Exhibit 4.12
AGREEMENT AND PLAN OF MERGER
AMONG
CARDIOME PHARMA CORP.
PARALEX, INC.
AND
CARDIOME, INC.
Dated as of December 21, 2001
Page i
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1. THE MERGER 1
1.1 The Merger 1
1.2 Effective Time 2
1.3 Effective Time of the Merger 2
1.4 Certificate of Incorporation; By-laws 2
1.5 Directors and Officers 2
1.6 Effect on Capital Stock 2
1.7 Dissenting Shares 3
1.8 Surrender of Company Certificates 4
1.9 No Further Ownership Rights in Company Common Stock 5
1.10 Lost, Stolen or Destroyed Company Certificates 6
1.11 Taking Necessary Action; Further Action 6
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 6
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB 13
ARTICLE 4. COVENANTS 22
4.1 Covenants of the Company 22
4.2 Covenants of Parent 24
ARTICLE 5. ADDITIONAL AGREEMENTS 26
5.1 Meetings of Stockholders 26
5.2 Access to Information and Confidentiality 26
5.3 Consents and Approvals 27
5.4 Investment Agreements 27
5.5 Notification of Certain Matters 27
5.6 Further Action 28
5.7 Public Announcements 28
5.8 Registration Rights Agreement 28
5.9 Board and Management 28
5.10 Listing 28
5.11 Stock Split 29
ARTICLE 6. CONDITIONS OF MERGER 29
6.1 Conditions for the Benefit of the Company, Parent and Merger Sub. 29
6.2 Additional Conditions for the Benefit of Parent and Merger Sub 30
6.3 Additional Conditions to Obligation of the Company 31
ARTICLE 7. TERMINATION, AMENDMENT AND WAIVER 33
7.1 Termination 33
7.2 Notice of Unfulfilled Conditions 34
7.3 Mutual Termination 34
7.4 Effect of Termination 34
7.5 Fees and Expenses 34
7.6 Amendment 34
7.7 Waiver 35
Page ii
ARTICLE 8. EXCLUSIVITY 35
ARTICLE 9. GENERAL PROVISIONS 36
9.1 Non-Survival of Representations, Warranties and Agreements 36
9.2 Notices 36
9.3 Certain Definitions 37
9.4 Proceeds of Financing 39
9.5 Director and Officer Insurance 39
9.6 Headings 40
9.7 Severability 40
9.8 Entire Agreement 40
9.9 Assignment 40
9.10 Parties in Interest 40
9.11 Governing Law 40
9.12 Counterparts and Facsimile 40
NOTE: THE EXHIBITS AND SCHEDULES ARE NOT INCLUDED IN THIS VERSION OF
THE AGREEMENT AND PLAN OF MERGER
EXHIBITS
--------
Exhibit A Certificate of Merger
Exhibit 5.2 Form of Confidentiality Agreement
Exhibit 5.4 Form of Investment Agreement
Exhibit 5.8 Form of Registration Rights Agreement
Exhibit 6.1(g) Form of Lock Up Agreement
SCHEDULES
---------
Schedule 2.1(b) List of Stockholders of Company, Liens, Options
Schedule 2.1(g) List of Employment, Management and Services Agreements
Schedule 2.1(h) Outstanding Agreements Regarding Company Stock
Schedule 2.1(n) Conduct of Business of Company Outside Ordinary Course
Schedule 2.1(p) List of Material Contracts of Company
Schedule 2.1(r) List of Brokerage Fees
Schedule 2.1(t)(i) List of Third Party IP Rights
Schedule 2.1(t)(iii) Description of Claims on Company IP
Schedule 2.1(w) List of Significant Contracts
Schedule 3.1(b) List of Outstanding Options, Warrants and Rights
Schedule 3.1(d) List of Parent Subs
Schedule 3.1(o) List of Material Contracts of Parent
Schedule 3.1(q) Description of Liabilities of Parent in connection with
Agreement
Schedule 3.1(s)(ii) List of Parent Intellectual Property
Schedule 3.1(s)(iii) List of Parent Licenses
Schedule 3.1(s)(v) List of Claims on Parent Intellectual Property
Schedule 9.3 Example of Share Adjustment Calculation
Page 1
AGREEMENT AND PLAN OF MERGER, dated as of December 21, 2001 (the
"Agreement")
AMONG:
CARDIOME PHARMA CORP., a British Columbia corporation having its
principal place of business at 0000 Xxxxxxxx Xxxx, Xxxxxxxxx,
Xxxxxxx Xxxxxxxx X0X 0X0
("Parent")
AND:
CARDIOME, INC., a Delaware corporation and a wholly owned subsidiary
of Parent, having an office at 0000 Xxxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxx
Xxxxxxxx X0X 0X0
("Merger Sub")
AND:
PARALEX, INC., a Delaware corporation having is principal place of
business at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX 00000
(the "Company")
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company have
each determined that it is in the best interests of their respective
stockholders for Parent to acquire the Company upon the terms and subject to the
conditions set forth herein; and
WHEREAS, in furtherance of such acquisition, the Boards of Directors of
Parent ("Parent Board"), Merger Sub and the Company have each approved the
merger (the "Merger") of Merger Sub with and into the Company in accordance with
the General Corporation Law of the State of Delaware ("Delaware Law") and upon
the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE 1. THE MERGER
1.1 The Merger.
-----------
At the Effective Time (as defined in Section 1.2) and subject to, and upon the
terms and conditions of, this Agreement and Delaware Law, Merger Sub shall be
merged with and into the Company, the separate corporate existence of Merger Sub
shall cease and the Company shall continue as the surviving corporation. The
Company as the surviving corporation after the Merger is hereinafter sometimes
referred to as the "Surviving Company." Following the Merger, the Surviving
Company shall be a wholly owned subsidiary of the Parent. It is intended that
the merger constitute a tax free reorganization under Section 368(a)(2)(E) of
the Code.
Page 2
1.2 Effective Time.
---------------
As promptly as practicable after the satisfaction or waiver of the conditions
set forth in Article 6, the parties hereto shall cause the Merger to be
consummated by filing a Certificate of Merger in the form attached as Exhibit A
(the "Certificate of Merger") with the Secretary of State of the State of
Delaware, in such form as required by, and executed in accordance with the
relevant provisions of, Delaware Law (the time of such filing being the
"Effective Time").
1.3 Effective Time of the Merger.
-----------------------------
At the Effective Time, the effect of the Merger shall be as provided in the
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Company, and all debts, liabilities, obligations and duties of the
Company and Merger Sub shall become the debts, liabilities, obligations and
duties of the Surviving Company.
1.4 Certificate of Incorporation; By-laws.
--------------------------------------
(a) Unless otherwise determined by Parent and the Company prior to the
Effective Time, at the Effective Time the Certificate of
Incorporation of the Company, as amended pursuant to the Certificate
of Merger, shall be the Certificate of Incorporation of the
Surviving Company until thereafter amended as provided by law and
such Certificate of Incorporation; and
(b) The By-laws of the Company shall be the By-laws of the Surviving
Company until thereafter amended as provided by Delaware Law, the
Certificate of Incorporation of the Surviving Company and such By-
laws.
1.5 Directors and Officers.
-----------------------
The director of Merger Sub immediately prior to the Effective Time, Xx. Xxxx
Xxxxx, shall be the initial director of the Surviving Company, to hold office in
accordance with the Certificate of Incorporation and By-laws of the Surviving
Company, and the officers of Merger Sub immediately prior to the Effective Time
shall be the initial officers of the Surviving Company, in each case until their
respective successors are duly elected or appointed and qualified.
1.6 Effect on Capital Stock.
------------------------
At the Effective Time, by virtue of the Merger and, except as provided herein,
without any action on the part of Merger Sub, Parent, the Company or the holders
of any of the Company Common Stock (as defined below), the following shall be
deemed to have occurred:
(a) Conversion of Company Common Stock. The issued and outstanding
common stock, $0.001 par value per share, of the Company immediately
prior to the Effective Time (the "Company Common Stock") other than
shares of Company Common Stock to be cancelled pursuant to Section
1.6(c) and any Dissenting Shares (as defined and to the extent
provided in Section 1.7) shall be converted automatically into a
number of common shares of Parent without par value ("Parent Common
Shares") equal to 43,070,181 less the Share Adjustment (the "Merger
Shares").
Page 3
(b) Exchange Ratio. Each of the Company Stockholders shall receive its
pro rata portion of the Merger Shares, as follows: each share of
Company Common Stock (other than shares of Company Common Stock to
be cancelled pursuant to Section 1.6(c) and any Dissenting Shares)
will be converted automatically into a number of fully paid and
nonassessable Parent Common Shares equal to the product of one (1)
times the Exchange Ratio, upon surrender of the certificate
representing such share of Company Common Stock in the manner
provided in Section 1.8. Accordingly, at and after the Effective
Time, each Company Certificate (as defined below) shall thereinafter
represent the right to receive the Parent Common Shares as
contemplated in this Section 1.6.
(c) Cancellation of Treasury Stock and Parent-Owned Stock. Each share of
Company Common Stock held in the treasury of the Company and each
share of Company Common Stock owned by Merger Sub, Parent or any
direct or indirect wholly owned subsidiary of Parent or of the
Company immediately prior to the Effective Time shall be cancelled
and extinguished without any conversion thereof.
(d) Capital Stock of Merger Sub. Each share of common stock, $0.001 par
value, of Merger Sub issued to Parent and outstanding immediately
prior to the Effective Time, which shall be the only shares of
capital stock of Merger Sub outstanding prior to the Effective Time
and shall be owned by Parent at the Effective Time, shall be
converted into and exchanged for one validly issued, fully paid and
non-assessable share of common stock, par value $0.001 per share, of
the Surviving Company and shall constitute at the Effective Time all
of the issued and outstanding capital stock of the Surviving
Company.
(e) Adjustment to Exchange Ratio. The Merger Shares and the Exchange
Ratio shall be adjusted to reflect fully the effect of any stock
split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Parent Common Shares or
Company Common Stock), reorganization, recapitalization or other
like change with respect to Parent Common Shares or Company Common
Stock occurring after the date hereof and prior to the Effective
Time and the Merger Shares and the Exchange Ratio shall be reduced
to reflect the costs and expenses of the Company in connection with
the transactions contemplated hereunder that are paid prior to the
Effective Time pursuant to Section 7.5 to the extent such payment
was not funded through additional Company Liabilities reflected in
the Share Adjustment
(f) Fractional Shares. No fraction of a Parent Common Share will be
issued. Each Company Stockholder who would otherwise be entitled to
receive a fraction of a Parent Common Share (after aggregating all
fractional Parent Common Shares to be received by such holder) shall
have the number of shares they are to receive rounded up to the next
whole number of shares.
(g) Defined Terms. Unless otherwise defined herein, capitalized terms
shall have the meaning set forth in Section 9.3 hereof.
1.7 Dissenting Shares.
------------------
Notwithstanding any provisions of this Agreement to the contrary, any shares of
capital stock of the Company outstanding immediately prior to the Effective Time
held by any person that has not consented to the Merger and has demanded and
perfected his right of appraisal of such shares in accordance with Delaware Law
Page 4
and who, as of the Effective Time, has not effectively withdrawn or lost such
right to appraisal ("Dissenting Shares"), shall not be converted into or
represent a right to receive Parent Common Shares pursuant to Section 1.6, but
the holder thereof shall only be entitled to such rights as are granted by
Delaware Law. Notwithstanding the foregoing, if any holder of shares of capital
stock of the Company who demands appraisal of such shares under Delaware Law
shall effectively withdraw or lose (through failure to perfect or otherwise) his
or her right to appraisal, then, as of the later of the Effective Time or the
occurrence of such event, such holder's shares shall automatically be converted
into and represent only the right to receive Parent Common Shares pursuant to
Section 1.6, without interest thereon, upon surrender of the certificate or
certificates representing such shares. The Company shall give Parent prompt
notice of any written demands for appraisal of any shares of capital stock of
the Company, withdrawals of such demands and any other instruments served
pursuant to Delaware Law and received by the Company. The Company shall give
Parent the opportunity to participate in all negotiations and proceedings with
respect to demands for appraisal under Delaware Law hereunder. The Company
shall not, except with the prior written consent of Parent, voluntarily make any
payment with respect to any demands for appraisal of any capital stock of the
Company or offer to settle or settle any such demands.
1.8 Surrender of Company Certificates.
----------------------------------
(a) Exchange Agent. Prior to the Effective Time, Parent shall designate
a bank or trust company to act as exchange agent (the "Exchange
Agent") in the Merger, which may be its registrar and transfer
agent.
(b) Parent to Provide Common Stock. Upon the Effective Time, Parent
shall make available to the Exchange Agent for exchange in
accordance with this Article 1, through such reasonable procedures
as Parent may adopt, the Parent Common Shares issuable pursuant to
Section 1.6 in exchange for outstanding shares of Company Common
Stock.
(c) Exchange Procedure. Promptly after the Effective Time, the Surviving
Company shall cause the Exchange Agent to mail to each holder of
record of a certificate or certificates (the "Company Certificates")
which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock whose shares were
converted into the right to receive Parent Common Shares pursuant to
Section 1.6:
(i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon delivery of the Company
Certificates to the Exchange Agent and shall be in such form
and have such other provisions as Parent may reasonably
specify); and
(ii) instructions for use in effecting the surrender of the
Company Certificates for cancellation to the Exchange Agent
or to such other agent or agents as may be appointed by
Parent. Upon surrender of the Company Certificates to the
Exchange Agent, together with such letter of transmittal,
duly completed and validly executed in accordance with the
instructions thereto, the holder of such Company Certificate
shall be entitled to receive in exchange therefor a
certificate representing the number of whole Parent Common
Shares which such holder has the right to receive pursuant
to Section 1.6 (the "Parent Certificates"), and the Company
Certificate so surrendered shall forthwith be cancelled.
Until so surrendered, each outstanding Company Certificate
that, prior to the Effective Time, represented shares of
Company Common Stock will be deemed from and after the
Effective Time, for all corporate purposes, other than the
Page 5
payment of dividends, to evidence the ownership of the
number of full Parent Common Shares into which shares of
Company Common Stock shall have been so converted in
accordance with Section 1.6.
(d) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with
respect to Parent Common Shares with a record date after the
Effective Time will be paid to the holder of any unsurrendered
Company Certificate with respect to Parent Common Shares represented
thereby until the holder of record of such Company Certificate shall
surrender such Company Certificate. Subject to applicable law,
following surrender of any such Company Certificate, there shall be
paid to the record holder of the certificates representing whole
Parent Common Shares issued in exchange therefor, without interest,
at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time
theretofore paid with respect to such Parent Common Shares.
(e) Transfers of Ownership. If any certificate for Parent Common Shares
is to be issued in a name other than that in which the Company
Certificate surrendered in exchange therefor is registered, it will
be a condition of the issuance thereof that (i) the Company
Certificate so surrendered will be properly endorsed and otherwise
in proper form for transfer, (ii) that the person requesting such
exchange will have paid to Parent, or any agent designated by it,
any transfer or other taxes required by reason of the issuance of a
certificate for Parent Common Shares in any name other than that of
the registered holder of the certificate surrendered, or established
to the satisfaction of Parent or any agent designated by it that
such tax has been paid or is not payable and (iii) that an opinion
shall have been delivered to Parent on behalf of the transferor to
the effect that such transfer will not violate Canadian or United
States securities laws or regulations.
(f) No Liability. Notwithstanding anything to the contrary in this
Section 1.8, none of the Exchange Agent, the Surviving Company or
any party hereto shall be liable to a Company Stockholder for any
amount properly paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(g) Investment Agreement. As a condition precedent to the receipt of
Parent Common Shares, a Company Stockholder must execute and deliver
to Parent an Investment Agreement in the form attached as Exhibit
5.4.
1.9 No Further Ownership Rights in Company Common Stock.
---------------------------------------------------
All Parent Common Shares issued upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms hereof shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock, and there shall be no further registration of transfers on
the records of the Surviving Company of shares of Company Common Stock which are
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Company Certificates are presented to the Surviving Company for any
reason, they shall be cancelled and exchanged for Parent Common Shares as
provided in this Article 1 and appropriately entered into the stock ledger of
the Surviving Company.
Page 6
1.10 Lost, Stolen or Destroyed Company Certificates.
-----------------------------------------------
In the event any Company Certificates shall have been lost, stolen or destroyed,
the Exchange Agent shall issue in exchange for such lost, stolen or destroyed
certificates, upon the making of an affidavit of that fact by the holder
thereof, such Parent Common Shares, as may be required pursuant to Section 1.6;
provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Parent or the Exchange
Agent with respect to the certificates alleged to have been lost, stolen or
destroyed.
1.11 Taking Necessary Action; Further Action.
----------------------------------------
If, at any time after the Effective Time, any such further action is necessary
or desirable to carry out the purposes of this Agreement and to vest the
Surviving Company with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company and Merger Sub, the
officers and directors of the Company and Merger Sub are fully authorized in the
name of their respective corporations or otherwise to take, and will take, all
such lawful and necessary action.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 The Company hereby represents and warrants to Parent and Merger Sub
that:
(a) the Company is a corporation duly organized, validly existing and in
good standing under Delaware Law, has all requisite corporate power
and authority to carry on its business as now being carried on by it
and to own or lease and operate its properties and assets and is
licensed or otherwise qualified to carry on business in each
jurisdiction in which a material amount of its business is conducted
or wherein the character of the properties and assets now owned by
it makes such qualification necessary;
(b) the authorized capital of the Company consists of 20,000,000 shares
of Common Stock, $0.001 par value per share, and 5,000,000 shares of
Preferred Stock, par value $0.001 per share, of which 4,000,000
shares of Company Common Stock and no shares of Preferred Stock are
validly issued and outstanding as fully paid and non-assessable
shares, of which none are subject to escrow or pooling arrangements;
a complete list of the Company's stockholders and the number of
shares of Company Common Stock held by them is attached hereto as
Schedule 2.1(b). Except as set forth in Schedule 2.1(b), all of the
issued and outstanding shares of Company capital stock were duly
authorized and validly issued and are fully paid and nonassessable
and are free of any liens or encumbrances created by or resulting
from the actions of the Company, and are not subject to preemptive
rights or rights of first refusal created by statute, the
Certificate of Incorporation or By-Laws of the Company or any
agreement to which the Company is a party or by which it is bound.
All outstanding shares of Company capital stock were issued in
compliance with all applicable federal and state securities laws.
Except as described in this Section 2.1(b) or reflected in Schedule
2.1(b), the Company does not have and is not bound, and will not be
bound as of the Effective Time, by any outstanding subscriptions,
options, warrants, convertible securities, calls, commitments,
agreements or obligations of any character, or rights or obligations
capable of becoming any of the foregoing, calling for the purchase,
redemption or issuance of any shares of Company capital stock or any
other equity security of the Company or any securities representing
Page 7
the right to purchase or otherwise receive any shares of Company
capital stock or any other equity security of the Company;
(c) the Company is not subject to any reporting requirements of the
Exchange Act;
(d) the Company has no subsidiaries;
(e) the Company has full corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved by the Board
of Directors of the Company (the "Company Board"). The Company Board
has directed that this Agreement and the transactions contemplated
hereby be submitted to the Company Stockholders for approval and,
except for the adoption of this Agreement by the requisite vote of
the Company Stockholders, no other corporate proceedings on the part
of the Company are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agreement and
all other agreements and documents to be entered into in connection
herewith have been duly and validly executed and delivered by the
Company and (assuming due authorization, execution and delivery by
Parent and Merger Sub) constitute valid and binding obligations of
the Company, enforceable against the Company in accordance with
their respective terms, except as enforcement may be limited by
general principles of equity whether applied in a court of law or a
court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally;
(f) [Reserved];
(g) except as set forth in Schedule 2.1(g), the Company is not a party
to any employment, management or service agreements;
(h) Except as set forth in Schedule 2.1(h) the Company has no
outstanding agreements or obligations in respect of the
registration, repurchase, redemption, exchange or conversion of any
of its outstanding securities and there are no pre-emptive rights
or, to the knowledge of the Company, voting, stockholder or other
similar agreements pertaining to the shares of Company Common Stock
or Preferred Stock;
(i) at the time of delivery pursuant to Section 4.1(h), the Company
Audited Financials will present fairly the financial condition and
results of operations of the Company at such dates and for the
respective periods indicated in such financial statements and have
been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis except as
otherwise stated in the notes to such financial statements;
(j) since October 31, 2001, there has been no material adverse change in
the business, operations, properties, assets or condition, financial
or otherwise, of the Company from that shown in the Company Audited
Financials;
(k) the books and records of the Company fairly and accurately set out
and disclose in all material respects the financial position of the
Company at the date hereof, all financial transactions relating to
the Company have been accurately recorded in such books and records
Page 8
and the minute books of the Company contain all records of the
meetings and proceedings of the Company Board and the Company
Stockholders;
(l) the Company does not have any liability or obligation including,
without limitation, tax liabilities, whether accrued, absolute,
contingent or otherwise, not reflected in the Company Audited
Financials including the notes thereto, except liabilities and
obligations that may be reflected on the Closing Date Balance Sheet,
which liabilities and obligations are not materially adverse in the
aggregate to the Company on a consolidated basis and do not exceed
in the aggregate US$25,000, and none of which results from, arises
out, relates to, is in the nature of or was caused by any breach of
contract, tort, breach of warranty, infringement or violation of
law. Except as disclosed in the Company Audited Financials, there
are no outstanding loans by the Company to any of the Company
Stockholders;
(m) there is no reasonable basis for and to the Company's knowledge,
there are no actions, suits, proceedings, investigations or
outstanding claims or demands, whether or not purportedly on behalf
of the Company, instituted, pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its
property or assets at law or in equity or before or by any
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or before any arbitrator, nor
to the Company's knowledge, is there any judgment, order, decree or
award of any court or other governmental authority having
jurisdiction, obtained, pending or, to the knowledge of the Company,
threatened against the Company or any of its property or assets.;
(n) except as described in Schedule 2.1(n), since October 31, 2001 there
has not occurred: (1) any acquisition or sale, transfer or other
disposition by the Company of any asset or property; (2) any damage,
destruction or loss whether or not covered by insurance; (3) any
declaration, setting aside or payment of any dividend or any other
distributions in respect of the capital stock or other equity
securities of the Company; (4) any issuance of any shares of the
capital stock of the Company or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock or other
equity securities of the Company; (5) any increase in the
compensation, pension or other benefits payable or to become payable
by the Company to any of its officers or employees, or any bonus
payments or arrangements made to or with any of them; (6) any
incurrence by the Company of any obligations or liabilities, whether
absolute, accrued, contingent or otherwise (including, without
limitation, liabilities as guarantor or otherwise with respect to
obligations of others); (7) any discharge or satisfaction by the
Company of any material lien or encumbrance or payment by the
Company of any obligation or liability (fixed or contingent); (8)
any change in any assumptions underlying or methods of calculating
any debt, contingency, or other reserve of the Company; (9) any
cancellation of any debt or claim or any waiver of any right of in
an amount; (10) any disposition, assignment, transfer or lapse of
any right of the Company to use any patent, registered trademark,
trade name, copyright, know-how or process; (11) any change in any
method of accounting or in any accounting practice of the Company;
(12) any payment, other than salary payments to employees of the
Company, loan or advance by the Company to, or any sale, transfer or
lease of any of Company's properties or assets to, or any other
contract, commitment, agreement, understanding, arrangement or
transaction with, any officer, director or shareholder of Company;
(13) the creation or imposition of any lien on the Company
properties or assets; (14) any capital expenditures by the Company;
(15) any agreement, whether in writing or otherwise, to take any of
Page 9
the foregoing actions described in this Section 2.1(n); or (16) any
material adverse change in the business, properties, assets,
liabilities, condition (financial or otherwise) or prospects of the
Company, taken as a whole.
(o) the business of the Company is being conducted in all material
respects in compliance with all applicable laws, regulations,
ordinances, by-laws, orders and decrees of all authorities having
jurisdiction over the Company;
(p) attached hereto as Schedule 2.1(p) is a complete list of each
contract or agreement between the Company and any other person, and
each such contract is in full force and effect and, to the knowledge
of the Company, is valid, binding and enforceable against each of
the parties thereto in accordance with its terms and no material
breach or default exists in respect thereof on the part of any
party thereto and no event has occurred which, with the giving of
notice or the lapse of time or both, would constitute such a
material breach or default. All material statutory municipal and
other licenses, consents, permits and authorities necessary or
desirable for the carrying on of the business and activities of the
Company as now carried on, have been obtained and are valid and
subsisting and all conditions thereof have been complied with in all
material respects and, to the knowledge of the Company, none of them
are likely to be suspended, cancelled, revised, refused or revoked;
(q) none of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or the
fulfilment of or compliance with the terms and provisions hereof do,
nor will they (with the giving of notice or the lapse of time or
both):
(i) violate any provision of any law or administrative
regulation or any judicial or administrative order, award,
judgment or decree applicable to the Company;
(ii) conflict with any of the terms, conditions or provisions of
the charter documents (including the bylaws) of the Company;
(iii) violate, materially conflict with, result in a material
breach of, constitute a material default under or accelerate
or permit the acceleration of the performance required by,
any agreement, covenant, undertaking, commitment,
instrument, judgment, order, decree, note, bond, mortgage,
license, sublicense, lease or other obligation, or award to
which the Company is a party or by which it is bound or to
which any of its property or assets is subject; or
(iv) result in the cancellation, suspension or material
alteration in the terms of any material license, permit or
authority held by the Company or in the creation of any
lien, charge, security interest or encumbrance upon any
material assets of the Company under any such material
agreement, covenant, undertaking, commitment, instrument,
judgment, order, decree or award or give to any other person
any material interest or rights, including rights of
purchase, termination, cancellation or acceleration, under
any such material agreement, covenant, undertaking,
commitment, instrument, judgment, order, decree or award;
(r) except as described in Schedule 2.1(r), the Company has not incurred
any liability for brokerage fees, finder's fees, agent's commissions
or other similar forms of compensation in connection with this
Agreement or the transactions contemplated hereby;
Page 10
(s) the shares of Company Common Stock or Preferred Stock are not listed
on any stock exchange;
(t) as to the "Company Intellectual Property," which means (A) that
certain License Agreement between the Company and Xxxxx Xxxxxxx
University dated April 18, 2001 (the "Xxxxx Xxxxxxx License") and
all of the Company's rights and obligations thereunder (all of which
by virtue of this Agreement pass through and inure to the benefit of
the Surviving Company, including the representations and warranties
of Xxxxx Xxxxxxx University), (B) that certain Sub-License Agreement
between the Company and ILEX Oncology, Inc. dated June 22, 2001 (the
"Sublicense Agreement"), (C) as of the Effective Time, the License
and Option Agreement dated December 19, 2001, covering ILEX
Technology (as defined in Section 9.3) and all of the Company's
rights and obligations thereunder which shall supersede and replace
(B) above (the "ILEX Agreement"), and (D) the Xxxxxx Agreement and
all of the Company's rights and obligations thereunder;
(i) except as described in Schedule 2.1(t)(i) the Company is not
a party to any agreement pursuant to which any third party
is authorized to use any Company Intellectual Property;
(ii) the Company is not, and to the knowledge of the Company,
without independent investigation, no party to any
agreements pertaining in any way to the Company's rights in
the Company Intellectual Property, including the Xxxxx
Xxxxxxx License, is in violation of such agreements, and the
execution and delivery of this Agreement and the performance
by the Company of its obligations hereunder will not impair
in any material respect the Company's rights or alter the
rights or obligations of any third party under or violate
any such agreements, and the Xxxxx Xxxxxxx License is fully
paid up as of the Effective Time;
(iii) except as set forth in Schedule 2.1(t)(iii) hereto, to the
knowledge of Company without independent investigation, no
claims with respect to the Company Intellectual Property
have been asserted or, to the knowledge of the Company, are
threatened by any person, nor does the Company have
knowledge without independent investigation of any valid
grounds for any bona fide claims (A) to the effect that the
manufacture, sale or use of any product, or any licensing of
any Company Intellectual Property, infringes on any
copyright, patent, trademark or trade secret or violates any
third party's rights in any domain name or any other third
party proprietary rights, (B) against the use by the Company
of any Company Intellectual Property, or (C) challenging the
ownership, control, validity or effectiveness of any of the
Company Intellectual Property; and to the knowledge of
Company, no proceedings have been initiated pertaining to
patent interferences or patent oppositions relating to
Company Intellectual Property or portions thereof;
(iv) to the knowledge of the Company, without independent
investigation, all patents and registered trademarks
encompassed by or part of the Company Intellectual Property
Page 11
are valid and subsisting, and no copyright encompassed by or
part of the Company Intellectual Property has been forfeited
to the public domain. To the Company's knowledge, without
independent investigation, there is no material unauthorized
use, infringement or misappropriation of any of the Company
Intellectual Property by any third party, including any
employee or former employee of the Company;
(v) to the knowledge of the Company, without independent
investigation, the Company Intellectual Property is free and
clear of all liens, claims, encumbrances, rights, or
equities whatsoever of any third party. Company has not
encumbered or agreed that any third party may encumber
(through liens, claims, rights or equities) the Company
Intellectual Property except for any encumbrances granted
under the Xxxx Xxxxxxx License and the Sublicense Agreement;
(vi) [Reserved]
(vii) To the knowledge of Company, without independent
investigation, the Company has not been sued or charged in
writing as a defendant in any claim, suit, action or
proceeding which involves a claim of infringement of
patents, trademarks, service marks, trade names, trade
dress, trade secrets, copyrights, moral rights, or domain
names, and which has not been finally terminated prior to
the date hereof. Company has no knowledge of any
infringement liability with respect to, or infringement by,
the Company or any of its subsidiaries of any patents,
trademarks, service marks, trade names, trade dress, trade
secrets, copyrights, moral rights, or domain names of
another;
(u) other than the Company Intellectual Property, the Company does not
own or otherwise have any rights (including without limitation
under any license) to or under any patents; inventions; trademarks;
service marks; trade names; trade dress; trade secrets; copyrights;
moral rights; domain names; any renewal rights, applications, and
registrations for any of the foregoing; any goodwill associated with
such trademarks, service marks, trade names, and trade dress;
technology; computer software programs or applications (in source
and/or object code form); any documents and files relating to
design, end user documentation, quality control, sales, marketing or
customer support, and any schematics, records (including, without
limitation, clinical records), or databases, the intellectual
property rights in which pertain to any of the foregoing; any know-
how or tangible or intangible proprietary information or materials;
or any third-party proprietary or confidential information;
(v) for purposes of this Article 2, "Taxes" means taxes, duties, fees,
premiums, assessments, imposts, levies and other charges of any kind
whatsoever imposed by any governmental authority, including all
interest, penalties, fines, additions to tax or other additional
amounts imposed in respect thereof, including those levied on, or
measured by, or referred to as, income, gross receipts, profits,
capital, transfer, land transfer, sales, goods and services,
harmonized sales, use, value-added, excise, stamp, withholding,
business, franchising, property, employer health, payroll,
employment, health, social services, education and social security
taxes, all surtaxes, all customs duties and import and export taxes,
all licence, franchise and registration fees and all employment
insurance, health insurance and other government pension plan
premiums or contributions. All tax returns, reports and forms of the
Page 12
Company required to be filed by or with the respect to the
activities of Company under the laws of any jurisdiction, domestic
or foreign, have been duly and timely filed, which returns, reports
and statements are true, correct and complete in all respects, and
all Taxes, fees and other governmental charges of any nature
whatsoever which were required to be paid have been paid. Complete
and accurate copies of all tax returns filed, if any, have been
previously delivered to Parent. There are no liens for taxes upon
the Company or its assets except liens for current Company taxes not
yet due. Company has made available to Parent complete copies of all
the income tax returns, all examination reports by any taxing
authority, and any statements of deficiencies proposed or assessed
against or agreed by Company. Company has received no written notice
of any claimed, proposed or assessed deficiencies or any adjustment
for any Tax;
(w) except as described in Schedule 2.1 (w), the Company is not a party
to or subject to: (i) any union contract, employment contract or
arrangement providing for future compensation, written or oral, with
any officer, consultant, director or employee not terminable at will
by the Company; (ii) any employee benefit plan or other plan or
contract or arrangement, written or oral, requiring Company to
provide bonuses, pensions, deferred compensation, retirement
payments, profit sharing or the like; (iii) any lease of real or
personal property; (iv) except for trade indebtedness incurred in
the ordinary course of business, any indebtedness for borrowed money
by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee or otherwise; or (v) any
contracts containing covenants purporting to limit Company's freedom
to compete in any line of business in any geographical area;
(x) the information supplied by the Company for inclusion in the
Information Circular (as hereinafter defined) to be filed with all
applicable securities regulatory authorities as part of the
registration statement to be filed pursuant to the Registration
Rights Agreement described in Section 5.8 hereof, or to be sent to
the shareholders of Parent in connection with the meeting of Parent
shareholders (the "Parent Shareholders") to consider the Merger (the
"Parent Meeting") (such information circular as amended or
supplemented is referred to herein as the "Information Circular"),
shall not, on the date the Information Circular (or any amendment
thereof or supplement thereto) is first mailed to Parent
Shareholders, at the time of the Parent Meeting and at the Effective
Time, contain any statement which, at such time and in light of the
circumstances under which it was made, be false or misleading with
respect to any material fact, or shall omit to state any material
fact necessary in order to make the statements made therein, not
false or misleading. If at any time prior to the Effective Time any
event relating to the Company or any of its respecting affiliates,
officers or directors should be discovered by the Company which
should be set forth in an amendment to the registration statement or
a supplement to the Information Circular, the Company shall promptly
inform Parent and Merger Sub. Notwithstanding the foregoing, the
Company makes no representation or warranty with respect to any
information supplied by Parent or Merger Sub which is contained in
any of the foregoing documents;
(y) the Company Board has, as of the date of this Agreement, (i)
determined that the Merger is fair to, and in the best interest of
the Company and its stockholders, and (ii) has agreed to recommend
that its stockholders approve this Agreement and the transactions
contemplated herein;
Page 13
(z) to the knowledge of the Company, neither the Company nor any of its
affiliates has taken or agreed to take any action, failed to take
any action or is aware of any fact or circumstance that would
prevent the Merger from constituting a tax-free reorganization
within the meaning of Section 368(a) of the Code or that would cause
any of the Company Stockholders to recognize gain for U.S. income
tax purposes upon the exchange of their Company Common Stock for
Parent Common Shares pursuant to the Merger; and
(aa) No representation, warranty or statement made by the Company in this
Agreement or in the Schedules or Exhibits attached hereto, contains
any untrue statement of a material fact or omits to state a material
fact required to be stated herein or therein or necessary to make
the statements contained herein or therein not misleading.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
3.1 Parent and Merger Sub hereby, jointly and severally, represent and
warrant to the Company that:
(a) each of Parent, Parent Subsidiaries and Merger Sub is a corporation
duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, has all requisite corporate
power and authority to carry on its business as now being carried on
by it and to own or lease and operate its properties and assets and
is licensed or otherwise qualified to carry on business in each
jurisdiction in which a material amount of its business is conducted
or wherein the character of the properties and assets now owned by
it makes such qualification necessary;
(b) the authorized capital of Parent consists of 200,000,000 common
shares without par value of which on the date hereof, 41,235,848
Parent Common Shares are validly issued and outstanding as fully
paid and non-assessable shares. Upon exercise of the Special
Warrants (as defined in Section 9.3) outstanding on the date hereof,
there will be 43,070,181 validly issued and outstanding fully paid
and non-assessable Parent Common Shares. Upon exercise or conversion
of all other warrants, rights, notes, preferred stock, and any other
convertible securities and options outstanding on the date hereof
there will be 52,001,035 validly issued and outstanding fully paid
and non-assessable Parent Common Shares. Except as set forth in
Schedule 3.1(b), all of the issued and outstanding Parent Common
Shares were duly authorized and validly issued and are fully paid
and nonassessable and are free of any liens or encumbrances created
by or resulting from the actions of the Parent, and are not subject
to preemptive rights or rights of first refusal created by statute,
the Memorandum or Articles of the Parent or any agreement to which
the Parent is a party or by which it is bound. All Parent Common
Shares outstanding on the date hereof have been offered, issued,
sold and delivered by Parent in compliance with: (i) all
registration or qualification and prospectus requirements (or
applicable exemptions therefrom) of all applicable Canadian
Securities Laws (as defined below) and other applicable securities
laws; and (ii) all material requirements set forth in applicable
agreements or instruments. Except as described in this Section
3.1(b) or reflected in the Schedule 3.1(b) the Parent does not have
and is not bound by any outstanding subscriptions, options,
warrants, convertible securities, calls, commitments, agreements or
obligations of any character calling for the purchase, redemption or
issuance of any Parent Common Shares or any other equity security of
the Parent or any securities representing the right to purchase or
otherwise receive any Parent Common Shares or any other equity
security of the Parent;
Page 14
(c) Parent is a reporting issuer in good standing under the securities
laws of the Provinces of British Columbia, Alberta, Ontario, Quebec
and the Yukon Territory, the rules, their respective regulations,
prescribed forms, orders and rulings made thereunder and the policy
statements issued by the securities commissions or other applicable
securities regulatory authorities thereunder (the "Canadian
Securities Laws") and is in material compliance with the by-laws,
rules and regulations of The Toronto Stock Exchange. Parent has
timely filed all material forms, reports and documents required to
be filed by Parent under the Canadian Securities Laws and the rules
and regulations of The Toronto Stock Exchange since Parent became a
reporting issuer under the Canadian Securities Laws or commenced
listing on The Toronto Stock Exchange, as applicable, other than a
failure to timely file any such document which would not have a
material adverse effect on the Parent or an adverse effect on the
ability to resell on The Toronto Stock Exchange the Parent Common
Shares issued to the Company Stockholders in the Merger; provided,
however, that all such material required forms, reports and
documents required to be filed by Parent before the date of this
Agreement have been filed. All such required forms, reports and
documents are referred to herein as the "Parent Securities Reports."
As of their respective dates, the Parent Securities Reports (i) were
prepared in accordance with the requirements of applicable Canadian
Securities Laws and the rules and regulations of The Toronto Stock
Exchange applicable to such Parent Securities Reports, and (ii) did
not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such
filing) contain any misrepresentation of a material fact or 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 under which they were made, not misleading. Parent
represents and warrants that, as of the date of this Agreement it is
eligible to utilize clause 74(2)(8) of the Securities Act (British
Columbia) in relation to the issue by Parent of the Parent Common
Shares to the Company Stockholders pursuant to the terms of this
Agreement;
Parent is a "qualifying issuer" (as that term is defined in
Multilateral Instrument 45-102 Resale of Securities) ("MI 45-102").
With regard to Canadian Securities Laws, by virtue of the
application of MI 45-102, the Parent Common Shares issuable to the
Company Stockholders upon consummation of the Merger will be freely
resaleable in Canada on The Toronto Stock Exchange provided that the
following conditions are met at the time of the trade: (i) Parent is
or has been a reporting issuer in a jurisdiction listed in Appendix
B of MI 45-102 for a period of four (4) months immediately preceding
the trade; (ii) the trade is not a "control distribution", as
defined in MI 45-102; (iii) no unusual effort is made to prepare the
market or to create a demand for the securities that are the subject
of the trade; (iv) no extraordinary commission or consideration is
paid to a person or company in respect of the trade; and (v) if the
selling security holder is an insider or officer of Parent, the
selling security holder has no reasonable grounds to believe that
the issuer is in default of securities legislation;
(d) The authorized and issued capital of Merger Sub consists of One
Thousand shares of common stock, all of which are held by Parent. In
addition to Merger Sub, Parent has two wholly owned subsidiaries
which are disclosed in Schedule 3.1(d) (together with Merger Sub,
collectively referred to as the "Parent Subsidiaries"). Parent owns
Page 15
all of the issued and outstanding shares or capital stock of the
Parent Subsidiaries, as the case may be, and Parent Subsidiaries do
not have and are not bound by any outstanding subscriptions,
options, warrants, convertible securities, calls, commitments,
agreements or obligations or any character calling for the purchase,
redemption or issuance of any shares or capital stock or other
equity security of Parent Subsidiaries or any securities
representing the right to purchase or otherwise receive any shares
of Parent Subsidiary capital stock or any other equity security of
Parent Subsidiaries. All outstanding shares of Parent Subsidiary
capital stock were issued in compliance with applicable Canadian
Securities Laws and applicable U.S. securities laws;
(e) The Parent has full corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby subject to
shareholder approval. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have
been duly and validly approved by the Parent Board. Except for the
adoption and approval of this Agreement and approval of the Merger
by the requisite vote of the Parent Shareholders, no other corporate
proceedings on the part of the Parent or the Parent Subsidiaries are
necessary to approve this Agreement or the Merger. This Agreement
and all other agreements and documents to be entered into in
connection herewith have been duly and validly executed and
delivered by the Parent and (assuming due authorization, execution
and delivery by Company) constitute valid and binding obligations of
the Parent, enforceable against the Parent in accordance with their
respective terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally. Merger Sub has all
requisite corporate power and authority to enter into, execute,
deliver and perform its obligations under, this Agreement. The
execution, delivery and performance by Merger Sub of this Agreement
has been duly authorized by the Merger Sub board of directors in
accordance with its charter documents and applicable laws. This
Agreement constitutes, when executed by the other parties hereto,
the valid and binding obligation of Merger Sub, enforceable in
accordance with its terms, except as such enforceability may be
limited by applicable insolvency, bankruptcy, reorganization or
other similar laws affecting creditors' rights generally and
applicable equitable principles (whether considered in a proceeding
at law or in equity);
(f) except as disclosed in Schedule 3.1(b) there are no pre-emptive
rights or, to the knowledge of Parent, voting, stockholders or other
similar agreements pertaining to the Parent Common Shares. The
Parent Common Shares to be issued to the Stockholders in the Merger,
when issued in accordance with the provisions of this Agreement,
will be validly issued, fully paid and non-assessable, and not
subject to any encumbrances or pre-emptive rights except for
applicable restrictions on transfer imposed by applicable securities
laws, including those imposed by the 1933 Act and Rule 144
promulgated under the 1933 Act, and under applicable "blue sky"
state securities laws or Canadian Securities Laws, and will be
issued in compliance with Canadian Securities Laws, and applicable
United States and applicable state securities laws;
(g) except with respect to the registration rights and requirements of
the Special Warrants described in Schedule 3.1(b) and with respect
to the registration rights of the holders of Common Stock pursuant
to the Registration Rights Agreement, the Parent and the Merger Sub
are under no obligations to register or qualify any capital stock of
the Parent or Merger Sub pursuant to any registration rights
agreement or similar agreement;
Page 16
(h) the audited consolidated financial statements of Parent for its
fiscal year ended November 30, 2000 (the "Parent Audited
Financials") and the unaudited consolidated financial statements for
the nine months ended August 31, 2001 present fairly the financial
condition and results of operations of Parent as at such dates and
for the respective periods indicated in such financial statements
and have been prepared in accordance with Canadian generally
accepted accounting principles applied on a consistent basis, except
as otherwise stated in the notes to such financial statements and
comply with all applicable requirements of Canadian Securities Laws;
(i) since August 31, 2001, there has been no material adverse change in
the business, operations, properties, assets or condition, financial
or otherwise, of Parent from that shown in the unaudited
consolidated financial statements of Parent for the period ended
August 31, 2001;
(j) the books and records of Parent fairly and accurately set out and
disclose in all material respects the financial position of Parent
as at the date hereof, all material financial transactions relating
to Parent have been accurately recorded in such books and records
and the minute books of Parent contain all records of the meetings
and proceedings of the stockholders and directors of Parent;
(k) Parent and Parent Subsidiaries do not have any material liability or
obligation including, without limitation, tax liabilities, whether
accrued, absolute, contingent or otherwise, not reflected in the
Parent Audited Financials or their unaudited consolidated financial
statements for the nine months ended August 31, 2001, except
liabilities and obligations incurred in the ordinary course of its
business since August 31, 2001, which liabilities and obligations
are not materially adverse in the aggregate to Parent on a
consolidated basis. Except as disclosed in the Public Documents,
there are no outstanding loans by the Parent to any Parent
Shareholders. The Parent (i) has been released from all securities,
guarantees, and indemnities given by or binding upon the Parent in
relation to any debt or obligation of its shareholders and/or all or
any third parties and (ii) no such securities and indemnities exist;
(l) there is no basis for and there are no material actions, suits,
proceedings, investigations or outstanding claims or demands,
whether or not purportedly on behalf of Parent, instituted, pending
or, to the knowledge of Parent, without independent investigation,
threatened against or materially adversely affecting Parent or any
of its property or assets at law or in equity or before or by any
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or before any arbitrator, nor
is there any judgment, order, decree or award of any court or other
governmental authority having jurisdiction, obtained, pending or, to
the knowledge of Parent without independent investigation,
threatened against Parent or any of its property or assets, which
would prevent or materially hinder the consummation of the
transactions contemplated by this Agreement or which would involve
the reasonable possibility of any material judgment or liability,
whether or not covered by insurance, or which in the aggregate would
have a material adverse effect on the business, operations,
properties, assets or condition, financial or otherwise, of Parent,
except as disclosed in the Public Documents;
(m) Except as described in the Public Documents, the Parent and each
Parent Subsidiary has conducted its business only in the ordinary
course and there has not occurred with respect to Parent or any
Parent Subsidiary: (1) any acquisition or sale, transfer or other
disposition of any asset or property other than inventory in the
Page 17
ordinary course of business; (2) any damage, destruction or loss
whether or not covered by insurance, in excess of $10,000 in the
aggregate; (3) any declaration, setting aside or payment of any
dividend or any other distributions in respect of the capital stock
or other equity securities; (4) any issuance of any shares of the
capital stock or any direct or indirect redemption, purchase or
other acquisition of any of the capital stock or other equity
securities; (5) any increase in the compensation, pension or other
benefits payable or to become payable to any of its officers or
employees, or any bonus payments or arrangements made to or with any
of them (other than annual or periodic increases made in the
ordinary course of business consistent with past practice); (6) any
incurrence of any obligations or liabilities, whether absolute,
accrued, contingent or otherwise (including, without limitation,
liabilities as guarantor or otherwise with respect to obligations of
others), other than obligations and liabilities incurred in the
ordinary course of business or as contemplated hereby; (7) any
discharge or satisfaction of any material lien or encumbrance or
payment of any obligation or liability (fixed or contingent) in an
amount exceeding $10,000 other than in the ordinary course of
business; (8) any change in any assumptions underlying or methods of
calculating any debt, contingency or other reserve; (9) any
cancellation of any debt or claim or any waiver of any right of in
an amount exceeding $10,000; (10) any disposition, assignment,
transfer or lapse of any right to use any patent, registered
trademark, trade name, copyright, know-how or process; (11) any
change in any method of accounting or in any accounting practice;
(12) any payment, other than salary payments to employees, loan or
advance to, or any sale, transfer or lease of any of Parent's or any
Parent Subsidiary's properties or assets to, or any other contract,
commitment, agreement, understanding, arrangement or transaction
with, any officer, director or shareholder of Parent or any Parent
Subsidiary; (13) the creation or imposition of any lien
properties or assets; (14) any capital expenditures in excess of
$10,000; (15) any agreement, whether in writing or otherwise, to
take any of the foregoing actions described in this Section 3.1(m);
or (16) any material adverse change in the business, properties,
assets, liabilities, condition (financial or otherwise) or prospects
of the Parent, taken as a whole;
(n) the business of Parent and each Parent Subsidiary is being conducted
in all material respects in compliance with all applicable laws,
regulations, ordinances, by-laws, orders and decrees of all
authorities having jurisdiction. All of the outstanding shares of
Merger Sub capital stock are owned by Parent and have been duly
authorized and validly issued, are fully paid and nonassessable and
have been issued in compliance with Canadian Securities Laws, and
applicable United States and applicable state securities laws.
Merger Sub was formed for the sole purpose of consummating the
Merger and has no assets or liabilities except as necessary for such
purpose;
(o) attached hereto as Schedule 3.1(o) is a complete list of each
contract or agreement between Parent and each Parent Subsidiary and
any other person which is material to the ownership, use or
operation of a material portion of the business, properties or
assets of Parent or Parent Subsidiaries and each such contract is in
full force and effect and, to the knowledge of Parent, is valid,
binding and enforceable against each of the parties thereto in
accordance with its terms and no material breach or default exists
in respect thereof on the part of any party thereto and no event has
occurred which, with the giving of notice or the lapse of time or
both, would constitute such a material breach or default. All
material statutory municipal and other licenses, consents, permits
and authorities necessary or desirable for the carrying on of the
business or activities of the Parent as now carried on have been
obtained and are valid and subsisting and all conditions thereof
have been complied with in all material respects and, to the
knowledge of Parent, none of them are likely to be suspended,
cancelled, revised, revoked or refused;
