PLACEMENT AGENT AGREEMENT Up to 14,583,000 Units YM BIOSCIENCES INC. PLACEMENT AGENT AGREEMENT
Up
to 14,583,000 Units
March 4,
2010
Xxxx
Capital Partners, LLC
Xxxxxxx
Securities, Inc.
Xxxxx
Xxxxxx & Co. Inc.
Xxxxxxx
Securities Inc.
c/o Roth
Capital Partners, LLC
00
Xxxxxxxxx Xxxxx
Xxxxxxx
Xxxxx, XX 00000
Dear
Sirs:
1. Introductory. YM
BioSciences Inc. (the “Company”), a corporation
continued under the Nova Scotia Companies Act (the “NSCA”), proposes to sell to
certain purchasers (each a “Purchaser” and, collectively,
the “Purchasers”),
pursuant to the terms of this Placement Agent Agreement (this “Agreement”) and, with respect
to Purchasers resident in the United States (each a “US Purchaser” and,
collectively, the “US
Purchasers”) the
Subscription Agreements in the form of Exhibit A attached
hereto (the “Subscription
Agreements”), up to an aggregate of 14,583,000 units (the “Units”) with each Unit
consisting of (i) one common share (a “Share” and, collectively, the
“Shares”), without
nominal or par value (the “Common Shares”), of the
Company and (ii) one-half of one common share purchase warrant (a “Warrant” and, collectively,
the “Warrants”). Each
whole Warrant will entitle the holder to purchase one (1) Common Share at an
exercise price of US$1.60 per Common Share (subject to
adjustment). The Warrants shall be in substantially the form of Exhibit B attached
hereto. The Units will not be issued or certificated. The
Shares and the Warrants are immediately separable and will be issued
separately. The Common Shares issuable upon the exercise of the
Warrants are hereinafter referred to as the “Warrant
Shares.” The Shares, the Warrants and the Warrant Shares are
hereinafter collectively referred to as the “Offered
Securities.” The Company hereby confirms its agreement with
Xxxx Capital Partners, LLC (“Xxxx”), Xxxxxxx Securities,
Inc. (“Xxxxxxx” and,
together with Xxxx, the “US
Placement Agents”), Xxxxx Xxxxxx & Co. Inc. (“Xxxxx Xxxxxx”) and Xxxxxxx
Securities Inc. (“Xxxxxxx” and, together with
Xxxxx Xxxxxx, the “Canadian
Placement Agents”) (collectively, the “Placement
Agents”).
2. Agreement to Act
as Placement Agents; Placement of Securities. On the basis of
the representations, warranties and agreements of the Company herein contained,
and subject to all the terms and conditions of this Agreement:
(I) The
Company hereby authorizes the Placement Agents to act as its exclusive agents to
solicit offers for the purchase of all or part of the Units from the Company in
connection with the proposed offering of the Units (the “Offering”). Until
the Closing Date (as defined in Section 4 hereof),
the Company shall not, without the prior consent of the Placement Agents,
solicit or accept offers to purchase Units otherwise than through the Placement
Agents.
(II) The
Placement Agents agree, as agents of the Company, to use their commercially
reasonable best efforts to solicit offers to purchase the Units from the Company
on the terms and subject to the conditions set forth in the Prospectuses (as
defined below); provided, however, that (i) in no event shall the US Placement
Agents solicit offers to purchase Units in Canada, (ii) in no event shall the
Canadian Placement Agents solicit offers to purchase Units in the United States
and (iii) all “trades” (as defined under applicable Canadian securities laws) in
Canada shall only by effected by Xxxxx Xxxxxx through Xxxxxxx as its
agent. The Placement Agents shall make commercially reasonable best
efforts to assist the Company in obtaining performance by each Purchaser whose
offer to purchase Units has been solicited by the Placement Agents and accepted
by the Company, but the Placement Agents shall not, except as otherwise provided
in this Agreement, be obligated to disclose the identity of any potential
purchaser or have any liability to the Company in the event any such purchase is
not consummated for any reason. Under no circumstances will the
Placement Agents be obligated to underwrite or purchase any Units for their own
accounts and, in soliciting purchases of Units, the Placement Agents shall act
solely as the Company's agents and not as principals. Notwithstanding
the foregoing and except as otherwise provided in Section 2(III), it is
understood and agreed that the Placement Agents (or their affiliates) may,
solely at their discretion and without any obligation to do so, purchase Units
as principals.
(III) Subject
to the provisions of this Section 2, offers for
the purchase of Units may be solicited by the Placement Agents as agents for the
Company at such times and in such amounts as the Placement Agents deem
advisable. Each Placement Agent shall communicate to the Company,
orally or in writing, each reasonable offer to purchase Units received by it as
agent of the Company. The Company shall have the sole right to accept
offers to purchase the Units and may reject any such offer, in whole or in
part. Each Placement Agent shall have the right, in its discretion
reasonably exercised, without notice to the Company, to reject any offer to
purchase Units received by it, in whole or in part, and any such rejection shall
not be deemed a breach of its agreement contained herein.
(IV) The
Units are being sold to the Purchasers at a price of US$ 1.20 per Unit (the
“Per Unit Purchase
Price”). The purchases of the Units by the Purchasers through
the US Placement Agents shall be evidenced by the execution of the Subscription
Agreements by each of the parties thereto.
(V) As
compensation for services rendered, on the Closing Date (as defined in Section 4 hereof) the
Company shall (i) pay to the Placement Agents by wire transfer of immediately
available funds to an account or accounts designated by the Placement Agents, a
cash fee (the “Cash
Fee”) equal to six percent (6.0%) of the gross proceeds received by the
Company from the sale of the Units on such Closing Date and (ii) issue to the
Placement Agents, or as the Placement Agents may otherwise direct, warrants (the
“Agent Warrants”), in
substantially the same form as the Warrants except as described below, entitling
the Placement Agents, or their respective assigns, to purchase up to an
aggregate of 6.0% of the total number of Shares sold as part of the Units in the
Offering (the “Agent Warrant
Shares”) at an exercise price equal to the exercise price of the Warrants
set forth on the cover page of the Prospectuses. The Agent Warrants will be
exercisable commencing six months from the Closing Date for a period of five
years from the date of the Prospectuses (as defined below) and will contain
cashless exercise provisions in the event that an effective registration
statement is not available. The Agent Warrants will be deemed
compensation by the Financial Industry Regulatory Authority, Inc. (“FINRA”) and may not be sold,
transferred, pledged, hypothecated or assigned for a period of 180-days
following the date of the Prospectuses pursuant to Rule 5110(g)(1) of the FINRA
Conduct Rules. The Cash Fee and the Agent Warrants are hereinafter
referred to herein as the “Placement Fee”. The
Placement Fee shall be allocated among the Placement Agents as they may agree;
provided, however, that in no event shall (i) the US Placement Agents receive
any Placement Fee in respect of any offers and sales of Units made in Canada or
(ii) the Canadian Placement Agents receive any Placement Fee in respect of any
offers and sales of Units made in the United States.
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(VI) No
Units which the Company has agreed to sell pursuant to this Agreement and, if
applicable, the Subscription Agreements shall be deemed to have been purchased
and paid for, or sold by the Company, until such Units shall have been delivered
to the Purchaser thereof against payment by such Purchaser. If the
Company shall default in its obligations to deliver Units to a Purchaser whose
offer it has accepted, the Company shall indemnify and hold the Placement Agents
harmless against any loss, claim or damage arising from or as a result of such
default by the Company.
3. Representations
and Warranties of the Company and its Subsidiaries.
(I) The
Company represents and warrants to and agrees with the several Placement Agents
and the Purchasers that:
(a) The
Company has prepared and filed with the Ontario Securities Commission (the
“OSC”) in the province
of Ontario, a final short form base shelf prospectus dated September 16, 2009
relating to the offering of up to an aggregate US$75,000,000 of Common Shares,
warrants and units comprising any combination thereof (together with any
documents incorporated therein by reference, and any supplements or amendments
thereto (the “Canadian Base
Prospectus”) in accordance with the Securities Act (Ontario) and the
rules, regulations, orders and notices made thereunder and the local, uniform
and national published policies adopted by the OSC (collectively, as applied and
interpreted, the “Canadian
Securities Laws”). The Company has prepared the Canadian Base
Prospectus pursuant to National Instruments 44-101 Short Form Prospectus
Distributions and 44-102 Shelf Distributions (the “Shelf
Procedures”). The Company has obtained from the OSC a receipt
for the Canadian Base Prospectus (a “Final Receipt”).
(b) The
Company has prepared and filed with the U.S. Securities and Exchange Commission
(the “Commission”)
pursuant to the Canada/U.S. Multi-Jurisdictional Disclosure System adopted by
the Canadian Securities Administrators (the “Canadian Commissions”) and the
Commission (the “MJDS”),
a registration statement on Form F-10 (Registration No. 333-161786) registering
the offering and sale of Common Shares, warrants and units comprising any
combination thereof under the U.S. Securities Act of 1933, as amended (together
with the rules and regulations thereunder, the “Securities Act”), including
the Canadian Base Prospectus (together with any documents incorporated therein
by reference, any supplements or amendments thereto and with such deletions
therefrom and additions or changes thereto as are permitted or required by Form
F-10 and the applicable rules and regulations of the Commission (the “Rules and Regulations”)) (the
“U.S. Base
Prospectus”). The Canadian Base Prospectus and the U.S. Base
Prospectus are hereinafter collectively sometimes referred to as the “Base Prospectuses.” The
Company has also prepared and filed with the Commission an Appointment of Agent
for Service of Process and Undertaking on Form F-X (the “Form F-X”) at the time of the
initial filing of the Registration Statement (as defined below) and prepared and
filed an amendment to the Form F-X on February 12, 2010.
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In
addition, the Company will prepare and file, as promptly as possible and in any
event (i) by the earlier of the date a Prospectus Supplement (as hereinafter
defined) is first sent or delivered to a Purchaser and two business days of the
execution and delivery of this Agreement, with the OSC, in accordance with the
Shelf Procedures, a prospectus supplement setting forth the Shelf Information
(as defined below) (including any documents incorporated therein by reference
and any supplements or amendments thereto, the “Canadian Prospectus
Supplement”), and (ii) with the Commission, within one business day
following the filing of the Canadian Prospectus Supplement with the OSC, in
accordance with General Instruction II.L of Form F-10, the Canadian Prospectus
Supplement (with such deletions therefrom and additions or changes thereto as
are permitted or required by Form F-10 and the applicable rules and regulations
of the Commission, the “U.S.
Prospectus Supplement”). The information, if any, included in
the Canadian Prospectus Supplement that is omitted from the Canadian Base
Prospectus for which a Final Receipt has been obtained from the OSC, but that is
deemed under the Shelf Procedures to be incorporated by reference into the
Canadian Base Prospectus as of the date of the Canadian Prospectus Supplement,
is referred to herein as the “Shelf Information.” The U.S.
Prospectus Supplement and the Canadian Prospectus Supplement are hereinafter
collectively sometimes referred to as the “Prospectus
Supplements.”
The
registration statement on Form F-10, including the exhibits thereto and the
documents incorporated by reference therein and the U.S. Prospectus, as amended
or supplemented in connection with the execution and delivery of this Agreement,
is herein called the “Registration Statement.” Any
preliminary prospectus supplement included in the Registration Statement or
filed with the Commission (including the documents incorporated by reference
therein) is hereinafter called a “Preliminary
Prospectus”. The term “U.S. Prospectus” shall refer
to the U.S. Base Prospectus, as supplemented by any Preliminary Prospectus until
such time as the U.S. Prospectus Supplement is included in the Registration
Statement, whereupon the U.S. Prospectus shall refer to the U.S. Base Prospectus
as supplemented by the U.S. Prospectus Supplement, including, in each case, the
documents incorporated by reference therein. Any reference to any
amendment or supplement to the Registration Statement or the U.S. Prospectus
shall be deemed to refer to and include any documents filed with the OSC and the
Commission after the effectiveness of such Registration Statement or the date of
such U.S. Prospectus and prior to the termination of the offering and which are
incorporated by reference in such Registration Statement or U.S.
Prospectus. The term “Canadian Prospectus” shall
refer to the Canadian Base Prospectus, as supplemented by any Canadian
Prospectus Supplement, including, in each case, the documents incorporated by
reference therein. Any amendment to the Canadian Prospectus, and any
amended or supplemented prospectus or auxiliary material, information, evidence,
return, report, application, statement or document that may be filed by or on
behalf of the Company under the Canadian Securities Laws prior to the Closing
Date (as defined in Section 4 hereof) or,
where such document is deemed to be incorporated by reference into the Canadian
Prospectus, prior to the expiry of the period of distribution of the Units, is
referred to herein collectively as the “Supplementary Material.” The
U.S. Prospectus and the Canadian Prospectus are hereinafter collectively
sometimes referred to as the “Prospectuses.”
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(c) The
Company is a “foreign private issuer” (as defined in Rule 405 under the
Securities Act) and meets the requirements for use of Form F-10 under the
Securities Act and is eligible for the use of a short form prospectus, the Shelf
Procedures and the MJDS provided under the Canadian Securities Laws; a Final
Receipt has been obtained from the OSC in respect of the Canadian Base
Prospectus, and no order suspending the trading or distribution of the Units has
been issued by the OSC and no proceedings, for that purpose, have been
instituted or are pending or, to the Company’s knowledge, are contemplated by
the OSC; no stop order suspending the effectiveness of the Registration
Statement has been issued by the Commission and no proceedings for that purpose
have been instituted or are pending or to the Company’s knowledge, are
contemplated by the Commission; the Registration Statement, including a U.S.
Base Prospectus and such amendments to such Registration Statement as may have
been required to the date of this Agreement, has been prepared by the Company
under the provisions of the Securities Act and has been filed with the
Commission; pursuant to Rule 467(b) under the Securities Act, the Registration
Statement became effective on September 17, 2009 (the “Effective Date”); copies of
the Registration Statement, including amendments thereof, have been delivered to
the Placement Agents, other than the Canadian Prospectus Supplement and U.S.
Prospectus Supplement, which will be filed as required by applicable law; on the
Closing Date, there will be no reports or information that, in accordance with
the requirements of the Canadian Securities Laws, must be filed or made publicly
available in connection with the listing of the Shares, the Warrant Shares or
the Agent Warrant Shares on the Toronto Stock Exchange (“TSX”) (other than routine
post-closing filings) that have not been filed or made publicly available as
required, other than the Canadian Prospectus Supplement and U.S. Prospectus
Supplement, which will be filed as required by applicable law; there are no
documents required to be filed with the OSC in connection with the Canadian Base
Prospectus, the Canadian Prospectus Supplement or the Canadian Prospectus that
have not been filed as required.
(d) On
the Effective Date, the date the Canadian Prospectus Supplement is first filed
with the OSC and the date the U.S. Prospectus Supplement is first filed with the
Commission, at all subsequent times through and including the Closing Date and
prior to the expiry of the period of distribution of the Units (A) the Canadian
Prospectus, together with any Supplementary Material, as of the date thereof,
did and will comply with the requirements of the Canadian Securities Laws
pursuant to which it has been filed and did and will provide full, true and
plain disclosure of all material facts (as defined in the Canadian Securities
Laws) relating to the Company and its subsidiaries (as defined in Section 15
below) (taken as a whole) and to the Units and did not and will not contain any
misrepresentation (as defined in the Canadian Securities Laws), (B) the U.S.
Prospectus did and will conform to the Canadian Prospectus except for such
deletions or changes therefrom and additions thereto as are permitted or
required by Form F-10 and the Rules and Regulations, (C) the Registration
Statement (as amended or as supplemented if the Company shall have filed with
the Commission any amendment or supplement thereto), including the financial
statements included therein, and the Form F-X did, and as amended as of February
12, 2010 will, comply with all applicable provisions of the Securities Act, (D)
the Registration Statement or any such amendment or supplement did not and will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein and (E) the U.S. Prospectus did not and will
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein in light of the circumstances
under which they were made, not misleading, provided however, that the foregoing
representations and warranties in this Section 3(I)(d) do
not apply to any statements or omissions made in reliance on and in conformity
with information solely relating to any Placement Agent and furnished in writing
to the Company by any of the Placement Agents specifically for inclusion in the
Registration Statement, the U.S. Prospectus or the Canadian Prospectus, which
information the parties hereto agree is limited to the Placement Agents’
Information as defined in Section 17; neither
the Company nor any of its directors and officers has distributed and none of
them will distribute, prior to the later of (i) the Closing Date (as defined in
Section 4
hereof) and (ii) the completion of the distribution of the Units, any offering
material in connection with the offering or sale of the Units other than the
Registration Statement, the U.S. Prospectus, the Canadian Prospectus, or other
materials, if any, permitted by the Securities Act and the Canadian Securities
Laws; the documents that are incorporated by reference in the Canadian
Prospectus, when they were or are filed with the OSC, conformed or will conform,
respectively, in all material respects with the requirements of the Canadian
Securities Laws, and none of such documents contained or will contain any untrue
statement of a material fact or omitted or will omit to state a material fact in
order to make the statements therein not misleading. The Company will
file with the Commission all Issuer Free Writing Prospectuses in the time and
manner required under Rules 163(b) and 433(d) under the Securities
Act.
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(e) As
of the Applicable Time (as defined below) and as of the Closing Date, neither
(i) the General Use Free Writing Prospectus(es) (as defined below), if any,
issued at or prior to the Applicable Time, and the Pricing Prospectus (as
defined below), if any, all considered together (collectively, the “General Disclosure Package”),
nor (ii) any individual Limited Use Free Writing Prospectus (as defined below),
nor (iii) the bona fide electronic road show (as defined in Rule 433(h)(5) under
the Rules and Regulations), if any, that has been made available without
restriction to any person, if any, when considered together with the General
Disclosure Package, included or will include any untrue statement of a material
fact or omitted or will omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the
Company makes no representations or warranties as to information contained in or
omitted from any Issuer Free Writing Prospectus, in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf of
any Placement Agent specifically for inclusion therein, which information the
parties hereto agree is limited to the Placement Agents’ Information (as defined
in Section
17. As used in this paragraph (b) and elsewhere in this
Agreement:
“Applicable Time” means 11:59
P.M., Eastern Standard time (EST), on the date of this
Agreement.
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“Pricing Prospectus” means any
Preliminary Prospectuses and the Base Prospectuses, each as amended and
supplemented immediately prior to the Applicable Time, including any document
incorporated by reference therein and any prospectus supplement deemed to be a
part thereof.
“Issuer Free Writing
Prospectus” means any “issuer free writing prospectus,” as defined in
Rule 433 under the Securities Act relating to the Units in the form filed or
required to be filed with the Commission or, if not required to be filed, in the
form retained in the Company’s records pursuant to Rule 433(g) under the
Securities Act.
“General Use Free Writing
Prospectus” means any Issuer Free Writing Prospectus that is identified
on Schedule A
to this Agreement.
“Limited Use Free Writing
Prospectuses” means any Issuer Free Writing Prospectus that is not a
General Use Free Writing Prospectus.
(f) No
order preventing or suspending the use of any Preliminary Prospectus, any Issuer
Free Writing Prospectus or the Prospectuses relating to the proposed offering of
the Units has been issued by the Commission, and no proceeding for that purpose
or pursuant to Section 8A of the Securities Act has been instituted or
threatened by the Commission, and any Preliminary Prospectus, at the time of
filing thereof, conformed in all material respects to the requirements of the
Canadian Securities Laws, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the
Company makes no representations or warranties as to information contained in or
omitted from any Preliminary Prospectus, in reliance upon, and in conformity
with, written information furnished to the Company by or on behalf of any
Placement Agent specifically for inclusion therein, which information the
parties hereto agree is limited to the Placement Agents’ Information (as defined
in Section
17).
(g) Each
Issuer Free Writing Prospectus, if any, as of its issue date and at all
subsequent times through the completion of the Offering or until any earlier
date that the Company notified or notifies the Placement Agents as described in
Section
5(I)(e), did not, does not and will not include any information that
conflicted, conflicts or will conflict with the information contained in the
Registration Statement, Pricing Prospectus or the Prospectuses, including any
document incorporated by reference therein and any prospectus supplement deemed
to be a part thereof that has not been superseded or modified, or included or
would include an untrue statement of a material fact or omitted or would omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances prevailing at the
subsequent time, not misleading. The foregoing sentence does not
apply to statements in or omissions from any Issuer Free Writing Prospectus in
reliance upon, and in conformity with, written information furnished to the
Company by or on behalf of any Placement Agent specifically for inclusion
therein, which information the parties hereto agree is limited to the Placement
Agents’ Information (as defined in Section
17).
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(h) The
Company has not, directly or indirectly, distributed and will not distribute any
offering material in connection with the Offering other than any Preliminary
Prospectus, the Prospectuses and other materials, if any, permitted under the
Securities Act and Canadian Securities Laws and consistent with Section 5(b)
below. At the time of the initial filing of the Registration
Statement, the Company was not an “ineligible issuer” in connection with the
offering pursuant to Rules 164, 405 and 433 under the Securities Act. The
Company will file with the Commission all Issuer Free Writing Prospectuses
(other than a “road show,” as defined in Rule 433(d)(8) under the Rules and
Regulations), if any, in the time and manner required under Rules 163(b)(2) and
433(d) under the Rules and Regulations.
(i) The
Company has the full right, power and authority to enter into this Agreement,
the Warrants, the Agent Warrants and each of the Subscription Agreements and to
perform and discharge its obligations hereunder and thereunder.
(j) The
Company has been continued and is existing as a corporation under the NSCA and
each of its subsidiaries (as defined in Section 15 and set
forth below) have been duly incorporated and are validly existing as
corporations or other legal entities in good standing (or the foreign equivalent
thereof) under the laws of their respective jurisdictions of
organization. The Company is qualified to do business as an
extra-provincial corporation in the Province of Ontario and each of its
subsidiaries is duly qualified to do business, and is in good standing, where
applicable, as a foreign corporation or other legal entity in each jurisdiction
in which its ownership or lease of property or the conduct of its business
requires such qualification and has all power and authority (corporate or other)
necessary to own or hold its properties and to conduct the business in which it
is engaged, except where the failure to so qualify or have such power or
authority (i) would not have, singularly or in the aggregate, a material adverse
effect on the condition (financial or otherwise), results of operations, assets,
or business of the Company and its subsidiaries taken as a whole, or (ii) impair
in any material respect the ability of the Company to perform its obligations
under this Agreement or to consummate any transactions contemplated by the
Agreement, the General Disclosure Package or the Prospectuses (any such effect
as described in clauses (i) or (ii), a “Material Adverse
Effect”). The Company owns or controls, directly or
indirectly, only the following corporations, partnerships, limited liability
partnerships, limited liability companies, associations or other entities: CIMYM
Biosciences Inc. (Ontario), YM BioSciences (USA) Inc. and Cytopia Limited
(“Cytopia”), each of
which shall, for purposes of this Agreement, be deemed a “subsidiary” of the
Company as defined in Section 15 below. The Company does not own or control,
directly or indirectly, any interest in any corporation, partnership, limited
liability partnership, limited liability corporation, association or other
entity.
(k) Each
of this Agreement, the Warrants, the Agent Warrants and the Subscription
Agreements has been duly authorized, executed and delivered by the Company and
constitutes a valid and binding obligation of the Company enforceable in
accordance with its terms, except as may be limited by bankruptcy,
reorganization, insolvency, moratorium and similar laws of general application
relating to or affecting the enforcement rights of creditors, and except as
enforceability of its obligations hereunder are subject to general principles of
equity.
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(l) The
Units to be issued and sold by the Company hereunder and under the Subscription
Agreements, the Warrant Shares, the Agent Warrants and the Agent Warrant Shares
have been duly and validly authorized and the Shares, when issued and delivered
against payment therefor as provided herein and in the Subscription Agreements,
the Warrant Shares, when issued and delivered against payment therefor as
provided in the Warrants, and the Agent Warrant Shares, when issued and
delivered against payment therefor as provided in the Agent Warrants, will be
duly and validly issued, fully paid and non-assessable and free of any
preemptive or similar rights and will conform to the description thereof
contained in the General Disclosure Package and the Prospectuses.
(m) The
Company has an authorized capitalization as set forth in the Pricing Prospectus,
and all of the issued share capital of the Company has been duly and validly
authorized and issued, is fully paid and non-assessable, has been issued in
compliance with the NSCA, territorial, provincial and federal and state
securities laws, and conforms to the description thereof contained in the
General Disclosure Package and the Prospectuses. As of March 2, 2010,
there were 65,604,476 Common Shares issued and outstanding and 7,247,943 Common
Shares were issuable upon the exercise of all options, warrants and convertible
securities outstanding as of such date. Since such date, the Company
has not issued any securities, other than Common Shares of the Company issued
pursuant to the exercise of stock options previously outstanding under the
Company’s stock option plans or the issuance of restricted Common Shares
pursuant to employee stock purchase plans. All of the Company’s
outstanding options, warrants and other rights to purchase or exchange any
securities for shares in the capital of the Company have been duly authorized
and validly issued and were issued in all material respects in compliance with
applicable securities laws. None of the outstanding Common Shares
were issued in violation of any preemptive rights, rights of first refusal or
other similar rights to subscribe for or purchase securities of the
Company. There are no authorized or outstanding shares in the capital
of the Company, options, warrants, preemptive rights, rights of first refusal or
other rights to purchase, or equity or debt securities convertible into or
exchangeable or exercisable for, any share capital of the Company or any of its
subsidiaries other than those described above or accurately described in the
General Disclosure Package. The description of the Company’s stock
plans or arrangements, and the options or other rights granted thereunder, as
described in the General Disclosure Package and the Prospectuses, accurately and
fairly present the information required to be shown with respect to such plans,
arrangements, options and rights in all material respects.
(n) All
the outstanding share capital of each subsidiary of the Company has been duly
authorized and validly issued, is fully paid and non-assessable and, except to
the extent set forth in the General Disclosure Package or the Prospectuses, is
owned by the Company directly, free and clear of any claim, lien, encumbrance,
security interest, restriction upon voting or transfer or any other claim of any
third party.
(o) The
execution, delivery and performance of this Agreement, the Subscription
Agreements, the Warrants and the Agent Warrants by the Company, the issue and
sale of the Units by the Company and the consummation of the transactions
contemplated hereby and thereby will not (with or without notice or lapse of
time or both) (i) conflict with or result in a breach or violation of any of the
terms or provisions of, constitute a default under, give rise to any right of
termination or other right or the cancellation or acceleration of any right or
obligation or loss of a benefit under, or give rise to the creation or
imposition of any lien, encumbrance, security interest, claim or charge upon any
property or assets of the Company or any subsidiary pursuant to, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, (ii) nor will such actions
result in any violation of the provisions of the charter or by-laws (or
analogous governing instruments, as applicable) of the Company or any of its
subsidiaries, or (iii) nor will such actions result in any violation of the
provisions of any law, statute, rule, regulation, judgment, order or decree of
any court or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or any of its subsidiaries or any of their
properties or assets, except, in the case of clauses (i) and (iii) of this
paragraph (n), as would not, singularly or in the aggregate, have a Material
Adverse Effect.
-9-
(p) Except
for the registration of the Offered Securities, the Agent Warrants and the Agent
Warrant Shares under the Securities Act, the qualification of the distribution
of the Offered Securities, the Agent Warrants and the Agent Warrant Shares under
Canadian Securities Laws, and such consents, approvals, authorizations,
registrations or qualifications as may be required under the Canadian Securities
Laws and the Exchange Act and applicable state securities laws, the TSX and the
NYSE Amex (“NYSE AMEX”)
in connection with the issuance and sale of the Units and the Agent Warrants, no
consent, approval, authorization or order of, or filing, qualification or
registration with, any court or governmental agency or body, foreign or
domestic, which has not been made, obtained or taken and is not in full force
and effect, is required for the execution, delivery and performance of this
Agreement by the Company, the offer or sale of the Units or the consummation of
the transactions contemplated hereby or thereby.
(q) KPMG
LLP, which has certified certain financial statements and related schedules
included or incorporated by reference in the Registration Statement, the General
Disclosure Package and the Prospectuses, is an independent registered public
accounting firm as required by the Securities Act and the Rules and Regulations
and the Public Company Accounting Oversight Board (United States) (the “PCAOB”) and is an independent
auditor as required by Canadian Securities Laws. KPMG LLP has not
been engaged by the Company to perform any “prohibited activities” (as described
in Section 10A(g) of the Exchange Act). BDO Audit (NSW-VIC) Pty
Ltd. (“BDO”), which has
certified certain financial statements and related schedules included or
incorporated by reference in the Registration Statement, the General Disclosure
Package and the Prospectuses, is an independent registered public accounting
firm as required by the Securities Act and the Rules and Regulations and the
PCAOB. BDO has not been engaged by the Company or Cytopia to perform
any “prohibited activities” (as described in Section 10A(g) of the Exchange
Act).
-10-
(r) The
financial statements included or incorporated by reference in the General
Disclosure Package, the Prospectuses and the Registration Statement, together
with the related notes and schedules, present fairly in all material respects
the consolidated financial position of the Company and its subsidiaries as of
the dates indicated and the consolidated statements of operations and cash flows
of the Company and the subsidiaries for the periods specified and do not contain
a misrepresentation (as defined under Canadian Securities Laws) and have been
prepared in conformity with accounting principles generally accepted in Canada
(“Canadian GAAP”) or
Australian International Financial Reporting Standards, as applicable, applied
on a consistent basis during the periods involved, together with any required
reconciliation, in accordance with the Securities Act and the Commission’s rules
and guidelines, to accounting principles generally accepted in the U.S. (“U.S. GAAP”); there are no
financial statements (historical or pro forma) that are required to be included
in the General Disclosure Package, the Prospectuses and the Registration
Statement, that are not included as required. No other financial
statements or supporting schedules or exhibits are required by Canadian
Securities Laws to be described, or included or incorporated by reference
in the Registration Statement, the General Disclosure Package or the
Prospectuses. There is no pro forma or as adjusted financial
information which is required to be included in the Registration
Statement, the General Disclosure Package, or the Prospectuses or a
document incorporated by reference therein in accordance with Canadian
Securities Laws which has not been included or incorporated as so
required. The pro forma and pro forma as adjusted financial
information and the related notes included or incorporated by reference in the
Registration Statement, the General Disclosure Package and the Prospectuses have
been properly compiled and prepared in accordance with the applicable
requirements of Canadian Securities Laws and present fairly the information
shown therein, and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions and circumstances referred to therein.
(s) Neither
the Company nor any of its subsidiaries has sustained, since the date of the
latest audited financial statements included or incorporated by reference in the
General Disclosure Package, any material loss or interference with its business
from fire, explosion, flood, terrorist act, or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the General
Disclosure Package; and, since such date, there has not been any change in the
share capital or long-term debt of the Company or any of its subsidiaries, or
any material adverse change, or any development involving a prospective material
adverse change, in or affecting the business, assets, general affairs,
management, financial position, shareholders’ equity or results of operations of
the Company and its subsidiaries taken as a whole, otherwise than as set forth
or contemplated in the General Disclosure Package.
(t) Except
as set forth in the General Disclosure Package, there is no legal or
governmental action, suit, claim or proceeding pending to which the Company or
any of its subsidiaries is a party or of which any property or assets of the
Company or any of its subsidiaries is the subject which is required to be
described in the Registration Statement, the General Disclosure Package or the
Prospectuses, or a document incorporated by reference therein, and is not
described therein, or which, singularly or in the aggregate, if determined
adversely to the Company or any of its subsidiaries, would have a Material
Adverse Effect; and to the best of the Company’s knowledge, no such proceedings
are threatened or contemplated by governmental authorities or threatened by
others.
(u) Neither
the Company nor any of its subsidiaries (i) is in violation of its charter or
by-laws (or analogous governing instrument, as applicable), (ii) is in default
in any respect, and no event has occurred which, with notice or lapse of time or
both, would constitute such a default, in the due performance or observance of
any term, covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which it is a
party or by which it is bound or to which any of its property or assets is
subject (including, without limitation, those administered by the Food and Drug
Administration of the U.S. Department of Health and Human Services (the “FDA”) or by any foreign,
federal, state or local governmental or regulatory authority performing
functions similar to those performed by the FDA) or (iii) is in violation in any
respect of any law, ordinance, governmental rule, regulation or court order,
decree or judgment to which it or its property or assets may be subject except,
in the case of clauses (ii) and (iii) of this paragraph (v), for any violations
or defaults which, singularly or in the aggregate, would not have a Material
Adverse Effect.
-11-
(v) The
Company and each of its subsidiaries possess all licenses, certificates,
authorizations and permits issued by, and have made all declarations and filings
with, the appropriate local, state, federal or foreign regulatory agencies or
bodies (including, without limitation, the FDA, the Office of Foreign Asset
Control of the U.S. Treasury Department (“OFAC”) and any other foreign,
federal, state or local government or regulatory authorities performing
functions similar to those performed by the FDA) which are necessary or
desirable for the ownership of their respective properties or the conduct or
proposed conduct of their respective businesses as described in the General
Disclosure Package and the Prospectuses (collectively, the “Governmental Permits”) except
where any failures to possess or make the same, singularly or in the aggregate,
would not have a Material Adverse Effect. The Company and its
subsidiaries are in compliance with all such Governmental Permits; all such
Governmental Permits are valid and in full force and effect, except where the
validity or failure to be in full force and effect would not, singularly or in
the aggregate, have a Material Adverse Effect. All such Governmental
Permits are free and clear of any restriction or condition that are in addition
to, or materially different from those normally applicable to similar licenses,
certificates, authorizations and permits. Neither the Company nor any
subsidiary has received notification of any revocation or modification (or
proceedings related thereto) of any such Governmental Permit and has no reason
to believe that any such Governmental Permit will not be renewed. The
Company has provided true and complete copies of all Governmental Permits issued
to the Company or any subsidiary by OFAC (the “OFAC Licenses”) to the
Placement Agents and their counsel.
(w) Neither
the Company nor any of its subsidiaries is or, after giving effect to the
Offering of the Units and the application of the proceeds thereof as described
in the General Disclosure Package and the Prospectuses, will be required to be
registered as an “investment company” pursuant to the Investment Company Act of
1940, as amended, and the rules and regulations of the Commission promulgated
thereunder.
(x) Neither
the Company, nor any of its subsidiaries nor any of their respective officers,
directors or affiliates has taken or will take, directly or indirectly, any
action designed or intended to stabilize or manipulate the price of any security
of the Company, or which caused or resulted in, or which might in the future
reasonably be expected to cause or result in, stabilization or manipulation of
the price of any security of the Company.
-12-
(y) The
Company and its subsidiaries own or possess the right to use all patents,
trademarks, trademark registrations, service marks, service xxxx registrations,
trade names, copyrights, licenses, inventions, software, databases, know-how,
Internet domain names, trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures, and other
intellectual property (collectively, "Intellectual Property")
necessary to carry on their respective businesses as currently conducted, and as
proposed to be conducted and described in the General Disclosure Package and the
Prospectuses, and the Company is not aware of any claim to the contrary or any
challenge by any other person to the rights of the Company and its subsidiaries
with respect to the foregoing, except for those that could not have a Material
Adverse Effect. The Intellectual Property licenses described in the
General Disclosure Package and the Prospectuses are valid, binding upon, and
enforceable by or against the parties thereto in accordance to their terms,
subject to bankruptcy, reorganization, insolvency, moratorium and similar laws
of general application relating to or affecting the enforcement rights of
creditors, and except as enforceability of its obligations hereunder are subject
to general principles of equity. The Company has complied in all
material respects with, and is not in breach nor has received any asserted or
threatened claim of breach of, any Intellectual Property license, and the
Company has no knowledge of any breach or anticipated breach by any other person
to any Intellectual Property license. To the Company’s knowledge, the
Company’s business as now conducted does not infringe or conflict with any
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses or other Intellectual Property or franchise right of any
person. Except as described in the General Disclosure Package, no
claim has been made against the Company alleging the infringement by the Company
of any patent, trademark, service xxxx, trade name, copyright, trade secret,
license in or other intellectual property right or franchise right of any
person. The Company has taken all reasonable steps to protect,
maintain and safeguard its rights in all Intellectual Property, including the
execution of appropriate nondisclosure and confidentiality
agreements. The consummation of the transactions contemplated by this
Agreement will not result in the loss or impairment of or payment of any
additional amounts with respect to, nor require the consent of any other person
in respect of, the Company's right to own, use, or hold for use any of the
Intellectual Property as owned, used or held for use in the conduct of the
business as currently conducted. The Company has at all times
complied with all applicable laws relating to privacy, data protection, and the
collection and use of personal information collected, used, or held for use by
the Company in the conduct of the Company's business. No claims have
been asserted or, to the Company’s knowledge, threatened against the Company
alleging a violation of any person's privacy or personal information or data
rights and the consummation of the transactions contemplated hereby will not
breach or otherwise cause any violation of any law related to privacy, data
protection, or the collection and use of personal information collected, used,
or held for use by the Company in the conduct of the Company's
business. The Company takes reasonable measures to ensure that such
information is protected against unauthorized access, use, modification, or
other misuse.
(z) Except
as would not result in a Material Adverse Effect, the Company and each of its
subsidiaries have good and marketable title in fee simple to, or have valid
rights to lease or otherwise use, all items of real or personal property which
are material to the business of the Company and its subsidiaries taken as a
whole, in each case free and clear of all liens, encumbrances, security
interests, claims and defects that do not, singularly or in the aggregate,
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company or any of its
subsidiaries; and all of the leases and subleases material to the business of
the Company and its subsidiaries, considered as one enterprise, and under which
the Company or any of its subsidiaries holds properties described in the General
Disclosure Package and the Prospectuses, are in full force and effect, and
neither the Company nor any subsidiary has any notice of any material claim of
any sort that has been asserted by anyone adverse to the rights of the Company
or any subsidiary under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or such subsidiary to the
continued possession of the leased or subleased premises under any such lease or
sublease.
-13-
(aa) No
labor disturbance by the employees of the Company or any of its subsidiaries
exists or, to the best of the Company’s knowledge, is imminent, and the Company
is not aware of any existing or imminent labor disturbance by the employees of
any of its or its subsidiaries’ principal suppliers, manufacturers, customers or
contractors, that could reasonably be expected, singularly or in the aggregate,
to have a Material Adverse Effect. The Company is not aware that any
key employee or significant group of employees of the Company or any subsidiary
plans to terminate employment with the Company or any such
subsidiary.
(bb) The
Company and its subsidiaries are in compliance with all Canadian, United States,
foreign, federal, state, local, provincial and territorial rules, laws and
regulations relating to the use, treatment, storage and disposal of hazardous or
toxic substances or waste and protection of health and safety or the environment
which are applicable to their businesses (“Environmental Laws”), except
where the failure to comply would not, singularly or in the aggregate, have a
Material Adverse Effect. There has been no storage, generation,
transportation, handling, treatment, disposal, discharge, emission, or other
release of any kind of toxic or other wastes or other hazardous substances by,
due to, or caused by the Company or any of its subsidiaries (or, to the
Company’s knowledge, any other entity for whose acts or omissions the Company or
any of its subsidiaries is or may otherwise be liable) upon any of the property
now or previously owned or leased by the Company or any of its subsidiaries, or
upon any other property, in violation of any law, statute, ordinance, rule,
regulation, order, judgment, decree or permit or which would, under any law,
statute, ordinance, rule (including rule of common law), regulation, order,
judgment, decree or permit, give rise to any liability, except for any violation
or liability which would not have, singularly or in the aggregate with all such
violations and liabilities, a Material Adverse Effect; and there has been no
disposal, discharge, emission or other release of any kind onto such property or
into the environment surrounding such property of any toxic or other wastes or
other hazardous substances with respect to which the Company or any of its
subsidiaries has knowledge, except for any such disposal, discharge, emission,
or other release of any kind which would not have, singularly or in the
aggregate with all such discharges and other releases, a Material Adverse
Effect.
(cc) The
clinical, pre-clinical and other studies and tests conducted by or on behalf of
or sponsored by the Company or its subsidiaries that are described or referred
to in the Base Prospectuses or Prospectus Supplement were and, if still pending,
are being conducted in accordance with all statutes, laws, rules and
regulations, as applicable (including, without limitation, those administered by
the FDA or by any foreign, federal, state or local governmental or regulatory
authority performing functions similar to those performed by the
FDA). The descriptions of the results of such studies and tests that
are described or referred to in the Base Prospectuses or Prospectus Supplement
are accurate and complete in all material respects and fairly present the
published data derived from such studies and tests, and each of the Company and
its subsidiaries has no knowledge of other studies or tests the results of which
are materially inconsistent with or otherwise call into question the results
described or referred to in the Base Prospectuses, the General Disclosure
Package, or the Prospectus Supplement. Neither the Company nor its
subsidiaries has received any notices or other correspondence from the FDA or
any other foreign, federal, state or local governmental or regulatory authority
performing functions similar to those performed by the FDA with respect to any
ongoing clinical or pre-clinical studies or tests requiring the termination or
suspension of such studies or tests. For the avoidance of doubt, the
Company makes no representation or warranty that the results of any studies,
tests or preclinical or clinical trials conducted by or on behalf of the Company
will be sufficient to obtain governmental approval from the FDA or any foreign,
state or local governmental body exercising comparable
authority.
-14-
The
Company has established and administers a compliance program applicable to the
Company and its subsidiaries, to assist the Company, its subsidiaries and their
directors, officers and employees of the Company and its subsidiaries in
complying with applicable regulatory guidelines (including, without limitation,
those administered by the FDA and any other foreign, federal, state or local
governmental or regulatory authority performing functions similar to those
performed by the FDA).
Except as
would not result in a Material Adverse Effect, neither the Company nor any of
its subsidiaries has failed to file with the applicable regulatory authorities
(excluding the FDA or any foreign, federal, state or local governmental or
regulatory authority performing functions similar to those performed by the FDA)
any filing, declaration, listing, registration, report or submission that is
required to be so filed. Neither the Company nor any of its
subsidiaries has failed to file with the FDA or any foreign, federal, state or
local governmental or regulatory authority performing functions similar to those
performed by the FDA, any filing, declaration, listing, registration, report or
submission that is required to be so filed. All such filings were in
material compliance with applicable laws when filed and no deficiencies have
been asserted by any applicable regulatory authority (including, without
limitation, the FDA or any foreign, federal, state or local governmental or
regulatory authority performing functions similar to those performed by the FDA)
with respect to any such filings, declarations, listings, registrations, reports
or submissions.
(dd) The
Company and its subsidiaries each (i) have timely filed all necessary federal,
state, local and foreign tax returns, and all such returns were true, complete
and correct, (ii) have paid all federal, state, local and foreign taxes,
assessments, governmental or other charges due and payable for which it is
liable, including, without limitation, all sales and use taxes and all taxes
which the Company or any of its subsidiaries is obligated to withhold from
amounts owing to employees, creditors and third parties, and (iii) do not have
any tax deficiency or claims outstanding or assessed or, to the best of its
knowledge, proposed against any of them, except those, in each of the cases
described in clauses (i), (ii) and (iii) of this subparagraph (ee), that would
not, singularly or in the aggregate, have a Material Adverse
Effect. The Company and its subsidiaries have not engaged in any
transaction which is a corporate tax shelter or which could be characterized as
such by the Internal Revenue Service or any other taxing
authority. The accruals and reserves on the books and records of the
Company and its subsidiaries in respect of tax liabilities for any taxable
period not yet finally determined are adequate to meet any assessments and
related liabilities for any such period, and since June 30, 2009 the Company and
its subsidiaries have not incurred any liability for taxes other than in the
ordinary course.
(ee) The
Company and each of its subsidiaries carry, or are covered by, insurance in such
amounts and covering such risks as is adequate for the conduct of their
respective businesses and the value of their respective properties and as is
customary for companies engaged in similar businesses in similar
industries.
-15-
(ff) The
Company and each of its subsidiaries maintains a system of internal accounting
and other controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of the Company’s consolidated financial statements in conformity
with Canadian Securities Laws and Canadian GAAP applied on a consistent basis
during the periods involved, together with any required reconciliation, in
accordance with the Securities Act and the Commission’s rules and guidelines, to
U.S. GAAP; and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. Except as described in the General
Disclosure Package, since the end of the Company’s most recent audited fiscal
year, there has been (A) no material weakness in the Company’s internal control
over financial reporting (whether or not remediated) and (B) no change in the
Company’s internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting. The Company has established and
maintains disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) that are designed to ensure that information required
to be disclosed by the Company in reports that it files or submits with the SEC
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC’s applicable rules and
forms. Since June 30, 2009, there have been no changes in the
Company’s internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial
reporting, Since June 30, 2009, to the Company’s knowledge, no event,
circumstance or development has occurred which could reasonably be expected to
result in a determination that there is a material weakness in the Company’s
disclosure controls and procedures or in the Company’s internal control over
financial reporting.
(gg) All
existing minute books of the Company and each of its Subsidiaries, including all
existing records of all meetings and actions of the board of directors
(including, Audit, Compensation, Nominating and Corporate Governance and other
board committees) and shareholders of the Company (collectively, the “Corporate Records”) have been
made available to the Placement Agents and their counsel and all such Corporate
Records are complete. There are no transactions, agreements or other
actions of the Company or any of its subsidiaries that are required to be
recorded in the Corporate Records that are not properly approved and/or recorded
in the Corporate Records. All required filings have been made with
the Nova Scotia Registry of Joint Stock Companies in a timely fashion under the
NSCA.
-16-
(hh) There
is no franchise, lease, contract, agreement or document required by Canadian
Securities Laws, the Securities Act or by the Rules and Regulations to be
described in the General Disclosure Package and in the Prospectuses, or a
document incorporated by reference therein, or to be filed as an exhibit to the
Registration Statement, or a document incorporated by reference therein, which
is not described or filed therein as required; and all descriptions of any such
franchises, leases, contracts, agreements or documents contained in the
Registration Statement, or in a document incorporated by reference therein, are
accurate and complete descriptions of such documents in all material
respects. Other than as described in the General Disclosure Package,
no such franchise, lease, contract or agreement has been suspended or terminated
for convenience or default by the Company or any of the other parties thereto,
and neither the Company nor any of its subsidiaries has received notice or has
any other knowledge of any such pending or threatened suspension or termination,
except for such pending or threatened suspensions or terminations that would not
reasonably be expected to, singularly or in the aggregate, have a Material
Adverse Effect.
(ii) No
relationship, direct or indirect, exists between or among the Company or any of
its subsidiaries, on the one hand, and the directors, officers, shareholders (or
analogous interest holders), customers or suppliers of the Company or any of its
subsidiaries or any of their respective affiliates on the other hand, which is
required to be described in the General Disclosure Package and the Prospectuses,
or a document incorporated by reference therein, and which is not so
described.
(jj) No
person or entity has the right to require registration or qualification of
Common Shares or other securities of the Company or any of its subsidiaries
because of the filing or effectiveness of the Registration Statement or
otherwise, except for persons and entities who have expressly waived such right
in writing or who have been given timely and proper written notice and have
failed to exercise such right within the time or times required under the terms
and conditions of such right. Except as described in the General
Disclosure Package, there are no persons with registration rights or similar
rights to have any securities registered by the Company or any Subsidiary
under the Securities Act.
(kk) Neither
the Company nor any of its subsidiaries owns any “margin securities” as that
term is defined in Regulation U of the Board of Governors of the Federal Reserve
System (the “Federal Reserve
Board”), and none of the proceeds of the sale of the Units will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security, for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the Offered Securities to be considered a
“purpose credit” within the meanings of Regulation T, U or X of the Federal
Reserve Board.
(ll) Neither
the Company nor any of its subsidiaries is a party to any contract, agreement or
understanding with any person that would give rise to a valid claim against the
Company or the Placement Agents for a brokerage commission, finder’s fee or like
payment in connection with the offering and sale of the Units or any transaction
contemplated by this Agreement, the Registration Statement, the General
Disclosure Package or the Prospectuses.
(mm) No
forward-looking statement or forward looking information (within the meaning of
Section 27A of the Securities Act, Section 21E of the Exchange Act and Section
138.4(9) of the Ontario Securities Act) contained in either the General
Disclosure Package or the Prospectuses has been made or reaffirmed without a
reasonable basis or has been disclosed other than in good faith.
-17-
(nn) The
Company has filed all documents or information required to be filed by it under
Canadian Securities Laws, the Securities Act, the Exchange Act, the Rules and
Regulations and the rules, regulations and policies of any stock exchange upon
which the Common Shares are listed; all press releases, material change reports,
annual information forms, financial statements, management proxy circulars and
other documents filed by or on behalf of the Company with any stock exchange and
the Canadian Commissions in each of the provinces where the Company is a
reporting issuer (or the equivalent), as of its date, did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and did not contain a
misrepresentation (as defined under Canadian Securities Laws) at the time at
which it was filed with applicable securities regulators, including, without
limitation, the OSC and the Commission; the Company has not filed any
confidential material change report with any securities regulatory authority or
regulator or any exchange or any document for confidential treatment with the
OSC that at the date hereof remains confidential. The Common Shares
are registered pursuant to Section 12(b) of the Exchange Act and are listed on
the TSX and the Amex, and the Company has taken no action designed to, or
reasonably likely to have the effect of, terminating the registration of the
Common Shares under the Exchange Act or delisting the Common Shares from any
stock exchange or other market, nor has the Company received any notification
that the Commission, any stock exchange or other market or FINRA is
contemplating terminating such registration or listing. The Company
has obtained or will have obtained, or has made or will have made, as
applicable, all necessary consents, approvals, authorizations or orders of, or
filing, notification or registration with, the TSX and the Amex required for the
listing and trading of the Shares, the Warrant Shares and the Agent Warrant
Shares on such stock exchanges or other markets.
(oo) The
Company is in material compliance with all applicable provisions of the
Xxxxxxxx-Xxxxx Act of 2002 and all rules and regulations promulgated thereunder
or implementing the provisions thereof (the “Xxxxxxxx-Xxxxx
Act”).
(pp) Neither
the Company nor any of its subsidiaries nor, to the best of the Company’s
knowledge, any employee or agent of the Company or any subsidiary, has made any
contribution or other payment to any official of, or candidate for, any federal,
state, local or foreign office in violation of any law, including the Foreign
Corrupt Practices Act of 1977, as amended, or the Corruption of Foreign Public
Officials Act (Canada), as amended, or of the character required to be disclosed
in the Registration Statement, the General Disclosure Package or the
Prospectuses, or a document incorporated by reference therein.
(qq) There
are no transactions, arrangements or other relationships between and/or among
the Company or any if its subsidiaries, any of their respective affiliates (as
such term is defined in Rule 405 of the Securities Act) and any unconsolidated
entity, including, but not limited to, any structure finance, special purpose or
limited purpose entity that could reasonably be expected to materially affect
the Company’s or any of its subsidiaries’ liquidity or the availability of or
requirements for their capital resources required to be described in the General
Disclosure Package and the Prospectuses, or a document incorporated by reference
therein, which have not been described as required.
-18-
(rr)
There are no outstanding loans, advances (except normal advances for business
expenses in the ordinary course of business) or guarantees or indebtedness by
the Company or any of its subsidiaries to or for the benefit of any of the
officers or directors of the Company, any of its subsidiaries or any of their
respective family members, except as disclosed in the Registration Statement,
the General Disclosure Package and the Prospectuses.
(ss)
The statistical and market related data included in the Registration Statement,
the General Disclosure Package and the Prospectuses are based on or derived from
sources that the Company believes to be reliable and accurate, and such data
agree with the sources from which they are derived.
(tt)
The operations of the Company and its subsidiaries are and have been conducted
at all times in compliance with applicable financial recordkeeping and reporting
requirements of the Proceeds of Crime (Money Laundering) and Terrorist Financing
Act (Canada) and applicable rules and regulations thereunder (collectively, the
“Money Laundering
Laws”), and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
or any of its subsidiaries with respect to the Money Laundering Laws is pending,
or to the best knowledge of the Company, threatened.
(uu)
Neither the Company nor any of its subsidiaries nor, to the knowledge of the
Company, any director, officer, agent, employee or affiliate of the Company or
any of its subsidiaries is currently subject to any U.S.
sanctions administered by OFAC. The Company has not loaned,
contributed, or otherwise made available any monies to any subsidiary, joint
venture partner or other person or entity, for the purpose of financing the
activities of any person currently subject to any U.S. sanctions administered by
OFAC except in strict compliance with the terms of the OFAC
Licenses.
(vv)
Neither the Company nor any subsidiary maintains any employment benefit plan,
program or arrangement that is subject to the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder.
(ww) Neither
the Company, its subsidiaries, nor any of the Company’s or its subsidiaries’
officers, directors or affiliates has offered, or caused any Placement Agent to
offer, Units to any person with the intent to influence unlawfully (i) a
customer or supplier of the Company to alter the customer’s or supplier’s level
or type of business with the Company or (ii) a trade journalist or publication
to write or publish favorable information about the Company or any of their
respective products or services.
(xx) Neither
the Company, nor any of its subsidiaries, nor any of their affiliates (within
the meaning of NASD Conduct Rule 2720(b)(1)(a)) directly or indirectly controls,
is controlled by, or is under common control with, or is an associated person
(within the meaning of Article I, Section l(ee) of the By-laws of FINRA) of, any
member firm of FINRA.
(yy)
The Company will make available to U.S. shareholders, upon their written
request, timely and accurate information as to the Company’s status as a
“passive foreign investment company” (“PFIC”) under the meaning of
Section 1297 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) and the status of any
subsidiary corporation that is also a PFIC (a “Subsidiary PFIC”) in which the
Company owns more than 50% of such Subsidiary PFIC’s total aggregate voting
power, and for each year the Company is a PFIC, provide to a U.S. shareholder,
upon such shareholder’s written request, all information and documentation that
a U.S. shareholder making a “qualified electing fund” election (under the
meaning of Section 1295 of the Code) with respect to the Company and such more
than 50% owned Subsidiary PFIC is required to obtain for U.S. federal income tax
purposes.
-19-
Any
certificate signed by or on behalf of the Company and delivered to the Placement
Agents or to counsel for the Placement Agents shall be deemed to be a
representation and warranty by the Company to each Placement Agent as to the
matters covered thereby.
4. The
Closing. The time and
date of closing and delivery of the documents required to be delivered to the
Placement Agents pursuant to Section 5 hereof
shall be at 10:00 A.M., EST, on March 10, 2010 (the “Closing Date”) at the office
of Xxxxxx Xxxxxxx XXX, Xxxxx 0000, Xxx Xxxxxxxx Center, 000 Xxx Xxxxxx, Xxxxxxx,
Xxxxxxx Xxxxxx X0X 0X0.
5. Further
Agreements of the Company.
(I) Further Agreements of the
Company. The Company agrees with the several Placement Agents
and the Purchasers:
(a) (i)
to make no further amendment or supplement prior to the Closing Date to the
Registration Statement or any amendment or supplement to the Prospectuses
without the consent of the Placement Agents, which consent shall not be
unreasonably withheld or delayed; (ii) for so long as the delivery of a
prospectus is required in connection with the offering or sale of the Units, to
advise the Placement Agents promptly after it receives notice thereof, of the
time when any amendment to the Registration Statement has been filed or becomes
effective or any supplement or amendment to the Prospectuses has been filed and
to furnish the Placement Agents with copies thereof; (iii) to file promptly all
reports required to be filed by the Company with the Commission; (iv) to file
all reports and other documents required to be filed by the Company with the OSC
to comply with Canadian Securities Laws and with the TSX and NYSE AMEX to
procure and ensure the continued listing of the Shares, the Warrant Shares and
the Agent Warrant Shares thereon subsequent to the date of the Prospectus
Supplements and for so long as the delivery of a prospectus is required in
connection with the offering or sale of the Units; and, for so long as the
delivery of a prospectus is required in connection with the offering or sale of
the Units, to provide the Placement Agents with a copy of such reports and
statements and other documents filed by the Company pursuant to Section 13, 14
or 15(d) of the Exchange Act or pursuant to the Canadian Securities Laws and to
promptly notify the Placement Agents of such filing; (v) to advise the Placement
Agents, promptly after it receives notices thereof, (x) of any request by the
OSC or the Commission to amend or supplement the Registration Statement, the
Canadian Base Prospectus, the U.S. Base Prospectus, the U.S. Prospectus
Supplement, the Canadian Prospectus Supplement or the Issuer Free Writing
Prospectus, if any, or for additional information with respect thereto or (y) of
the issuance by the Commission or the OSC of any stop order suspending the
effectiveness of the Registration Statement or the Prospectuses, respectively,
or the institution or threatening of any proceeding for any such purpose; (vi)
to advise the Placement Agents promptly of the happening of any event within the
time during which a prospectus relating to the Units is required to be delivered
under the Securities Act or the Canadian Securities Laws which could require the
making of any change in the Prospectuses, if any, then being used so that the
Prospectuses would (i) constitute full, true and plain disclosure of all
material facts relating to the Units and (ii) not include an untrue statement of
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they are made, not
misleading, and, during such time, subject to Section 5(b) hereof,
to prepare and furnish promptly to the Placement Agents, at the Company’s
expense, such amendments or supplements to the Prospectuses, as may be necessary
to reflect any such change and (vii) in the event the Commission shall issue any
order suspending the effectiveness of the Registration Statement or the OSC
shall issue any cease trading order, promptly to use its reasonable best efforts
to obtain the withdrawal of such order at the earliest practicable moment; and
to use its reasonable best efforts to prevent the issuance of any such
order.
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(b) To
comply with the requirements of the Shelf Procedures and General Instruction
II.L of Form F-10 and file the Canadian Prospectus Supplement with the OSC on
the earlier of the first date the Canadian Prospectus Supplement is delivered to
a prospective purchaser and the day which is two business days following the
dated of this Agreement, and the U.S. Prospectus Supplement with the Commission
one business day following the filing of the Canadian Prospectus Supplement with
the OSC. If during the period in which a prospectus is required by
law to be delivered by a Placement Agent or a dealer in connection with the
distribution of the Units contemplated by the Prospectuses, any event shall
occur that makes any statement made in the Registration Statement, the U.S.
Prospectus, the Canadian Prospectus or the Issuer Free Writing Prospectus, if
any, untrue or that as a result of which, in the judgment of the Company or in
the reasonable opinion of the Placement Agents or counsel for the Placement
Agents, it becomes necessary to amend or supplement the Registration Statement
in order to make the statements therein not misleading, or the U.S. Prospectus
or the Canadian Prospectus in order to (i) constitute full, true and plain
disclosure of all material facts; and (ii) make the statements therein, in the
light of the circumstances in which they are made, not misleading, or, if it is
necessary at any time to amend or supplement the Registration Statement, the
U.S. Prospectus, the Canadian Prospectus or the Issuer Free Writing Prospectus,
if any, to comply with any law, the Company promptly will prepare and file with
the Commission and the OSC, and furnish at its own expense to the Placement
Agents, an appropriate amendment to the Registration Statement or supplement to
the U.S. Prospectus, Canadian Prospectus or the Issuer Free Writing Prospectus,
if any, so that the Registration Statement as so amended or the U.S. Prospectus
or the Canadian Prospectus, as so amended or supplemented will (i) constitute
full, true and plain disclosure of all material facts; and (ii) not, in the
light of the circumstances when it is so delivered, be misleading, or so that
the Registration Statement, U.S. Prospectus or the Canadian Prospectus will
comply with such law. Before amending the Registration Statement or
amending or supplementing the U.S. Prospectus or the Canadian Prospectus in
connection with the Offering, the Company will furnish the Placement Agents with
a copy of such proposed amendment or supplement and will not file such amendment
or supplement to which the Placement Agents reasonably object.
-21-
(c) The
Company represents and agrees that, unless it obtains the prior written consent
(which may be in the form of electronic mail) of the Placement Agents, which
consent shall not be unreasonably withheld or delayed, and each Placement Agent
represents and agrees that, unless it obtains the prior consent of the Company,
it has not made and will not, make any offer relating to the Units that would
constitute a “free writing prospectus” as defined in Rule 405 under the
Securities Act (each, a “Permitted Free Writing
Prospectus”); provided that the prior
written consent of the Placement Agents hereto shall be deemed to have been
given in respect of the Issuer Free Writing Prospectus(es) included in Schedule A
hereto. The Company represents that it has treated and agrees that it
will treat, provided that in each case it shall have been informed by a
Placement Agent of the existence of a Permitted Free Writing Prospectus other
than an Issuer Free Writing Prospectus, each Permitted Free Writing Prospectus
as an Issuer Free Writing Prospectus, comply with the requirements of Rules 164
and 433 under the Securities Act applicable to any Issuer Free Writing
Prospectus, including the requirements relating to timely filing with the
Commission, legending and record keeping and will not take any action that would
result in a Placement Agent or the Company being required to file with the
Commission pursuant to Rule 433(d) under the Securities Act a free writing
prospectus prepared by or on behalf of such Placement Agent that such Placement
Agent otherwise would not have been required to file thereunder.
(d) If
the General Disclosure Package is being used to solicit offers to buy the Units
at a time when the Prospectuses are not yet available to prospective purchasers
and any event shall occur as a result of which, in the judgment of the Company
or in the reasonable opinion of the Placement Agents, it becomes necessary to
amend or supplement the General Disclosure Package in order to make the
statements therein, in the light of the circumstances then prevailing, not
misleading, or to make the statements therein not conflict with the information
contained, or incorporated by reference, in the Registration Statement then on
file and not superseded or modified, or if it is necessary at any time to amend
or supplement the General Disclosure Package to comply with any law, the Company
promptly will either (i) prepare, file with the OSC and the Commission (if
required) and furnish to the Placement Agents an appropriate amendment or
supplement to the General Disclosure Package or (ii) prepare and file with the
OSC (if required) and the Commission an appropriate filing under the Exchange
Act which shall be incorporated by reference in the General Disclosure Package
so that the General Disclosure Package as so amended or supplemented will not,
in the light of the circumstances then prevailing, be misleading or conflict
with the Registration Statement then on file, or so that the General Disclosure
Package will comply with law.
(e) If
at any time following issuance of any Issuer Free Writing Prospectus there
occurred or occurs an event or development as a result of which such Issuer Free
Writing Prospectus conflicted or will conflict with the information contained in
the Registration Statement, Pricing Prospectus or Prospectuses, including any
document incorporated by reference therein and any prospectus supplement deemed
to be a part thereof, and not superseded or modified or included or would
include an untrue statement of a material fact or omitted or would omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances prevailing at the
subsequent time, not misleading, the Company has promptly notified or will
promptly notify the Placement Agents so that any use of such Issuer Free Writing
Prospectus may cease until it is amended or supplemented and has promptly
amended or will promptly amend or supplement, at its own expense, such Issuer
Free Writing Prospectus to eliminate or correct such conflict, untrue statement
or omission. The foregoing sentence does not apply to statements in
or omissions from any Issuer Free Writing Prospectus in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf of
any Placement Agent specifically for inclusion therein, which information the
parties hereto agree is limited to the Placement Agents’ Information (as defined
in Section
17).
-22-
(f) To
furnish promptly to the Placement Agents and to counsel for the Placement Agents
a signed copy of the Canadian Base Prospectus as originally filed with the OSC
and Registration Statement as originally filed with the Commission, and of each
amendment thereto filed with the OSC and the Commission, including all consents
and exhibits filed therewith.
(g) To
deliver promptly to the Placement Agents in New York City such number of the
following documents as the Placement Agents shall reasonably request: (i)
conformed copies of the Registration Statement as originally filed with the
Commission (in each case excluding exhibits), (ii) any Preliminary Prospectus,
(iii) any Issuer Free Writing Prospectus, (iv) the Prospectuses (the delivery of
the documents referred to in clauses (i), (ii), (iii) and (iv) of this paragraph
(g) to be made not later than 10:00 A.M., EST, on the business day following the
execution and delivery of this Agreement), (v) conformed copies of any amendment
to the Registration Statement (excluding exhibits) and (vi) any amendment or
supplement to the General Disclosure Package or the Prospectuses (the delivery
of the documents referred to in clauses (v) and (vi) of this paragraph (g) to be
made not later than 10:00 A.M., EST, on the business day following the date of
such amendment or supplement).
(h) To
make generally available to its shareholders as soon as practicable, but in any
event not later than eighteen (18) months after the effective date of each
Registration Statement (as defined in Rule 158(c) under the Rules and
Regulations), an earnings statement of the Company and is Subsidiaries (which
need not be audited) complying with Section 11(a) of the Securities Act and the
Rules and Regulations (including, at the option of the Company, Rule
158).
(i) To
take promptly from time to time such actions as the Placement Agents may
reasonably request to qualify the Units for offering and sale under the
securities or Blue Sky laws of such jurisdictions (domestic or foreign) as the
Placement Agents may designate and to continue such qualifications in effect,
and to comply with such laws, for so long as required to permit the offer and
sale of the Units in such jurisdictions; provided that the Company and
its subsidiaries shall not be obligated to qualify as foreign corporations in
any jurisdiction in which they are not so qualified or to file a general consent
to service of process in any jurisdiction.
(j) Upon
request, during the period of five (5) years from the date hereof, to deliver to
each of the Placement Agents, (i) as soon as they are available, copies of all
reports or other communications furnished to shareholders, and (ii) as soon as
they are available, copies of any reports and financial statements furnished or
filed with the OSC and the Commission or any national securities exchange or
automatic quotation system on which the Company’s securities are listed or
quoted.
-23-
(i) Except
at an effective price per Common Share equal to or greater than the Per Unit
Purchase Price, the Company will not, for a period of thirty (30) days from the
date of the Prospectus, (the “Lock-Up Period”) without the
prior written consent of Xxxx, directly or indirectly offer, sell, assign,
transfer, pledge, contract to sell, or otherwise dispose of, any Common Shares
or any securities convertible into or exercisable or exchangeable for Common
Shares, other than the Company’s sale of the Units and the Agent Warrants
hereunder, the issue and sale of the Warrant Shares and the Agent Warrant Shares
as contemplated hereby and the issuance of restricted Common Shares or options
to acquire Common Shares pursuant to the Company’s employee benefit plans,
qualified stock option plans or other employee compensation plans as such plans
are in existence on the date hereof and described in the Prospectuses and the
issuance of Common Shares pursuant to the valid exercises of options, warrants
or rights outstanding on the date hereof. The Company will cause its
Chairman and Chief Executive Officer and each director listed in Schedule B to furnish
to the Placement Agents, prior to the Closing Date, a letter, substantially in
the form of Exhibit
C hereto, pursuant to which each such person shall agree, among other
things, not to directly or indirectly offer, sell, assign, transfer, pledge,
contract to sell, or otherwise dispose of, any Common Shares or any securities
convertible into or exercisable or exchangeable for Common Shares, not to engage
in any swap or other agreement or arrangement that transfers, in whole or in
part, directly or indirectly, the economic risk of ownership of Common Shares or
any such securities and not to engage in any short selling of any Common Shares
or any such securities, during the Lock-Up Period, without the prior written
consent of Xxxx. The Company also agrees that during such period, the
Company will not file any registration statement, preliminary prospectus or
prospectus, or any amendment or supplement thereto, under the Securities Act for
any such transaction or which registers, or offers for sale, Common Shares or
any securities convertible into or exercisable or exchangeable for Common
Shares, except for a registration statement on Form S-8 relating to employee
benefit plans, and, in connection with effective registration statements in
existence on the date hereof, except as may not increase the number of
securities subject to such registration statement. The Company hereby
agrees that (i) if it issues an earnings release or material news, or if a
material event relating to the Company occurs, during the last seventeen (17)
days of the Lock-Up Period, or (ii) if prior to the expiration of the Lock-Up
Period, the Company announces that it will release earnings results during the
sixteen (16)-day period beginning on the last day of the Lock-Up Period, the
restrictions imposed by this paragraph (j) or the letter shall continue to apply
until the expiration of the eighteen (18)-day period beginning on the issuance
of the earnings release or the occurrence of the material news or material
event.
(k) To
supply the Placement Agents with copies of all correspondence to and from, and
all documents issued to and by, the OSC and the Commission in connection with
the registration or qualification of the Units under the Canadian Securities
Laws, the Securities Act or any Registration Statement, any Preliminary
Prospectus or the Prospectuses, or any amendment or supplement thereto or
document incorporated by reference therein.
(l) Prior
to the Closing Date, to furnish to the Placement Agents, as soon as they have
been prepared, copies of any unaudited interim consolidated financial
statements of the Company for any periods subsequent to the periods covered by
the financial statements appearing in the Registration Statement and
the Prospectuses.
(m) Prior
to the Closing Date, not to issue any press release or other communication
directly or indirectly or hold any press conference with respect to the Company,
its condition, financial or otherwise, or earnings, business affairs or business
prospects (except for routine oral marketing communications in the ordinary
course of business and consistent with the past practices of the Company and of
which the Placement Agents are notified), without the prior written consent of
the Placement Agents, which consent shall not be unreasonably withheld, unless
in the judgment of the Company and its counsel, and after notification to the
Placement Agents, such press release or communication is required by
law.
-24-
(n) Until
the Placement Agents shall have notified the Company of the completion of the
offering of the Units, that the Company will not, and will cause its affiliated
purchasers (as defined in Regulation M under the Exchange Act) not to,
either alone or with one or more other persons, bid for or purchase, for any
account in which it or any of its affiliated purchasers has a
beneficial interest, any Units, or attempt to induce any person to purchase
any Units; and not to, and to cause its affiliated purchasers not to, make bids
or purchase for the purpose of creating actual, or apparent, active trading
in or of raising the price of the Units.
(o) Not
to take any action prior to Closing Date which would require the Prospectuses to
be amended or supplemented pursuant to this Section
5.
(p) To
apply the net proceeds from the sale of the Units as set forth in the
Registration Statement, the General Disclosure Package and the Prospectuses
under the heading “Use of Proceeds”, and, without limiting the generality of the
foregoing, will not directly or indirectly use the proceeds of the Offering, or
lend, contribute or otherwise make available such proceeds to any subsidiary,
joint venture partner or other person or entity, for any purpose of financing
the activities of any person subject to any U.S. sanctions administered by OFAC
except in strict compliance with the terms of the OFAC Licenses and any
Governmental Permits issued by OFAC subsequent to the date hereof.
(q) To
use its commercially reasonable best efforts to obtain (i) approval to list,
subject to official notice of issuance, the Shares, the Warrant Shares and the
Agent Warrant Shares on the NYSE AMEX and (ii) conditional approval to list the
Shares, the Warrant Shares and the Agent Warrant Shares on the TSX, subject only
to satisfying customary TSX listing requirements.
(r) To
use its commercially reasonable efforts to assist the Placement Agents with any
filings required to be made with FINRA and obtaining clearance from FINRA as to
the amount of compensation allowable or payable to the Placement
Agents.
(s) To
use its commercially reasonable best efforts to do and perform all things
required to be done or performed under this Agreement by the Company prior to
the Closing Date and to satisfy all conditions precedent to the delivery of the
Units.
-25-
6. Payment of
Expenses. The Company agrees with the Placement Agents to pay,
or reimburse if paid by the Placement Agents (subject to receipt by the Company
of appropriate documentation thereof), (a) the costs incident to the
authorization, issuance, sale, preparation and delivery of the Offered
Securities to the Purchasers and any stock or transfer taxes and stamp or
similar duties payable in that connection; (b) the costs incident to the
Registration of the Offered Securities, the Agent Warrants and the Agent Warrant
Shares under the Canadian Securities Laws and the Securities Act; (c) the costs
incident to the preparation, printing, filing and distribution of the
Registration Statement, the Form F-X, any Preliminary Prospectus, the
Prospectuses, any Issuer Free Writing Prospectus, the General Disclosure
Package, and any amendments, supplements and exhibits thereto or any document
incorporated by reference therein, and the costs of printing, reproducing and
distributing, this Agreement and any closing document by mail, telex or other
means of communication; (d) the reasonable fees and expenses (including related
fees and expenses of counsel for the Placement Agents) incurred in connection
with securing any required review by FINRA of the terms of the sale of the
Units and any filings made with FINRA, if applicable; (e) any applicable fees
related to the listing of the Shares, the Warrant Shares and the Agent Warrant
Shares on the TSX and NYSE AMEX; (f) (subject to the limitations set forth in
the following sentence) the reasonable fees and expenses of qualifying the Units
under the securities laws of the several jurisdictions as provided in Section 5(I)(i) and
of preparing, printing and distributing Blue Sky Memoranda (including related
fees and expenses of counsel to the Placement Agents); (g) the cost of preparing
and printing stock certificates, Warrants and Agent Warrants; (h) all fees and
expenses of the registrar and transfer agent of the Offered Securities, the
Agent Warrants and the Agent Warrant Shares; and (i) all other costs and
expenses incident to the performance of the obligations of the Company under
this Agreement (including, without limitation, the fees and expenses of the
Company’s counsel and the Company’s independent accountants and the travel,
lodging and other expenses incurred by Company personnel in connection with any
“roadshow” including, without limitation, any expenses advanced by the Placement
Agents on the Company’s behalf (which will be promptly reimbursed upon
presentation of a written invoice). Whether or not the issuance and
sale of the Units occurs, the Company shall reimburse Xxxx for its reasonable
out-of-pocket expenses; provided, however, that such out-of-pocket expenses
(other than reasonable fees and disbursements of counsel) shall not exceed
$15,000 in the aggregate and the reasonable fees and disbursements of counsel
shall not exceed $35,000, in each case without the Company’s prior approval,
such approval not to be unreasonably withheld or delayed. Except as
otherwise provided in this Section 6 and in
Sections 8 and
10, the
Placement Agents shall pay their own costs and expenses, including the fees and
expenses of their counsel. In no event will the total amount of
compensation paid to the Placement Agents and other securities brokers and
dealers upon completion of this Offering exceed 8.0% of the gross proceeds of
the Offering.
7. Conditions of
Obligations of the Placement Agents and the Purchasers, and the Sale of the
Units. The respective
obligations of the several Placement Agents hereunder and the US Purchasers
under the Subscription Agreements are subject to the accuracy, when made and on
the Applicable Time and on the Closing Date, of the representations and
warranties of the Company contained herein, to the accuracy of the statements of
the Company made in any certificates pursuant to the provisions hereof, to the
performance by the Company of its obligations hereunder, and to each of the
following additional terms and conditions:
(I) No
stop or cease-trade order suspending the effectiveness of any Registration
Statement or any part thereof, preventing or suspending the use of, any
Preliminary Prospectus, the Prospectuses or any Permitted Free Writing
Prospectus or any part thereof shall have been issued and no proceedings for
that purpose or pursuant to Section 8A under the Securities Act shall have been
initiated or, to the knowledge of the Company, threatened by the OSC and the
Commission, and all requests for additional information on the part of the OSC
and the Commission (to be included or incorporated by reference in the
Registration Statement or the Prospectuses or otherwise) shall have been
complied with to the reasonable satisfaction of the Placement Agents; each
Issuer Free Writing Prospectus and the Prospectuses shall have been filed with,
the OSC and the Commission within the applicable time period prescribed for such
filing by, and in compliance with, the Rules and Regulations.
-26-
(II)
None of the Placement Agents shall have discovered and disclosed to
the Company on or prior to the Closing Date that any Registration Statement or
any amendment or supplement thereto contains an untrue statement of a fact
which, in the opinion of counsel for the Placement Agents, is material or omits
to state any fact which, in the opinion of such counsel, is material and is
required to be stated therein or is necessary to make the statements therein not
misleading, or that the General Disclosure Package, any Issuer Free Writing
Prospectus or the Prospectuses or any amendment or supplement thereto contains
an untrue statement of fact which, in the opinion of such counsel, is material
or omits to state any fact which, in the opinion of such counsel, is material
and is necessary in order to make the statements, in the light of the
circumstances in which they were made, not misleading.
(III) All
corporate proceedings and other legal matters incident to the authorization,
form and validity of each of this Agreement, the Units, the Registration
Statement, the General Disclosure Package, each Issuer Free Writing Prospectus
and the Prospectuses and all other legal matters relating to this Agreement and
the transactions contemplated hereby shall be reasonably satisfactory in all
material respects to counsel for the Placement Agents, and the Company shall
have furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
(IV) Xxxxxx
Xxxxxxx, LLP and Xxxxxxx XxXxxxxx Stirling & Scales LLP shall have furnished
to the Placement Agents such counsel’s written opinions or letters, as Canadian
counsel to the Company, addressed to the Placement Agents and dated the Closing
Date, in form and substance reasonably satisfactory to the Placement
Agents.
(V) Xxxxxx
& Xxxxxxx, LLP shall have furnished to the Placement Agents such counsel’s
written opinion, as United States counsel to the Company, addressed to the
Placement Agents and dated the Closing Date, in form and substance reasonably
satisfactory to the Placement Agents.
(VI) Xxxxxxx
XxXxxxxxxx LLP shall have furnished to the Placement Agents such counsel’s
written opinions, as special OFAC counsel to the Company and as special IP
counsel to the Company, each addressed to the Placement Agents and dated the
Closing Date, each in form and substance reasonably satisfactory to the
Placement Agents.
(VII) The
Placement Agents shall have received from Xxxxxxxxxx Xxxxxxx PC, counsel for the
Placement Agents, such counsel’s negative assurance letter, dated the Closing
Date, with respect to such matters as the Placement Agents may reasonably
require, and the Company shall have furnished to such counsel such documents as
they request for enabling them to pass upon such matters.
(VIII) The
Placement Agents shall have received from the Company’s IP counsels, such
opinion or opinions, dated the Closing Date, in such form and with respect to
the Intellectual Property and such other matters as the Placement Agents may
reasonably require, and the Company shall have furnished to such Company’s IP
counsels such documents as they request for enabling them to pass upon such
matters.
-27-
(IX) At
the time of the execution of this Agreement, the Placement Agents shall have
received from KPMG LLP a letter, addressed to the Placement Agents, executed and
dated such date, in form and substance satisfactory to the Placement Agents (i)
confirming that they are an independent registered accounting firm with respect
to the Company and its subsidiaries within the meaning of the Securities Act and
the Rules and Regulations and PCAOB and independent auditors within the meaning
of Canadian Securities Laws and (ii) stating the conclusions and findings of
such firm, of the type ordinarily included in accountants’ “comfort letters” to
underwriters, with respect to certain financial statements and certain financial
information contained or incorporated by reference in the Registration
Statement, the General Disclosure Package and the Prospectuses.
(X) On
the effective date of any post-effective amendment to any Registration Statement
and on the Closing Date, the Placement Agents shall have received a letter (the
“KPMG bring-down
letter”) from KPMG LLP addressed to the Placement Agents and dated the
Closing Date confirming, as of the date of the KPMG bring-down letter (or, with
respect to matters involving changes or developments since the respective dates
as of which specified financial information is given in the General Disclosure
Package and the Prospectuses, as the case may be, as of a date not more than
three (3) business days prior to the date of the KPMG bring-down letter), the
conclusions and findings of such firm, of the type ordinarily included in
accountants’ “comfort letters” to underwriters, with respect to the financial
information and other matters covered by its letter delivered to the Placement
Agents concurrently with the execution of this Agreement pursuant to
subparagraph (IX) of this Section
7.
(XI) At
the time of the execution of this Agreement, the Placement Agents shall have
received from BDO a letter, addressed to the Placement Agents, executed and
dated such date, in form and substance satisfactory to the Placement Agents (i)
confirming that they are an independent registered accounting firm with respect
to the Company and its subsidiaries and Cytopia within the meaning of the
Securities Act and the Rules and Regulations and PCAOB and independent auditors
within the meaning of Canadian Securities Laws and (ii) stating the conclusions
and findings of such firm, of the type ordinarily included in accountants’
“comfort letters” to underwriters, with respect to certain financial statements
and certain financial information contained or incorporated by reference in the
Registration Statement, the General Disclosure Package and the
Prospectuses.
(XII) On
the effective date of any post-effective amendment to any Registration Statement
and on the Closing Date, the Placement Agents shall have received a letter (the
“BDO bring-down letter”)
from BDO addressed to the Placement Agents and dated the Closing Date
confirming, as of the date of the BDO bring-down letter (or, with respect to
matters involving changes or developments since the respective dates as of which
specified financial information is given in the General Disclosure Package and
the Prospectuses, as the case may be, as of a date not more than three (3)
business days prior to the date of the BDO bring-down letter), the conclusions
and findings of such firm, of the type ordinarily included in accountants’
“comfort letters” to underwriters, with respect to the financial information and
other matters covered by its letter delivered to the Placement Agents
concurrently with the execution of this Agreement pursuant to subparagraph (XI)
of this Section
7.
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(XIII) The
Company shall have furnished to the Placement Agents a certificate, dated the
Closing Date, of its Chairman and Chief Executive Officer and its Vice
President, Finance and Administration stating that (i) such officers have
carefully examined the Registration Statement, the General Disclosure Package,
any Permitted Free Writing Prospectus and the Prospectuses and, in their
opinion, the Registration Statement and each amendment thereto, at the
Applicable Time and as of the Closing Date did not include any untrue statement
of a material fact and did not omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the General Disclosure Package, as of the Applicable Time, as of the date of
this Agreement and as of the Closing Date, any Permitted Free Writing Prospectus
as of its date and as of the Closing Date, the Prospectuses and each amendment
or supplement thereto, as of the respective date thereof and as of the Closing
Date, did not include any untrue statement of a material fact and did not omit
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances in which they were made, not misleading, (ii)
since the effective date of the Registration Statement, no event has occurred
which should have been set forth in a supplement or amendment to the
Registration Statement, the General Disclosure Package or the Prospectuses,
(iii) to the best of their knowledge after reasonable investigation, as of the
Closing Date, the representations and warranties of the Company in this
Agreement are true and correct and the Company has complied with all agreements
and satisfied all conditions on its part to be performed or satisfied hereunder
at or prior to the Closing Date, and (iv) there has not been, subsequent to the
date of the most recent audited financial statements included, or incorporated
by reference, in the General Disclosure Package, any material adverse change in
the financial position or results of operations of the Company and its
subsidiaries, or any change or development that, singularly or in the aggregate,
would involve a material adverse change or a prospective material adverse
change, in or affecting the condition (financial or otherwise), results of
operations, business or assets of the Company and its subsidiaries taken as a
whole, except as set forth in the Prospectuses.
(XIV) Since
the date of the latest audited financial statements included in the General
Disclosure Package, or incorporated by reference in the General Disclosure
Package as of the date hereof, (i) neither the Company nor any of its
subsidiaries shall have sustained any loss or interference with its business
from fire, explosion, flood, terrorist act, or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth in the General Disclosure Package,
and (ii) there shall not have been any change in the share capital or long-term
debt of the Company or any of its subsidiaries, or any change, or any
development involving a prospective change, in or affecting the business,
assets, general affairs, management, financial position, shareholders’ equity or
results of operations of the Company and its subsidiaries, otherwise than as set
forth in the General Disclosure Package, the effect of which, in any such case
described in clause (i) or (ii) of this subparagraph (X), is, in the judgment of
the Placement Agents, so material and adverse as to make it impracticable or
inadvisable to proceed with the sale or delivery of the Units on the terms and
in the manner contemplated in the General Disclosure Package.
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(XV) No
action shall have been taken and no law, statute, rule, regulation or order
shall have been enacted, adopted or issued by any governmental agency or body
which would prevent the issuance or sale of the Units or materially and
adversely affect or potentially materially and adversely affect the business or
operations of the Company and its subsidiaries, taken as a whole; and no
injunction, restraining order or order of any other nature by any federal or
state court of competent jurisdiction shall have been issued which would prevent
the issuance or sale of the Units or materially and adversely affect or
potentially materially and adversely affect the business or operations of the
Company and its subsidiaries, taken as a whole.
(XVI) Subsequent
to the execution and delivery of this Agreement there shall not have occurred
any of the following: (i) trading in securities generally on the New York Stock
Exchange, the Nasdaq Stock Market, the TSX or NYSE AMEX or in the
over-the-counter market, or trading in any securities of the Company on any
stock exchange or in the over-the-counter market, shall have been suspended or
materially limited, or minimum or maximum prices or maximum range for prices
shall have been established on any such exchange or such market by the
Commission, by such exchange or market or by any other regulatory body or
governmental authority having jurisdiction, (ii) a banking moratorium shall have
been declared by Canadian or United States Federal or state authorities or a
material disruption has occurred in commercial banking or securities settlement
or clearance services in Canada or the United States, (iii) the United States
shall have become engaged in hostilities, or the subject of an act of terrorism,
or there shall have been an outbreak of or escalation in hostilities involving
the United States, or there shall have been a declaration of a national
emergency or war by the United States, or (iv) there shall have occurred such a
material adverse change in general economic, political or financial conditions
(or the effect of international conditions on the financial markets in the
United States or Canada shall be such) as to make it, in the judgment of the
Placement Agents, impracticable or inadvisable to proceed with the sale or
delivery of the Units on the terms and in the manner contemplated in the General
Disclosure Package and the Prospectuses.
(XVII) The
NYSE AMEX shall have approved the Shares, the Warrant Shares and the Agent
Warrant Shares for listing therein subject only to official notice of
issuance. The TSX shall have accepted for filing notice of the
Offering and shall have conditionally approved the listing of the Shares, the
Warrant Shares and the Agent Warrant Shares subject only to the satisfaction of
customary post-closing requirements.
(XVIII) Xxxx
shall have received the written agreements, substantially in the form of Exhibit C hereto, of
the Company’s Chairman and Chief Executive Officer and the directors of the
Company listed in Schedule B to this
Agreement.
(XIX) The
Company shall have entered into Subscription Agreements with each of the
Purchasers and such agreements shall be in full force and effect.
(XX) FINRA
shall have raised no objection that has not been resolved to the
fairness and reasonableness of the terms of this Agreement or the
transactions contemplated hereby
(XXI) The
Company shall have prepared and filed with the OSC, and with the Commission a
Report of Foreign Issuer on Form 6-K including as an exhibit thereto, this
Agreement.
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All
opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Placement Agents.
8. Indemnification
and Contribution. (I) The Company shall
indemnify and hold harmless each Placement Agent, each of its directors,
officers, managers, members, employees, representatives and agents and each
person, if any, who controls any Placement Agent within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act (collectively the
“Placement Agent Indemnified
Parties,” and each a “Placement Agent Indemnified
Party”) against any loss, claim, damage, expense or liability whatsoever
(or any action, investigation or proceeding in respect thereof), joint or
several, to which such Placement Agent Indemnified Party may become subject,
under the Securities Act or otherwise, insofar as such loss, claim, damage,
expense, liability, action, investigation or proceeding arises out of or is
based upon (A) any untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus, any Issuer Free Writing
Prospectus, any Registration Statement or the Prospectuses, or in any amendment
or supplement thereto, or (B) the omission or alleged omission to state in any
Preliminary Prospectus, any Issuer Free Writing Prospectus, any Registration
Statement or the Prospectuses, or in any amendment or supplement thereto, a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (C) any breach of the representations and warranties
of the Company contained herein or failure of the Company to perform its
obligations hereunder or pursuant to any law, any act or failure to act, or any
alleged act or failure to act, by the Placement Agent in connection with,
or relating in any manner to, the Units or the Offering, and which is
included as part of or referred to in any loss, claim, damage, expense,
liability, action, investigation or proceeding arising out of or based upon
matters covered by subclause (A), (B) or (C) above of this Section 8(I) (provided that the Company
shall not be liable in the case of any matter covered by this subclause (C) to
the extent that it is determined in a final judgment by a court of competent
jurisdiction that such loss, claim, damage, expense or liability resulted
directly from any such act or failure to act undertaken or omitted to be taken
by such Placement Agent through its gross negligence or willful misconduct), and
shall reimburse each Placement Agent Indemnified Party promptly upon demand for
any legal fees or other expenses reasonably incurred by that Placement Agent
Indemnified Party in connection with investigating, or preparing to defend, or
defending against, or appearing as a third party witness in respect of, or
otherwise incurred in connection with, any such loss, claim, damage, expense,
liability, action, investigation or proceeding, as such fees and expenses are
incurred; provided,
however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, expense or liability arises out of or is based upon an untrue
statement or alleged untrue statement in, or omission or alleged omission from
any Preliminary Prospectus, any Registration Statement or the Prospectuses, or
any such amendment or supplement thereto, or any Issuer Free Writing Prospectus
made in reliance upon and in conformity with written information furnished to
the Company by or on behalf of such Placement Agent specifically for use
therein, which information the parties hereto agree is limited to the Placement
Agents’ Information (as defined in Section
17). This indemnity agreement is not exclusive and will be in
addition to any liability which the Company might otherwise have and shall not
limit any rights or remedies which may otherwise be available at law or
in equity to any Placement Agent Indemnified Party.
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(II) Each
Placement Agent, severally and not jointly, shall indemnify and hold harmless
the Company and its directors, its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act
(collectively the “Company
Indemnified Parties” and each a “Company Indemnified Party”)
against any loss, claim, damage, expense or liability whatsoever (or any action,
investigation or proceeding in respect thereof), joint or several, to which such
Company Indemnified Party may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, expense, liability, action,
investigation or proceeding arises out of or is based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, any Issuer Free Writing Prospectus, any Registration
Statement or the Prospectuses, or in any amendment or supplement thereto, or
(ii) the omission or alleged omission to state in any Preliminary Prospectus,
any Registration Statement or the Prospectuses, or in any amendment or
supplement thereto, a material fact required to be stated therein or necessary
to make the statements therein not misleading, but in each case only to the
extent that the untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of that Placement Agent
specifically for use therein, which information the parties hereto agree is
limited to the Placement Agents’ Information as defined in Section 17, and shall
reimburse the Company for any legal or other expenses reasonably incurred by
such party in connection with investigating or preparing to defend or defending
against or appearing as third party witness in connection with any such loss,
claim, damage, liability, action, investigation or proceeding, as such fees and
expenses are incurred. This indemnity agreement is not exclusive and
will be in addition to any liability which the Placement Agents might otherwise
have and shall not limit any rights or remedies which may otherwise be available
under this Agreement, at law or in equity to the Company Indemnified
Parties. Notwithstanding the provisions of this Section 8(II), in no
event shall any indemnity by a Placement Agent under this Section 8(II) exceed
the total compensation received by such Placement Agent in accordance with Section
2(V).
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(III) Promptly
after receipt by an indemnified party under this Section 8 of notice
of the commencement of any action, the indemnified party shall, if a claim in
respect thereof is to be made against an indemnifying party under this Section 8, notify
such indemnifying party in writing of the commencement of that action; provided, however, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have under this Section 8 except to
the extent it has been materially prejudiced by such failure; and, provided, further, that the
failure to notify an indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section
8. If any such action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense of such action with counsel reasonably satisfactory to the
indemnified party (which counsel shall not, except with the written consent of
the indemnified party, be counsel to the indemnifying party). After
notice from the indemnifying party to the indemnified party of its election to
assume the defense of such action, except as provided herein, the indemnifying
party shall not be liable to the indemnified party under this Section 8 for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense of such action other than reasonable costs of
investigation; provided,
however, that any indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense of such
action but the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be at the expense of such indemnified party unless (i) the
employment thereof has been specifically authorized in writing by the Company in
the case of a claim for indemnification under Section 8(I) or Xxxx
in the case of a claim for indemnification under Section 8(II), (ii)
such indemnified party shall have been advised by its counsel that there may be
one or more legal defenses available to it which are different from or
additional to those available to the indemnifying party, or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party within a reasonable
period of time after notice of the commencement of the action or the
indemnifying party does not diligently defend the action after assumption of the
defense, in which case, if such indemnified party notifies the indemnifying
party in writing that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of (or, in the case of a failure to diligently defend the action
after assumption of the defense, to continue to defend) such action on behalf of
such indemnified party and the indemnifying party shall be responsible for legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense of such action; provided, however, that the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for all such indemnified parties (in addition to any local counsel), which
firm shall be designated in writing by Xxxx if the indemnified parties under
this Section 8
consist of any Placement Agent Indemnified Party or by the Company if the
indemnified parties under this Section 8
consist of any Company Indemnified Parties. Subject to this Section 8(III), the
amount payable by an indemnifying party under Section 8 shall
include, but not be limited to, (x) reasonable legal fees and expenses of
counsel to the indemnified party and any other expenses in investigating, or
preparing to defend or defending against, or appearing as a third party witness
in respect of, or otherwise incurred in connection with, any action,
investigation, proceeding or claim, and (y) all amounts paid in settlement of
any of the foregoing. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of judgment with respect to any pending or threatened action or any
claim whatsoever, in respect of which indemnification or contribution could be
sought under this Section 8 (whether or
not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party in form and substance reasonably satisfactory to such
indemnified party from all liability arising out of such action or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party. Subject to
the provisions of the following sentence, no indemnifying party shall be liable
for settlement of any pending or threatened action or any claim whatsoever that
is effected without its written consent (which consent shall not be unreasonably
withheld or delayed), but if settled with its written consent, if its consent
has been unreasonably withheld or delayed or if there be a judgment for the
plaintiff in any such matter, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment. In addition, if at any time an
indemnified party shall have requested that an indemnifying party reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated
herein effected without its written consent if (i) such settlement is entered
into more than forty-five (45) days after receipt by such indemnifying party of
the request for reimbursement, (ii) such indemnifying party shall have received
notice of the terms of such settlement at least thirty (30) days prior to such
settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
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(IV) If
the indemnification provided for in this Section 8 is unavailable or
insufficient to hold harmless an indemnified party under Section 8(I) or 8(II), then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid, payable or otherwise incurred by such indemnified
party as a result of such loss, claim, damage, expense or liability (or any
action, investigation or proceeding in respect thereof), as incurred, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Placement Agents on the other
from the offering of the Units, or (ii) if the allocation provided by clause (i)
of this Section
8(IV) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
of this Section
8(IV) but also the relative fault of the Company on the one hand and the
Placement Agents on the other with respect to the statements, omissions, acts or
failures to act which resulted in such loss, claim, damage, expense or liability
(or any action, investigation or proceeding in respect thereof) as well as any
other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Placement Agents on the other
with respect to such offering shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Units purchased under this
Agreement and, if applicable, the Subscription Agreements (before deducting
expenses) received by the Company bear to the total fees and commissions
received by the Placement Agents with respect to the Units, in each case as set
forth in the table on the cover page of the Prospectus
Supplements. The relative fault of the Company on the one hand and
the Placement Agents on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or the Placement Agents on
the other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such untrue statement,
omission, act or failure to act; provided that the parties
hereto agree that the written information furnished to the Company by or on
behalf of the Placement Agents for use in any Preliminary Prospectus, any
Registration Statement or the Prospectuses, or in any amendment or supplement
thereto, consists solely of the Placement Agents’ Information as defined in
Section
17. The Company and the Placement Agents agree that it would
not be just and equitable if contributions pursuant to this Section 8(IV) were to
be determined by pro rata allocation (even if the Placement Agents were treated
as one entity for such purpose) or by any other method of allocation which does
not take into account the equitable considerations referred to
herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage, expense, liability, action, investigation or
proceeding referred to above in this Section 8(IV) shall
be deemed to include, for purposes of this Section 8(IV), any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating, preparing to defend or defending against or
appearing as a third party witness in respect of, or otherwise incurred in
connection with, any such loss, claim, damage, expense, liability, action,
investigation or proceeding. Notwithstanding the provisions of this
Section 8(IV),
no Placement Agent shall be required to contribute any amount in excess of the
total compensation received by such Placement Agent in accordance with Section 2(V) less the
amount of any damages with such Placement Agent has otherwise paid or become
liable to pay by reason of any untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Placement Agents’ obligations to contribute as
provided in this Section 8(IV) are
several in proportion to their respective placement agent obligations and not
joint.
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9. Termination. The
obligations of the Placement Agents hereunder may be terminated by Xxxx, in its
absolute discretion by notice given to the Company prior to delivery of and
payment for the Units if, prior to that time, any of the events described in
Sections
7(XIV), 7(XV) or 7(XVI) have occurred
or if the Purchasers shall decline to purchase the Units for any reason
permitted under this Agreement or the Subscription Agreements.
10. Reimbursement of
Placement Agents’ Expenses. If the sale of the Units provided
for herein is not consummated because any condition to the obligations of the
Placement Agents and the Purchasers set forth in Section 7 hereof is
not satisfied, because of any termination pursuant to Section 9 hereof or
because of any refusal, inability or failure on the part of the Company to
perform any agreement herein or comply with any provision hereof other than by
reason of a default by the Placement Agents, the Company will reimburse, upon,
if requested by the Company, receipts of written invoices for such expenses, the
Placement Agents upon demand, through Xxxx, for all reasonable out-of-pocket
expenses (including reasonable fees and disbursements of counsel and any
expenses advanced by the Placement Agents on the Company’s behalf) that shall
have been incurred by the Placement Agents in connection with this Agreement and
the proposed purchase and sale of the Units and, upon demand, the Company shall
pay the full amount thereof to the Placement Agents.
11. Absence of
Fiduciary Relationship. The Company
acknowledges and agrees that:
(I) the
Placement Agents’ responsibility to the Company is solely contractual in nature,
the Placement Agents have been retained solely to act as placement agent in
connection with the sale of the Units and no fiduciary or advisory relationship
between the Company and any Placement Agent has been created in respect of any
of the transactions contemplated by this Agreement, irrespective of whether any
Placement Agent has advised or is advising the Company on other
matters;
(II) the
price of the Units to be sold in the Offering was established by the Company
following discussions and arm’s-length negotiations with the Purchasers, and the
Company is capable of evaluating and understanding, and understands and accepts,
the terms, risks and conditions of the transactions contemplated by this
Agreement;
(III) the
Company has been advised that each Placement Agent and its affiliates are
engaged in a broad range of transactions which may involve interests that differ
from those of the Company and that each Placement Agent has no obligation to
disclose such interests and transactions to the Company by virtue of any
fiduciary, advisory or agency relationship; and
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(IV) the
Company waives, to the fullest extent permitted by law, any claims it may have
against any Placement Agent for breach of fiduciary duty or alleged breach of
fiduciary duty and agrees that no Placement Agent shall have any liability
(whether direct or indirect) to the Company in respect of such a fiduciary duty
claim.
12.
Successors;
Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the several Placement Agents, the
Purchasers, the Company and their respective successors and
assigns. Nothing expressed or mentioned in this Agreement is intended
or shall be construed to give any person, other than the persons mentioned in
the preceding sentence, any legal or equitable right, remedy or claim under or
in respect of this Agreement, or any provisions herein contained, this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of such persons and for the benefit of no other
person; except that the representations, warranties, covenants, agreements and
indemnities of the Company contained in this Agreement shall also be for the
benefit of the Placement Agent Indemnified Parties and the indemnities of the
several Placement Agents shall be for the benefit of the Company Indemnified
Parties. It is understood that each Placement Agent’s responsibility
to the Company is solely contractual in nature and no Placement Agent owes the
Company, or any other party, any fiduciary duty as a result of this
Agreement.
13. Survival of
Indemnities, Representations, Warranties, etc. The respective
indemnities, covenants, agreements, representations, warranties and other
statements of the Company and the Placement Agents, as set forth in this
Agreement or made by them respectively, pursuant to this Agreement, shall remain
in full force and effect, regardless of any investigation made by or on behalf
of the Placement Agents, the Company, the Purchasers or any person controlling
any of them and shall survive delivery of and payment for the
Units.
14. Notices. All
statements, requests, notices and agreements hereunder shall be in writing,
and:
(I) if
to the Placement Agents, shall be delivered or sent by mail, telex or facsimile
transmission to the Placement Agents c/x Xxxx Capital Partners, LLC, 00
Xxxxxxxxx Xxxxx, Xxxxxxx Xxxxx, XX 00000, Attention: Xxxxx Xxxxxxxx (Fax:
000-000-0000), with a copy to: Xxxxxxxxxx Xxxxxxx PC, 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxx X. Xxxxxxxx (Fax:
000-000-0000).
(II) if
to the Company shall be delivered or sent by mail, telex or facsimile
transmission to YM BioSciences Inc., 0000 Xxxxxxx Xxxxx, Xxxxxxxx 00, Xxxxx 000,
Xxxxxxxxxxx, Xxxxxxx Xxxxxx L4W 4Y4, Attention: Chief Executive Officer (Fax:
000-000-0000), with copies (which shall not constitute notice) to: Xxxxxx
Xxxxxxx, LLP, Suite 2900, 000 Xxx Xxxxxx, Xxx Xxxxxxxx Xxxxxx, Xxxxxxx, XX
Xxxxxx M5H 2T4, Attention: Xxxxx Xxxx (Fax: 000-000-0000) and Xxxxxx &
Xxxxxxx LLP, 000 Xxxxxxxx Xxxxxx, Xxxxx 0000, X.X. Xxx 00000, Xxxxxxx Xxxxxx,
Xxxxxxxxx, XX Xxxxxx X0X 0X0, Attention: Xxxxxx X. Xxxxxx (Fax:
000-000-0000).
Any such
statements, requests, notices or agreements shall take effect at the time of
receipt thereof, except that any such statement, request, notice or agreement
delivered or sent by email shall take effect at the time of confirmation of
receipt thereof by the recipient thereof.
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15. Definition of
Certain Terms. For purposes of this Agreement, (a) “business day” means any day on
which the Toronto Stock Exchange, Inc. is open for trading and (b) “subsidiary” has the meaning
set forth in Rule 405 of the Rules and Regulations.
16. Governing Law,
Agent For Service and Jurisdiction. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York, including without limitation Section 5-1401 of the New York General
Obligations Law. No legal proceeding may be commenced, prosecuted or
continued in any court other than the courts of the State of New York located in
the City and County of New York or in the United States District Court for the
Southern District of New York, which courts shall have jurisdiction over the
adjudication of such matters, and the Company and the Placement Agents each
hereby consents to the jurisdiction of such courts and personal service with
respect thereto (with notice of such service mailed and delivered to the
Company’s Chief Executive Officers at its principal officer in Xxxxxxxxxxx,
Xxxxxxx, Xxxxxx). The Company and the Placement Agents each hereby
consent to personal jurisdiction, service and venue in any court in which any
legal proceeding arising out of or in any way relating to this Agreement is
brought by any third party against the Company or the Placement
Agents. The Company and the Placement Agents each hereby waive all
right to trial by jury in any legal proceeding (whether based upon contract,
tort or otherwise) in any way arising out of or relating to this
Agreement. The Company agrees that a final judgment in any such legal
proceeding brought in any such court shall be conclusive and binding upon the
Company and each of the Placement Agents and may be enforced in any other courts
in the jurisdiction of which the Company is or may be subject, by suit upon such
judgment.
17. Placement Agents’
Information. The parties
hereto acknowledge and agree that, for all purposes of this Agreement, the
Placement Agents’ Information consists solely of the names of the Placement
Agents contained on the cover of the Prospectus Supplements and the statements
concerning the Placement Agents contained in the third paragraph under the
heading “Plan of Distribution” in the Canadian Prospectus Supplement and the
U.S. Prospectus Supplement.
18. Partial
Unenforceability. The invalidity or unenforceability of any
Section, paragraph, clause or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph, clause or provision
hereof. If any Section, paragraph, clause or provision of this
Agreement is for any reason determined to be invalid or unenforceable, there
shall be deemed to be made such minor changes (and only such minor changes) as
are necessary to make it valid and enforceable.
19. General. This
Agreement constitutes the entire agreement of the parties to this Agreement and
supersedes all prior written or oral and all contemporaneous oral agreements,
understandings and negotiations with respect to the subject matter
hereof. In this Agreement, the masculine, feminine and neuter genders
and the singular and the plural include one another. The section
headings in this Agreement are for the convenience of the parties only and will
not affect the construction or interpretation of this Agreement. This
Agreement may be amended or modified, and the observance of any term of this
Agreement may be waived, only by a writing signed by the Company and the
Placement Agents.
-37-
20. Counterparts. This
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument.
-38-
If the
foregoing is in accordance with your understanding of the agreement between the
Company and the several Placement Agents, kindly indicate your acceptance in the
space provided for that purpose below.
Very
truly yours,
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By:
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/s/ Xxxxx Xxxxx
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Name:
Xxxxx Xxxxx
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Title:
Chairman & CEO
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Accepted
as of the date first above written:
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XXXX
CAPITAL PARTNERS, LLC
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By:
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/s/ Xxxxx Xxxxxxxx
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Name:
Xxxxx Xxxxxxxx
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Title:
Head of Equity Capital Markets
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XXXXX
XXXXXX & CO. INC.
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By:
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/s/ Xxxxxx Xxxxxx
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Name:
Xxxxxx Xxxxxx
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Title:
Chief Executive Officer
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XXXXXXX
SECURITIES, INC.
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By:
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/s/ Xxxxxx Xxxxxx
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Name:
Xxxxxx Xxxxxx
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Title:
Chief Executive Officer
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XXXXXXX
SECURITIES INC.
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By:
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/s/ Xxxxx Xxxxxxxx
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Name:
Xxxxx Xxxxxxxx
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Title:
Managing Director
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-39-
SCHEDULE
A
General
Use Free Writing Prospectuses
Free-Writing
Prospectus
filed
with the Securities and Exchange Commission on March 4, 2010
Filed
pursuant to Rule 433
Issuer
Free Writing Prospectus dated March 4, 2010
Relating
to Prospectus dated September 17, 2009
Registration
No. 333-161786
Term
Sheet
for
Offering
of Common Shares and Warrants
by
By
reading the information contained within this document (this “Term Sheet”), the
recipient agrees with YM BioSciences Inc. (“we”, “us” or the “Company”) to
maintain in confidence such information, together with any other non-public
information regarding us obtained from us, Xxxx Capital Partners, LLC, Xxxxxxx
Securities, Inc., Xxxxx Xxxxxx & Co. Inc., Xxxxxxx Securities Inc. or our or
their respective agents during the course of the proposed offering referred to
below and to comply with the recipient’s obligations under applicable US and
state securities laws.
We have
filed a registration statement (Registration No. 333-161786), including a base
prospectus with the Securities and Exchange Commission (the “SEC”) for the
offering to which this Term Sheet relates (the “Offering”). Before you make your
investment decision, you should read the base prospectus in that registration
statement (the “Base Prospectus”) and other documents we have filed with the SEC
that are incorporated therein by reference for more complete information about
us and the Offering. You may access these documents by visiting XXXXX on the SEC
website at xxx.xxx.xxx. Alternatively, we will arrange to send you the Base
Prospectus and any other offering documents if you request them by calling Xxxx
Capital Partners, LLC at (000) 000-0000 or sending an e-mail to
xxxxxxx@xxxx.xxx.
TERM SHEET
INFORMATION
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Issuer:
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YM
BioSciences Inc., a corporation continued under the Nova Scotia Companies
Act.
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Securities
Offered:
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Aggregate
of 14,583,000 units (“units”) of the Company, each unit consisting of one
of the Company’s common shares (a “unit share”) and one half of one common
share purchase warrant (a “warrant”). The warrants are not attached to the
unit shares and the warrants and unit shares will separate and be
separately transferable immediately on the closing of the Offering. There
will be no minimum offering amount.
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Warrants:
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Each
whole warrant will entitle the holder to purchase one of the Company’s
common shares (a “warrant share”) at an exercise price of US$1.60 per
warrant share, subject to adjustment, at any time beginning on the date
that is six months following the closing date of the Offering (the
“Closing Date”) until 5:00 p.m. (Toronto time) on the date that is five
years following the Closing Date. A summary of the warrants is
attached as Exhibit A.
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Purchase
Price:
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$1.20
per unit.
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Use
of Proceeds to Company:
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The
Company intends to use the net proceeds received from the sale of the
securities to fund the Company’s drug development activities and for
general corporate purposes, subject to certain restrictions on the use of
proceeds from the sale of units to US purchasers as a result of US
economic sanctions against Cuba.
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Purchase
and Closing Date:
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The
Company and each purchaser participating in the Offering (each a
“Purchaser”) will be required to execute a Subscription Agreement. It is expected that
the closing of the Offering shall occur on or about March 10,
2010.
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Recent
Developments:
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A
summary of the Company’s recent developments is attached as
Exhibit B.
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Risk
Factors:
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An
investment in the units involves a high degree of risk. See the disclosure
relating to the risks affecting the Company attached as Exhibit C and
set forth or incorporated by reference in the Base Prospectus and the
documents filed by the Company with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as
amended.
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-2-
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Federal
Income
Tax
Considerations:
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Purchasing
the securities may subject you to tax consequences both in the United
States and Canada. A summary of certain United States and
Canadian federal income tax considerations is attached as Exhibit D. This
Term Sheet, the Base Prospectus and the other offering documents may not
describe these tax consequences fully. You should read the tax
discussion set forth in Exhibit D and the other offering documents fully
and consult with your own tax advisers prior to investing in the
units.
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NYSE
Amex Market Symbol:
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YMI
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Toronto
Stock Exchange
Market
Symbol:
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YM
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Confidential
Information:
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The
recipient of this Term Sheet and the materials attached hereto agrees with
the Company, Xxxx Capital Partners, LLC, Xxxxxxx Securities, Inc., Xxxxx
Xxxxxx & Co. Inc. and Xxxxxxx Securities Inc. to maintain in
confidence this disclosed information, together with any other non-public
information regarding the Company obtained from the Company, Xxxx Capital
Partners, LLC, Xxxxxxx Securities, Inc., Xxxxx Xxxxxx & Co. Inc. and
Xxxxxxx Securities Inc. or their agents during the course of the proposed
Offering, and to comply with the recipient’s obligations under US and
state securities laws.
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Placement
Agents:
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The
Company has engaged Xxxx Capital Partners, LLC, Xxxxxxx Securities, Inc.,
Xxxxx Xxxxxx & Co. Inc. and Xxxxxxx Securities Inc. to act as
placement agents in connection with the Offering. The placement agents
will receive an aggregate cash commission equal to 6% of the proceeds of
the sale of units in the Offering and expense reimbursement of no more
than an aggregate of $50,000. In addition, the Company has
granted the placement agents broker warrants exercisable at any time
beginning on the date that is six months following the Closing Date until
5:00 p.m. (Toronto time) on the date that is five years following the date
of the prospectuses relating to the Offering to purchase up to that number
of common shares equal to 6% of the number of unit shares at an exercise
price of $1.60 per share. In no event will the total amount of
compensation paid to the placement agents and other securities brokers and
dealers upon completion of the Offering exceed 8.0% of the maximum gross
proceeds of the Offering.
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-3-
EXHIBIT
A
DESCRIPTION
OF WARRANTS
Each
purchaser of units will receive, for each unit purchased, one of our common
shares and one half (1/2) of one common share purchase warrant. Each
whole warrant will entitle the holder to purchase one (1) common share at an
exercise price of US$1.20 per common share (subject to adjustment). Each whole
warrant will entitle the holder to purchase one of our common shares (a “warrant
share”) upon payment of US$1.60, subject to adjustment as summarized below, at
any time between the date that is six months following the date of the closing
of the Offering until 5:00 p.m. (Toronto time) on the date that is five years
following the closing of the Offering.
There
is no market through which the warrants may be sold and purchasers may not be
able to resell the warrants purchased in the Offering. This may
affect the pricing of the warrants in the secondary market, the transparency and
availability of trading prices, the liquidity of such warrants, and the extent
of issuer regulation.
Certificates
representing the warrants forming part of the units will be issued on the
closing of the Offering. The rights evidenced by the warrants may be exercised
by the holder by providing to us at 0000 Xxxxxxx Xxxxx, Xxxxxxxx 00, Xxxxx 000,
Xxxxxxxxxxx, Xxxxxxx, X0X 0X0 the certificate representing the warrants and a
duly completed subscription form together with either payment of the exercise
price or notice of cashless exercise in accordance with the terms of the
warrants.
The terms
of the warrants will provide for adjustment in the number of warrant shares
and/or the exercise price per warrant share upon the occurrence of certain
events, including:
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(i)
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the
declaration of a dividend or other distribution payable into common shares
(or securities exchangeable for or convertible into common shares), other
than dividends paid in the ordinary course (as used in this paragraph,
“dividends paid in the ordinary course” means dividends declared payable
on our common shares (whether in cash, securities, property or assets) in
any fiscal year of the Company to the extent that such dividends do not
exceed, in the aggregate, the greater of: (i) the aggregate value of
dividends declared payable by the Company on our common shares in its
immediately preceding fiscal year; (ii) the arithmetic mean of the
aggregate value of dividends declared payable by the Company on our common
shares in its three immediately preceding fiscal years; and
(iii) 100% of the aggregate consolidated net income of the Company,
before extraordinary items, for its immediately preceding fiscal year
(such consolidated net income to be computed in accordance with Canadian
generally accepted accounting
principles);
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(ii)
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the
subdivision or change of our common shares into a greater number of
shares;
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(iii)
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the
reduction, combination or consolidation of our common shares into a lesser
number of shares;
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(any
of such events in paragraphs (i), (ii) or (iii) above being called a
“Share Reorganization”)
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(iv)
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the
issuance to all or substantially all of the holders of our common shares
of rights, options or warrants under which such holders are entitled,
during a period expiring not more than 45 days after the record date for
such issuance, to subscribe for or purchase common shares (or securities
convertible into or exchangeable for common shares) at a price per share
(or having a conversion or exchange price per share) which is less than
95% of the “current market price”, as defined in each certificate
representing warrants, for our common shares on such record date (any such
event being called a “Rights Offering”);
and
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-4-
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(v)
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the
payment, issuance or distribution to all or substantially all of the
holders of our common shares of (a) a dividend, (b) cash or assets
(including evidences of the Company’s indebtedness), or (iii)
rights or other securities (including without limitation, securities
convertible into or exchangeable for common shares), and such payment,
issue or distribution does not constitute a “dividend paid in the ordinary
course”, a Share Reorganization or a Rights Offering (each as defined
above).
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Each
certificate representing the warrants will also provide for adjustment in the
class and/or number of securities issuable upon the exercise of the warrants
and/or exercise price per security in the event of the following additional
events:
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(i)
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reorganization,
reclassification or other change of common shares at any time outstanding
or change of our common shares into other shares or into other securities
(other than a Share
Reorganization);
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(ii)
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consolidation,
amalgamation, arrangement or merger of the Company with or into any other
corporation or other entity; or
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(iii)
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the
transfer of all or substantially all of the undertaking or assets of the
Company to another corporation or entity in which the holders of common
shares are entitled to receive shares, other securities or property,
including cash.
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No
adjustment to the exercise price or the number of warrant shares will be
required to be made unless the cumulative effect of the such adjustment or
adjustments would result in a change of at least 1% in the prevailing exercise
price or a change in the number of warrant shares purchasable upon exercise by
at least one warrant share, as the case may be.
The
Company will also covenant in each certificate representing the warrants that,
during the period in which the warrants are exercisable, it will give notice to
each registered holder of warrants (each, a “warrantholder”) of certain stated
events, including events that would result in an adjustment to the exercise
price for the warrants or the number of warrant shares issuable upon exercise of
the warrants, at least seven days prior to the record date or effective date, as
the case may be, of such event.
No
fractional common shares will be issuable upon the exercise of any
warrants. Warrantholders will not have any voting or pre-emptive
rights or any other rights which a holder of common shares would
have.
-5-
EXHIBIT
B
RECENT
DEVELOPMENTS
On
September 17, 2009, we announced that nimotuzumab had been approved for
marketing in Mexico by CIMAB’s licensee in that country. (Nimotuzumab is
licensed to our majority-owned subsidiary, CIMYM BioSciences Inc., by CIMAB
S.A.(“CIMAB”), a Cuban company responsible for commercializing products
developed at Centro de Inmunología Molecular (Center for Molecular
Immunology)). We also announced that we had enrolled and treated the
first two patients in our multinational randomized, double-blind trial
evaluating nimotuzumab plus whole-brain radiation therapy (WBRT) against WBRT
alone in patients with brain metastases from non-small cell lung cancer. The
trial is designed to enrol approximately 88 patients over 12 months followed by
a 12-month follow-up period and will likely include 12 investigational centers
in Canada plus additional centers in other countries.
On
October 26, 2009, the trading of our common shares on the Alternative Investment
Market of the London Stock Exchange was terminated at our request. Our common
shares had traded on AIM since 2002, but the majority of our shareholder base
and liquidity now result from our Canadian and US listings. Therefore, we
concluded that the additional costs associated with maintaining a listing on AIM
were not justifiable given our North American-focused shareholder
base.
On
December 10, 2009, we announced the first results of a collaborative program
with the National Research Council of Canada’s Biotechnology Research Institute
(NRC-BRI). The program is a multi-target, parallel-discovery research project
funded by us and NRC-BRI to develop our IntelliMab™ technology, a proprietary
platform for generating new therapeutic antibodies that target cell surface
receptors associated with cancer, uniquely optimized to produce efficacy with
reduced toxicities. This collaboration has resulted in a number of antibodies
that bind optimally to HER2/neu-over-expressing breast cancer cells while
minimally binding to HER2 on normal cardiac cells.
On
December 17, 2009, we announced the signing of an agreement with Therapure
Biopharma Inc. pursuant to which Therapure will formulate and fill nimotuzumab
into sterile vials in their aseptic GMP certified and Health Canada licensed
fill suite in Mississauga, Canada. The final product will be utilized by us and
our licensees, Daiichi Sankyo in Japan, Kuhnil in South Korea and Oncoscience AG
in Europe, for all activities, and by Innogene Kalbiotech, our licensee in
Southeast Asia, for global clinical trials. Implementation of the agreement will
occur upon the finalization of an agreed arrangement with the Centre of
Molecular Immunology in Cuba.
On
January 4, 2010, we announced that Xxxxxxx X. Xxxxxxxxx, M.D., X.Xx., Director
of Cancer Research and Director of the Thoracic Oncology Program at the Mt.
Sinai Comprehensive Cancer Center, Miami Beach, Florida, Xxxxxx
Xxxxx, M.D., a radiation oncologist and professor at the University of Wisconsin
Medical School, and Xxxxx Xxxxx-Xxxxx, M.D., Chairman of the Department of
Oncology at Montefiore Medical Center, New York and Director of the Division of
Medical Oncology and Professor of Medicine and Molecular Pharmacology at the
Xxxxxx Xxxxxxxx College of Medicine, together with two additional US
oncologists, agreed to constitute a US consultative committee to us on the
ongoing development of nimotuzumab, CYT387 and CYT997.
On
January 11, 2010, we announced the results of a collaboration with researchers
at the University of Toronto for the development of potent antibody-radionuclide
conjugates for use in the treatment of cancer. The approach concluded its first
series of proof-of-principle experiments.
On
January 26, 2010, we announced that the FDA had advised us that we may now enrol
patients at US clinical sites into two on-going randomized, double-blind Phase
II trials of nimotuzumab. This follows the August 10, 2009 grant to our
subsidiary, YM BioSciences USA Inc., of a license by the US Department of
Treasury Office of Foreign Assets Control that lifted the limitation on the
development of nimotuzumab in the US for patients with solid tumor
cancers.
-6-
On
January 29, 2010, we completed our acquisition of Cytopia Limited, an Australian
public company based in Melbourne, Australia. The merger was completed pursuant
to a scheme of arrangement under applicable Australian laws. Under the terms of
the merger, we issued 7,276,688 common shares in exchange of all of the issued
and outstanding ordinary shares of Cytopia Limited. In addition, Mr. Xxxxxx X.X.
Xxxxxx, former Chairman of Cytopia Limited, has been appointed to our Board of
Directors. Xx. Xxxxxx has over twenty years experience as an executive and
director of large technology businesses.
On
February 10, 2010, we announced that we have been granted two additional patents
in the US for AeroLEF, our proprietary, inhaled-delivery composition of free and
liposome-encapsulated fentanyl in development for the treatment of moderate to
severe acute pain. US patent numbers 7,648,981 and 7,648,982 extend the life of
AeroLEF’s patent estate in the US to 2024. We also announced that AeroLEF’s
patent estate has expanded to include other territories with the issuance of
European patent number 1,603,533 and several patent allowances in China, India,
Mexico and other territories.
On March
2, 2010, we made an announcement describing that certain US patents for
nimotuzumab licensed to our majority-owned Canadian subsidiary, CIMYM, have
become subject to a lien in the United States, pursuant to a court order, to a
third party. The lien is a consequence of a dispute unrelated to us, the
licensor, or the patent owner, the Center of Molecular Immunology (CIM). We have
been advised by counsel that the lien does not affect the exclusive,
royalty-free license for nimotuzumab issued by CIMAB to CIMYM for numerous
territories, including the US. We announced that we do not believe that this
situation will have an impact on our continuing development of nimotuzumab in
the US nor do we expect the development to be material to our
business.
-7-
EXHIBIT
C
RISK
FACTORS
Investing
in our common shares and warrants involves a high degree of risk. You should
carefully consider the risks described below and set forth or incorporated by
reference in the Base Prospectus and the documents filed by us with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, before making an investment decision. You should also refer to the
other information in the Base Prospectus, including information incorporated, or
deemed to be incorporated, by reference in the Base Prospectus, including our
consolidated financial statements and related notes. The risks and uncertainties
described in this Term Sheet or set forth or incorporated by reference in the
Base Prospectus are those that we currently believe may materially affect us.
Additional risks and uncertainties that we are unaware of or that we currently
deem immaterial also may become important factors that affect us. If any of the
following risks actually occurs, our business, financial condition, and results
of operations could be materially adversely affected, the trading price of our
common shares could decline and you could lose all or part of your
investment.
Risks Relating To Our
Business
We
license products and technologies from Cuba.
The
United States has imposed economic sanctions against Cuba. These sanctions apply
to certain transactions from the United States or activities by a person subject
to US jurisdiction. Among other things, the sanctions prohibit transactions that
involve property in which Cuba or any Cuban national has or has had any interest
whatsoever, direct or indirect. The Offering will be considered a prohibited
transaction if any portion of the proceeds is used in support of the Cuban
licensed products and technologies related to nimotuzumab, a humanized
monoclonal antibody targeting the epidermal growth factor receptor (EGFR),
except for that portion of proceeds that may be used in compliance with the
various licenses issued to YM USA by the US Treasury Department’s Office of
Foreign Assets Control (OFAC) for activities related to permitted activities in
the US.
For
purposes of interpreting the sanctions, ‘‘person subject to US jurisdiction’’
means any US citizen, any US permanent resident alien, any entity organized
under the laws of the United States or any jurisdiction within the United States
(including foreign branches and subsidiaries) or any person in the United
States. We are not a person subject to US jurisdiction for purposes of the
sanctions and are not subject to the sanctions with respect to our activities
outside of the United States. However, because the sanctions prohibit persons
subject to US jurisdiction from participating in financing transactions that
would support the Cuban licensed products and technologies, the proceeds from
the sale of our units to US purchasers will be used only to fund drug
development activities that do not violate the terms of the Cuba
sanctions.
Nevertheless,
we cannot assure you that OFAC, which administers the US government’s Cuba
sanctions, would agree that the measures we have taken and will take are
sufficient to comply with the sanctions described above.
We are
the exclusive licensee of US, European and other patents related to nimotuzumab
owned by CIMAB, a Cuban company responsible for commercializing products
developed at Cuba’s Centro de Immunologia Molecular, a research institute formed
by the government of Cuba. In connection with a default judgment
obtained from a US federal court in Miami, Florida by an individual claimant
against the Republic of Cuba, the Cuban government and a number of other
parties, including CIMAB, the claimant has recorded a lien against the US
patents that are licensed by us from CIMAB. These are patents US 5,891,996 and
6,506,883, each of which expires in November 2015. The claimant also has
commenced an action to enforce that default judgment. If the claimant
succeeds in its action to enforce the judgment, ownership of the licensed US
patents could be transferred from CIMAB to the claimant or sold to a third
party. Based on the advice of our counsel, we believe that
any transfer of the US patents will be subject to our existing license from
CIMAB and that any such transfer should have no bearing on our rights under the
license agreement. However, there can be no assurance that any
subsequent owner of the US patents will fully cooperate with us in connection
with our efforts to continue the development of nimotuzumab in the United
States, will not attempt to invalidate our license agreement, or will not
attempt to take any other action that could potentially impact our license to
the US patents.
-8-
The
acquisition of Cytopia Limited will result in increased
expenditures.
The
acquisition of Cytopia Limited will result in an increase of expenditures for
the additional staff and resources, as well as the advancement of the Cytopia
Limited products in clinical development. This will result in the reduction of
our previously anticipated duration of our cash assets. If we are unsuccessful
in our financing efforts, we may have insufficient funds to complete our
clinical development plans as originally anticipated.
Risks Relating To This
Offering
There
can be no assurance as to the liquidity of the warrants or that a trading market
for the warrants will develop.
There is
currently no public market through which the warrants may be sold and we do not
intend to apply for the listing of the warrants on any securities exchange. This
may affect the pricing of the warrants in the secondary market, the transparency
and availability of trading prices and the liquidity of the
warrants.
Our
share price is volatile.
The
market price of our common shares, like that of the securities of many other
biotechnology companies in the development stage, has been, and is likely to
continue to be, highly volatile. This increases the risk of securities
litigation related to such volatility. Factors such as the results of our
preclinical studies and clinical trials, as well as those of our collaborators
or our competitors; other evidence of the safety or effectiveness of our
products or those of our competitors; announcements of technological innovations
or new products by us or our competitors; governmental regulatory actions;
developments with our collaborators; developments (including litigation)
concerning patent or other proprietary rights of our company or our competitors;
concern as to the safety of our products; period-to-period fluctuations in
operating results; changes in estimates of our performance by securities
analysts; market conditions for biotechnology stocks in general; and other
factors not within the control of our company could have a significant adverse
effect on the market price of our common shares.
We
have not paid dividends.
We have
never paid cash dividends on our common shares and do not anticipate paying any
cash dividends in the foreseeable future. We currently intend to
retain our future earnings, if any, to finance further research and the
expansion of our business.
-9-
Our
outstanding common shares could be subject to dilution.
The
exercise of stock options and warrants already issued by us and the issuance of
other additional securities in the future, including upon the exercise of the
warrants offered hereby could result in dilution in the value of our common
shares and the voting power represented by the common
shares. Furthermore, to the extent holders of our stock options or
other securities exercise their securities and then sell the common shares they
receive, our share price may decrease due to the additional amount of our common
shares available in the market.
It
may be difficult for non-Canadian investors to obtain and enforce judgments
against us because of our Canadian incorporation and presence.
We are a
corporation existing under the laws of Nova Scotia, Canada. Most of
our directors and officers, and certain of the experts named in the Base
Prospectus, are residents of Canada or otherwise reside outside the United
States, and all or a substantial portion of their assets, and a substantial
portion of our assets, are located outside the United States. Consequently,
although we have appointed an agent for service of process in the United States,
it may be difficult for holders of these securities who reside in the United
States to effect service within the United States upon those directors and
officers, and the experts who are not residents of the United States. It may
also be difficult for holders of these securities who reside in the United
States to realize in the United States upon judgments of courts of the United
States predicated upon our civil liability and the civil liability of our
directors, officers and experts under the United States federal securities
laws. Investors should not assume that Canadian courts (1) would
enforce judgments of US courts obtained in actions against us or such directors,
officers or experts predicated upon the civil liability provisions of the US
federal securities laws or the securities or “blue sky” laws of any state within
the United States or (2) would enforce, in original actions, liabilities against
us or such directors, officers or experts predicated upon the US federal
securities laws or any such state securities or “blue sky” laws. In addition, we
have been advised by our Canadian counsel that in normal circumstances, only
civil judgments and not other rights arising from United States securities
legislation are enforceable in Canada and that the protections afforded by
Canadian securities laws may not be available to investors in the United
States.
If
there are substantial sales of our common shares, the market price of our common
shares could decline.
Sales of
substantial numbers of our common shares could cause a decline in the market
price of our common shares. Any sales by existing shareholders or holders of
options may have an adverse effect on our ability to raise capital and may
adversely affect the market price of our common shares.
We have broad discretion in
how we use the net
proceeds of the Offering, and we may not use these proceeds in a manner
desired by our securityholders.
Our
management will have broad discretion with respect to the use of the net
proceeds from the Offering and investors will be relying on the judgment of our
management regarding the application of these proceeds. Our management could
spend most of the net proceeds from the Offering in ways that our shareholders
may not desire or that do not yield a favourable return. You will not have the
opportunity, as part of your investment in our common shares, to influence the
manner in which the net proceeds of the Offering are used. At the date of this
Term Sheet, we intend to use the net proceeds from the Offering to fund our drug
development activities and for general corporate purposes, subject to the
restrictions on our use of the proceeds from the sale of our units to US
purchasers. However, our needs may change as our business and the industry we
address evolve. As a result, the proceeds we receive in the Offering may be used
in a manner significantly different from our current expectations.
-10-
Because
there is no minimum offering amount required as a condition to closing the
Offering, the actual public offering amount and net proceeds to us, if any, from
the Offering are not presently determinable and may be substantially less than
the maximum offering amounts set forth above.
We
have adopted a shareholder rights plan.
We have
adopted a shareholder rights plan. The provisions of such plan could make it
more difficult for a third party to acquire a majority of our outstanding common
shares, the effect of which may be to deprive our shareholders of a control
premium that might otherwise be realized in connection with an acquisition of
our common shares. See “Description of Share Capital, Common Shares and Related
Information” on page 17 of the Base Prospectus.
We
expect to be a “passive foreign investment company” for the current taxable
year, which would likely result in materially adverse US federal income tax
consequences for US investors.
We generally
will be designated as a “passive foreign investment company” under the
meaning of Section 1297 of the United States Internal Revenue Code of 1986, as
amended (a “PFIC”) if (a) 75% or more of our gross income is “passive income”
(generally, dividends, interest, rents, royalties, and gains from the
disposition of assets producing passive income) in any taxable year, or (b) if
at least 50% or more of the quarterly average value of our assets produce, or
are held for the production of, passive income. US shareholders should be aware
that we believe that we constituted a PFIC during one or more prior taxable
years, and based on current business plans and financial projections, we expect
to be a PFIC for the current taxable year. If we are designated as a PFIC for
any taxable year during which a US person holds our common shares or warrants,
it would likely result in materially adverse US federal income tax consequences
for such US person, including, but not limited to, any gain from the sale of our
common shares and warrants would be taxed as ordinary income, as opposed to
capital gain, and such gain and certain distributions on our common shares would
be subject to an interest charge, except in certain circumstances. In addition,
US persons that hold common shares should be aware that there can be no
assurances that we will satisfy the record keeping requirements that apply to a
PFIC, or that the we will supply such US shareholders with the information that
such US shareholders require to make certain elections available under the Code
that are intended to mitigate the adverse tax consequences of the PFIC rules
with respect to such common shares, except as otherwise provided in this Term
Sheet or in the prospectuses related to the Offering. US persons that hold
warrants are not eligible to make certain elections available under the Code
that are intended to mitigate the adverse tax consequences of the PFIC rules
with respect to such warrants and stock received upon exercise of such warrants.
The PFIC rules are extremely complex. A US person holding our common shares or
warrants is encouraged to consult a tax adviser regarding the PFIC Rules and the
US federal income tax consequences of the acquisition, ownership, and
disposition of our common shares and warrants.
-11-
EXHIBIT
D
FEDERAL INCOME TAX
CONSIDERATIONS
MATERIAL
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The
following is a general summary of the material US federal income tax
consequences applicable to a US Holder (as defined below) arising from and
relating to the acquisition, ownership and disposition of units acquired
pursuant to the Offering, the acquisition, ownership, and disposition of unit
shares acquired as part of the units, the exercise, disposition, and lapse of
warrants acquired as part of the units, and the acquisition, ownership, and
disposition of warrant shares received on exercise of the warrants.
This
summary is for general information purposes only and does not purport to be a
complete analysis or listing of all potential US federal income tax
considerations that may apply to a US Holder as a result of the acquisition of
units pursuant to the Offering. In addition, this summary does not
take into account the individual facts and circumstances of any particular US
Holder that may affect the US federal income tax considerations applicable to
such US Holder. Accordingly, this summary is not intended to be, and
should not be construed as, legal or US federal income tax advice with respect
to any US Holder. Each US Holder should consult its own tax adviser
regarding the US federal, US state and local, and foreign tax consequences
relating to the acquisition, ownership, and disposition of units, unit shares,
warrants, and warrant shares.
No ruling
from the US Internal Revenue Service (the “IRS”) or legal opinion has been
requested, or will be obtained, regarding the US. Federal income tax
considerations applicable to US Holders as discussed in this
summary. This summary is not binding on the IRS, and the IRS is not
precluded from taking a position that is different from, and contrary to, the
positions taken in this summary. In addition, because the authorities
on which this summary is based are subject to various interpretations, the IRS
and the US courts could disagree with one or more of the positions taken in this
summary.
NOTICE
PURSUANT TO IRS CIRCULAR 230: NOTHING CONTAINED IN THIS SUMMARY CONCERNING ANY
US FEDERAL TAX ISSUE IS INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED,
BY A US HOLDER (AS DEFINED BELOW), FOR THE PURPOSE OF AVOIDING US FEDERAL TAX
PENALTIES UNDER THE CODE (AS DEFINED BELOW). THIS SUMMARY WAS WRITTEN TO SUPPORT
THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED BY THIS TERM
SHEET. EACH US HOLDER SHOULD SEEK US FEDERAL TAX ADVICE, BASED ON SUCH US
HOLDER’S PARTICULAR CIRCUMSTANCES, FROM AN INDEPENDENT TAX ADVISOR.
Authorities
This
summary is based on the Internal Revenue Code of 1986, as amended (the “Code”),
Treasury Regulations (whether final, temporary, or proposed), US court
decisions, published IRS rulings, published administrative positions of the IRS,
and the Convention Between Canada and the United States of America with Respect
to Taxes on Income and on Capital, signed September 26, 1980, as amended (the
“Canada-US Tax Convention”), that are applicable and, in each case, as in effect
and available, as of the date of this Term Sheet. Any of the
authorities on which this summary is based could be changed in a material and
adverse manner at any time, and any such change could be applied on a
retroactive basis and could affect the US federal income tax considerations
described in this summary. This summary does not discuss the
potential effects, whether adverse or beneficial, of any proposed legislation
that, if enacted, could be applied on a retroactive basis.
-12-
US
Holders
For
purposes of this summary, a “US Holder” is a beneficial owner of units, unit
shares, warrants, or warrant shares acquired pursuant to the Offering that is
(a) an individual who is a citizen or resident of the US for US federal income
tax purposes, (b) a corporation, or other entity classified as a corporation for
US federal income tax purposes, that is created or organized in or under the
laws of the US or any state in the US, including the District of Columbia, (c)
an estate if the income of such estate is subject to US federal income tax
regardless of the source of such income, or (d) a trust if (i) such trust has
validly elected to be treated as a US person for US federal income tax purposes
or (ii) a US court is able to exercise primary supervision over the
administration of such trust and one or more US persons have the authority to
control all substantial decisions of such trust.
Non-US
Holders
For
purposes of this summary, a “Non-US Holder” is a beneficial owner of units, unit
shares, warrants, or warrant shares that is neither a US Holder nor a
partnership. This summary does not address the US federal income tax
considerations applicable to Non-US Holders relating to the acquisition,
ownership, and disposition of units, unit shares, warrants, and warrant
shares. Accordingly, a Non-US Holder should consult its own tax
adviser regarding the US federal, US state and local, and foreign tax
consequences (including the potential application of and operation of any tax
treaties) relating to the acquisition, ownership, and disposition of units, unit
shares, warrants, and warrant shares.
US Holders Subject to
Special US Federal Income Tax Rules Not Addressed
This
summary does not address the US federal income tax considerations applicable to
US Holders that are subject to special provisions under the Code, including: (a)
US Holders that are tax-exempt organizations, qualified retirement plans,
individual retirement accounts, or other tax-deferred accounts; (b) US Holders
that are financial institutions, underwriters, insurance companies, real estate
investment trusts, or regulated investment companies or that are broker-dealers,
dealers, or traders in securities or currencies that elect to apply a
xxxx-to-market accounting method; (c) US Holders that have a “functional
currency” other than the US dollar; (d) US Holders that own units, unit shares,
warrants or warrant shares as part of a straddle, hedging transaction,
conversion transaction, constructive sale, or other arrangement involving more
than one position; (e) US Holders that acquired units, unit shares, warrants or
warrant shares in connection with the exercise of employee stock options or
otherwise as compensation for services; (f) US Holders that hold units, unit
shares, warrants or warrant shares other than as a capital asset within the
meaning of Section 1221 of the Code or (g) US Holders that own, directly,
indirectly, or by attribution, 10% or more, by voting power or value, of our
outstanding shares. The summary also does not address the US federal
income tax considerations applicable to US Holders who are (a) US
expatriates or former long-term residents of the US subject to Section 877 of
the Code, (b) persons that have been, are, or will be a resident or deemed to be
a resident in Canada for purposes of the Tax Act; (c) persons that use or hold,
will use or hold, or that are or will be deemed to use or hold, units, unit
shares, warrants, or warrant shares in connection with carrying on a business in
Canada; (d) persons whose units, unit shares, warrants, or warrant shares
constitute “taxable Canadian property” under the Tax Act; or (e) persons that
have a permanent establishment in Canada for the purposes of the Canada-US Tax
Convention. US Holders and others that are subject to special
provisions under the Code, including US Holders described immediately above,
should consult their own tax advisers.
If an
entity that is classified as partnership (or “pass-through” entity) for US
federal income tax purposes holds units, unit shares, warrants or warrant
shares, the US federal income tax consequences applicable to such partnership
(or “pass-through” entity) and the partners of such partnership (or owners of
such “pass-through” entity) generally will depend on the activities of the
partnership (or “pass-through” entity) and the status of such partners (or
owners). Partners of entities that are classified as partnerships
(and owners of “pass-through” entities) for US federal income tax purposes
should consult their own tax adviser regarding the US federal income tax
consequences relating to the acquisition, ownership, and disposition of units,
unit shares, warrants, and warrant shares.
-13-
Tax Consequences Other than
US Federal Income Tax Consequences Not Addressed
This
summary does not address the US state and local, US federal estate and gift, US
federal alternative minimum tax, or foreign tax consequences to US Holders
relating to the acquisition, ownership, and disposition of units, unit shares,
warrants, and warrant shares. Each US Holder should consult its own
tax adviser regarding the US state and local, US federal estate and gift, US
federal alternative minimum tax and foreign tax consequences relating to the
acquisition, ownership, and disposition of units, unit shares, warrants, and
warrant shares.
US Federal Income Tax
Consequences of the Acquisition of Units
For US
federal income tax purposes, the acquisition by a US Holder of a unit will be
treated as the acquisition of an “investment unit” consisting of two components:
one unit share and one half of one warrant. The purchase price
for each unit will be allocated between these two components in proportion to
their relative fair market values at the time the unit is purchased by the US
Holder. This allocation of the purchase price for each unit will
establish a US Holder’s initial tax basis for US federal income tax purposes in
the unit share and one half of one warrant that comprise each unit.
For this
purpose, we will allocate US$1.102 of the purchase price for each unit to the
unit share and US$0.098 of the purchase price for each unit to the one half of
one warrant. However, the IRS will not be bound by our allocation of
the purchase price for the units, and therefore, the IRS or a US court may not
respect the allocation set forth above. Each US Holder should consult
its own tax adviser regarding the allocation of the purchase price for the
units.
Passive Foreign Investment
Company Rules
If we are
considered a “passive foreign investment company” within the meaning of Section
1297 of the Code (a “PFIC”) at any time during a US Holder’s holding period, the
following sections will generally describe the US federal income tax
consequences to US Holder’s of the acquisition, ownership, and disposition of
units, unit shares, warrants or warrant shares.
PFIC
Status
We
generally will be a PFIC under Section 1297 of the Code if, for a tax year, (a)
75% or more of our gross income for such tax year is passive income or (b) 50%
or more of the value of our assets either produce passive income or are held for
the production of passive income, based on the quarterly average of the fair
market value of such assets. “Gross income” generally means all
revenues less the cost of goods sold, and “passive income” includes, for
example, dividends, interest, certain rents and royalties, certain gains from
the sale of stock and securities, and certain gains from commodities
transactions. Active business gains arising from the sale of
commodities generally are excluded from passive income if substantially all of a
foreign corporation’s commodities are (a) stock in trade of such foreign
corporation or other property of a kind which would properly be included in
inventory of such foreign corporation if it is on hand at the close of the
taxable year, or property held by such foreign corporation primarily for sale to
customers in the ordinary course of its trade or business, (b) property used in
the trade or business of such foreign corporation that would be subject to the
allowance for depreciation under Section 167 of the Code, or (c) supplies of a
type regularly used or consumed by such foreign corporation in the ordinary
course of its trade or business.
For
purposes of the PFIC income test and asset test described above, if we own,
directly or indirectly, 25% or more of the total value of the outstanding shares
of another corporation, we will be treated as if it (a) held a proportionate
share of the assets of such other corporation and (b) received directly a
proportionate share of the income of such other corporation. In
addition, for purposes of the PFIC income test and asset test described above,
“passive income” does not include any interest, dividends, rents, or royalties
that are received or accrued by us from a “related person” (as defined in
Section 954(d)(3) of the Code), to the extent such items are properly allocable
to the income of such related person that is not passive income.
-14-
Under
certain attribution rules, if we are a PFIC, US Holders will be deemed to own
their proportionate share of any of our subsidiaries which is also a PFIC (a
“Subsidiary PFIC”), and will be subject to US federal income tax on (i) a
distribution on the shares of a Subsidiary PFIC and (ii) a disposition of unit
shares of a Subsidiary PFIC, both as if the holder directly held the shares of
such Subsidiary PFIC.
We
believe that we constituted a PFIC for one or more prior taxable years, and
based on current business plans and financial projections, we expect that we
will be a PFIC for the current taxable year. The determination of
whether we (or a Subsidiary PFIC) was, or will be, a PFIC for a tax year
depends, in part, on the application of complex US federal income tax rules,
which are subject to differing interpretations. In addition, whether
we (or a Subsidiary PFIC) will be a PFIC for any tax year depends on our assets
and income (and each Subsidiary PFIC) over the course of each such tax year and,
as a result, cannot be predicted with certainty as of the date of this Term
Sheet. Accordingly, there can be no assurance that the IRS will not
challenge any determination made by us (or a Subsidiary PFIC) concerning our
PFIC status or that we (and each Subsidiary PFIC) were not, or will not be, a
PFIC for any tax year. Each US Holder should consult its own tax
adviser regarding our PFIC status and each Subsidiary PFIC.
Default PFIC Rules Under
Section 1291 of the Code
If we are
a PFIC, the US federal income tax consequences to a US Holder of the purchase of
units and the acquisition, ownership, and disposition of unit shares, warrants
and warrant shares will depend on whether such US Holder is eligible to make and
actually makes an election to treat us (and/or a Subsidiary PFIC) as a
“qualified electing fund” or “QEF” under Section 1295 of the Code (a “QEF
Election”) or has made a xxxx-to-market election under Section 1296 of the Code
(a “Xxxx-to-Market Election”) with respect to unit shares or warrant
shares. A US Holder that does not make either a QEF Election or a
Xxxx-to-Market Election will be referred to in this summary as a “Non-Electing
US Holder.”
A
Non-Electing US Holder will be subject to the rules of Section 1291 of the Code
with respect to (a) any gain recognized on the sale or other taxable disposition
of unit shares, warrants and warrant shares and (b) any excess distribution paid
on the unit shares and warrant shares. A distribution generally will
be an “excess distribution” to the extent that such distribution (together with
all other distributions received in the current tax year) exceeds 125% of the
average distributions received during the three preceding tax years (or during a
US Holder’s holding period for the unit shares and warrant shares, if
shorter).
Under
Section 1291 of the Code, any gain recognized on the sale or other taxable
disposition of unit shares, warrants and warrant shares of a PFIC (including an
indirect disposition of unit shares of a Subsidiary PFIC), and any excess
distribution paid on such unit shares and warrant shares (or a distribution by a
Subsidiary PFIC to its shareholder that is deemed to be received by a US Holder)
must be rateably allocated to each day of a Non-Electing US Holder’s holding
period for the unit shares or warrant shares. The amount of any such
gain or excess distribution allocated to the tax year of disposition or
distribution of the excess distribution and to years before the entity became a
PFIC, if any, would be taxed as ordinary income. The amounts
allocated to any other tax year would be subject to US federal income tax at the
highest tax applicable to ordinary income in each such year, and an interest
charge would be imposed on the tax liability for each such year, calculated as
if such tax liability had been due in each such year. A Non-Electing
US Holder that is not a corporation must treat any such interest paid as
“personal interest,” which is not deductible.
If we are
a PFIC for any tax year during which a Non-Electing US Holder holds unit shares,
warrant shares or warrants, we will continue to be treated as a PFIC with
respect to such Non-Electing US Holder, regardless of whether the Company ceases
to be a PFIC in one or more subsequent years. If we cease to be a
PFIC, a Non-Electing US Holder may terminate this deemed PFIC status with
respect to unit shares and warrant shares by electing to recognize gain (which
will be taxed under the rules of Section 1291 of the Code discussed above) as if
such unit shares and warrant shares were sold on the last day of the last tax
year for which we were a PFIC. No such election, however, may be made
with respect to warrants.
-15-
Under
proposed Treasury Regulations, if a US holder has an option, warrant, or other
right to acquire stock of a PFIC (such as the units or the warrants), such
option, warrant or right is considered to be PFIC stock subject to the default
rules of Section 1291 of the Code. Under rules described below, the
holding period for the warrant shares will begin on the date a US Holder
acquires the units. This will impact the availability of the QEF
Election and Xxxx-to-Market Election with respect to the warrant
shares. Thus, a US Holder may have to account for warrant shares and
unit shares under the PFIC rules and the applicable elections
differently. See discussion below under “QEF Election” and under
“Market-to-Market Election”.
QEF
Election
A US
Holder that makes a QEF Election for the first tax year in which its holding
period of its Unit Shares begins, generally, will not be subject to the rules of
Section 1291 of the Code discussed above with respect to its Unit
Shares. However, a US Holder that makes a QEF Election will be
subject to US federal income tax on such US Holder’s pro rata share of (a) our
net capital gain, which will be taxed as long-term capital gain to such US
Holder, and (b) and our ordinary earnings, which will be taxed as ordinary
income to such US Holder. Generally, “net capital gain” is the excess
of (a) net long-term capital gain over (b) net short-term capital gain, and
“ordinary earnings” are the excess of (a) “earnings and profits” over (b) net
capital gain. A US Holder that makes a QEF Election will be subject
to US federal income tax on such amounts for each tax year in which we are a
PFIC, regardless of whether such amounts are actually distributed to such US
Holder by us. However, for any tax year in which we are a PFIC and
has no net income or gain, US Holders that have made a QEF Election would not
have any income inclusions as a result of the QEF Election. If a US
Holder that made a QEF Election has an income inclusion, such a US Holder may,
subject to certain limitations, elect to defer payment of current US federal
income tax on such amounts, subject to an interest charge. If such US
Holder is not a corporation, any such interest paid will be treated as “personal
interest,” which is not deductible.
A US
Holder that makes a QEF Election generally (a) may receive a tax-free
distribution from us to the extent that such distribution represents our
“earnings and profits” that were previously included in income by the US Holder
because of such QEF Election and (b) will adjust such US Holder’s tax basis in
the unit shares to reflect the amount included in income or allowed as a
tax-free distribution because of such QEF Election. In addition, a US
Holder that makes a QEF Election generally will recognize capital gain or loss
on the sale or other taxable disposition of unit shares.
The
procedure for making a QEF Election, and the US federal income tax consequences
of making a QEF Election, will depend on whether such QEF Election is
timely. A QEF Election will be treated as “timely” if such QEF
Election is made for the first year in the US Holder’s holding period for the
unit shares in which we were a PFIC. A US Holder may make a timely
QEF Election by filing the appropriate QEF Election documents at the time such
US Holder files a US federal income tax return for such year.
A QEF
Election will apply to the tax year for which such QEF Election is made and to
all subsequent tax years, unless such QEF Election is invalidated or terminated
or the IRS consents to revocation of such QEF Election. If a US
Holder makes a QEF Election and, in a subsequent tax year, we cease to be a
PFIC, the QEF Election will remain in effect (although it will not be
applicable) during those tax years in which we are not a
PFIC. Accordingly, if we become a PFIC in another subsequent tax
year, the QEF Election will be effective and the US Holder will be subject to
the QEF rules described above during a subsequent tax year in which we qualify
as a PFIC.
As
discussed above, under proposed Treasury Regulations, if a US holder has an
option, warrant or other right to acquire stock of a PFIC (such as the units or
the warrants), such option, warrant or right is considered to be PFIC stock
subject to the default rules of Section 1291 of the Code. However, a
holder of an option, warrant or other right to acquire stock of a PFIC may not
make a QEF Election that will apply to the option, warrant or other right or to
acquire PFIC stock. In addition, under proposed Treasury Regulations,
if a US Holder holds an option, warrant or other right to acquire stock of a
PFIC, the holding period with respect to shares of stock of the PFIC acquired
upon exercise of such option, warrant or other right will include the period
that the option, warrant or other right was held.
-16-
Consequently,
if a US Holder of unit shares makes a QEF Election, such Election generally will
not be treated as a timely QEF Election with respect to warrant shares and the
rules of Section 1291 of the Code discussed above will continue to apply with
respect to such US Holder’s warrant shares. However, a US Holder of
warrant shares should be eligible to make a timely QEF Election if such US
Holder elects in the tax year in which such warrant shares are received to
recognize gain (which will be taxed under the rules of Section 1291 of the Code
discussed above) as if such warrant shares were sold for fair market value on
the date such US Holder acquired them. In addition, gain recognized
on the sale or other taxable disposition (other than by exercise) of the
warrants by a US Holder will be subject to the rules of Section 1291 of the Code
discussed above.
The QEF
Election is made on a shareholder-by-shareholder basis and, once made, can be
revoked only with the consent of the IRS. A US Holder generally makes
a QEF Election by attaching an appropriately completed IRS Form 8621 (Return by
a Shareholder of a Passive Foreign Investment Company or Qualified Electing
Fund), including the information provided in a PFIC annual information
statement, to a timely filed US federal income tax return for the tax year to
which the election relates. Retroactive QEF Elections generally may
be made only by filing a protective statement with such return and if certain
other conditions are met or with the consent of the IRS. In order to
comply with the requirements of a QEF Election, a US Holder must receive certain
information from us.
We will
make available to US Holders, upon their written request, timely and accurate
information as to our company’s status as a PFIC and the status of any
Subsidiary PFIC in which our company owns more than 50% of such Subsidiary
PFIC’s total aggregate voting power, and for each year we are a PFIC, provide to
a US Holder, upon written request, all information and documentation that a US
Holder making a QEF Election with respect to our company and such more than 50%
owned Subsidiary PFIC is required to obtain for US federal income tax
purposes. Because our company may hold 50% or less of the aggregate
voting power of one or more Subsidiary PFICs at any time, US Holders should be
aware that there can be no assurance that we will satisfy record keeping
requirements that apply to a QEF, or that we will supply US Holders with
information that such US Holders require to report under the QEF rules, in the
event that our company is a PFIC and a US Holder wishes to make a QEF Election
with respect to any such Subsidiary PFIC. With respect to Subsidiary
PFICs for which we do not or the US Holders do not obtain the required
information, US Holders will continue to be subject to the rules discussed above
that apply to Non-Electing US Holders with respect to the taxation of gains and
excess distributions. Each US Holder should consult his, her or its own tax
advisor regarding the availability of, and procedure for making, a QEF Election
with respect to us and any Subsidiary PFIC.
Xxxx-to-Market
Election
A US
Holder may make a Xxxx-to-Market Election only if the unit shares and warrant
shares are marketable stock. The unit shares and warrant shares
generally will be “marketable stock” if the unit shares and warrant shares are
regularly traded on (a) a national securities exchange that is registered with
the SEC, (b) the national market system established pursuant to section 11A of
the Securities and Exchange Act of 1934, or (c) a foreign securities exchange
that is regulated or supervised by a governmental authority of the country in
which the market is located, provided that (i) such foreign exchange has trading
volume, listing, financial disclosure, and other requirements and the laws of
the country in which such foreign exchange is located, together with the rules
of such foreign exchange, ensure that such requirements are actually enforced
and (ii) the rules of such foreign exchange ensure active trading of listed
stocks. If such stock is traded on such a qualified exchange or other
market, such stock generally will be “regularly traded” for any calendar year
during which such stock is traded, other than in de minimis quantities, on at
least 15 days during each calendar quarter.
-17-
A US
Holder that makes a Xxxx-to-Market Election with respect to its unit shares
generally will not be subject to the rules of Section 1291 of the Code discussed
above. However, if a US Holder does not make a Xxxx-to-Market
Election beginning in the first tax year of such US Holder’s holding period for
the unit shares or such US Holder has not made a timely QEF Election, the rules
of Section 1291 of the Code discussed above will apply to certain dispositions
of, and distributions on, the unit shares.
Any
Xxxx-to-Market Election made by a US Holder for the unit shares will also apply
to such US Holder’s warrant shares. As a result, if a
Market-to-Market Election has been made by a US Holder with respect to unit
shares, any warrant shares received will automatically be marked-to-market in
the year of exercise. Because a US Holder’s holding period for
warrant shares includes the period during which such US Holder held the
warrants, a US Holder will be treated as making a Xxxx-to-Market Election with
respect to its warrant shares after the beginning of such US Holder’s holding
period for the warrant shares unless the warrant shares are acquired in the same
tax year as the year in which the US Holder acquired its
units. Consequently, the default rules under Section 1291 described
above generally will apply to the xxxx-to-market gain realized in the tax year
in which warrant shares are received. However, the general
xxxx-to-market rules will apply to subsequent tax years.
A US
Holder that makes a Xxxx-to-Market Election will include in ordinary income, for
each tax year in which we are a PFIC, an amount equal to the excess, if any, of
(a) the fair market value of the unit shares and any warrant shares, as of the
close of such tax year over (b) such US Holder’s tax basis in the unit shares
and any warrant shares. A US Holder that makes a Xxxx-to-Market
Election will be allowed a deduction in an amount equal to the excess, if any,
of (i) such US Holder’s adjusted tax basis in the unit shares and any warrant
shares, over (ii) the fair market value of such unit shares and any warrant
shares (but only to the extent of the net amount of previously included income a
result of the Xxxx-to-Market Election for prior tax years).
A US
Holder that makes a Xxxx-to-Market Election generally also will adjust such US
Holder’s tax basis in the unit shares and warrant shares to reflect the amount
included in gross income or allowed as a deduction because of such
Xxxx-to-Market Election. In addition, upon a sale or other taxable
disposition of unit shares and warrant shares, a US Holder that makes a
Xxxx-to-Market Election will recognize ordinary income or loss (not to exceed
the excess, if any, of (a) the amount included in ordinary income because of
such Xxxx-to-Market Election for prior tax years over (b) the amount allowed as
a deduction because of such Xxxx-to-Market Election for prior tax
years).
A
Xxxx-to-Market Election applies to the tax year in which such Xxxx-to-Market
Election is made and to each subsequent tax year, unless the unit shares and
warrant shares cease to be “marketable stock” or the IRS consents to revocation
of such election. Each US Holder should consult its own tax adviser
regarding the availability of, and procedure for making, a Xxxx-to-Market
Election.
Although
a US Holder may be eligible to make a Xxxx-to-Market Election with respect to
the unit shares and warrant shares, no such election may be made with respect to
the stock of any Subsidiary PFIC that a US Holder is treated as owning because
such stock is not marketable. Hence, the Xxxx-to-Market Election will
not be effective to eliminate the interest charge described above with respect
to deemed dispositions of Subsidiary PFIC stock or distributions from a
Subsidiary PFIC.
Other PFIC
Rules
Under
Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations
that, subject to certain exceptions, would cause a US Holder that had not made a
timely QEF Election to recognize gain (but not loss) upon certain transfers of
unit shares and warrant shares that would otherwise be tax-deferred (e.g., gifts
and exchanges pursuant to corporate reorganizations). However, the
specific US federal income tax consequences to a US Holder may vary based on the
manner in which unit shares, warrants, or warrant shares are
transferred.
-18-
Certain
additional adverse rules will apply with respect to a US Holder if we are a
PFIC, regardless of whether such US Holder makes a QEF Election. For
example under Section 1298(b)(6) of the Code, a US Holder that uses unit shares,
warrants or warrant shares as security for a loan will, except as may be
provided in Treasury Regulations, be treated as having made a taxable
disposition of such unit shares, warrants or warrant shares.
In
addition, a US Holder who acquires unit shares, warrants or warrant shares from
a decedent will not receive a “step up” in tax basis of such unit shares,
warrants or warrant shares to fair market value.
Special
rules also apply to the amount of foreign tax credit that a US Holder may claim
on a distribution from a PFIC. Subject to such special rules, foreign taxes paid
with respect to any distribution in respect of stock in a PFIC are generally
eligible for the foreign tax credit. The rules relating to
distributions by a PFIC and their eligibility for the foreign tax credit are
complicated, and a US Holder should consult with their own tax adviser regarding
the availability of the foreign tax credit with respect to distributions by a
PFIC.
The PFIC
rules are complex, and each US Holder should consult its own tax adviser
regarding the PFIC rules and how the PFIC rules may affect the US federal income
tax consequences of the acquisition, ownership, and disposition of unit shares,
warrants and warrant shares.
US
Federal Income Tax Consequences of the Exercise and Disposition of
Warrants
Exercise of
Warrants
A US
Holder should not recognize gain or loss on the exercise of a warrant and
related receipt of a warrant share (except if cash is received in lieu of the
issuance of a fractional warrant share). A US Holder’s initial tax
basis in the warrant share received on the exercise of a warrant should be equal
to the sum of (a) such US Holder’s tax basis in such warrant plus (b) the
exercise price paid by such US Holder on the exercise of such
warrant. If, as anticipated, we are a PFIC, a US Holder’s holding
period for the warrant share should begin on the date on which such US Holder
acquired its units.
In
certain limited circumstances, a US Holder may be permitted to undertake a
cashless exercise of warrants into warrant shares. The US federal income tax
treatment of a cashless exercise of warrants into warrant shares is unclear, and
the tax consequences of a cashless exercise could differ from the consequences
upon the exercise of a warrant described in the preceding
paragraph. US Holders should consult their own tax advisers regarding
the US federal income tax consequences of a cashless exercise of
warrants.
Disposition of
Warrants
A US
Holder will recognize gain or loss on the sale or other taxable disposition of a
warrant in an amount equal to the difference, if any, between (a) the amount of
cash plus the fair market value of any property received and (b) such US
Holder’s tax basis in the warrant sold or otherwise disposed of. As
noted below under “Disposition of unit shares and warrant shares”, such gain or
loss will generally be treated as “US source” for purposes of the US foreign tax
credit calculations. Any gain is expected to be subject to the rules
of Section 1291 of the Code, as discussed above. Any such loss
generally will be a capital loss and will be long-term capital loss if the
warrant is held for more than one year.
Expiration of Warrants
Without Exercise
Subject
to the PFIC rules discussed above, upon the lapse or expiration of a warrant, a
US Holder will recognize a loss in an amount equal to such US Holder’s tax basis
in the warrant. Any such loss generally will be a capital loss and
will be long-term capital loss if the warrants are held for more than one
year. Deductions for capital losses are subject to complex
limitations under the Code.
-19-
Certain Adjustments to the
Warrants
Under
Section 305 of the Code, an adjustment to the number of warrant shares that will
be issued on the exercise of the warrants, or an adjustment to the exercise
price of the warrants, may be treated as a constructive distribution to a US
Holder of the warrants if, and to the extent that, such adjustment has the
effect of increasing such US Holder’s proportionate interest in the “earnings
and profits” or assets of the Company, depending on the circumstances of such
adjustment (for example, if such adjustment is to compensate for a distribution
of cash or other property to our shareholders). (See more detailed
discussion of the rules applicable to distributions made by us at “US Federal
Income Tax Consequences of the Acquisition, Ownership, and Disposition of Unit
Shares, and Warrant Shares – Distributions on Unit Shares and Warrant Shares”
below).
US
Federal Income Tax Consequences of the Acquisition, Ownership, and Disposition
of Unit Shares and Warrant Shares
Distributions on Unit Shares
and Warrant Shares
Subject
to the PFIC rules discussed above, a US Holder that receives a distribution,
including a constructive distribution, with respect to a Unit Share or warrant
share will be required to include the amount of such distribution in gross
income as a dividend (without reduction for any Canadian income tax withheld
from such distribution) to the extent of our current or accumulated “earnings
and profits”, as computed for US federal income tax purposes. To the
extent that a distribution exceeds our current and accumulated “earnings and
profits”, such distribution will be treated first as a tax-free return of
capital to the extent of a US Holder’s tax basis in the Unit Shares or warrant
shares and thereafter as gain from the sale or exchange of such Unit Shares or
warrant shares. (See “ Sale or Other Taxable Disposition of Unit
Shares and/or Warrant Shares” below). However, we do not intend to
maintain the calculations of earnings and profits in accordance with US federal
income tax principles, and each US Holder should therefore assume that any
distribution by us with respect to the Unit Shares or warrant share will
constitute ordinary dividend income. Dividends received on Unit Shares or
warrant shares generally will not be eligible for the “dividends received
deduction”.
In
addition, dividends received on unit shares or warrant shares generally are
expected not to be considered “qualified dividend income”, and thus will not be
eligible for the preferential tax rates applicable to long-term capital
gains.
Sale or Other Taxable
Disposition of Unit Shares and/or Warrant Shares
Subject
to the PFIC rules discussed above, upon the sale or other taxable disposition of
Unit Shares or warrant shares, a US Holder generally will recognize capital gain
or loss in an amount equal to the difference between (i) the amount of cash plus
the fair market value of any property received and (ii) such US Holder’s tax
basis in such Unit Shares or warrant shares sold or otherwise disposed of. While
gain or loss recognized on such sale or other disposition generally would be
long-term capital gain or loss if, at the time of the sale or other disposition,
the Unit Shares or warrant shares have been held for more than one year, the
PFIC rules discussed above may render such gain ordinary income.
Gain or
loss recognized by a US Holder on the sale or other taxable disposition of Unit
Shares or warrant shares generally will be treated as “US source” for purposes
of applying the US foreign tax credit rules unless the gain is subject to tax in
Canada and is resourced as “foreign source” under the Canada-US Tax Convention
and such US Holder elects to treat such gain or loss as “foreign
source.” (See more detailed discussion at “Foreign Tax Credit”
below).
-20-
Preferential
tax rates apply to long-term capital gain of a US Holder that is an individual,
estate, or trust. There are currently no preferential tax rates for
long-term capital gain of a US Holder that is a
corporation. Deductions for capital losses are subject to significant
limitations under the Code.
Proceeds
paid to a US Holder in foreign currency generally will be taxable as described
below under “Receipt of Foreign Currency”.
Foreign Tax
Credit
A US
Holder who pays (whether directly or through withholding) Canadian income tax
with respect to dividends paid on the unit shares and warrant shares generally
will be entitled, at the election of such US Holder, to receive either a
deduction or a credit for such Canadian income tax paid. This
election is made on a year-by-year basis and applies to all foreign taxes paid
(whether directly or through withholding) by a US Holder during a
year.
Complex
limitations apply to the foreign tax credit, including the general limitation
that the credit cannot exceed the proportionate share of a US Holder’s US
federal income tax liability that such US Holder’s “foreign source” taxable
income bears to such US Holder’s worldwide taxable income. In
applying this limitation, a US Holder’s various items of income and deduction
must be classified, under complex rules, as either “foreign source” or “US
source.” In addition, this limitation is calculated separately with
respect to specific categories of income. Dividends paid by us
generally will constitute “foreign source” income and generally will be
categorized as “passive category income.” The foreign tax credit
rules are complex, and each US Holder should consult its own tax adviser
regarding the foreign tax credit rules.
Subject
to certain specific rules, foreign taxes paid with respect to any distribution
in respect of stock in a PFIC are generally eligible for the foreign tax
credit. The rules relating to distributions by a PFIC and their
eligibility for the foreign tax credit are complicated, and a US Holder should
consult with their own tax adviser regarding the availability of the foreign tax
credit with respect to distributions by a PFIC.
Receipt of Foreign
Currency
The
amount of any distribution paid in foreign currency to a US Holder in connection
with the ownership of unit shares or warrant shares, or on the sale, exchange or
other taxable disposition of our unit shares, warrants or warrant shares
generally will be equal to the US dollar value of such foreign currency based on
the exchange rate applicable on the date of actual or constructive receipt
(regardless of whether such foreign currency is converted into US dollars at
that time). If the foreign currency received is not converted into US
dollars on the date of receipt, a US Holder will have a basis in the foreign
currency equal to its US dollar value on the date of receipt. A US
Holder that receives foreign currency and converts such foreign currency into US
dollars at a conversion rate other than the rate in effect on the date of
receipt may have a foreign currency exchange gain or loss, which generally would
be treated as US source ordinary income or loss for foreign tax credit
purposes. Each US Holder should consult its own US tax adviser
regarding the US federal income tax consequences of receiving, owning, and
disposing of foreign currency.
Information Reporting;
Backup Withholding Tax
Under US
federal income tax law and Treasury regulations, certain categories of United
States Persons must file information returns with respect to their investment
in, or involvement in, a foreign corporation. Penalties for failure to file
certain of these information returns are substantial. US Persons who
acquire units through the Offering and hold unit shares, warrants and warrant
shares should consult with their own tax advisers regarding the requirements of
filing information returns, and if applicable, any Xxxx-to-Market election or
QEF election.
-21-
Payments
made within the US, or by a US payor or US middleman, of dividends on, and
proceeds arising from certain sales or other taxable dispositions of the unit
shares and warrant shares may be subject to information reporting and backup
withholding tax, at the rate of 28%, if a US Holder (a) fails to furnish such US
Holder’s correct US social security or other taxpayer identification number
(generally on Form W-9), (b) furnishes an incorrect US taxpayer identification
number, (c) is notified by the IRS that such US Holder has previously failed to
properly report items subject to backup withholding tax, or (d) fails under
certain circumstances to certify, under penalty of perjury, that such US Holder
has furnished its correct US taxpayer identification number and that the IRS has
not notified such US Holder that it is subject to backup withholding
tax. However, US Holders that are corporations generally are excluded
from these information reporting and backup withholding tax
rules. Any amounts withheld under the US backup withholding tax rules
will be allowed as a credit against a US Holder’s US federal income tax
liability, if any, or will be refunded, if such US Holder furnishes required
information to the IRS. Each US Holder should consult its own tax
adviser regarding the information reporting and backup withholding tax
rules.
CERTAIN
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the
opinion of Xxxxxx Blaikie LLP, Canadian counsel to us and Blake, Xxxxxxx &
Xxxxxxx LLP, Canadian counsel to the placement agents, (collectively, “Counsel”)
the following, as of the date hereof, is a summary of the principal Canadian
federal income tax considerations generally applicable to the acquisition,
holding and disposition of unit shares and warrants by a holder who acquires
units pursuant to the Offering and who, for purposes of the Income Tax Act (Canada) (the
“Tax Act”) and at all relevant times deals at arm’s length and is not affiliated
with YM or the placement agents and holds common shares
of YM (“Common Shares”) and warrants as capital property. The Common Shares or
warrants, as the case may be, will generally constitute capital property to a
holder thereof unless the holder holds the Common Shares or warrants, as the
case may be, in the course of carrying on a business or acquires the Common
Shares or warrants in a transaction or transactions considered to be an
adventure in the nature of trade. Certain holders resident in Canada
for purposes of the Tax Act who might not otherwise be considered to hold their
Common Shares as capital property may, in certain circumstances, be entitled to
make an irrevocable election under subsection 39(4) of the Tax Act to have such
Common Shares and every other “Canadian security” (as defined in the Tax Act)
owned by such holder in the taxation year of the election and in all subsequent
taxation years deemed to be capital property. The election under
subsection 39(4) of the Tax Act does not apply to deem the warrants to be
capital property. Holders contemplating such election should consult their own
tax advisers for advice as to whether an election under subsection 39(4) is
available and/or advisable in their particular circumstances.
This
summary is not applicable to a holder: (i) that is a “financial institution” (as
defined in the Tax Act for purposes of the xxxx-to-market rules); (ii) that is a
“specified financial institution” (as defined in the Tax Act); (iii) an interest
in which would be a “tax shelter investment” (as defined in the Tax Act); (iv)
that reports its Canadian tax results in a currency other than Canadian
currency; or (v) who holds or subsequently acquires Common Shares acquired on
the exercise of a stock option or other agreement to issue or sell Common Shares
to an employee of YM or of a corporation or mutual fund trust (as defined in the
Tax Act) that does not deal with YM at arm’s length.
This
summary is based upon the facts set out in the Base Prospectus and this Term
Sheet, the current provisions of the Tax Act and the regulations thereunder (the
“Regulations”), all specific proposals to amend the Tax Act and the Regulations
publicly announced by or on behalf of the Minister of Finance (Canada) prior to
the date hereof (the “Proposed Amendments”) and Counsel’s understanding of the
current administrative policies and assessing practices of the Canada Revenue
Agency (the “CRA”) which have been made publicly available prior to the date
hereof. Except for the Proposed Amendments, this summary does not take into
account or anticipate any changes in law or administrative practice, nor does it
take into account provincial or territorial tax laws of Canada or the tax laws
of any foreign jurisdiction. No assurance can be given that the Proposed
Amendments will be enacted as proposed (or at all) or that legislative, judicial
or administrative changes will not alter the statements made
herein.
-22-
This
summary is of a general nature only and is not intended to be, nor should it be
construed to be, legal or tax advice to any particular holder. This summary is
not exhaustive of all possible Canadian federal income tax considerations
applicable to an investment in the Common Shares and warrants comprising the
units. The income and other tax consequences of acquiring, holding and disposing
of Common Shares and warrants will vary according to the status of the holder,
the jurisdiction in which the holder resides or carries on business and,
generally, the holder’s own particular circumstances. Accordingly, each
prospective holder of units should obtain independent advice regarding the
income tax consequences of investing in the Common Shares and warrants with
reference to the holder’s own particular circumstances.
Currency
For the
purposes of the Tax Act, each amount relating to the acquisition, holding or
disposition of Common Shares and warrants (including dividends received or
deemed to have been received, adjusted cost base and proceeds of disposition)
must generally be converted into Canadian dollars using the relevant exchange
rate quoted by the Bank of Canada for noon on the day such amount arose or
another rate of exchange that is acceptable to the Minister of National Revenue
(Canada).
Allocation of Purchase
Price
In
acquiring units, holders will be acquiring ownership of the unit shares and
warrants represented by such units. The unit shares and warrants
represented by units are separate properties and accordingly, holders will be
required to allocate the purchase price paid for each unit between the unit
share and the one half of one warrant comprising each unit on a reasonable basis
in order to determine their respective costs for purposes of the Tax Act. For
our purposes, we intend to allocate US$1.102 of the purchase price of each unit
as consideration for the issue of each unit share and US$0.098 of the purchase
price of each unit as consideration for the issue of one half of one warrant
collectively comprising each unit. While we consider this allocation
to be reasonable, it is not binding on the CRA or the holder and Counsel express
no opinion as to such allocation.
For
purposes of determining the adjusted cost base to a holder of unit shares or
warrants acquired
at a particular time, the cost of the newly acquired unit shares or warrants, as
the case may be, will be averaged with the adjusted cost base of all Common
Shares or warrants, as the case may be, owned by the holder as capital property
immediately before that time.
Holders Resident in
Canada
The
following part of this summary is applicable to a holder who, at all relevant
times, is or is deemed to be resident in Canada for purposes of the Tax Act (a
“Canadian Holder”).
Exercise of
warrants
The
exercise of a warrant to acquire a warrant share will not constitute a
disposition of property for purposes of the Tax Act and, consequently, no gain
or loss will be realized by a Canadian Holder upon such an exercise. A Canadian
Holder’s cost of a warrant share acquired on the exercise of a warrant will be
the aggregate of the adjusted cost base to the Canadian Holder of such warrant
and the exercise price paid for such warrant share. The cost of any
warrant share so acquired will be averaged with the adjusted cost base to the
holder of all Common Shares held by the Canadian Holder as capital property
immediately prior to such acquisition.
Disposition and expiry of
warrants
A
Canadian Holder who disposes of or is deemed to dispose of a warrant (not
including an exercise of a warrant into a warrant share, as discussed above)
will realize a capital gain (or capital loss) equal to the amount by which the
proceeds of disposition, net of any reasonable costs of disposition, exceed (or
are less than) the Canadian Holder’s adjusted cost base of the
warrant. In the event of the expiry of an unexercised warrant, the
Canadian Holder will realize a capital loss equal to the adjusted cost base to
the Canadian Holder of such warrant. The tax treatment of capital
gains and losses is discussed in greater detail below under “Taxation of Capital
Gains and Capital Losses”.
-23-
Taxation of Dividends on
Common Shares
Dividends
(including deemed dividends) received on the Common Shares by a Canadian Holder
who is an individual will be included in the individual’s income and will
generally be subject to the gross-up and the dividend tax credit rules normally
applicable to taxable dividends received from taxable Canadian
corporations. To the extent we designate the dividends as “eligible
dividends” in the prescribed manner, the Canadian Holder will be subject to the
enhanced gross-up and dividend tax credit rules.
Dividends
(including deemed dividends) received on the Common Shares by a Canadian Holder
that is a corporation will be included in computing the corporation’s income and
will generally be deductible in computing the corporation’s taxable
income.
A
Canadian Holder that is a “private corporation”, as defined in the Tax Act, or
any other corporation controlled by or for the benefit of an individual (other
than a trust) or a related group of individuals (other than trusts), will
generally be liable to pay a 33⅓ % refundable tax under Part IV of the Tax Act
on dividends received (or deemed to be received) on the Common Shares to the
extent such dividends are deductible in computing its taxable
income.
Disposition of Common
Shares
A
disposition or deemed disposition of a Common Share (other than a disposition on
a purchase for cancellation by YM) will generally result in the Canadian Holder
thereof realizing a capital gain (or a capital loss) to the extent that the
proceeds of disposition, net of any reasonable costs of disposition, exceed (or
are less than) the Canadian Holder’s adjusted cost base of such share
immediately before the disposition. If the Canadian Holder is a
corporation, any capital loss arising on a disposition of a share may in certain
circumstances be reduced by the amount of any dividends, including deemed
dividends, which have been received on the share. Analogous rules may apply to a
partnership or trust of which a corporation, partnership or trust is a member or
beneficiary.
Taxation of Capital Gains
and Capital Losses
One half
of any capital gain (a “taxable capital gain”) realized by a Canadian Holder
must be included in computing the income of the Canadian Holder in the year of
disposition. One half of any capital loss (an “allowable capital
loss”) realized generally must be applied to reduce taxable capital gains
realized by the Canadian Holder in the year of disposition. Allowable capital
losses in excess of taxable capital gains for the year of disposition generally
may be applied by the Canadian Holder to reduce net taxable capital gains
realized in any of the three preceding taxation years or in any subsequent
taxation year to the extent and in the circumstances prescribed in the Tax
Act.
A
Canadian Holder that is a “Canadian-controlled private corporation” (as defined
in the Tax Act) will be subject to an additional 6⅔% refundable tax on its
“aggregate investment income” for the year, which is defined to include an
amount in respect of taxable capital gains.
Alternative Minimum
Tax
Individuals
(other than certain trusts) realizing net capital gains or receiving dividends
may be subject to an alternative minimum tax under the Tax Act. Canadian Holders
should consult their own advisers with respect to alternative minimum
tax.
-24-
Holders Not Resident in
Canada
The
following part of this summary is generally applicable to a holder who, at all
relevant times, is neither resident nor deemed to be resident in Canada for
purposes of the Tax Act and any applicable income tax treaty or convention, and
who does not use or hold, and is not deemed to use or hold, the Common Shares or
warrants, comprising the units, in connection with carrying on a business in
Canada (a “Non-Resident Holder”). Special rules not discussed in this
summary may apply to a non-resident insurer carrying on an insurance business in
Canada and elsewhere; such insurers should consult their own tax
advisers.
Taxation of Dividends on
Common Shares
Amounts
paid or credited or deemed to be paid or credited to a Non-Resident Holder as,
on account or in lieu of, or in satisfaction of a dividend on the Common Shares
will be subject to a Canadian withholding tax under Part XIII of the Tax Act at
a rate of 25%, subject to reduction under the provisions of any applicable
income tax treaty or convention. For example, under the Canada-United States Tax Convention
(1980) (the “Canada-US Treaty”), the withholding tax rate in respect of a
dividend paid to a person who is the beneficial owner of the dividend and is
resident in the United States for purposes of, and entitled to full benefits
under, the Canada-US Treaty, is generally reduced to 15% (unless the beneficial
owner is a company that owns at least 10% of our voting stock, in which case the
rate is generally reduced to 5%).
Disposition of Common Shares
or warrants
A
Non-Resident Holder of Common Shares or warrants will not generally be subject
to income tax under the Tax Act in respect of the disposition or deemed
disposition of such shares or warrants, provided that the Common Shares or
warrants, as the case may be, are not, and are not deemed to be, “taxable
Canadian property” (as defined in the Tax Act) to the Non-Resident Holder at the
time of disposition.
Generally,
Common Shares or warrants, as the case may be, will not be taxable Canadian
property to a Non-Resident Holder at a particular time provided that: (i) the
Common Shares are listed on a designated stock exchange (which currently
includes the TSX and NYSE Amex) at that time; (ii) at no time during the sixty
(60) month period immediately preceding the disposition of such shares or
warrants did the Non-Resident Holder, either alone or together with one or more
persons with whom the holder does not deal at arm’s length, own or have an
interest in or an option in respect of, 25% or more of the issued shares of any
class or series of YM’s capital stock; and (iii) the Common Shares or warrants,
as the case may be, were not deemed under the Tax Act to be taxable Canadian
property to the Non-Resident Holder.
In the
event that the Common Shares or warrants constitute or are deemed to constitute
taxable Canadian property to any Non-Resident Holder, the tax consequences of
realizing a capital gain on the disposition of such shares or warrants as
described above under the heading “Holders Resident in Canada – Taxation of
Capital Gains and Capital Losses” generally will apply, subject to the
Non-Resident Holder being entitled to relief under the provisions of an
applicable income tax treaty or convention, and the notification and purchaser
withholding requirements under section 116 of the Tax Act may also apply in
respect of the disposition. Non-Resident Holders whose Common Shares
or warrants may be taxable Canadian property should consult with their own tax
advisers for advice having regard to their particular
circumstances.
-25-
SCHEDULE B
List of
directors subject to Section
5(I)(j)
Directors
Xxxxx
G.P. Xxxxx
Xxxxxx
I.A. Xxxxx, Q.C.
Xxxx
Xxxxxxxxx
Xxxxx
Xxxxxxx, O.C., M.D., F.R.S.C.
Xxxxxx
Xxxxx, M.D., Ph.D.
Xxxxxxxx
Xxxxxx, M.D.
Xxxxxx
Xxxxxx
Xxxxxxx
Xxxxxx, PhD
Xxxxx X.
Xxxxxxxx, BSc
Exhibit
A
Form of
Subscription Agreement
Form
of Subscription Agreement
0000
Xxxxxxx Xxxxx
Xxxxxxxx
00, Xxxxx 000
Xxxxxxxxxxx,
Xxxxxxx Xxxxxx X0X0X0
Gentlemen:
The
undersigned (the “‘Investor”) hereby confirms its
agreement with YM BioSciences Inc., a corporation continued under the
Companies Act (Nova Scotia) (the “Company”), as
follows:
1. This
Subscription Agreement, including the Terms and Conditions For Purchase of Units
attached hereto as Annex I
(collectively, (this “Agreement”) is made as of the
date set forth below between the Company and the Investor.
2. The
Company has authorized the sale and issuance to certain investors of up to an
aggregate of 14,583,000 units (the “Units”), subject to adjustment
by the Company’s Board of Directors, or a committee thereof, with each Unit
consisting of (i) one common share, without nominal or par value (“Common Shares”), of the
Company and (ii) one-half of one common share purchase warrant (a “Warrant” and, collectively,
the “Warrants”). Each
whole Warrant will entitle the holder to purchase one (1) Common Share at an
exercise price of US$1.60 per Common Share (subject to adjustment) and is
exercisable commencing six months after the Closing Date (as defined below) for
a period of five (5) years from the Closing Date. The certificate
representing the Warrants shall be in substantially the form of Exhibit B attached
hereto (the “Warrant
Certificate”). The aggregate of up to 14,583,000 Common Shares
so proposed to be sold is hereinafter referred to as the “Shares.” The Units
will not be issued or certificated. The Shares and the Warrants are
immediately separable and will be issued separately. The Common
Shares issuable upon exercise of the Warrants are referred to herein as the
“Warrant Shares” and,
together with the Units, the Shares and the Warrants, are referred to herein as
the “Securities”).
3. The
offering and sale of the Units (the “Offering”) are being made pursuant
to (1) the Company’s effective Registration Statement including a base
prospectus (the “Base
Prospectus”) on Form F-10 (File No.
333-161786) pursuant to the Canada/U.S. Multi-Jurisdictional Disclosure System
adopted by the Canadian Securities Administrators and the U.S. Securities and
Exchange Commission (the “Commission”) (which, together
with all amendments or supplements thereto is referred to herein as the “Registration Statement”) filed by the Company
with the Commission, (2) if applicable, certain “free writing prospectuses” (as
that term is defined in Rule 405 under the U.S. Securities Act of 1933, as
amended (the “Securities
Act”)), that have or will be filed with the Commission and delivered to
the Investor on or prior to the date hereof (each, an “Issuer Free Writing
Prospectus”), and (3) a Prospectus Supplement (the “Prospectus Supplement” and
together with the Base Prospectus, the “Prospectus”) containing
certain supplemental information regarding the Units and terms of the Offering
that has been or will be filed with the Commission and delivered to the Investor
(or made available to the Investor by the filing by the Company of an electronic
version thereof with the Commission).
4. The
Company and the Investor agree that the Investor will purchase from the Company
and the Company will issue and sell to the Investor the Units set forth below
for the aggregate purchase price set forth below. The Units shall be
purchased pursuant to the Terms and Conditions for Purchase of Units attached
hereto as Annex
I and incorporated herein by this reference as if fully set forth
herein. The Investor acknowledges that the Offering is not being
underwritten by the placement agents (the “Placement Agents”) named in
the Prospectus Supplement and that there is no minimum offering
amount.
5. The
manner of settlement of the Shares included in the Units purchased by the
Investor shall be as follows:
A. Delivery
by crediting the account of the Investor’s prime broker (as specified by such
Investor on Exhibit A annexed hereto) with the Depository Trust Company (“DTC”) through its
Deposit/Withdrawal At Custodian (“DWAC”) system, whereby
Investor’s prime broker shall initiate a DWAC transaction on the Closing Date
using its DTC participant identification number, and released by Mellon Investor
Services LLC, the Company’s United States co-transfer agent (the “Transfer Agent”), to the Investor at the
Company’s direction. NO LATER
THAN ONE (1) BUSINESS DAY AFTER THE EXECUTION OF THIS AGREEMENT BY THE INVESTOR
AND THE COMPANY, THE INVESTOR SHALL:
|
|
(I)
|
DIRECT THE BROKER-DEALER AT
WHICH THE ACCOUNT OR ACCOUNTS TO BE CREDITED WITH THE SHARES ARE
MAINTAINED TO SET UP A DWAC INSTRUCTING THE TRANSFER AGENT TO CREDIT SUCH
ACCOUNT OR ACCOUNTS WITH THE SHARES,
AND
|
|
|
(II)
|
REMIT BY WIRE TRANSFER THE
AMOUNT OF FUNDS EQUAL TO THE AGGREGATE PURCHASE PRICE FOR THE UNITS BEING
PURCHASED BY THE INVESTOR TO THE FOLLOWING
ACCOUNT:
|
|
|
N.B.
The Company’s wire instructions will be provided
separately.
|
IT IS THE INVESTOR’S
RESPONSIBILITY TO (A) MAKE THE NECESSARY WIRE TRANSFER OR CONFIRM THE PROPER
ACCOUNT BALANCE IN A TIMELY MANNER AND (B) ARRANGE FOR SETTLEMENT BY WAY OF DWAC
IN A TIMELY MANNER. IF THE INVESTOR DOES NOT DELIVER THE AGGREGATE
PURCHASE PRICE FOR THE UNITS OR DOES NOT MAKE PROPER ARRANGEMENTS FOR SETTLEMENT
IN A TIMELY MANNER, THE SHARES AND WARRANTS MAY NOT BE DELIVERED AT CLOSING
TO THE INVESTOR OR THE INVESTOR MAY BE EXCLUDED FROM THE CLOSING
ALTOGETHER.
-2-
6. The
executed Warrants shall be delivered in accordance with the terms
thereof.
7. The
Investor represents that, except as set forth below, (a) it has had no position,
office or other material relationship within the past three years with the
Company or persons known to it to be affiliates of the Company, (b) it is
not a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) or an Associated
Person (as such term is defined under the FINRA’s NASD Membership and
Registration Rules Section 1011) as of the Closing, and (c) neither the
Investor nor any group of Investors (as identified in a public filing made with
the Commission) of which the Investor is a part in connection with the Offering,
acquired, or obtained the right to acquire, twenty percent (20%) or more of the
Common Shares (or securities convertible into or exercisable for Common Shares)
or the voting power of the Company on a post-transaction basis.
Exceptions:
(If no
exceptions, write “none.” If left blank, response will be deemed to be
“none.”)
8. The
Investor represents that it has received (or otherwise had made available to it
by the filing by the Company of an electronic version thereof with the
Commission) the final Base Prospectus, dated September 16, 2009, which is a
part of the Company’s Registration Statement, the documents incorporated by
reference therein and any Issuer Free Writing Prospectus (collectively, the
“Disclosure Package”),
prior to or in connection with the receipt of this Agreement.
9. No
offer by the Investor to buy Units will be accepted and no part of the Purchase
Price will be delivered to the Company until the Investor has received the
Disclosure Package and the Company has accepted such offer by countersigning a
copy of this Agreement, and any such offer may be withdrawn or revoked, without
obligation or commitment of any kind, at any time prior to the Company (or Xxxx
on behalf of the Company) sending (orally, in writing or by electronic mail)
notice of its acceptance of such offer. An indication of interest
will involve no obligation or commitment of any kind until the Investor has been
delivered the Disclosure Package and this Agreement is accepted and
countersigned by or on behalf of the Company.
[Remainder of Page Intentionally Left
Blank; Signature Page Follows]
-3-
Number of
Units: _________________________
Purchase
Price Per Unit: ______________________
Aggregate
Purchase Price: US$__________________________
Number of
Warrant Shares (Equal to Number of Units multiplied by 0.5 and rounded down to
the nearest whole
number): _______________________________________
Please
confirm that the foregoing correctly sets forth the agreement between us by
signing in the space provided below for that purpose.
|
Dated
as of: March 4, 2010
|
| __________________________________ |
|
INVESTOR
|
|
By:_______________________________
|
|
Print
Name:_________________________
|
|
Title:______________________________
|
|
Address:___________________________
|
| __________________________________ |
| __________________________________ |
Agreed
and Accepted
this
4th day
of March, 2010:
YM
BIOSCIENCES INC.
By:
Title:
[Signature
Page to Subscription Agreement]
ANNEX
1
TERMS
AND CONDITIONS FOR PURCHASE OF UNITS
1. Authorization and Sale of the Units.
Subject to the terms and conditions of this Agreement, the Company has
authorized the sale of the Units.
2. Agreement
to Sell and Purchase the Units; Placement Agents.
2.1 At
the Closing (as defined in Section 3.1). the
Company will sell to the Investor, and the Investor will purchase from the
Company, upon the terms and conditions set forth herein, the number of Units set
forth on the last page of the Agreement to which these Terms and Conditions for
Purchase of Units are attached as Annex I (the “Signature Page”) for the aggregate
purchase price therefor set forth on the Signature Page.
2.2 The
Company proposes to enter into substantially this same form of Subscription
Agreement with each investor that was solicited outside of Canada (collectively,
the “Other
Investors”) and expects to complete
sales of Units to them. The Investor and the Other Investors are
hereinafter sometimes collectively
referred to as the “Investors,” and this Agreement and
the Subscription Agreements executed by the Other Investors are hereinafter
sometimes collectively referred to as the “Agreements.”
2.3 Investor
acknowledges that the Company intends to pay Xxxx Capital Partners, LLC, Xxxxxxx
Securities, Inc., Xxxxx Xxxxxx & Co. and Xxxxxxx Securities Inc.
(collectively, the “Placement
Agents”) a fee (the “Placement Fee”) and certain
expenses in
respect of the sale of the Units, as further described in the Disclosure
Package.
2.4 The
Company has entered into a Placement Agent Agreement, dated the date hereof (the
“Placement Agreement”),
with the Placement Agents that contains certain representations, warranties,
covenants and agreements of the Company that may be relied upon by the Investor,
which shall be a third party beneficiary thereof. The Company
confirms that neither it nor any other Person acting on its behalf has provided
the Investor or their agents or counsel with any information that constitutes or
could reasonably be expected to constitute material, nonpublic information,
except as will be disclosed in the Prospectus and/or in any Report of Foreign
Private Issuer on Form 6-K furnished or to be furnished by the Company to the
Commission. The Company understands and confirms that the Investor
will rely on the foregoing representations in effecting transactions in
securities of the Company.
3. Closings
and Delivery of the Units and Funds.
3.1 Closing. The
completion of the purchase and sale of the Units (the “Closing”) will occur at a place
and time (the “Closing
Date”) to
be specified by the Company and the Placement Agents, and of which the Investors
will be notified in advance by the Placement Agents in accordance with Rule
15c6-l promulgated under the U.S. Securities Exchange Act of 1934, as amended
(the “Exchange
Act”). At the Closing,
(a) the Company shall cause Mellon Investor Services LLC, the Company’s United
States co-transfer agent (the “Transfer Agent”), to deliver
to the Investor the number of Shares set forth on the Signature Page registered
in the name of the Investor or, if so indicated on the Investor Questionnaire
attached hereto as Exhibit A, in
the name of a nominee designated by the Investor, (b) the Company shall cause to
be delivered to the Investor one Warrant Certificate representing the right to
purchase the number of Warrant Shares set forth on the Signature Page, and (c)
the aggregate purchase price for the Units being purchased by the Investor will
be delivered by or on behalf of the Investor to the Company.
A1-1
3.2 Conditions to the
Obligations of the Parties.
(a) Conditions to the Company’s
Obligations. The Company’s obligation
to issue and sell the Units to the Investor shall be subject to: (i) the receipt
by the Company of the purchase price for the Units being purchased hereunder as
set forth on the Signature Page and (ii) the accuracy of the representations and
warranties made by the Investor and the fulfillment of those undertakings of the
Investor to be fulfilled prior to the Closing Date.
(b) Conditions to the Investor’s
Obligations. The Investor’s obligation to purchase the Units will be
subject to the accuracy of the representations and warranties made by the
Company and the fulfillment of those undertakings of the Company to be fulfilled
prior to the Closing Date, including, without limitation, those contained in the
Placement Agreement, and to the condition that the Placement Agents shall
not have: (a) terminated the Placement Agreement pursuant to the
terms thereof or (b) determined that the conditions to the closing in the
Placement Agreement have not been satisfied. The Investor’s
obligations are expressly not conditioned on the purchase by any or all of the
Other Investors of the Units that they have agreed to purchase from the
Company. The Investor understands and agrees that, in the event that
Xxxx, as representative of the Placement Agents, in its sole discretion
determines that the conditions to closing of the Offering set forth in the
Placement Agreement have not been satisfied or if the Placement Agreement may be
terminated for any other reason permitted by such Placement Agreement, then Xxxx
may, but shall not be obligated to, terminate such Agreement, which shall have
the effect of terminating this Subscription Agreement pursuant to Section 14
below.
3.3 Delivery of
Funds. Delivery by Electronic Book-Entry at
The Depository Trust Company. No later
than one (1) business day after the execution of this Agreement by the Investor
and the Company,
the Investor shall remit by wire transfer the amount of funds equal to
the aggregate purchase price for the Units being purchased by the Investor to
the following account designated by the Company:
N.B. The
Company’s wire instructions will be provided separately.
3.4 Delivery of
Shares. Delivery by Electronic Book-Entry at
The Depository Trust Company. No later
than one (1) business day after the execution of this Agreement by the Investor
and the Company,
the Investor shall direct the broker-dealer at which the account or
accounts to be credited with the Shares being purchased by such Investor are
maintained, which broker/dealer shall be a DTC participant, to set up a DWAC
instructing the Transfer Agent to credit such account or accounts with the
Shares. Such DWAC instruction shall indicate the settlement date
for the deposit of the Shares, which date shall be provided to the Investor by
Xxxx. Upon the closing of the Offering, the Company shall direct the
Transfer Agent to credit the Investor’s account or accounts with the Shares
pursuant to the information contained in the DWAC.
A1-2
4. Representations,
Warranties and Covenants of the Investor.
The
Investor acknowledges, represents and warrants to, and agrees with, the Company
and the Placement Agents that:
4.1 The
Investor (a) is knowledgeable, sophisticated and experienced in making, and is
qualified to make decisions with respect to, investments in securities
presenting an investment decision like that involved in the purchase of the
Units, including investments in securities issued by the Company and investments
in comparable companies, and has requested, received, reviewed and considered
all information it deemed relevant in making an informed decision to purchase
the Units, (b) the Investor has answered all questions on the Investor
Questionnaire for use in preparation of the Prospectus Supplement and the
answers thereto are true and correct as of the date hereof and will be true and
correct as of the Closing Date and (c) the Investor, in connection with its
decision to purchase the number of Shares set forth on the Signature Page, is
relying only upon the Disclosure Package and the documents incorporated by
reference therein.
4.2 (a)
No action has been or will be taken in any jurisdiction outside the United
States and the Province of Ontario by the Company or any Placement Agent that
would permit an offering of the Shares, or possession or distribution of
offering materials in connection with the issue of the Shares in any
jurisdiction outside the United States and the Province of Ontario where action
for that purpose is required, (b) if the Investor is outside the United States
and the Province of Ontario, it will comply with all applicable laws and
regulations in each foreign jurisdiction in which it purchases, offers, sells or
delivers Shares or has in its possession or distributes any offering material,
in all cases at its own expense, (c) the Placement Agents are not authorized to
make and have not made any representation, disclosure or use of any information
in connection with the issue, placement, purchase and sale of the Shares, except
as set forth or incorporated by reference in the Prospectus or the Prospectus
Supplement.
4.3 (a)
The Investor has full right, power, authority and capacity to enter into this
Agreement and to consummate the transactions contemplated hereby and has taken
all necessary action to authorize the execution, delivery and performance
of this Agreement, and (b) this Agreement constitutes a valid and
binding obligation of the Investor enforceable against the Investor in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ and contracting parties’ rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as to the enforceability of any rights to
indemnification or contribution that may be violative of the public policy
underlying any law, rule or regulation (including any federal or state
securities law, rule or regulation).
4.4 The
Investor understands that nothing in this Agreement, the Prospectus, the
Disclosure Package or any other materials presented to the Investor in
connection with the purchase and sale of the Units constitutes legal, tax or
investment advice. The Investor has consulted such legal, tax and
investment advisors and made such investigation as it, in its sole discretion,
has deemed necessary or appropriate in connection with its purchase of Units.
The Investor also understands that there is no established public trading market
for the Warrants being offered in the Offering, and that the Company does not
expect such a market to develop. In addition, the Company does not intend to
apply for listing of the Warrants on any securities exchange. The Investor
understands that without an active market, the liquidity of the Warrants will be
limited.
A1-3
4.5 The
Investor will maintain the confidentiality of all information acquired as a
result of the transactions contemplated hereby prior to the public disclosure of
that information by the Company in accordance with Section 13 of this
Annex.
4.6 Since
the time at which any Placement Agent first contacted such Investor about the
Offering, the Investor has not disclosed any information regarding the Offering
to any third parties (other than its legal, accounting and other advisors in
connection with the Offering) and has not engaged in any purchases or sales of
the securities of the Company (including, without limitation, any Short Sales
(as defined herein) involving the Company’s securities). The Investor
covenants that it will not engage in any purchases or sales of the securities of
the Company (including Short Sales) prior to the time that the transactions
contemplated by this Agreement are publicly disclosed. The Investor
agrees that it will not use any of the Securities acquired pursuant to this
Agreement to cover any short position in the Common Shares if doing so would be
in violation of applicable securities laws. For purposes hereof,
“Short Sales” include, without limitation, all “short sales” as defined in Rule
200 promulgated under Regulation SHO under the Exchange Act, whether or not
against the box, and all types of direct and indirect share pledges, forward
sales contracts, options, puts, calls, short sales, swaps, “put equivalent
positions” (as defined in Rule 16a-1(h) under the Exchange Act) and similar
arrangements (including on a total return basis), and sales and other
transactions through non-U.S. broker dealers or foreign regulated
brokers.
5. Survival of Representations,
Warranties and Agreements. Notwithstanding any investigation
made by any party to this Agreement or by the Placement Agents, all covenants,
agreements, representations and warranties made by the Company and the Investor
herein will survive the execution of this Agreement, the delivery to the
Investor of the Shares and Warrants being purchased and the payment
therefor. Each of the Placement Agents shall be a third party
beneficiary with respect to the representations, warranties and agreements of
the Investor in Section 4
hereof.
6. Notices. All
notices, requests, consents and other communications hereunder will be in
writing, will be mailed (a) if within the domestic United States by
first-class registered or certified airmail, or nationally recognized overnight
express courier, postage prepaid, or by facsimile or (b) if delivered from
outside the United States, by International Federal Express or facsimile, and
will be deemed given (i) if delivered by first-class registered or certified
mail domestic, three business days after so mailed, (ii) if delivered by
nationally recognized overnight carrier, one business day after so mailed, (iii)
if delivered by International Federal Express, two business days after so
mailed and (iv) if delivered by facsimile, upon electronic confirmation of
receipt and will be delivered and addressed as follows:
A1-4
if to the
Company, to:
YM
BioSciences Inc.
Xxxxx
000, Xxxxxxxx 00
0000
Xxxxxxx Xxxxx
Xxxxxxxxxxx,
Xxxxxxx X0X 0X0
Xxxxxx
Attention:
Xxx Xxxxxx, Vice President, Finance and Administration
Facsimile:
(000) 000-0000
with
copies to:
Xxxxxx
Xxxxxxx XXX
Xxx
Xxxxxxxx Xxxxxx
X.X. Xxx
0000
000 Xxx
Xxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxxxx X0X 0X0
Xxxxxx
Attention:
Xxxxx Xxxx
Facsimile:
(000) 000-0000
and
Xxxxxx
& Whitney LLP
000
Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx,
X.X. Xxxxxx X0X 0X0
Attention:
Xxxxxx Xxxxxx
Facsimile:
(000) 000-0000
if to the
Investor, at its address on the Signature Page hereto, or at such other address
or addresses as may have been furnished to the Company in
writing.
7. Changes. This
Agreement may not be modified or amended except pursuant to an instrument in
writing signed by the Company and the Investor.
8. Headings. The
headings of the various sections of this Agreement have been inserted for
convenience of reference only and will not be deemed to be part of this
Agreement.
9. Severability. In
case any provision contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein will not in any way be affected
or impaired thereby.
10. Governing Law. This
Agreement will be governed by, and construed in accordance with, the
internal laws of the State of New York, without giving effect to the
principles of conflicts of law that would require the application of the
laws of any other jurisdiction.
A1-5
11. Counterparts. This
Agreement may be executed in two or more counterparts, each of which will
constitute an original, but all of which, when taken together, will constitute
but one instrument, and will become effective when one or more counterparts have
been signed by each party hereto and delivered to the other
parties. The Company and the Investor acknowledge and agree that the
Company shall deliver its counterpart to the Investor along with the
Prospectus Supplement (or the filing by the Company of an electronic
version thereof with the Commission).
12. Confirmation of
Sale. The Investor acknowledges and agrees that such
Investor’s receipt of the Company’s signed counterpart to this Agreement,
together with the Prospectus Supplement (or the filing by the Company of an
electronic version thereof with the Commission) shall constitute written
confirmation of the Company’s sale of Units to such Investor.
13. Press Release. The
Company and the Investor agree that the Company shall (a) prior to the
opening of the financial markets in New York City on March 5, 2010 issue a press
release announcing the Offering and disclosing all material information
regarding the Offering and (b) as promptly as practicable thereafter, furnish a
Report of Foreign Private Issuer on Form 6-K to the Commission including, but
not limited to, a form of this Agreement and a form of the Warrant
Certificate.
14. Termination. In the
event that the Placement Agreement is terminated by the Placement Agents
pursuant to the terms thereof, this Agreement shall terminate without any
further action on the part of the parties hereto.
A1-6
Exhibit
A
YM
BIOSCIENCES INC.
INVESTOR
QUESTIONNAIRE
Pursuant
to Section 3 of
Annex I to the
Agreement, please provide us with the
following information:
| 1. |
The
exact name that your Shares and Warrants are to be registered in.
You may use a nominee name if appropriate:
|
____________________________________________
|
|
| 2. |
The
relationship between the Investor and the registered holder listed in
response to item 1 above:
|
____________________________________________
|
|
| 3. |
The
mailing address of the registered holder listed in response to item 1
above:
|
____________________________________________
|
|
| 4. |
The
Social Security Number or Tax Identification Number of the registered
holder listed in the response to item 1 above:
|
____________________________________________
|
|
| 5. |
Name
of DTC Participant (broker-dealer at which the account or accounts to be
credited with the Shares are maintained):
|
____________________________________________
|
|
| 6. |
DTC
Participant Number:
|
____________________________________________
|
|
| 7. |
Name
of Account at DTC Participant being credited with the
Shares:
|
____________________________________________
|
|
| 8. |
Account
Number at DTC Participant being credited with the Shares:
|
____________________________________________
|
Exhibit
B
Form of
Warrant
THIS
CERTIFICATE, AND THE COMMON SHARE PURCHASE WARRANTS EVIDENCED HEREBY, WILL BE
VOID AND OF NO VALUE UNLESS EXERCISED ON OR BEFORE 5:00 P.M. (TORONTO TIME) ON
MARCH 10, 2015.
YM
BIOSCIENCES INC.
|
NO.
●
|
●
WARRANTS
|
Date of
Issuance: March 10, 2010 (the “Issuance Date”)
COMMON
SHARE PURCHASE WARRANTS
THIS IS
TO CERTIFY THAT for value received ●, the registered holder hereof or its
permitted assigns (the “Holder”), is entitled, subject
to the terms set forth below, for each whole warrant represented by this
certificate (this “Warrant
Certificate”) to purchase, at any time beginning on the date that is six
months from the Issuance Date up to and including 5:00 p.m. (Toronto time) on
March 10, 2015 (the “Time of
Expiry”), one fully paid and non-assessable common share (“Common Share”) in the capital
of YM BioSciences Inc. (the “Company”) (such common share,
a “Warrant Share” and
collectively, the “Warrant
Shares”) at a price per share of US$1.60 (the “Exercise Price”), subject to
adjustment as hereinafter referred to. The warrants represented by
this Warrant Certificate are the warrants to purchase Common Shares (the “Warrants”) issued pursuant to
(A) in the United States, (i) that certain Subscription Agreement, dated as
of March 4, 2010, by and between the Company and the Holder (the “Subscription Agreement”) and
(ii) the Company’s Registration Statement on Form F-10 (File number 333-161786),
and (B) in Canada, the Company’s final short form base shelf prospectus dated
September 16, 2009 and prospectus supplement filed with the Ontario Securities
Commission.
|
1.
|
Exercise
of Warrants.
|
|
1.1
|
Election to
Purchase.
|
The
rights evidenced by this Warrant Certificate may be exercised by the Holder at
any time beginning on the date that is six months from the Issuance Date up to
and including the Time of Expiry in accordance with the provisions
hereof. The exercise may be effected by providing to the Company at
0000 Xxxxxxx Xxxxx, Xxxxxxxx 00, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxx, X0X 0X0 (or
such other address as may be notified in writing by the Company) (i) this
Warrant Certificate and a duly completed and executed Subscription Form in
substantially the form attached as Exhibit “1” hereto (“Subscription Form”) and (ii)
(A) payment of the Exercise Price by a certified cheque, bank draft or money
order payable at par to the order of the Company, or by wire or electronic funds
transfer to an account designated by the Company, in each case in the amount of
the aggregate Exercise Price for the number of Warrant Shares specified in the
Subscription Form (the “Aggregate Exercise Price”) or
(B) provided the conditions for cashless exercise set forth in Section 1.5 are
satisfied, by notifying the Company that the Warrants are being exercised
pursuant to a Cashless Exercise (as defined in Section 1.5). A duly
completed and executed Subscription Form shall be deemed to be delivered only
upon personal delivery thereof to, or if sent by mail or other means of
transmission upon actual receipt thereof by, the Company. If the
Holder subscribes for a lesser number of Common Shares than may be subscribed
for pursuant to this Warrant Certificate, the Holder shall be entitled to
receive, without charge to the Holder, a new warrant certificate in respect of
the balance of the Warrants referred to in any surrendered warrant certificate
but not exercised pursuant to the Subscription Form. On or before the
first (1st) business day following the date on which the Company has received
each of this Warrant Certificate, the duly executed Subscription Form and the
Aggregate Exercise Price (or notice of a Cashless Exercise) (collectively, the
“Exercise Delivery
Documents”), the Company shall transmit by facsimile or electronic mail
an acknowledgment of confirmation of receipt of the Exercise Delivery Documents
to the Holder and to the Company’s transfer agent (the “Transfer
Agent”). For purposes of this Warrant Certificate, “business day” means any day
which is not Saturday or Sunday or a legal holiday in the City of Xxxxxxx,
Xxxxxxx.
- 2
-
|
1.2
|
Exercise.
|
The
Company shall, as soon as possible following the date of receipt of the Exercise
Delivery Documents (the “Exercise Date”) and in
accordance with Section 1.3, issue as of the Exercise Date that number of
Warrant Shares specified in the Subscription Form as fully paid and
non-assessable common shares in the capital of the Company. The
Company shall pay any and all transfer taxes which may be payable with respect
to the issuance and delivery of Warrant Shares upon exercise of the
Warrants.
|
1.3
|
Share
Delivery.
|
As
promptly as practicable after the Exercise Date and, in any event, within three
(3) business days of the Exercise Date (the “Share Delivery Date”), the
Company shall (A) in the case of a Holder that is a resident of the United
States (i) provided that the Transfer Agent is participating in The Depository
Trust Company (“DTC”)
Fast Automated Securities Transfer Program, upon the request of the Holder,
credit such aggregate number of Warrant Shares to which the Holder is entitled
pursuant to such exercise to the Holder’s or its designee’s balance account with
DTC through its Deposit/Withdrawal At Custodian system or (ii) if the Transfer
Agent is not participating in the DTC Fast Automated Securities Transfer
Program, issue and dispatch by overnight courier to the address as specified in
the Subscription Form, or, if not so specified in the Subscription Form, cause
to be held for collection by the Holder at the address of the Company as set out
in subsection 1.1 (or at such additional place as may be decided by the Company
from time to time and notified to the Holder), certificates, registered in the
Company’s share register in the name of the Holder or its designee, for the
number of Warrant Shares to which the Holder is entitled pursuant to such
exercise, and (B) in the case of a Holder that is a resident of Canada (i)
credit such aggregate number of Warrant Shares to which the Holder is entitled
pursuant to such exercise to the book-entry account of the participant of CDS
Clearing and Depository Services Inc. or its successor (“CDS”) acting on behalf of the
Holder or (ii) if CDS notifies the Company that it is unwilling or unable to
continue as depository in connection with the Warrant Shares or if at any time
CDS ceases to be a clearing agency or otherwise ceases to be eligible to be a
depository and the Company is unable to locate a qualified successor, cause to
be held for collection by the Holder at the address of the Company as set out in
subsection 1.1 (or at such additional place as may be decided by the Company
from time to time and notified to the Holder), certificates, registered in the
Company’s share register in the name of the Holder or its designee, for the
number of Warrant Shares to which the Holder is entitled pursuant to such
exercise. Subject to applicable laws, upon delivery of the Exercise
Delivery Documents, the Holder shall be deemed for all corporate purposes to
have become the holder of record of the Warrant Shares with respect to which the
Warrants have been exercised, irrespective of the date such Warrant Shares are
credited to the Holder’s DTC account or the book-entry account of the CDS
participant acting on behalf of the Holder or the date of delivery of the
certificates evidencing such Warrant Shares, as the case may be.
- 3 -
|
1.4
|
Company’s Failure to Timely
Deliver Securities.
|
If, upon
the Company’s exercise of the Warrants, the Company shall fail for any reason or
for no reason to issue to the Holder within three (3) trading days of receipt of
the Exercise Delivery Documents in compliance with the terms of this Section 1, a
certificate for the number of Common Shares to which the Holder is entitled and
register such Common Shares on the Company’s share register, to credit the
Holder’s balance account with DTC for such number of Common Shares to which the
Holder is entitled or to credit such number of Common Shares to which the Holder
is entitled to the book-entry account of the participant of CDS acting on behalf
of the Holder, and if on or after such third (3rd) trading day the Holder
purchases (in an open market transaction or otherwise) Common Shares to deliver
in satisfaction of a sale by the Holder of Common Shares issuable upon such
exercise that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company
shall, within three (3) business days after the Holder’s written request and in
the Holder’s discretion, either (i) pay cash to the Holder in an amount
equal to the Holder’s total purchase price (including brokerage commissions, if
any) for the Common Shares so purchased (the “Buy-In Price”), at which point
the Company’s obligation to deliver such certificate (and to issue such Warrant
Shares) shall terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such Warrant Shares and pay
cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price
over the product of (A) such number of Common Shares, times (B) the Closing Bid
Price (as defined below) on the date of exercise.
As used
in this Warrant Certificate, “Closing Bid Price” means, for
any security as of any date, the last closing bid price for such security on the
Principal Market (as defined in Section 2.1), as reported by Bloomberg, or, if
the Principal Market begins to operate on an extended hours basis and does not
designate the closing bid price, then the last bid price of such security prior
to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the Principal
Market is not the principal securities exchange or trading market for such
security, the last closing bid price or last trade price, respectively, of such
security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the “pink sheets” by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.). If the
Closing Bid Price cannot be calculated for a security on a particular date on
any of the foregoing bases, the Closing Bid Price of such security on such date
shall be the fair market value as mutually determined by the Company and the
Holder. All such determinations to be appropriately adjusted for any
share dividend, share split, share combination or other similar transaction
during the applicable calculation period.
- 4 -
|
1.5
|
Cashless Exercise by U.S.
Persons.
|
Notwithstanding
anything contained herein to the contrary, if, at any time following the six
month anniversary of the date hereof, a registration statement under the United
States Securities Act of 1933, as amended (the “U.S. Securities Act”),
including any amendments or supplements thereto, registering the Warrant Shares
(a “U.S. Registration
Statement”) is not effective thereunder, prior to the Time of Expiry, and
for so long as the U.S. Registration Statement is not effective, any holder of
any Warrant that is a person in the United States, a “U.S. person” as defined in
Rule 902(k) of Regulation S under the U.S. Securities Act (a “U.S. Person”) or person
holding a Warrant for the account or benefit of a person in the United States or
U.S. Person may, in its sole discretion, exercise the Warrants in whole or in
part and, in lieu of making the cash payment otherwise contemplated to be made
to the Company upon such exercise in payment of the Aggregate Exercise Price,
elect instead to receive upon such exercise the “Net Number” of Warrant Shares
determined according to the following formula (a “Cashless
Exercise”):
Net Number = (A x B) - (A x
C)
B
For purposes of the foregoing
formula:
A= the
total number of Warrant Shares with respect to which the Warrants are then being
exercised.
B= the
Weighted Average Price (as defined below) of the Common Shares (as reported by
Bloomberg) for the five consecutive trading days ending on the date immediately
preceding the date of the Exercise Notice.
C= the
Exercise Price then in effect for the applicable Warrant Shares at the time of
such exercise.
As used
in this Warrant Certificate, “Weighted Average Price” means,
for any security as of any date, the dollar volume-weighted average price for
such security on the Principal Market during the period beginning at 9:30:01
a.m., New York City time, and ending at 4:00:00 p.m., New York City time, as
reported by Bloomberg through its “Volume at Price” function or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York City time,
and ending at 4:00:00 p.m., New York City time, as reported by Bloomberg, or, if
no dollar volume-weighted average price is reported for such security by
Bloomberg for such hours, the average of the highest closing bid price and the
lowest closing ask price of any of the market makers for such security as
reported in the “pink sheets” by Pink Sheets LLC. If the Weighted
Average Price cannot be calculated for such security on such date on any of the
foregoing bases, the Weighted Average Price of such security on such date shall
be the fair market value as mutually determined by the Company and the
Holder. All such determinations shall be appropriately adjusted for
any share dividend, share split or other similar transaction during such
period.
- 5
-
|
1.6
|
Beneficial
Ownership.
|
The
Company shall not effect the exercise of the Warrants, and the Holder shall not
have the right to exercise the Warrants, to the extent that after giving effect
to such exercise, such person (together with such person’s affiliates (as such
term is defined in the Securities Exchange Act of 1934, as amended (the “Exchange
Act”))) would beneficially own in excess of 4.99% (the “Maximum
Percentage”) of the Common Shares outstanding immediately after giving
effect to such exercise. For purposes of the foregoing sentence, the
aggregate number of Common Shares beneficially owned by such person and its
affiliates shall include the number of Common Shares issuable upon exercise of
the Warrants with respect to which the determination of such sentence is being
made, but shall exclude Common Shares which would be issuable upon (i) exercise
of the remaining, unexercised portion of the Warrants beneficially owned by such
person and its affiliates and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company beneficially owned by
such person and its affiliates (including, without limitation, any convertible
notes or convertible preferred shares or warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained
herein. Except as set forth in the preceding sentence, for purposes
of this paragraph, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act. For purposes of this Warrant
Certificate, in determining the number of outstanding Common Shares, the Holder
may rely on the number of outstanding Common Shares as reflected in the most
recent of (1) the Company’s most recent Annual Report on Form 20-F or Form 40-F,
as applicable, Report of Foreign Private Issuer on Form 6-K that contains
quarterly financial statements, or other public filing by the Company with the
Securities and Exchange Commission, as the case may be, (2) a more recent public
announcement by the Company, or (3) any other notice by the Company or the
Transfer Agent setting forth the number of Common Shares
outstanding. In any case, the number of outstanding Common Shares
shall be determined after giving effect to the conversion or exercise of
securities of the Company, including the Warrants, by the Holder and its
affiliates since the date as of which such number of outstanding Common Shares
was reported. By written notice to the Company, the Holder may from
time to time increase or decrease the Maximum Percentage to any other
percentage not in
excess of 9.99% specified in such notice; provided
that (i) any such increase will not be effective until the sixty-first (61st) day
after such notice is delivered to the Company, and (ii) any such increase or
decrease will apply only to the Holder. The provisions of this
paragraph shall be construed,
corrected and implemented in a manner so as to
effectuate the intended beneficial ownership limitation herein
contained.
|
1.7
|
Fractional Warrant
Share.
|
Fractional
Warrant Shares shall not be issued upon the exercise of any
Warrants. The Holder shall not be entitled to any compensation or
other right in lieu of a fractional Warrant Share, as the case may
be.
- 6 -
|
2.
|
Anti-Dilution
Protection.
|
|
2.1
|
Definitions.
|
For the
purposes of Section 2 the words and terms defined below shall have the
respective meanings specified therefor in this subsection 2.1:
|
|
(i)
|
“Adjustment Period” means
the period commencing on the Issuance Date and ending at the Time of
Expiry;
|
|
|
(ii)
|
“Current Market Price per Common
Share”, at any date, means the volume weighted average price per
Common Share at which the Common Shares have traded (each, a “Trading Day”) on the
NYSE Amex (or if the Common Shares are not then listed on the NYSE Amex,
the recognized stock exchange on which the Common Shares are listed on
which the greatest volume of Common Shares were traded during the period
referenced below or, if the Common Shares are not so listed on any
recognized stock exchange, then on the over-the-counter market on which
the Common Shares are traded as selected by action of the directors acting
reasonably for such purpose) (the “Principal Market”),
during the five (5) most recent trading days ending on the third trading
day before such date on which there has occurred at least one trade of at
least one board lot of Common Shares prior to such date, such weighted
average price to be determined by dividing the aggregate sale price of all
Common Shares sold in board lots on such exchange or market, as the case
may be, during the said five (5) trading days, by the number of Common
Shares so sold;
|
|
|
(iii)
|
“Dividends Paid in the Ordinary
Course” means any dividend declared payable on the Common Shares
(whether in cash, securities, property or assets) in any fiscal year of
the Company to the extent that such dividends do not exceed, in the
aggregate, the greater of: (i) the aggregate value of dividends
declared payable by the Company on the Common Shares in its immediately
preceding fiscal year; (ii) the arithmetic mean of the aggregate
value of dividends declared payable by the Company on the Common Shares in
its three immediately preceding fiscal years; and (iii) 100% of the
aggregate consolidated net income of the Company, before extraordinary
items, for its immediately preceding fiscal year (such consolidated net
income to be computed in accordance with Canadian generally accepted
accounting principles);
|
|
|
(iv)
|
“director” means a
director of the Company for the time being and reference herein to an
“action by the
directors” means an action by the directors of the Company as a
board or, whenever duly empowered, an action by a committee of directors;
|
|
|
(v)
|
“recognized stock
exchange” means a stock exchange or quotation system recognized by
the Canadian Securities Administrators;
and
|
- 7 -
|
|
(vi)
|
“TSX” means the Toronto
Stock Exchange.
|
|
2.2
|
Adjustments.
|
The
Exercise Price and the number of Warrant Shares shall, whilst any Warrants are
still outstanding and unexercised, be subject to adjustment from time to time
upon the occurrence of any of the events and in the manner provided as
follows:
|
|
(a)
|
If
and whenever during the Adjustment Period, the Company
shall:
|
|
|
(i)
|
declare
a dividend or make a distribution on its Common Shares payable in Common
Shares (or securities exchangeable for or convertible into Common Shares),
other than Dividends Paid in the Ordinary Course;
or
|
|
|
(ii)
|
subdivide
or change its outstanding Common Shares into a greater number of Common
Shares; or
|
|
|
(iii)
|
reduce,
combine or consolidate its outstanding Common Shares into a lesser number
or Common Shares,
|
(any of
such events in paragraphs (i), (ii) or (iii) above being called a “Share Reorganization”), then
effective immediately after the record date or effective date, as the case may
be, at which the holders of Common Shares are determined for the purposes of the
Share Reorganization, the Exercise Price shall be adjusted to a price determined
by multiplying the applicable Exercise Price in effect on such effective date or
record date by a fraction, the numerator of which shall be the number of Common
Shares outstanding on such effective date or record date before giving effect to
such Share Reorganization and the denominator of which shall be the number of
Common Shares outstanding immediately after giving effect to such Share
Reorganization (including, in the case where securities exchangeable for or
convertible into Common Shares are distributed, the number of additional Common
Shares that would have been outstanding had such securities been exchanged for
or converted into Common Shares immediately after giving effect to such Share
Reorganization).
|
|
(b)
|
If
and whenever during the Adjustment Period the Company shall fix a record
date for the issuing of rights, options or warrants to all or
substantially all of the holders of the Common Shares entitling them for a
period expiring not more than forty-five (45) days after such record date
(the “Rights
Period”) to subscribe for or purchase Common Shares (or securities
convertible into or exchangeable for Common Shares) at a price per share
(or having a conversion or exchange price per share) which is less than
95% of the Current Market Price per Common Share on the record date for
such issue (any of such events being called a “Rights Offering”), then
effective immediately after such record date the Exercise Price shall be
adjusted to a price determined by multiplying the applicable Exercise
Price in effect as of the record date for the Rights Offering by a
fraction the numerator of which shall be the sum
of:
|
- 8 -
|
|
(i)
|
the
number of Common Shares outstanding as of the record date for the Rights
Offering; and
|
|
|
(ii)
|
a
number determined by dividing (A) either (i) the product of the number of
Common Shares offered for subscription or purchase during the Rights
Period upon exercise of the rights, warrants or options under the Rights
Offering and the price at which such Common Shares are offered, or (ii) as
the case may be, the product of the number of Common Shares for or into
which the convertible or exchangeable securities offered during the Rights
Period upon exercise of the rights, warrants or options under the Rights
Offering are exchangeable or convertible and the exchange or conversion
price of the convertible or exchangeable securities so offered, by (B) the
Current Market Price per Common Share as of the record date for the Rights
Offering, and
|
the
denominator of which shall be the aggregate of the number of Common Shares
outstanding on such record date and the number of Common Shares offered for
subscription or purchase during the Rights Period upon exercise of the rights,
warrants or options under the Rights Offering or which would be outstanding upon
the conversion or exchange of all convertible or exchangeable securities offered
during the Rights Period upon exercise of the rights, warrants or options under
the Rights Offering, as applicable, in each case after giving effect to the
Rights Offering.
Any
Common Shares owned by or held for the account of the Company shall be deemed
not to be outstanding for the purpose of any computation. If all the
rights, options or warrants are not so issued or if all rights, options or
warrants are not exercised prior to the expiration thereof, the Exercise Price
shall be readjusted to the Exercise Price in effect immediately prior to the
record date and the Exercise Price shall be further adjusted based upon the
number of Common Shares (or securities convertible or exchangeable for Common
Shares) actually delivered upon the exercise of the rights, options or warrants,
as the case may be, but subject to any other adjustment required hereunder by
reason of any event arising after that record date.
|
|
(c)
|
If
and whenever during the Adjustment Period the Company shall fix a record
date for the payment, issue or distribution to all or substantially all of
the holders of the Common Shares of (i) a dividend, (ii) cash or assets
(including evidences of the Company’s indebtedness), or (iii)
rights or other securities (including without limitation, securities
convertible into or exchangeable for Common Shares), and such payment,
issue or distribution does not constitute a Dividend Paid in the Ordinary
Course, a Share Reorganization or a Rights Offering (any of such
non-excluded events being herein called a “Special Distribution”),
the Exercise Price shall be adjusted as determined by action of the
directors (whose determination shall be conclusive) effective immediately
after such record date by an amount that is no greater than the difference
between (x) the volume weighted average trading price of the Common Shares
on the Principal Market for the five (5) most recent Trading Days ending
immediately prior to the Trading Day the Common Shares begin trading on an
“ex-distribution” basis, and (y) the volume weighted average trading price
of the Common Shares on the Principal Market for the five (5) most recent
Trading Days beginning immediately after the Trading Day the Common Shares
commence trading on an “ex-distribution”
basis.
|
- 9 -
Such
adjustment shall be made successively whenever such a record date is fixed. To
the extent that such payment, issuance or distribution is not so made or any
rights options or warrants so distributed are not exercised, the Exercise Price
shall be readjusted effective immediately to the Exercise Price which would then
be in effect based upon such payment, issuance or distribution actually made, or
based on the Common Shares or securities exchangeable or convertible for Common
Shares actually delivered upon the exercise of any rights options or warrants as
the case may be but subject to any other adjustment required hereunder by reason
of any event arising after the record date.
|
|
(d)
|
If
and whenever at any time during the Adjustment Period there shall be a
reorganization, reclassification or other change of Common Shares at any
time outstanding or change of the Common Shares into other shares or into
other securities (other than a Share Reorganization), or a consolidation,
amalgamation, arrangement or merger of the Company with or into any other
company or other entity, or a transfer of all or substantially all of the
undertaking or assets of the Company to another company or entity, in each
case in which the holders of Common Shares are entitled to receive shares,
other securities or property, including cash, (any of such events being
herein called a “Capital
Reorganization”), any Holder who exercises his right to subscribe
for and purchase Warrant Shares pursuant to the exercise of the Warrants
after the effective date of such Capital Reorganization shall be entitled
to receive, and shall accept for the same aggregate consideration in lieu
of the number of Warrant Shares to which such Holder was theretofore
entitled upon such exercise, the aggregate number of shares, other
securities or other property, including cash, which such Holder would have
received as a result of such Capital Reorganization had he exercised his
right to acquire Warrant Shares immediately prior to the effective date or
record date, as the case may be, of the Capital Reorganization and had he
been the holder of such Warrant Shares on such effective date or record
date, as the case may be, subject to adjustment thereafter in accordance
with provisions the same, as nearly as may be possible, as those contained
in subsections 2.2(b) and 2.2(c). If determined appropriate by
the directors, acting reasonably, and subject to any required prior
approval of the NYSE Amex, TSX and any other stock exchange or market on
which the Common Shares may be listed or traded, appropriate adjustments
shall be made as a result of any such Capital Reorganization in the
application of the provisions set forth in this subsection 2.2, with
respect to the rights and interests thereafter of a Holder to the end that
the provisions set forth in this subsection 2.2 shall thereafter
correspondingly be made applicable as nearly as may reasonably be in
relation to any shares, other securities or other property, including
cash, thereafter deliverable upon the exercise of any
Warrant. Any such adjustments shall be made by and set forth in
an agreement supplemental hereto approved by action by the directors,
acting reasonably, and shall for all purposes be conclusively deemed to be
appropriate adjustments.
|
- 10 -
|
|
(e)
|
If
and whenever at any time during the Adjustment Period there shall occur a
Share Reorganization which results in an adjustment to the Exercise Price
pursuant to subsection 2.2(a), the number of Warrants Shares purchaseable
(at the adjusted Exercise Price) shall be adjusted contemporaneously with
the adjustment of the Exercise Price by multiplying the number of Warrant
Shares theretofore purchaseable on the exercise thereof by a fraction, the
numerator of which shall be the applicable Exercise Price in effect
immediately prior to such adjustment and the denominator of which shall be
the applicable Exercise Price resulting from such
adjustment.
|
|
|
(f)
|
In
case the Company during the Adjustment Period shall take any action
affecting the Common Shares, other than action described above in this
subsection 2.2 which in the opinion of the directors, acting reasonably,
would materially adversely affect the rights of the Holder, the Exercise
Price or the number of Warrant Shares shall be adjusted in such manner, if
any, and at such time, by action by the directors, acting reasonably, as
they may determine to be equitable in the circumstances, but subject in
all cases to any necessary regulatory
approval.
|
|
2.3
|
Rules.
|
For the
purposes of subsection 2.2 hereof, any adjustment shall be made successively
whenever an event referred to therein shall occur, subject to the following
provisions:
|
|
(a)
|
all
calculations shall be rounded down to the nearest Common
Share;
|
|
|
(b)
|
no
adjustment to an Exercise Price shall be required unless such adjustment
would result in a change of at least 1% in the prevailing Exercise Price
and no adjustment in the number of Warrant Shares will be required to be
made unless the cumulative effect of such adjustment or adjustments would
change the number of Warrant Shares by at least one Warrant Share and, for
greater clarity, any adjustment which, except for the qualification of
this section, would otherwise have been required to be made shall be
carried forward and taken into account in any subsequent adjustment;
provided, however, that in no event shall the Company be obligated to
issue fractional Warrant Shares or fractional interests in Warrant Shares
upon exercise of a Warrant or pay any amount in cash in lieu of issuing
fractional Warrant Shares;
|
|
|
(c)
|
if
a dispute shall at any time arise with respect to adjustments to the
Exercise Price or the number of Warrant Shares purchasable pursuant to the
exercise rights represented by a Warrant, such disputes shall be
conclusively determined by the Company’s auditors or, if they are unable
or unwilling to act, by such other firm of independent chartered
accountants as may be selected by action by the directors and any such
determination, shall be conclusive evidence of the correctness of any
adjustments made;
|
-
11 -
|
|
(d)
|
if
the Company shall set a record date to determine the holders of its Common
Shares for the purpose of entitling them to receive any dividend or
distribution or any subscription or purchase rights, options or warrants
and shall thereafter and before the distribution to such shareholders of
any such dividend, distribution or subscription or purchase rights legally
abandon its plan to pay or deliver such dividend, distribution or
subscription or purchase rights, then no adjustment in the Exercise Price
or the number of Warrant Shares shall be required by reason of the setting
of such record date; and
|
|
|
(e)
|
in
any case in which this Warrant Certificate requires that an adjustment
become effective immediately after a record date for an event referred to
in subsection 2.2 hereof, the Company may defer, until the occurrence of
such event:
|
|
|
(i)
|
issuing
to the Holder, to the extent that the Warrants are exercised after such
record date and before the occurrence of such event, the additional
Warrant Shares issuable upon such exercise by reason of the adjustment
required by such event; and
|
|
|
(ii)
|
delivering
to the Holder any distribution declared with respect to such additional
Warrant Shares after such record date and before such
event;
|
provided,
however, that the Company delivers to the Holder an appropriate instrument
evidencing the right of the Holder, upon the occurrence of the event requiring
the adjustment, to an adjustment in the Exercise Price and/or the number of
Warrant Shares.
|
2.4
|
Taking of
Actions.
|
As a
condition precedent to the taking of any action which would require an
adjustment pursuant to Section 2.2 hereof, the Company shall take any action
that may, in the opinion of counsel, be necessary in order that the Company may
validly and legally issue as fully paid and non-assessable all of the Common
Shares which the Holder is entitled to receive in accordance with the provisions
of this Warrant Certificate.
|
2.5
|
Notice.
|
At least
seven days prior to the effective date or record date, as the case may be, of
any event that requires or that may require an adjustment in any of the exercise
rights of the Holder under this Warrant Certificate, including the number of
Warrant Shares, the Company shall deliver to the Holder a certificate
of the Company specifying the particulars of such event and, if determinable,
the required adjustment and the computation of such adjustment. In
case any adjustment for which a certificate has been given is not then
determinable, the Company shall promptly after such adjustment is determinable
deliver to the Holder hereof a certificate of the Company showing how such
adjustment was computed. The Company hereby covenants and agrees that
the register of transfers and share transfer books for the Common Shares shall
be open during normal business hours for inspection by the Holder, and that the
Company will not take any action which might deprive the Holder of the
opportunity of exercising the rights of subscription contained in this Warrant
Certificate, during such seven day period.
- 12 -
|
3.
|
Shares
to be Reserved.
|
The
Company will at all times take all action necessary to reserve and keep
available out of its authorized Common Shares, solely for the purpose of issue
upon the exercise of the Warrants, 100% of the number of Warrant
Shares as are then issuable upon the exercise of the Warrants (without regard to
any limitations on exercise). The Company covenants and agrees that
all Warrant Shares that are so issuable will, upon issuance in accordance with
the terms of this Warrant Certificate and applicable laws, be duly authorized,
fully paid and non-assessable. The Company will take such actions as
may be reasonably necessary and as are within its power to ensure that all such
Warrant Shares may be so issued without violation of any applicable laws or the
applicable requirements of any stock exchange upon which the Common Shares of
the Company may be listed.
|
4.
|
Noncircumvention.
|
The
Company hereby covenants and agrees that the Company will not, by amendment of
its Articles of Association or through any reorganization, transfer of assets,
consolidation, merger, scheme of arrangement, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant Certificate, and will at all
times in good faith comply with all the provisions of this Warrant Certificate
and take all actions consistent with effectuating the purposes of this Warrant
Certificate. Without limiting the generality of the foregoing, the Company shall
take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable Common Shares
upon the exercise of the Warrants.
|
5.
|
Warrant
Holder Not Deemed a Shareholder.
|
Except as
otherwise specifically provided herein, the Holder, solely in such person’s
capacity as a holder of the Warrants, shall not be entitled to vote or receive
dividends or be deemed the holder of share capital of the Company for any
purpose, nor shall anything contained in this Warrant Certificate be construed
to confer upon the Holder, solely in such person’s capacity as the Holder of the
Warrants, any of the rights of a shareholder of the Company or any right to
vote, give or withhold consent to any corporate action (whether any
reorganization, issue of shares, reclassification of share capital,
consolidation, merger, conveyance or otherwise), receive notice of meetings,
receive dividends or subscription rights, or otherwise, prior to the issuance to
the Holder of the Warrant Shares which such person is then entitled to receive
upon the due exercise of a Warrant. In addition, nothing contained in
this Warrant Certificate shall be construed as imposing any liabilities on the
Holder to purchase any securities (upon exercise of a Warrant or otherwise) or
as a shareholder of the Company, whether such liabilities are asserted by the
Company or by creditors of the Company.
- 13 -
|
6.
|
The
Register.
|
The
Company shall keep:
|
|
(a)
|
at
the principal office of the Company, a register of holders of the Warrants
represented by this Warrant Certificate or any portion thereof in which
shall be entered in alphabetical order the names and addresses of the
holders and particulars of the Warrants held by them;
and
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(b)
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at
the principal office of the Company, a register of transfers in which all
transfers of the Warrants represented by this Warrant Certificate or any
portion thereof and the date and other particulars of each transfer shall
be entered.
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7.
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Transfer
of Warrants.
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Subject
to the following provisions of this Section 7 and applicable laws, the Warrants
evidenced hereby and/or any portion of the rights to subscribe for and purchase
Warrant Shares hereunder may be transferred by the Holder. No
transfer of the Warrants evidenced hereby or any portion of the rights hereunder
will be valid unless duly entered on the appropriate register of transfers, upon
the surrender to the Company of this Warrant Certificate accompanied by a duly
completed Transfer Form in substantially the form attached as Exhibit “2”
hereto executed by
the registered Holder or its executors, administrators or other legal
representatives or its attorney duly appointed by an instrument in writing in
form and execution satisfactory to the Company, and, upon compliance with all
applicable securities laws and such other reasonable requirements as the Company
may prescribe, such transfer will be duly recorded by the Company on the
applicable registers. If less than all of the Warrants represented by
this Warrant Certificate are transferred, the Holder shall receive a new Warrant
Certificate representing the portion of such Warrants that were not transferred,
registered in the name of the Holder.
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8.
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Replacement.
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Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant Certificate and, if requested by the Company, upon
delivery of an indemnity and/or surety bond in amount and form satisfactory to
the Company (or, in the case of mutilation, upon surrender of this Warrant
Certificate), the Company shall issue and deliver to the Holder a replacement
certificate containing the same legends, terms and conditions as this Warrant
Certificate.
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9.
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Expiry
Date.
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The
Warrants shall expire and all rights to purchase Warrant Shares hereunder shall
cease and become null and void at 5:00 p.m. (Toronto time) on March 10,
2015.
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10.
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Time.
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Time
shall be of the essence of this Warrant Certificate.
- 14 -
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11.
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Business
Day.
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In the
event that any day on or before which any action is required or permitted to be
taken hereunder is not a business day, such action shall be required or
permitted to be taken on or before the requisite time on the next succeeding day
that is a business day.
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12.
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Notices.
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Whenever
notice is required to be given under this Warrant Certificate, unless otherwise
provided herein, such notice will be in writing, will be mailed (a) if within
the domestic United States by first-class registered or certified airmail, or
nationally recognized overnight express courier, postage prepaid, or by
facsimile or (b) if delivered from outside the United States, by International
Federal Express or facsimile, and will be deemed given (i) if delivered by
first-class registered or certified mail domestic, three business days after so
mailed, (ii) if delivered by nationally recognized overnight carrier, one
business day after so mailed, (iii) if delivered by International Federal
Express, two business days after so mailed and (iv) if delivered by facsimile,
upon electronic confirmation of receipt and will be delivered and addressed as
follows:
if to the
Company, to:
YM
BioSciences Inc.
Xxxxx
000, Xxxxxxxx 00
0000
Xxxxxxx Xxxxx
Xxxxxxxxxxx,
Xxxxxxx X0X 0X0
Xxxxxx
Attention:
Xxx Xxxxxx, Vice President, Finance and Administration
Facsimile:
(000) 000-0000
- 15 -
with
copies (which shall not constitute notice) to:
Xxxxxx
Blaikie LLP
Bay
Adelaide Centre
P.O. Box
2900
000 Xxx
Xxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxxxx X0X 0X0
Xxxxxx
Attention:
Xxxxx Xxxx
Facsimile:
(000) 000-0000
and
Xxxxxx
& Whitney LLP
000
Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx,
X.X. Xxxxxx X0X 0X0
Attention:
Xxxxxx Xxxxxx
Facsimile:
(000) 000-0000
if to the
Holder, at its address appearing on the register hereinbefore mentioned, or at
such other address or addresses as may have been furnished to the Company in
writing.
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13.
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Amendment
and Waiver.
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Except as
otherwise provided herein, the provisions of this Warrant Certificate may be
amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has
obtained the written consent of the Holder.
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14.
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Governing
Law.
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This
Warrant Certificate shall be governed by and construed and enforced in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein and the parties irrevocably submit to the exclusive
jurisdiction of the courts of the Province of Ontario.
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15.
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Successor.
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The
Company shall not enter into any transaction whereby all or substantially all of
its undertaking, property and assets would become the property of any other
Company (herein called a “Successor Company”) whether by
way of reorganization, reconstruction, consolidation, amalgamation, merger,
transfer, sale, disposition or otherwise, unless prior to or contemporaneously
with the consummation of such transaction the Company and the Successor Company
shall have executed such instruments and done such things as the Company, acting
reasonably, considers to be necessary or advisable to establish that upon the
consummation of such transaction:
- 16 -
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(a)
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the
Successor Company will have assumed all the covenants and obligations of
the Company under this Warrant Certificate,
and
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(b)
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this
Warrant Certificate will be a valid and binding obligation of the
Successor Company entitling the Holder, as against the Successor Company,
to all the rights of the Holder under this Warrant Certificate (without
limitation reflecting any adjustments to which the Holder may be entitled
as a result of such transaction pursuant to Sections 2.2 and
2.3).
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Whenever
the conditions of this Section 15 shall have been duly observed and performed,
the Successor Company shall possess, and from time to time may exercise, each
and every right and power of the Company under this Warrant Certificate in the
name of the Company or otherwise and any act or proceeding by any provision
hereof required to be done or performed by any director or officer of the
Company may be done and performed with like force and effect by the like
directors or officers of the Successor Company.
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16.
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General.
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This
Warrant Certificate is not valid for any purpose whatsoever unless and until it
has been signed by or on behalf of the Company. The holding of the
Warrants evidenced by this Warrant Certificate shall not be construed as
conferring upon the Holder any right or interest whatsoever as a shareholder of
the Company nor entitle the holder hereof to any right or interest in respect
thereof except as expressly provided in this Warrant Certificate.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
- 17 -
IN WITNESS WHEREOF the Company
has caused this Warrant Certificate to be executed by its duly authorized
officer.
DATED as of the 10th day of
March, 2010.
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YM
BIOSCIENCES INC.
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Name:
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Title:
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EXHIBIT
1
Subscription
Form
The
undersigned Holder hereby irrevocably elects to exercise the number of Warrants
of YM BioSciences Inc. (the “Company”) set out below for the number of Warrant
Shares as set forth below, evidenced by the attached certificate representing
Warrants issued by the Company (the “Warrant
Certificate”). Capitalized terms used herein and not otherwise
defined shall have the respective meanings set forth in the Warrant
Certificate:
1. Form
of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:
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(A)
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________
a
“Cash
Exercise” with respect
to:
|
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(i)
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Number
of Warrants to be exercised:
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(ii)
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Number
of Warrant Shares to be acquired:
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(iii)
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Exercise Price per
Warrant:
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;
and/or
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(B)
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________
a
“Cashless
Exercise” with respect
to:
|
|
(i)
|
Number of Warrants
to be exercised:
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(ii)
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Number of Warrant
Shares to be acquired:
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2. Payment
of Exercise Price. In the event that the Holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the Holder shall pay the Aggregate Exercise Price in the sum of
US$___________________ [1(A)(ii) multiplied by 1(A)(iii above)] to the Company
in accordance with the terms of the Warrant Certificate.
3. Delivery
of Warrant Shares. The Holder directs Warrant Shares to be registered
and issued as directed below and the Company shall deliver to the Holder such
Warrant Shares in accordance with the terms of the Warrant
Certificate.
4. The
Holder acknowledges that the Warrants are exercisable only in accordance with
applicable laws.
[Signature Page
Follows]
DATED
this
day of ,
20_____.
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(Signature
of registered holder)
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(Name
of registered holder)
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Direction as to
Registration
|
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Name
of registered Holder:
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Address
of registered Holder:
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EXHIBIT
2
Transfer
Form
FOR VALUE
RECEIVED, the undersigned hereby sells, transfers and assigns to
Warrants represented by the within Warrant Certificate and appoints
YM BioSciences Inc. attorney to transfer the said Warrants on its books with
full power of substitution in the premises.
DATED
this
day of ,
20_____.
In the
presence of:
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Signature
of Holder guaranteed by:
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||
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(Signature
of registered Holder hereof)
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||
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(Name
of registered Holder
hereof)
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NOTICE:
|
The
signature of this assignment must correspond with the name as written upon
the face of this Warrant Certificate (or, in the case of a corporate
holder, by a duly authorized representative) in every particular without
alteration or enlargement or any change whatsoever. The
transferor must pay to the Company all exigible
taxes.
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All
endorsements or assignments of these Warrants must be signature guaranteed by a
Canadian chartered bank or trust company or by a medallion signature guarantee
from a member of a recognized signature medallion guarantee
program. The guarantor must affix a stamp bearing the actual words
“Signature Guaranteed”. Signature guarantees are not accepted from
Treasury Branches or credit unions unless they are members of the Stamp
Medallion Program.
If
the Transfer Form is signed by a trustee, executor, administrator, curator,
guardian, attorney, officer of a corporation or any person acting in a fiduciary
of representative capacity, the certificate must be accompanied by evidence of
authority to sign satisfactory to the Company.
Warrants
shall only be transferable in accordance with applicable laws.
Warrants
will be transferred only upon receipt by the Company of the documentation
required in such circumstances pursuant to the Warrant
Certificate.
Exhibit
C
Form of
Lock-Up Agreement
Lock-Up
Agreement
March __,
2010
Xxxx
Capital Partners, LLC
As Representative of the several Placement Agents
c/o Roth
Capital Partners, LLC
00
Xxxxxxxxx Xxxxx
Xxxxxxx
Xxxxx, XX 00000
Re:
YM BioSciences Inc. - Offering of Units
Dear
Sirs:
In order
to induce Xxxx Capital Partners, LLC (“Xxxx”), Xxxxx Xxxxxx &
Co., Xxxxxxx Securities Inc. and Xxxxxxx Securities, Inc. (collectively, the
“Placement Agents”) to
enter in to a certain placement agent agreement (the “Placement Agent Agreement”)
with YM BioSciences Inc., a corporation continued under the Nova Scotia Companies Act
(the “Company”), with
respect to the offering of units, each unit consisting of (i) one common share,
without nominal or par value (“Common Shares”), of the
Company and (ii) ● of one common share purchase warrant, the undersigned hereby
agrees that, for a period of thirty (30) days following the date of the
prospectus supplement (the “Prospectus Supplement”) filed
by the Company with the U.S. Securities and Exchange Commission in connection
with such offering (the “Lock-Up Period”), the
undersigned will not, without the prior written consent of Xxxx, as
representative of the Placement Agents, directly or indirectly, (i) offer, sell,
assign, transfer, pledge, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend or otherwise dispose of, any Common Shares (including,
without limitation, Common Shares which may be deemed to be beneficially owned
by the undersigned in accordance with the rules and regulations promulgated
under the U.S. Securities Act of 1933, as amended (the “Securities Act”) and the U.S.
Securities Exchange Act of 1934, as the same may be amended or supplemented from
time to time (such shares, the “Beneficially Owned Shares”))
or securities convertible into or exercisable or exchangeable for Common Shares,
provided that nothing herein shall prohibit the undersigned from exercising any
options or warrants to purchase Common Shares held at any time during the
Lock-Up Period by the undersigned; provided, however, that any Common Shares
received upon the exercise of any such option or warrant will also be subject to
this Lock-Up Agreement, (ii) enter into any swap, hedge or similar agreement or
arrangement that transfers to another, in whole or in part, any of the economic
risk of ownership of the Beneficially Owned Shares or securities convertible
into or exercisable or exchangeable for Common Shares, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Shares or such other securities, in cash or otherwise, (iii) engage in
any short selling of the Common Shares, or (iv) publicly announce an intention
to effect any transaction specified in clause (i), (ii) or (iii) above.
Notwithstanding the foregoing, nothing contained herein will be deemed to
restrict or prohibit the transfer of Common Shares, Beneficially Owned Shares or
securities convertible into or exercisable or exchangeable for Common Shares (A)
as a bona fide gift, provided the recipient thereof agrees in writing to be
bound by the terms of this Lock-Up Agreement, or (B) as a disposition to any
trust for the direct or indirect benefit of the undersigned and/or the immediate
family of the undersigned, provided that such trust agrees in writing to be
bound by the terms of this Lock-Up Agreement, and provided further that any such
transfer shall not involve a disposition for value. For purposes of
this Lock-Up Agreement, “immediate family” shall mean any relationship by blood,
marriage or adoption, not more remote than first cousin.
For the
purpose of allowing you to comply with FINRA Rule 2711(f)(4), if (i) during the
last seventeen (17) days of the Lock-Up Period, the Company issues an earnings
release or material news or a material event relating to the Company occurs, or
(ii) prior to the expiration of the Lock-Up Period, the Company announces that
it will release earnings results during the sixteen (16)-day period beginning on
the last day of the Lock-Up Period, then in each case the restrictions imposed
by this Lock-Up Agreement shall continue to apply until the expiration of the
eighteen (18)-day period beginning on the issuance of the earnings release or
the occurrence of the material news or material event, as
applicable.
Anything
contained herein to the contrary notwithstanding, any person to whom Common
Shares or Beneficially Owned Shares are transferred from the undersigned from
and after the date hereof shall agree to be bound by the terms of this Lock-Up
Agreement.
The
foregoing restrictions are expressly agreed to preclude the undersigned from
engaging in any hedging or other transaction which is designed to or reasonably
expected to lead to or result in a sale or disposition of Common Shares even if
such securities would be disposed of by someone other than the
undersigned. Such prohibited hedging or other transactions would
include without limitation any short sale or any purchase, sale or grant of any
right (including without limitation any put option or put equivalent position or
call option or call equivalent position) with respect to any of the Common
Shares or with respect to any security that includes, relates to, or derives any
significant part of its value from such shares.
In
addition, the undersigned hereby confirms that the undersigned does not have the
right to request or demand registration pursuant to the Securities Act of any
Common Shares that are registered in the name of the undersigned or that are
Beneficially Owned Shares. In order to enable the aforesaid covenants to be
enforced, the undersigned hereby consents to the placing of legends and/or
stop-transfer orders with the transfer agent of the Common Shares with respect
to any Common Shares or Beneficially Owned Shares.
The
undersigned understands that the Company and the Placement Agents are relying
upon this Lock-Up Agreement in proceeding towards consummation of the offering
of units. The undersigned hereby represents and warrants that the undersigned
has full power and authority to enter into this Lock-Up Agreement. The
undersigned further understands that this Lock-Up Agreement is irrevocable and
all authority herein conferred or agreed to be conferred and any obligations of
the undersigned shall be binding upon the undersigned’s heirs, legal
representatives, successors and assigns.
The
undersigned understands that, if the Placement Agent Agreement does not become
effective, or if the Placement Agent Agreement (other than the provisions
thereof which survive termination) shall terminate or be terminated prior to
payment for and delivery of the units to be sold thereunder, the undersigned
shall be released from all obligations under this Lock-Up
Agreement.
This
Lock-Up Agreement shall be governed by and construed in accordance with the laws
of the State of New York, without regard to the conflict of laws principles
thereof.
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Very
truly yours,
|
|
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Name:
|
