Exhibit 99.47
SHARE PURCHASE AGREEMENT
THIS AGREEMENT made the 24th day of February, 2006.
AMONG:
TRANSITION THERAPEUTICS INC., a body corporate, incorporated under the
laws of the Province of Ontario (hereinafter referred to as the
"PURCHASER");
AND
1255205 ONTARIO INC., a body corporate, incorporated under the laws of
the Province of Ontario (hereinafter referred to as "BIO");
AND
ELLIPSIS NEUROTHERAPEUTICS INC., a body corporate, incorporated under
the laws of the Province of Ontario (hereinafter referred to as
"ENI");
AND
1255206 ONTARIO INC., a body corporate, incorporated under the laws of
the Province of Ontario (hereinafter referred to as "HOLDCO");
AND
__, an individual resident in the City of Toronto, in the Province of
Ontario ("__");
AND
__, an individual resident in the City of Toronto, in the Province of
Ontario ("__");
AND
__, an individual resident in the City of Toronto, in the Province of
Ontario ("__");
AND
__, an individual resident in the City of Toronto, in the Province of
Ontario ("__");
(__, __, __, and __ are collectively, hereinafter referred to as the
"BIO DIRECTORS").
AND
__, an individual resident in the City of Toronto, in the Province of
Ontario ("__");
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AND
__, an individual resident in the City of Toronto, in the Province of
Ontario ("__");
AND
__, an individual resident in the City of London, in the Province of
Ontario ("__");
(__, __, __, and __ are collectively, hereinafter referred to as the
"ENI DIRECTORS");
(__, __, __, are collectively, hereinafter referred to as the "HOLDCO
DIRECTORS");
AND
__, a body corporate incorporated under the laws Ontario (the "WARRANT
HOLDER");
WHEREAS the Purchaser wishes to acquire all of the issued and outstanding
securities of Bio, and, in that regard, wishes to make the Bio Offer, as defined
herein, to all of the holders of such securities;
AND WHEREAS the Purchaser wishes to acquire all of the issued and
outstanding securities of ENI other than those owned by Bio and, in that regard,
wishes to make the ENI Offer, as defined herein, to all holders of such
securities;
AND WHEREAS the Purchaser wishes to acquire all of the issued and
outstanding securities of HoldCo pursuant to this Agreement;
AND WHEREAS the Bio Directors have agreed to accept the Bio Offer and sell,
and the Purchaser desires to purchase, their respective Bio Shares upon and
subject to the terms and conditions hereinafter set forth;
AND WHEREAS the ENI Directors have agreed to accept the ENI Offer and sell,
and the Purchaser desires to purchase, their respective ENI Shares upon and
subject to the terms and conditions hereinafter set forth;
AND WHEREAS the HoldCo Directors have agreed to sell, and the Purchaser
agreed to purchase, their respective HoldCo Shares upon and subject to the terms
and conditions hereinafter set forth;
THIS AGREEMENT WITNESSES THAT in consideration of the respective covenants,
warranties, representations, agreements and payments herein contained, the
parties hereto covenant and agree as follows:
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ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Agreement, including the premises hereto, this article and each
schedule, the words and phrases set forth below shall have the meanings ascribed
thereto, namely:
(a) "AGREED REMITTANCE DATE" means the 28th day after the end of the month
containing the Closing Date.
(b) "AGREEMENT" means this agreement among the Purchaser, Bio, ENI, HoldCo, the
Directors, and the Warrant Holder and the expressions "above", "below",
"herein", "hereto", "hereof" and similar expressions refer to this
Agreement;
(c) "APPLICABLE LAW" means the applicable provisions of any law, by-law,
statute, regulation, rule, ordinance, policy, order, information letter,
general bulletin, guideline criteria or directive enacted or issued by any
governmental or regulatory body or other duly constituted public authority
(whether legislative, administrative or executive) having jurisdiction over
the Purchaser, Bio, ENI, HoldCo or Directors and includes, without
limitation, the applicable provisions of any permit, licence, approval or
other governmental or regulatory authorization issued to the Purchaser,
Bio, ENI, HoldCo, and Directors in respect of any of them;
(d) "BIO DIRECTORS" means __, __, __, and __;
(e) "BIO FINANCIAL STATEMENTS" means the financial statements of Bio as at
December 31, 2005 and for the year then ended, which are attached hereto as
Schedule "A";
(f) "BIO OFFER" means an offer to purchase all of the Bio Shares, which offer
is made to the Bio Directors and accepted by them under this Agreement with
respect to the Bio Directors' Bio Shares and shall be made for the Bio
Purchase Consideration to the Remaining Bio Shareholders substantially in
the form attached hereto as Schedule "D";
(g) "BIO PURCHASE CONSIDERATION" means __;
(h) "BIO SHAREHOLDERS" means all holders of the common shares in the capital of
Bio;
(i) "BIO SHARES" means common shares in the capital of Bio;
(j) "BUSINESS" means the business presently and heretofore carried on by Bio,
ENI, and HoldCo respectively, as a going concern;
(k) "BUSINESS DAY" means a week day, excluding all statutory holidays in the
City of Toronto;
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(l) "CERTIFICATE" means written certification of a matter or matters of fact
which, if required from a corporation, shall be made by a duly authorized
officer of the corporation on behalf of the corporation and without
personal liability being assumed by such officer;
(m) "CLOSING" means the closing of the purchase and sale of the Purchased
Shares by the Purchaser and the payment by the Purchaser of the ENI
Purchase Consideration, the Bio Purchase Consideration and the HoldCo
Purchase Consideration therefore and the completion of all matters
incidental thereto;
(n) "CLOSING DATE" means March 10, 2006 or such other date as the parties
hereto agree;
(o) "COMFORT LETTER" means a letter addressed to the Purchaser, the
Non-Resident Vendor or counsel to the Non-Resident Vendor from the CRA
which provides that any amount withheld by the Purchase is to be retained
and not remitted to the Receiver General of Canada until such later date as
may be specified by the CRA.
(p) "COMPLIANCE CERTIFICATE" has the meaning ascribed thereto in Section
5.1(1);
(q) "CRA" means the Canada Revenue Agency;
(r) "CRA REMITTANCE DATE" means the later of the Agreed Remittance Date and
Such Date as may be specified later in writing by the CRA;
(s) "DEBT" means the corporation's total indebtedness, including long term
debt, bank debt and working capital deficiency;
(t) "DIRECTORS" means collectively, the ENI Directors, the Bio Directors, and
the HoldCo Directors;
(u) "DOLLARS" and "$" means dollars of the lawful money of Canada;
(v) "EFFECTIVE DATE" means the date of execution hereof;
(w) "ENI DIRECTORS" means __, __, __, and __;
(x) "ENI FINANCIAL STATEMENTS" means the financial statements of ENI as at
December 31, 2005 and for the year then ended, which are attached hereto as
Schedule "B";
(y) "ENI OFFER" means an offer to purchase all of the ENI Shares, which offer
is made to the ENI Directors and the Warrant Holder and accepted by them
under this Agreement with respect to the ENI Directors' ENI Shares and the
ENI Shares issuable to the Warrant Holder upon the exercise of the ENI
warrants, and shall be made for the ENI Purchase Consideration, to the
Remaining ENI Shareholders substantially in the form attached hereto as
Schedule "E";
(z) "ENI PURCHASE CONSIDERATION" means the price per ENI Share, set out in
Article 3, to be paid by the Purchaser for the ENI Shares purchased
pursuant to this Agreement;
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(aa) "ENI SHAREHOLDERS" means all holders of the common shares in the capital of
ENI;
(bb) "ENI SHARES" means the common shares in the capital of ENI;
(cc) "ENI WARRANTS" means warrants held by the Warrant Holder entitling it to
acquire __ ENI Shares for aggregate consideration of $__;
(dd) "ESCROW AGENT" means Computershare Trust Company of Canada;
(ee) "FDA" means the United States of America Food and Drug Administration;
(ff) "HOLDCO FINANCIAL STATEMENTS" means the financial statements of HoldCo as
at December 31, 2005 and for the year then ended, which are attached hereto
as Schedule "C";
(gg) "HOLDCO PURCHASE CONSIDERATION" means __;
(hh) "HOLDCO DIRECTORS" means __, __, and __;
(ii) "HOLDCO SHAREHOLDERS" means all holders of the common shares in the capital
of HoldCo;
(jj) "HOLDCO SHARES" means the common shares in the capital of HoldCo;
(kk) "NDA" means a New Drug Application, which is the vehicle through which drug
sponsors formally propose that the FDA approve a new pharmaceutical for
sale and marketing in the United States of America;
(ll) "NON-RESIDENT" shall mean not resident in Canada for the purposes of the
Tax Act;
(mm) "NON-RESIDENT VENDORS" means the Vendors who tender their respective Bio
Shares, ENI Shares, and HoldCo Shares in accordance with this Agreement and
who are Non-Residents;
(nn) "PARTIES" means a party to this Agreement, being the Purchaser, Bio, ENI,
HoldCo, Directors and the Warrant Holder and "PARTY" means any one of the
Parties;
(oo) "PLACE OF CLOSING" means the offices of the Purchaser's Counsel located at
Xxxxx 0000, Xxxxxxx Xxxxxxxx Xxxxx Xxxxxxx, Xxxxxxx X0X 0X0;
(pp) "PURCHASE PRICE" means the purchase consideration paid to the Vendors in
accordance with this Agreement;
(qq) "PURCHASED SHARES" means, collectively, the Bio Shares, the ENI Shares and
the HoldCo Shares as tendered to the Purchaser pursuant to this Agreement;
(rr) "PURCHASER'S COUNSEL" means XxXxxxxx Xxxxxxxx LLP;
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(ss) "REGULATORY APPROVALS" means the approvals for the transactions
contemplated herein required from all regulatory bodies, including the
Toronto Stock Exchange;
(tt) "REMAINING BIO SHAREHOLDERS" means those individuals or corporations, other
than the Bio Directors who are shareholders of Bio;
(uu) "REMAINING BIO SHARES" means __ common shares of Bio;
(vv) "REMAINING ENI SHAREHOLDERS" means those individuals or corporations, other
than the Purchaser, the ENI Directors and Bio who are shareholders of ENI;
(ww) "REMAINING ENI SHARES" means __ common shares of ENI;
(xx) "ROYALTY" shall have the meaning ascribed thereto in the Form of Royalty
Agreement attached hereto as Schedule "H";
(yy) "TAX ACT" shall mean the Income Tax Act (Canada) and the Income Tax Act
Regulations, as amended from time to time or publicly proposed to be
amended to the date of this Agreement;
(zz) "TAX AMOUNT" has the meaning ascribed thereto in Section 5.1(4);
(aaa) "TIME OF CLOSING" means 1:00 p.m. (Toronto time) on the Closing Date;
(bbb) "TRANSACTION" has the meaning ascribed thereto in Section 5.1(1);
(ccc) "TRANSITION MARKET PRICE" means the volume weighted average trading price
of the Transition Shares, calculated by dividing the total value by the
total volume of securities traded for the five trading days immediately
preceding the date each respective milestone is met;
(ddd) "TRANSITION SHARES" means the common shares in the capital of Transition;
(eee) "TSX" means the Toronto Stock Exchange;
(fff) "U.S. LEGEND" has the meaning ascribed thereto in Section 3.4(1)(5);
(ggg) "VENDORS" means the Bio Directors, the ENI Directors, the HoldCo
Directors, the Warrant Holder, the Remaining Bio Shareholders and the
Remaining ENI Shareholders who tender their respective ENI Shares, Bio
Shares and HoldCo Shares in accordance with this Agreement; and
(hhh) "WORKING CAPITAL" means current assets minus current liabilities, as
calculated in accordance with GAAP as of February 23, 2006, as set forth in
Schedule "F".
1.2 INCORPORATION OF APPENDICES
Appended hereto and forming part of this Agreement are the following
Schedules:
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Schedule "A" - Bio Financial Statements
Schedule "B" - ENI Financial Statements
Schedule "C" - HoldCo Financial Statements
Schedule "D" - Bio Offer to Purchase
Schedule "E" - ENI Offer to Purchase
Schedule "F" - Working Capital Calculation
Schedule "G" - Shareholdings and Consideration to be Received
Schedule "H" - Form of Royalty Agreement
Schedule "I" - Bio Assets and Liabilities
1.3 REFERENCES
References herein to an Article, clause, subclause, section or paragraph
shall mean a reference to an Article, clause, subclause, section or paragraph
within the body of this Agreement.
1.4 HEADINGS
The headings of Articles, clauses, subclauses, sections and paragraphs
herein and in the Schedules are inserted for convenience of reference only and
shall not affect or be considered to affect the construction of the provisions
hereof.
1.5 GENDER
In this Agreement words importing persons include corporations, companies,
individuals and other bodies corporate and vice versa, and words importing the
masculine gender include the feminine and neuter genders and vice versa.
1.6 ENTIRE AGREEMENT AND AMENDMENTS
This Agreement (including all appendices hereto) constitutes the entire
agreement between the parties hereto pertaining to the Purchased Shares and
supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties, and there
are no warranties, representations or other agreements between the parties in
connection with the subject matter hereof, except as specifically set forth
herein. No supplement, modification, waiver or termination of this Agreement
shall be binding unless executed in writing by the party to be bound thereby.
1.7 ENUREMENT
This Agreement shall be binding upon and shall enure to the benefit of the
parties hereto and their respective successors, receivers, receiver-managers,
trustees and permitted assigns.
1.8 ACCOUNTING PRINCIPLES
Wherever in this Agreement reference is made to a calculation to be made in
accordance with generally accepted accounting principles, such reference shall
be deemed to be to the generally accepted accounting principles ("GAAP") from
time to time approved by the Canadian
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Institute of Chartered Accountants, or any successor institute, applicable as at
the date on which such calculation is made or required to be made in accordance
with generally accepted accounting principles.
1.9 KNOWLEDGE
Where in this Agreement, or in any certificate or document delivered in
connection herewith or to effect any of the transactions contemplated hereby,
any statement, representation or warranty is made as to, or as being based on,
the knowledge, information or belief of a Party, it is understood to be based on
the actual knowledge, information and belief of a Party, after reasonable
inquiry.
ARTICLE 2
OFFERS, PURCHASE AND SALE AND CLOSING
2.1 PURCHASE AND SALE OF BIO SHARES
The Bio Directors agree to sell and convey the Bio Shares to the Purchaser
and the Purchaser agrees to purchase and accept the Bio Shares from the Bio
Directors in accordance with and subject to the terms and conditions set forth
in this Agreement.
2.2 OFFER TO REMAINING BIO SHAREHOLDERS
The Purchaser shall, upon execution of this Agreement, make the Bio Offer
to the Remaining Bio Shareholders for the Remaining Bio Shares. Bio undertakes
to use its reasonable commercial efforts to ensure that the Remaining Bio
Shareholders tender their Bio Shares pursuant to the Bio Offer.
2.3 PURCHASE AND SALE OF ENI SHARES
The ENI Directors agree to sell and convey the ENI Shares to the Purchaser
and the Purchaser agrees to purchase and accept the ENI Shares from the ENI
Directors in accordance with and subject to the terms and conditions set forth
in this Agreement.
2.4 OFFER TO REMAINING ENI SHAREHOLDERS
The Purchaser shall, upon execution of this Agreement, make the ENI Offer
to the Remaining ENI Shareholders for the Remaining ENI Shares. ENI undertakes
to use its reasonable commercial efforts to ensure that the Remaining ENI
Shareholders tender their ENI Shares pursuant to the ENI Offer.
2.5 PURCHASE AND SALE OF HOLDCO SHARES
The HoldCo Directors agree to sell and convey the HoldCo Shares to the
Purchaser and the Purchaser agrees to purchase and accept the HoldCo Shares from
the HoldCo Directors in accordance with and subject to the terms and conditions
set forth in this Agreement.
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2.6 CLOSING
Closing shall take place at the Place of Closing at the Time of Closing, or
at such other place or at such other time as the Purchaser, Bio, ENI, HoldCo,
Bio Directors, ENI Directors, HoldCo Directors, and the Warrant Holder may
agree.
ARTICLE 3
PURCHASE CONSIDERATION
3.1 ENI PURCHASE CONSIDERATION
(1) The ENI Directors shall sell the ENI Shares to the Purchaser and the
Purchaser shall purchase the ENI Shares from the ENI Directors, effective
as of the Closing Date, for the ENI Purchase Consideration upon and subject
to the terms and conditions hereof.
(2) The ENI Purchase Consideration payable by the Purchaser to the ENI
Directors for the ENI Shares shall be paid in the form of Transition Shares
issued at the Transition Market Price as set forth in Section 3.4 hereof.
3.2 BIO PURCHASE CONSIDERATION
(1) The Bio Directors shall sell the Bio Shares to the Purchaser and the
Purchaser shall purchase the Bio Shares from the Bio Directors, effective
as of the Closing Date, for the Bio Purchase Consideration upon and subject
to the terms and conditions hereof.
(2) The Bio Purchase Consideration payable by the Purchaser to the Bio
Directors for the Bio Shares shall be paid in the form of Transition Shares
issued at the Transition Market Price as set forth in Section 3.5 hereof.
3.3 HOLDCO PURCHASE CONSIDERATION
(1) The HoldCo Directors shall sell the HoldCo Shares to the Purchaser and the
Purchaser shall purchase the HoldCo Shares from the HoldCo Directors,
effective as of the Closing Date, for the HoldCo Purchase Consideration
upon and subject to the terms and conditions hereof.
(2) The HoldCo Purchase Consideration payable by the Purchaser to the HoldCo
Directors for the HoldCo Shares shall be paid in the form of Transition
Shares issued at the Transition Market Price as set forth in Section 3.6
hereof.
3.4 PAYMENT OF ENI PURCHASE CONSIDERATION
(1) The ENI Purchase Consideration shall be paid by Transition through: (i) an
up front payment (the "UP FRONT PAYMENT") equivalent to $__ per ENI Share
in the form of __ Transition Shares for each ENI Share, (ii) a
proportionate interest in the Royalty as set out in Section 3.8 of this
Agreement, and (iii) future Milestone payments (payable in the form of
additional Transition Shares issued at the then current Transition Market
Price) equivalent to up to $__ per ENI Share as set out below:
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(a) __ per ENI Share (the "FIRST MILESTONE");
(b) __ per ENI share (the "SECOND MILESTONE") less the amount paid
pursuant to 3.4(1)(a);
(c) __ per ENI share (the "THIRD MILESTONE") less the amounts paid
pursuant to 3.4(1)(a) and (b); and
(d) __ per ENI share (the "FOURTH MILESTONE") less the amounts paid
pursuant to 3.4(1)(a), (b) and (c);
(the First Milestone, the Second Milestone, the Third Milestone and the
Fourth Milestone are hereinafter referred to collectively as the
"MILESTONES", or individually, a "MILESTONE").
(2) The Purchaser and the Vendors agree that, at Closing, the fair market value
of the consideration in Section 3.4(1)(i) as set out above is $__ per ENI
Share and the fair market value of the consideration in Sections 3.4(1)(ii)
and 3.4(1)(iii) as set out above, is in the aggregate, $__ per ENI Share.
(3) In the event that the Transition Shares are no longer listed on a stock
exchange, any remaining portion of the ENI Purchase Consideration
associated with Milestones, which becomes payable pursuant to Section
3.4(1) hereof, shall be satisfied by the Purchaser through cash
consideration. If the Purchaser merges with another corporation, the
successor corporation (the "SUCCESSOR") will assume the payment obligations
arising under this Agreement, and any such Milestone payments may, at the
Successor's option, be satisfied through cash consideration or through the
delivery of shares in the capital of the Successor, provided such shares
are listed on a stock exchange in Canada. Further, if the Purchaser sells
the ENI Shares to an arm's length party, the acquiror of such shares shall
assume the Purchaser's payment obligations arising under this Agreement
without any further consent of the other parties hereto.
(4) Attached as Schedule "G" hereto is a schedule reflecting the ENI Purchase
Consideration payable to each ENI Shareholder assuming a Transition Market
Price of $0.70.
(5) The Transition Shares issued pursuant to Section 3.4(1) shall be subject to
a resale restriction period wherein on each four month anniversary of the
date of issue, the resale restriction period will cease for one third of
the issued shares, following which such Transition Shares will be freely
tradeable. In addition to the foregoing, certificates representing
Transition Shares issued to residents of the United States of America shall
bear the following legend (the "U.S. LEGEND"):
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THE
HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF
TRANSITION THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY (A) TO
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TRANSITION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF
REGULATION S UNDER THE 1933 ACT OR (C) WITHIN THE UNITED STATES IN
ACCORDANCE WITH ONE OR MORE EXEMPTIONS FROM REGISTRATION UNDER THE 1933
ACT, IF AVAILABLE, AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES
LAWS. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE GOOD DELIVERY IN
SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. PROVIDED THAT
TRANSITION IS A "FOREIGN ISSUER" WITHIN THE MEANING OF REGULATION S AT THE
TIME OF SALE, A NEW CERTIFICATE BEARING NO LEGEND MAY BE OBTAINED FROM
TRANSITION, UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED
DECLARATION, IN A FORM SATISFACTORY TO TRANSITION, TO THE EFFECT THAT SUCH
SALE IS BEING MADE IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE
1933 ACT."
(6) Transition Shares issued pursuant to a Milestone shall be issued within 14
days of the Milestone being achieved.
3.5 PAYMENT OF BIO PURCHASE CONSIDERATION
(1) The Bio Purchase Consideration shall be paid by Transition through: (i) an
up front payment (the "UP FRONT PAYMENT") equivalent to $__ per Bio Share
in the form of__ Transition Shares for each Bio Share, (ii) a proportionate
interest in the Royalty as set out in Section 3.8 of this Agreement, and
(iii) future Milestone payments (payable in the form of additional
Transition Shares issued at the then Transition Market Price) equivalent to
up to $__ per Bio Share as set out below:
(a) upon the First Milestone being achieved, $__ per Bio Share;
(b) upon the Second Milestone being achieved, $__ per Bio Share less the
amount paid pursuant to 3.5(1)(a);
(c) upon the Third Milestone being achieved, $__ per Bio Share less the
amounts paid pursuant to 3.5(1)(a) and (b); and
(d) upon the Fourth Milestone being achieved, $__ per Bio Share less the
amounts paid pursuant to 3.5(1)(a), (b) and (c).
(2) The Purchaser and the Vendors agree that at Closing, the fair market value
of the consideration in Section 3.5(1)(i) as set out above is $__ per Bio
Share and the fair market value of the consideration in Sections 3.5(1)(ii)
and 3.5(1)(iii) as set out above, is in the aggregate, $__ per Bio Share.
(3) In the event that the Transition Shares are no longer listed on a stock
exchange, any remaining portion of the Bio Purchase Consideration
associated with Milestones, which becomes payable pursuant to Section
3.5(1) hereof, shall be satisfied by the Purchaser through cash
consideration. If the Purchaser merges with another corporation, the
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successor corporation (the "SUCCESSOR") will assume the payment obligations
arising under this Agreement, and any such Milestone payments may, at the
Successor's option, be satisfied through cash consideration or through the
delivery of shares in the capital of the Successor, provided such shares
are listed on a stock exchange in Canada. Further, if the Purchaser sells
the Bio Shares to an arm's length party, the acquiror of such shares shall
assume the Purchaser's payment obligations arising under this Agreement
without any further consent of the other parties hereto.
(4) Attached as Schedule "G" hereto is a schedule reflecting the Bio Purchase
Consideration payable to each Bio Shareholder assuming a Transition Market
Price of $0.70.
(5) The Transition Shares issued pursuant to Section 3.5(1) in respect of the
Up Front Payment only shall be subject to a resale restriction period
wherein on each four month anniversary of the date of issue, the resale
restriction period will cease for one third of the issued shares, following
which such Transition Shares will be freely tradeable. In addition to the
foregoing, certificates representing Transition Shares issued to residents
of the United States of America shall bear the U.S. Legend.
(6) Transition Shares issued pursuant to a Milestone shall be issued within 14
days of the Milestone being achieved.
3.6 PAYMENT OF HOLDCO PURCHASE CONSIDERATION
(1) The HoldCo Purchase Consideration shall be paid by Transition through: (i)
an up front payment (the "UP FRONT PAYMENT") equivalent to $__ per HoldCo
Share in the form of __ Transition Shares for each HoldCo Share, (ii) a
proportionate interest in the Royalty as set out in Section 3.8 of this
Agreement, and (iii) future Milestone payments (payable in the form of
additional Transition Shares issued at the then Transition Market Price)
equivalent to up to $__ per HoldCo Share as set out below:
(a) upon the First Milestone being achieved, $__ per HoldCo Share;
(b) upon the Second Milestone being achieved, $__ per HoldCo Share less
the amount paid pursuant to 3.6(1)(a);
(c) upon the Third Milestone being achieved, $__ per HoldCo Share less the
amounts paid pursuant to 3.6(1)(a) and (b); and
(d) upon the Fourth Milestone being achieved, $__ per HoldCo Share less
the amounts paid pursuant to 3.6(1)(a)(b) and (c).
(2) The Purchaser and the Vendors agree that at Closing, the fair market value
of the consideration in Section 3.6(1)(i) as set out above is $__ per
HoldCo Share and the fair market value of the consideration in Sections
3.6(1)(ii) and 3.6(1)(iii) as set out above, is in the aggregate, $__ per
HoldCo Share.
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(3) In the event that the Transition Shares are no longer listed on a stock
exchange, any remaining portion of the HoldCo Purchase Consideration
associated with Milestones, which becomes payable pursuant to Section
3.6(1) hereof, shall be satisfied by the Purchaser through cash
consideration. If the Purchaser merges with another corporation, the
successor corporation (the "SUCCESSOR") will assume the payment obligations
arising under this Agreement, and any such Milestone payments may, at the
Successor's option, be satisfied through cash consideration or through the
delivery of shares in the capital of the Successor, provided such shares
are listed on a stock exchange in Canada. Further, if the Purchaser sells
the HoldCo Shares to an arm's length party, the acquiror of such shares
shall assume the Purchaser's payment obligations arising under this
Agreement without any further consent of the other parties hereto.
(4) Attached as Schedule "G" hereto is a schedule reflecting the HoldCo
Purchase Consideration payable to each HoldCo Shareholder assuming a
Transition Market Price of $0.70.
(5) The Transition Shares issued pursuant to Section 3.6(1) shall be subject to
a resale restriction period wherein on each four month anniversary of the
date of issue, the resale restriction period will cease for one third of
the issued shares, following which such Transition Shares will be freely
tradeable. In addition to the foregoing, certificates representing
Transition Shares issued to residents of the United States of America shall
bear the U.S. Legend.
(6) Transition Shares issued pursuant to a Milestone shall be issued within 14
days of the Milestone being achieved.
3.7 FRACTIONAL SHARES
Notwithstanding anything contained in this Agreement, including, without
limitation, this Article 3, none of the Vendors shall be entitled to, and the
Purchaser will not deliver, fractions of Transition Shares. Where the
application of the provisions of this Agreement, including, without limitation,
Article 3, would otherwise result in a Vendor receiving a fraction of a
Transition Share, the Vendor shall be entitled to receive that number of
Transition Shares that has been rounded up to the nearest whole number of
Transition Shares.
3.8 ROYALTY
In addition to the Bio Purchase Consideration, the ENI Purchase
Consideration, and the HoldCo Purchase Consideration all Bio Shareholders, ENI
Shareholders, and HoldCo Shareholders, respectively, that tender their
respective Bio Shares, ENI Shares and HoldCo Shares to the Purchaser in
accordance with this Agreement, shall receive at Closing a royalty agreement in
the form attached hereto as Schedule "H". Schedule "G" sets forth each Vendor's
respective Royalty interest; each of the Vendor's interest in the Royalty is
calculated assuming that all of the Bio Shares, ENI Shares and HoldCo Shares are
tendered to the Purchaser. Should less than all of the Bio Shares, ENI Shares
and HoldCo Shares be tendered, the Vendors' respective Royalty interests will
not be increased.
-14-
3.9 POTENTIAL PRODUCT DIVESTITURE
__.
3.10 DELIVERY OF CERTIFICATES FOR PURCHASED SHARES
Subject to the fulfilment of all of the terms and conditions hereof, at the
Time of Closing the Directors shall deliver to the Purchaser share certificates
representing the Purchased Shares duly endorsed for transfer to the Purchaser,
or other evidence of transfer of the Purchased Shares on the books of the Bio,
ENI, and HoldCo respectively, satisfactory to the Purchaser or the Purchaser's
Counsel, together with such other documentation as the Purchaser or the
Purchaser's Counsel may reasonably request for the purpose of effecting the
transfer and delivery of the Purchased Shares.
ARTICLE 4
TAX ELECTION
4.1 ELECTION UNDER SUBSECTION 85(1) OF THE TAX ACT
(1) The Purchaser will, at the request of the Vendors, jointly elect with each
Vendor under subsection 85(1) of the Tax Act with respect to the sale of
the Purchased Shares. Such election will be prepared by each Vendor and
filed by each Vendor and the Purchaser in the form and manner and within
the time prescribed by the Tax Act. The agreed amount for the purposes of
paragraph 85(1)(a) of the Tax Act in respect of each such property will be
such amount as is determined by each Vendor within the limits prescribed in
the Tax Act.
(2) The Purchaser will, at the request of each Vendor, jointly elect with each
Vendor under corresponding provisions of applicable provincial income tax
legislation with respect to the sale of the Purchased Shares. The
provisions of Section 4.1(1) will apply to the making of any such
provincial elections, with necessary changes.
ARTICLE 5
WITHHOLDING TAX
5.1 WITHHOLDING TAX
(1) The Purchaser and the Non-Resident Vendors acknowledge that, pursuant to
Section 116 of the Tax Act, in respect of purchase and sale of the
Purchased Shares contemplated herein (the "TRANSACTION"), the Purchaser is
entitled to withhold and must remit to the Receiver General of Canada the
prescribed percentage of the amount, if any, by which the Purchase Price
payable to a Non-Resident Vendor exceeds the certificate limit set out in a
certificate of compliance (a "COMPLIANCE CERTIFICATE") obtained from the
CRA by a Non-Resident Vendor for the purposes of Section 116 of the Tax Act
in respect of the Transaction;
(2) To ensure that the Purchaser will be able to meet its withholding
requirements as outlined in Section 5.1(1) of this Agreement the Purchaser
shall deposit all of the Transition
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Shares to which a Non-Resident Vendor is entitled with the Escrow Agent who
will pool all such Transition Shares and the Purchaser shall be entitled to
instruct the Escrow Agent to sell a sufficient number of the Transition
Shares in accordance with Sections 5.1(5) and 5.1(7) of this Agreement on
deposit with the Escrow Agent, net of transaction costs, to which the
Non-Resident Vendor is otherwise entitled, that will enable the Purchaser
to meet its withholding requirements as outlined in Section 5.1(1) of this
Agreement;
(3) Notwithstanding Section 5.1(1) of this Agreement and Section 5.1(2) of this
Agreement, the Purchaser and the Non-Resident Vendors acknowledge that some
or all of the Non-Resident Vendors may not be able to provide a Compliance
Certificate to the Purchaser at or prior to the Closing Date, and the
Purchaser and the Non-Resident Vendors wish to provide a mechanism to allow
the Non-Resident Vendors to attempt to obtain a Compliance Certificate
prior to the expiry of the statutory period by which the remittance of the
withholding taxes, if any, is required to be paid to the Receiver General
of Canada;
(4) If the CRA indicates that payment of an amount (the "TAX AMOUNT") would
allow the CRA to issue a Compliance Certificate with a certificate limit
equal to the Purchase Price payable to a Non-Resident Vendor, the
Purchaser, upon receipt of a written direction signed by the Non-Resident
Vendor to that effect, shall pay the Tax Amount to the CRA from any amount
so withheld or, at the request of the Non-Resident Vendor, shall release
and forward the Tax Amount to the Non-Resident Vendor's counsel on the
trust condition that such funds be used for the sole purpose of making the
aforementioned payment to the CRA and, upon delivery of the resultant
Compliance Certificate to the Purchaser, the balance of the funds so
withheld shall be released to the Non-Resident Vendor;
(5) Where the Non-Resident Vendor delivers to the Purchaser a Compliance
Certificate issued by the Minister of National Revenue under subsection
116(2) of the Tax Act, the Purchaser:
(a) may, if the Purchaser has not received a Comfort Letter within 10 days
prior to the Agreed Remittance Date, instruct the Escrow Agent to sell
a sufficient number of the Transition Shares, to which the
Non-Resident Vendor is otherwise entitled and on deposit with the
Escrow Agent, to pay, net of transaction costs, the amount described
in Section 5.1(5)(b) of this Agreement;
(b) shall pay on the CRA Remittance Date to the Receiver General of Canada
25% of the amount, if any, by which the Purchase Price exceeds the
certificate limit fixed in such Compliance Certificate; and
(c) shall pay within 2 days following the CRA Remittance Date to the
Non-Resident Vendor any amount that the Purchaser has withheld and is
not required to pay to the Receiver General of Canada in accordance
with Section 5.1(5)(b) of this Agreement;
-16-
(6) Where the Non-Resident Vendor delivers to the Company a Compliance
Certificate issued by the Minister of National Revenue under subsection
116(4) of the Tax Act prior to the CRA Remittance Date, the Purchaser shall
pay to the Non-Resident Vendor forthwith all amounts the Purchaser has
withheld in respect of the Non-Resident Vendor;
(7) Where no Compliance Certificate has been delivered to the Purchaser by the
Non-Resident Vendor, the Purchaser:
(a) may, if the Purchaser has not received a Comfort Letter within 10 days
prior to the Agreed Remittance Date, instruct the Escrow Agent to sell
a sufficient number of the Transition Shares, to which the
Non-Resident Vendor is otherwise entitled and on deposit with the
Escrow Agent, to pay, net of transaction costs, the amount described
in Section 5.1(7)(b) of this Agreement;
(b) shall pay on the CRA Remittance Date to the Receiver General of Canada
25% of the Purchase Price payable to that Non-Resident Vendor; and
(c) shall pay within 2 days following the CRA Remittance Date to the
Non-Resident Vendor any amount that the Purchaser has withheld and is
not required to pay to the Receiver General of Canada in accordance
with Section 5.1(7)(b) of this Agreement;
(8) The Purchaser shall not remit the amounts referred to in Section 5.1(5) of
this Agreement and Section 5.1(7) of this Agreement on the Agreed
Remittance Date if a Comfort Letter is delivered to the Purchaser prior to
the Agreed Remittance Date, in which case the Purchaser shall not remit
such amounts prior to the CRA Remittance Date.
(9) Any amount paid by the Purchaser to the Receiver General of Canada under
Section 5.1(5) of this Agreement or under Section 5.1(7) of this Agreement
shall constitute a payment made by the Purchaser to the Non-Resident Vendor
on account of the Purchase Price.
(10) Transition Shares subject to this Article 5 hereof shall not bear the U.S.
Legend or other resale restriction legend unless they are released from
Escrow to the respective Non-Resident Vendor. All Transition Shares sold by
the Escrow Agent pursuant to Section 5.1(5) and 5.1(7) shall not bear the
U.S. Legend or other resale restriction legend.
(11) While the Escrow Agent will take reasonable steps to sell such withheld
Transition Shares in an orderly manner, the Purchaser makes no assurance as
to the price that will be received in respect of such sales and the
Purchaser will not be liable in any manner in respect of the sale
procedure, terms, timing or purchase price received for such withheld
Transition Shares.
-17-
ARTICLE 6
INTERIM OPERATIONS
6.1 NORMAL COURSE OPERATIONS
Other than as contemplated by this Agreement, Bio, ENI and HoldCo shall,
conduct all operations of Bio, ENI and HoldCo between the Effective Date and the
Closing Date in the normal course, in accordance with generally accepted
industry practice and in a good and efficient manner. Bio, ENI and HoldCo agree
to inform the Purchaser of all material activities proposed with respect to the
Business of Bio, ENI and HoldCo to take place between the Effective Date and the
Closing Date.
ARTICLE 7
TECHNICAL, OPERATING AND FINANCIAL INFORMATION
7.1 TECHNICAL AND OPERATING
Bio, ENI and HoldCo shall, subject to any and all applicable contractual
restrictions, make available to the Purchaser and its authorized representatives
for inspection at a location in the City of Toronto, any and all records
pertaining to operating revenues and expenses, as are in the possession of Bio,
ENI or HoldCo or to which Bio, ENI or HoldCo is entitled.
7.2 ACCOUNTS
Bio, ENI and HoldCo shall, subject to any and all contractual restrictions
on it, make available to the Purchaser and its authorized representatives for
inspection at a location in the City of Toronto any and all books, accounts,
records and other financial, operating, marketing and other data as the
Purchaser reasonably requires in connection herewith.
ARTICLE 8
REPRESENTATIONS OF BIO
8.1 BIO REPRESENTATIONS
Bio, with respect only to matters pertaining to itself or its activities,
hereby represents and warrants to the Purchaser at the Effective Date, which
representations and warranties shall also be true and correct as at the Closing
Date, that:
(a) other than the Purchaser, no person, firm or corporation has any right,
under preferential rights of purchase clauses or otherwise, which will not
have been waived prior to the Closing Date (__), to acquire any interest in
any Bio Shares by virtue of or arising from this Agreement or otherwise;
(b) no person, firm or corporation has any right, under preferential rights of
purchase clauses or otherwise, which has not been waived prior to the
Closing Date, to acquire any interest in any assets of Bio by virtue of or
arising from this Agreement or otherwise;
-18-
(c) the execution and delivery of this Agreement and each and every agreement
or document to be executed and delivered hereunder by Bio and the
consummation of transactions contemplated herein will not, as a result of
Bio's involvement, violate nor be in conflict with any provision of any
material agreement or instrument to which Bio is a party or is bound or, to
the best of the Bio's knowledge, information and belief, any judgment,
decree, order, statute, rule or regulation applicable to Bio;
(d) this Agreement has been duly executed and delivered by Bio and all
documents required hereunder to be executed and delivered by Bio shall have
been duly executed and delivered and this Agreement does, and such
documents will, constitute legal, valid and binding obligations of Bio
enforceable in accordance with their respective terms;
(e) Bio has not incurred any liability, contingent or otherwise, for brokers'
or finders' fees in respect of this transaction for which Bio, ENI, the
Directors or the Warrant Holder, shall have any obligation or liability;
(f) Bio is not a non-resident of Canada within the meaning of the Tax Act;
(g) the only assets of Bio are the shares held by it in ENI and those other
assets listed in Schedule "I", and Bio has no assets or liabilities other
than those listed on Schedule "I";
(h) no person, firm or corporation has any right under preferential rights of
purchase clauses or otherwise which has not been waived prior to the Time
of Closing to acquire any interest in the share capital of Bio save as
referred to in 8.1(a) above;
(i) Bio has no subsidiary corporations and owns no shares or securities of any
other entity other than __ ENI Shares and __ common shares in the capital
of __ ;
(j) since its incorporation, Bio has not paid, declared or authorized any
dividends or other distributions in respect of its outstanding shares;
(k) the minute book of Bio contains copies of all minutes of all meetings and
the consent resolutions of the directors, committees of directors and
shareholders of Bio and the registers therein are current, true and correct
and, all such meetings were duly called and properly held and all such
consent resolutions were properly adopted;
(l) other than as disclosed to the Purchaser in writing prior to the date
hereof, Bio has no outstanding employment contracts for services, including
any management, consulting, employee or labour agreements or arrangements
and no payments have been made or authorized since the date of Bio's
Financial Statements by Bio to its former or present officers, directors,
shareholders or employees, or to any person or company not dealing at arm's
length (as such term is defined in the Tax Act);
(m) since the date of Bio's Financial Statements, no material liabilities or
material obligations have been incurred or authorized by Bio, except as
disclosed herein or otherwise to the Purchaser in writing;
-19-
(n) Bio is not a party to any agreement of guarantee, indemnification or
assumption of the obligations of a third party, or other like commitment,
including endorsements or other contingent liabilities, other than as
disclosed in Bio's Financial Statements;
(o) Bio is not a reporting issuer in any jurisdiction;
(p) there is not a published market in respect of the securities that comprise
the Purchased Shares or those subject to the Bio Offer;
(q) the number of holders of Bio Shares is not more than 50;
(r) there are no legal or governmental proceedings pending or, to the knowledge
of Bio, contemplated or threatened to which Bio is a party;
(s) Bio's Financial Statements attached hereto as Schedule "A" present fairly
the assets and liabilities of Bio as at their date, and include all
material liabilities as at their date, and there has not been any material
adverse change in the financial position of Bio since such date, other than
as previously disclosed in writing to the Purchaser or in connection with
factors affecting the biotechnology industry in general, and, Bio's
Financial Statements have been prepared in accordance with GAAP;
(t) Bio is not now a party to any bonus, pension, profit sharing, deferred
compensation, retirement, hospitalization insurance, medical insurance or
similar plan or practice, formal or informal, in effect with respect to any
employees or others, other than as set out in the minutes of the directors
of Bio or previously disclosed in writing to the Purchaser;
(u) there are no amounts payable by Bio under any obligations or liabilities of
Bio to pay any amount to its officers, directors, employees or consultants
on the change of control of Bio pursuant to any consulting agreements. No
severance is payable or owing to any director, officer or employee, or
consultants to Bio;
(v) there are no shareholder loans, bonuses or salaries owing by Bio to any
person, including, without limitation, the Bio Directors or any officer,
employee or consultant of Bio;
(w) Bio has not incurred any obligation or liability, contingent or otherwise,
for brokers' or finders' fees in respect of this transaction for which the
Purchaser shall have any obligation or liability;
(x) except as previously disclosed to the Purchaser, all material laws,
regulations and orders of all governmental agencies having jurisdiction
over Bio have been materially complied with by Bio and Bio has not received
notice of and is not otherwise aware of any material default or material
non-compliance with any such law, regulation or order of any governmental
agency, whereby such default would have a material adverse effect on Bio;
(y) Bio is a corporation duly incorporated and validly subsisting under its
jurisdiction of incorporation and has the corporate power to execute this
Agreement, and to carry on its business as now conducted by it and Bio is
duly registered to carry on business in each jurisdiction as the nature of
its business requires;
-20-
(z) Bio has authorized capital of consisting of an unlimited number of common
shares;
(aa) the only outstanding securities of Bio of any class are __ common shares
and there are no other outstanding securities, subscriptions, rights,
warrants or other agreements or commitments obligating Bio to sell or issue
any additional shares of any class or securities convertible into any share
of any class, other than the rights referred to in subsection 8.1(a), which
will be exercised prior to the Closing Date;
(bb) the working capital of Bio, as calculated in accordance with GAAP is __;
(cc) Bio has the requisite power and authority to enter into this Agreement and
the perform its obligations hereunder;
(dd) all necessary corporate action will have been taken by Bio at the Closing
Date to authorize the execution and delivery of this Agreement by it and
all other agreements and instruments contemplated by this Agreement;
(ee) Bio has sufficient reserves in its account for all taxes exigible from it
or for the collection of which it is responsible under the laws of Canada
or any other jurisdiction, in the case of taxes on income, in respect of
all fiscal years ended since its incorporation and adequate provision has
been made on the books of Bio for taxes payable for the current period for
which tax returns are not yet required to be filed;
(ff) there are no existing or contingent liabilities or obligations (including
but not limited to make royalty payments) under the Research Collaboration
Agreement dated November 30, 1999 between Bio and __ (the "__ AGREEMENT"),
nor were any Jointly Owned Inventions (as defined in the __ Agreement)
developed thereunder; and
(gg) prior to Closing, the directors of Bio will have consented to the transfer
of the Bio Shares pursuant to this Agreement.
ARTICLE 9
REPRESENTATIONS OF ENI
9.1 ENI REPRESENTATIONS
ENI, with respect only to matters pertaining to itself or its activities,
hereby represents and warrants to the Purchaser at the Effective Date, which
representations and warranties shall also be true and correct as at the Closing
Date, that:
(a) other than the Purchaser and the Warrant Holder, no person, firm or
corporation has any right, under preferential rights of purchase clauses or
otherwise, which has not been waived prior to the Closing Date, to acquire
any interest in any ENI Shares by virtue of or arising from this Agreement
or otherwise;
(b) no person, firm or corporation has any right, under preferential rights of
purchase clauses or otherwise, which has not been waived prior to the
Closing Date, to acquire any interest in any of the assets of ENI by virtue
of or arising from this Agreement or otherwise;
-21-
(c) the execution and delivery of this Agreement and each and every agreement
or document to be executed and delivered hereunder by ENI and the
consummation of transactions contemplated herein will not, as a result of
ENI's involvement, violate nor be in conflict with any provision of any
material agreement or instrument to which ENI is a party or is bound or, to
the best of the ENI's knowledge, information and belief, any judgment,
decree, order, statute, rule or regulation applicable to ENI;
(d) this Agreement has been duly executed and delivered by ENI and all
documents required hereunder to be executed and delivered by ENI shall have
been duly executed and delivered and this Agreement does, and such
documents will, constitute legal, valid and binding obligations of ENI
enforceable in accordance with their respective terms;
(e) ENI owns, or has obtained valid and enforceable licenses for, or other
rights to use, the inventions, patent applications, patents, trademarks
(both registered and unregistered), trade-names, copyrights, trade secrets
and other proprietary information as being owned or licensed by them or
having other rights to use, except where the failure to own, license or
have such rights would not, individually or in the aggregate, have a
material adverse effect (collectively, the "INTELLECTUAL PROPERTY"); ENI
has no knowledge that ENI lacks or will be unable to obtain any rights or
licenses to use all Intellectual Property necessary for the conduct of its
business (including the commercialization of ENI's product candidates); ENI
has no knowledge of third parties who have rights to any Intellectual
Property, to ENI's knowledge, there is no infringement by third parties of
any Intellectual Property; there is no pending or, to ENI's knowledge,
threatened action, suit, proceeding or, to ENI's knowledge, claim by others
challenging ENI's rights in or to any Intellectual Property and ENI is
unaware, after reasonable inquiry, of any facts which form a reasonable
basis for any such claims; there is no pending or, to ENI's knowledge,
threatened action, suit, proceeding or, to ENI's knowledge, claim by others
challenging the validity or enforceability of any Intellectual Property,
and ENI is unaware of any finding of unenforceability or invalidity of the
Intellectual Property; there is no pending, or to ENI's knowledge,
threatened action, suit, proceeding or, to ENI's knowledge, claim by others
that ENI or the Intellectual Property infringes or otherwise violates (or
would infringe or otherwise violate upon commercialization of ENI's
products under development) any patent, trademark, copyright, trade secret
or other proprietary rights of others;
(f) the clinical, pre-clinical and other studies and tests conducted by or on
behalf of or sponsored by ENI or in which ENI or its products under
development have participated, or if still pending, are being conducted in
accordance with good clinical practice (GCP) and medical standard-of-care
procedures; ENI has operated and currently is in compliance in all material
respects with all applicable rules, regulations and policies of the
Therapeutic Products Program of Canada, the US Food and Drug Administration
or any other regulatory or governmental agency having jurisdiction over ENI
or its activities; __;
(g) except in compliance with applicable legislation, ENI has not used any of
its property or facilities to generate, manufacture, process, distribute,
use, treat, store, dispose of, transport or handle any pollutants,
contaminants, chemicals or industrial toxic or
-22-
hazardous waste or substances ("HAZARDOUS SUBSTANCES") in a manner that
could reasonably be expected to result in a material adverse effect;
(h) except in compliance with applicable legislation, ENI has not caused or
permitted the release, in any manner whatsoever, of any Hazardous
Substances on or from any of its properties or assets or any such release
on or from a facility owned or operated by third parties but with respect
to which ENI is or may reasonably be alleged to have material liability or
has received any notice that it is potentially responsible for a federal,
provincial, municipal or local cleanup site or corrective action under any
applicable laws, statutes, ordinances, bylaws, regulations or any orders,
directions or decisions rendered by any ministry, department or
administrative regulatory agency relating to the protection of the
environment, occupational health and safety or otherwise relating to or
dealing with Hazardous Substances in a manner that could reasonably be
expected to result in a material adverse effect;
(i) ENI has not incurred any liability, contingent or otherwise, for brokers'
or finders' fees in respect of this transaction for which Bio, ENI, the
Directors, or the Warrant Holder shall have any obligation or liability;
(j) there are no actions, suits, proceedings or claims existing or, to the best
of the knowledge, information and belief of ENI, pending or threatened with
respect to or in any manner challenging respective ownership of the ENI
Shares or the sale of the ENI Shares pursuant to this Agreement;
(k) there are no actions, suits, proceedings or claims existing or, to the best
of the knowledge, information and belief of ENI, pending or threatened,
which might reasonably be expected to result in a material impairment or
loss of such the ENI Directors' interest in the ENI Shares, and there is no
particular circumstance, matter or thing known to ENI which could
reasonably be anticipated to give rise to any such action, suit, proceeding
or claim;
(l) ENI is not a non-resident of Canada within the meaning of the Tax Act;
(m) the business of ENI has been carried on in the ordinary course of the
biotechnology industry since the date of incorporation;
(n) no person, firm or corporation has any right under preferential rights of
purchase clauses or otherwise which has not been waived prior to the Time
of Closing to acquire any interest in the share capital of ENI;
(o) ENI has no subsidiary corporations and owns no shares or securities of any
other entity other than Transition Shares;
(p) since its incorporation, ENI has not paid, declared or authorized any
dividends or other distributions in respect of its outstanding shares;
(q) the minute book of ENI contains copies of all minutes of all meetings and
the consent resolutions of the directors, committees of directors and
shareholders of ENI and the
-23-
registers therein are current, true and correct and all such meetings were
duly called and properly held and all such consent resolutions were
properly adopted;
(r) other than as disclosed to the Purchaser in writing prior to the date
hereof, ENI has no outstanding employment contracts for services, including
any management, consulting, employee or labour agreements or arrangements
and no payments have been made or authorized since the date of ENI's
Financial Statements by ENI to its former or present officers, directors,
shareholders or employees, or to any person or company not dealing at arm's
length (as such term is defined in the Tax Act);
(s) since the date of ENI's Financial Statements, no material liabilities or
material obligations have been incurred or authorized by ENI, except as
disclosed herein or otherwise to the Purchaser in writing;
(t) ENI is not a party to any agreement of guarantee, indemnification or
assumption of the obligations of a third party, or other like commitment,
including endorsements or other contingent liabilities, other than as
disclosed in ENI's Financial Statements;
(u) ENI is not a reporting issuer in any jurisdiction;
(v) there is not a published market in respect of the securities that comprise
the Purchased Shares or those subject to the ENI Offer;
(w) the number of holders of ENI Shares is not more than 50;
(x) there are no legal or governmental proceeding pending or, to the knowledge
of ENI, contemplated or threatened to which ENI is a party;
(y) ENI's Financial Statements attached hereto as Schedule "B" present fairly
the assets and liabilities of ENI as at their date, and include all
material liabilities as at their date, and there has not been any material
adverse change in the financial position of ENI since such date, other than
as previously disclosed in writing to the Purchaser or in connection with
factors affecting the biotechnology industry in general, and, ENI's
Financial Statements have been prepared in accordance with GAAP;
(z) ENI is not now a party to any bonus, pension, profit sharing, deferred
compensation, retirement, hospitalization insurance, medical insurance or
similar plan or practice, formal or informal, in effect with respect to any
employees or others, other than as set out in the minutes of the directors
of ENI or previously disclosed in writing to the Purchaser;
(aa) there are no amounts payable by ENI under any obligations or liabilities of
ENI to pay any amount to its officers, directors, employees or consultants
on the change of control of ENI pursuant to any consulting agreements. No
severance is payable or owing to any director, officer, employee or
consultant to, ENI;
(bb) there are no shareholder loans, bonuses or salaries owing by ENI to any
person, including, without limitation, the Directors or any officer,
employee or consultant of ENI;
-24-
(cc) ENI has not incurred any obligation or liability, contingent or otherwise,
for brokers' or finders' fees in respect of this transaction for which the
Purchaser shall have any obligation or liability;
(dd) except as previously disclosed to the Purchaser, all material laws,
regulations and orders of all governmental agencies having jurisdiction
over ENI have been materially complied with by ENI and ENI has not received
notice of and is not otherwise aware of any material default or material
non-compliance with any such law, regulation or order of any governmental
agency, whereby such default would have a material adverse effect on ENI;
(ee) ENI is a corporation duly incorporated and validly subsisting under its
jurisdiction of incorporation and has the corporate power to execute this
Agreement, and to carry on its business as now conducted by it and ENI is
duly registered to carry on business in each jurisdiction as the nature of
its business requires;
(ff) ENI has authorized capital of consisting of an unlimited number of common
shares;
(gg) the only outstanding securities of ENI of any class are __ ENI Shares and
there are no other outstanding securities, subscriptions, rights, warrants
or other agreements or commitments obligating ENI to sell or issue any
additional shares of any class or securities convertible into any share of
any class other than the __ warrants held by the Warrant Holder and the ENI
Shares held by the Purchaser which will be exercised prior to the Closing
Date;
(hh) the working capital of ENI, as calculated in accordance with GAAP is __;
(ii) ENI has the requisite power and authority to enter into this Agreement and
to perform its obligations hereunder;
(jj) all necessary corporate action will have been taken by ENI at the Closing
Date to authorize the execution and delivery of this Agreement by it and
all other agreements and instruments contemplated by this Agreement;
(kk) prior to Closing, the directors of ENI will have consented to the transfer
of the ENI Shares pursuant to this Agreement; and
(ll) ENI has sufficient reserves in its account for all taxes exigible from it
or for the collection of which it is responsible under the laws of Canada
or any other jurisdiction, in the case of taxes on income, in respect of
all fiscal years ended since its incorporation and adequate provision has
been made on the books of ENI for taxes payable for the current period for
which tax returns are not yet required to be filed.
-25-
ARTICLE 10
REPRESENTATIONS OF HOLDCO
10.1 HOLDCO REPRESENTATIONS
HoldCo, with respect only to matters pertaining to itself or its
activities, hereby represents and warrants to the Purchaser at the Effective
Date, which representations and warranties shall also be true and correct as at
the Closing Date, that:
(a) other than the Purchaser, no person, firm or corporation has any right,
under preferential rights of purchase clauses or otherwise, which has not
been waived prior to the Closing Date, to acquire any interest in any
HoldCo Shares by virtue of or arising from this Agreement or otherwise;
(b) no person, firm or corporation has any right, under preferential rights of
purchase clauses or otherwise, which has not been waived prior to the
Closing Date, to acquire any interest in any assets of HoldCo by virtue of
or arising from this Agreement or otherwise;
(c) the execution and delivery of this Agreement and each and every agreement
or document to be executed and delivered hereunder by HoldCo and the
consummation of transactions contemplated herein will not, as a result of
HoldCo's involvement, violate nor be in conflict with any provision of any
material agreement or instrument to which HoldCo is a party or is bound or,
to the best of the HoldCo's knowledge, information and belief, any
judgment, decree, order, statute, rule or regulation applicable to HoldCo;
(d) this Agreement has been duly executed and delivered by HoldCo and all
documents required hereunder to be executed and delivered by HoldCo shall
have been duly executed and delivered and this Agreement does, and such
documents will, constitute legal, valid and binding obligations of HoldCo
enforceable in accordance with their respective terms;
(e) HoldCo has not incurred any liability, contingent or otherwise, for
brokers' or finders' fees in respect of this transaction for which Bio,
ENI, HoldCo, the Directors or the Warrant Holder, shall have any obligation
or liability;
(f) there are no actions, suits, proceedings or claims existing or, to the best
of the knowledge, information and belief of HoldCo, pending or threatened
with respect to or in any manner challenging respective ownership of the
HoldCo Shares or the sale of the HoldCo Shares pursuant to this Agreement;
(g) there are no actions, suits, proceedings or claims existing or, to the best
of the knowledge, information and belief of HoldCo, pending or threatened,
which might reasonably be expected to result in a material impairment or
loss of such the HoldCo Directors' interest in the HoldCo Shares, and there
is no particular circumstance, matter or thing known to HoldCo which could
reasonably be anticipated to give rise to any such action, suit, proceeding
or claim;
(h) HoldCo is not a non-resident of Canada within the meaning of the Tax Act;
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(i) the only assets of HoldCo are the shares held by it in Bio, and HoldCo has
no liabilities;
(j) no person, firm or corporation has any right under preferential rights of
purchase clauses or otherwise which has not been waived prior to the Time
of Closing to acquire any interest in the share capital of HoldCo;
(k) HoldCo has no subsidiary corporations and owns no shares or securities of
any other entity other than __ Bio Shares;
(l) since its incorporation, HoldCo has not paid, declared or authorized any
dividends or other distributions in respect of its outstanding shares;
(m) the minute book of HoldCo contains copies of all minutes of all meetings
and the consent resolutions of the directors, committees of directors and
shareholders of HoldCo and the registers therein are current, true and
correct and, all such meetings were duly called and properly held and all
such consent resolutions were properly adopted;
(n) other than as disclosed to the Purchaser in writing prior to the date
hereof, HoldCo has no outstanding employment contracts for services,
including any management, consulting, employee or labour agreements or
arrangements and no payments have been made or authorized since the date of
HoldCo's Financial Statements by HoldCo to its former or present officers,
directors, shareholders or employees, or to any person or company not
dealing at arm's length (as such term is defined in the Tax Act);
(o) since the date of HoldCo's Financial Statements, no material liabilities or
material obligations have been incurred or authorized by HoldCo, except as
disclosed herein or otherwise to the Purchaser in writing;
(p) HoldCo is not a party to any agreement of guarantee, indemnification or
assumption of the obligations of a third party, or other like commitment,
including endorsements or other contingent liabilities, other than as
disclosed in HoldCo's Financial Statements;
(q) HoldCo is not a reporting issuer in any jurisdiction;
(r) there is not a published market in respect of the securities that comprise
the Purchased Shares;
(s) the number of holders of HoldCo Shares is not more than 50;
(t) there are no legal or governmental proceeding pending or, to the knowledge
of HoldCo, contemplated or threatened to which HoldCo is a party;
(u) HoldCo's Financial Statements attached hereto as Schedule "C" present
fairly the assets and liabilities of HoldCo as at their date, and include
all material liabilities as at their date, and there has not been any
material adverse change in the financial position of HoldCo since such
date, other than as previously disclosed in writing to the Purchaser or in
connection with factors affecting the biotechnology industry in general,
and, HoldCo's Financial Statements have been prepared in accordance with
GAAP;
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(v) HoldCo is not now a party to any bonus, pension, profit sharing, deferred
compensation, retirement, hospitalization insurance, medical insurance or
similar plan or practice, formal or informal, in effect with respect to any
employees or others, other than as set out in the minutes of the directors
of HoldCo or previously disclosed in writing to the Purchaser;
(w) there are no amounts payable by HoldCo under any obligations or liabilities
of HoldCo to pay any amount to its officers, directors, employees or
consultants on the change of control of HoldCo pursuant to any consulting
agreements. No severance is payable or owing to any director, officer or
employee, or consultants to HoldCo;
(x) there are no shareholder loans, bonuses or salaries owing by HoldCo to any
person, including, without limitation, the HoldCo Directors or any
director, officer, employee or consultant of HoldCo;
(y) HoldCo has not incurred any obligation or liability, contingent or
otherwise, for brokers' or finders' fees in respect of this transaction for
which the Purchaser shall have any obligation or liability;
(z) except as previously disclosed to the Purchaser, all material laws,
regulations and orders of all governmental agencies having jurisdiction
over HoldCo have been materially complied with by HoldCo and HoldCo has not
received notice of and is not otherwise aware of any material default or
material non-compliance with any such law, regulation or order of any
governmental agency, whereby such default would have a material adverse
effect on HoldCo;
(aa) HoldCo is a corporation duly incorporated and validly subsisting under its
jurisdiction of incorporation and has the corporate power to execute this
Agreement, and to carry on its business as now conducted by it and HoldCo
is duly registered to carry on business in each jurisdiction as the nature
of its business requires;
(bb) HoldCo has authorized capital of consisting of an unlimited number of
common shares;
(cc) the only outstanding securities of HoldCo of any class are __ common shares
and there are no other outstanding securities, subscriptions, rights,
warrants or other agreements or commitments obligating HoldCo to sell or
issue any additional shares of any class or securities convertible into any
share of any class;
(dd) the working capital of HoldCo, as calculated in accordance with GAAP is __;
(ee) HoldCo has the requisite power and authority to enter into this Agreement
and the perform its obligations hereunder;
(ff) all necessary corporate action will have been taken by HoldCo at the
Closing Date to authorize the execution and delivery of this Agreement by
it and all other agreements and instruments contemplated by this Agreement;
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(gg) HoldCo has sufficient reserves in its account for all taxes exigible from
it or for the collection of which it is responsible under the laws of
Canada or any other jurisdiction, in the case of taxes on income, in
respect of all fiscal years ended since its incorporation and adequate
provision has been made on the books of HoldCo for taxes payable for the
current period for which tax returns are not yet required to be filed; and
(hh) prior to Closing the directors of HoldCo will have consented to the
transfer of the HoldCo Shares pursuant to this Agreement.
ARTICLE 11
REPRESENTATIONS OF BIO DIRECTORS
11.1 BIO DIRECTORS' REPRESENTATIONS
The Bio Directors, jointly and severally, hereby represent and warrant to
the Purchaser at the Effective Date, which representations and warranties shall
also be true and correct as at the Closing Date, that:
(a) they are the legal and beneficial holder of their respective Bio Shares as
reflected on Schedule "G" hereto and all their respective Bio Shares have
been validly issued and are fully paid and non-assessable;
(b) the Bio Shares are held by the Bio Directors free and clear of all liens,
charges, encumbrances, and adverse claims whatsoever;
(c) no person, firm or corporation other than the Purchaser under this
Agreement has any agreement or option or any right capable of becoming an
agreement or option to purchase the Bio Directors' Bio Shares;
(d) there are no actions, suits, proceedings or claims existing or, to the best
of the knowledge, information and belief of Bio, pending or threatened,
which might reasonably be expected to result in a material impairment or
loss of such the Bio Directors' interest in the Bio Shares, and there is no
particular circumstance, matter or thing known to Bio which could
reasonably be anticipated to give rise to any such action, suit, proceeding
or claim;
(e) they are not non-residents of Canada within the meaning of the Tax Act
(Canada); and
(f) they have read the Bio Representations as provided in Article 8 hereof, and
to the best of their knowledge, the Bio Representations are true and
correct as of the Effective Date and will be true and correct at the
Closing Date.
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ARTICLE 12
REPRESENTATIONS OF ENI DIRECTORS
12.1 ENI DIRECTORS' REPRESENTATIONS
The ENI Directors, jointly and severally, hereby represent and warrant to
the Purchaser at the Effective Date, which representations and warranties shall
also be true and correct as at the Closing Date, that:
(a) they are the legal and beneficial holder of their respective ENI Shares as
reflected on Schedule "G" hereto and all their respective ENI Shares have
been validly issued and are fully paid and non-assessable;
(b) the ENI Shares are held by the ENI Directors free and clear of all liens,
charges, encumbrances, and adverse claims whatsoever;
(c) no person, firm or corporation other than the Purchaser under this
Agreement has any agreement or option or any right capable of becoming an
agreement or option to purchase the ENI Directors' ENI Shares;
(d) there are no actions, suits, proceedings or claims existing or, to the best
of the knowledge, information and belief of ENI, pending or threatened,
which might reasonably be expected to result in a material impairment or
loss of such the ENI Directors' interest in the ENI Shares, and there is no
particular circumstance, matter or thing known to ENI which could
reasonably be anticipated to give rise to any such action, suit, proceeding
or claim;
(e) they are not non-residents of Canada within the meaning of the Tax Act
(Canada); and
(f) they have read the ENI Representations as provided in Article 9 hereof, and
to the best of their knowledge, the ENI Representations are true and
correct as of the Effective Date and will be true and correct at the
Closing Date.
ARTICLE 13
REPRESENTATIONS OF HOLDCO DIRECTORS
13.1 HOLDCO DIRECTORS' REPRESENTATIONS
The HoldCo Directors and __, jointly and severally, hereby represent and
warrant to the Purchaser at the Effective Date, which representations and
warranties shall also be true and correct as at the Closing Date, that:
(a) if applicable, they are the legal and beneficial holder of their respective
HoldCo Shares as reflected on Schedule "G" hereto and all their respective
HoldCo Shares have been validly issued and are fully paid and
non-assessable;
(b) if applicable, the HoldCo Shares are held by the HoldCo Directors free and
clear of all liens, charges, encumbrances, and adverse claims whatsoever;
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(c) if applicable, no person, firm or corporation other than the Purchaser
under this Agreement has any agreement or option or any right capable of
becoming an agreement or option to purchase the HoldCo Directors' HoldCo
Shares;
(d) there are no actions, suits, proceedings or claims existing or, to the best
of the knowledge, information and belief of HoldCo, pending or threatened,
which might reasonably be expected to result in a material impairment or
loss of such the HoldCo Directors' interest in the HoldCo Shares, and there
is no particular circumstance, matter or thing known to Bio which could
reasonably be anticipated to give rise to any such action, suit, proceeding
or claim;
(e) if applicable, they are not non-residents of Canada within the meaning of
the Tax Act (Canada); and
(f) they have read the HoldCo Representations as provided in Article 10 hereof,
and the HoldCo Representations are true and correct as of the Effective
Date and will be true and correct at the Closing Date.
ARTICLE 14
REPRESENTATIONS OF WARRANT HOLDER
14.1 WARRANT HOLDER REPRESENTATIONS
The Warrant Holder, hereby represents and warrants to the Purchaser at the
Effective Date, which representations and warranties shall also be true and
correct as at the Closing Date, that:
(a) it is the legal holder of ENI Warrants and holds them for __ ("__") and,
all of the ENI Warrants have been, and the ENI Shares issuable on exercise
of the ENI Warrants will be, validly issued and are fully paid and
non-assessable;
(b) the ENI Warrants are, and the ENI Shares issuable on exercise of the ENI
Warrants will be, held by the Warrant Holder or __ free and clear of all
liens, charges, encumbrances, and adverse claims whatsoever;
(c) neither the Warrant Holder or __ is a non-resident of Canada within the
meaning of the Tax Act (Canada), and
(d) no person, firm or corporation other than the Purchaser under this
Agreement has any agreement or option or any right capable of becoming an
agreement or option to purchase the ENI Warrants.
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ARTICLE 15
PURCHASER'S REPRESENTATIONS
15.1 PURCHASER'S REPRESENTATIONS
The Purchaser hereby represents and warrants to ENI, Bio, HoldCo, the
Directors, and the Warrant Holder at the Effective Date, which representations
and warranties shall also have been true and will be true and correct as at the
Closing Date, that:
(a) the Purchaser is a corporation duly incorporated under its jurisdiction of
incorporation, validly existing, and is in good standing under the laws of
Ontario;
(b) the Purchaser has all requisite power and authority to enter into this
Agreement and to purchase and pay for the Purchased Shares on the terms
described herein and to perform the other obligations of the Purchaser
under this Agreement;
(c) the Purchaser is, and will at the Time of Closing be, a reporting issuer
(or equivalent status) in good standing under the securities laws of the
Province of Ontario and to the best of its knowledge is in compliance with
the by-laws, rules and regulations of The Toronto Stock Exchange Inc. (the
"EXCHANGE") and no material change relating to the Purchaser has occurred
since June 30, 2005 (other than in respect of the transactions contemplated
hereby) that have not been publicly announced;
(d) the authorized capital of the Purchaser consists of an unlimited number of
common shares of which 139,508,579 Transition Shares are issued and
outstanding at the date hereof;
(e) all press releases, material change reports and other documents filed by or
on behalf of the Purchaser since June 30, 2005 with any securities
commission or the Exchange were true and correct in all material respects
and did not contain any misrepresentation (as defined in the Securities Act
(Ontario)), as at the respective dates of such filings;
(f) the Purchaser is not party to and has not granted any agreement, warrant,
option or right or privilege capable of becoming an agreement, for the
purchase, subscription or issuance of any common shares or securities
convertible into or exchangeable for Transition Shares, other than
1,384,615 warrants with an expiration date of February 24, 2006 and
3,080,665 issued and outstanding options to purchase Transition Shares;
(g) the audited annual consolidated financial statements of the Purchaser as at
and for the 12 month period ended June 30, 2005 have been prepared in
accordance with Canadian generally accepted accounting principles, present
fairly, in all material respects, the financial position of the Purchaser
as at June 30, 2005, and the results of its operations and the changes in
its financial position for the 12 month periods ended June 30, 2005, and do
not omit to state any material fact that is required by Canadian generally
accepted accounting principles or by applicable law to be stated or
reflected therein or which is necessary to make the statements contained
therein not misleading;
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(h) the Purchaser has the requisite power and authority to enter into this
Agreement and to perform its obligations hereunder;
(i) all necessary corporate action has been taken by the Purchaser at the
Effective Date to authorize the execution and delivery by the Purchaser of
this Agreement and all other agreements and instruments contemplated by
this Agreement;
(j) the execution and delivery of this Agreement and each and every agreement
or document to be executed and delivered hereunder and the consummation of
the transactions contemplated herein will not violate, nor be in conflict
with, any provision of any material agreement or instrument to which the
Purchaser is a party or is bound, or any judgment, decree, order, statute,
rule or regulation applicable to the Purchaser or the constating documents
or by-laws of the Purchaser; and
(k) this Agreement has been duly executed and delivered by the Purchaser and
all documents required hereunder to be executed and delivered by the
Purchaser shall have been duly executed and delivered and this Agreement
does, and such documents will, constitute legal, valid and binding
obligations of the Purchaser enforceable in accordance with their
respective terms.
ARTICLE 16
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
16.1 SURVIVAL
(1) Notwithstanding anything to the contrary herein expressed or implied, it is
expressly agreed and understood that the representations and warranties of
Bio, ENI and HoldCo set forth in Article 8, 9 and 10 are true on the
Effective Date hereof and at the Closing Date and, notwithstanding the
Closing or deliveries of representations and warranties in any other
agreements at Closing or prior or subsequent thereto or investigations by
the parties hereto or their counsel, the representations and warranties
along with all rights of action in connection therewith set forth in
Articles 8, 9 and 10 shall survive Closing for the benefit of the parties
hereto:
(a) the representations and warranties of Bio, ENI and HoldCo relating to
the tax liability of Bio, ENI and HoldCo shall, unless such
representations and warranties prove to be false as a result of any
misrepresentation made or fraud committed in filing a return or
supplying information for the purposes of the Income Tax Act (Canada)
or any other legislation imposing tax on Bio, ENI, or HoldCo continue
in full force and effect for the benefit of the Purchaser for a period
of twenty four (24) months from the Closing Date;
(b) the representations and warranties of Bio, ENI and HoldCo relating to
the tax liability of Bio, ENI and HoldCo which prove to be false as a
result of any misrepresentation made or fraud committed in filing a
return or in supplying information for the purposes of the Income Tax
Act (Canada), or any other legislation imposing tax on Bio, ENI or
HoldCo shall continue in full force and
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effect for the benefit of the Purchaser for a period of twenty four
(24) months from the Closing Date; and
(c) the remaining representations and warranties of Bio, ENI and HoldCo
set forth in Sections 8, 9, and 10 shall continue in full force and
effect for the benefit of the Purchaser for a period of twenty four
(24) months from the Closing Date.
(2) The representations, warranties and covenants of Bio, ENI, HoldCo, the ENI
Directors, the Bio Directors, the HoldCo Directors and the Warrant Holder
set forth in this Agreement shall continue in full force and effect for the
benefit of the Purchaser for a period of twenty four (24) months from the
Closing Date.
(3) The representations and warranties of the Purchaser set forth in Section 15
shall survive the completion of the sale and purchase of the Shares herein
provided for and, notwithstanding such completion, shall continue in full
force and effect for the benefit of Bio, ENI and HoldCo for a period of
twenty four (24) months from the Closing Date.
(4) The covenants of the Purchaser set forth in this Agreement shall survive
the completion of the sale and purchase of the Shares herein provided for
and, notwithstanding such completion, shall continue in full force and
effect for the benefit of Bio, ENI and HoldCo and the Vendors in accordance
with the terms thereof.
ARTICLE 17
DIRECTORS' AND WARRANT HOLDER'S CLOSING CONDITIONS
17.1 DIRECTORS' AND WARRANT HOLDER'S CLOSING CONDITIONS
The obligation of the Directors and the Warrant Holder to complete the sale
of the Purchased Shares to the Purchaser pursuant to this Agreement is subject
to the satisfaction of the following conditions precedent:
(a) all representations and warranties of the Purchaser contained in this
Agreement shall be true and have been complied with in all material
respects and the Purchaser shall have tendered to the Directors a
Certificate, dated as of the Closing Date, from a senior officer of the
Purchaser to such effect and the Purchaser shall have performed and
satisfied all covenants required by this Agreement to be performed and
satisfied by the Purchaser at or prior to the Closing Date;
(b) at the Time of Closing, the Purchaser shall have tendered to the Directors
the Bio Purchase Consideration, the ENI Purchase Consideration and the
HoldCo Purchase Consideration payable hereunder with respect to the
Purchased Shares;
(c) all of the Purchased Shares shall be duly endorsed for transfer and
delivered to the Purchaser pursuant to this Agreement, the Bio Offer, and
the ENI Offer and shall be free of any encumbrances, liens, charges and
demands of whatsoever nature;
(d) at the Time of Closing, no action or proceeding shall have been instituted
or threatened by any person or entity before any court or governmental
agency to obtain damages in
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respect of this Agreement or to restrain or prohibit the consummation of
the transactions contemplated herein;
(e) at the Time of Closing, no litigation or proceeding shall be existing,
pending or threatened to restrain, set aside or invalidate the transactions
contemplated by, or to obtain substantial damages in respect of, this
Agreement;
(f) at the Time of Closing, all necessary Regulatory Approvals, including
without limitation with respect to the TSX, shall have been obtained;
(g) at the Time of Closing the Purchaser shall have delivered to the Directors
and Warrant Holder an opinion of Purchaser's Counsel in form and substance
satisfactory to, and based and relying on such assumptions and
qualifications acceptable to, the Directors and the Warrant Holder, acting
reasonably, that:
(i) the Purchaser was duly incorporated and is validly existing as a
corporation under the Business Corporations Act (Ontario);
(ii) the Purchaser is a reporting issuer in good standing in the Province
of Ontario;
(iii) the authorized capital of the Purchaser consists of an unlimited
number of common shares, of which 139,508,579 Transition Shares, and
no other shares are issued and outstanding (unless issued after the
date hereof);
(iv) the Purchaser has the requisite corporate power and authority to
execute, deliver and perform its obligations under the this Agreement;
(v) all necessary corporate action has been taken by the Purchaser to
authorize the execution and delivery by it of each of this Agreement
and the performance of the Purchaser's obligations hereunder and
thereunder and the issue and sale of the Transition Shares;
(vi) this Agreement has been duly executed and delivered by the Purchaser
and constitutes legal, valid and binding obligations of the Purchaser,
enforceable against the Purchaser in accordance with its terms;
(vii) the execution and delivery of each of this Agreement, and the
fulfillment of the terms hereof and thereof by the Purchaser, do not
result in a breach of, or constitute a default under, the articles of
incorporation of the Purchaser, the by-laws of the Purchaser or any
statute, regulation or other law of the Province of Ontario or the
laws of Canada applicable to the Purchaser; and
(viii) all required approvals of the Toronto Stock Exchange have been
obtained for the issue, sale of the Transition Shares to be issued to
satisfy the Up Front Payments.
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17.2 CONDITIONS FOR THE BENEFIT OF THE DIRECTORS' AND THE WARRANT HOLDER
The conditions contained in Section 17.1 shall be for the benefit of the
Directors and the Warrant Holder and may, without prejudice to any rights of the
Directors and the Warrant Holder hereunder, be waived by the Directors or the
Warrant Holder in writing, in whole or in part, at any time. In case any of the
said conditions shall not be complied with through no act, default or omission
of the Directors or the Warrant Holder or waived by the Directors or the Warrant
Holder, at or before the Closing Date, the Directors or the Warrant Holder may
rescind and terminate this Agreement, without liability of any party, by written
notice to the Purchaser.
ARTICLE 18
PURCHASER'S CLOSING CONDITIONS
18.1 PURCHASER'S CLOSING CONDITIONS
The obligation of the Purchaser to complete the purchase of the Purchased
Shares from the Directors pursuant to this Agreement and from the Remaining
Shareholders who accept Bio Offer or ENI Offer is subject to the satisfaction of
the following conditions precedent:
(a) all representations and warranties of Bio, ENI, HoldCo, ENI Directors, Bio
Directors, HoldCo Directors and the Warrant Holder contained in this
Agreement shall be true and have been complied with in all material
respects and the Directors shall have tendered to the Purchaser a
Certificate dated as of the Closing Date to such effect and Bio, ENI,
HoldCo, ENI Directors, Bio Directors, HoldCo Directors and the Warrant
Holder shall have performed and satisfied all covenants required by this
Agreement to be performed and satisfied by Bio, ENI, HoldCo, the ENI
Directors, the Bio Directors, the HoldCo Directors and the Warrant Holder,
respectively, at or prior to the Closing Date;
(b) the Bio Offer (and the acquisition of the Bio Shares from the Bio
Directors) is subject to the condition that at least two thirds of the
issued and outstanding Bio Shares are tendered by the Bio Directors and
under the Bio Offer, collectively, as of the Closing Date;
(c) __ Bio Shares shall have been issued to __ in full satisfaction of all
obligations of Bio under its consulting agreement dated __ prior to the
Closing Date;
(d) the __ warrants held by the Warrant Holder shall have been exercised prior
to the Closing Date;
(e) a settlement to the Purchaser's sole satisfaction of the $__ convertible
term note originally issued by Bio to __, which was subsequently
transferred to __ on May 10, 2003;
(f) all of the Purchased Shares shall be duly endorsed for transfer and
delivered to the Purchaser pursuant to this Agreement, the Bio Offer and
the ENI Offer and shall be free of any encumbrances, liens, charges and
demands of whatsoever nature;
(g) at the Time of Closing, all necessary Regulatory Approvals, including
without limitation, the approval of the TSX to the issuance of 18,908,000
Transition Shares to the Vendors
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and the listing and posting for trading of such shares on the TSX, shall
have been obtained;
(h) Bio's debt and ENI's debt at the Closing Date shall not exceed $__;
(i) at the Time of Closing, there shall be no shareholder loans, bonuses or
salaries owing by Bio, ENI or HoldCo to any person, including, without
limitation, any holder of Bio Shares, ENI Shares, or HoldCo Shares
including the Directors, or any director, officer, employee or consultant
of Bio, ENI or HoldCo;
(j) the individual Directors, officers, and employees of Bio, ENI, and HoldCo
at the request of the Purchaser, shall have tendered their resignations as
such at and effective as of the Closing Date, and in so doing each shall
acknowledge that such resignation is not accompanied by any form of
severance;
(k) with respect to each agreement listed in the table below, Bio shall have
obtained from the party(ies) named opposite each such agreement (i) the
consent to the transfer and assignment of Bio's rights and obligations
thereunder, and (ii) the release from all of Bio's obligations thereunder,
all in form and substance satisfactory to the Purchaser in its sole
discretion, to __ Inc. ("__") pursuant to the asset purchase agreement
dated November 3, 2005 between __ and Bio (the "__");
AGREEMENT CONSENTOR(S)/RELEASOR(S)
--------- ------------------------
__ __
__ __
__ Capital Lease Equipment lessor (may be __.)
Office Lease for __, Toronto, Ontario Landlord or property manager, as
applicable
(l) with respect to the License Agreement: Office Space dated August 1, 2005
between ENI and __ (the "LEASE AGREEMENT"), ENI shall have:
(i) entered into an agreement (the "Lease Assignment Agreement") to
transfer and assign all of its rights, title and interest in and to
the Lease Agreement to __ and pursuant to which __ shall assume all of
ENI's obligations under the Lease Agreement;
(ii) obtained from __ (a) the consent to the transfer and assignment of
ENI's rights and obligations thereunder, and (b) the release from all
of ENI's obligations thereunder, in form and substance satisfactory to
the Purchaser in its sole discretion, to __ pursuant to the Lease
Assignment Agreement.
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(m) the terms of the restrictive covenants contained in Section 8 of the __
Agreement shall have been amended to reduce and clarify their restrictive
nature, in particular with respect to the business carried on by __, in the
manner satisfactory to the Purchaser in its sole discretion;
(n) the shareholders' agreements among the Bio Shareholders, the ENI
Shareholders and the HoldCo Shareholders shall each have been terminated;
(o) the release of __ and __ from all claims, demands, actions, costs,
contracts and debts whatsoever in law or in equity arising out of or in any
way connected with the consulting agreement dated February 1, 2004 between
__ and Bio shall have been signed and delivered by each of __ and __;
(p) all deficiencies identified by the Purchaser prior to the Closing in the
minute books of each of Bio, ENI and HoldCo shall have been remedied in the
manner satisfactory to the Purchaser, acting reasonably; and
(q) with respect to the finder's fee payable in connection with the completion
of the transactions provided for under the __, as such finder's fee is
referred to under Note 6 to the financial statements of Bio as at and for
the year ended December 31, 2005, Bio shall have obtained from the payee of
such fee (i) written acknowledgement that such fee has been received, and
(ii) a waiver releasing Bio from any further claims in respect of such fee
or otherwise in connection with or in any way related to the __, all in
form and substance satisfactory to the Purchaser in its sole discretion.
18.2 CONDITIONS FOR THE BENEFIT OF PURCHASER
The conditions contained in Section 18.1 shall be for the benefit of the
Purchaser and may, without prejudice to any of the rights of the Purchaser
hereunder, be waived by the Purchaser in writing, in whole or in part, at any
time. In case any of the said conditions shall not be complied with through no
act, default or omission of the Purchaser or waived by the Purchaser at or
before the Closing Date, the Purchaser may rescind and terminate this Agreement,
without liability of any party, by written notice to Bio, ENI, HoldCo the
Directors, the HoldCo Directors and the Warrant Holder.
ARTICLE 19
TERMINATION
19.1 TERMINATION
In the event that this Agreement is terminated pursuant to either of
Sections 17.2 or 18.2, each party hereto shall be released from all obligations
hereunder and each party hereto shall take all reasonable action to return the
other parties hereto to the position relative to the Bio Shares, the ENI Shares
and the HoldCo Shares which such party occupied prior to the execution hereof,
it being understood that the Purchaser, Bio and ENI, HoldCo, and the Directors,
shall be responsible for the respective costs incurred by each of them.
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ARTICLE 20
ATTORNMENT AND PROPER LAW
20.1 GOVERNING LAW
This Agreement shall be exclusively subject to and be interpreted,
construed and enforced in accordance with the laws in effect in the Province of
Ontario. Each party hereto irrevocably attorns to the exclusive jurisdiction of
the courts of the Province of Ontario and all courts of appeal therefrom.
ARTICLE 21
COVENANTS OF THE PURCHASER
21.1 COVENANTS
The Purchaser covenants and agrees with Bio, ENI, HoldCo, the ENI
Directors, the Bio Directors, the HoldCo Directors and the Warrant Holder that
until the purchase and sale contemplated herein becomes effective or until the
parties hereto are unable to consummate the transaction because a condition set
out herein cannot be satisfied and has not been waived by the appropriate party
hereunder, and except with the prior written approval of the Directors, to use
its best efforts to obtain all necessary consents, assignments, waivers or
amendments or terminations to any instruments or take such other measures as may
be appropriate to fulfil its obligations under and to carry out the transactions
contemplated by this Agreement. The Purchaser further covenants to provide the
Bio Offer to the Bio Shareholders and the ENI Offer to the ENI Shareholders.
ARTICLE 22
COVENANTS OF ENI AND BIO
22.1 COVENANTS
Bio, ENI, HoldCo covenant and agree with the Purchaser, that until the
purchase and sale contemplated herein becomes effective or until the parties
hereto are unable to consummate the transaction contemplated because a condition
set out herein cannot be satisfied and has not been waived by the appropriate
party hereunder, and except with the prior written approval of the Purchaser:
(a) except as otherwise provided in this Agreement, Bio, ENI and HoldCo will
not sell, transfer or dispose of or create any mortgage, pledge, waiver or
other encumbrance or a security interest on or in respect of the whole or
any material part of the assets of the Bio, ENI, or HoldCo respectively,
except in the ordinary course of business;
(b) Bio, ENI, and HoldCo will not borrow money or incur any indebtedness for
money borrowed except with the prior written consent of the Purchaser not
to be unreasonably withheld;
(c) Bio, ENI, and HoldCo will not make loans, advances or other payments,
except for expenses incurred or acquisitions made in the ordinary course of
business;
-39-
(d) Bio, ENI and HoldCo will not make any capital expenditures without the
prior written consent of the Purchaser;
(e) Bio, ENI and HoldCo will not issue, sell or agree to issue or sell any
shares, rights, warrants or other securities of Bio, ENI or HoldCo;
(f) Bio, ENI and HoldCo will not purchase or otherwise acquire for any
consideration any issued securities of Bio, ENI and HoldCo;
(g) Bio, ENI and HoldCo will not declare, pay or set aside in respect of its
capital any dividends or other distribution or payment by way of return of
capital, and not pay any stock dividend or make any reclassification in
respect of its respective outstanding shares;
(h) Bio, ENI and HoldCo will not alter or amend, in any way, its respective
articles or by-laws as they exist on the Effective Date and they will
maintain their corporate existence under the laws of Ontario; and
(i) Bio, ENI and HoldCo will not engage in any business, enterprise or other
activity materially different from that carried on by it at the Effective
Date or enter into any transaction or incur any obligation not in the
ordinary course of business or enter into any transaction with a party or
parties with whom Bio, ENI and HoldCo do not deal at arm's length.
22.2 OTHER TRANSACTIONS
Bio, ENI and HoldCo covenants and agrees with the Purchaser that:
(a) Bio, ENI and HoldCo shall immediately cease and cause to be terminated all
existing discussions and negotiations, if any, with any parties conducted
before the date of this Agreement with respect to any Acquisition Proposal
(as defined below);
(b) Bio, ENI and HoldCo shall not, nor authorize or permit any of the officers,
directors, or employees of Bio, ENI and HoldCo or any financial advisor,
expert or other representative retained by them to:
(i) solicit, initiate or encourage (including, without limitation, by way
of furnishing information) any inquiry or the making of any proposal
to Bio, ENI and HoldCo or its shareholders from any person which
constitutes, or may reasonably be expected to lead to (in either case
whether in one transaction or a series of transactions):
(A) an issuance by Bio, ENI and HoldCo or an acquisition from its
shareholders of any securities of Bio, ENI and HoldCo;
(B) any acquisition of any amount of assets of Bio, ENI and HoldCo
other than in the ordinary course of business;
-40-
(C) an amalgamation, arrangement, merger, or consolidation of any of
Bio, ENI and HoldCo; or
(D) any take-over bid, issuer bid, exchange offer, recapitalization,
liquidation, dissolution, reorganization into a royalty trust or
income fund or similar transaction involving any of Bio, ENI and
HoldCo or any other transaction, the consummation of which would
or could reasonably be expected to impede, interfere with,
prevent or delay the transactions contemplated by this Agreement,
the Bio Offer or the ENI Offer or which would or could reasonably
be expected to materially reduce the benefits to the Purchaser
under this Agreement, the Bio Offer or the ENI Offer (any such
inquiry or proposal in respect of any of the foregoing being an
"ACQUISITION PROPOSAL");
(ii) enter into or participate in any discussions or negotiations regarding
an Acquisition Proposal, or, except in the ordinary course of
business, furnish to any other person any information with respect to
the business, properties, operations, prospects or conditions
(financial or otherwise) of Bio, ENI and HoldCo or an Acquisition
Proposal or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort to attempt of any
person to do or seek to do any of the foregoing; or
(iii) waive or otherwise forbear (except in respect of non-material
matters) in the enforcement of, or enter into or participate in any
discussions, negotiations or agreements to waive or otherwise forbear
in respect of, any rights or other benefits of Bio, ENI and HoldCo
under confidential information agreements, including, without
limitation, any "standstill provisions" thereunder.
(c) Notwithstanding Section 22.2(b), Bio, ENI and HoldCo may engage in
discussions or negotiations with a third party who (without any
solicitation, initiation or encouragement, directly or indirectly, by Bio,
ENI and HoldCo, its other representatives after the date hereof) seeks to
initiate such discussions or negotiations and may furnish such third party
information concerning Bio, ENI and HoldCo and its business, properties and
assets if, and only to the extent that the third party has first made an
Acquisition Proposal and has demonstrated that the funds or other
consideration necessary for the Acquisition Proposal are reasonably likely
to be available (as determined in good faith in each case by Bio, ENI or
HoldCo's board of directors) and the Bio, ENI or HoldCo's board of
directors shall conclude in good faith, after considering applicable law
and receiving the written advice of outside counsel that such action is
necessary for the board of directors to act in a manner consistent with its
fiduciary duties under applicable law.
ARTICLE 23
COVENANTS OF DIRECTORS
23.1 COVENANTS
The Directors, jointly and severally, covenant and agree with the Purchaser
that:
-41-
(a) as of the Time of Closing the Directors will tender their Shares to the
Purchaser;
(b) the Bio Directors and the ENI Directors will unanimously pass a resolution
recommending to their respective shareholders that the Bio Offer and the
ENI Offer be accepted;
(c) the Directors will keep the terms of this Agreement and the Term Sheet
confidential and not disclose any such terms to any third party without the
consent of the Purchaser, except as required by law;
(d) that they shall not:
(i) solicit, initiate or encourage (including, without limitation, by way
of furnishing information) any inquiry or the making of any proposal
to Bio, ENI or HoldCo or its shareholders from any person which
constitutes, or may reasonably be expected to lead to (in either case
whether in one transaction or a series of transactions):
(A) an issuance by Bio, ENI or HoldCo or an acquisition from its
shareholders of any securities of Bio, ENI or HoldCo;
(B) any acquisition of any amount of assets of Bio, ENI or HoldCo
other than in the ordinary course of business;
(C) an amalgamation, arrangement, merger, or consolidation of any of
Bio, ENI or HoldCo; or
(D) any take-over bid, issuer bid, exchange offer, recapitalization,
liquidation, dissolution, reorganization into a royalty trust or
income fund or similar transaction involving any of Bio, ENI or
HoldCo or any other transaction, the consummation of which would
or could reasonably be expected to impede, interfere with,
prevent or delay the transactions contemplated by this Agreement
or the Offer or which would or could reasonable be expected to
materially reduce the benefits to the Purchaser under this
Agreement or the Offer (any such inquiry or proposal in respect
of any of the foregoing being an "ACQUISITION PROPOSAL");
(ii) enter into or participate in any discussions or negotiations regarding
an Acquisition Proposal, or, except in the ordinary course of
business, furnish to any other person any information with respect to
the business, properties, operations, prospects or conditions
(financial or otherwise) of Bio, ENI or HoldCo or an Acquisition
Proposal or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort to attempt of any
person to do or seek to do any of the foregoing; or
(iii) waive or otherwise forbear (except in respect of non-material
matters) in the enforcement of, or enter into or participate in any
discussions, negotiations or agreements to waive or otherwise forbear
in respect of, any rights or other
-42-
benefits of Bio, ENI or HoldCo under confidential information
agreements, including, without limitation, any "standstill
provisions" thereunder; and
(e) notwithstanding Section 23.1(c), the Directors may engage in
discussions or negotiations with a third party who (without any
solicitation, initiation or encouragement, directly or indirectly, by
the Directors, its other representatives after the date hereof) seeks
to initiate such discussions or negotiations and may furnish such
third party information concerning Bio, ENI or HoldCo and its
business, properties and assets if, and only to the extent that the
third party has first made an Acquisition Proposal and has
demonstrated that the funds or other consideration necessary for the
Acquisition Proposal are reasonably likely to be available (as
determined in good faith in each case by Bio, ENI or HoldCo's board of
directors) and the respective Bio Directors ENI Directors or HoldCo
Directors shall conclude in good faith, after considering applicable
law and receiving the written advice of outside counsel that such
action is necessary for the board of directors to act in a manner
consistent with its fiduciary duties under applicable law.
ARTICLE 24
COVENANTS OF WARRANT HOLDER
The Warrant Holder covenants and agrees with the Purchaser that the Warrant
Holder will exercise its ENI Warrants forthwith and shall tender the ENI Shares
issuable upon such exercise to the ENI Offer.
ARTICLE 25
NOTICES
25.1 NOTICES
Any notice required or permitted to be given by a Party hereto to the other
shall be given in writing and addressed:
(a) if to the Purchaser:
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX X0X 0X0
Attention: Dr. Xxxx Xxxx
Fax: (000) 000-0000
(b) if to Bio:
____________________
Attention: __
Fax: (__) __
-43-
(c) if to ENI:
____________________
Attention: __
Fax: (__) __
(d) if to HoldCo:
____________________
Attention: __
Fax: (__) __
(e) if to the Bio Directors at:
____________________
Attention: __
Fax: (__) __
(f) if to the ENI Directors at:
____________________
Attention: __
Fax: (__) __
(g) if to HoldCo Directors:
____________________
Attention: __
Fax: (__) __
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(h) if to Warrant Holder:
____________________
Attention: __
Fax: (__) __
Any notice delivered as aforesaid shall be deemed to have been received by the
Party hereto which it is so delivered at the time on the date of its being so
delivered. Any Party may change its address for notice by giving notice to that
effect.
ARTICLE 26
MISCELLANEOUS
26.1 RELEASE OF INFORMATION
The Parties hereto shall cooperate with each other in releasing information
concerning this Agreement and the transactions contemplated herein, and shall
furnish to and discuss with the other Parties drafts of all press and other
releases prior to publication. Nothing contained herein shall prevent a Party at
any time from furnishing information to any governmental agency or regulatory
authority or to the public if required by applicable law.
26.2 TIME
Time shall, in all respects, be of the essence in this Agreement.
26.3 ENUREMENT AND ASSIGNMENT
This Agreement shall be binding upon and shall enure to the benefit of the
Parties hereto and their respective successors, receivers, receiver-managers,
trustees and permitted assigns. No Party may assign its interest under this
Agreement without the prior written consent of all other Parties, such consent
not to be unreasonably withheld.
26.4 EXPENSES
The Parties hereto shall each be responsible for their own legal costs in
relation to this Agreement, the consummation of the transactions herein and all
other matters related thereto. The parties hereto acknowledge that the
Purchaser's Counsel are acting in respect of the drafting of this purchase and
sale agreement and all negotiations and consummation of the transactions
contemplated hereby for and on behalf of the Purchaser and not on behalf of any
other party hereto.
-45-
26.5 CONFIDENTIAL INFORMATION
Until immediately after the Closing, all documents and information received
by the Purchaser from Bio, ENI, HoldCo, the Directors, or the Warrant Holder,
and their respective auditors and solicitors, shall be treated by the Purchaser
as confidential information and will not be disclosed to others by the Purchaser
except to its solicitors, auditors and bankers, and except as required by
applicable securities legislation. This provision shall not prevent the
Purchaser from disclosing all information received by it to the TSX.
26.6 COUNTERPART EXECUTION
This Agreement may be executed by facsimile and in several counterparts,
each of which so executed shall be deemed to be an original, and such
counterparts together shall constitute one and the same instrument and,
notwithstanding their date of execution, shall be deemed to bear the date as of
the date above written.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
date first above written.
TRANSITION THERAPEUTICS INC. 1255205 ONTARIO INC.
Per: /s/ Xxxx Xxxxx Per: (signed) Director
-------------------------------- -----------------------------------
ELLIPSIS NEUROTHERAPEUTICS INC. _______________________
Per: (signed) Director Per: (signed) Director
-------------------------------- -----------------------------------
1255206 ONTARIO INC.
Per: (signed) Director
--------------------------------
(signed)
------------------------------------- ----------------------------------------
(witness) ________________________
(signed)
------------------------------------- ----------------------------------------
(witness) ________________________
(signed)
------------------------------------- ----------------------------------------
(witness) ________________________
(signed)
------------------------------------- ----------------------------------------
(witness) ________________________
(signed)
------------------------------------- ----------------------------------------
(witness) ________________________
(signed)
------------------------------------- ----------------------------------------
(witness) ________________________
(signed)
------------------------------------- ----------------------------------------
(witness) ________________________
SCHEDULE "A"
BIO FINANCIAL STATEMENTS
(as per the attached pages)
A-1
-
A-2
SCHEDULE "B"
ENI FINANCIAL STATEMENTS
(as per the attached pages)
B-1
-
B-2
SCHEDULE "C"
HOLDCO FINANCIAL STATEMENTS
(as per the attached pages)
C-1
-
C-2
SCHEDULE "D"
BIO OFFER TO PURCHASE
(as per the attached pages)
D-1
BIO OFFER TO PURCHASE
TRANSITION THERAPEUTICS INC.
000 XXXXXXX XXXXXX, XXXXX 000
XXXXXXX, XX X0X 0X0
TO: ALL SHAREHOLDERS OF 1255205 ONTARIO INC. ("BIO"), EXCEPT THE DIRECTORS OF
BIO (THE "DIRECTORS")
(ALL SHAREHOLDERS OF BIO THAT ACCEPT THIS OFFER SHALL HEREINAFTER BE
REFERRED TO AS THE "VENDORS" OR INDIVIDUALLY AS A "VENDOR")
RE: OFFER (THE "OFFER") TO PURCHASE ALL OUTSTANDING COMMON SHARES (THE "COMMON
SHARES") OF BIO
DEFINITIONS
Capitalized terms used but not defined in this Offer shall have the meaning
ascribed thereto in the share purchase agreement entered into among Transition,
Bio, ENI, HoldCo, the Directors, the ENI Directors, and the Warrant Holder (the
"SHARE PURCHASE AGREEMENT").
DIRECTORS' ACCEPTANCE
The Directors have agreed to sell all the Common Shares held by them to
Transition pursuant to the terms and conditions of the Share Purchase Agreement
for the same consideration as described below.
THE OFFER
Subject to the terms and conditions set forth in the accompanying Letter of
Acceptance and Transmittal, the Share Purchase Agreement, and as set forth
below, Transition Therapeutics Inc. ("TRANSITION") hereby offers to purchase all
of the outstanding Common Shares for: (i) an up front payment (the "UP FRONT
PAYMENT") equivalent to $- per Common Share in the form of - of a common share
of Transition ("TRANSITION SHARES") for each Common Share, (ii) a proportionate
interest in the Royalty (as that term is defined in Section 2.1 of the form of
Royalty Agreement attached hereto as Exhibit "A" to this Offer) with such
individual proportionate interest being set out in Exhibit "C" and (iii) future
Milestone payments (payable in the form of additional Transition Shares issued
at the then Transition Market Price) as set out below:
(a) - per Common Share;
(b) - Common Share less the amount paid pursuant to (a);
(c) - per Common Share less the amounts paid pursuant to (a) and (b);
and
D-2
(d) - per Common Share less the amounts paid pursuant to (a), (b) and
(c);
(the events specified in sections (a) through (d) are hereinafter referred
to collectively as the "MILESTONES", or individually, a "MILESTONE").
Transition and the Vendors shall agree that at Closing the fair market value of
the consideration in (i) as set out above is $- per Common Share and the fair
market value of the consideration in (ii) and (iii) as set out above, will in
the aggregate be $- per Common Share.
Transition Shares issued pursuant to a Milestone shall be issued within 14 days
of the Milestone being achieved. In the event that the Transition Shares are no
longer listed on a stock exchange, any remaining portion of the consideration
associated with Milestones, which becomes payable to the above, shall be
satisfied by Transition through cash consideration. If the Purchaser merges with
another corporation, the successor corporation (the "SUCCESSOR") will assume, at
the Successor's option, the payment obligations arising under this Agreement,
and any such Milestone payments may, at the Successor's option, be satisfied
through cash consideration or through the delivery of shares in the capital of
the Successor, provided such shares are listed on a stock exchange in Canada.
Further, if Transition sells the Bio Shares to an arm's length party, the
acquiror of such shares shall assume the Purchaser's payment obligations arising
under this Offer without any further consent of the other parties hereto.
No fractional Transition Shares shall be issued to a Vendor. Where a Vendor
would otherwise be entitled to a fractional Transition Share, the Vendor shall
be entitled to receive that number of Transition Shares that has been rounded up
to the nearest whole number of Transition Shares.
The Transition Shares issued in respect of the Up Front Payment will be subject
to a hold period upon issuance. On the fourth month anniversary of the date of
issue, the hold period will end for one third of issued Transition Shares. On
the eighth month anniversary of the date of issue, the hold period will end for
one third of issued Transition Shares. On the twelfth month anniversary of the
date of issue, the hold period will end for the final third of the issued
Transition Shares. The certificates representing such shares will be legended
accordingly. Transition Shares issued to residents of the United States of
America will bear an additional legend as described in Appendix "A" of the
Letter of Acceptance and Transmittal.
-.
CONDITIONS OF THE OFFER
Transition reserves the right to withdraw the Offer and not take up and pay for
any Bio Shares deposited under the Offer unless all of the conditions described
in the Share Purchase Agreement, are satisfied or waived prior to the expiry of
the Offer Period by Transition. The Offer is conditional (unless waived or
amended by Transition) upon, among other things:
(a) there being validly deposited under the Offer and not withdrawn,
prior to the expiry of the Offer Period and at the time Transition
first takes up and pays for the Bio Shares under the Offer, at least
66 2/3% of the outstanding Bio Shares;
D-3
(b) the closing of the purchase of all of the Common Shares owned by the
Directors pursuant to the Share Purchase Agreement; and
(c) receipt of duly executed letters of acceptance and transmittal from
remaining shareholders of Bio who agree to accept the Offer.
A copy of the Share Purchase Agreement is available upon request to any
shareholder or may be viewed at the offices of Stikeman Elliott LLP, 0000
Xxxxxxxx Xxxxx Xxxx, 000 Xxx Xxxxxx, Xxxxxxx, Xxxxxxx, X0X 0X0, solicitors for
Bio, at any time during normal business hours up until the Closing Date.
The Offer shall remain open until 2:00 p.m. (Toronto time) on March 9, 2006, or
such later date or dates as may be fixed by Transition from time to time (the
"OFFER PERIOD"). If the Offer does not close in accordance with the terms of
this Offer and the Share Purchase Agreement within six months after March 9,
2006 (or other date as fixed by Transition) all Bio Shares tendered under the
offer shall be returned to the Vendors.
ACQUISITION OF BIO SHARES NOT DEPOSITED
If the Offer has been accepted by the holders of not less than 90% of the Common
Shares, and such Common Shares have been taken up and paid for by Transition,
Transition currently intends to acquire the remaining securities of any such
class pursuant to the Compulsory Acquisition provisions of Part 15 of the
Business Corporations Act (Ontario) on the same terms on which Transition
acquired the securities pursuant to the Offer. If such statutory right of
Compulsory Acquisition is not available or if Transition elects not to proceed
by way of such statutory right, Transition will consider other means of
acquiring, directly or indirectly, all of the securities not deposited under the
Offer. Transition will cause the securities acquired under the Offer to be voted
in favour of such a transaction and, to the extent permitted under applicable
corporate and securities laws, to be counted as part of any shareholder approval
that may be required in connection with such transaction.
MANNER OF ACCEPTANCE
The Offer may be accepted during the Offer Period by depositing or forwarding
the Letter of Acceptance and Transmittal attached hereto as Exhibit "B", duly
completed and signed, to the registered office of Transition x/x XxXxxxxx
Xxxxxxxx XXX, Xxxxx 0000, Xxxxxxx Xxxxxxxx Xxxxx Xxxxxxx, Xxxxxxx X0X 0X0, Attn:
-.
In order to accept the Offer, the Common Shares held by the Shareholder must be
duly endorsed for transfer and delivered to Transition together with your
completed Letter of Acceptance and Transmittal.
Transition reserves the right to permit a holder of Common Shares to accept the
Offer in a manner other than as set out above.
D-4
PAYMENT FOR SHARES
Upon receipt of the Common Shares, Transition will pay for the Common Shares
tendered in acceptance of the Offer by issuing and delivering a certificate
representing the number of Up Front Transition Shares to the Vendors who are
resident of Canada (the Transition Shares issuable to non-Residents under the
Offer shall be held by and dealt with by the Escrow Agent pursuant to the
Withholding Tax provisions as set out in Appendix "B" of the Letter of
Acceptance). In addition, all Vendors shall receive the Royalty Agreement
issuable to the holder in accordance with the Offer in the name and to the
address specified in the Letter of Acceptance and Transmittal. Upon the
achievement of a Milestone, Transition will issue and deliver a certificate
representing the number of Transition Shares issuable to the holder (based on
the then current Transition Market Price) in accordance with the Milestone
payment plan as described above.
TAX ELECTION
Transition will, at the request of the Vendors, jointly elect with each Vendor
under subsection 85(1) of the Tax Act with respect to the sale of the Common
Shares. Such election will be prepared by each Vendor and filed by each Vendor
and Transition in the form and manner and within the time prescribed by the Tax
Act. The agreed amount for the purposes of paragraph 85(1)(a) of the Tax Act in
respect of each such property will be such amount as is determined by each
Vendor within the limits prescribed in the Tax Act.
Transition will, at the request of each Vendor, jointly elect with each Vendor
under corresponding provisions of applicable provincial income tax legislation
with respect to the sale of the Common Shares. This section will apply to the
making of any such provincial elections, with necessary changes.
WITHHOLDING TAX
Vendors who are residents of the United States of America will be subject to the
Withholding Tax provisions as set out in Appendix "B" of the Letter of
Acceptance and Transmittal attached hereto.
WARRANTIES AND COVENANTS OF TRANSITION
Transition warrants and covenants as follows:
(a) the execution and delivery of this Offer and the Share Purchase
Agreement by Transition and the consummation of the transaction
contemplated hereby do not constitute a breach of or default under
any agreement to which Transition is a party or by which Transition
is bound, and is legally binding upon Transition in accordance with
its terms;
(b) all requisite corporate action has been taken by Transition to
authorize the execution and delivery of this Offer and the Share
Purchase Agreement and this Offer and Share Purchase Agreement have
been duly executed and delivered by Transition; and
D-5
(c) all representations and warranties of Transition contained in the
Share Purchase Agreement are incorporated herein by reference.
This Offer is dated this 24th day of February, 2006.
TRANSITION THERAPEUTICS INC.
Per:
----------------------------------
Name: Xxxx Xxxxx
Title: Chief Financial Officer
D-6
EXHIBIT "A"
ROYALTY AGREEMENT
TO: - (the "PAYEE")
FROM: ELLIPSIS NEUROTHERAPEUTICS INC. ("ENI"), TRANSITION THERAPEUTICS
INC. ("TRANSITION")
DATE: March 10, 2006
BACKGROUND
1. Pursuant to the terms of an offer made by Transition and accepted by the
Payee by way of a letter of acceptance dated - (the "LETTER OF
ACCEPTANCE"), Transition has agreed to purchase and the Payee has agreed
to sell all of the Payee's shares in ENI and/or 1255205 Ontario Inc.
("BIO") and/or 1255206 Ontario Inc.
2. As part of the consideration for the purchase and sale of the Payee's
shares, Transition has agreed to cause ENI to enter into this Agreement
with the Payee, and the Payee has agreed to enter into this Agreement with
ENI, to provide for the payment by ENI to the Payee of the Royalties (as
defined below) in accordance with the terms of this Agreement.
AGREEMENT
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS
In this Agreement, including the recitals and the schedules, the following
words and expressions have the following meanings unless the context otherwise
requires:
(a) "AFFILIATE" of any Person means any other Person which, directly or
indirectly, controls or is controlled by or is under common control with
such Person, and for the purposes of this definition "CONTROL" (including
correlative meanings of the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the power to direct or cause the direction of the
management and policies of any Person, whether through the ownership of
shares or by contract or otherwise;
(b) "INTELLECTUAL PROPERTY" means any intellectual property rights in the
AZD-103 (-, including (i) all domestic and foreign patents and
applications therefor and all reissues, divisions, continuations,
renewals, extensions and continuations-in-part thereof; (ii) all
inventions (whether patentable or not), invention disclosures,
improvements, trade secrets, proprietary information, know-how,
technology, technical data, and schematics,
D-7
and all documentation relating to any of the foregoing; (iii) all
copyrights, copyright registrations and applications therefor, and all
other rights corresponding thereto throughout the world; (iv) all designs
and any registrations and applications therefor; (v) all software (both
source code and object code form) and any proprietary rights in such
software, including documentation and other materials related thereto;
(vi) all income, royalties, damages and payments now and hereafter due
and/or payable with respect to any of the foregoing, including, without
limitation, damages and payments for past or future infringements or
misappropriations thereof; and (vii) all rights to xxx for past, present
and future infringements or misappropriations of any of the foregoing.
(c) "LETTER OF ACCEPTANCE" has the meaning provided in the recitals;
(d) "NET REVENUES" in respect of Products sold in normal arm's-length
commercial transactions between parties which are not Affiliates, means
the gross revenues from Products sold at the genuine selling price at
which customers are billed in the usual course of business, less usual
commissions, discounts, refunds, allowances, replacements, or credits
allowed to purchasers for return or recall of the Products, less all
distribution costs (except that any such distribution costs shall not
exceed 1.5% of such gross revenues), freight and insurance costs incurred
in respect of Products, and less all sales and use taxes, customs duties,
and any other governmental tax or charge (except income tax) imposed on or
at the time of the production, importation, use or sale of the Products. A
sale or transfer to an Affiliate for resale by such Affiliate shall not be
considered a sale for purposes of this provision, but the resale by such
Affiliate to a third party shall be a sale for such purposes;
(e) "PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture or other entity;
(f) "PRODUCTS" means the compound AZD-103 -;
(g) "ROYALTIES" has the meaning provided in Section 2.1;
(h) "ROYALTY COMMENCEMENT DATE" means -; and
(i) "ROYALTY RATE" means, in respect of each calendar year or part thereof and
considered on a year to year basis, -.
ARTICLE 2
ROYALTIES
2.1 ROYALTIES
Transition will pay, or will cause ENI its Affiliates, sub-licensees and
distributors to pay to the Payee, subject to the terms of this Agreement and the
terms of the Letter of Acceptance, royalties ("ROYALTIES") at the Royalty Rate
on Net Revenues from the sale of Products worldwide made after the Royalty
Commencement Date. For clarity, the Payee will be entitled
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to receive Royalties based on Net Revenues realized only by ENI, its Affiliates
or any sublicensee or distributor of ENI or its Affiliates in accordance with
Section 2.2.
2.2 EARNING OF NET REVENUES BY ENI AND ITS AFFILIATES
Net Revenues from sales of Products by ENI or any of its Affiliates will
be deemed to been received by ENI or any of its Affiliates when Products are
billed out or invoiced and consideration for same is actually received by ENI or
its Affiliates. Net Revenues from any sublicensee or distributor of ENI or any
of ENI's Affiliates will be deemed to have been received by ENI or its
Affiliates when consideration is actually received by ENI or its Affiliates from
such sublicensee or distributor, and the total consideration received by ENI or
its Affiliates from any such sublicensee or distributor will be allocated to
Royalties on a pro rata basis vis-a-vis such total consideration, such that
Royalties will accumulate proportionately as such total consideration is
received by ENI or its Affiliates. For clarity, in no event shall the Royalties
payable to the Payee exceed the Royalty Rate in any given year.
2.3 CURRENCY
Unless otherwise indicated, all dollar amounts referred to in this
Agreement are in lawful money of Canada.
2.4 PAYMENT OF ROYALTIES
Within 45 days after the end of each calendar year, ENI will pay to the
Payee all Royalties due hereunder to the Payee in respect of such calendar year
at the Payee's address given under Section 4.3. All payments of Royalties
hereunder will be made by way of cheque or other form of payment acceptable to
ENI and the Payee, and will be net of any tax that ENI is required to withhold
under applicable law, provided that ENI provides Payee with a copy of such
withholding tax calculation of the required payment. ENI will afford all
necessary cooperation and support to Payee in order for Payee to obtain credit
or reimbursement.
2.5 AUDIT RIGHTS
No more frequently than once per year during the term of this Agreement,
Persons including the Payee (collectively, the "AUDITING PARTY") who
collectively are entitled to receive royalties from ENI of not less than -
received by ENI or any Affiliate from the sale of Products worldwide will be
entitled as a group to retain a reputable, independent certified public
accounting firm (the "AUDITOR") reasonably acceptable to ENI solely for the
purposes of auditing, at a mutually agreed upon time during normal business
hours, only those records of ENI that are reasonably necessary to verify the Net
Revenues and royalties payable to the members of the Auditing Party, including
the Royalties payable to the Payee as provided for in this Agreement. Prior to
the audit, ENI may require the Auditor to sign a confidentiality agreement
reasonably acceptable to ENI. Such audit shall be conducted in accordance with
generally accepted auditing standards. The Auditor will be entitled to disclose
to the Auditing Party only whether or not ENI is in compliance with its payment
obligations under this Agreement and, if ENI is not in compliance, the amount of
any non-compliance. The Auditor will be precluded from disclosing any other
confidential information of ENI to the Auditing
D-9
Party without the prior written consent of ENI. In the event an audit reveals a
shortfall in payment by ENI to the Payee, ENI will immediately pay the amount of
the shortfall to the Payee. Each audit will only cover the prior 3 years under
this Agreement.
2.6 FUTURE OPERATIONS OF ENI
The Payee acknowledges that ENI will operate its business and
commercialize Products in ENI's sole discretion, that ENI is not under any
obligation to operate its business or commercialize Products in any particular
manner, that there can be no assurance that any Royalties will be received, that
ENI will have no obligation to operate its business or commercialize Products in
order to maximize the amount of the Royalties, and that none of ENI, Transition
or Bio owes a fiduciary duty or express or implied duty to the Payee, but
instead the parties intend the express provisions of this Agreement to govern
their contractual relationship.
ARTICLE 3
TERM
3.1 TERM
This Agreement and ENI's obligations to pay Royalties to the Payee will
terminate - years from the date of execution of this Agreement.
3.2 SURVIVAL OF TERMS
All payment obligations accruing prior to the date of termination, and
such other provisions as may reasonably be expected to remain in force, will
survive the termination of this Agreement and will remain in full force and
effect following such termination.
ARTICLE 4
GENERAL
4.1 GOVERNING LAW AND ATTORNMENT
This Agreement will be governed by and construed in accordance with the
substantive laws of Ontario and the federal laws of Canada applicable in
Ontario, without regard to the conflict of law rules of Ontario that would apply
a different body of law. The parties irrevocably submit to and accept generally
and unconditionally the exclusive jurisdiction of the courts and appellate
courts of Ontario with respect to any legal action or proceeding which may be
brought at any time relating in any way to this Agreement.
4.2 ASSIGNMENT
(a) This Agreement and any of its rights and obligations are freely
assignable by Payee in whole or in part without the consent of ENI.
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(b) This Agreement is not assignable by ENI and/or Transition without
the prior written consent of the Payee, except that, upon written
notice to the Payee but without the Payee's consent, ENI and/or
Transition may assign this Agreement in its entirety in connection
with any transfer by ENI and/or Transition of all or substantially
all of the commercialization rights, including Intellectual Property
rights necessary to make, have made, use and sell the Products, in
which case ENI and/or Transition will obtain the agreement of the
assignee to assume the obligations of ENI and Transition under this
Agreement on the same terms as this Agreement.
(c) Upon effecting any permitted assignment under this Agreement, in
connection with the sale of the commercialization rights as
described in (b) above to an arms-length purchaser that assumes the
obligations of ENI and Transition under this Agreement then
Transition and the assigning party will be relieved and discharged
from all liability and obligations in respect of the assigned rights
and obligations, and the non-assigning party will look solely to the
assignee with respect to all matters regarding such assigned rights
and obligations.
(d) Any attempt by any party to assign any of the rights or obligations
of this Agreement except as permitted by this Agreement is void.
4.3 NOTICES
Any notice, direction, request or other communication required or
contemplated by any provision of this Agreement will be given in writing and
will be given by delivering or faxing or emailing the same to the parties as
follows:
(a) To ENI at:
c/o Transition Therapeutics Inc.
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX X0X 0X0
Attention: Dr. Xxxx Xxxx
Fax: (000) 000-0000
(b) To the Payee at:
The address specified in the Payee's
Letter of Acceptance.
Any such notice, direction, request or other communication will be deemed
to have been given or made on the date on which it was delivered or, in the case
of fax or email, on the next business day after receipt of transmission. Any
party may change its fax number or address for service or email address from
time to time by written notice in accordance with this Section.
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4.4 AMENDMENTS AND WAIVER
No amendment or waiver of this Agreement will be binding unless executed
in writing by the party to be bound thereby. No waiver of any provision of this
Agreement will be deemed or will constitute a waiver of any other provision nor
will any such waiver constitute a continuing waiver unless otherwise expressly
provided.
4.5 ENTIRE AGREEMENT
This Agreement supersedes all previous invitations, proposals, letters,
correspondence, negotiations, promises, agreements, covenants, conditions,
representations and warranties with respect to the subject matter of this
Agreement. There is no representation, warranty, collateral term or condition or
collateral agreement affecting this Agreement, other than as expressed in
writing in this Agreement.
4.6 INVALIDITY OF PARTICULAR PROVISION
If any provision of this Agreement or any part of any provision (in this
Section called the "OFFENDING PROVISION") is declared or becomes unenforceable,
invalid or illegal for any reason whatsoever including, without limiting the
generality of the foregoing, a decision by any competent courts, legislation,
statutes, bylaws or regulations or any other requirements having the force of
law, then the remainder of this Agreement will remain in full force and effect
as if this Agreement had been executed without the Offending Provision.
4.7 RELATIONSHIP
Nothing in this Agreement will make or be construed to make the parties
partners or agents of each other or to create any other relationship by which
the acts of any party may bind the others or result in any liability to the
other.
4.8 HEADINGS AND CAPTIONS
The headings and captions of sections and paragraphs contained in this
Agreement are all inserted for convenience of reference only and are not to be
considered when interpreting this Agreement.
4.9 ENUREMENT
Subject to the restrictions on transfer contained in this Agreement, this
Agreement will enure to the benefit of and be binding on the parties and their
respective heirs, executors, administrators, successors and permitted assigns.
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TRANSITION THERAPEUTICS INC. ELLIPSIS NEUROTHERAPEUTICS INC.
Per: Per:
------------------------------ --------------------------------
c/s
Per: Per:
------------------------------ --------------------------------
(End of Agreement.)
D-13
EXHIBIT "B"
LETTER OF ACCEPTANCE AND TRANSMITTAL (BIO)
TO: TRANSITION THERAPEUTICS INC.
The undersigned (the "OFFEREE") holder of a number of Common Shares
(collectively, the "COMMON SHARES") of Bio indicated below hereby:
1. acknowledges receipt of the offer of Transition Therapeutics Inc.
("TRANSITION") dated February 24, 2006 (the "OFFER");
2. irrevocably agrees to the terms of and accepts the Offer and sells,
assigns and transfers to Transition all right, title and interest of the
Offeree in and to all of the Common Shares held by the Offeree, subject to
the condition precedent that the closing of the purchase of Common Shares
held by the Directors (as defined in the Offer) occurs as contemplated in
the Share Purchase Agreement (also as defined in the Offer);
3. represents and warrants that it has good title to the Common Shares free
and clear of all liens, charges and encumbrances and, subject to the
approval of the board of directors of ENI, that it has full power and
authority to sell, assign and transfer the Common Shares held by it and
when the Common Shares are taken up and paid for by Transition, Transition
will acquire good, marketable and unencumbered title to the Common Shares
free and clear of all liens, restrictions, charges and encumbrances, and
the same will not be subject to any adverse claim;
4. represents and warrants that, to the best of its knowledge, information
and belief, there are no actions, suits, proceedings or claims existing or
pending or threatened with respect to or in any manner challenging
respective ownership of the Bio Shares or the sale of the Bio Shares
pursuant to this Agreement;
5. covenants that it will execute, upon request, any additional documents
reasonably necessary or desirable to complete the transaction contemplated
herein; and
6. covenants that it is (PLEASE CHECK ONE):
___ not a non-resident of Canada within the meaning of the Income Tax
Act (Canada),
___ a non-resident of Canada with the meaning of the Income Tax Act
(Canada), and is a resident of the United States of America, and as
such covenants that the representations in Appendix "A" are true and
correct as of the Closing Date and agrees to the Withholding Tax
arrangement as set forth in Appendix "B".
By execution of this letter, the Offeree irrevocably appoints a director or
officer of Bio as attorney of the Offeree, effective the date hereof, with full
power of substitution, in the name and on behalf of the Offeree, to endorse the
certificate(s) representing Common Shares held by the
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Offeree, attend at a closing of the purchase and sale of the Common Shares and
accept the cash consideration payable under the Offer on behalf of the Offeree.
Capitalized terms used, but not defined, in this Letter of Acceptance and
Transmittal which are defined in the Offer have the respective meanings set out
in the Offer.
Each and every authority, whether as attorney or otherwise, herein conferred by
the Offeree is irrevocable, is granted in consideration of the purchase of the
Common Shares by Transition in accordance with the terms of the Offer, shall
survive the death, insolvency, bankruptcy or incapacity of the Offeree and shall
be binding upon the successors and assigns of the Offeree and upon the
executors, administrators, committees, heirs and personal representatives of the
undersigned.
DATED: , 2006.
---------------
---------------------------------------------------
Name of Offeree (Please Print)
---------------------------------------------------
Signature
---------------------------------------------------
Name of person signing (if Offeree is a company)
Address of Offeree
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
Number of Common Shares held by Offeree
-----------
D-15
APPENDIX "A"
U.S. Representations & Warranties
1. [it/he/she] is authorized to consummate the receipt of the Transition
Shares;
2. [it/he/she] understands that the Transition Shares have not been and will
not be registered under the United States Securities Act of 1933, as
amended (the "1933 Act") or any applicable state securities laws and that
the contemplated [transfer/issuance] is being made in reliance on a
private placement exemption to accredited investors (as such term is
defined on Annex A hereto, "Accredited Investors");
3. [it/he/she] has had access to such additional information, if any,
concerning Transition as it has considered necessary in connection with
its investment decision to receive the Transition Shares;
4. [it/he/she] has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of its
investment in the Transition Shares and is able to bear the economic risks
of such investment;
5. [it/he/she] is an Accredited Investor and is acquiring the Transition
Shares for its own account or for the account of an Accredited Investor as
to which it exercises sole investment discretion, and not with a view to
any resale, distribution or other disposition of the Transition Shares in
violation of United States securities laws or applicable state securities
laws;
6. [it/he/she] acknowledges that it has not purchased the Transition Shares
as a result of any general solicitation or general advertising, including
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar media have been invited by general
solicitation or general advertising;
7. [it/he/she] agrees that if it decides to offer, sell or otherwise transfer
any of the Transition Shares, such Transition Shares may be offered, sold
or otherwise transferred only, (i) to Transition, (ii) outside the United
States in accordance with Rule 904 of Regulation S under the 1933 Act or
(iii) within the United States in accordance with one or more exemptions
from registration under the 1933 Act, if available, and in compliance with
any applicable state securities laws;
8. [it/he/she] understands and acknowledges that upon the original issuance
thereof, and until such time as the same is no longer required under
applicable requirements of the 1933 Act or applicable state securities
laws, certificates representing Transition Shares, and all certificates
issued in exchange therefor or in substitution thereof, shall bear the
following legend (the "U.S. LEGEND"):
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THE
HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF
TRANSITION THAT SUCH SECURITIES MAY
D-16
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO TRANSITION, (B)
OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S
UNDER THE 1933 ACT OR (C) WITHIN THE UNITED STATES IN ACCORDANCE WITH ONE
OR MORE EXEMPTIONS FROM REGISTRATION UNDER THE 1933 ACT, IF AVAILABLE, AND
IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS. DELIVERY OF THIS
CERTIFICATE MAY NOT CONSTITUTE GOOD DELIVERY IN SETTLEMENT OF TRANSACTIONS
ON STOCK EXCHANGES IN CANADA. PROVIDED THAT TRANSITION IS A "FOREIGN
ISSUER" WITHIN THE MEANING OF REGULATION S AT THE TIME OF SALE, A NEW
CERTIFICATE BEARING NO LEGEND MAY BE OBTAINED FROM TRANSITION, UPON
DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM
SATISFACTORY TO TRANSITION, TO THE EFFECT THAT SUCH SALE IS BEING MADE IN
ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE 1933 ACT.";
provided, that if Transition Shares are being transferred under paragraph
(7)(ii) above, and provided that Transition is a "foreign issuer" within the
meaning of Regulation S at the time of sale, any such legend may be removed by
providing a declaration to Transition to the effect set forth in Annex B hereto
(or as Transition may prescribe from time to time); and provided, further, that,
if any such Transition Shares are being transferred under paragraph (7)(iii)
above, the legend may be removed by delivery to Transition of an opinion of
counsel, of recognized standing reasonably satisfactory to Transition, that such
legend is no longer required under applicable requirements of the 1933 Act or
state securities laws;
9. [it/he/she] consents to Transition making a notation on its records or
giving instructions to any transfer agent of the Transition Shares in
order to implement the restrictions on transfer set forth and described
herein; and
10. if required by applicable U.S. securities laws or by the U.S. Securities
Exchange Commission, [it/he/she] will execute, deliver and file and
otherwise assist Transition in filing reports, questionnaires,
undertakings and other documents with respect to the transfer of the
Transition Shares.
D-17
ANNEX A
DEFINITION OF ACCREDITED INVESTOR
"Accredited Investor" means any entity which comes within any of the following
categories:
11. Any bank as defined in Section 3(a)(2) of the 1933 Act or any savings and
loan association or other institution as defined in Section 3(a)(5)(A) of
the 1933 Act whether acting in its individual or fiduciary capacity; any
broker dealer registered pursuant to Section 15 of the Securities Exchange
Act of 1934; any insurance company as defined in Section 2(13) of the 1933
Act; any investment company registered under the Investment Company Act of
1940 or a business development company as defined in Section 2(a)(48) of
that Act; any Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; any plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state or
its political subdivisions, for the benefit of its employees, if such plan
has total assets in excess of US$5,000,000; any employee benefit plan
within the meaning of the Employee Retirement Income Security Act of 1974,
if the investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or if
the employee benefit plan has total assets in excess of US$5,000,000, or,
if a self-directed plan, with investment decisions made solely by persons
that are accredited investors;
12. Any private business development company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940;
13. Any organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of US$5,000,000;
14. Any trust with total assets in excess of US$5,000,000, not formed for the
specific purpose of acquiring the securities offered, whose purchase is
directed by a sophisticated person, being defined as a person who has such
knowledge and experience in financial and business matters that he or she
is capable of evaluating the merits and risks of the prospective
investment;
15. Any director or executive officer of Transition/Bio/ENI;
16. Any natural person with an individual net worth, or joint net worth with
his or her spouse, at the time of purchase in excess of US$1,000,000;
17. Any natural person with an individual income in excess of US$200,000 in
each of the last 2 years or joint income with his or her spouse in excess
of US$300,000 in each of those years, and who reasonably expects to reach
the same income level in the current year; or
18. Any entity in which all of the equity owners are accredited investors.
D-18
As used herein, the term "net worth" means the excess of total assets over total
liabilities. In computing net worth for the purpose of paragraph (6) above, the
principal residence of the investor must be valued at cost, including cost of
improvements, or at recently appraised value by an institutional lender making a
secured loan, net of encumbrances. In determining income, an investor should add
to adjusted gross income any amount attributable to tax exempt income received,
losses claimed as a limited partner in any limited partnership, deductions
claimed for depletion, contributions to an XXX or Xxxxx retirement plan, (2)
alimony payments, and any amount by which income from long term capital gains
has been reduced in arriving at adjusted gross income.
D-19
ANNEX B
TO: Transition Therapeutics Inc.
The undersigned (a) acknowledges that the sale of the securities of Transition
Therapeutics Inc. (Transition") to which this declaration relates is being made
in reliance on Rule 904 of Regulation S under the United States Securities Act
of 1933, as amended (the "1933 Act") and (b) certifies that (1) the undersigned
is not an affiliate of Transition as that term is defined in the 1933 Act, (2)
the offer of such securities was not made to a person in the United States and
either (A) at the time the buy order was originated, the buyer was outside the
United States, or the seller and any person acting on its behalf reasonably
believed that the buyer was outside the United States, or (B) the transaction
was executed in, on or through the facilities of The Toronto Stock Exchange, the
Montreal Exchange, or the Canadian Venture Exchange or any other designated
offshore securities market as defined in Regulation S under the 1933 Act and
neither the seller nor any person acting on its behalf knows that the
transaction has been prearranged with a buyer in the United States (3) neither
the seller nor any affiliate of the seller nor any person acting on any of their
behalf has engaged or will engage in any directed selling efforts in the United
States in connection with the offer and sale of such securities, (4) the sale is
bona fide and not for the purpose of "washing off" the resale restrictions
imposed because the securities are "restricted securities" (as such term is
defined in Rule 144(a)(3) under the 1933 Act), (5) the seller does not intend to
replace the securities sold in reliance on Rule 904 of the 1933 Act with
fungible unrestricted securities and (6) the contemplated sale is not a
transaction, or part of a series of transactions which, although in technical
compliance with Regulation S, is part of a plan or scheme to evade the
registration provisions of the 1933 Act. Terms used herein have the meanings
given to them by Regulation S.
Dated:
------------------------ -----------------------------------------
Name of Seller
By:
-------------------------------------
Name:
Title:
X-00
Xxxxxxxx "X"
WITHHOLDING TAXES
1. DEFINITIONS
The following definitions shall apply to this Appendix "B":
"AGREED REMITTANCE DATE" means the 28th day after the end of the month
containing the Closing Date.
"COMFORT LETTER" means a letter addressed to the Purchaser, the
Non-Resident Vendor or counsel to the Non-Resident Vendor from the CRA
which provides that any amount withheld by the Purchase is to be retained
and not remitted to the Receiver General of Canada until such later date
as may be specified by the CRA.
"COMPLIANCE CERTIFICATE" has the meaning ascribed thereto in Section 2(a);
"CRA" means the Canada Revenue Agency;
"CRA REMITTANCE DATE" means the later of the Agreed Remittance Date and
such date as may be specified later in writing by the CRA.
"ESCROW AGENT" means Computershare Trust Company of Canada;
"NON-RESIDENT" shall mean not resident in Canada for the purposes of the
Tax Act;
"NON-RESIDENT VENDORS" means the Bio Directors, the ENI Directors, the
Warrant Holder, the Remaining Bio Shareholders and the Remaining ENI
Shareholders who tender their respective ENI Shares and Bio Shares in
accordance with this Appendix "B" and who are Non-Residents;
"PURCHASE PRICE" means the purchase consideration paid to the Vendors in
accordance with the Share Purchase Agreement;
"TAX ACT" shall mean the Income Tax Act (Canada) and the Income Tax Act
Regulations, as amended from time to time or publicly proposed to be
amended to the date of this Appendix "B";
"TAX AMOUNT" has the meaning ascribed thereto in Section 2(f); and
"TRANSACTION" has the meaning ascribed thereto in Section 2(a).
2. WITHHOLDING TAXES
(a) The Purchaser and the Non-Resident Vendors acknowledge that,
pursuant to Section 116 of the Tax Act, in respect of purchase and
sale of the Purchased Shares contemplated herein (the
"TRANSACTION"), the Purchaser is entitled to withhold and must remit
to the Receiver General of Canada the prescribed
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percentage of the amount, if any, by which the Purchase Price
payable to a Non-Resident Vendor exceeds the certificate limit set
out in a certificate of compliance (a "COMPLIANCE CERTIFICATE")
obtained from the CRA by a Non-Resident Vendor for the purposes of
Section 116 of the Tax Act in respect of the Transaction;
(b) To ensure that the Purchaser will be able to meet its withholding
requirements as outlined in Section 2(a) of this Appendix "B" the
Purchaser shall deposit all of the Transition Shares to which a
Non-Resident Vendor is entitled with the Escrow Agent who will pool
all such Transition Shares and the Purchaser shall be entitled to
instruct the Escrow Agent to sell a sufficient number of the
Transition Shares in accordance with Sections 2(e) and 2(g) of this
Appendix "B" on deposit with the Escrow Agent, net of transaction
costs, to which the Non-Resident Vendor is otherwise entitled, that
will enable the Purchaser to meet its withholding requirements as
outlined in Section 2(a) of this Appendix "B";
(c) Notwithstanding Section 2(a) of this Appendix "B" and Section 2(b)
of this Appendix "B", the Purchaser and the Non-Resident Vendors
acknowledge that some or all of the Non-Resident Vendors may not be
able to provide a Compliance Certificate to the Purchaser at or
prior to the Closing Date, and the Purchaser and the Non-Resident
Vendors wish to provide a mechanism to allow the Non-Resident
Vendors to attempt to obtain a Compliance Certificate prior to the
expiry of the statutory period by which the remittance of the
withholding taxes, if any, is required to be paid to the Receiver
General of Canada;
(d) If the CRA indicates that payment of an amount (the "TAX AMOUNT")
would allow the CRA to issue a Compliance Certificate with a
certificate limit equal to the Purchase Price payable to a
Non-Resident Vendor, the Purchaser, upon receipt of a written
direction signed by the Non-Resident Vendor to that effect, shall
pay the Tax Amount to the CRA from any amount so withheld or, at the
request of the Non-Resident Vendor, shall release and forward the
Tax Amount to the Non-Resident Vendor's counsel on the trust
condition that such funds be used for the sole purpose of making the
aforementioned payment to the CRA and, upon delivery of the
resultant Compliance Certificate to the Purchaser, the balance of
the funds so withheld shall be released to the Non-Resident Vendor;
(e) Where the Non-Resident Vendor delivers to the Purchaser a Compliance
Certificate issued by the Minister of National Revenue under
subsection 116(2) of the Tax Act, the Purchaser:
(i) may, if the Purchaser has not received a Comfort Letter within
10 days prior to the Agreed Remittance Date, instruct the
Escrow Agent to sell a sufficient number of the Transition
Shares, to which the Non-Resident Vendor is otherwise entitled
and on deposit with the Escrow Agent, to pay, net of
transaction costs, the amount described in Section 2(e)(ii) of
this Appendix "B";
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(ii) shall pay on the CRA Remittance Date to the Receiver General
of Canada 25% of the amount, if any, by which the Purchase
Price exceeds the certificate limit fixed in such Compliance
Certificate; and
(iii) shall pay within 2 days following the CRA Remittance Date to
the Non-Resident Vendor any amount that the Purchaser has
withheld and is not required to pay to the Receiver General of
Canada in accordance with Section 2(e)(ii) of this Appendix
"B";
(f) Where the Non-Resident Vendor delivers to the Company a Compliance
Certificate issued by the Minister of National Revenue under
subsection 116(4) of the Tax Act prior to the CRA Remittance Date,
the Purchaser shall pay to the Non-Resident Vendor forthwith all
amounts the Purchaser has withheld in respect of the Non-Resident
Vendor;
(g) Where no Compliance Certificate has been delivered to the Purchaser
by the Non-Resident Vendor, the Purchaser:
(i) may, if the Purchaser has not received a Comfort Letter within
10 days prior to the Agreed Remittance Date, instruct the
Escrow Agent to sell a sufficient number of the Transition
Shares, to which the Non-Resident Vendor is otherwise entitled
and on deposit with the Escrow Agent, to pay, net of
transaction costs, the amount described in Section 2(g)(ii)
2(g)(ii)of this Appendix "B";
(ii) shall pay on the CRA Remittance Date to the Receiver General
of Canada 25% of the Purchase Price payable to that
Non-Resident Vendor; and
(iii) shall pay within 2 days following the CRA Remittance Date to
the Non-Resident Vendor any amount that the Purchaser has
withheld and is not required to pay to the Receiver General of
Canada in accordance with Section 2(g)(ii) of this Appendix
"B";
(h) The Purchaser shall not remit the amounts referred to in Section
2(e) of this Appendix "B" and Section 2(g) of this Appendix "B" on
the Agreed Remittance Date if a Comfort Letter is delivered to the
Purchaser prior to the Agreed Remittance Date, in which case the
Purchaser shall not remit such amounts prior to the CRA Remittance
Date.
(i) Any amount paid by the Purchaser to the Receiver General of Canada
under Section 2(e) of this Appendix "B" or under Section 2(g) of
this Appendix "B" shall constitute a payment made by the Purchaser
to the Non-Resident Vendor on account of the Purchase Price.
(j) Transition Shares subject to this Article 2 hereof shall not bear
the U.S. Legend or other resale restriction legend unless they are
released from Escrow to the respective Non-Resident Vendor. All
Transition Shares sold by the Escrow Agent
D-23
pursuant to Section 2(e) and 2(g) shall not bear the U.S. Legend or
other resale restriction legend.
(k) While the Escrow Agent will take reasonable steps to sell such
withheld Transition Shares in an orderly manner, the Purchaser makes
no assurance as to the price that will be received in respect of
such sales and the Purchaser will not be liable in any manner in
respect of the sale procedure, terms, timing or purchase price
received for such withheld Transition Shares.
D-24
EXHIBIT "C"
PROPORTIONATE INTEREST IN ROYALTY
D-1
SCHEDULE "E"
ENI OFFER TO PURCHASE
(as per the attached pages)
E-1
ENI OFFER TO PURCHASE
TRANSITION THERAPEUTICS INC.
000 XXXXXXX XXXXXX, XXXXX 000
XXXXXXX, XX X0X 0X0
TO: ALL SHAREHOLDERS OF ELLIPSIS NEUROTHERAPEUTIC INC. ("ENI"), EXCEPT
TRANSITION THERAPEUTICS INC. ("TRANSITION"), THE DIRECTORS OF ENI (THE
"DIRECTORS") AND 1255205 ONTARIO INC. ("BIO")
(ALL SHAREHOLDERS OF ENI THAT ACCEPT THIS OFFER SHALL HEREINAFTER BE
REFERRED TO AS THE "VENDORS" OR INDIVIDUALLY AS A "VENDOR")
RE: OFFER (THE "OFFER") TO PURCHASE ALL OUTSTANDING COMMON SHARES (THE "COMMON
SHARES") OF ENI
DEFINITIONS
Capitalized terms used but not defined in this Offer shall have the meaning
ascribed thereto in the share purchase agreement entered into among Transition,
Bio, ENI, HoldCo, the Bio Directors, the Directors, and the Warrant Holder (the
"SHARE PURCHASE AGREEMENT").
DIRECTORS' ACCEPTANCE
The Directors have agreed to sell all the Common Shares held by them to
Transition pursuant to the terms and conditions of the Share Purchase Agreement
for the same consideration as described below.
THE OFFER
Subject to the terms and conditions set forth in the accompanying Letter of
Acceptance and Transmittal, the Share Purchase Agreement, and as set forth
below, Transition hereby offers to purchase all of the outstanding Common Shares
for: (i) an up front payment (the "UP FRONT PAYMENT") equivalent to $- per
Common Share in the form of - common shares of Transition ("TRANSITION SHARES")
for each Common Share, (ii) a proportionate interest in the Royalty (as that
term is defined in Section 2.1 of the form of Royalty Agreement attached hereto
as Exhibit "A" to this Offer), with such individual proportionate interest being
set out in Exhibit "C" and (iii) future Milestone payments (payable in the form
of additional Transition Shares issued at the then Transition Market Price)
equivalent to up to $- per Common Share, as set out below:
(a) - per Common Share;
(b) - per Common Share, less the amount paid pursuant to (a);
(c) - per Common Share, less the amounts paid pursuant to (a) and (b);
and
E-2
(d) - per Common Share, less the amounts paid pursuant to (a), (b) and
(c);
(the events specified in sections (a) through (d) are hereinafter referred
to collectively as the "MILESTONES", or individually, a "MILESTONE").
Transition and the Vendors shall agree that, at Closing, the fair market value
of the consideration in section (i) as set out above is $- per ENI Share and at
Closing, the fair market value of the consideration in sections (ii) and (iii)
as set out above, will in the aggregate be $- per ENI Share.
Transition Shares issued pursuant to a Milestone shall be issued within 14 days
of the Milestone being achieved. In the event that the Transition Shares are no
longer listed on a stock exchange, any remaining portion of the consideration
associated with Milestones, which becomes payable to the above, shall be
satisfied by Transition through cash consideration. If the Purchaser merges with
another corporation, the successor corporation (the "SUCCESSOR") will assume, at
the Successor's option, the payment obligations arising under this Agreement,
and any such Milestone payments may, at the Successor's option, be satisfied
through cash consideration or through the delivery of shares in the capital of
the Successor, provided such shares are listed on a stock exchange in Canada.
Further, if Transition sells the ENI Shares to an arm's length party, the
acquiror of such shares shall assume the Purchaser's payment obligations arising
under this Offer without any further consent of the other parties hereto.
No fractional Transition Shares shall be issued to a Vendor. Where a Vendor
would otherwise be entitled to a fractional Transition Share, the Vendor shall
be entitled to receive that number of Transition Shares that has been rounded up
to the nearest whole number of Transition Shares.
The Transition Shares issued in respect of the Up Front Payment will be subject
to a hold period upon issuance. On the fourth month anniversary of the date of
issue, the hold period will end for one third of issued Transition Shares. On
the eighth month anniversary of the date of issue, the hold period will end for
one third of issued Transition Shares. On the twelfth month anniversary of the
date of issue, the hold period will end for the final third of the issued
Transition Shares. The certificates representing such shares will be legended
accordingly. Transition Shares issued to residents of the United States of
America will bear an additional legend as described in Appendix "A" of the
Letter of Acceptance and Transmittal.
-.
CONDITIONS OF THE OFFER
Transition reserves the right to withdraw the Offer and not take up and pay for
any ENI Shares deposited under the Offer unless all of the conditions described
in the Share Purchase Agreement, are satisfied or waived prior to the expiry of
the Offer Period by Transition. The Offer is conditional (unless waived or
amended by Transition) upon, among other things:
(a) the closing of the purchase of all of the Common Shares owned by the
Directors and the Warrant Holder pursuant to the Share Purchase
Agreement; and
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(b) receipt of duly executed letters of acceptance and transmittal
from remaining shareholders of ENI who agree to accept the
Offer.
The Offer is not subject to a minimum acquisition threshold by Transition.
A copy of the Share Purchase Agreement is available upon request to any
shareholder or may be viewed at the offices of Stikeman Elliott LLP, 0000
Xxxxxxxx Xxxxx Xxxx, 000 Xxx Xxxxxx Xxxxxxx, Xxxxxxx X0X 0X0, solicitors for
ENI, at any time during normal business hours up until the Closing Date.
The Offer shall remain open until 2:00 p.m. (Toronto time) on March 9, 2006, or
such later date or dates as may be fixed by Transition from time to time (the
"OFFER PERIOD"). If the Offer does not close in accordance with the terms of
this Offer and the Share Purchase agreement within six months after March 9,
2006 (or other date as fixed by Transition) all ENI Shares tendered under the
Offer shall be returned to the Vendors.
ACQUISITION OF ENI SHARES NOT DEPOSITED
If the Offer has been accepted by the holders of not less than 90% of the Common
Shares not presently held by Transition, and such Common Shares have been taken
up and paid for by Transition, Transition currently intends to acquire the
remaining securities of any such class pursuant to the Compulsory Acquisition
provisions of Part 15 of the Business Corporations Act (Ontario) on the same
terms on which Transition acquired the securities pursuant to the Offer. If such
statutory right of Compulsory Acquisition is not available or if Transition
elects not to proceed by way of such statutory right, Transition will consider
other means of acquiring, directly or indirectly, all of the securities not
deposited under the Offer. Transition will cause the securities acquired under
the Offer to be voted in favour of such a transaction and, to the extent
permitted under applicable corporate and securities laws, to be counted as part
of any shareholder approval that may be required in connection with such
transaction.
MANNER OF ACCEPTANCE
The Offer may be accepted during the Offer Period by depositing or forwarding
the Letter of Acceptance and Transmittal attached hereto as Exhibit "B", duly
completed and signed, to the registered office of Transition x/x XxXxxxxx
Xxxxxxxx XXX, Xxxxx 0000, Xxxxxxx Xxxxxxxx Xxxxx Xxxxxxx, Xxxxxxx X0X 0X0, Attn:
-.
In order to accept the Offer, the Common Shares held by the Shareholder must be
duly endorsed for transfer and delivered to Transition together with your
completed Letter of Acceptance and Transmittal.
Transition reserves the right to permit a holder of Common Shares to accept the
Offer in a manner other than as set out above.
PAYMENT FOR SHARES
Upon receipt of the Common Shares, Transition will pay for the Common Shares
tendered in acceptance of the Offer by issuing and delivering a certificate
representing the number of Up
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Front Transition Shares to the Vendors who are resident of Canada (the
Transition Shares issuable to non-Residents under the Offer shall be held by and
dealt with by the Escrow Agent pursuant to the Withholding Tax provisions as set
out in Appendix "B" of the Letter of Acceptance). In addition, all Vendors shall
receive the Royalty Agreement issuable to the holder in accordance with the
Offer in the name and to the address specified in the Letter of Acceptance and
Transmittal. Upon the achievement of a Milestone, Transition will issue and
deliver a certificate representing the number of Transition Shares issuable to
the holder (based on the then current Transition Market Price) in accordance
with the Milestone payment plan as described above.
TAX ELECTION
Transition will, at the request of the Vendors, jointly elect with each Vendor
under subsection 85(1) of the Tax Act with respect to the sale of the Common
Shares. Such election will be prepared by each Vendor and filed by each Vendor
and Transition in the form and manner and within the time prescribed by the Tax
Act. The agreed amount for the purposes of paragraph 85(1)(a) of the Tax Act in
respect of each such property will be such amount as is determined by each
Vendor within the limits prescribed in the Tax Act.
Transition will, at the request of each Vendor, jointly elect with each Vendor
under corresponding provisions of applicable provincial income tax legislation
with respect to the sale of the Common Shares. This section will apply to the
making of any such provincial elections, with necessary changes.
WITHHOLDING TAX
Vendors who are residents of the United States of America will be subject to the
Withholding Tax provisions as set out in Appendix "B" of the Letter of
Acceptance and Transmittal attached hereto.
E-5
WARRANTIES AND COVENANTS OF TRANSITION
Transition warrants and covenants as follows:
(a) the execution and delivery of this Offer and the Share Purchase
Agreement by Transition and the consummation of the transaction
contemplated hereby do not constitute a breach of or default under
any agreement to which Transition is a party or by which Transition
is bound, and is legally binding upon Transition in accordance with
its terms;
(b) all requisite corporate action has been taken by Transition to
authorize the execution and delivery of this Offer and the Share
Purchase Agreement and this Offer and Share Purchase Agreement have
been duly executed and delivered by Transition; and
(c) all representations and warranties of Transition contained in the
Share Purchase Agreement are incorporated herein by reference.
This Offer is dated this 24th day of February, 2006.
TRANSITION THERAPEUTICS INC.
Per:
-------------------------------------
Name: Xxxx Xxxxx
Title: Chief Financial Officer
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EXHIBIT "A"
ROYALTY AGREEMENT
E-7
ROYALTY AGREEMENT
TO: - (the "PAYEE")
FROM: ELLIPSIS NEUROTHERAPEUTICS INC. ("ENI"), TRANSITION THERAPEUTICS INC.
("Transition")
DATE: March 10, 2006
BACKGROUND
1. Pursuant to the terms of an offer made by Transition and accepted by the
Payee by way of a letter of acceptance dated - (the "LETTER OF
ACCEPTANCE"), Transition has agreed to purchase and the Payee has agreed
to sell all of the Payee's shares in ENI and/or 1255205 Ontario Inc.
("BIO") and/or 1255206 Ontario Inc.
2. As part of the consideration for the purchase and sale of the Payee's
shares, Transition has agreed to cause ENI to enter into this Agreement
with the Payee, and the Payee has agreed to enter into this Agreement with
ENI, to provide for the payment by ENI to the Payee of the Royalties (as
defined below) in accordance with the terms of this Agreement.
AGREEMENT
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS
In this Agreement, including the recitals and the schedules, the following
words and expressions have the following meanings unless the context otherwise
requires:
(a) "AFFILIATE" of any Person means any other Person which, directly or
indirectly, controls or is controlled by or is under common control with
such Person, and for the purposes of this definition "CONTROL" (including
correlative meanings of the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the power to direct or cause the direction of the
management and policies of any Person, whether through the ownership of
shares or by contract or otherwise;
(b) "INTELLECTUAL PROPERTY" means any intellectual property rights in the
AZD-103 (-, including (i) all domestic and foreign patents and
applications therefor and all reissues, divisions, continuations,
renewals, extensions and continuations-in-part thereof; (ii) all
inventions (whether patentable or not), invention disclosures,
improvements, trade secrets, proprietary information, know-how,
technology, technical data, and schematics, and all documentation relating
to any of the foregoing; (iii) all copyrights, copyright registrations and
applications therefor, and all other rights corresponding thereto
E-8
throughout the world; (iv) all designs and any registrations and
applications therefor; (v) all software (both source code and object code
form) and any proprietary rights in such software, including documentation
and other materials related thereto; (vi) all income, royalties, damages
and payments now and hereafter due and/or payable with respect to any of
the foregoing, including, without limitation, damages and payments for
past or future infringements or misappropriations thereof; and (vii) all
rights to xxx for past, present and future infringements or
misappropriations of any of the foregoing.
(c) "LETTER OF ACCEPTANCE" has the meaning provided in the recitals;
(d) "NET REVENUES" in respect of Products sold in normal arm's-length
commercial transactions between parties which are not Affiliates, means
the gross revenues from Products sold at the genuine selling price at
which customers are billed in the usual course of business, less usual
commissions, discounts, refunds, allowances, replacements, or credits
allowed to purchasers for return or recall of the Products, less all
distribution costs (except that any such distribution costs shall not
exceed 1.5% of such gross revenues), freight and insurance costs incurred
in respect of Products, and less all sales and use taxes, customs duties,
and any other governmental tax or charge (except income tax) imposed on or
at the time of the production, importation, use or sale of the Products. A
sale or transfer to an Affiliate for resale by such Affiliate shall not be
considered a sale for purposes of this provision, but the resale by such
Affiliate to a third party shall be a sale for such purposes;
(e) "PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture or other entity;
(f) "PRODUCTS" means the compound AZD-103 -;
(g) "ROYALTIES" has the meaning provided in Section 2.1;
(h) "ROYALTY COMMENCEMENT DATE" means -; and
(i) "ROYALTY RATE" means, in respect of each calendar year or part thereof and
considered on a year to year basis, -.
ARTICLE 2
ROYALTIES
2.1 ROYALTIES
Transition will pay, or will cause ENI its Affiliates, sub-licensees and
distributors to pay to the Payee, subject to the terms of this Agreement and the
terms of the Letter of Acceptance, royalties ("ROYALTIES") at the Royalty Rate
on Net Revenues from the sale of Products worldwide made after the Royalty
Commencement Date. For clarity, the Payee will be entitled to receive Royalties
based on Net Revenues realized only by ENI, its Affiliates or any sublicensee or
distributor of ENI or its Affiliates in accordance with Section 2.2.
E-9
2.2 EARNING OF NET REVENUES BY ENI AND ITS AFFILIATES
Net Revenues from sales of Products by ENI or any of its Affiliates will
be deemed to been received by ENI or any of its Affiliates when Products are
billed out or invoiced and consideration for same is actually received by ENI or
its Affiliates. Net Revenues from any sublicensee or distributor of ENI or any
of ENI's Affiliates will be deemed to have been received by ENI or its
Affiliates when consideration is actually received by ENI or its Affiliates from
such sublicensee or distributor, and the total consideration received by ENI or
its Affiliates from any such sublicensee or distributor will be allocated to
Royalties on a pro rata basis vis-a-vis such total consideration, such that
Royalties will accumulate proportionately as such total consideration is
received by ENI or its Affiliates. For clarity, in no event shall the Royalties
payable to the Payee exceed the Royalty Rate in any given year.
2.3 CURRENCY
Unless otherwise indicated, all dollar amounts referred to in this
Agreement are in lawful money of Canada.
2.4 PAYMENT OF ROYALTIES
Within 45 days after the end of each calendar year, ENI will pay to the
Payee all Royalties due hereunder to the Payee in respect of such calendar year
at the Payee's address given under Section 4.3. All payments of Royalties
hereunder will be made by way of cheque or other form of payment acceptable to
ENI and the Payee, and will be net of any tax that ENI is required to withhold
under applicable law, provided that ENI provides Payee with a copy of such
withholding tax calculation of the required payment. ENI will afford all
necessary cooperation and support to Payee in order for Payee to obtain credit
or reimbursement.
2.5 AUDIT RIGHTS
No more frequently than once per year during the term of this Agreement,
Persons including the Payee (collectively, the "AUDITING PARTY") who
collectively are entitled to receive royalties from ENI of not less than -
received by ENI or any Affiliate from the sale of Products worldwide will be
entitled as a group to retain a reputable, independent certified public
accounting firm (the "AUDITOR") reasonably acceptable to ENI solely for the
purposes of auditing, at a mutually agreed upon time during normal business
hours, only those records of ENI that are reasonably necessary to verify the Net
Revenues and royalties payable to the members of the Auditing Party, including
the Royalties payable to the Payee as provided for in this Agreement. Prior to
the audit, ENI may require the Auditor to sign a confidentiality agreement
reasonably acceptable to ENI. Such audit shall be conducted in accordance with
generally accepted auditing standards. The Auditor will be entitled to disclose
to the Auditing Party only whether or not ENI is in compliance with its payment
obligations under this Agreement and, if ENI is not in compliance, the amount of
any non-compliance. The Auditor will be precluded from disclosing any other
confidential information of ENI to the Auditing Party without the prior written
consent of ENI. In the event an audit reveals a shortfall in payment by ENI to
the Payee, ENI will immediately pay the amount of the shortfall to the Payee.
Each audit will only cover the prior 3 years under this Agreement.
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2.6 FUTURE OPERATIONS OF ENI
The Payee acknowledges that ENI will operate its business and
commercialize Products in ENI's sole discretion, that ENI is not under any
obligation to operate its business or commercialize Products in any particular
manner, that there can be no assurance that any Royalties will be received, that
ENI will have no obligation to operate its business or commercialize Products in
order to maximize the amount of the Royalties, and that none of ENI, Transition
or Bio owes a fiduciary duty or express or implied duty to the Payee, but
instead the parties intend the express provisions of this Agreement to govern
their contractual relationship.
ARTICLE 3
TERM
3.1 TERM
This Agreement and ENI's obligations to pay Royalties to the Payee will
terminate - years from the date of execution of this Agreement.
3.2 SURVIVAL OF TERMS
All payment obligations accruing prior to the date of termination, and
such other provisions as may reasonably be expected to remain in force, will
survive the termination of this Agreement and will remain in full force and
effect following such termination.
ARTICLE 4
GENERAL
4.1 GOVERNING LAW AND ATTORNMENT
This Agreement will be governed by and construed in accordance with the
substantive laws of Ontario and the federal laws of Canada applicable in
Ontario, without regard to the conflict of law rules of Ontario that would apply
a different body of law. The parties irrevocably submit to and accept generally
and unconditionally the exclusive jurisdiction of the courts and appellate
courts of Ontario with respect to any legal action or proceeding which may be
brought at any time relating in any way to this Agreement.
4.2 ASSIGNMENT
(a) This Agreement and any of its rights and obligations are freely
assignable by Payee in whole or in part without the consent of ENI.
(b) This Agreement is not assignable by ENI and/or Transition without
the prior written consent of the Payee, except that, upon written
notice to the Payee but without the Payee's consent, ENI and/or
Transition may assign this Agreement in its entirety in connection
with any transfer by ENI and/or Transition of all or substantially
all of the commercialization rights, including Intellectual Property
E-11
rights necessary to make, have made, use and sell the Products, in
which case ENI and/or Transition will obtain the agreement of the
assignee to assume the obligations of ENI and Transition under this
Agreement on the same terms as this Agreement.
(c) Upon effecting any permitted assignment under this Agreement, in
connection with the sale of the commercialization rights as
described in (b) above to an arms-length purchaser that assumes the
obligations of ENI and Transition under this Agreement then
Transition and the assigning party will be relieved and discharged
from all liability and obligations in respect of the assigned rights
and obligations, and the non-assigning party will look solely to the
assignee with respect to all matters regarding such assigned rights
and obligations.
(d) Any attempt by any party to assign any of the rights or obligations
of this Agreement except as permitted by this Agreement is void.
4.3 NOTICES
Any notice, direction, request or other communication required or
contemplated by any provision of this Agreement will be given in writing and
will be given by delivering or faxing or emailing the same to the parties as
follows:
(a) To ENI at:
c/o Transition Therapeutics Inc.
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX X0X 0X0
Attention: Dr. Xxxx Xxxx
Fax: (000) 000-0000
(b) To the Payee at:
The address specified in the Payee's
Letter of Acceptance.
Any such notice, direction, request or other communication will be deemed
to have been given or made on the date on which it was delivered or, in the case
of fax or email, on the next business day after receipt of transmission. Any
party may change its fax number or address for service or email address from
time to time by written notice in accordance with this Section.
4.4 AMENDMENTS AND WAIVER
No amendment or waiver of this Agreement will be binding unless executed
in writing by the party to be bound thereby. No waiver of any provision of this
Agreement will be deemed or will constitute a waiver of any other provision nor
will any such waiver constitute a continuing waiver unless otherwise expressly
provided.
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4.5 ENTIRE AGREEMENT
This Agreement supersedes all previous invitations, proposals, letters,
correspondence, negotiations, promises, agreements, covenants, conditions,
representations and warranties with respect to the subject matter of this
Agreement. There is no representation, warranty, collateral term or condition or
collateral agreement affecting this Agreement, other than as expressed in
writing in this Agreement.
4.6 INVALIDITY OF PARTICULAR PROVISION
If any provision of this Agreement or any part of any provision (in this
Section called the "OFFENDING PROVISION") is declared or becomes unenforceable,
invalid or illegal for any reason whatsoever including, without limiting the
generality of the foregoing, a decision by any competent courts, legislation,
statutes, bylaws or regulations or any other requirements having the force of
law, then the remainder of this Agreement will remain in full force and effect
as if this Agreement had been executed without the Offending Provision.
4.7 RELATIONSHIP
Nothing in this Agreement will make or be construed to make the parties
partners or agents of each other or to create any other relationship by which
the acts of any party may bind the others or result in any liability to the
other.
4.8 HEADINGS AND CAPTIONS
The headings and captions of sections and paragraphs contained in this
Agreement are all inserted for convenience of reference only and are not to be
considered when interpreting this Agreement.
4.9 ENUREMENT
Subject to the restrictions on transfer contained in this Agreement, this
Agreement will enure to the benefit of and be binding on the parties and their
respective heirs, executors, administrators, successors and permitted assigns.
TRANSITION THERAPEUTICS INC. ELLIPSIS NEUROTHERAPEUTICS INC.
Per: Per:
----------------------------- -----------------------------
c/s
Per: Per:
----------------------------- -----------------------------
(End of Agreement.)
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EXHIBIT "B"
LETTER OF ACCEPTANCE AND TRANSMITTAL (ENI)
TO: TRANSITION THERAPEUTICS INC.
The undersigned (the "OFFEREE") holder of a number of Common Shares
(collectively, the "COMMON SHARES") of ENI indicated below hereby:
1. acknowledges receipt of the offer of Transition Therapeutics Inc.
("TRANSITION") dated February 24, 2006 (the "OFFER");
2. irrevocably agrees to the terms of and accepts the Offer and sells,
assigns and transfers to Transition all right, title and interest of the
Offeree in and to all of the Common Shares held by the Offeree, subject to
the condition precedent that the closing of the purchase of Common Shares
held by the Directors (as defined in the Offer) occurs as contemplated in
the Share Purchase Agreement (also as defined in the Offer);
3. represents and warrants that it has good title to the Common Shares free
and clear of all liens, charges and encumbrances and, subject to the
approval of the board of directors of ENI, that it has full power and
authority to sell, assign and transfer the Common Shares held by it and
when the Common Shares are taken up and paid for by Transition, Transition
will acquire good, marketable and unencumbered title to the Common Shares
free and clear of all liens, restrictions, charges and encumbrances, and
the same will not be subject to any adverse claim;
4. represents and warrants that, to the best of its knowledge, information
and belief, there are no actions, suits, proceedings or claims existing or
pending or threatened with respect to or in any manner challenging
respective ownership of the ENI Shares or the sale of the ENI Shares
pursuant to this Agreement;
5. covenants that it will execute, upon request, any additional documents
reasonably necessary or desirable to complete the transaction contemplated
herein; and
6. covenants that it is (PLEASE CHECK ONE):
_____ not a non-resident of Canada within the meaning of the Income Tax
Act (Canada),
_____ a non-resident of Canada with the meaning of the Income Tax Act
(Canada), and is a resident of the United States of America, and as
such covenants that the representations in Appendix "A" are true and
correct as of the Closing Date and agrees to the Withholding Tax
arrangement as set forth in Appendix "B".
By execution of this letter, the Offeree irrevocably appoints a director or
officer of ENI as attorney of the Offeree, effective the date hereof, with full
power of substitution, in the name and on behalf of the Offeree, to endorse the
certificate(s) representing Common Shares held by the Offeree, attend at a
closing of the purchase and sale of the Common Shares and accept the cash
consideration payable under the Offer on behalf of the Offeree.
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Capitalized terms used, but not defined, in this Letter of Acceptance and
Transmittal which are defined in the Offer have the respective meanings set out
in the Offer.
Each and every authority, whether as attorney or otherwise, herein conferred by
the Offeree is irrevocable, is granted in consideration of the purchase of the
Common Shares by Transition in accordance with the terms of the Offer, shall
survive the death, insolvency, bankruptcy or incapacity of the Offeree and shall
be binding upon the successors and assigns of the Offeree and upon the
executors, administrators, committees, heirs and personal representatives of the
undersigned.
DATED: ______________________, 2006.
--------------------------------------------------
Name of Offeree (Please Print)
--------------------------------------------------
Signature
--------------------------------------------------
Name of person signing (if Offeree is a company)
Address of Offeree
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
Number of Common Shares held by Offeree __________
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APPENDIX "A"
U.S. Representations & Warranties
1. [it/he/she] is authorized to consummate the receipt of the Transition
Shares;
2. [it/he/she] understands that the Transition Shares have not been and will
not be registered under the United States Securities Act of 1933, as
amended (the "1933 Act") or any applicable state securities laws and that
the contemplated [transfer/issuance] is being made in reliance on a
private placement exemption to accredited investors (as such term is
defined on Annex A hereto, "Accredited Investors");
3. [it/he/she] has had access to such additional information, if any,
concerning Transition as it has considered necessary in connection with
its investment decision to receive the Transition Shares;
4. [it/he/she] has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of its
investment in the Transition Shares and is able to bear the economic risks
of such investment;
5. [it/he/she] is an Accredited Investor and is acquiring the Transition
Shares for its own account or for the account of an Accredited Investor as
to which it exercises sole investment discretion, and not with a view to
any resale, distribution or other disposition of the Transition Shares in
violation of United States securities laws or applicable state securities
laws;
6. [it/he/she] acknowledges that it has not purchased the Transition Shares
as a result of any general solicitation or general advertising, including
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar media have been invited by general
solicitation or general advertising;
7. [it/he/she] agrees that if it decides to offer, sell or otherwise transfer
any of the Transition Shares, such Transition Shares may be offered, sold
or otherwise transferred only, (i) to Transition, (ii) outside the United
States in accordance with Rule 904 of Regulation S under the 1933 Act or
(iii) within the United States in accordance with one or more exemptions
from registration under the 1933 Act, if available, and in compliance with
any applicable state securities laws;
8. [it/he/she] understands and acknowledges that upon the original issuance
thereof, and until such time as the same is no longer required under
applicable requirements of the 1933 Act or applicable state securities
laws, certificates representing Transition Shares, and all certificates
issued in exchange therefor or in substitution thereof, shall bear the
following legend (the "U.S. LEGEND"):
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THE
HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF
TRANSITION THAT SUCH SECURITIES MAY
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BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO TRANSITION, (B)
OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S
UNDER THE 1933 ACT OR (C) WITHIN THE UNITED STATES IN ACCORDANCE WITH ONE
OR MORE EXEMPTIONS FROM REGISTRATION UNDER THE 1933 ACT, IF AVAILABLE, AND
IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS. DELIVERY OF THIS
CERTIFICATE MAY NOT CONSTITUTE GOOD DELIVERY IN SETTLEMENT OF TRANSACTIONS
ON STOCK EXCHANGES IN CANADA. PROVIDED THAT TRANSITION IS A "FOREIGN
ISSUER" WITHIN THE MEANING OF REGULATION S AT THE TIME OF SALE, A NEW
CERTIFICATE BEARING NO LEGEND MAY BE OBTAINED FROM TRANSITION, UPON
DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM
SATISFACTORY TO TRANSITION, TO THE EFFECT THAT SUCH SALE IS BEING MADE IN
ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE 1933 ACT.";
provided, that if Transition Shares are being transferred under paragraph
(7)(ii) above, and provided that Transition is a "foreign issuer" within the
meaning of Regulation S at the time of sale, any such legend may be removed by
providing a declaration to Transition to the effect set forth in Annex B hereto
(or as Transition may prescribe from time to time); and provided, further, that,
if any such Transition Shares are being transferred under paragraph (7)(iii)
above, the legend may be removed by delivery to Transition of an opinion of
counsel, of recognized standing reasonably satisfactory to Transition, that such
legend is no longer required under applicable requirements of the 1933 Act or
state securities laws;
9. [it/he/she] consents to Transition making a notation on its records or
giving instructions to any transfer agent of the Transition Shares in
order to implement the restrictions on transfer set forth and described
herein; and
10. if required by applicable U.S. securities laws or by the U.S. Securities
Exchange Commission, [it/he/she] will execute, deliver and file and
otherwise assist Transition in filing reports, questionnaires,
undertakings and other documents with respect to the transfer of the
Transition Shares.
E-17
ANNEX A
DEFINITION OF ACCREDITED INVESTOR
"Accredited Investor" means any entity which comes within any of the following
categories:
11. Any bank as defined in Section 3(a)(2) of the 1933 Act or any savings and
loan association or other institution as defined in Section 3(a)(5)(A) of
the 1933 Act whether acting in its individual or fiduciary capacity; any
broker dealer registered pursuant to Section 15 of the Securities Exchange
Act of 1934; any insurance company as defined in Section 2(13) of the 1933
Act; any investment company registered under the Investment Company Act of
1940 or a business development company as defined in Section 2(a)(48) of
that Act; any Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; any plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state or
its political subdivisions, for the benefit of its employees, if such plan
has total assets in excess of US$5,000,000; any employee benefit plan
within the meaning of the Employee Retirement Income Security Act of 1974,
if the investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or if
the employee benefit plan has total assets in excess of US$5,000,000, or,
if a self-directed plan, with investment decisions made solely by persons
that are accredited investors;
12. Any private business development company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940;
13. Any organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of US$5,000,000;
14. Any trust with total assets in excess of US$5,000,000, not formed for the
specific purpose of acquiring the securities offered, whose purchase is
directed by a sophisticated person, being defined as a person who has such
knowledge and experience in financial and business matters that he or she
is capable of evaluating the merits and risks of the prospective
investment;
15. Any director or executive officer of Transition/Bio/ENI;
16. Any natural person with an individual net worth, or joint net worth with
his or her spouse, at the time of purchase in excess of US$1,000,000;
17. Any natural person with an individual income in excess of US$200,000 in
each of the last 2 years or joint income with his or her spouse in excess
of US$300,000 in each of those years, and who reasonably expects to reach
the same income level in the current year; or
18. Any entity in which all of the equity owners are accredited investors.
E-18
As used herein, the term "net worth" means the excess of total assets over total
liabilities. In computing net worth for the purpose of paragraph (6) above, the
principal residence of the investor must be valued at cost, including cost of
improvements, or at recently appraised value by an institutional lender making a
secured loan, net of encumbrances. In determining income, an investor should add
to adjusted gross income any amount attributable to tax exempt income received,
losses claimed as a limited partner in any limited partnership, deductions
claimed for depletion, contributions to an XXX or Xxxxx retirement plan, (2)
alimony payments, and any amount by which income from long term capital gains
has been reduced in arriving at adjusted gross income.
E-19
ANNEX B
TO: Transition Therapeutics Inc.
The undersigned (a) acknowledges that the sale of the securities of Transition
Therapeutics Inc. (Transition") to which this declaration relates is being made
in reliance on Rule 904 of Regulation S under the United States Securities Act
of 1933, as amended (the "1933 Act") and (b) certifies that (1) the undersigned
is not an affiliate of Transition as that term is defined in the 1933 Act, (2)
the offer of such securities was not made to a person in the United States and
either (A) at the time the buy order was originated, the buyer was outside the
United States, or the seller and any person acting on its behalf reasonably
believed that the buyer was outside the United States, or (B) the transaction
was executed in, on or through the facilities of The Toronto Stock Exchange, the
Montreal Exchange, or the Canadian Venture Exchange or any other designated
offshore securities market as defined in Regulation S under the 1933 Act and
neither the seller nor any person acting on its behalf knows that the
transaction has been prearranged with a buyer in the United States (3) neither
the seller nor any affiliate of the seller nor any person acting on any of their
behalf has engaged or will engage in any directed selling efforts in the United
States in connection with the offer and sale of such securities, (4) the sale is
bona fide and not for the purpose of "washing off" the resale restrictions
imposed because the securities are "restricted securities" (as such term is
defined in Rule 144(a)(3) under the 1933 Act), (5) the seller does not intend to
replace the securities sold in reliance on Rule 904 of the 1933 Act with
fungible unrestricted securities and (6) the contemplated sale is not a
transaction, or part of a series of transactions which, although in technical
compliance with Regulation S, is part of a plan or scheme to evade the
registration provisions of the 1933 Act. Terms used herein have the meanings
given to them by Regulation S.
Dated:
----------------------------------- -----------------------------------
Name of Seller
By:
--------------------------------
Name:
Title:
X-00
XXXXXXXX "X"
WITHHOLDING TAXES
1. DEFINITIONS
The following definitions shall apply to this Appendix "B":
"AGREED REMITTANCE DATE" means the 28th day after the end of the month
containing the Closing Date.
"COMFORT LETTER" means a letter addressed to the Purchaser, the
Non-Resident Vendor or counsel to the Non-Resident Vendor from the CRA
which provides that any amount withheld by the Purchase is to be retained
and not remitted to the Receiver General of Canada until such later date
as may be specified by the CRA.
"COMPLIANCE CERTIFICATE" has the meaning ascribed thereto in Section 2(a);
"CRA" means the Canada Revenue Agency;
"CRA REMITTANCE DATE" means the later of the Agreed Remittance Date and
such date as may be specified later in writing by the CRA.
"ESCROW AGENT" means Computershare Trust Company of Canada;
"NON-RESIDENT" shall mean not resident in Canada for the purposes of the
Tax Act;
"NON-RESIDENT VENDORS" means the Bio Directors, the ENI Directors, the
Warrant Holder, the Remaining Bio Shareholders and the Remaining ENI
Shareholders who tender their respective ENI Shares and Bio Shares in
accordance with this Appendix "B" and who are Non-Residents;
"PURCHASE PRICE" means the purchase consideration paid to the Vendors in
accordance with the Share Purchase Agreement;
"TAX ACT" shall mean the Income Tax Act (Canada) and the Income Tax Act
Regulations, as amended from time to time or publicly proposed to be
amended to the date of this Appendix "B";
"TAX AMOUNT" has the meaning ascribed thereto in Section 2(f); and
"TRANSACTION" has the meaning ascribed thereto in Section 2(a).
2. WITHHOLDING TAXES
(a) The Purchaser and the Non-Resident Vendors acknowledge that,
pursuant to Section 116 of the Tax Act, in respect of purchase and
sale of the Purchased Shares contemplated herein (the
"TRANSACTION"), the Purchaser is entitled to withhold and must remit
to the Receiver General of Canada the prescribed
E-21
percentage of the amount, if any, by which the Purchase Price
payable to a Non-Resident Vendor exceeds the certificate limit set
out in a certificate of compliance (a "COMPLIANCE CERTIFICATE")
obtained from the CRA by a Non-Resident Vendor for the purposes of
Section 116 of the Tax Act in respect of the Transaction;
(b) To ensure that the Purchaser will be able to meet its withholding
requirements as outlined in Section 22(a) of this Appendix "B" the
Purchaser shall deposit all of the Transition Shares to which a
Non-Resident Vendor is entitled with the Escrow Agent who will pool
all such Transition Shares and the Purchaser shall be entitled to
instruct the Escrow Agent to sell a sufficient number of the
Transition Shares in accordance with Sections 2(e) and 2(g) of this
Appendix "B" on deposit with the Escrow Agent, net of transaction
costs, to which the Non-Resident Vendor is otherwise entitled, that
will enable the Purchaser to meet its withholding requirements as
outlined in Section 2(a) of this Appendix "B";
(c) Notwithstanding Section 2(a) of this Appendix "B" and Section 2(b)
of this Appendix "B", the Purchaser and the Non-Resident Vendors
acknowledge that some or all of the Non-Resident Vendors may not be
able to provide a Compliance Certificate to the Purchaser at or
prior to the Closing Date, and the Purchaser and the Non-Resident
Vendors wish to provide a mechanism to allow the Non-Resident
Vendors to attempt to obtain a Compliance Certificate prior to the
expiry of the statutory period by which the remittance of the
withholding taxes, if any, is required to be paid to the Receiver
General of Canada;
(d) If the CRA indicates that payment of an amount (the "TAX AMOUNT")
would allow the CRA to issue a Compliance Certificate with a
certificate limit equal to the Purchase Price payable to a
Non-Resident Vendor, the Purchaser, upon receipt of a written
direction signed by the Non-Resident Vendor to that effect, shall
pay the Tax Amount to the CRA from any amount so withheld or, at the
request of the Non-Resident Vendor, shall release and forward the
Tax Amount to the Non-Resident Vendor's counsel on the trust
condition that such funds be used for the sole purpose of making the
aforementioned payment to the CRA and, upon delivery of the
resultant Compliance Certificate to the Purchaser, the balance of
the funds so withheld shall be released to the Non-Resident Vendor;
(e) Where the Non-Resident Vendor delivers to the Purchaser a Compliance
Certificate issued by the Minister of National Revenue under
subsection 116(2) of the Tax Act, the Purchaser:
(i) may, if the Purchaser has not received a Comfort Letter within
10 days prior to the Agreed Remittance Date, instruct the
Escrow Agent to sell a sufficient number of the Transition
Shares, to which the Non-Resident Vendor is otherwise entitled
and on deposit with the Escrow Agent, to pay, net of
transaction costs, the amount described in Section 2(e)(ii) of
this Appendix "B";
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(ii) shall pay on the CRA Remittance Date to the Receiver General
of Canada 25% of the amount, if any, by which the Purchase
Price exceeds the certificate limit fixed in such Compliance
Certificate; and
(iii) shall pay within 2 days following the CRA Remittance Date to
the Non-Resident Vendor any amount that the Purchaser has
withheld and is not required to pay to the Receiver General of
Canada in accordance with Section 2(e)(ii) of this Appendix
"B";
(f) Where the Non-Resident Vendor delivers to the Company a Compliance
Certificate issued by the Minister of National Revenue under
subsection 116(4) of the Tax Act prior to the CRA Remittance Date,
the Purchaser shall pay to the Non-Resident Vendor forthwith all
amounts the Purchaser has withheld in respect of the Non-Resident
Vendor;
(g) Where no Compliance Certificate has been delivered to the Purchaser
by the Non-Resident Vendor, the Purchaser:
(i) may, if the Purchaser has not received a Comfort Letter within
10 days prior to the Agreed Remittance Date, instruct the
Escrow Agent to sell a sufficient number of the Transition
Shares, to which the Non-Resident Vendor is otherwise entitled
and on deposit with the Escrow Agent, to pay, net of
transaction costs, the amount described in Section 2(g)(ii)
2(g)(ii)of this Appendix "B";
(ii) shall pay on the CRA Remittance Date to the Receiver General
of Canada 25% of the Purchase Price payable to that
Non-Resident Vendor; and
(iii) shall pay within 2 days following the CRA Remittance Date to
the Non-Resident Vendor any amount that the Purchaser has
withheld and is not required to pay to the Receiver General of
Canada in accordance with Section 2(g)(ii) of this Appendix
"B";
(h) The Purchaser shall not remit the amounts referred to in Section
2(e) of this Appendix "B" and Section 2(g) of this Appendix "B" on
the Agreed Remittance Date if a Comfort Letter is delivered to the
Purchaser prior to the Agreed Remittance Date, in which case the
Purchaser shall not remit such amounts prior to the CRA Remittance
Date.
(i) Any amount paid by the Purchaser to the Receiver General of Canada
under Section 2(e) of this Appendix "B" or under Section 2(g) of
this Appendix "B" shall constitute a payment made by the Purchaser
to the Non-Resident Vendor on account of the Purchase Price.
(j) Transition Shares subject to this Article 2 hereof shall not bear
the U.S. Legend or other resale restriction legend unless they are
released from Escrow to the respective Non-Resident Vendor. All
Transition Shares sold by the Escrow Agent
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pursuant to Section 2(e) and 2(g) shall not bear the U.S. Legend or
other resale restriction legend.
(k) While the Escrow Agent will take reasonable steps to sell such
withheld Transition Shares in an orderly manner, the Purchaser makes
no assurance as to the price that will be received in respect of
such sales and the Purchaser will not be liable in any manner in
respect of the sale procedure, terms, timing or purchase price
received for such withheld Transition Shares.
E-24
EXHIBIT "C"
PROPORTIONATE INTEREST IN ROYALTY
-
E-25
SCHEDULE "F"
WORKING CAPITAL CALCULATION
---------------------------
(as per the attached pages)
F-1
1255205 ONTARIO INC.
WORKING CAPITAL BALANCE
-
-
F-2
ELLIPSIS NEUROTHERAPEUTICS INC.
WORKING CAPITAL BALANCE
-
F-3
SCHEDULE "G"
SHAREHOLDINGS AND CONSIDERATION TO BE RECEIVED
----------------------------------------------
(as per the attached pages)
G-1
-
G-2
SCHEDULE "H"
FORM OF ROYALTY AGREEMENT
-------------------------
(as per the attached pages)
H-1
ROYALTY AGREEMENT
TO: - (the "PAYEE")
FROM: ELLIPSIS NEUROTHERAPEUTICS INC. ("ENI"), TRANSITION
THERAPEUTICS INC. ("TRANSITION")
DATE: March 10, 2006
BACKGROUND
1. Pursuant to the terms of an offer made by Transition and accepted by the
Payee by way of a letter of acceptance dated - (the "LETTER OF
ACCEPTANCE"), Transition has agreed to purchase and the Payee has agreed
to sell all of the Payee's shares in ENI and/or 1255205 Ontario Inc.
("BIO") and/or 1255206 Ontario Inc.
2. As part of the consideration for the purchase and sale of the Payee's
shares, Transition has agreed to cause ENI to enter into this Agreement
with the Payee, and the Payee has agreed to enter into this Agreement with
ENI, to provide for the payment by ENI to the Payee of the Royalties (as
defined below) in accordance with the terms of this Agreement.
AGREEMENT
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS
In this Agreement, including the recitals and the schedules, the following
words and expressions have the following meanings unless the context otherwise
requires:
(a) "AFFILIATE" of any Person means any other Person which, directly or
indirectly, controls or is controlled by or is under common control with
such Person, and for the purposes of this definition "CONTROL" (including
correlative meanings of the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the power to direct or cause the direction of the
management and policies of any Person, whether through the ownership of
shares or by contract or otherwise;
(b) "INTELLECTUAL PROPERTY" means any intellectual property rights in the
AZD-103 (-, including (i) all domestic and foreign patents and
applications therefor and all reissues, divisions, continuations,
renewals, extensions and continuations-in-part thereof; (ii) all
inventions (whether patentable or not), invention disclosures,
improvements, trade secrets, proprietary information, know-how,
technology, technical data, and schematics, and all documentation relating
to any of the foregoing; (iii) all copyrights, copyright registrations and
applications therefor, and all other rights corresponding thereto
H-2
throughout the world; (iv) all designs and any registrations and
applications therefor; (v) all software (both source code and object code
form) and any proprietary rights in such software, including documentation
and other materials related thereto; (vi) all income, royalties, damages
and payments now and hereafter due and/or payable with respect to any of
the foregoing, including, without limitation, damages and payments for
past or future infringements or misappropriations thereof; and (vii) all
rights to xxx for past, present and future infringements or
misappropriations of any of the foregoing.
(c) "LETTER OF ACCEPTANCE" has the meaning provided in the recitals;
(d) "NET REVENUES" in respect of Products sold in normal arm's-length
commercial transactions between parties which are not Affiliates, means
the gross revenues from Products sold at the genuine selling price at
which customers are billed in the usual course of business, less usual
commissions, discounts, refunds, allowances, replacements, or credits
allowed to purchasers for return or recall of the Products, less all
distribution costs (except that any such distribution costs shall not
exceed 1.5% of such gross revenues), freight and insurance costs incurred
in respect of Products, and less all sales and use taxes, customs duties,
and any other governmental tax or charge (except income tax) imposed on or
at the time of the production, importation, use or sale of the Products. A
sale or transfer to an Affiliate for resale by such Affiliate shall not be
considered a sale for purposes of this provision, but the resale by such
Affiliate to a third party shall be a sale for such purposes;
(e) "PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture or other entity;
(f) "PRODUCTS" means the compound AZD-103 -;
(g) "ROYALTIES" has the meaning provided in Section 2.1;
(h) "ROYALTY COMMENCEMENT DATE" means -; and
(i) "ROYALTY RATE" means, in respect of each calendar year or part thereof and
considered on a year to year basis, -.
ARTICLE 2
ROYALTIES
2.1 ROYALTIES
Transition will pay, or will cause ENI its Affiliates, sub-licensees and
distributors to pay to the Payee, subject to the terms of this Agreement and the
terms of the Letter of Acceptance, royalties ("ROYALTIES") at the Royalty Rate
on Net Revenues from the sale of Products worldwide made after the Royalty
Commencement Date. For clarity, the Payee will be entitled to receive Royalties
based on Net Revenues realized only by ENI, its Affiliates or any sublicensee or
distributor of ENI or its Affiliates in accordance with Section 2.2.
H-3
2.2 EARNING OF NET REVENUES BY ENI AND ITS AFFILIATES
Net Revenues from sales of Products by ENI or any of its Affiliates will
be deemed to been received by ENI or any of its Affiliates when Products are
billed out or invoiced and consideration for same is actually received by ENI or
its Affiliates. Net Revenues from any sublicensee or distributor of ENI or any
of ENI's Affiliates will be deemed to have been received by ENI or its
Affiliates when consideration is actually received by ENI or its Affiliates from
such sublicensee or distributor, and the total consideration received by ENI or
its Affiliates from any such sublicensee or distributor will be allocated to
Royalties on a pro rata basis vis-a-vis such total consideration, such that
Royalties will accumulate proportionately as such total consideration is
received by ENI or its Affiliates. For clarity, in no event shall the Royalties
payable to the Payee exceed the Royalty Rate in any given year.
2.3 CURRENCY
Unless otherwise indicated, all dollar amounts referred to in this
Agreement are in lawful money of Canada.
2.4 PAYMENT OF ROYALTIES
Within 45 days after the end of each calendar year, ENI will pay to the
Payee all Royalties due hereunder to the Payee in respect of such calendar year
at the Payee's address given under Section 4.3. All payments of Royalties
hereunder will be made by way of cheque or other form of payment acceptable to
ENI and the Payee, and will be net of any tax that ENI is required to withhold
under applicable law, provided that ENI provides Payee with a copy of such
withholding tax calculation of the required payment. ENI will afford all
necessary cooperation and support to Payee in order for Payee to obtain credit
or reimbursement.
2.5 AUDIT RIGHTS
No more frequently than once per year during the term of this Agreement,
Persons including the Payee (collectively, the "AUDITING PARTY") who
collectively are entitled to receive royalties from ENI of not less than -
received by ENI or any Affiliate from the sale of Products worldwide will be
entitled as a group to retain a reputable, independent certified public
accounting firm (the "AUDITOR") reasonably acceptable to ENI solely for the
purposes of auditing, at a mutually agreed upon time during normal business
hours, only those records of ENI that are reasonably necessary to verify the Net
Revenues and royalties payable to the members of the Auditing Party, including
the Royalties payable to the Payee as provided for in this Agreement. Prior to
the audit, ENI may require the Auditor to sign a confidentiality agreement
reasonably acceptable to ENI. Such audit shall be conducted in accordance with
generally accepted auditing standards. The Auditor will be entitled to disclose
to the Auditing Party only whether or not ENI is in compliance with its payment
obligations under this Agreement and, if ENI is not in compliance, the amount of
any non-compliance. The Auditor will be precluded from disclosing any other
confidential information of ENI to the Auditing Party without the prior written
consent of ENI. In the event an audit reveals a shortfall in payment by ENI to
the Payee, ENI will immediately pay the amount of the shortfall to the Payee.
Each audit will only cover the prior 3 years under this Agreement.
H-4
2.6 FUTURE OPERATIONS OF ENI
The Payee acknowledges that ENI will operate its business and
commercialize Products in ENI's sole discretion, that ENI is not under any
obligation to operate its business or commercialize Products in any particular
manner, that there can be no assurance that any Royalties will be received, that
ENI will have no obligation to operate its business or commercialize Products in
order to maximize the amount of the Royalties, and that none of ENI, Transition
or Bio owes a fiduciary duty or express or implied duty to the Payee, but
instead the parties intend the express provisions of this Agreement to govern
their contractual relationship.
ARTICLE 3
TERM
3.1 TERM
This Agreement and ENI's obligations to pay Royalties to the Payee will
terminate - years from the date of execution of this Agreement.
3.2 SURVIVAL OF TERMS
All payment obligations accruing prior to the date of termination, and
such other provisions as may reasonably be expected to remain in force, will
survive the termination of this Agreement and will remain in full force and
effect following such termination.
ARTICLE 4
GENERAL
4.1 GOVERNING LAW AND ATTORNMENT
This Agreement will be governed by and construed in accordance with the
substantive laws of Ontario and the federal laws of Canada applicable in
Ontario, without regard to the conflict of law rules of Ontario that would apply
a different body of law. The parties irrevocably submit to and accept generally
and unconditionally the exclusive jurisdiction of the courts and appellate
courts of Ontario with respect to any legal action or proceeding which may be
brought at any time relating in any way to this Agreement.
4.2 ASSIGNMENT
(a) This Agreement and any of its rights and obligations are freely
assignable by Payee in whole or in part without the consent of ENI.
(b) This Agreement is not assignable by ENI and/or Transition without
the prior written consent of the Payee, except that, upon written
notice to the Payee but without the Payee's consent, ENI and/or
Transition may assign this Agreement in its entirety in connection
with any transfer by ENI and/or Transition of all or substantially
all of the commercialization rights, including Intellectual Property
H-5
rights necessary to make, have made, use and sell the Products, in
which case ENI and/or Transition will obtain the agreement of the
assignee to assume the obligations of ENI and Transition under this
Agreement on the same terms as this Agreement.
(c) Upon effecting any permitted assignment under this Agreement, in
connection with the sale of the commercialization rights as
described in (b) above to an arms-length purchaser that assumes the
obligations of ENI and Transition under this Agreement then
Transition and the assigning party will be relieved and discharged
from all liability and obligations in respect of the assigned rights
and obligations, and the non-assigning party will look solely to the
assignee with respect to all matters regarding such assigned rights
and obligations.
(d) Any attempt by any party to assign any of the rights or obligations
of this Agreement except as permitted by this Agreement is void.
4.3 NOTICES
Any notice, direction, request or other communication required or
contemplated by any provision of this Agreement will be given in writing and
will be given by delivering or faxing or emailing the same to the parties as
follows:
(a) To ENI at:
c/o Transition Therapeutics Inc.
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX X0X 0X0
Attention: Dr. Xxxx Xxxx
Fax: (000) 000-0000
(b) To the Payee at:
The address specified in the Payee's
Letter of Acceptance.
Any such notice, direction, request or other communication will be deemed
to have been given or made on the date on which it was delivered or, in the case
of fax or email, on the next business day after receipt of transmission. Any
party may change its fax number or address for service or email address from
time to time by written notice in accordance with this Section.
4.4 AMENDMENTS AND WAIVER
No amendment or waiver of this Agreement will be binding unless executed
in writing by the party to be bound thereby. No waiver of any provision of this
Agreement will be deemed or will constitute a waiver of any other provision nor
will any such waiver constitute a continuing waiver unless otherwise expressly
provided.
H-6
4.5 ENTIRE AGREEMENT
This Agreement supersedes all previous invitations, proposals, letters,
correspondence, negotiations, promises, agreements, covenants, conditions,
representations and warranties with respect to the subject matter of this
Agreement. There is no representation, warranty, collateral term or condition or
collateral agreement affecting this Agreement, other than as expressed in
writing in this Agreement.
4.6 INVALIDITY OF PARTICULAR PROVISION
If any provision of this Agreement or any part of any provision (in this
Section called the "OFFENDING PROVISION") is declared or becomes unenforceable,
invalid or illegal for any reason whatsoever including, without limiting the
generality of the foregoing, a decision by any competent courts, legislation,
statutes, bylaws or regulations or any other requirements having the force of
law, then the remainder of this Agreement will remain in full force and effect
as if this Agreement had been executed without the Offending Provision.
4.7 RELATIONSHIP
Nothing in this Agreement will make or be construed to make the parties
partners or agents of each other or to create any other relationship by which
the acts of any party may bind the others or result in any liability to the
other.
4.8 HEADINGS AND CAPTIONS
The headings and captions of sections and paragraphs contained in this
Agreement are all inserted for convenience of reference only and are not to be
considered when interpreting this Agreement.
4.9 ENUREMENT
Subject to the restrictions on transfer contained in this Agreement, this
Agreement will enure to the benefit of and be binding on the parties and their
respective heirs, executors, administrators, successors and permitted assigns.
TRANSITION THERAPEUTICS INC. ELLIPSIS NEUROTHERAPEUTICS INC.
Per: __________________________ Per: _____________________________
c/s
Per: __________________________ Per: _____________________________
(End of Agreement.)
H-7
SCHEDULE "I"
BIO ASSETS AND LIABILITIES
--------------------------
(as per the attached pages)
I-1
ASSETS AND LIABILITIES
-
I-2
