Obligations” means any obligations or liabilities of Old Lorus to pay
any amount to its officers, directors, employees or consultants, other than
(i)
for salary, bonuses under existing bonus arrangements, or directors’ fees in the
ordinary course, in each case in amounts consistent with historic practices,
and
(ii) obligations or liabilities in respect of insurance or indemnification
contemplated by this Agreement or arising in the ordinary and usual course
of
business and subject to Corporate Laws and, without limiting the generality
of
the foregoing, Officer Obligations will include the obligations of Old Lorus
to
officers, employees or consultants for: (A) severance, termination or other
payments on or in connection with the reorganization of Old Lorus pursuant
to
any executive involuntary severance and termination agreements in the case
of
officers and pursuant to Old Lorus’ severance policy in the case of employees;
(B) retention bonus payments pursuant to any retention bonus program; or
(C) commissions, bonuses or other amounts payable to any employees,
officers, directors or consultants in connection with the reorganization,
including in connection with the Arrangement;
“Old
Lorus Debentures” means the prime plus 1% secured convertible
debentures of Old Lorus due on October 6, 2009 in the aggregate principal
amount of $15,000,000, issued to TEMIC in equal principal amounts of $5,000,000
each on each of October 6, 2004, January 14, 2005 and April 15,
2005;
“Old
Lorus Governing Documents” means the articles and by-laws of Old Lorus
in effect as of the date hereof;
“Old
Lorus Options” means the stock options issued to directors, senior
officers, employees and consultants of Old Lorus, governed by the terms of
the
Old Lorus Stock Option Plans and permitting the holders thereof to purchase
as
of the date hereof an aggregate of up to 25,921,000 Old Lorus Shares, as such
number may be amended from time to time;
“Old
Lorus Securityholders” means, collectively, the holders of Old Lorus
Shares, Old Lorus Options, Old Lorus Warrants and Old Lorus
Debentures;
“Old
Lorus Securityholders’ Meeting” means the special meeting of Old Lorus
Securityholders, and any adjournments thereof, to be called to, inter
alia, consider and, if thought fit, authorize, approve and adopt the
Arrangement Resolution in accordance with the Interim Order;
“Old
Lorus Share Equivalents” means any securities of Old Lorus or any of
the Subsidiaries which would entitle the holder thereof to acquire at any time
Old Lorus Shares, including any debt, preferred stock, rights, options, warrants
or other instrument that is at any time convertible into or exercisable or
exchangeable for, or otherwise entitles the holder thereof to receive, Old
Lorus
Shares;
“Old
Lorus Shareholders” means the holders of Old Lorus Shares;
“Old
Lorus Shares” means common shares in the share capital of Old
Lorus;
“Old
Lorus Stock Option Plans” means, collectively, Old Lorus’ 2003 Stock
Option Plan and the 1993 Stock Option Plan;
“Old
Lorus Warrants” means the 3,000,000 common share purchase warrants
of Old Lorus issued to TEMIC, each of which entitles TEMIC to acquire, subject
to adjustment, one Old Lorus Share at a price per share of $1.00;
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6
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“Outside
Date” means July 31, 2007;
“Parties”
means Old Lorus, NuChem, GeneSense, New Lorus, Pinnacle and Investor, and
“Party” means any one of them;
“Person”
includes any individual, firm, partnership, joint venture, limited liability
company, unlimited liability company, association, trust, trustee, executor,
administrator, legal personal representative, estate, group, body corporate,
corporation, unincorporated association or organization, Governmental Authority,
syndicate or other entity, whether or not having legal status;
“Pinnacle
Information” means the information contained in the Information
Circular provided to Old Lorus by Pinnacle and Investor, all as described in
the
letter of Pinnacle and Investor dated on or before the date of the Information
Circular and delivered to Old Lorus and signed by Pinnacle and Investor, with
receipt acknowledged thereon, acting reasonably, by Old Lorus;
“Pinnacle
Material Adverse Effect” means any fact, circumstance, change, effect,
matter, action, condition, event or occurrence that, individually or in the
aggregate with all other facts, circumstances, changes, effects, matters,
actions, conditions, events or occurrences, would reasonably be expected to
materially impair or delay the consummation of the transactions contemplated
by
this Agreement by Pinnacle or Investor beyond the Outside Date or materially
impair or delay the ability of Pinnacle or Investor to pay the Pinnacle
Non-Completion Fee or perform its obligations hereunder, including each of
their
indemnification obligations pursuant to Section 13.3;
“Pinnacle
Payment Event” has the meaning ascribed thereto in Section
12.2;
“Pinnacle
Share Purchase Agreement” has the meaning ascribed thereto in the
Plan of Arrangement, which agreement will be substantially in the form attached
hereto as Schedule I;
“Plan
of Arrangement” means the plan of arrangement relating to the
Arrangement substantially in the form and content of Schedule A attached
hereto, as such plan of arrangement may be amended pursuant to this
Agreement;
“Prepaid
Expenses and Receivables” means those assets set out in the disclosure
letter to the Prepaid Expenses and Receivables Transfer Agreement;
“Prepaid
Expenses and Receivables Transfer Agreement” means the asset purchase
agreement to be entered into between Old Lorus and GeneSense pursuant to which
Old Lorus will transfer the Prepaid Expenses and Receivables to GeneSense,
as
contemplated in the Plan of Arrangement and substantially in the form attached
hereto as Schedule F;
“Property”
means property, real or personal, tangible or intangible, other than
Intellectual Property Rights;
“Reimbursement
Amount” has the meaning ascribed thereto in Section
16.2(b);
“Required
Approvals” has the meaning ascribed thereto in Section
4.1(e);
“resident
in the United States” shall be determined as provided in Rule
12g-4(a)(2) under the United States Securities Exchange Act of 1934, as
amended;
“Sarbanes
Oxley Act” means the United States Xxxxxxxx-Xxxxx Act of 2002, and any
successor thereto, and any rules and regulations promulgated thereunder, all
as
the same will be in effect from time to time;
“SEC”
means the United States Securities and Exchange Commission, or any other federal
agency at the time administering the United States Securities Act or the
Exchange Act;
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“Securities
Laws” means the Canadian Securities Legislation and the United States
Securities Laws;
“SEDAR”
means the System for Electronic Document Analysis and Retrieval developed by
the
Canadian Securities Administrators;
“Share
Purchase Plan” means Old Lorus’ employee share purchase
plan;
“Stock
Option Plans” means Old Lorus’ 2003 Stock Option Plan and/or the 1993
Stock Option Plan;
“Subsidiary”
has the meaning ascribed thereto in Section 4.1(a);
“Subsidiary
Share Purchase Agreements” means, collectively, the GeneSense Share
Purchase Agreement and the XxXxxx Share Purchase Agreement;
“Superior
Proposal” has the meaning ascribed thereto in
Section 8.3(b);
“Tangible
Business Assets” means Old Lorus’ depreciable Property other than
capitalized legal fees set out in the disclosure letter to the Tangible Business
Assets Transfer Agreement;
“Tangible
Business Assets Transfer Agreement” means the asset purchase agreement
to be entered into between Old Lorus and GeneSense pursuant to which Old Lorus
will transfer the Tangible Business Assets to GeneSense, as contemplated in
the
Plan of Arrangement and substantially in the form attached hereto as
Schedule E;
“TEMIC”
means The Xxxx Xxxxx Investment Corporation;
“Termination
Date” means the date of termination of this Agreement pursuant to the
terms hereof;
“Trading
Market” means the AMEX or the TSX;
“TSX”
means the Toronto Stock Exchange;
“TSX
Company Manual” means The Toronto Stock Exchange Company
Manual;
“United
States” means the United States of America, its territories and
possessions, any state of the United States and the District of
Columbia;
“United
States Securities Act” means the United States Securities Act of
1933, as amended, and any successor thereto, and any rules and regulations
promulgated thereunder, all as the same will be in effect from time to
time;
“United
States Securities Laws” means the United States Securities Act, the
Exchange Act, the Sarbanes Oxley Act, all applicable state or “blue sky” laws
and all rules and regulations promulgated thereunder or otherwise adopted from
time to time by the applicable authority having jurisdiction in respect thereof,
and the AMEX Rules, as applicable;
“University
of Manitoba Agreement” means the agreement entered into between Old
Lorus, the University of Manitoba, the Manitoba Cancer Treatment and Research
Foundation, Xx. Xxx X. Xxxxxx, Xx. Xxxxxx Xxxxx and GeneSense dated June 20,
1997 in connection with the licensing of certain patent rights;
“Virulizin
and Small Molecule Patent Assets” means those assets set out in the
disclosure letter to the Virulizin and Small Molecule Patent Assets Transfer
Agreement; and
“Virulizin
and Small Molecule Patent Assets Transfer Agreement” means the asset
purchase agreement to be entered into between Old Lorus and GeneSense pursuant
to which Old Lorus will transfer the Virulizin and
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Small
Molecule Patent Assets to GeneSense, as contemplated in the Plan of Arrangement
and substantially in the form attached hereto as Schedule D.
1.2 Extended
Meanings
In
this
Agreement, unless the contrary intention appears, words importing the singular
include the plural and vice versa; words importing gender will include all
genders; words importing persons will include a natural person, firm, trust,
partnership, association, corporation, joint venture or government (including
any Governmental Authority); and the term “including” means
“including without limiting the generality of the foregoing”.
1.3
Deemed
Currency
Unless
otherwise stated, all references in this Agreement to sums of money are
expressed in lawful money of Canada.
1.4
Interpretation
The
division of this Agreement into Articles, Sections, subsections and paragraphs
and the insertion of headings are for convenience of reference only and will
not
affect in any way the meaning or interpretation of this Agreement. The
Parties acknowledge that their respective 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 will not be applicable in the interpretation
of this Agreement.
1.5
Article
References
Unless
the contrary intention appears, references in this Agreement to an Article,
Section, subsection, paragraph or Schedule by number or letter or both refer
to
the specified Article, Section, subsection, paragraph or Schedule, respectively,
bearing that designation in this Agreement.
1.6
Date
for any Action
In
the
event that any date by or on which any action is required or permitted to be
taken hereunder by any of the Parties is not a Business Day, such action will
be
required to be taken by or on the next succeeding day which is a Business
Day.
1.7
Governing
Law
This
Agreement will be governed by and interpreted in accordance with the laws of
the
Province of Ontario and the laws of Canada applicable therein. Each Party
hereto hereby irrevocably attorns to the non-exclusive jurisdiction of the
courts of the Province of Ontario in respect of all matters arising under or
in
relation to this Agreement.
1.8
Accounting
Matters
Unless
otherwise stated, all accounting terms used in this Agreement will have the
meanings attributable thereto under GAAP and all determinations of an accounting
nature required to be made will be made in a manner consistent with
GAAP.
1.9
Material
The
terms
“material” and “materially” will, when used in
this Agreement, be construed, measured or assessed on the basis of whether
the
matter, either individually or in the aggregate with other matters, would
materially affect a Party or would significantly impede the ability to complete
the Arrangement in accordance with this Agreement.
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1.10
Incorporation
of Schedules
The
following Schedules are annexed to this Agreement and are hereby incorporated
by
reference into the Agreement and form part hereof:
Schedule
A
Plan
of
Arrangement;
Schedule
B
PPSA
Registrations;
Schedule
C
Antisense
Patent Assets Transfer Agreement;
Schedule
D
Virulizin
and Small Molecule Patent Assets Transfer Agreement;
Schedule
E
Tangible
Business Assets Transfer Agreement;
Schedule
F
Prepaid
Expenses and Receivables Transfer Agreement;
Schedule
G
GeneSense
Share Purchase Agreement;
Schedule
H
XxXxxx
Share Purchase Agreement;
Schedule
I
Pinnacle
Share Purchase Agreement; and
Schedule
J
Indemnification
Agreement.
ARTICLE 2
THE ARRANGEMENT
THE ARRANGEMENT
2.1
General
Subject
to the terms and conditions of this Agreement, each of the Parties hereto agrees
to use its reasonable commercial efforts prior to the Effective Time to take,
or
cause to be taken, all actions and to do, or cause to be done, all things
necessary or advisable to complete the transactions contemplated by this
Agreement and the Plan of Arrangement.
2.2
Steps
to be taken by Old Lorus
Old
Lorus
covenants in favour of Pinnacle and Investor that Old Lorus will:
(a)
as
soon
as reasonably practicable, apply to the Court in a manner acceptable to
Investor, acting reasonably, under Section 192 of the CBCA, for the Interim
Order, providing for, among other things, the calling of the Old Lorus
Securityholders’ Meeting, and thereafter proceed with and diligently seek the
Interim Order;
(b)
lawfully
convene and hold the Old Lorus Securityholders’ Meeting for the purpose of,
among other things, considering the Arrangement Resolution and the other matters
set forth in the Information Circular as soon as reasonably practicable and
in
any event, no later than the seventh Business Day immediately preceding the
Outside Date;
(c)
subject
to obtaining any approvals as are required by the Interim Order, proceed with
and diligently pursue the application to the Court for the Final Order;
and
(d)
subject
to obtaining the Final Order, exert reasonable commercial efforts to make such
arrangements with the Director as may be necessary or desirable to permit the
filing with the Director of the Articles of Arrangement.
2.3
Interim
Order
Old
Lorus
confirms that the Interim Order will provide:
(a)
for
the
class of persons to whom notice is to be provided in respect of the Arrangement
and the Old Lorus Securityholders’ Meeting and for the manner in which such
notice is to be provided;
(b)
that
the
requisite approval for the Arrangement will be (i) not less than 66 2/3% of
the
vote cast by the Old Lorus Securityholders, and (ii) such other approvals,
if
any, as may be required by applicable
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Securities
Laws, with each holder of Old Lorus Shares entitled to vote thereon being
entitled to one vote for each Old Lorus Share held, each holder of Old Lorus
Options entitled to vote thereon being entitled to one vote for each Old Lorus
Option held, each holder of Old Lorus Debentures entitled to vote thereon being
entitled to one vote for each whole Old Lorus Share into which such holder’s Old
Lorus Debentures are convertible and each holder of Old Lorus Warrants entitled
to vote thereon being entitled to one vote for each whole Old Lorus Share for
which such holder’s Old Lorus Warrants are exercisable;
(c)
for
the
grant of the Dissent Rights;
(d)
that,
in
all other respects, the terms and conditions of the Old Lorus Governing
Documents, including quorum requirements and all other matters, will apply
in
respect of the Old Lorus Securityholders’ Meeting; and
(e)
for
such
other matters as the Parties may agree, acting reasonably.
2.4
Information
Circular
As
promptly as practicable after execution of this Agreement, Old Lorus will
prepare, and Investor will co-operate in the preparation of, the Information
Circular (setting forth inter alia the recommendation of Old Lorus’ board
of directors set forth in Section 2.5(a)(ii) and the opinion of Old Lorus’
advisors referred to in Section 2.5(b)) and Old Lorus and Investor will, on
a timely basis, use their reasonable commercial efforts to co-operate in the
preparation of all other documents and filings and the seeking and obtaining
of
all consents, orders and approvals, including regulatory and judicial orders
and
approvals and other matters reasonably determined by Old Lorus and Investor
to
be necessary in connection with this Agreement and the Arrangement. Old Lorus
will ensure that the Information Circular and other documents, filings,
consents, orders and approvals contemplated by this Section 2.4 and mailed
to the Old Lorus Securityholders and other persons required by law are in
accordance with Securities Laws, the CBCA, the requirements of the TSX, the
requirements of the AMEX and all other Applicable Laws. The term
“Information Circular” will mean such proxy or other required
information statement or circular, as the case may be, and all related materials
at the time required to be mailed to the Old Lorus Securityholders in connection
with the Old Lorus Securityholders’ Meeting and all amendments or supplements
thereto, if any. Old Lorus, Pinnacle and Investor each will use all
reasonable commercial efforts to obtain and furnish the information required
to
be included in the Information Circular. The information to be provided by
Old
Lorus, Pinnacle and Investor for use in the Information Circular, on both the
date the Information Circular is first mailed to Old Lorus Securityholders
and
on the date the Old Lorus Securityholders’ Meeting is held, will not contain any
misrepresentation, and Old Lorus, Pinnacle and Investor each agree to correct
promptly any such information provided by any of them for use in the Information
Circular which has ceased to meet such standard. In any such event, Old Lorus
will prepare a supplement or amendment to the Information Circular or such
application or other document, as required, and, if required, will cause the
same to be distributed to the Old Lorus Securityholders and/or filed with the
Canadian Securities Regulatory Authorities, stock exchanges and/or other
Governmental Authority after Pinnacle, Investor and its advisors have had a
reasonable opportunity to review and comment on all such documentation and
all
such documentation is in form and content reasonably satisfactory to Pinnacle
and Investor.
2.5
Old
Lorus Board Recommendation and Fairness Opinion
(a)
Old
Lorus
represents and warrants to Investor and Pinnacle that all members or its board
of directors entitled to vote thereon have, upon consultation with its advisors,
has unanimously determined that:
(i)
the
Arrangement is fair, from a financial point of view, to Old Lorus
Securityholders and is otherwise in the best interests of Old Lorus and Old
Lorus Securityholders; and
(ii)
Old
Lorus’ board of directors will unanimously recommend that Old Lorus
Securityholders vote in favour of the Arrangement, which recommendation may
not
be withdrawn, modified or changed in any manner except as set forth
herein.
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(b)
Old
Lorus
represents and warrants to Investor and Pinnacle that its board of directors
has
received a preliminary opinion, subject to the qualifications set out therein,
from Deloitte & Touche LLP, that the Arrangement is fair, from a financial
point of view, to Old Lorus Securityholdersand that such financial advisor
has
advised it that it will provide a written opinion to such effect before the
application for the Interim Order.
2.6
Final
Order
As
promptly as practicable following the approval of the Arrangement by Old Lorus
Securityholders, Old Lorus will apply to the Court, in a manner acceptable
to
Investor, acting reasonably, for the Final Order.
ARTICLE 3
PUBLICITY
PUBLICITY
3.1
Publicity
Each
Party will advise, consult and cooperate with all other Parties prior to
issuing, or permitting any of its directors, officers, employees or agents
to
issue, any news release or other written public statement with respect to this
Agreement, the transactions contemplated hereby or any other matters, from
the
date hereof until the Effective Time. No Party will issue any such news release
or make any such writtenpublic statement prior to such consultation, except
as
may be required by Applicable Laws including, for greater certainty, in order
to
fulfil Old Lorus’ continuous disclosure obligations under Securities Laws or
pursuant to the rules of the TSX or the AMEX and only after using its reasonable
commercial efforts to consult the other Parties taking into account the time
constraints to which it is subject as a result of such law or
obligation.
ARTICLE 4
REPRESENTATION AND WARRANTIES OF OLD LORUS
REPRESENTATION AND WARRANTIES OF OLD LORUS
4.1
Representations
and Warranties of Old Lorus
Except
as
set out under the corresponding section of the Disclosure Letter, which
Disclosure Letter will be deemed a part hereof, Old Lorus hereby represents
and
warrants to Investor and Pinnacle as follows in this Section 4.1 and
acknowledges that Investor and Pinnacle are relying upon those representations
and warranties in connection with entering into this Agreement. Any
disclosure set forth in a section or subsection of the Disclosure Letter
discloses an exception to a representation or warranty made in the
correspondingly numbered or otherwise specified section or subsection of this
Agreement. Any disclosure made under one section or subsection of the
Disclosure Letter will be deemed to be disclosed under one or more other
sections or subsections of the Disclosure Letter only to the extent specific
reference to the relevant section(s) or subsection(s) of the representations
and
warranties or covenants of this Agreement is made.
(a)
Subsidiaries. Each
of the direct and indirect subsidiaries of Old Lorus (each, a
“Subsidiary”) is set out in Section 4.1(a) of the Disclosure
Letter. The Company owns directly (i) all of the issued and outstanding
shares or other equity interests in the capital of GeneSense, (ii) all of the
issued and outstanding shares or other equity interests in the capital of New
Lorus and (iii) 80% of the issued and outstanding voting share capital and
100%
of the issued and outstanding non-voting preference share capital of XxXxxx,
in
each case free and clear of any Liens. All the issued and outstanding
shares in the capital of each Subsidiary are validly issued and are fully paid,
non-assessable and free of pre-emptive and similar rights to subscribe for
or
purchase securities.
(b)
Organization,
Authority. Old Lorus and each Subsidiary is an entity duly
incorporated or otherwise organized, validly existing and in good standing
under
the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite corporate power and authority to own and use
its
Property and to carry on its business as currently conducted. Neither Old Lorus
nor any Subsidiary is in violation or default of any of the provisions of its
respective certificate or articles of incorporation, by-laws or other
organizational or constating documents. Each of Old Lorus and the
Subsidiaries is
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duly
qualified to conduct business and is in good standing as a foreign corporation
or other entity in each jurisdiction in which the nature of the business
conducted or Property owned or leased by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case
may
be, could not have or reasonably be expected to result in a Material Adverse
Effect and, to the knowledge of Old Lorus, no proceeding has been instituted
in
any such jurisdiction revoking, limiting or curtailing or seeking to revoke,
limit or curtail such power and authority or qualification.
(c)
Authorization;
Enforcement. Each of Old Lorus and the Subsidiaries has full right,
corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise carry out its respective
obligations hereunder. The execution and delivery of this Agreement by
each of Old Lorus and the Subsidiaries and the consummation by each of them
of
the transactions contemplated hereby have been duly authorized by their
respective boards of directors, and, subject to the approval of the Arrangement
Resolution by the Old Lorus Securityholders, no further action is required
by
Old Lorus or any Subsidiary, their boards of directors or their shareholders,
in
connection therewith. This Agreement has been (or upon delivery will have
been) duly executed by each of Old Lorus and the Subsidiaries and, when
delivered in accordance with the terms hereof, will constitute the valid and
binding obligation of each of Old Lorus and the Subsidiaries, enforceable
against them in accordance with its terms except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally; (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies; and (iii) insofar as indemnification and contribution provisions
may
be limited by Applicable Law.
(d)
No
Conflicts. The execution, delivery and performance of this Agreement
by each of Old Lorus and the Subsidiaries, the completion of the transactions
contemplated hereby and the fulfillment and compliance by each of Old Lorus
and
the Subsidiaries with any of the terms and provisions hereof will not (i)
conflict with or violate any provision of their respective certificates or
articles of incorporation, by-laws or other organizational or constating
documents, or (ii), subject to the Required Approvals, conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any Lien upon any
of
their respective Property, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any Material Contract, or (iii) subject to the Required Approvals,
conflict with or result in a violation of any Intellectual Property Right or
any
Applicable Laws to which Old Lorus or a Subsidiary is subject, or by which
any
Property of Old Lorus or a Subsidiary is bound or affected; except in the case
of each of clauses (ii) and (iii), such as could not have or reasonably be
expected to result in a Material Adverse Effect.
(e)
Filings,
Consents and Approvals. Old Lorus is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any Governmental Authority or other Person in
connection with the execution, delivery and performance by Old Lorus of
this Agreement, other than (i) filings disclosed in Section 4.1(e) of the
Disclosure Letter, (ii) the obtaining of Old Lorus Securityholder approval
at
the Old Lorus Securityholders’ Meeting in accordance with Applicable Laws, (iii)
the obtaining of the Interim Order and the Final Order, (iv) applications
to the AMEX and the TSX for the delisting of the Old Lorus Shares and the
listing of the New Lorus Shares, (v) any other required filings with one or
more
of the Canadian Securities Regulatory Authorities, (vi) any other required
approvals of any Trading Market, and (vii) any notice to TEMIC if required
(collectively, the “Required Approvals”).
(f)
Capitalization.
The capitalization of Old Lorus is as described in the interim financial
statements for the six month period ended November 30, 2006 filed on SEDAR.
Since May 31, 2006, Old Lorus has not issued any securities other
than pursuant to the Old Lorus Debentures, the exercise of employee stock
options under the Old Lorus Stock Option Plans and pursuant to the conversion
or
exercise of outstanding Old Lorus Share Equivalents. No Person has any
right of first refusal, pre-emptive right, right of participation, or any
similar right to participate in the transactions contemplated by this Agreement.
Except as a result of the Old Lorus Stock Option Plans, the Old Lorus
Debentures and the Old Lorus Warrants, there are no outstanding options,
warrants, script rights to subscribe to, calls or
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commitments
of any character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any Person any
right to subscribe for or acquire, any Old Lorus Shares, or contracts,
commitments, understandings or arrangements by which Old Lorus or any Subsidiary
is or may become bound to issue additional Old Lorus Shares or Old Lorus Share
Equivalents. All of the outstanding Old Lorus Shares are validly issued,
fully paid and nonassessable and to the knowledge of Old Lorus, have been issued
in compliance with all Applicable Laws and, to the knowledge of Old Lorus,
none
of such outstanding Old Lorus Shares was issued in violation of any pre-emptive
rights or similar rights to subscribe for or purchase securities. Other
than agreements entered into in connection with the Arrangement, there are
no
shareholders agreements, voting agreements or other similar agreements with
respect to Old Lorus’ authorized capital to which Old Lorus is a party or, to
the knowledge of Old Lorus, between or among any of the Old Lorus Shareholders.
(g)
Ownership
of Shares. To the knowledge of Old Lorus, based solely on a review of
information concerning Old Lorus publicly disclosed on SEDAR as of May 1,
2007:
(i)
save
and
except for the Lock-Up Holders, no Person, whether alone or jointly or in
concert with others, beneficially owns, or exercises control or direction over,
more than 10% of the issued and outstanding Old Lorus Shares; and
(ii)
the
Lock-Up Holders (together with any person acting jointly or in concert with
the
Lock-Up Holders) do not beneficially own, or exercise control or direction
over,
in the aggregate, more than 25% of the issued and outstanding common shares
of
Old Lorus.
(h)
Continuous
Reports; Financial Statements. Old Lorus has filed or submitted all
reports, financial statements, schedules, forms, statements and other documents
required to be filed or submitted by it under the Securities Laws, for the
three
years preceding the date of this Agreement (or such shorter period as Old Lorus
may have been required by the Securities Laws to file or submit such material)
(the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as
the
“Continuous Disclosure Reports”) on a timely basis or has
received a valid extension of such time of filing or submission and has filed
or
submitted any such Continuous Disclosure Reports prior to the expiration of
any
such extension, except where a failure to do so could not have or could not
reasonably be expected to have a Material Adverse Effect. As of their
respective dates, the Continuous Disclosure Reports complied with the material
requirements of the Securities Laws, and none of the Continuous Disclosure
Reports, when filed or submitted, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of
Old Lorus included in the Continuous Disclosure Reports have been prepared
in
accordance with Canadian generally accepted accounting principles applied on
a
consistent basis during the periods involved (“GAAP”), except
as may be otherwise specified in such financial statements or the notes thereto
and except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the financial
position of Old Lorus and its consolidated subsidiaries as of and for the dates
thereof and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial, year-end
audit adjustments.
(i)
No
Undisclosed Liabilities. Except for liabilities and obligations:
(i)
incurred
in the ordinary course of business and consistent with past practice;
(ii)
disclosed
in the financial statements of Old Lorus and forming part of the Continuous
Disclosure Reports; or
(iii)
incurred
pursuant to the terms of this Agreement,
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Old
Lorus
has not incurred any liabilities of any nature, whether accrued, contingent
or
otherwise (or which would be required by generally accepted accounting
principles to be reflected on a balance sheet of Old Lorus). All material
accounts payable and accrued liabilities are shown in the financial statements
included within the Continuous Disclosure Reports, have been disclosed in
writing to Investor.
(j)
Material
Changes. Since the date of the latest audited financial statements
included within the Continuous Disclosure Reports and except as specifically
disclosed in the Continuous Disclosure Reports:
(i)
there
has
been no event, occurrence or development that has had or that could reasonably
be expected to result in a Material Adverse Effect;
(ii)
Old
Lorus
has not incurred any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in Old Lorus’ financial statements pursuant to GAAP or required to be disclosed
in filings made or required to be made pursuant to the Securities
Laws;
(iii)
Old
Lorus
has not altered its method of accounting except as required by
GAAP;
(iv)
Old
Lorus
has not declared or made any dividend or distribution of cash or other Property
to the Old Lorus Shareholders or purchased, redeemed or made any agreements
to
purchase or redeem any of the Old Lorus Shares; and
(v)
Old
Lorus
has not issued any equity securities to any officer, director or Affiliate,
except pursuant to the Old Lorus Stock Option Plans or the Old Lorus Share
Purchase Plan.
Old
Lorus
does not have pending before any of the Canadian Securities Regulatory
Authorities any confidential material change report.
(k)
Litigation.
There is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of Old Lorus, threatened or
contemplated (including by any of the Canadian Securities Regulatory
Authorities) against or affecting Old Lorus, any Subsidiary or any of their
respective Property, Intellectual Property Rights, or, to the knowledge of
Old
Lorus, any current officer or director or former officer or director of Old
Lorus before or by any Governmental Authority which (i) adversely affects or
challenges the legality, validity or enforceability of this Agreement or (ii)
could, if there were an unfavourable decision, have or reasonably be expected
to
result in a Material Adverse Effect. Neither Old Lorus nor any Subsidiary,
nor, to the knowledge of Old Lorus, any director or officer thereof, is the
subject of any action involving a claim of violation of or liability under
the
Applicable Laws or a claim of breach of fiduciary duty. No stop order or
other order suspending the trading in securities of Old Lorus is outstanding.
(l)
Labour
Relations. Section 4.1(l) of the Disclosure Letter contains a list of
every benefit plan, program, agreement or arrangement (whether written or
unwritten) maintained, contributed to, or provided by Old Lorus or any
Subsidiary for the benefit of any of its employees or former employees or
independent contractors of Old Lorus or any Subsidiary employed or retained
in
connection with the conduct of its business or their respective dependants
or
beneficiaries (the “Benefit Plans”) including all bonus,
deferred compensation, incentive compensation, share purchase, share option,
stock appreciation, phantom stock, savings, profit sharing, severance or
termination pay, health or other medical, life, disability or other insurance
(whether insured or self-insured), supplementary unemployment benefit, pension,
retirement and supplementary retirement plans, programs, agreements and
arrangements except for any statutory plans to which the Vendor is obliged
to
contribute or comply including the Canada/Québec Pension Plan, or plans
administered pursuant to applicable federal or provincial health, worker’s
compensation and employment insurance legislation. All of the
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Benefit
Plans are fully funded in accordance with their terms and all Applicable Laws
and generally accepted actuarial principles and practices. None of the
Benefit Plans are multi-employer plans. Old Lorus and each Subsidiary is
employing all its employees in material compliance with all applicable taxation,
health, labour and employment laws, rules, regulations, notices, and orders.
Neither Old Lorus nor any Subsidiary is a party to or bound by any
collective bargaining agreement. No labour dispute exists or, to the
knowledge of Old Lorus, is imminent with respect to any of the employees of
Old
Lorus which could reasonably be expected to result in a Material Adverse Effect.
(m)
Compliance.
To the knowledge of Old Lorus, neither Old Lorus nor any
Subsidiary:
(i)
is
in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default
by
Old Lorus or any Subsidiary under), nor has Old Lorus or any Subsidiary received
written notice of a claim that it is in default under or that it is in violation
of, any indenture, loan or credit agreement or any other material agreement
or
instrument, including the Material Contracts, to which it is a party or by
which
it or any of its Property is bound (whether or not such default or violation
has
been waived);
(ii)
is
in
violation of any order of any Governmental Authority; or
(iii)
is
or has
been in violation of any Applicable Law,
except
in
each case as could not have a Material Adverse Effect.
(n)
Material
Contracts. The Material Contracts, the Intellectual Property Rights
and Old Lorus’s arrangements with certain of its employees constitute all
agreements, contracts, licenses, arrangements, certificates, rights and other
agreements that are material to or necessary for the conduct of Old Lorus’
business as currently conducted or expected to be conducted prior to the
Effective Time.
(o)
Regulatory
Permits. Old Lorus and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate Governmental Authorities
necessary to conduct their respective businesses as described in the Continuous
Disclosure Reports, except where the failure to possess such permits could
not
have or reasonably be expected to result in a Material Adverse Effect
(“Material Permits”), and neither the Company nor any
Subsidiary has received any notice of proceedings relating to the revocation
or
modification of any Material Permit.
(p)
Title
to Property. Old Lorus and the Subsidiaries do not own real property.
Old Lorus and the Subsidiaries have good and marketable title in all
personal property (tangible or intangible) owned by them that is material to
the
business of Old Lorus and the Subsidiaries, in each case free and clear of
all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by Old Lorus and the Subsidiaries and Liens for the payment of
federal, provincial, state or other taxes, the payment of which is neither
delinquent nor subject to penalties. Any real property (including
facilities) held under lease by Old Lorus and the Subsidiaries is held by them
under valid, subsisting and enforceable leases of which Old Lorus the
Subsidiaries are in compliance, except as would not have a Material Adverse
Effect.
(q)
Intellectual
Property. Old Lorus and the Subsidiaries have title to, or have rights
to use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and other similar rights
necessary or material for use (as determined by Old Lorus, acting commercially
reasonably) in connection with their respective businesses as currently
conducted and anticipated to be conducted, as described in the Continuous
Disclosure Reports and except where the failure to do so would not have a
Material Adverse Effect (collectively, the “Intellectual Property
Rights”). Neither Old Lorus nor any Subsidiary has received a
written notice that the Intellectual
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Property
Rights used by Old Lorus or any Subsidiary violates or infringes upon the rights
of any Person. To the knowledge of Old Lorus: (i) all such
Intellectual Property Rights are enforceable; and (ii) there is no existing
infringement by another Person of any of the Intellectual Property Rights.
(r)
Insurance.
Old Lorus and the Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
are prudent and customary in the businesses in which Old Lorus and the
Subsidiaries are engaged. Neither Old Lorus nor any Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.
(s)
Transactions
With Affiliates and Employees. Except as set out in the Continuous
Disclosure Reports, none of the current officers or directors of Old Lorus,
and,
to the knowledge of Old Lorus, none of the employees of Old Lorus, is a party
to
any transaction with Old Lorus or any Subsidiary (other than for services as
employees, officers or directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
leasing, rental or licensing to or from, or otherwise requiring payments to
or
from any officer, director or such employee or, to the knowledge of Old Lorus,
any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner, other
than:
(i)
for
payment of salary or consulting fees for services rendered;
(ii)
reimbursement
for expenses incurred on behalf of Old Lorus; and
(iii)
for
other
employee benefits, including the Share Purchase Plan and stock option agreements
under the Stock Option Plans.
(t)
Securities
Laws; Internal Accounting Controls. Old Lorus is in material
compliance with all provisions of the Securities Laws which are applicable
to
it. Old Lorus and the Subsidiaries maintain a system of internal
accounting controls as required by MI 52-109. Old Lorus has established
disclosure controls and procedures as required by MI 52-109 for Old Lorus and
designed such disclosure controls and procedures to ensure that material
information relating to Old Lorus, including its Subsidiaries, is made known
to
the certifying officers by others within those entities, particularly during
the
period in which Old Lorus’ most recently filed periodic report under Canadian
Securities Laws is being prepared. Old Lorus’ certifying officers have
evaluated the effectiveness of Old Lorus’ controls and procedures as of the date
prior to the filing date of the most recently filed periodic report under
Canadian Securities Laws (such date, the “Evaluation Date”).
Old Lorus presented in its most recently filed periodic report
under
Canadian Securities Laws the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date to the extent required by MI 52-109.
Since the Evaluation Date, except as disclosed in the Continuous
Disclosure Reports, there have been no significant changes in Old Lorus’
internal disclosure controls and procedures or its internal control over
financial reporting (as such terms are defined in Section 1.1 of MI 52-109)
or,
to Old Lorus’ knowledge, in other factors that could significantly affect Old
Lorus’ internal disclosure controls and procedures or its internal control over
financial reporting.
(u)
Certain
Fees. No brokerage or finder’s fees or commissions are or will be
payable by Old Lorus to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement.
(v)
Listing
and Maintenance Requirements. The Old Lorus Shares are listed on the
TSX and the AMEX, and except as contemplated by the Arrangement, Old Lorus
has
taken no action designed to, or which to its knowledge is likely to have the
effect of, terminating the listing of the Old Lorus Shares on the TSX or the
AMEX nor has Old Lorus received any notification that the TSX or the AMEX is
contemplating terminating such listing. Old Lorus has not, in the 12
months preceding the date of this Agreement, received notice from any Trading
Market on which the Old Lorus Shares are or have been
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listed
or
quoted to the effect that Old Lorus is not in compliance with the listing or
maintenance requirements of such Trading Market, except as would not have a
Material Adverse Effect.
(w)
Disclosure.
The Disclosure Letter to this Agreement and the representations and
warranties made herein are true and correct with respect to the statements
made
therein and do not contain any untrue statement of a material fact or omit
to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
(x)
Solvency.
The Continuous Disclosure Reports set out as of the dates thereof all
outstanding secured and unsecured Indebtedness of Old Lorus or any Subsidiary,
or for which Old Lorus or any Subsidiary has commitments. For the purposes
of this Agreement, “Indebtedness” will mean:
(i)
any
liabilities for borrowed money or amounts owed in excess of $50,000 (other
than
trade accounts payable incurred in the ordinary course of
business);
(ii)
all
guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected
in
Old Lorus’ balance sheet (or the notes thereto), except obligations in respect
of indemnification, guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business; and
(iii)
the
present value of any lease payments in excess of $50,000 due under leases
required to be capitalized in accordance with GAAP.
Neither
Old Lorus nor any Subsidiary is in default with respect to any Indebtedness,
except as would not have a Material Adverse Effect.
(y)
Tax
Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, Old Lorus and each Subsidiary has duly and timelyfiled, in prescribed
form, all necessary federal, provincial, state and foreign income and franchise
tax and information returns which accurately report income, losses, and other
information as required under Applicable Laws for all periods prior to the
date
hereof and has paid, including instalments and prepayments of taxes, or accrued
all taxes shown as due thereon and all taxes now owing have been paid, and
has
placed an adequate reserve on its books with respect to taxes owing (net of
any
instalments paid) and there are no outstanding agreements or waivers extending
the statutory period of limitations applicable to any federal, provincial or
other tax return for any period, and all payments to any non-resident of Canada
have been made in accordance with all applicable legislation in respect of
withholding tax and there are no assessments or reassessments pursuant to which
there are amounts owing or discussions in respect thereof with any taxing
authority relating to Old Lorus or any Subsidiary, and Old Lorus and each
Subsidiary has withheld from each payment made to any of its officers,
directors, and employees and former officers, directors, and employees the
amount of all taxes (including, without limitation, income tax) and other
deductions required to be withheld therefrom and has paid the same to the proper
tax or other authority within the time required by Applicable Law.
(z)
Accountants.
Old Lorus’ accountants are set out on Section 4.1(z) of the Disclosure
Letter. To the knowledge of Old Lorus, such accountants are independent
accountants as may be required by the CBCA and the Securities Laws.
4.2
Investigation
Any
investigation by Pinnacle, Investor or their respective advisors will not
mitigate, diminish or affect the representations and warranties of Old Lorus
made in or pursuant to this Agreement.
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4.3
No
Other Representations or Warranties
Except
for the representations and warranties contained in this Agreement or in any
other agreement or instrument contemplated hereby or by the Plan of Arrangement,
Old Lorus makes no other express or implied representation or warranty with
respect to any matters not specifically represented herein.
ARTICLE 5
REPRESENTATION AND WARRANTIES OF OLD LORUS
REPRESENTATION AND WARRANTIES OF OLD LORUS
5.1
Representations
and Warranties of New Lorus
New
Lorus
hereby represents and warrants to Investor and Pinnacle as of the date of this
Agreement as follows in this Section 5.1 and acknowledges that Investor and
Pinnacle are relying upon those representations and warranties in connection
with entering into this Agreement.
(a)
Organization,
Authority. New Lorus is an entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization with
full right, corporate power and authority to enter into and to consummate the
transactions contemplated by this Agreement and otherwise to carry out its
obligations hereunder.
(b)
Authorization;
Enforcement. The execution and delivery of this Agreement by New Lorus
and the consummation by it of the transactions contemplated hereby have been
duly authorized by the board of directors of New Lorus, and no further action
is
required by New Lorus or its board of directors or shareholders, in connection
therewith. This Agreement has been (or upon delivery will have been) duly
executed by New Lorus and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of New Lorus enforceable
against it in accordance with its terms except:
(i)
as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally;
(ii)
as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies; and
(iii)
insofar
as indemnification and contribution provisions may be limited by Applicable
Law.
(c)
No
Conflicts. The execution, delivery and performance of this Agreement
by New Lorus, the completion of the transactions contemplated hereby and the
fulfillment and compliance by New Lorus with any of the terms and provisions
hereof will not (i) conflict with or violate any provision of its certificate
or
articles of incorporation, by-laws or other organizational or constating
documents, or (ii), subject to the Required Approvals, conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any Lien upon any
of
its Property, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of,
any agreement, credit facility, debt or other instrument (evidencing a New
Lorus
debt or otherwise) or other understanding to which New Lorus is a party or
by
which any Property of New Lorus is bound or affected, or (iii) subject to the
Required Approvals, conflict with or result in a violation of any Applicable
Laws to which New Lorus is subject, or by which any Property of New Lorus is
bound or affected; except in the case of each of clauses (ii) and (iii), such
as
could not have or reasonably be expected to result in a Material Adverse
Effect.
(d)
Filings,
Consents and Approvals. New Lorus is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any Governmental Authority or other Person in
connection with the execution, delivery and performance by New Lorus of this
Agreement, other than:
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(i)
the
obtaining of the Interim Order and the Final Order;
(ii)
an
application to the TSX and AMEX for the listing of the New Lorus Common Shares
for trading thereon in the time and manner required hereby and
thereby;
(iii)
any
other
required filings with one or more of the Canadian Securities Regulatory
Authorities; and
(iv)
any
other
required approvals of any Trading Market.
(e)
Capitalization.
The capitalization of New Lorus consists of an unlimited number of common
shares. New Lorus has not issued any securities other than one common
share to Old Lorus. No Person has any right of first refusal, pre-emptive
right, right of participation, or any similar right to participate in the
transactions contemplated by this Agreement and the Arrangement. There are
no outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights
or
obligations convertible into or exercisable or exchangeable for, or giving
any
Person any right to subscribe for or acquire, any New Lorus Common Shares,
or
contracts, commitments, understandings or arrangements by which New Lorus is
or
may become bound to issue additional New Lorus Common Shares. All of the
outstanding New Lorus Common Shares are validly issued, fully paid and
nonassessable, to the knowledge of New Lorus, have been issued in compliance
with all Applicable Laws and, to the knowledge of New Lorus, none of such
outstanding New Lorus Common Shares was issued in violation of any pre-emptive
rights or similar rights to subscribe for or purchase securities. There
are no shareholders agreements, voting agreements or other similar agreements
with respect to New Lorus’ authorized capital to which New Lorus is a party or,
to the knowledge of New Lorus, between or among any of the shareholders of
New
Lorus.
(f)
Litigation.
There is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of New Lorus, threatened or
contemplated (including by any of the Canadian Securities Regulatory
Authorities) against or affecting New Lorus or any of its Property or, to the
knowledge of New Lorus, any current officer or director or former officer or
director of New Lorus before or by any Governmental Authority which (i)
adversely affects or challenges the legality, validity or enforceability of
this
Agreement or (ii) could, if there were an unfavourable decision, have or
reasonably be expected to result in a Material Adverse Effect. Neither New
Lorus, nor, to the knowledge of New Lorus, any director or officer thereof,
is
the subject of any action involving a claim of violation of or liability under
the Applicable Laws or a claim of breach of fiduciary duty.
5.2
Investigation
Any
investigation by Pinnacle, Investor or their respective advisors will not
mitigate, diminish or affect the representations and warranties of New Lorus
made in or pursuant to this Agreement.
5.3
No
Other Representations or Warranties
Except
for the representations and warranties contained in this Agreement or in any
other agreement or instrument contemplated hereby or by the Plan of Arrangement,
New Lorus makes no other express or implied representation or warranty with
respect to any matters not specifically represented herein.
ARTICLE 6
REPRESENTATION AND WARRANTIES OF INVESTOR
REPRESENTATION AND WARRANTIES OF INVESTOR
6.1
Representations
and Warranties of Investor
Investor
hereby represents and warrants to Old Lorus, New Lorus, GeneSense and XxXxxx
as
of the date of this Agreement as follows in this Section 6.1 and acknowledges
that Old Lorus, New Lorus, GeneSense and XxXxxx are relying upon those
representations and warranties in connection with entering into this Agreement.
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(a)
Organization,
Authority. Investor is an entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization with
full right, corporate power and authority to enter into and to consummate the
transactions contemplated by this Agreement and otherwise to carry out its
obligations hereunder.
(b)
Authorization;
Enforcement. The execution and delivery of this Agreement by Investor
and the consummation by it of the transactions contemplated hereby have been
duly authorized by the board of directors of Investor, and no further action
is
required by Investor or its board of directors or shareholders, in connection
therewith. This Agreement has been (or upon delivery will have been) duly
executed by Investor and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of Investor enforceable
against it in accordance with its terms except:
(i)
as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally;
(ii)
as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies; and
(iii)
insofar
as indemnification and contribution provisions may be limited by Applicable
Laws.
(c)
No
Conflicts. The execution, delivery and performance of this Agreement
by Investor, the completion of the transactions contemplated hereby and the
fulfillment and compliance by Investor with any of the terms and provisions
hereof will not (i) conflict with or violate any provision of its certificate
or
articles of incorporation, by-laws or other organizational or constating
documents, or (ii), conflict with, or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, result
in
the creation of any Lien upon any of its Property, or give to others any rights
of termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Investor debt or otherwise) or other understanding
to
which Investor is a party or by which any Property of Investor is bound or
affected, or (iii) conflict with or result in a violation of any Applicable
Laws
to which Investor is subject, or by which any Property of Investor is bound
or
affected; except in the case of each of clauses (ii) and (iii), such as could
not have or reasonably be expected to result in a Pinnacle Material Adverse
Effect.
(d)
Filings,
Consents and Approvals. Investor is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any Governmental Authority or other Person in
connection with the execution, delivery and performance by Investor of this
Agreement, other than (i) the obtaining of the Interim Order and the Final
Order, and (ii) any other required filings with one or more of the Canadian
Securities Regulatory Authorities.
(e)
Litigation.
There is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of Investor, threatened or
contemplated (including by any of the Canadian Securities Regulatory
Authorities) against or affecting Investor or any of its Property or, to the
knowledge of Investor, any current officer or director or former officer or
director of Investor before or by any Governmental Authority which (i) adversely
affects or challenges the legality, validity or enforceability of this Agreement
or (ii) could, if there were an unfavourable decision, have or reasonably be
expected to result in a Pinnacle Material Adverse Effect. Neither
Investor, nor, to the knowledge of Investor, any director or officer thereof,
is
the subject of any action involving a claim of violation of or liability under
the Applicable Laws or a claim of breach of fiduciary duty.
(f)
Funds
Available. Investor has made adequate financial arrangement prior to
the execution of this Agreement to ensure that sufficient funds are available
to
allow Investor to carry out its obligations hereunder.
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6.2
Investigation
Any
investigation by Old Lorus, New Lorus, NuChem, GeneSense or their respective
advisors will not mitigate, diminish or affect the representations and
warranties of Investor made in or pursuant to this Agreement.
6.3
No
Other Representations or Warranties
Except
for the representations and warranties contained in this Agreement or in any
other agreement or instrument contemplated hereby or by the Plan of Arrangement,
Investor makes no other express or implied representation or warranty with
respect to any matters not specifically represented herein.
ARTICLE 7
REPRESENTATION AND WARRANTIES OF PINNACLE
REPRESENTATION AND WARRANTIES OF PINNACLE
7.1
Representations
and Warranties of Pinnacle
Pinnacle
hereby represents and warrants to Old Lorus, New Lorus, GeneSense and XxXxxx
as
of the date of this Agreement as follows in this Section 7.1 and acknowledges
that Old Lorus, New Lorus, GeneSense and XxXxxx are relying upon those
representations and warranties in connection with entering into this Agreement.
(a)
Organization,
Authority. Pinnacle is an entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization with
full right, corporate power and authority to enter into and to consummate the
transactions contemplated by this Agreement and otherwise to carry out its
obligations hereunder.
(b)
Authorization;
Enforcement. The execution and delivery of this Agreement by Pinnacle
and the consummation by it of the transactions contemplated hereby have been
duly authorized by the board of directors of Pinnacle, and no further action
is
required by Pinnacle or its board of directors or shareholders, in connection
therewith. This Agreement has been (or upon delivery will have been) duly
executed by Pinnacle and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of Pinnacle enforceable against
it in accordance with its terms except:
(i)
as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally;
(ii)
as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies; and
(iii)
insofar
as indemnification and contribution provisions may be limited by Applicable
Laws.
(c)
No
Conflicts. The execution, delivery and performance of this Agreement
by Pinnacle, the completion of the transactions contemplated hereby and the
fulfillment and compliance by Pinnacle with any of the terms and provisions
hereof will not (i) conflict with or violate any provision of its certificate
or
articles of incorporation, by-laws or other organizational or constating
documents, or (ii), conflict with, or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, result
in
the creation of any Lien upon any of its Property, or give to others any rights
of termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Pinnacle debt or otherwise) or other understanding
to
which Pinnacle is a party or by which any Property of Pinnacle is bound or
affected, or (iii) conflict with or result in a violation of any Applicable
Laws
to which Pinnacle is subject, or by which any Property of Pinnacle is bound
or
affected; except in the case of each of clauses (ii) and (iii), such as could
not have or reasonably be expected to result in a Pinnacle Material Adverse
Effect.
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(d)
Filings,
Consents and Approvals. Pinnacle is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any Governmental Authority or other Person in
connection with the execution, delivery and performance by Pinnacle of this
Agreement, other than (i) the obtaining of the Interim Order and the Final
Order, and (ii) any other required filings with one or more of the Canadian
Securities Regulatory Authorities.
(e)
Litigation.
There is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of Pinnacle, threatened or
contemplated (including by any of the Canadian Securities Regulatory
Authorities) against or affecting Pinnacle or any of its Property or, to the
knowledge of Pinnacle, any current officer or director or former officer or
director of Pinnacle before or by any Governmental Authority which (i) adversely
affects or challenges the legality, validity or enforceability of this Agreement
or (ii) could, if there were an unfavourable decision, have or reasonably be
expected to result in a Pinnacle Material Adverse Effect. Neither
Pinnacle, nor, to the knowledge of Pinnacle, any director or officer thereof,
is
the subject of any action involving a claim of violation of or liability under
the Applicable Laws or a claim of breach of fiduciary duty.
(f)
Funds
Available. Pinnacle has made adequate financial arrangement prior to
the execution of this Agreement to ensure that sufficient funds are available
to
allow Pinnacle and the Investor to carry out its obligations
hereunder.
7.2
Investigation
Any
investigation by Old Lorus, New Lorus, NuChem, GeneSense or their respective
advisors will not mitigate, diminish or affect the representations and
warranties of Pinnacle made in or pursuant to this Agreement.
7.3
No
Other Representations or Warranties
Except
for the representations and warranties contained in this Agreement or in any
other agreement or instrument contemplated hereby or by the Plan of Arrangement,
Pinnacle makes no other express or implied representation or warranty with
respect to any matters not specifically represented herein.
ARTICLE 8
COVENANTS OF OLD LORUS
COVENANTS OF OLD LORUS
8.1
Covenants
of Old Lorus
Old
Lorus
covenants and agrees that, except as contemplated in this Agreement or the
Plan
of Arrangement, until the Effective Date or the day upon which this Agreement
is
terminated, whichever is earlier:
(a)
except
to
the extent required to implement the transactions contemplated by this Agreement
and except as previously disclosed in writing to or with the prior written
consent of Investor, it will conduct its business, and will cause XxXxxx and
GeneSense to conduct their respective businesses, in the usual, ordinary and
regular course of business and consistent with past practices;
(b)
except
as
previously disclosed in writing to Investor or as otherwise set out in this
Agreement, it will not, without the prior written consent of Investor, which
will not (except in the case of clause 8.1(b)(v)) be unreasonably withheld
or
delayed, directly or indirectly do or permit to occur any of the
following:
(i)
issue
or
agree to issue any of its shares or any options, warrants, calls, conversion
privileges or rights of any kind to acquire any of its shares, except pursuant
to the Old Lorus Options, Old Lorus Warrants and Old Lorus
Debentures;
(ii)
sell,
pledge, hypothecate, lease, dispose of, encumber any of its assets, which,
in
such case, are individually or in the aggregate material, or agree to do any
of
the foregoing; except
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pursuant
to the purchase and sale agreements contemplated by the Plan of Arrangement
or
in the ordinary course of business consistent with past practice;
(iii)
amend
or
propose to amend the Old Lorus Governing Documents;
(iv)
split,
combine or reclassify the Old Lorus Shares, or declare, set aside or pay any
dividend or other distribution payable in cash, stock, property or otherwise
with respect to the Old Lorus Shares;
(v)
take
any
action that results in, or could reasonably be expected to result in, Old Lorus’
tax pools being reduced;
(vi)
redeem,
purchase or offer to purchase any of its securities unless otherwise required
by
the terms of such securities;
(vii)
reorganize,
amalgamate or merge with any other person, corporation, partnership or other
business organization whatsoever;
(viii)
acquire
or, unless disclosed to Investor, agree to acquire any person, corporation,
partnership, joint venture or other business organization or division or acquire
or agree to acquire any assets, which, in each case, are individually or in
the
aggregate material or out of the ordinary course of business consistent with
past practice;
(ix)
settle
or
compromise any claim brought by any present, former or purported holder of
any
of its securities in connection with the transactions contemplated by this
Agreement or the Plan of Arrangement;
(x)
take
any
action that would interfere with or be inconsistent with the completion of
the
transactions contemplated hereby or that would render, or that reasonably may
be
expected to render, any representation or warranty made by it in this Agreement
untrue in any material respect at any time prior to the Effective Date if then
made; or
(xi)
take
any
action, refrain from taking any action, or permit any action to be taken or
not
taken, inconsistent with this Agreement or which would reasonably be expected
to
significantly impede the consummation of the Arrangement;
(c)
it
will:
(i)
use
its
reasonable commercial efforts (taking into account insurance market conditions
and offerings and industry practices) to cause its current insurance (or
re-insurance) policies not to be cancelled or terminated or any of the coverage
thereunder to lapse, except where such cancellation, termination or lapse would
not individually or in the aggregate have a Material Adverse Effect, unless
simultaneously with such termination, cancellation or lapse, replacement
policies underwritten by insurance and re-insurance companies of nationally
recognized standing providing coverage equal to or greater than the coverage
under the cancelled, terminated or lapsed policies for substantially similar
premiums are in full force and effect;
(ii)
use
its
reasonable commercial efforts to preserve intact its business organization
and
goodwill, to keep available the services of its officers, employees and
consultants as a group and to maintain satisfactory relationships with partners,
suppliers, agents, distributors, customers and others having business
relationships with it;
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(iii)
perform
and comply with all material covenants and conditions contained in all
contracts, leases, grants, agreements, permits, licences orders and documents
governing its assets or to which its assets are subject;
(iv)
obtain,
on or before the Effective Date, a discharge of the Personal Property
Security Act (Ontario) registrations against Old Lorus listed in Schedule
B;
(v)
promptly
notify Investor of any Material Adverse Change, or any change, effect, event,
occurrence or change in a state of facts which could, with the passage of time,
reasonably be expected to become or result in a Material Adverse Change, and
of
any Governmental Authority or third party written complaints, investigations
or
hearings (or communications indicating that the same may be contemplated in
respect of the Arrangement); and
(vi)
satisfy
all Officer Obligations on or prior to the Effective Date, which obligation
may
be satisfied by causing New Lorus to assume such obligations on terms and
conditions satisfactory to Investor, acting reasonably;
(d)
it
will
use its reasonable commercial efforts to satisfy (or cause the satisfaction
of)
the conditions precedent to its obligations hereunder to the extent the same
is
within its control and take, or cause to be taken, all other action and do,
or
cause to be done, all other things necessary, proper or advisable under all
Applicable Laws to complete the Arrangement, including using its reasonable
commercial efforts to:
(i)
obtain
all necessary waivers, consents and approvals required to be obtained by it
from
other parties to contracts;
(ii)
obtain
all necessary consents, approvals and authorizations that are required to be
obtained by it under any Applicable Laws;
(iii)
effect
all necessary registrations and filings and submissions of information requested
by Governmental Authorities required to be effected by it in connection with
the
Arrangement and participate and appear in any proceedings of any Party before
Governmental Authorities in connection with the Arrangement;
(iv)
oppose,
lift or rescind any injunction or restraining order or other order or action
seeking to stop, or otherwise adversely affecting the ability of the Parties
to
consummate, the transactions contemplated hereby or by the Plan of
Arrangement;
(v)
fulfil
all conditions and satisfy all provisions of this Agreement;
(vi)
cooperate
with Pinnacle and Investor in connection with the performance by it of its
obligations hereunder; and
(vii)
conduct
its affairs, and cause the affairs of each of the Subsidiaries to be conducted,
so that all of their respective representations and warranties contained
hereinwill be true and correct in all material respects on and as of the
Effective Date as if made thereon;
(e)
it
will
discuss and consider such pre-arrangement steps or amendments to the Plan of
Arrangement as may be proposed by Investor and implement such pre-arrangement
steps or such amendments that it considers to be in the best interests of the
Old Lorus Securityholders, provided such steps are agreed to in writing by
Investor;
(f)
it
will
make or cooperate as necessary in the making of all necessary filings and
applications under all Applicable Laws required in connection with the
transactions contemplated hereby and take all reasonable action necessary to
be
in compliance with such Applicable Laws;
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(g)
it
will,
in a timely and expeditious manner:
(i)
file,
proceed with and diligently prosecute an application to the Court for the
Interim Order with respect to the Arrangement, provided that, notwithstanding
the foregoing, the Parties agree to consult regarding the terms of, and the
obtaining of, the Interim Order;
(ii)
carry
out
the terms of the Interim Order;
(iii)
prepare,
in consultation with Investor, and file where required by law the Information
Circular in all jurisdictions where the same is required to be filed and mail
the same as ordered by the Interim Order and in accordance with all Applicable
Laws, complying in all material respects with all Applicable Laws on the date
of
mailing thereof and containing full, true and plain disclosure of all material
facts relating to the Arrangement and Old Lorus and not containing any
misrepresentation, as defined under such Applicable Laws, with respect
thereto;
(iv)
prepare,
in consultation with Investor, and file where required by law any mutually
agreed (or otherwise required by Applicable Laws) amendments or supplements
to
the Information Circular with respect to the Old Lorus Securityholders’ Meeting
and mail the same as required by the Interim Order and in accordance with all
Applicable Laws, in all jurisdictions where the same is required;
(v)
solicit
proxies for the approval of the Arrangement and related matters in accordance
with Applicable Laws;
(vi)
convene
the Old Lorus Securityholders’ Meeting as ordered by the Interim
Order;
(vii)
provide
notice to Investor of the Old Lorus Securityholders’ Meeting and allow
Investor’s representatives to attend the Old Lorus Securityholders’ Meeting
unless such attendance is prohibited by the Interim Order;
(viii)
conduct
the Old Lorus Securityholders’ Meeting in accordance with the Interim Order, the
Old Lorus Governing Documents and any instrument governing such meeting, as
applicable, and as otherwise required by Applicable Laws;
(ix)
subject
to the approval of the Arrangement at the Old Lorus Securityholders’ Meeting,
forthwith proceed with and diligently prosecute an application for the Final
Order; and
(x)
carry
out
the terms of the Final Order (to the extent within its power);
(h)
except
for individual proxies and other non-substantive communications and materials
relating to the Old Lorus Securityholders’ Meeting, furnish promptly to Investor
a copy of each notice, report, report of proxies submitted, schedule or other
document or communication delivered, filed or received by Old Lorus in
connection with the Arrangement or the Interim Order, the Old Lorus
Securityholders’ Meeting or any other meeting of Old Lorus Securityholders or
class of security holders which all such holders, as the case may be, are
entitled to attend, any filings under Applicable Laws and any dealings with
regulatory agencies in connection with, or in any way affecting, the
transactions contemplated herein;
(i)
subject
to the terms hereof, in a timely and expeditious manner, provide to Investor
all
information as may be reasonably requested by Investor with respect to Old
Lorus
and its business and properties;
(j)
it
will,
within two Business Days of Old Lorus receiving any written audit inquiry,
assessment, reassessment, confirmation or variation of an assessment, indication
that tax assessment is being considered, request for filing of a waiver or
extension of time or any other notice in writing relating to
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taxes,
interest, penalties, losses or tax pools (an “Assessment”),
deliver to Investor a copy thereof together with a statement setting out, to
the
extent then determinable, an estimate of the obligations, if any, of Old Lorus,
or the appropriate Affiliate, on the assumption that such Assessment is valid
and binding; and
(k)
undertake
and carry out the transactions described in the Plan of
Arrangement.
8.2
Recommendation
of the Old Lorus Board of Directors
The
Information Circular will include the recommendation of the board of directors
of Old Lorus to the Old Lorus Securityholders in respect of the Arrangement
as
set out in Section 2.5. Notwithstanding any other provision of this
Agreement, the board of directors of Old Lorus may change its recommendation
to
the Old Lorus Securityholders in respect of the Arrangement from that set forth
herein, as applicable, if such board concludes, in good faith, after receiving
the advice of outside counsel and financial advisors that is reflected in the
minutes of a meeting of the board, that such action is necessary for such board
to act in a manner consistent with its fiduciary duty or Applicable Laws and,
in
the event that Sections 8.3 or 8.4 and 12.1 are applicable, if Old Lorus
and its board are in compliance with those sections and Old Lorus has paid
any
fee applicable under Article 12. The foregoing will not relieve Old Lorus
from its obligation to proceed to call and hold the Old Lorus Securityholders’
Meeting, solicit proxies for such meeting and hold the vote of Old Lorus
Securityholders in respect of the Arrangement at such meeting.
8.3
Old
Lorus Covenant Regarding Non-Solicitation
(a)
Old
Lorus
will immediately terminate and cause to be terminated all solicitations,
initiations, encouragements, discussions or negotiations with any parties
conducted prior to the date hereof by Old Lorus, or its officers, directors,
employees, legal counsel, financial advisors, experts, representatives agents,
or other persons acting on its behalf, with respect to any Acquisition
Proposal.
(b)
Old
Lorus
will not, directly or indirectly, through any officer, director, employee,
legal
counsel, financial advisor, expert, representative, agent, or other person
acting on its behalf, solicit, initiate, invite or knowingly encourage
(including by way of furnishing confidential information or entering into any
form of agreement, arrangement or understanding) the initiation of or
participate in, any inquiries or proposals regarding an Acquisition Proposal,
provided that nothing contained in this Section 8.3 or other provisions of
this Agreement (including, without limitation, Section 8.1) will prevent
the board of directors of Old Lorus from considering, negotiating, approving
or
recommending to the Old Lorus Securityholders an agreement in respect of an
unsolicited written Acquisition Proposal:
(i)
which
did
not result from a breach of this Section 8.3(b);
(ii)
in
respect of which any required financing has been demonstrated to the
satisfaction of the board of directors of Old Lorus, acting in good faith,
to be
reasonably likely to be obtained;
(iii)
in
respect of which the board of directors of Old Lorus determines (having
consulted outside counsel) that in the exercise of its fiduciary duty it would
be necessary for such board of directors to take such action in order to avoid
breaching its fiduciary duties; and
(iv)
in
respect of which the board of directors of Old Lorus determines in good faith,
after consultation with financial advisors, if consummated in accordance with
its terms, would result in a transaction more favourable financially to its
securityholders than the Arrangement,
(any
such
Acquisition Proposal that satisfies clauses (i) through (iv) above being
referred to herein as a “Superior Proposal”).
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(c)
Old
Lorus
agrees not to release any third party from any confidentiality agreement in
respect of an Acquisition Proposal to which such third party is a party.
Old Lorus further agrees not to release any third party from any
standstill agreement to which such third party is a party, unless such third
party has made a Superior Proposal.
(d)
Old
Lorus
will promptly notify Investor of any current or any future Acquisition Proposal
of which any of Old Lorus’ directors or senior officers become aware, or any
amendments to the foregoing, or any request for non-public information relating
to Old Lorus in connection with an Acquisition Proposal or for access to the
properties, books or records or for a list of the securityholders of Old Lorus
by any person or entity that informs Old Lorus that it is considering making
an
Acquisition Proposal. Such notice will include a copy of all written
communications and a description of the material terms and conditions of any
proposal and provide such details of the proposal, inquiry or contact as
Investor may reasonably request, including without limitation the identity
of
the person and controlling person, if any, making such proposal, inquiry or
contact.
(e)
If
Old
Lorus receives a request for material non-public information from a Person
who
proposes an Acquisition Proposal in respect of Old Lorus, and the board of
directors of Old Lorus determines that such proposal would be a Superior
Proposal pursuant to Section 8.3(b), assuming the satisfactory outcome of a
due diligence condition, then, and only in such case, the board of directors
may, subject to the execution of a confidentiality agreement and provided Old
Lorus sends a copy of any such confidentiality agreement to Investor immediately
upon its execution, provide such person with access to non-public information.
Old Lorus will provide Investor with a list of the information provided to
the
person making the Superior Proposal.
(f)
Old
Lorus
will ensure that its directors and officers and any financial advisors or other
advisors or representatives retained by it are aware of the provisions of this
Section 8.3, and it will be responsible for any breach of this
Section 8.3 by its financial advisors or other advisors or
representatives.
8.4
Notice
of Superior Proposal Determination
Old
Lorus
will not accept, approve or recommend or enter into any agreement (except for
a
confidentiality agreement pursuant to Section 8.3(e)) in respect of an
Acquisition Proposal on the basis that it constitutes a Superior Proposal unless
(i) it has complied with its obligations under Section 8.3(b), (ii) it has
provided Investor with a complete copy of the Acquisition Proposal document
which has been determined to be a Superior Proposal, with such deletions as
are
necessary to protect confidential portions of such Acquisition Proposal
document, provided that material terms or conditions or the identity of the
controlling person, if any, making the Acquisition Proposal may not be deleted,
(iii) four (4) Business Days (the “Notice Period”) will have
elapsed from the later of the date Investor received notice of the determination
to accept, approve or recommend an agreement in respect of such Acquisition
Proposal, and the date Investor received a copy of the Acquisition Proposal
document, and (iv) it concurrently terminates this Agreement and pays to
Investor the non-completion fee provided for in Section 12.1. During the Notice
Period, Old Lorus will provide a reasonable opportunity to Investor to consider,
discuss and offer such adjustments in the terms and conditions of this Agreement
as would enable Old Lorus to proceed with its recommendation to the Old Lorus
Securityholders with respect to the Arrangement; provided however that any
such
adjustment will be at the discretion of Old Lorus and Investor at the time.
The
board of directors of Old Lorus will review in good faith any offer made by
Investor to amend the terms of this Agreement in order to determine, in its
discretion, as part of its exercising its fiduciary duties, whether the proposed
amendments would, upon acceptance, result in such Superior Proposal ceasing
to
be a Superior Proposal. If the board of directors of Old Lorus determines that
the Superior Proposal would cease to be a Superior Proposal, it will so advise
Investor and will accept the offer by Investor to amend the terms of this
Agreement and Old Lorus and Investor agree to take such actions and execute
such
documents as are necessary to give effect to the foregoing. If the board of
directors of Old Lorus continues to believe, in good faith and after
consultation with financial advisors and outside counsel, that such Superior
Proposal remains a Superior Proposal and therefore rejects the amendments
offered by Investor, Old Lorus may, subject to the terms of this Agreement
including payment of the non-completion fee provided for in Section 12.1,
accept, approve, recommend or enter into an agreement, understanding or
arrangement in respect of such Superior Proposal. Each successive material
modification of any Acquisition Proposal or a Superior Proposal will constitute
a new Acquisition Proposal for the purposes of this Section 8.4 and will
require a four (4) Business Day Notice Period from the
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date
such
amendment is communicated to Investor. Information provided hereunder will
constitute confidential information under the Confidentiality
Agreement.
8.5
Access
to Information
Subject
to the Confidentiality Agreementand Applicable Laws, upon reasonable notice,
Old
Lorus will afford the officers, employees, counsel, accountants and other
authorized representatives and advisors of Pinnacle and Investor access, during
normal business hours from the date hereof and until the earlier of the
Effective Date or the termination of this Agreement, to its properties, books,
contracts and records as well as to its management personnel, and, during such
period, Old Lorus will furnish promptly to Pinnacle and Investor (without
duplication) all information concerning its business, properties and personnel
as Pinnacle or Investor may reasonably request.
ARTICLE 9
COVENANTS OF INVESTOR
COVENANTS OF INVESTOR
9.1
Covenants
of Investor
Investor
covenants in favour of Old Lorus, NuChem, GeneSense and New Lorus and agrees
that, except as contemplated in this Agreement or the Plan of Arrangement,
until
the Effective Date or the day upon which this Agreement is terminated, whichever
is earlier:
(a)
it
will:
(i)
not
take
any action, refrain from taking any action, or permit any action to be taken
or
not taken that would interfere with or be inconsistent with the completion
of
the transactions contemplated hereby or that would render, or that reasonably
may be expected to render, any representation or warranty made by it in this
Agreement untrue in any material respect at any time prior to the Effective
Date
if then made; and
(ii)
promptly
notify Old Lorus of receipt by Investor of any Governmental Authority or third
party written complaints, investigations or hearings (or communications
indicating that the same may be contemplated) in respect of the
Arrangement;
(b)
it
will
use all reasonable commercial efforts to satisfy (or cause the satisfaction
of)
the conditions precedent to its obligations hereunder to the extent the same
is
within its control and take, or cause to be taken, all other action and do,
or
cause to be done, all other things necessary, proper or advisable under all
Applicable Laws to complete the Arrangement, including using its reasonable
commercial efforts to:
(i)
obtain
all necessary waivers, consents and approvals required to be obtained by it
from
other parties to contracts;
(ii)
obtain
all necessary consents, approvals and authorizations that are required to be
obtained by it under any Applicable Laws;
(iii)
effect
all necessary registrations and filings and submissions of information requested
by Governmental Authorities required to be effected by it in connection with
the
Arrangement and participate and appear in any proceedings of any Party before
Governmental Authorities in connection with the Arrangement;
(iv)
oppose,
lift or rescind any injunction or restraining order or other order or action
seeking to stop, or otherwise adversely affecting the ability of the Parties
to
consummate, the transactions contemplated hereby or by the Plan of
Arrangement;
(v)
fulfil
all conditions and satisfy all provisions of this Agreement;
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(vi)
cooperate
with Old Lorus in connection with the performance by it of its obligations
hereunder; and
(vii)
conduct
its affairs so that all of its representations and warranties contained herein
will be true and correct in all material respects on and as of the Effective
Date as if made thereon;
(c)
it
will
discuss and consider such pre-arrangement steps or amendments to the Plan of
Arrangement as may be proposed by Old Lorus and implement such pre-arrangement
steps or such amendments that it considers to be in its best interests, provided
such steps are agreed to in writing by Old Lorus;
(d)
it
will
make or cooperate as necessary in the making of all necessary filings and
applications under all Applicable Laws required in connection with the
transactions contemplated hereby and take all reasonable action necessary to
be
in compliance with such laws; and
(e)
it
will,
subject to the terms hereof, in a timely and expeditious manner, provide to
Old
Lorus all information as may be reasonably requested by Old Lorus or as required
by the Interim Order or Applicable Laws with respect to Investor and its
business and properties.
ARTICLE 10
COVENANTS OF PINNACLE
COVENANTS OF PINNACLE
10.1
Covenants
of Pinnacle
Pinnacle
covenants in favour of Old Lorus, NuChem, GeneSense and New Lorus and agrees
that, except as contemplated in this Agreement or the Plan of Arrangement,
until
the Effective Date or the day upon which this Agreement is terminated, whichever
is earlier:
(a)
it
will:
(i)
not
take
any action, refrain from taking any action, or permit any action to be taken
or
not taken that would interfere with or be inconsistent with the completion
of
the transactions contemplated hereby or that would render, or that reasonably
may be expected to render, any representation or warranty made by it in this
Agreement untrue in any material respect at any time prior to the Effective
Date
if then made; and
(ii)
promptly
notify Old Lorus of receipt by Pinnacle of any Governmental Authority or third
party written complaints, investigations or hearings (or communications
indicating that the same may be contemplated) in respect of the
Arrangement;
(b)
it
will
use all reasonable commercial efforts to satisfy (or cause the satisfaction
of)
the conditions precedent to its obligations hereunder to the extent the same
is
within its control and take, or cause to be taken, all other action and do,
or
cause to be done, all other things necessary, proper or advisable under all
Applicable Laws to complete the Arrangement, including using its reasonable
commercial efforts to:
(i)
fulfil
all conditions and satisfy all provisions of this Agreement;
(ii)
cooperate
with Old Lorus in connection with the performance by it of its obligations
hereunder; and
(iii)
conduct
its affairs so that all of its representations and warranties contained herein
will be true and correct in all material respects on and as of the Effective
Date as if made thereon; and
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(c)
it
will,
subject to the terms hereof, in a timely and expeditious manner, provide to
Old
Lorus all information as may be reasonably requested by Old Lorus or as required
by the Interim Order or Applicable Laws with respect to Pinnacle and its
business and properties.
ARTICLE 11
CONDITIONS PRECEDENT
CONDITIONS PRECEDENT
11.1
Mutual
Conditions Precedent
The
respective obligations of the Parties hereto to consummate the transactions
contemplated hereby, and in particular the Arrangement, are subject to the
satisfaction, on or before the Effective Date or such other time as is specified
below, of the following conditions, any of which may be waived by the mutual
consent of such Parties without prejudice to their right to rely on any other
of
such conditions:
(a)
the
Interim Order will have been granted in form and substance satisfactory to
each
of Old Lorus and Investor, acting reasonably and will not have been set aside
or
modified in a manner unacceptable to such parties, acting reasonably, on appeal
or otherwise;
(b)
on
or
before June 30, 2007, the Arrangement Resolution will have been passed by the
Old Lorus Securityholders in form and substance satisfactory to each of Old
Lorus and Investor, acting reasonably, duly approving the Arrangement in
accordance with the Interim Order and the requirements of applicable Securities
Laws, as applicable;
(c)
on
or
before July 15, 2007, the Final Order will have been granted in form and
substance satisfactory to each of Old Lorus and Investor each acting
reasonably;
(d)
each
of
the Lock-Up Holders will have (i) voted all Old Lorus Shares held by, or under
the control or direction of, them in favour of the Arrangement, and (ii) agreed,
subject to certain terms and conditions, to sell to Investor at the Effective
Time all of the Old Lorus Voting Shares (as defined in the Plan of Arrangement)
held by each Lock-Up Holder pursuant to written documentation (which remains
in
full force and effect) in form and substance satisfactory to each of Old Lorus
and Investor, each acting reasonably, and the Investor, acting reasonably,
will
be satisfied that no condition exists that has resulted in, or could result
in,
any of the Lock-Up Holders failing to sell all of its Old Lorus Voting Shares
to
the Investor pursuant to the Arrangement;
(e)
the
Articles of Arrangement, together with the Final Order, to be filed with the
Director in accordance with the Arrangement and Section 192(6) of the CBCA,
will be in form and substance satisfactory to each of Old Lorus and Investor,
each acting reasonably;
(f)
the
TSX
will have accepted notice of the Arrangement and the transactions contemplated
thereby and will have approved the listing of the New Lorus Shares, subject
only
to the conditions that may be imposed by the TSX;
(g)
the
AMEX
will have accepted notice of the Arrangement and the transactions contemplated
and will have approved the listing of the New Lorus Shares, subject only to
the
conditions that may be imposed by the AMEX;
(h)
subject
to Section 11.4(c), the Arrangement will have become effective on or before
the
Outside Date;
(i)
there
will be no action taken under any Applicable Law that:
(i)
makes
illegal or otherwise directly or indirectly restrains, enjoins or prohibits
the
Arrangement or any other transactions contemplated herein;
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31
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(ii)
results
in a judgment or assessment of material damages directly or indirectly relating
to the transactions contemplated herein; or
(iii)
has
had
or, if the Arrangement was consummated, would reasonably be expected to result
in, a Material Adverse Effect on Old Lorus, NuChem, GeneSense, New Lorus,
Pinnacle or Investor;
(j)
the
Pinnacle Share Purchase Agreement contemplated by the Plan of Arrangement will
have been executed on terms satisfactory to New Lorus and Investor, acting
reasonably, in accordance with this Agreement;
(k)
the
Escrow Agreement will have been executed on terms satisfactory to the Investor
and New Lorus, acting reasonably;
(l)
each
of
the Asset Transfer Agreements and the Subsidiary Share Transfer Agreements
will
have been executed and delivered by each of the parties thereto and each of
the
transactions contemplated by such agreements will have been completed in
accordance with the terms thereof;
(m)
the
Indemnification Agreement will have been executed on terms satisfactory to
Investor, New Lorus and Old Lorus, each acting reasonably, in accordance with
this Agreement;
(n)
no
material action or proceeding will be pending or threatened by any Person or
Governmental Authority to enjoin or prohibit the Arrangement from being
completed, or result in a judgment in material damages relating to the
transaction as contemplated herein;
(o)
other
than the Lock-Up Holders (except to the extent that any Lock-Up Holder has
terminated any agreement contemplated by Section 11.1(d)), no Person, whether
alone or jointly or in concert with others, will, immediately prior to the
Effective Date, beneficially own, or exercise control or direction over, more
than 10% of the then issued and outstanding Old Lorus Shares;
(p)
immediately
prior to the Effective Date, the Lock-Up Holders (together with any person
acting jointly or in concert with the Lock-Up Holders) will not beneficially
own, or exercise control or direction over, in the aggregate, more than 25%
of
the then issued and outstanding common shares of Old Lorus; and
(q)
Pinnacle,
in its reasonable judgment, will be satisfied that, immediately prior to the
Effective Time, Old Lorus shareholders resident in the United States do not
hold, in the aggregate, more than 10% of the outstanding Old Lorus
Shares.
The
foregoing conditions are for the mutual benefit of each of Old Lorus and
Investor and may be asserted by each of Old Lorus and Investor regardless of
the
circumstances and may be waived by each of Old Lorus and Investor in their
sole
discretion, in whole or in part, at any time and from time to time without
prejudice to any other rights which Old Lorus or Investor may
have.
11.2
Conditions
to Obligations of Old Lorus
The
obligations of Old Lorus to consummate the transactions contemplated hereby,
and
in particular the Arrangement, are subject to the satisfaction, on or before
the
Effective Date or such other time as is specified below, of the following
conditions:
(a)
each
of
the acts and undertakings of Pinnacle and Investor to be performed on or before
the Effective Date pursuant to the terms of this Agreement will have been duly
performed by Pinnacle and Investor in accordance with the terms of this
Agreement and the Plan of Arrangement;
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(b)
except
as
affected by the transactions contemplated by this Agreement, the representations
and warranties of Investor contained in Section 6.1 and the representations
and
warranties of Pinnacle contained in Section 7.1 will be true and correct in
all
material respects on the Effective Date with the same force and effect as though
such representations and warranties had been made at and as of such time (except
to the extent that such representations and warranties speak as of a particular
date) except where the failure of such representations and warranties to be
true
and correct would not have a Material Adverse Effect on Pinnacle or Investor,
and both Pinnacle and Investor will have complied in all material respects
with
their respective covenants in this Agreement and Old Lorus will have received
certificates to that effect, dated the Effective Date, from a senior officer
of
each of Pinnacle and Investor, respectively, acting solely on behalf of the
company in question and not in his personal capacity, to the best of his
information and belief having made reasonable inquiry and Old Lorus will have
no
actual knowledge to the contrary;
(c)
there
will not have occurred a Material Adverse Change in respect of Pinnacle or
Investor;
(d)
all
requisite consents, orders, approvals and authorizations, including, without
limitation, regulatory and judicial approvals and orders, required or necessary
for the completion of the Arrangement will have been completed or obtained
on
terms and conditions satisfactory to Old Lorus, acting reasonably, and all
applicable statutory or regulatory waiting periods to the transactions
contemplated under the Arrangement, will have been expired or been terminated,
and no objection or opposition will have been filed, initiated or made by any
regulatory authority during any applicable statutory or regulatory
period;
(e)
holders
of Old Lorus Shares will not have exercised the Dissent Rights or similar
rights, and will not have instituted proceedings to exercise the Dissent Rights
or similar rights in connection with the Arrangement (other than holders of
Old
Lorus Shares representing, in the aggregate, not more than 2.5% of the
outstanding Old Lorus Shares);
(f)
Old
Lorus
will have received a written fairness opinion from Deloitte & Touche LLP
confirming its preliminary opinion that the consideration to be issued pursuant
to the Arrangement is fair, from a financial point of view, to the Old Lorus
Securityholders, which opinion will have been included in the Information
Circular; and
(g)
there
being no change in law (including a proposal by the Minister of Finance of
Canada to amend the Income Tax Act (Canada) or any announcement,
governmental or regulatory initiative, condition, event or development involving
a change or a prospective change) that in the judgment of Old Lorus, acting
reasonably, directly or indirectly, has or may have a Material Adverse Effect
on
or with respect to Old Lorus, GeneSense, XxXxxx or New Lorus, with respect
to
the regulatory regime applicable to their respective businesses and operations,
or with respect to consummating the transactions contemplated by the Plan of
Arrangement.
The
conditions in this Section 11.2 are for the exclusive benefit of Old Lorus
and may be asserted by Old Lorus regardless of the circumstances or may be
waived by Old Lorus in its sole discretion, in whole or in part, at any time
and
from time to time without prejudice to any other rights which Old Lorus may
have.
11.3
Conditions
to Obligations of Pinnacle and Investor
The
obligations of Pinnacle and Investor to consummate the transactions contemplated
hereby, are subject to the satisfaction, on or before the Effective Date or
such
other time as is specified below, of the following conditions:
(a)
each
of
the acts and undertakings of each of Old Lorus, NuChem, GeneSense and New Lorus
to be performed on or before the Effective Date pursuant to the terms of this
Agreement will have been duly performed by each of Old Lorus, NuChem, GeneSense
and New Lorus in accordance with the terms of this Agreement and the Plan of
Arrangement;
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(b)
except
as
affected by the transactions contemplated by this Agreement, the representations
and warranties of Old Lorus contained in Section 4.1 and of New Lorus contained
in Section 5.1 will be true in all material respects on the Effective Date
with
the same force and effect as though such representations and warranties had
been
made at and as of such time (except to the extent such representations and
warranties speak as of a particular date) except where the failure of such
representations and warranties to be true and correct would not have a Material
Adverse Effect on Old Lorus, and Old Lorus will have complied in all material
respects with its covenants in this Agreement and Investor will have received
certificates to that effect, dated the Effective Date, from a senior officer
of
each of Old Lorus, NuChem, GeneSense and New Lorus respectively, acting solely
on behalf of the company in question and not in his personal capacity, to the
best of his information and belief having made reasonable inquiry and Investor
will have no actual knowledge to the contrary provided that, Old Lorus will
have
the ability in such certificate to update the representation and warranty of
Old
Lorus contained in Section 4.1(g) hereof as at the Effective Date;
(c)
there
will not have occurred any Material Adverse Change in respect of Old Lorus
or
any Subsidiary;
(d)
the
directors and officers of Old Lorus identified by Investor will have provided
their resignations, together with mutual releases in favour of Old Lorus and
Investor, effective on the Effective Date, each in a form and substance and
on
such terms as are satisfactory to Investor, acting reasonably;
(e)
Old
Lorus
will not have declared or paid any dividends or made any other distributions
of
any of its securities or granted any further options or warrants or any right
or
privilege capable of becoming an option or agreement in respect of its
securities;
(f)
Investor
will be satisfied that all steps have been taken to ensure that all liabilities
and obligations of Old Lorus will have been paid or otherwise extinguished
or
assumed and Investor will have received such releases or other evidence of
the
satisfaction or assumption of such liabilities, as Investor, in its sole
discretion considers appropriate or necessary;
(g)
all
security registrations against Old Lorus will have been discharged;
and
(h)
there
being no change in law (including a proposal by the Minister of Finance of
Canada to amend the Income Tax Act (Canada) or any announcement,
governmental or regulatory initiative, condition, event or development involving
a change or a prospective change) that in the judgment of Investor or Pinnacle,
acting reasonably, directly or indirectly, has or may have a Material Adverse
Effect on or with respect to Old Lorus, GeneSense or XxXxxx, with respect to
the
regulatory regime applicable to their respective businesses and operations,
or
with respect to consummating the transactions contemplated by the Plan of
Arrangement.
The
conditions described in this Section 11.3 are for the exclusive benefit of
Investor and may be asserted by Investor regardless of the circumstances or
may
be waived by Investor in its sole discretion, in whole or in part, at any time
and from time to time without prejudice to any other rights which Investor
may
have.
11.4
Notice
and Cure Provisions and Effect of Failure to Comply with
Conditions
(a)
Each
of
Old Lorus, NuChem, GeneSense, New Lorus, Pinnacle and Investor will give prompt
notice to the others of the occurrence, or failure to occur, at any time from
the date hereof to the Effective Date of any event or state of facts which
occurrence or failure would, or would be likely to, (i) cause any of the
representations or warranties of any Party contained herein to be untrue or
inaccurate in any material respect, or (ii) result in the failure to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by any Party hereunder provided, however, that no such notification
will affect the representations or warranties of the Parties or the conditions
to the obligations of the Parties hereunder.
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(b)
Subject
to Section 11.4(c), if any of the conditions precedents set forth in
Sections 11.1, 11.2 or 11.3 hereof will not be complied with or waived by
the Party for whose benefit such conditions are provided on or before the date
required for the performance thereof, then the Party for whose benefit the
condition precedent is provided may, in addition to any other remedies they
may
have at law or equity, rescind and terminate this Agreement pursuant to Section
14.1 provided that the Party intending to rely thereon has delivered a written
notice to the other Parties, specifying in reasonable detail all breaches of
covenants, representations and warranties or other matters which the Party
delivering such notice is asserting as the basis for the non-fulfilment of
the
applicable conditions precedent. If any such notice is delivered, provided
that a Party is proceeding diligently to cure such matter and such matter is
capable of being cured (except matters arising out of the failure to make
appropriate disclosure in the Disclosure Letter delivered on the date of
execution of this Agreement) no Party may terminate this Agreement until the
later of the Outside Date and the expiration of a period of 30 days from the
date of such notice. If such notice has been delivered prior to the date of
the
Old Lorus Securityholders’ Meeting, such meeting will be postponed until the
expiry of such period. If such notice has been delivered prior to the making
of
the applications for Final Order or the filing of the Articles of Arrangement,
such applications and such filings will be postponed until the expiry of such
period. More than one such notice may be delivered by a Party.
(c)
If
the
conditions precedent set forth in Section 11.1(o) cannot be satisfied at the
Effective Date, the Effective Date will be reset to the date that is three
Business Days after the first date that such condition precedent can be complied
with, provided that the Effective Date occurs on or prior to July 31, 2007
or such other date as agreed in writing by the Parties.
11.5
Satisfaction
of Conditions
The
conditions set out in this Article 11 are conclusively deemed to have been
satisfied, waived or released when, with the agreement of the Parties, Articles
of Arrangement are filed under the CBCA to give effect to the
Arrangement.
ARTICLE 12
AGREEMENT AS TO NON-COMPLETION FEE
AGREEMENT AS TO NON-COMPLETION FEE
12.1
Lorus
Non-Completion Fee
If
at any
time after the execution of this Agreement and prior to the termination of
this
Agreement pursuant to Article 14:
(a)
the
board
of directors of Old Lorus withdraws, qualifies or changes any of its
recommendations or determinations referred to in Section 2.5(a) in a manner
adverse to Investor or resolves to do so prior to the Effective Date; provided
that if the board of directors of Old Lorus determines in good faith that
Pinnacle or Investor is in material breach of any of its representations,
warranties or covenants hereunder and communicates such determination to the
Old
Lorus Securityholders, such communication will not constitute a withdrawal
or
qualification of the recommendation of the board of directors of Old Lorus
referred to in Section 2.5(a); or
(b)
Old
Lorus
accepts, approves, recommends or enters into any contractual agreement with
any
Person in respect of an Acquisition Proposal prior to the Old Lorus
Securityholders’ Meeting, excluding a confidentiality agreement entered into in
compliance with Section 8.3; or
(c)
except
as
contemplated by Section 8.4 with respect to Investor’s right to respond to any
Superior Proposal, Old Lorus publicly announces its intention to do any of
the
foregoing; or
(d)
the
Old
Lorus Securityholders’ Meeting is cancelled, adjourned or postponed except with
the prior written consent of Pinnacle.
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(each
of
the above being a “Lorus Payment Event”), then Old Lorus will
pay to Investor the amount of $600,000 as a non-completion fee in immediately
available funds to an account designated by Investor within two Business Days
after the occurrence of any one of the Lorus Payment Events.
Notwithstanding anything to the contrary, if a payment has been made under
any of Section 12.1(a), 12.1(b), 12.1(c) or 12.1(d), no further payment will
be
required under any of Section 12.1(a), 12.1(b), 12.1(c) or
12.1(d).
12.2
Pinnacle
Non-Completion Fee
If
at any
time after the execution of this Agreement and prior to the termination of
this
Agreement pursuant to Article 14, except in the event that the board of
directors of Pinnacle or Investor determines in good faith that Old Lorus is
in
material breach of any of its representations, warranties or covenants
hereunder, the board of directors of Pinnacle or Investor withdraws its approval
for the entering into of this Agreement or, resolves to do so prior to the
Effective Date (a “Pinnacle Payment Event”), then Pinnacle and
Investor will be liable to pay to Old Lorus, on a joint and several basis,
the
amount of $600,000 as a non-completion fee in immediately available funds to
an
account designated by Old Lorus within two Business Days after the occurrence
of
any one of the Pinnacle Payment Events.
12.3
Liquidated
Damages
Each
Party acknowledges that the amounts set out in Sections 12.1 and 12.2 represent
liquidated damages which are a genuine pre-estimate of the damages, including
opportunity costs, which Investor or Old Lorus, as applicable, will suffer
or
incur as a result of the event giving rise to such damages and resultant
termination of this Agreement, and are not penalties. Each Party
irrevocably waives any right it may have to raise as a defence that any such
liquidated damages are excessive or punitive.
12.4
Limited
Remedy
For
greater certainty, each of Investor and Old Lorus agrees that the compensation
or damages to be received pursuant to this Article 12 is the sole remedy in
compensation or damages of Investor and Old Lorus in respect of a Lorus Payment
Event or a Pinnacle Payment Event, as applicable, provided however that nothing
contained in this Article 12 or Section 14.1, including the payment of
an amount under this Article 12, will relieve or have the effect of
relieving Pinnacle, Investor or Old Lorus, in any way from liability for damages
incurred or suffered by Pinnacle, Investor or Old Lorus as a result of a breach
of this Agreement by Pinnacle, Investor or Old Lorus, as applicable, acting
in
bad faith with a clear intent and design to prevent the conditions precedent
to
this Agreement’s completion from being satisfied. Nothing herein will preclude a
Party from seeking injunctive relief to restrain any breach or threatened breach
of the covenants or agreements set forth in this Agreement or the
Confidentiality Agreement or otherwise to obtain specific performance of any
of
such act, covenant or agreement.
ARTICLE 13
IDEMNIFICATION
IDEMNIFICATION
13.1
Indemnification
by Old Lorus and New Lorus
Subject
to Section 13.2(b) hereof, each of Old Lorus and New Lorus hereby covenants
and
agrees to indemnify and save harmless Pinnacle, Investor and their respective
directors, officers and employees (collectively, the “Indemnified
Parties”) from and against all liabilities, claims, losses (excluding
loss of profits and indirect or consequential losses), costs (including without
limitation legal fees and disbursements on a solicitor and his own client basis)
fines, penalties, damages and expenses to which any Indemnified Party may
be subject or may suffer or incur, whether under the provisions of any statute
or otherwise, in any way caused by or arising directly or indirectly by reason
or in consequence of:
(i)
any
incorrectness in or breach of any representation or warranty of Old Lorus or
New
Lorus contained in this Agreement or any other certificate or instrument
executed and delivered pursuant to this Agreement;
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(ii)
any
information or statement contained in the Information Circular relating to
Old
Lorus or New Lorus (other than the Pinnacle Information) or the business,
operations, results of operations, assets, capitalization, financial condition,
rights, liabilities or prospects of Old Lorus or New Lorus and whether on a
prospective or pro forma basis (other than the Pinnacle Information), containing
a misrepresentation; or
(iii)
any
breach of any covenant or other obligation of Old Lorus or New Lorus contained
herein.
If
any
matter or thing contemplated by this Section 13.1 (any such matter or thing
being hereinafter referred to as a “Claim”) is asserted against
the Indemnified Party, or if any potential Claim contemplated by this
Section 13.1 will come to the knowledge of the Indemnified Party, the
Indemnified Party will notify Old Lorus and New Lorus as soon as possible of
the
nature of such Claim (provided that any failure to so notify will not affect
Old
Lorus’ or New Lorus’ liabilities under this Section 13.1 except to the
extent that the failure materially prejudices Old Lorus or New Lorus and Old
Lorus and New Lorus will, subject as hereinafter provided, be entitled (but
not
required) at their expense to assume the defence of any suit brought to enforce
such Claim; provided, however, that the defence will be conducted through legal
counsel acceptable to the Indemnified Party, acting reasonably. No admission
of
liability or settlement of any such Claim may be made by Old Lorus, New Lorus
or
any Indemnified Party, without, in each case, the prior written consent of
the
other party, such consent not to be unreasonably withheld. In respect of any
such Claim, the Indemnified Party will have the right to retain separate or
additional counsel to act on its behalf and participate in the defence thereof;
provided that the fees and disbursements of such counsel will be paid by the
Indemnified Party unless Old Lorus or New Lorus does not assume the defence
of
such suit on behalf of the Indemnified Party within three Business Days of
Old
Lorus receiving notice of such Claim; or the named party to any such Claim
(including any added third or interpleaded party) include both the Indemnified
Party, on the one hand, and Old Lorus and New Lorus on the other hand, and
the
Indemnified Party will have been advised by their counsel that representation
of
both parties by the same counsel would be inappropriate due to the actual or
potential differing interests between them (in which case Old Lorus or New
Lorus
will not have the right to assume the defence of such Claim but will be liable
to pay the reasonable fees and expenses of counsel for the Indemnified
Party).
13.2
Limitation
on Indemnification by Old Lorus and New Lorus
(1)
Notwithstanding
the provisions of Section 13.1 and except in the case of fraud:
(a)
neither
Old Lorus nor New Lorus will have any obligation to indemnify an Indemnified
Party for any Claims contemplated by Section 13.1(i) or Section 13.1(ii) in
excess, either individually or in the aggregate, of the purchase price paid
by
Investor to New Lorus for the shares of Old Lorus pursuant to the Pinnacle
Share
Purchase Agreement (and for the purposes of this Section 13.2(1)(a), all Claims
(as determined by a non-appealable court of competent jurisdiction or pursuant
to a binding settlement between the parties) by an Indemnified Party will be
aggregated with all claims and demands by the Purchaser Indemnified Parties
(as
defined in the Pinnacle Share Purchase Agreement) pursuant to section 7.02
of
the Pinnacle Share Purchase Agreement); and
(b)
neither
Old Lorus nor New Lorus will have any obligation to indemnify an Indemnified
Party under Section 13.1 for any Claim contemplated by Section 13.1(i) or
Section 13.1(ii) unless the amount of such Claim, or series of related Claims,
exceeds an amount equal to $20,000, in which case Old Lorus and New Lorus will,
subject to Section 13.2(2), be liable for all such Claims.
(2)
Notwithstanding
any other provision of this Agreement, (i) up to the Effective Time, the
obligations of Old Lorus and New Lorus under Section 13.1 will be joint and
several, and (ii) from and after the Effective Time, Old Lorus will have no
liability whatsoever with respect to any claim for indemnification under Section
13.1 made against New Lorus, whether or not such claim relates to any matter
or
thing arising prior to the Effective Time. New Lorus agrees that it will
not make any claim or take any proceeding against Old Lorus with respect to
any
matter which any Indemnified Party is entitled to indemnification under Section
13.1 which may result in any claim arising against Old Lorus for
contribution or indemnity or other relief.
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13.3
Indemnification
by Pinnacle and Investor
Each
of
Pinnacle and Investor hereby covenants and agrees to indemnify Old Lorus,
GeneSense, XxXxxx and New Lorus and their directors, officers and employees
on a
joint and several basis with respect to from and against all liabilities,
claims, losses (excluding loss of profits and indirect or consequential losses),
costs (including without limitation legal fees and disbursements on a solicitor
and his own client basis) fines, penalties, damages and expenses to which
any Indemnified Party (as defined below) may be subject or may suffer or incur,
whether under the provisions of any statute or otherwise, in any way caused
by
or arising directly or indirectly by reason or in consequence of:
(i)
any
incorrectness in or breach of any representation or warranty of Pinnacle or
Investor contained in this Agreement or any other certificate or instrument
executed and delivered pursuant to this Agreement;
(ii)
any
misrepresentation in the Pinnacle Information; or
(iii)
any
breach of any covenant or other obligation of Pinnacle or Investor contained
herein;
and
the
provisions of subsection 13.1 will apply mutatis mutandis to such indemnity,
with Old Lorus, GeneSense, XxXxxx and New Lorus and their directors, officers
and employees as the “Indemnified Party”.
13.4
Limitation
on Indemnification by Pinnacle and Investor
Notwithstanding
the provisions of Section 11.3 and except in the case of fraud:
(a)
neither
Pinnacle nor Investor will have any obligation to indemnify Old Lorus,
GeneSense, XxXxxx or New Lorus or any of their respective directors, officers
and employees for any Claims contemplated by Section 13.3(i) or Section 13.3(ii)
in excess, either individually or in the aggregate, of the purchase price paid
by Investor to New Lorus for shares of Old Lorus pursuant to the Pinnacle Share
Purchase Agreement (and for the purposes of this Section 13.4(a), all Claims
by
Old Lorus, GeneSense, XxXxxx or New Lorus or any of their respective directors,
officers and employees will be aggregated with all claims and demands by New
Lorus pursuant to section 7.02 of the Pinnacle Share Purchase Agreement);
and
(b)
neither
Pinnacle nor Investor will have any obligation to indemnify Old Lorus,
GeneSense, XxXxxx or New Lorus or any of their respective directors, officers
and employees under Section 13.3 for any Claim contemplated by Section 13.3(i)
or Section 13.3(ii) unless the amount of such Claim, or series of related
Claims, exceeds an amount equal to $20,000, in which case Pinnacle and Investor
will be liable for all such Claims.
13.5
Exclusive
Remedy
From
and
after the completion of the transactions herein contemplated, the rights of
indemnity set forth in this Article 13 are the sole and exclusive remedies
of each party in respect of any inaccuracy or misrepresentation in any
representation or warranty, or breach of covenant or other obligation by another
Party under this Agreement, other than as set out in Article 12.
Accordingly, each of the Parties waive, from and after the Effective Date,
any and all rights, remedies and claims that such Party may have against another
Party, whether at law, under any statute or in equity (including claims for
contribution or other rights of recovery arising under any Environmental Law,
claims for breach of contract, breach of representation and warranty, negligent
representation and all claims for breach of duty), or otherwise, directly or
indirectly, relating to the provisions of this Agreement other than any right,
remedy or claim of such party (i) expressly provided for in Article 12 or
Article 13, (ii) arising with respect to any fraud, and (iii) under or
arising with respect to any agreement (other than this Agreement) to which
such
Party is a party. This Article 13 will remain in full force and
effect in all circumstances and will not be terminated by any breach
(fundamental, negligent or otherwise) by any Party of its representations,
warranties, covenants or other obligations under this Agreement or under any
ancillary document or by any termination or rescission of this Agreement by
any
Party.
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13.6
Survival
All
covenants, representations and warranties of each Party contained in this
Agreement will survive the completion of the Arrangement and will continue
in
full force and effect, subject to the provisions of this
Article 13.
ARTICLE 14
TERMINATION, AMENDMENT AND WAIVER
TERMINATION, AMENDMENT AND WAIVER
14.1
Termination
Subject
to Section 14.2, this Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the Arrangement by the
Old
Lorus Securityholders, by the mutual agreement of Old Lorus and Investor or
by
written notice promptly given to the other Parties based on the
following:
(a)
by
either
Old Lorus or Investor, with respect to termination rights specified in
Section 11.1, 11.2 or 11.3, other than as a result of a breach of this
Agreement by the terminating Party which has not been cured in accordance with
Section 11.4;
(b)
by
Investor upon the occurrence of a Lorus Payment Event as provided in Section
12.1;
(c)
by
Old
Lorus upon the acceptance of a Superior Proposal pursuant to, and in accordance
with, Sections 8.3 and 8.4 but only so long as the Arrangement has not been
approved by the requisite majority of Old Lorus Securityholders; or
(d)
by
Old
Lorus upon the occurrence of a Pinnacle Payment Event as provided in Section
12.2.
This
Agreement will be automatically terminated if the Old Lorus Securityholders
do
not approve the Arrangement at the Old Lorus Securityholders’
Meeting.
14.2
Effect
of Termination
In
the
event of the termination of this Agreement as provided in Section 14.1,
this Agreement will forthwith have no further force or effect and there will
be
no obligation on the part of Old Lorus, NuChem, GeneSense, New Lorus or Investor
hereunder except as set forth in Article 12, which provisions will survive
the termination of this Agreement. Nothing in this Section 14.2 will
relieve any Party from liability for any breach of this
Agreement.
14.3
Amendment
This
Agreement may be amended by mutual agreement between the Parties. This Agreement
may not be amended except by an instrument in writing signed by the appropriate
officers on behalf of each of the Parties.
14.4
Waiver
Old
Lorus, NuChem, GeneSense and New Lorus, on the one hand, and Investor, on the
other hand, may:
(i)
extend
the time for the performance of any of the obligations or other acts of the
other;
(ii)
waive
compliance with any of the agreements of the other or the fulfillment of any
conditions to its own obligations contained herein; or
(iii)
waive
inaccuracies in any of the representations or warranties of the other contained
herein or in any document delivered by the other; provided, however, that any
such extension or waiver will be valid only if set forth in an instrument in
writing signed on behalf of such Party.
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ARTICLE 15
CLOSING
CLOSING
15.1
Closing
Date
The
date
of Closing will be the date selected by Old Lorus and Investor, which date,
subject to Section 11.4(c) will not be later than the date that is fifteen
(15)
days following the receipt of such the Final Order (or such later date as Old
Lorus and Pinnacle may agree), and on such date the Closing will occur in
accordance with Sections 15.2 and 15.3 (the “Closing
Date”).
15.2
Effect
of Closing
On
the
Closing Date, as promptly as practicable after the satisfaction or, to the
extent permitted hereunder, the waiver of the conditions set forth in
Article 11, the Parties will cause the Arrangement to be consummated by the
filing of the Articles of Arrangement and any other necessary documents prepared
in accordance with the provisions of this Agreement and the CBCA with the
Director in accordance with the CBCA, and at the Effective Time on the Effective
Date, as specified in the Plan of Arrangement and the other transactions
contemplated by the Plan of Arrangement will occur.
15.3
Place
of Closing
The
Closing as detailed in Section 15.2 will take place at the offices of
XxXxxxxx in Toronto, Ontario at the Closing Timeon the Closing
Date.
15.4
Other
Closing Matters
In
addition to the other matters required to be delivered under the terms and
conditions of this Agreement, each of Old Lorus, NuChem, GeneSense, New Lorus
and Investor will deliver, at the Closing, such customary certificates,
resolutions and other closing documents as may be required by the other Parties
hereto, acting reasonably.
ARTICLE 16
GENERAL PROVISIONS
GENERAL PROVISIONS
16.1
Notices
Any
notice, request, consent, waiver, direction or other communication required
or
permitted to be given under this Agreement will be in writing and may be given
by delivering same or sending same by facsimile transmission or by delivery
addressed to the Party to which the notice is to be given at its address for
service herein. Any such notice, request, consent, waiver, direction or other
communication will, if delivered, be deemed to have been given and received
on
the day on which it was delivered to the address provided herein (if that day
is
a Business Day, and if it is not, then on the next succeeding Business Day),
and
if sent by facsimile transmission will be deemed to have been given and received
at the time of receipt unless actually received after 4:00 p.m. at the
point of delivery, in which case it will be deemed to have been given and
received on the next Business Day.
(a)
|
|
If
to Pinnacle or
Investor
|
Xxxxx
000
000 Xxxxx Xxxxxx Xxxxxxxxx, XX X0X 0X0 |
Attention:
President
Fax: (000)
000-0000
|
-
40
-
(b)
|
if
to Old Lorus,
NuChem,
GeneSense
or
New Lorus :
|
0
Xxxxxxxx Xxxx
Xxxxxxx,
XX X0X 0X0
Attention: Director
of Finance
Fax: (000)
000-0000
|
16.2
|
Fees
and Expenses
|
(a)
Subject
to Section 16.2(b), each Party will be responsible for its own fees and expenses
in connection with the negotiation of this Agreement and the implementation
of
the Arrangement. Old Lorus will bear all costs associated with the costs
of printing and mailing the Information Circular, transfer agent and depository
costs, audit costs, listing fees and the provision of any fairness
opinion.
(b)
If
the
Arrangement does not close as a result of the occurrence of any of the events
described in Section 12.1 (a“Default”), the defaulting Party
(the “Defaulting Party”) will pay to the other Party the
reasonable third party expenses incurred by the other Party, to a maximum of
$160,000 (the “Reimbursement Amount”). Each Party will be
entitled to receive payment for the expenses described above up to the maximum
of the Reimbursement Amount promptly upon receipt by the Defaulting Party of
invoices evidencing the incurring of such expenses by the other
Party.
16.3
Time
of Essence
Time
will
be of the essence in this Agreement.
16.4
Entire
Agreement
Except
for the various collateral agreements entered into in connection with the
Arrangement, this Agreement constitutes the entire agreement between the Parties
and cancels and supersedes all prior agreements (including the letter agreement
dated April 4, 2006, as amended) and understandings between the Parties with
respect to the subject matter hereof. To the extent that provisions of the
Confidentiality Agreement conflict with provisions of this Agreement, the
provisions of this Agreement will govern.
16.5
Assignment
Except
as
expressly permitted by the terms hereof, neither this Agreement nor any of
the
rights, interests or obligations hereunder will be assigned by any of the
Parties without the prior written consent of the other Parties. Investor may
assign all or any part of its rights to subscribe for any of the securities
to
be acquired to any party provided that if such assignment takes place, Investor
will continue to be liable to the other Parties for any default in performance
by the assignee.
16.6
Binding
Effect
This
Agreement will be binding upon and will enure to the benefit of the parties
hereto and their respective successors and permitted assigns.
16.7
Further
Assurances
Each
Party hereto will, from time to time, and at all times hereafter, at the request
of the other Parties hereto, but without further consideration, do all such
further acts and execute and deliver all such further documents and instruments
as will be reasonably required in order to fully perform and carry out the
terms
and intent hereof.
-
41
-
16.8
Severability
If
any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement will nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon
such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto will negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely
as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
16.9
Counterpart
Execution
This
Agreement may be executed in any number of counterparts and each such
counterpart will be deemed to be an original instrument but all such
counterparts together will constitute one agreement.
[BALANCE
OF PAGE INTENTIONALLY LEFT BLANK]
-
42
-
IN
WITNESS WHEREOF, Pinnacle, Investor, Old Lorus, GeneSense, XxXxxx and New Lorus
have caused this Agreement to be executed as of the date first written above
by
their respective officers thereunto duly authorized.
PINNACLE
INTERNATIONAL LANDS, INC.
|
||||
Per:
|
“Xxxxxxx
Xx Xxxxxx”
|
Per:
|
“Xxxxxx
Xxxxx”
|
|
Name:
|
Xxxxxxx
Xx Xxxxxx
|
Name:
|
Xxxxxx
Xxxxx
|
|
Title:
|
President
|
Title:
|
President
and Chief Executive Officer
|
|
GENESENSE
TECHNOLOGIES INC.
|
XXXXXX
PHARMACEUTICALS INC.
|
|||
Per:
|
“Xxxxxx
Xxxxx”
|
Per:
|
“Xxxxxx
Xxxxx”
|
|
Name:
|
Xxxxxx
Xxxxx
|
Name:
|
Xxxxxx
Xxxxx
|
|
Title:
|
Director
|
Title:
|
Director
|
|
6650309
CANADA INC.
|
6707157
CANADA INC.
|
|||
Per:
|
“Xxxxxx
Xxxxx”
|
Per:
|
“Xxxxxxx
Xx Xxxxxx”
|
|
Name:
|
Xxxxxx
Xxxxx
|
Name:
|
Xxxxxxx
Xx Xxxxxx
|
|
Title:
|
President
and Chief Executive Officer
|
Title:
|
President
|
-
43
-
SCHEDULE
A
PLAN
OF ARRANGEMENT
Final
version
PLAN
OF ARRANGEMENT
made
pursuant to
Section
192 of the Canada Business Corporations Act
ARTICLE 1
DEFINITIONS
DEFINITIONS
1.1
Definitions
In
this
Plan, unless the context otherwise requires:
(1)
“Act”
means the Canada Business Corporations Act, R.S.C. 1985, c. C-44, as from
time to time amended or re-enacted, including all regulations promulgated
thereunder;
(2)
“Antisense
Patent Assets” means those assets set out in the Antisense Patent
Assets Transfer Agreement;
(3)
“Antisense
Patent Assets Transfer Agreement” means the asset purchase agreement to
be entered into between GeneSense and New Lorus pursuant to which GeneSense
will
transfer the Antisense Patent Assets to New Lorus and substantially in
the form
attached as Schedule C to the Arrangement Agreement;
(4)
“Appropriate
Number”means that number of Old Lorus Voting Shares which, if combined
with the aggregate number of Old Lorus Voting Shares purchased pursuant
to
Section , would result in Investor holding a total number of Old Lorus
Voting
Shares representing approximately 41% of the issued and outstanding Old
Lorus
Voting Shares at the conclusion of the Arrangement;
(5)
“Arrangement”
means the business reorganization pursuant to which, among other things,
Investor will acquire approximately 41% of the issued and outstanding voting
shares and all of the issued and outstanding non-voting shares of Old Lorus
as
contemplated by this Plan pursuant to section 192 of the Act;
(6)
“Arrangement
Agreement” means the arrangement agreement between Old Lorus, NuChem,
GeneSense, New Lorus, Pinnacle and Investor dated as of May 1, 2007 which
sets
out the terms and conditions pursuant to which the parties thereto will
effect
the Arrangement;
(7)
“Articles
of Arrangement” means the articles of arrangement of Old Lorus in
respect of the Arrangement required under subsection 193(6) of the Act
to be
filed with the Director after the Final Order has been made in order to
give
effect to the Arrangement;
(8)
“Business
Day” means a day, other than a Saturday, Sunday or other day, when
banks in Toronto, Ontario or Vancouver, British Columbia are not generally
open
for business;
(9)
“Court”
means the Ontario Superior Court of Justice;
(10)
“Debenture
Assumption Agreement” means the agreement to be entered into between
Old Lorus and New Lorus pursuant to which New Lorus will assume Old Lorus’
obligation to pay TEMIC the aggregate principal amount of $15,000,000 plus
accrued interest owing under the Old Lorus Debentures, as contemplated
by
Section ;
(11)
“Depositary”
means Computershare Investor Services Inc., the appointed depositary in
respect
of the Arrangement at its principal transfer office in Toronto,
Ontario;
(12)
“Director”
means the Director appointed under the Act;
(13)
“Dissent
Rights” has the meaning ascribed thereto in Section ;
(14)
“Effective
Date” means the effective date set out in the Articles of Arrangement
which are filed with the Director;
(15)
“Effective
Time” means 12:01 a.m. (Toronto time) on the Effective
Date;
(16)
“Escrow
Agreement” has the meaning ascribed thereto in the Arrangement
Agreement;
(17)
“Final
Order” means the final order of the Court issued in connection with the
approval of the Arrangement, providing, among other matters, for the Arrangement
to be sanctioned and to take effect, as such order may be affirmed, amended
or
modified by any court of competent jurisdiction;
(18)
“GeneSense”
means GeneSense Technologies Inc., a corporation existing under the laws
of
Canada;
(19)
“GeneSense
Share Purchase Agreement” means the share purchase agreement to be
entered into between Old Lorus and New Lorus pursuant to which Old Lorus
will
transfer all of the GeneSense Shares to New Lorus and substantially in
the form
attached as Schedule G to the Arrangement Agreement;
(20)
“GeneSense
Shares” means common shares in the capital of GeneSense;
(21)
“Information
Circular” means the management proxy circular relating to the Old Lorus
Securityholders’ Meeting and forwarded to Old Lorus Securityholders in
connection with, among other things, the transactions contemplated in this
Plan;
-
2 -
(22)
“Interim
Order” means an interim order of the Court concerning the Arrangement
under subsection 192(4) of the Act, containing declarations and directions
with
respect to the Arrangement and the holding of the Old Lorus Securityholders’
Meeting, as such order may be affirmed, amended or modified by any court
of
competent jurisdiction;
(23)
“Investor”
means 6707157 Canada Inc., a corporation existing under the laws of
Canada;
(24)
“Letter
of Transmittal” means the letter of transmittal enclosed with the
Information Circular pursuant to which an Old Lorus Securityholder is required
to surrender certificates representing Old Lorus Securities in order to
receive,
upon completion of the Arrangement, New Lorus Securities issued pursuant
to the
Arrangement and, as applicable, Old Lorus Voting Shares or a cash payment
in
lieu thereof;
(25)
“Lock-Up
Holders” has the meaning ascribed thereto in Section ;
(26)
“New
Lorus” means 6650309 Canada Inc., a corporation existing under the laws
of Canada;
(27)
“New
Lorus Note 1” has the meaning ascribed thereto in Section
;
(28)
“New
Lorus Note 2” has the meaning ascribed thereto in Section
;
(29)
“New
Lorus Note 3” has the meaning ascribed thereto in Section
;
(30)
“New
Lorus Replacement Note” has the meaning ascribed thereto in Section
;
(31)
“New
Lorus Options” has the meaning ascribed thereto in Section
;
(32)
“New
Lorus Securities” has the meaning ascribed thereto in Section
;
(33)
“New
Lorus Shares” has the meaning ascribed thereto in Section
;
(34)
“New
Lorus Warrants” has the meaning ascribed thereto in Section
;
(35)
“XxXxxx”
means XxXxxx Pharmaceuticals Inc., a corporation existing under the laws
of
Ontario;
(36)
“XxXxxx
Share Purchase Agreement” means the share purchase agreement to be
entered into between Old Lorus and New Lorus pursuant to which Old Lorus
will
transfer all of the XxXxxx Shares held by it to New Lorus and substantially
in
the form attached as Schedule H to the Arrangement Agreement;
(37)
“XxXxxx
Shares” means common shares in the capital of XxXxxx;
-
3 -
(38)
“Old
Lorus” means Lorus Therapeutics Inc., a corporation existing under the
laws of Canada;
(39)
“Old
Lorus Debentures” means the prime plus 1% secured convertible
debentures of Old Lorus due on October 6, 2009 in the aggregate principal
amount
of $15,000,000, issued to TEMIC in equal amounts of $5,000,000 each on
each of
October 6, 2004, January 15, 2005 and April 15,
2005;
(40)
“Old
Lorus Non-Voting Shares” means the non-voting common shares of Old
Lorus issued and outstanding following the reorganization of Old Lorus’ share
capital pursuant to the Arrangement;
(41)
“Old
Lorus Note” has the meaning ascribed thereto in Section ;
(42)
“Old
Lorus Options” means the issued and outstanding stock options issued to
directors, senior officers, employees and consultants of Old Lorus, governed
by
the terms of the Old Lorus Stock Option Plans and permitting the holders
thereof
to purchase an aggregate of up to 25,921,000 Old Lorus Shares, as such
number
may be amended from time to time;
(43)
“Old
Lorus Securities” means, collectively, the Old Lorus Debentures, the
Old Lorus Options, the Old Lorus Shares and the Old Lorus Warrants;
(44)
“Old
Lorus Securityholders” means, collectively, the holders of Old Lorus
Shares, Old Lorus Options, Old Lorus Warrants and Old Lorus
Debentures;
(45)
“Old
Lorus Securityholders’ Meeting” means the special meeting of Old Lorus
Securityholders, and any adjournments thereof, called to consider and authorize,
approve and adopt, among other things, the Arrangement in accordance with
the
Interim Order;
(46)
“Old
Lorus Shareholders” means the holders of Old Lorus Shares;
(47)
“Old
Lorus Share Purchase Plan” means the Old Lorus employee share purchase
plan;
(48)
“Old
Lorus Shares” means the common shares of Old Lorus issued and
outstanding immediately prior to the reorganization of Old Lorus’ share capital
pursuant to the Arrangement;
(49)
“Old
Lorus Stock Option Plans” means, collectively, Old Lorus’ 2003 Stock
Option Plan and the 1993 Stock Option Plan;
(50)
“Old
Lorus Voting Shares” means the voting common shares of Old Lorus issued
and outstanding following the reorganization of Old Lorus’ share capital
pursuant to the Arrangement;
-
4 -
(51)
“Old
Lorus Warrants” means the 3,000,000 issued and outstanding common share
purchase warrants of Old Lorus issued to TEMIC, each of which entitles
TEMIC to
acquire, subject to adjustment, one Old Lorus Share at a price per share
of
$1.00;
(52)
“Pinnacle”
means Pinnacle International Lands, Inc., a corporation existing under
the laws
of British Columbia;
(53)
“Pinnacle
Share Purchase Agreement” means the share purchase agreement to be
entered into between Investor and New Lorus pursuant to which Investor
will
purchase from New Lorus the Appropriate Number of Old Lorus Voting Shares
and
all of the Old Lorus Non-Voting Shares and substantially in the form attached
as
Schedule I to the Arrangement Agreement;
(54)
“Plan”
means this plan of arrangement as amended or supplemented from time to
time, and
“hereby”, “hereof’, “herein”, “hereunder”, “herewith” and similar terms refer to
this Plan and not to any particular provision of this Plan;
(55)
“Prepaid
Expenses and Receivables” means those assets set out in the Prepaid
Expenses and Receivables Transfer Agreement;
(56)
“Prepaid
Expenses and Receivables Transfer Agreement” means the asset purchase
agreement to be entered into between Old Lorus and GeneSense pursuant to
which
Old Lorus will transfer the Prepaid Expenses and Receivables to GeneSense
and
substantially in the form attached as Schedule F to the Arrangement
Agreement;
(57)
“resident
in the United States” shall be determined as provided in Rule
12g-4(a)(2) under the United States Securities Exchange Act of 1934, as
amended;
(58)
“Tangible
Business Assets” means Old Lorus’ depreciable property set out in the
Tangible Business Assets Transfer Agreement;
(59)
“Tangible
Business Assets Transfer Agreement” means the asset purchase agreement
to be entered into between Old Lorus and GeneSense pursuant to which Old
Lorus
will transfer the Tangible Business Assets to GeneSense and substantially
in the
form attached as Schedule E to the Arrangement Agreement;
(60)
“TEMIC”
means The Xxxx Xxxxx Investment Corporation;
(61)
“Transfer
Agent and Registrar” means Computershare Investor Services
Inc.;
(62)
“United
States” means the United States of America, its territories and
possessions, any state of the United States and the District of
Columbia;
(63)
“Virulizin
and Small Molecule Patent Assets” means those assets set out in the
Virulizin and Small Molecule Patent Assets Transfer Agreement;
-
5 -
(64)
“Virulizin
and Small Molecule Patent Assets Transfer Agreement” means the asset
purchase agreement to be entered into by Old Lorus and GeneSense pursuant
to
which Old Lorus will transfer the Virulizin and Small Molecule Patent Assets
to
GeneSense and substantially in the form attached as Schedule D to the
Arrangement Agreement; and
(65)
“Warrant
Purchase Agreement” means the warrant purchase agreement between New
Lorus and TEMIC pursuant to which New Lorus has agreed to purchase the
New Lorus
Warrants from TEMIC dated May 1, 2007.
1.2
Headings
The
headings contained in this Plan are for reference purposes only and will
not
affect in any way the meaning or interpretation of this Plan.
1.3
Interpretation
Unless
the contrary intention appears, references in this Plan to an article,
section,
paragraph, subparagraph or schedule by number or letter or both refer to
the
article, section, paragraph, subparagraph or schedule bearing that designation
in this Plan.
1.4
Extended
Meanings
In
this
Plan, unless the contrary intention appears, words importing the singular
include the plural and vice versa; words importing gender will include
all
genders; “person” includes any individual, partnership, firm, trust, body
corporate, government, governmental body, agency or instrumentality,
unincorporated body of persons or association; and the term “including” means
“including without limiting the generality of the foregoing”.
1.5
Date
for any Action
In
the
event that the date on which any action is required to be taken hereunder
by any
of the parties is not a Business Day in the place where the action is required
to be taken, such action will be required to be taken on the next succeeding
day
which is a Business Day in such place.
1.6
Statutory
References
References
in this Plan to any statute or sections thereof will include such statute
as
amended or substituted and any regulations promulgated thereunder from
time to
time in effect.
1.7
Deemed
Currency
Unless
otherwise stated, all references in this Plan to sums of money are expressed
in
lawful money of Canada.
-
6 -
ARTICLE 2
PURPOSE AND EFFECT OF THE PLAN
PURPOSE AND EFFECT OF THE PLAN
2.1
Purpose
and Effect of the Plan
The
purpose of this Plan is to carry out a reorganization of the business,
assets,
liabilities and share capital of Old Lorus, GeneSense, XxXxxx and New Lorus
as
described in Section .
ARTICLE 3
ARRANGEMENT
ARRANGEMENT
3.1
Arrangement
At
the
Effective Time, each of the events set out below will occur and be deemed
to
occur in the sequence set out without further act or formality:
(1)
The
Old
Lorus Shareholders, holders of Old Lorus Options and holders of Old Lorus
Warrants will transfer their Old Lorus Shares, Old Lorus Options and Old
Lorus
Warrants, as applicable, to New Lorus in exchange for the issuance by New
Lorus
of shares (the “New Lorus Shares”), options (the “New
Lorus Options”) and warrants (the “New Lorus Warrants”
and, together with the New Lorus Shares and
the New Lorus Options, the
“New Lorus Securities”), respectively, having the same value,
terms and conditions as the Old Lorus Shares, Old Lorus Options and Old
Lorus
Warrants;
(2)
New
Lorus
will repurchase the New Lorus Warrants from TEMIC pursuant to the Warrant
Purchase Agreement;
(3)
Pursuant
to the Debenture Assumption Agreement, New Lorus will assume Old Lorus’
obligation to pay TEMIC the $15,000,000 aggregate principal amount of the
Old
Lorus Debentures plus accrued and unpaid interest thereon in consideration
for
Old Lorus issuing a non-interest bearing promissory note to New Lorus for
an
amount equal to the amount owing under the Old Lorus Debentures (the“Old
Lorus Note”). The right of TEMIC under the Old Lorus Debentures
to convert such debentures into Old Lorus Shares will be exchanged for
the right
to convert such debentures into an equal number of New Lorus
Shares;
(4)
Old
Lorus
will surrender to New Lorus for cancellation the initial New Lorus Share
that
was issued to Old Lorus upon the incorporation of New Lorus;
(5)
The
articles of Old Lorus will be amended to change its name to “4325231 Canada
Inc.” or a name to be used for real estate development purposes;
(6)
The
articles of New Lorus will be amended to change its name to “Lorus Therapeutics
Inc.”;
-
7 -
(7)
The
articles of Old Lorus will be amended to conform with the form of the amended
articles agreed upon in writing by the parties to the Arrangement Agreement
on
or prior to the date of the Interim Order, such amendments to effect, among
other things, a reorganization of the share capital of Old Lorus to create
an
unlimited number of Old Lorus Voting Shares and an unlimited number of
Old Lorus
Non-Voting Shares. The Old Lorus Voting Shares and the Old Lorus
Non-Voting Shares will rank equally with respect to participation in dividends
and the liquidation of Old Lorus;
(8)
As
part
of the reorganization of the share capital of Old Lorus, the Old Lorus
Shares
held by New Lorus will be exchanged for 21,127,828 Old Lorus Voting Shares
and
2,078,872,172 Old Lorus Non-Voting Shares, the Old Lorus Options and the
Old
Lorus Warrants will be cancelled and a right to acquire Old Lorus Shares
under
the Old Lorus Share Purchase Plan will become a right to acquire an equivalent
number of New Lorus Shares under such plan;
(9)
Pursuant
to the Tangible Business Assets Transfer Agreement, Old Lorus will transfer
the
Tangible Business Assets to GeneSense in consideration for the issuance
by
GeneSense of one GeneSense Share to Old Lorus;
(10)
Pursuant
to the Antisense Patent Assets Transfer Agreement, GeneSense will transfer
the
Antisense Patent Assets to New Lorus in consideration for the issuance
by New
Lorus to GeneSense of a demand non-interest bearing promissory note in
an amount
equal to the fair market value of the Antisense Patent Assets (“New
Lorus Note 1”);
(11)
Pursuant
to the Virulizin and Small Molecule Patent Assets Transfer Agreement, Old
Lorus
will transfer the Virulizin and Small Molecule Patent Assets to GeneSense
in
consideration for the issuance by GeneSense of one GeneSense Share to Old
Lorus;
(12)
GeneSense
will repay its debt owing to Old Lorus in exchange for the issuance by
GeneSense
of one GeneSense Share to Old Lorus;
(13)
Pursuant
to the Prepaid Expenses and Receivables Transfer Agreement, Old Lorus will
transfer the Prepaid Expenses and Receivables to GeneSense in exchange
for the
issuance by GeneSense of one GeneSense Share to Old Lorus;
(14)
Pursuant
to the GeneSense Share Purchase Agreement, Old Lorus will transfer all
of the
GeneSense Shares to New Lorus at a price equal to their fair market value
in
exchange for the assumption by New Lorus of Old Lorus’ remaining liabilities and
transaction costs (other than the Old Lorus Note) and the issuance by New
Lorus
of a demand non-interest bearing promissory note to Old Lorus for an amount
equal to the amount by which the purchase price for the GeneSense Shares
exceeds
the amount of Old Lorus’ liabilities assumed by New Lorus (“New Lorus
Note 2”);
-
8 -
(15)
Pursuant
to the XxXxxx Share Purchase Agreement, Old Lorus will transfer all of
the
XxXxxx Shares held by it to New Lorus at a price equal to their fair market
value in consideration for the issuance by New Lorus to Old Lorus of a
demand,
non-interest bearing promissory note in an amount equal to the purchase
price
for the XxXxxx Shares (“New Lorus Note 3”);
(16)
Old
Lorus
will assign all of its contractual obligations to New Lorus or its assignee
and
New Lorus or its assignee will assume such obligations;
(17)
New
Lorus
will offer employment to all of the employees of Old Lorus and will assume
all
employment obligations related thereto;
(18)
New
Lorus
will repay the amount owing by New Lorus to Old Lorus under the New Lorus
Note 2
and the New Lorus Note 3 by way of set off against the Old Lorus Note and
the
issuance to Old Lorus of a replacement non-interest bearing demand promissory
note (the “New Lorus Replacement Note”) for an amount equal to
the amount by which the aggregate amount owing by New Lorus under the New
Lorus
Note 2 and the New Lorus Note 3 exceeds the amount of the Old Lorus
Note;
(19)
Old
Lorus
will reduce its stated capital by an amount equal to its remaining cash,
cash
equivalents, and short term and long term investments, less the amount
required
to fund the repurchase of Old Lorus Voting Shares described in Section
, plus an
amount equal to the amount of the New Lorus Replacement Note and will distribute
such property to New Lorus in satisfaction of the capital reduction
amount;
(20)
[intentionally
deleted]
(21)
Pursuant
to the Pinnacle Share Purchase Agreement, Investor will purchase the Appropriate
Number of the Old Lorus Voting Shares and all of the Old Lorus Non-Voting
Shares
from New Lorus in consideration of a cash payment equal to $0.0040775156
per Old
Lorus Voting Share and $0.0040775156 per Old Lorus Non-Voting Share, subject
to
payment and adjustment in accordance with the Pinnacle Share Purchase Agreement
and a holdback pursuant to the Escrow Agreement;
(22)
The
New
Lorus Shares will be conditionally approved for listing on the Toronto
Stock
Exchange and the American Stock Exchange subject to the fulfillment of
the
conditions set out in the applicable conditional approval letter;
(23)
New
Lorus
will reduce its stated capital by an amount equal to the fair market value
of
its Old Lorus Voting Shares, determined based on the price per Old
-
9 -
Lorus
Voting Share paid by Investor in Section above. In satisfaction of
the capital reduction, New Lorus will: (i) in the case of shareholders
of New
Lorus who are not resident in the United States, distribute Old Lorus Voting
Shares on a pro rata basis, disregarding fractions (provided such distribution
effects a distribution of not less than 90%of the Old Lorus Voting Shares
then
owned by New Lorus); and (ii) in the case of shareholders of New Lorus
who are
resident in the United States, sell to Old Lorus for cash consideration
New
Lorus’ remaining Old Lorus Voting Shares (not to exceed 10%of the Old Lorus
Voting Shares then owned by New Lorus) at the price per Old Lorus Voting
Share
paid by Investor at the Effective Time in Section and
distribute the proceeds of such sale to such shareholders who are resident
in
the United States on a pro rata basis, disregarding fractions, as the cash
equivalent to the value of the Old Lorus Voting Shares otherwise distributable
to them;
(24)
Investor
will purchase all of the Old Lorus Voting Shares held by High Tech
Beteilingungen GmbH & Co. KG, Technifund Inc. and Xxxxxxx Xxxxxxxx
(collectively, the “Lock-Up Holders”) at a fair market price
determined based on the price per Old Lorus Voting Share paid at the Effective
Time by the Investor in Section ;
(25)
Investor
will subscribe for 294,296,851 additional Old Lorus Non-Voting Shares for
a cash
payment of $1,200,000; and
(26)
Pinnacle
or an affiliate thereof will transfer interests in certain real estate
development projects to Old Lorus in return for a cash payment and a promissory
noteof Old Lorus and Old Lorus will enter into certain development, management
and marketing agreements with Pinnacle and/or one or more affiliates
thereof.
ARTICLE 4
OUTSTANDING SECURITIES
OUTSTANDING SECURITIES
4.1
Outstanding
Certificates
From
and
after the Effective Date, certificates representing the Old Lorus Securities
prior to the Arrangement will, thereafter represent only the right to receive
the certificates representing the New Lorus Securities which such holder
is
entitled to receive pursuant to Section and any distributions accruing to
the holder of such securities, upon the holder depositing with the Depositary
the certificates duly endorsed for transfer and accompanied by such other
documents as such Depositary may reasonably require, subject to compliance
with
the requirements set forth in this .
4.2
Old
Lorus Shares
(1)
As
soon
as practicable following the Effective Time, New Lorus shall cause to be
delivered for the benefit of the Old Lorus Shareholders, certificates
representing, in the aggregate, the New Lorus Shares to which such holders
are
entitled pursuant to Section . New Lorus will, as soon as practicable
following the
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10 -
later
of the Effective Date and the date of deposit (by a former holder
of Old Lorus Shares exchanged under the Arrangement) of a duly completed
Letter
of Transmittal and the certificates representing such Old Lorus Shares,
either:
(a)
forward
orcause to be forwarded by first class mail (postage prepaid) (or, in the
case
of postal disruption, by such other means as the Depositary may deem prudent)
to
such former holder at the address specified in the Letter of Transmittal;
or
(b)
if
requested by such holder in the Letter of Transmittal, make available or
cause
to be made available at the Depositary for pickup by such holder;
certificates
representing the number of New Lorus Shares issued to such holder under
the
Arrangement.
(2)
All
distributions made with respect to any New Lorus Shares allotted and issued
pursuant to this Arrangement but for which a certificate has not been issued
will be paid or delivered to the Depositary to be held by the Depositary
in
trust for the registered holder thereof. All monies received by the
Depositary will be invested by it in trust accounts upon such terms as
the
Depositary may reasonably deem appropriate. The Depositary will pay and
deliver to any such registered holder, as soon as reasonably practicable
after
application therefore is made by the registered holder to the Depositary
in such
form as the Depositary may reasonably require, such distributions to which
such
holder is entitled, net of applicable withholding and other taxes.
(3)
Where
a
certificate formerly representing Old Lorus Shares is not deposited with
all
other documents as provided for in Section on or prior to the sixth
anniversary date of the Effective Time, it will cease to represent a right
or
claim of any kind or nature. Thereafter, the New Lorus Shares to be
exchanged with the former holder of such certificate will be deemed to
be
surrendered to New Lorus together with all distributions and sale proceeds
thereon held for such holder.
(4)
New
Lorus
will be entitled to deduct and withhold from any consideration otherwise
payable
to any holder of Old Lorus Securities such amounts as New Lorus is required
to
deduct and withhold with respect to such payment under the Income Tax Act
(Canada), the United States Internal Revenue Code of 1986 or any provision
of
federal, provincial, state, local or foreign tax law, in each case, as
amended.
To the extent that amounts are so withheld, such withheld amounts will
be
treated for all purposes hereof as having been paid to the holder of the
Old
Lorus Securities in respect of which such deduction and withholding was
made,
provided that such withheld amounts are actually remitted to the appropriate
taxing authority.
(5)
If
any
certificate which immediately prior to the Effective Time represented an
interest in outstanding Old Lorus Shares that were exchanged pursuant to
Section has been lost, stolen or destroyed, upon the making of an
affidavit
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11 -
of
that
fact by the person claiming such certificate to have been lost, stolen
or
destroyed, the Transfer Agent and Registrar will issue and the Depositary
will
deliver in exchange for such lost, stolen or destroyed certificate the
consideration to which the holder is entitled pursuant to the Arrangement
(and
any distributions with respect thereto) as determined in accordance with
the
Arrangement. The person who is entitled to receive such consideration
will, as a condition precedent to the receipt thereof, give a bond to each
of
New Lorus and its Depositary, which bond is in form and substance satisfactory
to each of New Lorus and the Depositary, or will otherwise indemnify New
Lorus
and its Depositary against any claim that may be made against any of them
with
respect to the certificate alleged to have been lost, stolen or
destroyed.
4.3
Old
Lorus Options and Old Lorus Warrants
Each
Old
Lorus Option and each Old Lorus Warrant will be cancelled without further
act or
formality. Each New Lorus Option will represent a right to purchase that
number of New Lorus Shares equal to the number of Old Lorus Shares underlying
the Old Lorus Option. The term to expiry, conditions to and manner of
exercising, vesting schedule and all other terms and conditions of each
New
Lorus Option will otherwise be the same as the terms and conditions of
the
corresponding Old Lorus Option. Except as specified in this Plan, any
document or agreement previously evidencing such Old Lorus Option will
thereafter evidence and be deemed to evidence such New Lorus Option, with
any
adjustments deemed to be made thereto as are necessary to ensure consistency
with the provisions of this Section .
4.4
Old
Lorus Share Purchase Plan
From
and
after the Effective Date, the entitlement of any participant to receive
Old
Lorus Shares prior to the Arrangement under the Old Lorus Share Purchase
Plan
will thereafter represent only the right to receive an equivalent number
of New
Lorus Shares. Except as specified in this Plan, the terms and conditions
of the Old Lorus Share Purchase Plan will otherwise be the same. Except as
specified in this Plan, any document or agreement previously evidencing
a right
to acquire an Old Lorus Share pursuant to the Old Lorus Share Purchase
Plan will
thereafter evidence and be deemed to evidence a right to require a New
Lorus
Share, with any adjustments deemed to be made thereto as are necessary
to ensure
consistency with the provisions of this Section .
4.5
Old
Lorus Voting Shares
(1)
As
soon
as practicable following the Effective Time, New Lorus shall cause to be
delivered for the benefit of the shareholders of New Lorus who are not
resident
in the United States, certificates representing, in the aggregate, the
Old Lorus
Voting Shares to which such holders are entitled pursuant to Section .
New Lorus will, as soon as practicable following the Effective Date,
either:
(a)
forward
orcause to be forwarded by first class mail (postage prepaid) (or, in the
case
of postal disruption, by such other means as the Depositary
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12 -
may
deem
prudent) to such holder at the address specified in the Letter of Transmittal;
or
(b) if
requested by such holder in the Letter of Transmittal, make available
or cause
to be made available at the Depositary for pickup by such
holder,
certificates representing the number of Old Lorus Voting
Shares issued to such holder under the Arrangement.(2)
New
Lorus
will be entitled to deduct and withhold from any consideration otherwise
payable
to any holder of New Lorus Shares such amounts as New Lorus is required
to
deduct and withhold with respect to such payment under the Income Tax Act
(Canada), the United States Internal Revenue Code of 1986 or any provision
of
federal, provincial, state, local or foreign tax law, in each case, as
amended.
To the extent that amounts are so withheld, such withheld amounts will
be
treated for all purposes hereof as having been paid to the holder of the
New
Lorus Shares in respect of which such deduction and withholding was made,
provided that such withheld amounts are actually remitted to the appropriate
taxing authority.
4.6
Cash
Payments Pursuant to Section (ii)
(1)
As
soon
as practicable following the Effective Time, New Lorus shall cause to be
delivered to the Transfer Agent and Registrar, for the benefit of each
shareholder of New Lorus who is resident in the United States, an amount
equal
to the aggregate of the payments representing each holder’s pro rata portion of
the cash equivalent of the value of the Old Lorus Voting Shares otherwise
distributable to New Lorus shareholders who are resident in the United
States
pursuant to Section .
(2)
Such
payment shall be made by cheque payable at par at any branch of New Lorus’
bankers for the time being in Canada (or, with the consent of the holder,
by any
other means of immediately available funds).
(3)
New
Lorus
will be entitled to deduct and withhold from any consideration otherwise
payable
to any holder of New Lorus Shares such amounts as New Lorus is required
to
deduct and withhold with respect to such payment under the Income Tax Act
(Canada), the United States Internal Revenue Code of 1986 or any provision
of
federal, provincial, state, local or foreign tax law, in each case, as
amended.
To the extent that amounts are so withheld, such withheld amounts will
be
treated for all purposes hereof as having been paid to the holder of the
New
Lorus Shares in respect of which such deduction and withholding was made,
provided that such withheld amounts are actually remitted to the appropriate
taxing authority.
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13
-
ARTICLE 5
RIGHTS OF DISSENT
RIGHTS OF DISSENT
5.1
Rights
of Dissent
Old
Lorus
Shareholders (other than the Lock-Up Holders) may exercise rights of dissent
in
connection with the Arrangement with respect to their Shares pursuant to
and in
the manner set forth in the Interim Order, section 190 of the Act and this
Section (the “Dissent Rights”) as
the
same may be modified by the Interim Order or the Final Order. Old Lorus
Shareholders who duly exercise such Dissent Rights and who:
(a)
are
ultimately entitled to be paid fair value for their Old Lorus Shares shall
be
deemed to have transferred such Old Lorus Shares to New Lorus on the Effective
Date simultaneously with the transactions described in Section without any
further act or formality and free and clear of all liens, claims and
encumbrances, with New Lorus being obligated to pay such Old Lorus Shareholders
in consideration therefor the fair value of such Old Lorus Shares, which
fair
value, notwithstanding anything to the contrary in the Act, if permitted
by the
Court, shall be determined as of the close of business on the day before
the
special resolution of Securityholders approving this Plan is adopted, and
the
name of each such Old Lorus Shareholder will be removed from the register
of
holders of Old Lorus Shares and New Lorus will be recorded as the registered
holder of the Old Lorus Shares so transferred and will be deemed to be
the legal
and beneficial owner of such Old Lorus Shares free and clear of any liens,
claims or encumbrances; or
(b)
for
any
reason are ultimately not entitled to be paid fair value for their Old
Lorus
Shares shall be deemed to have participated in the Arrangement on the same
basis
as any non-dissenting Old Lorus Shareholder who is not a Lock-Up Holder
as at
and from the Effective Time, and shall be deemed to have transferred their
Old
Lorus Shares to New Lorus in exchange for New Lorus Shares under Section
, but
in no case shall Old Lorus, New Lorus or any other person be required to
recognize such Old Lorus Shareholders as holders of Old Lorus Shares after
the
time set out in Section , and the names of such Old Lorus Shareholders
shall be
deleted from the register of Old Lorus Shareholders at the time set out
in
Section .
ARTICLE 6
AMENDMENTS
AMENDMENTS
6.1
Amendments
(1)
Old
Lorus, GeneSense, XxXxxx, New Lorus, Investor and Pinnacle reserve the
right to
amend, modify and/or supplement this Plan from time to time at any time
-
14
-
prior
to
the Effective Time provided that any such amendment, modification or supplement
must be contained in a written document that is:
(a)
agreed
to
by all such parties;
(b)
filed
with the Court and approved by the Court; and
(c)
communicated
to Old Lorus Securityholders in the manner required by the Court (if so
required).
(2) Any
amendment, modification or
supplement to this Plan which is approved by the Court will be effective
only:
(a)
if
it is
consented to by Old Lorus and Pinnacle; and
(b)
if
required by the Court or Applicable Law, it is consented to by the Old
Lorus
Securityholders.
(3)
Notwithstanding
that the transactions and events set out herein will occur and be deemed
to
occur in the order set out in this Plan without any further act or formality,
each of the parties to the Arrangement Agreement shall make, do and execute,
or
cause to be made, done and executed, all such further acts, deeds, agreements,
transfers, assurances, instruments or documents as may reasonably be required
by
any of them in order further to document or evidence any of the transactions
or
events set out herein.
ARTICLE 7
GENERAL
GENERAL
7.1
General
(1)
Any
director or officer of Old Lorus is hereby authorized to execute and file
the
Articles of Arrangement and to execute and deliver all other documents
and do
all such other acts and things necessary or desirable to give effect to
this
Arrangement.
(2)
The
directors of Old Lorus are hereby authorized, if they deem appropriate
in their
sole discretion, to revoke this Plan of Arrangement and to not proceed
with the
Arrangement without further approval of the Old Lorus
Securityholders.
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15 -
SCHEDULE
B
PPSA
REGISTRATIONS
Nil.
SCHEDULE
C
ANTISENSE
PATENT ASSETS TRANSFER AGREEMENT
[Antisense
Patent Assets Transfer Agreement]
ASSET
PURCHASE AGREEMENT
BETWEEN
LORUS THERAPEUTICS INC.
AND
GENESENSE TECHNOLOGIES INC.
MADE AS OF
•, 2007
BETWEEN
LORUS THERAPEUTICS INC.
AND
GENESENSE TECHNOLOGIES INC.
MADE AS OF
•, 2007
XxXxxxxx
Xxxxxxxx LLP
TABLE
OF CONTENTS
ARTICLE
1 - INTERPRETATION
|
1
|
|
1.01
|
Definitions
|
1
|
1.02
|
Headings
|
2
|
1.03
|
Extended
Meanings
|
2
|
1.04
|
Statutory
References
|
3
|
1.05
|
Accounting
Principles
|
3
|
1.06
|
Currency
|
3
|
1.07
|
Schedules
|
3
|
ARTICLE
2 - SALE
AND PURCHASE
|
3
|
|
2.01
|
Assets
to be Sold and Purchased
|
3
|
2.02
|
Purchase
Price
|
3
|
2.03
|
Payment
of Purchase Price
|
4
|
2.04
|
Non-Assignable
Contracts and Commitments
|
4
|
ARTICLE
3 - REPRESENTATIONS
AND WARRANTIES
|
4
|
|
3.01
|
Vendor’s
Representations and Warranties
|
4
|
3.02
|
Purchaser’s
Representations and Warranties
|
5
|
3.03
|
Survival
of Representations, Warranties and Covenants
|
6
|
ARTICLE
4 - COVENANTS
|
6
|
|
4.01
|
Covenants
of the Vendor
|
6
|
4.02
|
Covenants
of the Purchaser
|
7
|
4.03
|
Cooperation
|
7
|
4.04
|
Cooperationon
Tax Matters
|
7
|
ARTICLE
5 - CONDITIONS
|
7
|
|
5.01
|
Conditions
for the Benefit of the Purchaser
|
7
|
5.02
|
Conditions
for the Benefit of the Vendor
|
8
|
ARTICLE
6 - CLOSING
ARRANGEMENTS
|
9
|
|
6.01
|
Closing
|
9
|
6.02
|
Examination
of Records and Assets
|
|