EXHIBIT 2
SHARE PURCHASE AGREEMENT
dated as of July 13, 2006
Between
LORUS THERAPEUTICS INC.
and
HIGH TECH BETEILIGUNGEN GMBH & CO. KG
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS..............................................................1
1.1 Definitions..............................................................1
1.2 Interpretation...........................................................7
ARTICLE 2 FILING OF QUALIFICATION PROSPECTUS.......................................8
2.1 Filing of Qualification Prospectus.......................................8
2.2 Documents to be Delivered in Connection with Filing......................8
2.3 Covenants of the Company Concerning Prospectus...........................9
ARTICLE 3 PURCHASE AND SALE........................................................9
3.1 Closing..................................................................9
3.2 Deliveries...............................................................9
3.3 Closing Conditions......................................................10
3.4 Mutual Conditions.......................................................11
ARTICLE 4 REPRESENTATIONS AND WARRANTIES..........................................11
4.1 Representations and Warranties of the Company...........................11
4.2 Representations and Warranties of the Purchaser.........................20
ARTICLE 5 OTHER AGREEMENTS OF THE PARTIES.........................................21
5.1 Qualification and Registration of the Purchased Shares for Resale.......21
5.2 Prospectus Disclosure...................................................21
5.3 Furnishing of Information...............................................21
5.4 Securities Laws Disclosure; Publicity...................................22
5.5 Regulation S; Directed Selling Efforts..................................22
5.6 Use of Proceeds.........................................................22
5.7 Indemnification.........................................................23
5.8 Subsequent Equity Sales.................................................24
5.9 Board Representation....................................................24
5.10 Officer Share Transactions..............................................25
5.11 Compliance with Securities Laws.........................................25
5.12 Ordinary Course of Business.............................................25
5.13 No Dividends............................................................26
ARTICLE 6 MISCELLANEOUS...........................................................26
6.1 Fees and Expenses.......................................................26
6.2 Entire Agreement........................................................26
6.3 Notices.................................................................26
6.4 Amendments; Waivers.....................................................26
6.5 Successors and Assigns..................................................27
6.6 No Third-Party Beneficiaries............................................27
6.7 Governing Law...........................................................27
6.8 Survival................................................................27
6.9 Execution...............................................................27
i
TABLE OF CONTENTS
(continued)
6.10 Severability............................................................27
6.11 Construction............................................................27
ii
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "Agreement") is dated as of July 13, 2006
BETWEEN LORUS THERAPEUTICS INC., a Canadian corporation (the
"Company")
AND HIGH TECH BETEILIGUNGEN GMBH & CO. KG, a German limited
partnership, herein represented by CONPHARM ANSTALT, a
Liechtenstein corporation (the "Purchaser")
WHEREAS, subject to the terms and conditions set out in this Agreement, the
Company desires to issue and sell to the Purchaser, and the Purchaser desires to
purchase from the Company, securities of the Company as more fully described in
this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchaser agree
as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement,
the following terms have the meanings indicated in this Section 1.1 for all
purposes of this Agreement:
"Action" shall have the meaning ascribed to such term in
Section 4.1(j).
"Affiliate" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled
by or is under common control with a Person as such terms are
used in and construed under Rule 144 under the United States
Securities Act.
"AMEX" means the American Stock Exchange.
"AMEX Rules" means collectively, all rules, requirements and
policies of the AMEX applicable to the Company, including such
as are contained in the Rules of the AMEX and the AMEX Company
Guide.
"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.
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"Canada Business Corporations Act" means the Canada Business
Corporations Act and the regulations made thereunder, as now
in effect and as they may be amended from time to time.
"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.
"Closing" means the closing of the purchase and sale of the
Purchased Shares pursuant to Section 3.1.
"Closing Date" means the earlier of:
(a) the third Trading Day after all conditions precedent
to (i) the Purchaser's obligations to pay the
Purchase Price, and (ii) the Company's obligations to
deliver the Purchased Shares as set out in Section
3.3 have been satisfied or waived; and
(b) the Outside Date.
"Canadian Securities Regulatory Authorities" has the meaning
attributed to such term in NI 14-101.
"Common Shares" means the common shares of the Company, and
any other class of securities into which such securities may
hereafter have been reclassified or changed into.
"Common Share Equivalents" means any securities of the Company
or the Subsidiaries which would entitle the holder thereof to
acquire at any time Common 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, Common Shares.
"Company Counsel" means XxXxxxxx Xxxxxxxx LLP and Xxxxxx &
Whitney LLP.
"Continuous Disclosure Reports" shall have the meaning
ascribed to such term in Section 4.1(h)).
"Debentureholder" means The Xxxx Xxxxx Investment Corporation,
the registered holder of the Debentures.
"Debentures" means the secured convertible debentures of the
Company in the aggregate principal amount of CAN
$15,000,000.00 issued to the Debentureholder in equal amounts
of $5,000,000 each on each of October 6, 2004, January 15,
2005 and April 15, 2005.
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"Disclosure Letter" means the Disclosure Letter of the Company
delivered to the Purchaser concurrently herewith and signed by
the Company with receipt acknowledged thereon by the
Purchaser.
"Evaluation Date" shall have the meaning ascribed to such term
in Section 4.1(r).
"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 shall
be in effect from time to time.
"Exempt Issuance" means the issuance of (a) Common Shares or
options to employees, officers or directors of the Company
pursuant to any stock or option plan duly adopted by a
majority of the non-employee members of the Board of Directors
of the Company or a majority of the members of a committee of
non-employee directors established for such purpose or the
Company's Stock Option Plans or such other incentive plans as
may be otherwise approved in accordance with the requirements
set out in the TSX Company Manual, and (b) Common Shares or
Common Share Equivalents pursuant to the terms of the
Debentures.
"GAAP" shall have the meaning ascribed to such term in Section
4.1(h).
"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.
"Intellectual Property Rights" shall have the meaning ascribed
to such term in Section 4.1(o).
"knowledge of the Company", "its knowledge", "knowledge" and
similar expressions when used in relation to the Company means
the knowledge of Xxx X. Xxxxxx, President and Chief Executive
Officer of the Company and Xxxxxx X. Xxxxx, Chief Operating
Officer of the Company, as applicable, after commercially
reasonable enquiry and review with the relevant directors,
officers and employees of the Company or its Subsidiaries, 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.
"Material Adverse Effect" in relation to the Company and its
Subsidiaries means any material adverse effect on the
Property, business, results of operations, capital or
condition (financial or otherwise) of the Company and the
Subsidiaries taken as a whole; other than any of the
following, either alone or in combination: (a) any change
affecting economic or financial conditions generally (global,
national, or regional, as applicable); (b) any change
affecting the Company's or its Subsidiaries' industry as a
whole; (c) any change in the Company's share price or trading
volume; (d) any failure to meet analysts' or internal earnings
estimates, milestones or business plans; (e) any action
contemplated by the Debentures or taken at the Purchaser's
request; (f) any action required by Applicable Laws; or (g)
the results of any clinical trials of any product candidates.
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"Material Permits" shall have the meaning ascribed to such
term in Section 4.1(m).
"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.
"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.
"Ontario Securities Laws" has the meaning attributed to the
term "Ontario securities law" in section 1.1 of the Securities
Act (Ontario).
"OSC" means the Ontario Securities Commission.
"Outside Date" means:
(a) if no Shareholder Approval is required, September 30,
2006; and
(b) if Shareholder Approval is required, 45 days after the
Shareholder Approval is received.
"Parties" means the Company and the Purchaser, collectively,
and "Party" means either one of them.
"Per Share Purchase Price" means CAN $0.36.
"Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint
venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other
entity of any kind.
"Preliminary Qualification Prospectus" means a preliminary
short form prospectus of the Company, including all material
incorporated by reference therein, filed with the OSC and
qualifying the distribution of the Purchased Shares to the
Purchaser.
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"Proceeding" means an action, claim, suit, investigation or
proceeding (including an investigation or partial proceeding).
"Property" means property, real or personal, tangible or
intangible, other than Intellectual Property Rights.
"Purchase Price" means the aggregate amount to be paid for the
Purchased Shares purchased hereunder as specified in Section
3.1.
"Purchased Shares" means the Common Shares issued or issuable
to the Purchaser pursuant to this Agreement.
"Purchaser Counsel" means Fasken Xxxxxxxxx DuMoulin LLP.
"Purchaser Nominee" shall have the meaning ascribed to such
term in Section 5.9(a).
"Purchaser Party" shall have the meaning ascribed to such term
in Section 5.7.
"Qualification Prospectus" means the (final) short form
prospectus, including all material incorporated by reference
therein, filed with the OSC and qualifying the Purchased
Shares for distribution to the Purchaser.
"Receipt" means a receipt issued by any of the Canadian
Securities Regulatory Authorities evidencing the receipt of
such of the Canadian Securities Regulatory Authorities for a
preliminary or (final) prospectus, including any amendment
thereto, and includes, where applicable, a decision document
issued by such of the Canadian Securities Regulatory
Authorities on behalf of itself and, if applicable, one or
more Canadian Securities Regulatory Authorities evidencing the
receipt of all such Canadian Securities Regulatory Authorities
for a preliminary or (final) prospectus, including any
amendment thereto, pursuant to National Policy 43-201 - Mutual
Reliance Review System for Prospectuses and Annual Information
Forms.
"Registration Rights Agreement" means that certain
registration rights agreement, attached as Schedule 3.3,
between the Company and the Purchaser.
"Regulation S" means Rules 901 through 905 promulgated by the
SEC pursuant to the United States Securities Act, as such
Rules may be amended from time to time.
"Required Approvals" shall have the meaning ascribed to such
term in Section 4.1(e).
"Rule 144" means Rule 144 promulgated by the SEC pursuant to
the United States Securities Act, as such Rule may be amended
from time to time, or any similar rule or regulation hereafter
adopted by the SEC having substantially the same effect as
such Rule.
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"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.
"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 the Company's share purchase plan.
"Shareholder Approval" means such approval (and related
disclosure from the Company) as may be required by the TSX
Company Manual or the AMEX Rules with respect to the
transactions contemplated by this Agreement.
"Stock Option Plans" means the Company's 2003 Stock Option
Plan or the 1993 Stock Option Plan.
"Subsidiary" shall have the meaning ascribed to such term in
Section 4.1(a).
"Supplementary Material" shall have the meaning ascribed to
such term in Section 2.2(c).
"Trading Day" means a day on which the Common Shares are
traded on a Trading Market.
"Trading Market" means the following markets or exchanges on
which the Common Shares are listed or quoted for trading on
the date in question: the AMEX, the New York Stock Exchange,
the Nasdaq National Market or the TSX.
"Transaction Documents" means this Agreement, the Registration
Rights Agreement and any other documents or agreements
executed in connection with the transactions contemplated
hereunder including the confidentiality agreement between the
Parties dated March 13, 2006.
"TSX" means the Toronto Stock Exchange.
"TSX Company Manual" means the Toronto Stock Exchange Company
Manual.
"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 shall be in effect from time to time.
"United States Securities Laws" means the United States
Securities Act, the Exchange 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.
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"Updated Disclosure Letter" shall have the meaning ascribed to
it in Section 3.3(b)(i).
1.2 Interpretation.
(a) Headings. The division of this Agreement into Articles and
Sections and the insertion of headings are for convenience of
reference only and shall not affect the construction or
interpretation of this Agreement.
(b) Articles; Sections. The terms "this Agreement", "hereof",
"hereunder" "hereto" and similar expressions refer to this
Agreement and not to any particular Article, Section or other
portion hereof and include any agreement supplemental hereto.
Unless something in the subject matter or context is
inconsistent therewith, references herein to Articles and
Sections are to Articles and Sections of this Agreement.
(c) Schedules. The Disclosure Letter and other Schedules referred
to herein form an integral part of this Agreement. (d) Number;
Gender. Words, including defined terms, importing the singular
number only shall include the plural and vice versa, and
words, including defined terms, importing gender include all
genders.
(e) Extended Meaning. The word "include(s)" means "include(s),
without limitation", and the word "including" means
"including, but not limited to" or "including, without
restricting the generality of the foregoing", as the context
requires.
(f) Reference to Agreements and Enactments. Reference herein to
any agreement, instrument, licence or other document shall be
deemed to include reference to such agreement, instrument,
licence or other document as the same may from time to time be
amended, modified, supplemented or restated in accordance with
the provisions of this Agreement; and reference herein to any
enactment shall be deemed to include reference to such
enactment as re-enacted, amended or extended from time to time
and to any successor enactment.
(g) Dollars or "$". A reference herein to "CAN $", "$" or the word
"Dollars", without more, shall be a reference to lawful money
of Canada.
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ARTICLE 2
FILING OF QUALIFICATION PROSPECTUS
2.1 Filing of Qualification Prospectus.
(a) Filing. The Company shall file the Preliminary Qualification
Prospectus with the OSC as soon as practicable after the date
of this Agreement and obtain a Receipt issued by the OSC. The
Company shall, as soon as practicable after all regulatory
deficiencies have been satisfied with respect to the
Preliminary Qualification Prospectus file the Qualification
Prospectus with the OSC and obtain a Receipt issued by the OSC
in respect of the Qualification Prospectus.
(b) Co-operation. The Company and the Purchaser shall cooperate in
the preparation of the filing of the Preliminary Qualification
Prospectus and the Qualification Prospectus and shall do all
such other acts and things as may be reasonably necessary or
desirable in order to file the Preliminary Qualification
Prospectus and the Qualification Prospectus as soon as
reasonably practicable.
2.2 Documents to be Delivered in Connection with Filing.
(a) Preliminary Qualification Prospectus. Concurrently with or
prior to the filing of the Preliminary Qualification
Prospectus, the Company shall deliver to the Purchaser (i) a
copy of the Preliminary Qualification Prospectus signed and
certified; and (ii) a copy of any other document required to
be filed by the Company under the laws of the Province of
Ontario in compliance with Ontario Securities Laws.
(b) Qualification Prospectus. Concurrently with or prior to the
filing of the Qualification Prospectus, the Company shall
deliver to the Purchaser (i) a copy of the Qualification
Prospectus signed and certified; (ii) a copy of any other
document required to be filed by the Company under the laws of
the Province of Ontario in compliance with the Ontario
Securities Laws; and (iii) a copy of the letter from each of
the TSX and the AMEX advising the Company that approval of the
conditional listing of the Purchased Shares has been granted
by the TSX and the AMEX, subject to the satisfaction of
certain usual conditions set out therein.
(c) Supplementary Material. The Company shall deliver to the
Purchaser duly signed copies of all amendments or supplements
or any other supplemental documents to the Preliminary
Qualification Prospectus or the Qualification Prospectus, as
the case may be, that the Company prepares or that are
required to be prepared by the Company under Ontario
Securities Laws (collectively, the "Supplementary Material").
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2.3 Covenants of the Company Concerning Prospectus. The Company covenants to the
Purchaser that:
(a) the Company shall advise the Purchaser, promptly after
receiving notice thereof, of the time when the Preliminary
Qualification Prospectus, the Qualification Prospectus and any
Supplementary Material has been filed and Receipts therefor
have been obtained and shall provide evidence reasonably
satisfactory to the Purchaser of each such filing and copies
of such Receipts; and
(b) the Company shall cause the Preliminary Qualification
Prospectus, the Qualification Prospectus and the Supplementary
Material to comply with the requirements of Ontario Securities
Laws, to provide full, true and plain disclosure of all
material facts relating to the Company and to the Purchased
Shares as required by Ontario Securities Laws and to not
contain any misrepresentation (as defined in Ontario
Securities Laws).
ARTICLE 3
PURCHASE AND SALE
3.1 Closing. On the Closing Date, upon the terms and subject to the conditions
set out herein, the Company agrees to sell and the Purchaser agrees to purchase
28,800,000 Common Shares, as fully paid and non assessable, in the capital of
the Company (the "Purchased Shares") registered in the name of the Purchaser for
an aggregate purchase price of CAN$10,368,000 (the "Purchase Price"). The
Purchaser shall deliver to the Company via wire transfer in immediately
available funds equal to the Purchase Price and the Company shall deliver to the
Purchaser its Purchased Shares pursuant to Section 3.2 and the other items set
out in Section 3.2 issuable at the Closing. Upon satisfaction of the conditions
set out in Section 3.2 and Section 3.3, the Closing shall occur at the offices
of Purchaser Counsel, or such other location as the Parties shall mutually
agree.
3.2 Deliveries.
(a) On the Closing Date, the Company shall deliver or cause to be
delivered to the Purchaser the following:
(i) legal opinions of Company Counsel, customary for
transactions of this type;
(ii) a share certificate or certificates representing the
Purchased Shares registered in the name of the
Purchaser; and
(iii) an Officer's Certificate certifying (A) that the
conditions to Closing set out in Sections 3.3(b)(i),
3.3(b)(iv), 3.3(b)(v) and 3.3(b)(vi) are satisfied as of
the relevant time, (B) the articles and by-laws of the
Company, (C) incumbency particulars, and (D) all
resolutions of the board of directors and, if necessary,
shareholders approving the transactions contemplated by
this Agreement.
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(b) On the Closing Date, the Purchaser shall deliver or cause to
be delivered to the Company the following
(i) the Purchase Price by wire transfer of immediately
available funds to the account as specified in writing
to the Company; and
(ii) an Officer's Certificate certifying that the conditions
to Closing set out in Sections 3.3(a)(i) and 3.3(a)(ii)
are satisfied as of the relevant time.
3.3 Closing Conditions.
(a) The obligations of the Company hereunder in connection with
the Closing are subject to the following conditions being met:
(i) the truth and accuracy in all material respects (with
the exception of any representations and warranties
qualified by materiality, which shall be true and
accurate in all respects) on the Closing Date of the
representations and warranties of the Purchaser
contained herein;
(ii) all obligations, covenants and agreements of the
Purchaser required to be performed at or prior to the
Closing Date (including delivery by the Purchaser of the
items set out in Section 3.2(b)) shall have been
performed; and
(iii) the delivery by the Purchaser of the items set out in
Section 3.2(b)).
(b) The obligations of the Purchaser hereunder in connection with
the Closing are subject to the following conditions being met:
(i) the truth and accuracy in all material respects (with
the exception of any representations and warranties
qualified by materiality, which shall be true and
accurate in all respects) on the Closing Date of the
representations and warranties of the Company contained
herein (for the avoidance of doubt, if any of the
representations and warranties of the Company contained
herein refers to a date prior to, or a period of time
preceding, the date of this Agreement, such
representation and warranty shall remain true and
accurate in respect of such reference date or period of
time), and the delivery of an updated Disclosure Letter
(the "Updated Disclosure Letter") on the Closing Date
revised to reflect changes in the operations or
condition of the Company and its Subsidiaries between
the date of this Agreement and the Closing Date and the
representations and warranties in Section 4.1 shall be
deemed to have been amended accordingly, provided that
if the Updated Disclosure Letter discloses any fact,
state of facts, event, circumstances or matter with
respect to any representation and warranty that
constitutes a Material Adverse Effect, then such
representation and warranties shall be and shall be
deemed to be not accurate on the Closing Date and the
condition provided in this Section 3.3(b)(i) shall not
be met or satisfied;
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(ii) a Receipt shall have been issued by the OSC for the
Qualification Prospectus and such Receipt shall be
effective;
(iii) the execution and delivery by the Parties of the
Registration Rights Agreement;
(iv) all obligations, covenants and agreements of the Company
required to be performed at or prior to the Closing Date
(including delivery by the Purchaser of the items set
out Section 3.2(a)) shall have been performed;
(v) there shall have been no Material Adverse Effect with
respect to the Company since the date of this Agreement;
(vi) from the date of this Agreement to and including the
Closing Date, trading in the Common Shares shall not
have been suspended by any of the Canadian Securities
Regulatory Authorities, the TSX or the AMEX (except for
any suspension of trading of limited duration agreed to
by the Company, which suspension shall be terminated
prior to the Closing); and
(vii) the delivery by the Company of the items set out in
Section 3.2(a).
3.4 Mutual Conditions. The respective obligations of the Company and the
Purchaser hereunder in connection with the Closing are subject to the following
conditions being met:
(a) the Required Approvals shall have been obtained and be in full
force and effect and shall not be subject to any stop-order or
proceeding seeking a stop-order or revocation;
(b) no Action or proceeding shall be pending or threatened by any
person to enjoin, restrict or prohibit the sale and purchase
of the Purchased Shares contemplated hereby; and
(c) no provision of any Applicable Laws and no judgment,
injunction, order or decree shall be in effect which restrains
or enjoins or otherwise prohibits the transactions
contemplated by this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company. Except as set out under the
corresponding section of the Disclosure Letter, which Disclosure Letter shall be
deemed a part hereof, the Company hereby represents and warrants to the
Purchaser as of the date of this Agreement as follows in this Section 4.1. 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 shall be deemed to be disclosed under one or more other sections or
subsections of the Disclosure Letter 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.
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(a) Subsidiaries. Each of the direct and indirect subsidiaries of
the Company (each, a "Subsidiary") are set out in Section
4.1(a) of the Disclosure Letter. The Company owns, directly or
indirectly, all of the issued and outstanding shares or other
equity interests in the capital of each Subsidiary free and
clear of any Liens, and 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 and Qualification. The Company and each of the
Subsidiaries 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 power and authority to own
and use its Property and to carry on its business as currently
conducted. Neither the Company 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 the
Company and the Subsidiaries is 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 the Company, 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. The Company has the requisite
corporate power and authority to enter into and to consummate
the transactions contemplated by each of the Transaction
Documents and otherwise to carry out its obligations hereunder
and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by
it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company
and no further action is required by the Company, its board of
directors or its shareholders, in connection therewith other
than in connection with the Required Approvals. Each
Transaction Document has been (or upon delivery shall have
been) duly executed by the Company and, when delivered in
accordance with the terms hereof and thereof, shall constitute
the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (ii) as limited
by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
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(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of
the Purchased Shares and the consummation by the Company of
the other transactions contemplated hereby and thereby do not
and shall not (i) conflict with or violate any provision of
the Company's or any Subsidiary's 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 the Property of
the Company or any Subsidiary, 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
Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a
party or by which any Property of the Company or any
Subsidiary is bound or affected, or (iii) subject to the
Required Approvals, conflict with or result in a violation of
any Applicable Laws to which the Company or a Subsidiary is
subject, or by which any Property of the Company 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. The Company 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 the Company of the
Transaction Documents, other than (i) filings required
pursuant to Section 5.4, (ii) the filing of the Preliminary
Qualification Prospectus and the Qualification Prospectus,
(iii) application(s) to the AMEX and the TSX for the listing
of the Purchased Shares for trading thereon in the time and
manner required hereby and thereby, (iv) Shareholder Approval,
if required, (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 the Debentureholder if required (collectively, the
"Required Approvals").
(f) Issuance of the Purchased Shares. The Purchased Shares, when
issued and paid for in accordance with the terms and
conditions of the applicable Transaction Documents, shall be
duly authorized and validly issued, fully paid and
non-assessable, free and clear of all Liens imposed by the
Company.
(g) Capitalization. The capitalization of the Company is as
described in the Company's most recent periodic report filed
on SEDAR. The Company has not issued any securities other than
pursuant to the Debentures, the exercise of employee stock
options under the Stock Option Plans and pursuant to the
conversion or exercise of outstanding Common 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 the
Transaction Documents. Except as a result of the purchase and
sale of the Purchased Shares, the Stock Option Plans or the
Debentures, 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 Common
Shares, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may
become bound to issue additional Common Shares or Common Share
Equivalents. The issuance and sale of the Purchased Shares
shall not obligate the Company to issue Common Shares or other
securities to any Person (other than the Purchaser) and shall
not result in a right of any holder of Company securities to
adjust the exercise, conversion, exchange or reset price under
such securities. All of the outstanding Common Shares are
validly issued, fully paid and nonassessable, to the knowledge
of the Company, have been issued in compliance with all
Applicable Laws and, to the knowledge of the Company, none of
such outstanding Common Shares was issued in violation of any
pre-emptive rights or similar rights to subscribe for or
purchase securities. Except for the Required Approvals, no
further approval or authorization of any shareholder, the
Board of Directors of the Company or others is required for
the issuance and sale of the Purchased Shares. There are no
shareholders agreements, voting agreements or other similar
agreements with respect to the Company's authorized capital to
which the Company is a party or, to the knowledge of the
Company, between or among any of the Company's shareholders.
- 14 -
(h) Continuous Reports; Financial Statements. The Company 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
two (2) years preceding the date of this Agreement (or such
shorter period as the Company 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 reasonably be expected to have a Material
Adverse Effect. As of their respective dates, the Continuous
Disclosure Reports complied with the 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 the Company 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 the Company 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.
- 15 -
(i) 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) the Company 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 the Company's
financial statements pursuant to GAAP or required to be
disclosed in filings made or required to be made pursuant to
the Securities Laws, (iii) the Company has not altered its
method of accounting except as required by GAAP, (iv) the
Company has not declared or made any dividend or distribution
of cash or other Property to its shareholders or purchased,
redeemed or made any agreements to purchase or redeem any of
its Common Shares and (v) the Company has not issued any
equity securities to any officer, director or Affiliate,
except pursuant to the Stock Option Plans or the Share
Purchase Plan. The Company does not have pending before any of
the Canadian Securities Regulatory Authorities any
confidential material change report.
(j) Litigation. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened or contemplated
(including by any of the Canadian Securities Regulatory
Authorities) against or affecting the Company, any Subsidiary
or any of their respective Property or, to the knowledge of
the Company, any current officer or director or former officer
or director of the Company before or by any Governmental
Authority (collectively, an "Action") which (i) adversely
affects or challenges the legality, validity or enforceability
of any of the Transaction Documents or the Purchased Shares or
(ii) could, if there were an unfavourable decision, have or
reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any Subsidiary, nor, to the knowledge
of the Company, 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 the Company is outstanding.
(k) Labour Relations. No labour dispute exists or, to the
knowledge of the Company, is imminent with respect to any of
the employees of the Company which could reasonably be
expected to result in a Material Adverse Effect.
(l) Compliance. To the knowledge of the Company, neither the
Company 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 the Company or any Subsidiary under),
nor has the Company or any Subsidiary received 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
agreement or instrument 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.
- 16 -
(m) Regulatory Permits. The Company 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.
(n) Title to Property. The Company and the Subsidiaries do not own
real property. Subject to the provisions of Section 4.1(o),
the Company 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 the Company 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 the Company 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 the Company and the
Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries
are in compliance, except as would not have a Material Adverse
Effect.
(o) Intellectual Property. The Company 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 the
Company, 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 so have
could have a Material Adverse Effect (collectively, the
"Intellectual Property Rights"). Neither the Company nor any
Subsidiary has received a written notice that the Intellectual
Property Rights used by the Company or any Subsidiary violates
or infringes upon the rights of any Person. To the knowledge
of the Company: (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.
(p) Insurance. The Company 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 the Company and the
Subsidiaries are engaged. Neither the Company nor any
Subsidiary has any reason to believe that it shall 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.
- 17 -
(q) Transactions With Affiliates and Employees. Except as set out
in the Continuous Disclosure Reports, none of the current
officers or directors of the Company and, to the knowledge of
the Company, none of the employees of the Company is a party
to any transaction with the Company or any Subsidiary (other
than for services as employees, officers and 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 the Company, 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 the Company and (iii) for other employee
benefits, including the Share Purchase Plan and stock option
agreements under the Stock Option Plans.
(r) Securities Laws; Internal Accounting Controls. The Company is
in material compliance with all provisions of the Securities
Laws which are applicable to it. The Company and the
Subsidiaries maintain a system of internal accounting controls
as required by MI 52-109. The Company has established
disclosure controls and procedures as required by MI 52-109
for the Company and designed such disclosure controls and
procedures to ensure that material information relating to the
Company, including its Subsidiaries, is made known to the
certifying officers by others within those entities,
particularly during the period in which the Company's most
recently filed periodic report under the Securities Laws, as
the case may be, is being prepared. The Company's certifying
officers have evaluated the effectiveness of the Company's
controls and procedures as of the date prior to the filing
date of the most recently filed periodic report under the
Securities Laws (such date, the "Evaluation Date"). The
Company presented in its most recently filed periodic report
under the 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 the
Company's 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 the Company's
knowledge, in other factors that could significantly affect
the Company's internal disclosure controls and procedures or
its internal control over financial reporting. To the extent
any requirements applicable to the Company under the
Xxxxxxxx-Xxxxx Act of 2002, and the rules and regulations
promulgated by the SEC pursuant to such Act, differ from the
foregoing, the Company is in compliance with all such
requirements, except as would not have a Material Adverse
Effect.
- 18 -
(s) Certain Fees. No brokerage or finder's fees or commissions are
or shall be payable by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents.
(t) Private Offering and Sale. Assuming the accuracy of the
Purchaser's representations and warranties set out in Section
4.2, no registration under the United States Securities Act is
required for the offer and sale of the Purchased Shares by the
Company to the Purchaser as contemplated hereby.
(u) Investment Company. The Company is not, and immediately after
consummation of the transactions contemplated by the
Transaction Documents, shall not be, registered or required to
be registered as an "investment company" under the U.S.
Investment Company Act of 1940, as amended.
(v) Listing and Maintenance Requirements. The Common Shares are
listed on the TSX and the AMEX, and the Company has taken no
action designed to, or which to its knowledge is likely to
have the effect of, terminating the listing of the Common
Shares on the TSX or the AMEX nor has the Company received any
notification that the TSX or the AMEX is contemplating
terminating such listing. The Company has not, in the 12
months preceding the date of this Agreement, received notice
from any Trading Market on which the Common Shares are or have
been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of
such Trading Market, except as would not have a Material
Adverse Effect. The Company is, and has no reason to believe
that it shall not in the foreseeable future continue to be, in
compliance with the listing and maintenance requirements of
the TSX and the AMEX.
(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 the Company or any Subsidiary, or for which
the Company or any Subsidiary has commitments. For the
purposes of this Agreement, "Indebtedness" shall mean (a) any
liabilities for borrowed money or amounts owed in excess of
CAN $50,000 (other than trade accounts payable incurred in the
ordinary course of business), (b) all guaranties, endorsements
and other contingent obligations in respect of Indebtedness of
others, whether or not the same are or should be reflected in
the Company's 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 (c) the present value of any lease payments in
excess of CAN $50,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor
any Subsidiary is in default with respect to any Indebtedness,
except as would not have a Material Adverse Effect. Based on
the current understanding of the Company of funding
alternatives available to it, as well as its ability to make
operational decisions to control its "burn rate" as needed,
the Company does not expect to become insolvent within the
12-month period commencing from the date of this Agreement.
The Company shall not pursue any equity financing from the
date of this Agreement until the earlier of the Closing Date
and September 30, 2006.
- 19 -
(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, the Company and each Subsidiary has
filed all necessary federal, provincial, state and foreign
income and franchise tax returns and has paid or accrued all
taxes shown as due thereon, and the Company has no knowledge
of a tax deficiency which has been asserted or threatened
against the Company or any Subsidiary.
(z) Foreign Corrupt Practices. Neither the Company, nor to the
knowledge of the Company, any agent or other Person acting on
behalf of the Company, has (i) directly or indirectly, used
any funds for unlawful contributions, gifts, entertainment or
other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign
or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from
corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting
on its behalf of which the Company is aware) which is in
violation of Applicable Laws, or (iv) violated in any respect
any provision of the United States Foreign Corrupt Practices
Act of 1977, as amended.
(aa) Accountants. The Company's accountants are set out on Section
4.1(aa) of the Disclosure Letter. To the knowledge of the
Company, such accountants are independent accountants as may
be required by the Canada Business Corporations Act and the
Securities Laws.
(bb) Regulation S; Directed Selling Efforts. (i) None of the
Company, its Subsidiaries or any persons acting on its or
their behalf has engaged in any directed selling effort
(within the meaning of Regulation S) with respect to the
Purchased Shares; (ii) none of the Company, its Subsidiaries
or any Person acting on its or their behalf has offered to
sell any of the Purchased Shares by means of any form of
general solicitation or general advertising (as those terms
are used in Regulation D of the United States Securities Act)
or in any manner involving a public offering within the
meaning of Section 4(2) of the United States Securities Act;
and (iii) it is a "foreign issuer" within the meaning of
Regulation S and reasonably believes that there is no
"substantial U.S. market interest" in the Purchased Shares of
the Corporation (as such term is defined under Regulation S).
(cc) Reporting Issuer Status. The Company is a "reporting issuer"
(or equivalent concept thereof) in each province of Canada
that has the concept. The Company is eligible at the date of
this Agreement (i) to file a prospectus in Canada in the form
of a short form prospectus pursuant to NI 44-101 and (ii) to
file under the United States Securities Act a registration
statement on Form F-3 for purposes of registering securities
to be offered and sold for the account of any person other
than the issuer, and the Company, in each case, is not engaged
in or contemplating any act or transaction or series of acts
or transactions the consummation of which would result in the
Company ceasing to be eligible to file such a short form
prospectus or Form F-3. The Company is a "foreign private
issuer" under United States Securities Laws.
- 20 -
4.2 Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company as of the date of this Agreement as
follows:
(a) Organization; Authority. The Purchaser is an entity duly
organized, validly existing and in good standing under the
laws of the jurisdiction of its organization with full right,
corporate or partnership power and authority to enter into and
to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder
and thereunder. The execution, delivery and performance by the
Purchaser of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate or
similar action on the part of the Purchaser. Each Transaction
Document to which it is a party has been duly executed by the
Purchaser, and when delivered by the Purchaser in accordance
with the terms hereof, shall constitute the valid and legally
binding obligation of the Purchaser, 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.
(b) No Conflicts. Neither the entering into nor the delivery of
this Agreement nor the completion of the transactions
contemplated hereby by the Purchaser shall result in a
violation of: (i) any of the provisions of the constating
documents or by-laws of the Purchaser; (ii) any agreement or
other instrument to which the Purchaser is a party or by which
the Purchaser is bound; or (iii) any Applicable Laws.
(c) No Common Shares. The Purchaser does not own, beneficially or
otherwise, any Common Shares or Common Share Equivalents.
- 21 -
(d) Experience of Purchaser. The Purchaser has such knowledge,
sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks
of the prospective investment in the Purchased Shares, and has
so evaluated the merits and risks of such investment. The
Purchaser is able to bear the economic risk of an investment
in the Purchased Shares and, at the present time, is able to
afford a complete loss of such investment.
(e) General Solicitation. The Purchaser is not purchasing the
Purchased Shares as a result of any advertisement, article,
notice or other communication regarding the Company published
in any newspaper, magazine or similar media, including the
internet, or broadcast over television or radio or presented
at any seminar or meeting whose attendees had been invited by
general solicitation or general advertising.
(f) United States Securities Laws. The Purchaser acknowledges that
it was not offered the Purchased Shares in the United States
(as defined in the United States Securities Act), did not
execute this Agreement in the United States and was not in the
United States at the time the buy order for the Purchased
Shares was made.
ARTICLE 5
OTHER AGREEMENTS OF THE PARTIES
5.1 Qualification and Registration of the Purchased Shares for Resale. The
rights and obligations of each of the Company and the Purchaser, and other terms
and conditions relating to the registration of the resale of the Purchased
Shares for resale in the United States and the qualification of the resale of
the Purchased Shares for resale in Canada are set out in the Registration Rights
Agreement.
5.2 Prospectus Disclosure. At the respective times of filing and at all times
subsequent to the filing thereof during the distribution, the Preliminary
Qualification Prospectus, the Qualification Prospectus and any Supplementary
Material shall comply with the requirements of Ontario Securities Laws, and the
Preliminary Qualification Prospectus and the Qualification Prospectus shall
provide full, true and plain disclosure of all material facts relating to the
Company, and to the Purchased Shares as required by Ontario Securities Laws and
the Preliminary Qualification Prospectus and the Qualification Prospectus shall
not contain any misrepresentation.
5.3 Furnishing of Information. As long as the Purchaser owns Purchased Shares,
the Company covenants to timely file or submit (or obtain extensions in respect
thereof and file or submit within the applicable grace period) all reports
required to be filed or submitted by the Company after the date of this
Agreement pursuant to Securities Laws, when applicable except where a failure to
so timely file or submit could not have or reasonably be expected to have a
Material Adverse Effect. As long as the Purchaser owns Purchased Shares, if the
Company is not required to file reports pursuant to the Exchange Act, it shall
prepare and furnish to the Purchaser and make publicly available in accordance
with Rule 144(c) such information as is required for the Purchaser to sell the
Purchased Shares under Rule 144. The Company further covenants that it shall
take such further action as the Purchaser may request acting commercially
reasonably, all to the extent required from time to time to enable such Person
to sell such Purchased Shares without registration under the United States
Securities Act in accordance with the exemptions provided by Rule 144.
- 22 -
5.4 Securities Laws Disclosure; Publicity. The Company shall issue a press
release, file a material change report and, if applicable, submit a Current
Report on Form 6-K pursuant to Securities Laws and within the timeframes set out
in the Securities Laws, reasonably acceptable to the Purchaser disclosing the
material terms of the transactions contemplated hereby or such other information
as may be required by applicable Securities Laws, and shall attach and/or file
or submit those Transaction Documents required to be filed or submitted with any
such filings or submissions by the applicable Securities Laws or required to be
filed on SEDAR. The Company and the Purchaser shall consult with each other in
issuing such press release, submitting any such Form 6-K and filing such
Transaction Documents on SEDAR as required by Securities Laws, and any other
press releases with respect to the transactions contemplated by the Transaction
Documents. Neither the Company nor the Purchaser shall issue any such press
release or otherwise make any such public statement or publicly disclose
(collectively, a "Public Disclosure") without the prior consent of the Company,
with respect to any Public Disclosure of the Purchaser, or without the prior
consent of the Purchaser, with respect to any Public Disclosure of the Company,
which consent shall not unreasonably be withheld. Notwithstanding the foregoing,
in the event that the Company or the Purchaser is required by Applicable Laws
or, in the case of the Company the requirements of any Trading Market on which
its Common Shares are listed, to publicly disclose information regarding the
transactions contemplated by the Transaction Documents (a "Required Disclosure")
and it is not then reasonably possible to delay such Required Disclosure until
such time as such Party shall have notified, consulted with and obtained the
consent of the other Party to such Required Disclosure as required by this
Section 5.4, then any such Required Disclosure made without prior notice to,
consultation with or obtaining the consent of the Purchaser shall not be deemed
a breach of the disclosing Party's obligations under this Section 5.4.
5.5 Regulation S; Directed Selling Efforts. (i) None of the Company, its
Subsidiaries or any persons acting on its or their behalf shall engage in any
directed selling effort (within the meaning of Regulation S) with respect to the
Purchased Shares; (ii) to the extent that the Company engages in a sale of the
Purchased Shares, or other securities substantially similar to the Purchased
Shares, outside of the United States, it shall comply with the requirements for
an "offshore transaction", as such term is defined in Regulation S; (iii) none
of the Company, its Subsidiaries or any Person acting on its or their behalf
shall offer to sell any of the Purchased Shares by means of any form of general
solicitation or general advertising (as those terms are used in Regulation D of
the United States Securities Act) or in any manner involving a public offering
within the meaning of Section 4(2) of the United States Securities Act; and (iv)
the Company shall notify its transfer agent as soon as practicable upon it
becoming a "domestic issuer", as defined in Regulation S.
5.6 Use of Proceeds. The Company shall use the net proceeds from the sale of the
Purchased Shares hereunder for the purposes and in the amounts specified in
Section 5.6 of the Disclosure Letter for so long as such purposes are
scientifically and economically feasible, as determined by management of the
Company and its board of directors, and not for the satisfaction of any portion
of the Debentures or any debt (other than debt which may be incurred in
implementing the purposes specified in Section 5.6 of the Disclosure Letter) or
to redeem any Common Shares or Common Share Equivalents or to settle any
outstanding litigation.
- 23 -
5.7 Indemnification.
(a) Indemnification of Purchaser. Subject to the provisions of
this Section 5.7(a), the Company shall indemnify and hold the
Purchaser and its directors, officers, partners and employees
(each, a "Purchaser Party") harmless from any and all claims,
legal procedures, obligations, liabilities, contingencies,
damages, losses, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating
to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement
or in the other Transaction Documents or (b) any action
instituted against the Purchaser, by any shareholder of the
Company, with respect to any of the transactions contemplated
by the Transaction Documents (unless such action is based upon
a breach of the Purchaser's representations, warranties or
covenants under the Transaction Documents or any relevant and
material agreements or understandings the Purchaser may have
with any such shareholder or any material violations by the
Purchaser of Securities Laws or any conduct by the Purchaser
which constitutes fraud, gross negligence or wilful
misconduct). If any action shall be brought against any
Purchaser Party in respect of which indemnity may be sought
pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall
have the right to assume the defence thereof with counsel of
its own choosing. Any Purchaser Party shall have the right to
employ separate counsel in any such action and participate in
the defence thereof, but the fees and expenses of such counsel
shall be at the expense of such Purchaser Party except to the
extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has
failed after a reasonable period of time to assume such
defence and to employ counsel or (iii) in such action there
is, in the reasonable opinion of such separate counsel, a
material conflict on any material issue between the position
of the Company and the position of such Purchaser Party. The
Company shall not be liable to any Purchaser Party under this
Agreement for any settlement by a Purchaser Party effected
without the Company's prior written consent, which shall not
be unreasonably withheld or delayed. For avoidance of doubt,
the Company's obligations and the Purchaser's rights under
Section 5.7(a) are in addition to any such obligations and
rights imposed or provided in the Registration Rights
Agreement relating to the registration of Purchased Shares.
(b) Limitation. To the extent permitted by Applicable Laws, the
liability of the Company under Section 5.7(a) shall be limited
to the Purchase Price.
- 24 -
5.8 Subsequent Equity Sales. Neither the Company nor any Subsidiary shall, until
July 31, 2007, issue Common Shares or Common Share Equivalents at a price per
share that is less than the Per Share Purchase Price, except for Exempt
Issuances.
5.9 Board Representation.
(a) Commencing with the first of the annual, special or
extraordinary meetings of shareholders of the Company the
record date for which next follows the Closing Date, and at
each annual meeting of shareholders of the Company thereafter,
the Purchaser shall be entitled to present to the Board of
Directors or the nominating committee thereof one nominee
(each such person, or replacement designated by the Purchaser,
a "Purchaser Nominee") for election to the Board of Directors
at each such meeting of shareholders of the Company. In the
event of the death, disability, resignation or removal of a
Purchaser Nominee, or the failure of a Purchaser Nominee to
qualify to act as a director pursuant to Section 5.9(e), the
Purchaser shall designate a replacement for such director,
which replacement the Company shall cause to be nominated for
election to the Board of Directors at the annual, special or
extraordinary meeting of shareholders of the Company the
record date for which next follows the date on which such
director ceased to be a director as a result of his or her
death, disability, resignation or removal from the Board of
Directors.
(b) The Company shall cause each Purchaser Nominee designated for
election to the Board of Directors pursuant to Section 5.9(a)
to be included in the slate of nominees recommended by the
Board of Directors to the shareholders of the Company for
election as directors at the relevant meeting of the
shareholders, and shall use its commercially reasonable
efforts to cause the election of each such Purchaser Nominee,
including soliciting proxies in favour of the election of such
person.
(c) Notwithstanding the foregoing provisions of this Section 5.9,
the Purchaser shall not be entitled to designate a Purchaser
Nominee for election to the Board of Directors as of the first
date on which the Purchaser no longer owns any Purchased
Shares of the Company. In the event that the Purchaser shall
no longer be entitled to designate Purchaser Nominees for
election to the Board of Directors pursuant to this Section
5.9(c), the Purchaser shall cause any Purchaser Nominee then
serving as a director to resign from the Board of Directors no
later than the thirtieth (30th) day after the first day on
which the Purchaser no longer owns any Purchased Shares of the
Company.
(d) If at any time that the Purchaser is entitled to designate a
Purchaser Nominee for election to the Board of Directors no
Purchaser Nominee shall then be elected and serving as a
director on the Board of Directors, then until such time as a
Purchaser Nominee shall be elected to serve as a director the
Purchaser shall be entitled to designate one person (each such
person, a "Board Observer") who shall be permitted to attend
all regular and special meetings of the Board of Directors.
Each Board Observer shall enter into the Company's standard
form confidentiality agreement prior to acting as a Board
Observer. The Company shall (i) notify each Board Observer of
any such meeting no later than the time at which it notifies
any member of the Board of Directors of such meeting and (ii)
provide to such Board Observer copies of all written or other
materials delivered to other members of the Board of
Directors.
- 25 -
(e) The Purchaser Nominee shall, at all times, be qualified and
eligible to act as a director pursuant to the requirements of
the Canada Business Corporations Act and the Securities Laws,
as applicable.
5.10 Officer Share Transactions. The Company shall use its commercially
reasonable efforts to cause each of the Company's Chief Executive Officer and
President, Chief Operating Officer, Director of Business Development, and
Director of Finance to enter into an agreement on the Closing Date, which
provides that he or she shall not, directly or indirectly, without the prior
consent of the Purchaser, (i) offer, sell, contract to sell, secure, pledge,
grant or sell any option, right or warrant to purchase, or otherwise lend,
transfer or dispose of, or announce any intention to do so, any securities of
the Company, or (ii) make any short sale, engage in any hedging transaction, or
enter into any swap or other arrangement that transfers to another Person any of
the economic consequences of ownership of Common Shares (each, an "Officer
Disposition"), for a period of 30 days following the Closing Date, and for the
30 days immediately following such initial 30 day period, the aggregate Officer
Dispositions of any of such Scheduled Officer shall not exceed 50% of the
aggregate number of Common Shares held by such Scheduled Officer on the Closing
Date. Each such agreement with such Scheduled Officers may contain customary
exceptions to such restrictions, which exceptions shall be reasonably acceptable
to the Purchaser.
5.11 Compliance with Securities Laws. The Purchaser shall comply with all
applicable Securities Laws in connection with any resale of the Purchased
Shares.
5.12 Ordinary Course of Business. The Company shall exercise commercially
reasonable efforts to ensure that, until the Closing Date its operations and
business are conducted only in the ordinary course, substantially in the same
manner as currently conducted, including in such manner that:
(a) it shall not incur any indebtedness or obligation except in
the ordinary course of business, and in a manner consistent
with, past practices;
(b) it shall not dispose of its Property (in whole or in part as
may otherwise constitute a "bulk sale"), except in the
ordinary course of business, and in a manner consistent with
past practices;
(c) it shall not dispose of or lose any of its title to or right
to use any of the Intellectual Property Rights, except in the
ordinary course of business, and in a manner consistent with
past practices;
(d) it shall maintain in force all policies of insurance; and
- 26 -
(e) it shall not enter or agree to enter into any transaction that
may result in a Material Adverse Effect.
The Company shall promptly notify the Purchaser of the occurrence or existence
of any event or circumstance on or prior to the Closing Date by reason of which
the Company has ceased to conduct its operations and business in the ordinary
course as currently conducted or by reason of which the representations and
warranties made by the Company herein have ceased to be true and correct in any
material respect (or, in the case of representations and warranties qualified by
materiality, in any respect).
5.13 No Dividends. From the date of this Agreement until the Closing Date, the
Company shall not declare, pay or set aside for payment any dividend (including
a dividend in specie or in kind) or other distribution to holders of any of its
shares (including by way of return of capital).
ARTICLE 6
MISCELLANEOUS
6.1 Fees and Expenses. The Company shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and of Purchaser
Counsel incident to the negotiation, preparation, execution and delivery of this
Agreement. The Company shall pay all transfer agent fees, stamp taxes and other
taxes and duties levied in connection with the delivery of any Purchased Shares.
The fees and expenses that the Company is obligated to pay pursuant to this
Section 6.1 shall be in addition to all such fees and expenses the Company is
obligated to pay pursuant to the terms of any other Transaction Document.
6.2 Entire Agreement. The Transaction Documents, together with the schedules
thereto, contain the entire understanding of the Parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters, including, without limitation the
non-binding term sheet between the Parties dated as of June 13, 2006.
6.3 Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission, if such
notice or communication is delivered via facsimile or via internet at the
facsimile number or internet address respectively set out on the signature pages
attached hereto prior to 5:30 p.m. (Toronto time) on a Trading Day, (b) the next
Trading Day after the date of transmission, if such notice or communication is
delivered via facsimile or via internet at the facsimile number or internet
address respectively set out on the signature pages attached hereto on a day
that is not a Trading Day or later than 5:30 p.m. (Toronto time) on any Trading
Day, (c) the 2nd Trading Day following the date of mailing, if sent by an
internationally recognized overnight courier service, or (d) upon actual receipt
by the Party to whom such notice is required to be given. The address for such
notices and communications shall be as set out on the signature pages attached
hereto.
6.4 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the
Company and the Purchaser or, in the case of a waiver, by the Party against whom
enforcement of any such waiver is sought. No waiver of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either Party to exercise any right hereunder in any manner
impair the exercise of any such right.
- 27 -
6.5 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the Parties and their successors and permitted assigns. Neither
Party may assign this Agreement or any rights or obligations hereunder without
the prior written consent of the other Party.
6.6 No Third-Party Beneficiaries. This Agreement is intended for the benefit of
the Parties and their respective successors and permitted assigns and is not for
the benefit of, nor may any provision hereof be enforced by, any other Person,
except as otherwise set out in Section 5.7.
6.7 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the Province of Ontario and the laws of Canada
applicable therein.
6.8 Survival. The representations and warranties contained herein shall survive
the Closing for a period of two years thereafter, except in the case of fraud
and except that the representations and warranties set out in Sections 4.1(f)
and 4.1(y) shall survive for the limitation period applicable to the respective
subject matter thereof.
6.9 Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each Party and
delivered to the other Party, it being understood that both Parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the Party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
6.10 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the Parties shall attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
6.11 Construction. The Parties confirm that each of them together with the
Company Counsel and Purchaser Counsel, as applicable, has reviewed and had an
opportunity to revise the Transaction Documents and, therefore, the provisions
of this Agreement express the Parties' mutual intent and the rule of
construction to the effect that any ambiguities are to be resolved against the
drafting Party shall not be employed in the interpretation of the Transaction
Documents or any amendments hereto and no rule of strict construction shall be
applied against either Party.
(Signature Pages Follow)
- 28 -
IN WITNESS WHEREOF, the Parties have caused this Share
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated on the first page hereof.
LORUS THERAPEUTICS INC.
Per: /s/ Xxx Xxxxxx
------------------------------------------
Name: Xxx Xxxxxx
Title: Chief Executive Officer
Per: /s/ Xxxxxx X. Xxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Chief Operating Officer
Address for Notice:
0 Xxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxx Xxxxxx, CEO
Telephone: x(000) 000-0000 Ext. 340
Telecopy: x(000) 000-0000
E-mail: xxxxxxxx@xxxxxxxxxx.xxx
and
Attention: Xxxxxx X. Xxxxx, COO
Telephone: x(000) 000-0000 Ext. 379
Telecopy: x(000) 000-0000
E-mail: xxxxxxx@xxxxxxxxxx.xxx
- 29 -
HIGHTECH BETEILIGUNGEN GMBH & CO. KG represented by
CONPHARM ANSTALT
Per: /s/ Xxxxx Xxxxxx
------------------------------------------
Name: Xxxxx Xxxxxx
Title: Managing Director
Address for Notice:
ConPharm Anstalt
Xxxxxxxxx 10
FL 9492 Eschen
Principality of Liechtenstein
Attention: Xxxxx Xxxxxx, Managing Director
Telephone: x000 00 00 000
Telecopy: x000 000 0000
E-mail: xxxxxxx@xxxxxxxx-xx.xxx
With copy to:
HighTech Beteiligungen GmbH & Co. KG
Xxxxxxxxxxxx 00
X 00000 Xxxxxxxxxx
Xxxxxxx
Attention: Xxxxx Xxxxxx, Managing Partner
Telephone: x00 000 00 000 000
Telecopy: x00 000 00 000 000
E-mail: xxxxxxx@xxxxxxxx-xx.xxx
