EXHIBIT 4.6
SUBSCRIPTION AGREEMENT
THIS AGREEMENT is made in the City of Montreal, Province of Quebec, as of
February 18, 2000;
AMONG: SGF SANTE INC., a company duly
incorporated pursuant to the laws of
Quebec, having its head office at
600 de La Gauchetiere Street West,
Suite 1700, Xxxxxxxx, Xxxxxx, X0X 0X0,
acting and represented herein by Xxxxxxx
Xxxxxxx, its president, and by Xxxxxx
Xxxxxx, its secretary, duly authorized as
they so declare;
(hereinafter referred to as "SGF SANTE")
AND: DRAXIS PHARMA INC., a corporation duly
incorporated under the laws of Canada,
having its head office at 0000 Xxxx Xxxxxx,
0xx Xxxxx, Xxxxxxxx, Xxxxxx, X0X 0X0, acting
and represented herein by Xxxxxx Xxxxxx, its
president, duly authorized as he so declares;
(hereinafter referred to as the
"CORPORATION")
WHEREAS, subject to the terms hereof, SGF Sante wishes to subscribe for
6,302,521 Common Shares in the capital of the Corporation, representing
32.05% of the outstanding Common Shares of the Corporation on a non-diluted
basis after such subscription and after the subscription by Xxxxxx Xxxxxx and
Xxxxxxxx Xxxxxx respectively, pursuant to their employment agreement,
referred to hereinafter;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
covenants, agreements, warranties and payments herein set out and provided
for, the parties hereto hereby respectively, covenant and agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement, where used in this Agreement, unless there is something in the
context or the subject matter inconsistent therewith, the following terms
shall have the following meanings respectively:
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"ACCOUNTS PAYABLE" means all amounts due and owing by the Corporation to
traders, suppliers and other Persons in the ordinary course of Business;
"ACCOUNTS RECEIVABLE" means any and all accounts receivable, bills,
receivables, trade accounts, book debts and insurance claims recorded as
receivables in the Books and Records of the Corporation and any other
amount due to the Corporation, including any refunds and rebates, and the
benefit of all security (including cash deposits), guarantees and other
collateral held by the Corporation;
"AGREEMENT" means this subscription agreement including all attached
Schedules, as the same may be supplemented, amended, restated or replaced
from time to time;
"APPLICABLE FISCAL LAW" means the INCOME TAX ACT (Canada);
"APPLICABLE LAW" means any domestic or foreign statute, law, ordinance,
regulation, by-law (zoning or otherwise), or order that applies to the
Corporation;
"ARTICLES" means the documents of incorporation of a corporation, as
amended from time to time or the equivalent in any applicable jurisdiction
or with respect to any other entity;
"ASSETS" means all of the assets and properties, moveable and
immoveable, tangible and intangible of a Person;
"BENEFIT PLANS" means all bonus, deferred compensation, incentive
compensation, share purchase, share appreciation and share option,
severance or termination pay, hospitalization or other medical benefits,
life or other insurance, dental, disability, salary continuation,
vacation, supplemental unemployment benefits, profit-sharing, hypothec
assistance, pension, retirement or supplemental retirement plan, program,
agreement or arrangement, and each other employee benefit plan, program,
agreement or arrangement sponsored, maintained or contributed to or
required to be contributed to by the employer, whether or not insured or
funded, whether formal or informal and whether sponsored by the Corporation
or a Related Party to the Corporation and including the Equity
Participation Plan;
"BOOKS AND RECORDS" means the books of account, accounting records and
other financial data and information, including copies of Tax Returns and
tax assessment notices for each fiscal year, and all books, records, sales
and purchase records, lists of suppliers and customers, formulae, business
reports and research and development information including, without
limitation, all data and information stored electronically or on computer
related media;
"BUSINESS" means the business carried on by the Corporation which
consists, INTER ALIA, of contract manufacturing of pharmaceutical products;
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"BUSINESS DAY" means a day other than a Saturday or Sunday, on which
Canadian chartered banks are open for the transaction of domestic business
in the City of Montreal, Province of Quebec;
"BUSINESS PLAN" means the business plan of the Corporation attached
hereto as Schedule 1.1(a) as it may be amended from time to time in
accordance with the Shareholders' Agreement;
"BY-LAWS" has the meaning set forth in subsection 3.1.4;
"CLAIMS" has the meaning set forth in section 7.2;
"CLOSING" means the completion of the subscription by SGF Sante for the
Subscribed Shares and the completion of all other transactions contemplated
by this Agreement which are to occur contemporaneously with the
subscription for the Subscribed Shares;
"CLOSING DATE" has the meaning set forth in section 6.1;
"CLOSING DOCUMENT" means any document delivered at or subsequent to the
Closing Date as provided in or pursuant to this Agreement;
"COLLECTIVE AGREEMENT" means any collective agreement, contract, letter
of understanding, letter of intent or other written communication with any
labour union or association which may qualify as a labor union, which would
cover any employees;
"COMMON SHARES" means the common shares of the share capital of the
Corporation;
"CONTRACT" has the meaning set forth in subsection 3.1.11;
"CONTROL" (and "CONTROLLING") for a legal person means the holding, or
exercise of control or direction over, by a Person, directly or indirectly,
other than as a creditor only, of securities which grant it more than 50%
of the votes that may be cast for the election of the directors of the
legal person in question (irrespective of whether or not, at the time,
stock of any other class or classes of such Person shall have or might have
voting power by reason of the happening of any contingency);
"CONVERTIBLE SECURITY" means a security of a body corporate, including a
debt obligation, which is convertible into, exchangeable for or which
carries a right or obligation to purchase, one or more shares, voting
securities or participating securities of such body corporate, including
for greater certainty, options and warrants;
"CORPORATION" has the meaning ascribed thereto in the preamble;
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"CORPORATION INDEMNIFIED PERSONS" has the meaning set forth in section 7.3;
"DISPUTE" has the meaning set forth in section 8.2;
"DRAXIS HEALTH" means Draxis Health Inc., a corporation incorporated
pursuant to the laws of Canada, the shares of which are traded on the
Toronto Stock Exchange and NASDAQ;
"EFFECTIVE DATE" means the close of business on January 31, 2000;
"ENCUMBRANCE" means any security interest, mortgage, lien, hypothec,
pledge, servitude, assignment, charge, call, commitment, right of first
refusal, prior claim, demand, restriction, deemed trust, voting trust or
pooling agreement with respect to securities, an adverse claim or any
other right or option affecting any Assets or shares;
"ENVIRONMENTAL LAWS" means all applicable federal, provincial or municipal
(including the Montreal Urban Community) statutes, regulation, by-laws,
permits, policies and orders of any Governmental Authority, relating in
whole or in part to the environment or public or occupational health and
safety (including the ATOMIC ENERGY CONTROL ACT (Canada));
"EQUIPMENT" means all fixed assets and tangible personal property;
"EQUITY PARTICIPATION PLAN" means the equity participation plan adopted by
the Corporation, a copy of which is attached hereto as Schedule 1.1(c);
"FINANCIAL STATEMENTS" means the audited financial statements for the
Corporation for the year ended December 31, 1998 and unaudited financial
statements for the year ended December 31, 1999;
"GAAP" means generally accepted accounting principles from time to time
approved by the Canadian Institute of Chartered Accountants, or any
successor institute, applicable as at the date on which any calculation or
determination is required to be made in accordance with generally accepted
accounting principles, and where the Canadian Institute of Chartered
Accountants includes a recommendation in its Handbook concerning the
treatment of any accounting matter, such recommendation shall be regarded
as the only generally accepted accounting principle applicable to the
circumstances that it covers;
"GOVERNMENTAL AUTHORITY" means any domestic or foreign government whether
federal, provincial, state or municipal and any governmental agency,
governmental authority, governmental tribunal, governmental body or
governmental commission of any kind whatever;
"HAZARDOUS SUBSTANCES" has the meaning set forth in subsection 3.1.27;
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"IMMOVEABLE PROPERTY" has the meaning set forth in subsection 3.1.20;
"INCLUDING" means "including without limitation" and the term "including"
shall not be construed to limit any general statement which it follows to
the specific or similar items or matters immediately following it;
"INDEBTEDNESS" of any Person means all obligations of such Person (i) for
borrowed money (including any negative cash balance or intercompany
advance), (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for which interest charges are customarily paid, (iv)
under conditional sale or other title retention agreements relating to
property or assets purchased by such Person, (v) issued or assumed as the
deferred purchase price of property or services (other than trade accounts
payable and accrued obligations incurred in the ordinary course of
business), (vi) under capital leases, (vii) in respect of interest rate
protection agreements, foreign currency exchange agreements or other
interest or exchange rate hedging arrangements, (viii) as an account party
in respect of letters of credit and bankers' acceptances, (ix) with respect
to Indebtedness of others, secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Encumbrance on property owned or acquired by such Person, or (x) in
the nature of guarantees of Indebtedness of others;
"INDEMNITEE" has the meaning set forth in subsection 7.4.1;
"INDEMNITOR" has the meaning set forth in subsection 7.4.1;
"INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in subsection
3.1.19;
"INTER-COMPANY AGREEMENTS" has the meaning set forth in subsection 3.1.11;
"INVENTORY" means all inventories of raw materials, work-in-progress,
stock-in-trade, finished goods, supplies, packaging and advertising and
publicity materials, wherever located;
"KNOWLEDGE","TO THE BEST OF THE KNOWLEDGE" and similar expressions mean,
with respect to any particular fact or other matter, in the case of an
individual:
(a) that such individual is actually aware of such fact or other matter,
or
(b) that a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the
existence of such fact or other matter;
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and, in the case of a Person other than an individual, that any individual
who is serving, as an officer or director of such Person (or in any similar
capacity) has, or at any time had, or would be considered to have knowledge
of such fact or other matter in accordance with the above;
"LICENCE" means any licence, permit, approval, right, privilege, concession
or franchise issued, granted, conferred or otherwise created by a
Governmental Authority;
"MANAGEMENT SHAREHOLDERS" means each of Xxxxxx Xxxxxx and Xxxxxxxx Xxxxxx;
"MANAGEMENT SUBSCRIPTION" means the subscription letter for shares of the
Corporation executed by each Management Shareholder on the Closing Date;
"MATERIAL ADVERSE EFFECT" means any change or effect that is materially
adverse or would reasonably be expected to be material to the Business,
operations, Assets or condition, financial or otherwise, of the
Corporation, in each case or in the aggregate;
"MERCK FROSST AGREEMENT" means the agreement entered into as of June 12,
0000 xxxxx Xxxxx Xxxxxx Xxxxxx Inc., the Corporation, Draxis Health and
Draximage Inc.;
"NOTICE TO ARBITRATE" has the meaning set forth in section 8.2;
"PERSON" shall be broadly interpreted and includes an individual, body
corporate, partnership, joint venture, trust, association, unincorporated
organization, the Crown, any Governmental Authority or any other entity
recognized by law;
"RELATED PARTY" with respect to another Person means (i) a Person who/which
does not deal at arm's length with this other Person or with any of the
Persons described in subparagraphs (ii) to (vi) inclusively of this
definition, within the meaning of the Applicable Fiscal Law; (ii) a Person
who/which is an "associate" in relation to this other Person under the
CANADA BUSINESS CORPORATIONS ACT; (iii) a Person in relation to whom/which
this other Person is an "associate" under the CANADA BUSINESS CORPORATIONS
ACT; (iv) a Subsidiary of this other Person; (v) a Person in relation to
whom/which this other Person is a Subsidiary or (vi) a Person who/which is
an "affiliate" of this other Person under the CANADA BUSINESS CORPORATIONS
ACT;
"RIGHTS" means any options, rights, warrants or subscription privileges
issued or granted by any Person (whether or not currently exercisable or
exercisable on conditions) to purchase securities or shares or other
interests of such Person;
"SGF SANTE INDEMNIFIED PERSONS" has the meaning set forth in section 7.2;
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"SGF SHARE OF THE UNDERLYING LOSS" has the meaning set forth in section
7.6;
"SHAREHOLDERS' AGREEMENT" means the unanimous shareholders' agreement
entered into on the Closing Date among Draxis Health, SGF Sante, the
Corporation, Xxxxxx Xxxxxx and Xxxxxxxx Xxxxxx;
"SUBSCRIBED SHARES" means the 6,302,521 Common Shares of the share
capital of the Corporation hereby subscribed by SGF Sante;
"SUBSCRIPTION PRICE" has the meaning set forth in section 2.1;
"SUBSIDIARY" means, with respect to any Person, any other Person of
which more than 50% of the outstanding shares having ordinary voting power
of such other Person (irrespective of whether or not at the time shares of
any other class or classes of such other Person shall have or might have
voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned by the first mentioned Person, or by one or
more of its subsidiaries;
"TAXES" means all taxes (including income, corporation, capital, value
added, sales, withholding, franchise, customs duties, profits, gross
receipts, excise, property, stamp, transfer, water, business, and good and
services taxes), imposts, duties, levies, deductions, withholdings,
charges, assessments, reassessments or fees of any nature (including
interest, penalties and additions) that are imposed by any relevant taxing
authority; and "Tax" shall mean any one of them;
"TAX RETURNS" means all reports, returns and other documents filed or
required to be filed in respect of Taxes or in respect of or pursuant to
any domestic or foreign, federal, provincial, state, municipal,
territorial or other taxing statute;
"THIRD-PARTY CLAIM" has the meaning set forth in subsection 7.4.1;
"UNDERLYING LOSS" has the meaning set forth in section 7.6;
"YEAR 2000 COMPLIANT" means, with respect to computer software, source
code, software programs or hardware, that such software or hardware uses
methods of sorting, interpreting, manipulating, calculating, processing and
reporting dates based on the full four digits for each year, such that all
arithmetic operations, comparisons, sorts and reporting involving dates
yield correct results for the year 2000 and all years before and after the
year 2000, including the correct recognition of February 29th during any
leap year.
1.2 GAAP. All accounting and financial terms used herein, unless
specifically provided to the contrary, shall be interpreted and applied in
accordance with GAAP consistently applied.
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1.3 INTERPRETATION NOT AFFECTED BY HEADINGS. The division of this Agreement
into articles and the insertion of headings are for convenience and
reference only and shall not affect the construction or interpretation of
this Agreement.
1.4 EXTENDED MEANINGS. Words importing the singular number include the
plural and vice versa and words importing the masculine gender include the
feminine and neuter genders.
1.5 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties pertaining to the subject matter hereof and supersedes
all prior agreements, negotiations, discussions and understandings, written
or oral, between the parties and, in particular, the offer addressed by SGF
Sante to Draxis Health on December 23, 1999 and accepted on December 24,
1999.
1.6 AMENDMENT. This Agreement may be amended, modified or supplemented only
by a written agreement signed by each party.
1.7 WAIVER OF RIGHTS. Any waiver of, or consent to depart from, the
requirements of any provision of this Agreement shall be effective only if
it is in writing and signed by the party giving it, and only in the
specific instance and for the specific purpose for which it has been
given. No failure on the part of any party to exercise, and no delay in
exercising, any right under this Agreement shall operate as a waiver of
such right. No single or partial exercise of any such right shall
preclude any other or further exercise of such right or the exercise of
any other right.
1.8 SCHEDULES. The following Schedules form part of this Agreement:
SCHEDULE DESCRIPTION OF SCHEDULE
-------- -----------------------
1.1(a) Business Plan
1.1(b) [INTENTIONALLY DELETED]
1.1(c) Equity Participation Plan
3.1.1 List of officers and directors
3.1.3 Authorized and Issued Capital of the Corporation
3.1.5 Consents and Approvals
3.1.7 Transactions with Related Parties
3.1.8 Financial Statements
3.1.11 Existing Contracts
3.1.13 Employees
3.1.14 Collective Agreements
3.1.15 Benefit Plans
3.1.17 Insurance
3.1.18 Title to Assets
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3.1.19 Intellectual Property Rights
3.1.20 Immoveable Property
3.1.21 Suppliers and Customers
3.1.24 Bank Accounts
3.1.27 Environmental Studies and Disclosure
3.1.29 Encumbrances on Inventory
3.1.30 Accounts Payable and Accounts Receivable
3.1.31 Draxis Advances
5.2.8 Employee Agreement
1.9 APPLICABLE LAW. This Agreement shall be deemed to have been made in the
Province of Quebec and shall be interpreted in accordance with and
governed by the laws of Quebec and the laws of Canada applicable therein.
1.10 FUNDS. All dollar amounts referred to in this Agreement are in lawful
money of Canada.
1.11 BUSINESS DAY. In the event that any action to be taken hereunder falls
on a day which is not a Business Day, then such action shall be taken on
the next succeeding Business Day.
1.12 THIRD PARTY BENEFICIARIES. Nothing in this Agreement or in any Closing
Document is intended expressly or by implication to, or shall, confer upon
any Person other than the parties, any Rights or remedies of any kind.
ARTICLE 2
SUBSCRIPTION, ALLOTMENT AND ISSUE OF SUBSCRIBED SHARES
2.1 SUBSCRIPTION. Subject to the terms and conditions hereof, SGF Sante
hereby subscribes for and agrees to purchase and take up, and the
Corporation hereby agrees to allot and issue from treasury to SGF Sante,
as at the Closing Date, an aggregate of 6,302,521 Common Shares, for an
aggregate subscription price of $7,500,000 (the "Subscription Price"). The
Subscribed Shares shall represent, after the Closing, 32.05% of the
outstanding Common Shares of the Corporation on a non-diluted basis.
2.2 SUBSCRIPTION PRICE. The Subscription Price of the Subscribed Shares
shall be payable by wire transfer, cheque or banker's draft to the order
of the Corporation at the Closing Date, against delivery by the Corporation
of a certificate representing the Subscribed Shares, duly registered in the
name of SGF Sante, as fully paid and non-assessable.
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2.3 USE OF PROCEEDS. The Corporation hereby agrees to use the Subscription
Price as well as the proceeds from the subscription by the Management
Shareholders in accordance with the Business Plan.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
REGARDING THE CORPORATION
3.1 REPRESENTATIONS AND WARRANTIES REGARDING THE CORPORATION. As of the
Closing Date, each of the Corporation and Draxis Health, solidarily,
represents and warrants to SGF Sante as follows and acknowledges that SGF
Sante is relying upon such representations and warranties in entering
into this Agreement.
3.1.1 CORPORATE MATTERS
(a) The Corporation (i) is a corporation duly incorporated,
organized and validly existing and in good standing under
the laws of its jurisdiction of incorporation; (ii) is
licensed, authorized and qualified to carry on business in
all jurisdictions where, by virtue of the nature of its
Business or the vocation or character of its Assets, such
licensing, authorization or qualification is necessary; and
(iii) the only jurisdiction in which the Corporation has a
permanent establishment or owns Assets is the province of
Quebec.
(b) The Corporation, to the extent necessary, has all necessary
power and authority, and has taken all actions required
(i) to execute, deliver and perform this Agreement and
(ii) to issue, sell and deliver the Subscribed Shares and
to register them in the name of SGF Sante. This Agreement,
the Shareholders' Agreement and all other documents and
instruments executed by the Corporation pursuant hereto when
delivered, are and will be duly authorized, valid and
binding obligations of the Corporation, enforceable against
the Corporation in accordance with their respective terms,
subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors, equitable
principles limiting rights to specific performance or other
equitable remedies. Upon the issue, sale, delivery and
registration of the Subscribed Shares in the name of SGF
Sante in accordance with the terms hereof, the Subscribed
Shares will be validly issued and fully paid and
non-assessable, and will be free and clear of all
Encumbrances, subject only to restrictions on transfer under
the Shareholders' Agreement.
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(c) The Corporation has the corporate power, authority and
capacity to own its Assets and to carry on its Business in
the manner and to the extent currently carried on in all
jurisdictions in which it presently carries on business and
to perform its obligations hereunder and consummate the
transactions contemplated hereby.
(d) The Corporation is in compliance with the terms and
provisions of its Articles and By-laws, each as amended and
in effect on the Closing Date.
(e) The list of officers and directors in Schedule 3.1.1
constitutes a complete and accurate list of all officers and
directors of the Corporation as of the Closing Date.
3.1.2 SUBSIDIARIES
The Corporation has no Subsidiary nor any other interest of any
kind in any corporate body, partnership, joint venture,
association or other entity of any nature.
3.1.3 AUTHORIZED AND ISSUED CAPITAL OF THE CORPORATION
The authorized and issued share capital of the Corporation is
as described in Schedule 3.1.3 and is held by the Persons set out
therein. Upon the subscription by SGF Sante pursuant to this
Agreement and the subscription by the Management Shareholders as
stated in the Management Subscription, the issued share capital of
the Corporation will be as set forth in Schedule 3.1.3 hereto and
held by the Persons set out therein in the percentages indicated
opposite their names. Except as described in Schedule 3.1.3 or as
otherwise contemplated by this Agreement, the Shareholders'
Agreement or any Schedules attached to this Agreement or the
Shareholders' Agreement, the Merck Frosst Agreement or the Equity
Participation Plan: (a) there are no Rights to purchase shares of
the share capital of the Corporation, or Convertible Security,
authorized, issued or outstanding, and the Corporation is not
obligated in any manner to issue any shares of its share capital
or Convertible Securities or any Right to acquire shares of
its share capital, or to distribute to holders of any of its share
capital any evidence of Indebtedness or Assets; (b) no Person has
any preemptive right, right of first refusal or similar Right to
acquire additional shares of share capital in connection with the
sale and purchase of the Subscribed Shares pursuant to this
Agreement or otherwise; (c) there are no restrictions on the
transfer of the shares of share capital of the Corporation other
than as set forth in its Articles; (d) no Person has any right to
cause the Corporation to effect the registration under the
relevant securities laws of any shares of share capital or any
other securities (including debt securities) of the Corporation;
(e) the Corporation has no obligation to purchase, redeem or
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otherwise acquire any of its equity securities or any interests
therein, or to pay any dividend or make any other distribution in
respect thereof other than pursuant to its Articles; and (f) there
are no voting trusts, shareholders' agreements, or proxies
relating to any securities of the Corporation.
3.1.4 NO VIOLATION
The execution, delivery and performance of this Agreement, the
Shareholders' Agreement and any documents or instruments
delivered, executed and performed in connection herewith or
therewith, the consummation of the transactions contemplated
hereby or thereby (including the issuance, sale and delivery of
the Subscribed Shares) and compliance with the provisions hereof
and thereof (a) will not violate to the best of the knowledge of
the Corporation and of Draxis Health any provision of any
Applicable Law, (b) violate any provision of the Corporation's
Articles, By-laws, as amended (the "By-laws") or directors' or
shareholders' resolutions, (c) violate or constitute a default
under, or cause or permit the acceleration of the maturity of, any
debt, obligation or contract, commitment or other agreement,
written or oral, to which the Corporation is bound, (d) result in
the creation or imposition of any Encumbrance (i) on the
Subscribed Shares, (ii) the Corporation, (iii) any of its Assets
or (iv) under any agreement or commitment to which the Corporation
is a party or by which the Corporation or any of its Assets may be
bound, or conflict with, result in the breach of or constitute
(with due notice or lapse of time or both) a default under any
such agreement or commitment or (e) violate any judgment, decree,
order, regulation, or rule of any Governmental Authority
applicable to the Corporation or any of its Assets.
3.1.5 CONSENTS, APPROVALS
Except as disclosed in Schedule 3.1.5, no consent, approval,
permit or authorization of, or declaration, filing, qualification,
designation or registration with, any third party or Governmental
Authority is required in connection with the execution, delivery
and performance of this Agreement, the Shareholders' Agreement and
any documents or instructions delivered, executed and performed in
connection herewith or therewith, by the Corporation and the
consummation of the transactions contemplated hereby or thereby
(including the subscription, issuance and delivery of the
Subscribed Shares).
3.1.6 OTHER AGREEMENTS OF OFFICERS
To the best of the knowledge of the Corporation and Draxis
Health, no Management Shareholder, officer or director of the
Corporation has any present
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intention of terminating his or her employment with the
Corporation, and the Corporation has no present intention of
terminating any such employment.
3.1.7 TRANSACTIONS WITH RELATED PARTIES
Except as disclosed in Schedule 3.1.7, in Section 3.1.30 or
in Schedule 3.1.31, the Corporation has no outstanding
Indebtedness, claim, liability or obligation for amounts owing to
(including for cash advances or negative cash balances) or
receivable from, or leases, contracts or other commitments or
arrangements with or for the benefit of the Corporation or its
Related Parties, directors, officers or employees or any Related
Party of such directors, officers or employees.
3.1.8 FINANCIAL STATEMENTS
A copy of the Financial Statements is attached as Schedule
3.1.8 hereto. Each balance sheet included in the Financial
Statements is true, complete and correct and presents fairly the
financial position of the Corporation, as of the date of such
balance sheet and each of the statements of operations and
retained earnings and cash flows included in the Financial
Statements is true, complete and correct and presents fairly the
results of operations and cash flows of the Corporation, for the
periods set forth therein, in each case in accordance with GAAP
consistently applied, except as otherwise noted therein, and in
each case were compiled from the Books and Records regularly
maintained by management and used to prepare the Financial
Statements of the Corporation in accordance with the principles
stated therein. The Corporation has maintained its Books and
Records in a manner sufficient to permit the preparation of the
Financial Statements in accordance with GAAP consistently applied.
Such Books and Records fairly reflect the income, expenses, Assets
and liabilities of the Corporation and provide a fair and accurate
basis for the preparation of the Financial Statements.
3.1.9 CHANGES IN THE CORPORATION'S BUSINESS
Other than as provided in this Agreement, the Shareholders'
Agreement and the Management Subscription, since December 31, 1999
to the Closing Date, the Business of the Corporation has been
carried on in the ordinary course of business, in substantially
the same manner as before and, in particular, the Corporation has
not:
(a) purchased or redeemed, directly or indirectly, any of its
issued shares or paid any dividends or made any other
distributions in respect thereof;
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(b) issued or sold (or agreed to issue or sell) any shares of
its capital of any class or any Rights to purchase any such
shares or any Convertible Securities;
(c) made any change in its Articles or By-laws;
(d) suffered any material adverse change in its Business or
financial condition or results of operations or experienced
any material loss (whether insured or not insured) nor has
knowledge of any present condition or contingency which could
reasonably result in a Material Adverse Effect;
(e) incurred any obligations or liabilities (whether absolute,
accrued, contingent or otherwise, whether due or to become
due and whether determined or determinable) having an
aggregate value in excess of $100,000 other than trade
accounts payable in the ordinary course which are listed on
Schedule 3.1.30;
(f) entered into any contract or agreement having, in each case,
a value in excess of $100,000;
(g) paid, discharged or satisfied any Encumbrance or liability
(whether absolute, accrued, contingent or otherwise, whether
due or to become due and whether determined or determinable),
other than claims, Encumbrances or liabilities which (i) are
reflected or reserved against in the Financial Statements and
which were paid, discharged or satisfied since December 31,
1999 in the ordinary course of business and consistent with
past practice, (ii) were incurred and paid, discharged or
satisfied since December 31, 1999 in the ordinary course of
business and consistent with past practice;
(h) sold, transferred, conveyed or assigned any Assets or created
an Encumbrance or agreed to sell, transfer, convey or assign
or create an Encumbrance on any of its Assets, in each case
with a value in excess of $100,000;
(i) granted or promised any increase in the compensation of any
employee (including without limitation, any increase pursuant
to any bonus or Benefit Plan) or instituted or adopted any
new employee Benefit Plan other than salary increases or
adjustments pursuant to annual performance review which
do not in the aggregate exceed 2% of such costs in the last
completed financial year;
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(j) made any pension, retirement, profit sharing, bonus or other
employee welfare or benefit payment to any of its directors,
officers or employees;
(k) made any change in any method or principle of accounting or
accounting practice or procedure as compared to those used in
the preparation of the Financial Statements;
(l) conducted its Business other than in the ordinary course;
(m) made any loan or advance to any Person, other than advances
to employees for reasonable business expenses;
(n) suffered any extraordinary losses or waived any rights of
material value, whether or not in the ordinary course of
business or consistent with past practice;
(o) agreed, whether in writing or otherwise, to take any action
described in this subsection 3.1.9 other than actions
expressly permitted under this subsection 3.1.9.
3.1.10 TAXES
All Tax Returns required to be filed by or on behalf of the
Corporation and any election forms in this connection have been
accurately prepared, duly executed and filed within the prescribed
period (save and except for the Tax Returns for the year ended
December 31, 1998 which were filed on January 12, 2000). To the
best of the knowledge of the Corporation and Draxis Health, all
information provided in such Tax Returns pertaining to the
Corporation is true, complete and accurate, all Taxes attributable
to the Corporation that were due and payable have been paid and
adequate provision has been made on the books of the Corporation
for all Taxes payable for the current year for which Tax Returns
are not yet required to be filed.
The Corporation has never claimed any research and development tax
credits.
The Corporation has not received any notice of assessment of
additional Taxes or any other claim or notice of any nature
whatsoever that any Tax or additional Tax is due which has not
been paid or otherwise finally settled or satisfied. There are no
actions, suits, proceedings, investigations or Claims pending or,
to the best of the knowledge of the Corporation or of Draxis
Health, threatened in respect of any Taxes, nor are there any
matters under discussion with any Governmental Authority relating
to any Taxes asserted by any such authority. No waiver of any
statute of limitations as to any Tax Return with respect to any
taxation year, has
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been executed by the Corporation. There are no Encumbrances for
Taxes on the Assets of the Corporation, except for Encumbrances
for Taxes not yet due.
The Corporation has withheld from its employees, officers,
directors, customers and any other applicable payees (and timely
paid to the appropriate Governmental Authority) proper and accurate
amounts in compliance with all tax withholding and has remitted
such withheld amounts within the prescribed periods to the
appropriate Governmental Authority. The Corporation has remitted
all pension plan contributions, unemployment insurance premiums,
employee health taxes and the equivalent in applicable jurisdictions
and other Taxes payable by it in respect of its employees and has
or will have remitted such amounts to the proper Governmental
Authority within the time required by Applicable Law. The
Corporation has charged, collected and remitted on a timely basis
all Taxes required by Applicable Law on any sale, supply or delivery
whatsoever made by the Corporation.
3.1.11 EXISTING CONTRACTS
Except for the contracts of the Corporation listed on Schedule
3.1.11 attached hereto (collectively, the "Contracts"), the
Corporation is not a party to or otherwise bound by any:
(a) agreements with respect to the acquisition of Intellectual
Property Rights and license agreements;
(b) contracts or series of contracts with the same Person for
the purchase or sale of goods or services, or the furnishing
of services, including manufacture and supply agreements,
which contracts have a value in excess of $100,000 per year
or which in the aggregate exceed $100,000 per year;
(c) contract or other commitment with any supplier (i)
containing any provision permitting any party other than the
Corporation to renegotiate the price or other terms, or (ii)
containing any pay-back or other similar provision, upon the
occurrence of a failure by the Corporation to meet its
obligations under the contract when due or the occurrence of
any other event, which contracts have a value in excess of
$100,000;
(d) contract for the future purchase of fixed Assets or for the
future purchase of materials, supplies or Equipment which
contracts have a value in excess of $100,000;
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(e) agreement or indenture relating to the borrowing of money or
to the hypothecating, mortgaging or pledging of, or
otherwise placing a lien, security interest or Encumbrance
on, any Asset of the Corporation, or any agreement or
instrument evidencing any guarantee by the Corporation of
payment or performance by any other Person;
(f) voting trust or agreement, shareholders' agreement, pledge
agreement, buy-sell agreement or first refusal or preemptive
rights agreement relating to any securities of the
Corporation;
(g) immoveable property leases or Rights of occupancy, leases,
conditional sale contracts, hire purchase agreements,
security interest agreements or other title retention
agreements;
(h) grants and subsidies from which the Corporation benefits;
(i) agreement or obligation (contingent or otherwise) to issue,
sell or otherwise distribute or to repurchase or otherwise
acquire or cancel any shares of its share capital or any of
its other equity securities;
(j) agreement under which the Corporation has advanced or agreed
to advance money, or under which the Corporation has agreed
to lease any property as lessee or lessor;
(k) agreement under which the Corporation has granted any Person
any registration rights or Rights;
(l) agreement under which the Corporation has limited or
restricted its right to compete with any Person in any
respect or which restricts or interferes with the conduct of
its Business or the use of its Assets;
(m) contract or other commitment involving more than $100,000;
(n) agreement providing for disposition of the Business, Assets
or shares of the Corporation by way of amalgamation or
consolidation to which the Corporation is a party or letter
of intent with respect to the foregoing; or
(o) agreement or letter of intent with respect to the
acquisition of the Business, Assets or shares of any other
Person.
The Corporation has supplied copies of all Contracts, if any, to
SGF Sante and made available for inspection all other contracts
to which the Corporation is a
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party. The Corporation and all of the other parties to such
Contracts have performed all materiel obligations required to be
performed by such Persons to date under the Contracts, have
received no notice of default and are not in default under any of
the Contracts.
The Corporation is not in default nor has it committed or
permitted any event which with notice or the passage of time or
both would constitute such a default, and no notice of alleged
default has been received by it under any such Contracts. None of
the other parties to such Contracts is in default and neither
Draxis Health nor the Corporation has reason to believe that there
will be any such default by any such party thereafter. There has
been no cancellation, and the Corporation has not received any
written threat to cancel or not to renew or extend any such
Contract from any other party thereto. Each Contract is in full
force and effect and is valid and binding upon the parties.
3.1.12 COMPLIANCE WITH APPLICABLE LAWS
The Corporation has conducted and is conducting its Business in
compliance with all Applicable Laws and is not in breach of any
provision of any Applicable Laws.
3.1.13 EMPLOYEES
Schedule 3.1.13 sets forth with respect to the Corporation:
(a) the names and titles of all employees of the Corporation
together with the location of their employment and whether
or not they are unionized;
(b) the date each such employee was hired;
(c) a list of all written employment contracts between the
Corporation and such employees; and
(d) the terms of remuneration (including all benefits) of all
such employees as at the Closing Date and any bonuses paid
since the end of the last completed financial year.
No such employee is on long term or short term disability or
presently receiving payments under any occupational health and
safety legislation unless he has been identified as such in
Schedule 3.1.13. The Corporation has complied with all Applicable
Laws relating to the employment of labour, including, without
limitation, provisions thereof relating to wages, hours,
collective bargaining rights and worker health and safety. Except
for current unpaid salaries and benefits, the
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Corporation has no Indebtedness to or from any of its Related
Parties, directors, officers or employees, past or present, or to
any Person or entity which is a Related Party to any of them. All
non-unionized employees of the Corporation are bound by written
agreements which provide confidentiality undertakings and
assignment of intellectual property, discoveries, inventions and
the like to the employer in the form set out in Schedule 5.2.8. To
the best of the knowledge of the Corporation or of Draxis Health,
none of the employees, past or present, of the Corporation has had
a work-related accident or occupational disease which will likely
give rise to a claim by a Governmental Authority under an
Applicable Law, and there are no Claims or appeals pending
thereunder concerning the Corporation and the Corporation has not
received any assessments thereunder.
No such employee is employed under a contract which cannot be
terminated by the employer with or without notice, except for those
employees who are employed on indefinite hirings requiring
reasonable notice of termination by Applicable Law. The Corporation
is in compliance with all pay equity legislation applicable to the
Business and the employees of the Corporation.
3.1.14 COLLECTIVE AGREEMENTS
All collective bargaining agreements and other union contracts by
which the Corporation is bound are listed on Schedule 3.1.14. To
the best of the knowledge of the Corporation and Draxis Health,
there is no pending or threatened labour dispute, grievance,
strike, or work stoppage.
3.1.15 BENEFIT PLANS
Schedule 3.1.15 sets forth all Benefit Plans offered to employees
of the Corporation as well as the funding status of each of them as
at December 31, 1999. The funding status of the Benefit Plans, as
set forth in Schedule 3.1.15, has not materially changed since
December 31, 1999 and no fact, condition or circumstance exists
which would materially affect said funding status. No contribution
holiday has been taken in respect of the Benefit Plans by the
Corporation. The Benefit Plans are duly registered when required
by, and are in good standing under, any applicable legislation.
Except as disclosed on Schedule 3.1.15, there are no outstanding
defaults or violations by the Corporation of any obligation
required to be performed by it in connection with any Benefit Plans.
There are no claims or proceedings of any nature pending or
threatened with respect to the Benefit Plans (other than for
routine claims for benefits) against the Corporation. Except as
disclosed on Schedule 3.1.15, all required contributions or
premiums under the Benefit Plans have been duly made or remitted.
No promises
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or commitments have been made by the Corporation to amend the
Benefit Plans or to provide increased benefits to the employees of
the Corporation.
3.1.16 LITIGATION
There is no action, suit, proceeding or investigation pending or,
to the best of the knowledge of the Corporation and Draxis Health,
threatened against or affecting the Corporation; and, to the best of
the knowledge of the Corporation, no event has occurred and no
condition exists on the basis of which any such litigation,
proceeding or investigation might properly be instituted. The
Corporation is not in default with respect to any order, writ,
injunction, decree, ruling or decision of any court, commission,
board or other Governmental Authority. No proceedings have been
taken or authorized by the Corporation or, to the best of the
knowledge of the Corporation or Draxis Health, by any other Person,
with respect to the bankruptcy, insolvency, liquidation,
dissolution or winding-up of the Corporation.
3.1.17 INSURANCE
The Corporation is insured by reputable insurers against liability,
loss and damage in such amounts and against such risks as are
customarily carried and insured against by owners of comparable
businesses, properties and Assets. Schedule 3.1.17 is a true and
complete description of the insurance policies (specifying the
insured, the amount of coverage, the type of insurance, the police
number and any pending claims thereunder) maintained by the
Corporation in respect of its Assets and its Business as of the
Closing Date. Such insurance policies are sufficient for compliance
with all laws and contracts to which the Corporation, is a party or
by which it is otherwise bound. The Corporation is not in default
with respect to any of the provisions contained in such insurance
policies. For any current claim that has not been settled or
finally determined, the Corporation has not failed to give any
notice or present any claim under any such insurance policies in a
due and timely fashion such that the insurer would be entitled to
terminate coverage or deny liability on any such claim. Such
policies of insurance are in full force and effect and the
Corporation is not in default, whether as to the payment of
premiums or otherwise, under their terms. No claims have been made
under such policies or any similar policy by or on behalf of the
Corporation.
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3.1.18 TITLE TO ASSETS
Without restricting the generality of other representations and
warranties made hereby with respect to the Assets of the
Corporation, except as disclosed in the Financial Statements or in
Schedule 3.1.18 hereto, the Corporation has good and marketable
title to all of its Assets and without restricting the generality of
the foregoing, to all the Assets required for the operation of its
Business, free and clear of all Encumbrances, except for minor
imperfections of title and Encumbrances, if any, which individually
and in the aggregate do not have a Material Adverse Effect on the
use or value of any such Assets or render title thereto
unmarketable.
3.1.19 INTELLECTUAL PROPERTY RIGHTS
Schedule 3.1.19 sets forth a true and complete list of all
registered intellectual property rights of the Corporation. The
Corporation owns or is licensed or otherwise has the right to use
in the manner that the same are now being used all intellectual
property rights necessary or useful to enable it to operate its
Business, develop, manufacture or have manufactured, market and
sell its products in conformity with the Applicable Laws and in
total respect of the rights of third parties, if any, including
patents, trade marks, industrial drawings, industrial designs,
copyrights, trade names, know-how, trade secrets and secret
processes (the "Intellectual Property Rights"), and the Corporation
has not granted any license, permit or right to use its
Intellectual Property Rights. The Intellectual Property Rights are
held by the Corporation and all rights thereto have been assigned
to the Corporation by all developers who had been involved in the
creation or development of such Intellectual Property Rights. Any
registrations or filings which are necessary in any jurisdiction to
preserve the rights of the Corporation in and to the Intellectual
Property Rights have been made and none have been made in favour of
any other party in any jurisdiction. Neither Draxis Health nor the
Corporation has knowledge of any material infringement of, material
passing-off related to, or other material interference with the
Intellectual Property Rights by third parties or any claim by any
Person that any of the Intellectual Property Rights are, or may be,
invalid or unenforceable. The Corporation is not a party to any
claim, or subject to any liability, contingent or otherwise, for
trademark, trade name, industrial design, patent or copyright
infringements as to any product manufactured, produced, used or
sold by the Corporation, either as plaintiff or as defendant or any
other claim or liability relating to Intellectual Property Rights
owned or licensed by the Corporation.
The Corporation has not infringed or misappropriated the rights of
third parties with respect to the Intellectual Property Rights. All
rights or fees due and payable to maintain the validity or existence
of the Intellectual Property Rights have been
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duly paid. There are no facts or circumstances (including past or
current disclosure) that could affect or result in the cancellation of
any rights in respect of such Intellectual Property Rights, including
pending patents in any jurisdiction. Except as set forth in Schedule
3.1.19, there has been continuous use of the trademarks which are
included in the Intellectual Property Rights. Neither Draxis Health
nor the Corporation has knowledge of any facts or circumstances,
situation or problems, of a juridical, technical or commercial nature
that could interfere with the development, the manufacture, the
marketing or the sale of the products or services of the Corporation
in the operation of its Business.
3.1.20 IMMOVEABLE PROPERTY
(a) Schedule 3.1.20 sets forth a list of all immoveable property
owned, leased or sub-leased by the Corporation (collectively
referred to herein as the "Immoveable Property"). The
Corporation has not entered into any other lease or sub-lease
or agreement granting to anyone any right to possession, use,
occupancy or enjoyment of the Immoveable Property or any
portion thereof. Except as set out in Schedule 3.1.20 or in
the Business Plan, there are no works or improvements now
underway in the Immoveable Property or ordered by any
authority or by the landlord thereof and none is currently
planned. The Immoveable Property is fit for the operations of
the Corporation, as the case may be.
(b) The Corporation is the absolute and registered owner of the
Immoveable Property, by good, valid and marketable title, free
and clear of any Encumbrances except as set forth in Schedule
3.1.20;
(c) The Immoveable Property complies with the requirements of all
pertinent Governmental Authorities and Applicable Laws, and
the Corporation has not received a written notice from any
competent Governmental Authority having jurisdiction over the
Immoveable Property notifying the Corporation or its
predecessors in title or placing either of them in default to
conform with any Applicable Law relating to fire, health,
environment, zoning, police rules or otherwise, and the
Corporation has no knowledge of any violation or infraction
thereto;
(d) The Immoveable Property is not situated within a protected
area pursuant to the ACT TO PRESERVE AGRICULTURAL LAND
(R.S.Q., c. P-41.1);
(e) The Immoveable Property does not form part of a housing
complex pursuant to AN ACT RESPECTING THE REGIE DU LOGEMENT
(R.S.Q., c. R-8.1);
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(f) The Immoveable Property is not a classified cultural
property or recognized as such and is not situated within a
historic or a natural area, within a classified historic site
or in a protected area within the meaning of the CULTURAL
PROPERTY ACT (R.S.Q., c. B-4);
(g) The Corporation has not received any written notice with
respect to (i) any actual or contemplated expropriation
proceedings, (ii) road widenings, or (iii) any reserves;
(h) All equipment owned or leased by the Corporation and forming
part of the Immoveable Property including the water, gas,
electrical, steam, compressed air, telecommunication,
sanitary and storm sewage lines and systems or other similar
systems serving the Immoveable Property, as well as all
heating equipment and electrical and lighting fixtures are in
good working order and condition;
(i) There are no contracts, agreements (including agreements for
future commission payable), arrangements or understandings
between the Corporation and its predecessors in title with
any third parties affecting the Immoveable Property.
3.1.21 SUPPLIERS AND CUSTOMERS
Schedule 3.1.21 sets forth a list of all of the customers of the
Corporation for an amount of $100,000 per year and more (for the fiscal
year ended December 31, 1999), and a list of all of the suppliers of
the Corporation for an amount of $100,000 per year and more (for the
six-month period ended December 31, 1999). Except as set out in
Schedule 3.1.21, there has been no material interruption to or
discontinuity in any customer or supplier arrangements or
relationships referred to in this Schedule.
3.1.22 LICENCES
(a) The Corporation holds all necessary Licences required under
Applicable Laws to own and operate its Assets as utilized in
its Business presently and none of such Licences is adversely
affected by the transactions contemplated by this Agreement
or requires consent with respect thereto; and
(b) the Corporation has complied with each and all Licences used
in connection with its Business or Assets including any
required filings and
-24-
renewals, and no default exists with respect thereto; and the
Corporation has not received written notice of violation of
any such Licences.
3.1.23 YEAR 2000 ISSUES
All material software, source code and software programs of the
Corporation developed, marketed, sold or used by the Corporation are
Year 2000 Compliant.
The Corporation has implemented a millennium compliance program such
that it has verified and will continue to verify that its products,
services, systems and processes are millennium compliant. The
Corporation has put in place a program to contact all significant
customers, suppliers and other third parties that can materially
adversely affect its operations in order to determine whether or not
these customers, suppliers and other third parties are millennium
compliant and, if found to be non-compliant, how such non-compliance
will affect the Corporation, its products and its operations.
3.1.24 BANK ACCOUNTS
Schedule 3.1.24 sets forth a complete list of every financial
institution in which the Corporation maintains accounts and the name
of all persons exercising signing authority thereunder.
3.1.25 LIABILITIES
There are no material liabilities of the Corporation of any kind
whatsoever, whether or not accrued and whether or not determined or
determinable, absolute or contingent, other than (i) liabilities
disclosed on, reflected in or identified in the Financial Statements,
(ii) liabilities disclosed or referred to in this Agreement or in the
Schedules attached hereto and (iii) commercial liabilities and
obligations incurred since the date of the Financial Statements in
the ordinary course of business and consistent with past practice.
3.1.26 CORPORATE RECORDS
The minute books of the Corporation contain complete and accurate
copies of the Articles and By-laws of the Corporation and minutes of
all meetings of the directors and shareholders of the Corporation
held since the incorporation of the Corporation. Such meetings were
duly called and held, and the share certificate books, register of
shareholders, register of transfers and register of directors of the
Corporation are complete and accurate.
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3.1.27 ENVIRONMENTAL PROTECTION
(a) Except as disclosed on Schedule 3.1.27, the Assets
including the Immoveable Property and the operation of
the Business of the Corporation and the operation of the
businesses of all Related Parties of the Corporation
carried on in the Immoveable Property are and have been
during the past two years in compliance with all
Environmental Laws of each jurisdiction in which it
carries on business. The Corporation has obtained and is
in compliance with all permits, Licences, certificates,
authorizations, approvals, consents and registrations
issued or granted pursuant to Environmental Laws and
required for the Assets and the operation of its
Business.
(b) There is no claim, suit, action, written notice of
non-compliance, administrative order or other
proceeding, outstanding or pending or threatened against
the Corporation, nor is there, to the best of the
knowledge of the Corporation and of Draxis Health, any
pending investigation in respect of its Business or
Assets pursuant to any Environmental Laws. Except as
disclosed on Schedule 3.1.27, the Corporation is not
responsible for any clean-up, corrective or remedial
action in respect of the Business, including the
Immoveable Property, or the Assets pursuant to any
Environmental Law. Except as disclosed on Schedule
3.1.27, the operations of the Corporation and Related
Parties of the Corporation have not, in the past two years
caused, and the Corporation and Related Parties of the
Corporation have not permitted to occur, the release,
emission, deposit, issuance, disposal or discharge of
any contaminant, pollutant, waste, hazardous waste,
hazardous material, dangerous goods, toxic substances,
prescribed substances (as these terms are defined
pursuant to Environmental Laws) ("Hazardous Substances")
nor are any Hazardous Substances present, in, on, or
under the Assets or on any Immoveable Property owned by
the Corporation nor were any Hazardous Substances
present in, on or under the Assets or on the Immoveable
Property at the time of its acquisition by the
Corporation; all Hazardous Substances have at all times
been stored, handled, treated and eliminated in
compliance with Environmental Laws in the operation of
its Business by the Corporation. Except as set out in
Schedule 3.1.27, the Assets and Immoveable Properties
owned by the Corporation do not contain any
polychlorinated biphenyls, asbestos, or urea
formaldehyde foam insulation or any Hazardous
Substances, nor do they contain or have they contained
any underground storage tanks, nor have they been used
by the Corporation as a waste site.
-26-
Except as listed on Schedule 3.1.27, the Corporation has
not conducted and is not aware of any environmental or
occupational health and safety evaluations, assessments,
audits, studies or tests with respect to its Assets,
including the Immoveable Property, or Business.
3.1.28 THE PLANT
The Corporation's plant and operations, practices and
procedures meet current Canadian Good Manufacturing Practices
(GMP) guidelines and standards and have been certified by U.S.
Food and Drug Administration with respect to Sterile and
Ointment productions as described on page 37 of the KPMG
confidential financing memorandum of April 1998. The
Corporation's plant is also expected to meet U.S. Food and
Drug Administration standards for the production of its
sterile products (liquid and lyophilization) and non sterile
Solid Dosages, Ointments, Creams and Liquids.
3.1.29 INVENTORY
The Inventories in the Financial Statements are valued at
weighted average of historical cost (raw materials and bulk)
and at standard cost, as revised at least once a year
(semi-finished and finished products), in accordance with GAAP
consistently applied. The Inventories are of quality and
quantity which are usable in the ordinary course of Business
consistent with past practice (subject to reserve as reflected
on the Financial Statements), conform to customer
specifications and are owned by the Corporation free and clear
from all Encumbrances, except as set out in Schedule 3.1.29.
Such reserves have been reflected on the Financial Statements
in accordance with GAAP and the historical practices of the
Corporation and are adequate.
3.1.30 ACCOUNTS PAYABLE AND ACCOUNTS RECEIVABLE
Schedule 3.1.30 contains a true and complete aged list of all
Accounts Payable and a true and complete aged list of all
Accounts Receivable of the Corporation, in each case as of the
month-end prior to the Closing Date and, in both cases,
categorized depending on whether they are owed to or
receivable from a Related Party to the Corporation. The
Accounts Receivable shown on the Financial Statements (subject
to reserve for non collectability as reflected therein) and
all receivables acquired or generated by the Corporation since
December 31, 1999 are BONA FIDE receivables and represent
amounts due with respect to actual transactions entered into
in the ordinary course of Business consistent with past
practice and are collectable at their recorded amounts. Such
reserves for non collectibility have been reflected on the
Financial Statements in accordance with GAAP and are adequate.
No such
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receivable has been assigned or pledged to any other Person
and no defense of set-off or similar right to any such
receivable has been asserted by the account obligor.
3.1.31 ADVANCES FROM DRAXIS HEALTH
As set forth in Schedule 3.1.31, there are outstanding
advances in the amount of $9,097,516 owing to Draxis Health by
the Corporation, otherwise than as trade payables, which
advances have been used by the Corporation in accordance with
the Business Plan.
3.1.32 DISCLOSURE
The Corporation and Draxis Health are unaware of any fact,
other than as disclosed herein, which might adversely affect
the property, activities, results, operations or business
prospects of the Corporation or which, if known to SGF Sante,
might reasonably have affected its decision to subscribe for
the Shares and pay the Subscription Price.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SGF SANTE
4.1 REPRESENTATIONS AND WARRANTIES OF SGF SANTE. As of the Closing Date, SGF
Sante represents and warrants to the Corporation as follows and
acknowledges that the Corporation is relying upon such representations
and warranties in entering into this Agreement.
4.1.1 CORPORATE MATTERS
(a) SGF Sante (i) is a corporation duly incorporated,
organized and validly existing and in good standing
under the laws of its jurisdiction of incorporation; and
(ii) has full corporate power and authority to own and
hold its Assets and to carry on its business as
presently conducted.
(b) SGF Sante, to the extent necessary, has all necessary
power and authority, and has taken all actions required
(i) to execute, deliver and perform this Agreement, the
Shareholders' Agreement and all agreements executed
pursuant thereto. This Agreement, the Shareholders'
Agreement and all other documents and instruments
executed by SGF Sante pursuant hereto when delivered,
are and will be duly authorized, valid and binding
obligations of SGF Sante, enforceable against SGF Sante
in accordance with their respective terms, subject to
laws of general application relating
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to bankruptcy, insolvency and the relief of debtors,
equitable principles limiting rights to specific performance
or other equitable remedies.
(c) SGF Sante is a Subsidiary of the Societe generale de
financement du Quebec.
(d) SGF Sante has the corporate power, authority and capacity to
own its Assets and to carry on its business in the manner
and to the extent currently carried on in all jurisdictions
in which it presently carries on business and to perform its
obligations hereunder and consummate the transactions
contemplated hereby.
(e) SGF Sante is in compliance with the terms and provisions of
its Articles and by-laws, each as amended and in effect on
the Closing Date.
4.1.2 NO VIOLATION
The execution, delivery and performance of this Agreement, the
Shareholders' Agreement and any documents or instruments
delivered, executed and performed in connection herewith or
therewith, the consummation of the transactions contemplated
hereby or thereby (including the subscription for the Subscribed
Shares) and compliance with the provisions hereof and thereof
(a) will not, to the best of the knowledge of SGF Sante, violate
any provision of any Applicable Law, (b) violate any provision of
the Articles, by-laws, as amended, or directors' or shareholders'
resolutions of SGF Sante, (c) violate or constitute a default
under, or cause or permit the acceleration of the maturity of, any
debt, obligation or contract, commitment or other agreement,
written or oral, to which SGF Sante is bound, (d) result in the
creation or imposition of any Encumbrance (i) on the Subscribed
Shares, (ii) SGF Sante, (iii) any of its Assets or (iv) under
any agreement or commitment to which SGF Sante is a party or by
which SGF Sante or any of its Assets may be bound, or conflict
with, result in the breach of or constitute (with due notice or
lapse of time or both) a default under any such agreement or
commitment or (e) violate any judgment, decree, order,
regulation, or rule of any Governmental Authority applicable to
SGF Sante or any of its Assets.
4.1.3 CONSENTS, APPROVALS
No consent, approval, permit or authorization of, or declaration,
filing, qualification, designation or registration with, any
third party or Governmental Authority is required which has not
been duly obtained in connection with the execution, delivery and
performance of this Agreement, the Shareholders' Agreement and
any documents or instructions delivered, executed and performed
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in connection herewith or therewith, by SGF Sante and the
consummation of the transactions contemplated hereby or thereby
(including the subscription for the Subscribed Shares).
ARTICLE 5
COVENANTS
5.1 REPORTS. As of the Closing Date and for so long as SGF Sante or
its successors or permitted assigns holds shares of the Corporation
representing not less than 10% of the total outstanding shares and
Convertible Securities of the Corporation, the Corporation undertakes
to supply SGF Sante, without charge, the following documents and
acknowledges that SGF Sante rely on such undertakings for the purpose
of its subscription:
5.1.1 within 60 days following the end of each fiscal year, the annual
audited financial statements of the Corporation and any
Subsidiary, both on a consolidated and non-consolidated basis;
5.1.2 within 30 days following the end of each fiscal year, the
financial statements of the Corporation together with the report
of the president of the Corporation on the Corporation's
operations;
5.1.3 within 30 days following the end of each month, the financial
statements of the Corporation;
5.1.4 not less than 45 days before the beginning of each fiscal year, a
copy of the business plan of the Corporation for the said fiscal
year which shall include quarterly and annual operating expenses
(including inter-company charges) and cash flow budgets (including
capital expenditures and repayment of advances from Draxis
Health), the whole as approved by the board of directors of the
Corporation;
5.1.5 within five Business Days following the receipt thereof, a copy
of any notice, letter or other document advising the Corporation
of the occurrence of an event of default pursuant to any contract
or financial undertaking to which the Corporation is a party or
pursuant to the Applicable Law;
5.1.6 within five Business Days of a senior officer of the Corporation
or Draxis Health having knowledge of the receipt of any notice,
letter or other document informing the Corporation of the
institution or contestation of any legal proceeding involving the
Corporation, a copy thereof; and
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5.1.7 within a reasonable delay, any other document or information
which is sent to shareholders of the Corporation.
5.2 ONGOING OBLIGATIONS. As of the Closing Date and for so long as SGF
Sante or its successors or permitted assigns holds shares of he
Corporation representing not less than 10% of the total outstanding
shares and Convertible Securities of the Corporation, the Corporation
covenants and agrees that it shall do or cause to be done each of the
things set forth herein:
5.2.1 the Corporation will use the Subscription Price exclusively in
accordance with the Business Plan;
5.2.2 the Corporation shall keep its Equipment in good repair, working
order and condition;
5.2.3 the Corporation shall subscribe for and maintain insurance
coverages which are adequate and customary in the industry for
each of the following items:
(a) insurance against loss or damage to its Assets, business
interruption and civil responsibility;
(b) directors and officers liability insurance policy in an
amount of no less than one million dollars ($1,000,000) and
to adopt an indemnity provision either in its Articles or in
its By-laws protecting its directors;
5.2.4 the Corporation shall comply, in all material respects, will all
Applicable Laws and Environmental Laws and shall obtain and renew
all permits, certificates of authorizations, Licences and
Intellectual Property Rights required to conduct its Business as
required by Applicable Laws and Environmental Laws;
5.2.5 the Corporation shall pay and discharge all Taxes when due, unless
they are contested in good faith;
5.2.6 the Corporation shall keep and maintain complete and accurate
Books and Records and Tax Returns and file all Tax Returns when
due;
5.2.7 the Corporation shall properly maintain and protect its corporate
existence, technology and Intellectual Property Rights;
5.2.8 the Corporation shall ensure that all its employees are bound by
proper confidentiality agreements and agreements providing for
the assignment to employer of all intellectual property, rights,
discoveries and inventions, substantially in accordance with the
form set out in Schedule 5.2.8;
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5.2.9 the Corporation shall allow SGF Sante's representative to visit
its facilities, inspect its Books and Records and Assets and
discuss with its directors, officers and auditors its affairs and
finances during normal business hours upon giving reasonable
written notice;
5.2.10 the Corporation shall ensure that at each of its board of
directors' meeting, its comptroller tables a written report
confirming the status of all prescribed deductions at source,
withdrawals and other remittances mandated under all Applicable
Laws;
5.2.11 the Corporation shall provide its directors with a copy of the
draft minutes of the latest board meeting within 20 Business Days
following the date of such meeting;
5.2.12 the Corporation shall respect at all times all rights benefiting
SGF Sante under the Shareholders' Agreement;
5.2.13 the Corporation shall take all such actions as are within its
power to control and to use all reasonable commercial efforts to
cause other actions to be taken which are not within their power
to control so as to ensure compliance with any of its covenants
and conditions set forth herein;
5.3 ACTIONS TO SATISFY COVENANTS. Each of the Corporation, Draxis Health and
SGF Sante hereby agrees to take all such actions as are within its power
to control and to use all reasonable commercial efforts to cause other
actions to be taken which are not within its power to control so as to
ensure compliance with any of its covenants and conditions set forth
herein.
ARTICLE 6
CLOSING
6.1 CLOSING. The Closing of the transaction contemplated by this Agreement
shall be held at the offices of Fasken Xxxxxxxxx XxXxxxxx LLP, at 000
Xxxxx-Xxxxxxxx, Xxxxx 0000, Xxxxxxxx, Xxxxxx, X0X 0X0, on February 18,
2000 or on such other date and at such other time as may be agreed upon by
the parties hereto (the "Closing Date").
6.2 EFFECTIVE DATE. Notwithstanding the Closing Date and except as otherwise
specifically stated to the contrary herein, the transaction contemplated
by this Agreement shall be effective as of the Effective Date.
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ARTICLE 7
SURVIVAL AND RELIANCE ON REPRESENTATIONS
AND WARRANTIES AND INDEMNIFICATION
7.1 SURVIVAL NOTWITHSTANDING INVESTIGATION. The parties hereto shall be
entitled to rely upon the representations and warranties set forth
herein and the covenants and obligations of the parties hereto which shall
survive the Closing Date and shall continue in full force and effect in
accordance with and subject to the terms of this Article 7 notwithstanding
any due diligence investigation by SGF Sante.
7.2 INDEMNIFICATION BY THE CORPORATION AND DRAXIS HEALTH. Subject to the
limitations provided in this Agreement, the Corporation and Draxis Health
shall be solidarily liable to SGF Sante and its respective directors,
officers and employees (collectively, the "SGF Sante Indemnified Persons"
and singly a "SGF Sante Indemnified Person") and shall defend, indemnify
and hold harmless all of the SGF Sante Indemnified Persons against any and
all loss, including a decrease in value of the Subscribed Shares,
liability, cost, fine or expense of any kind (other than indirect,
consequential or incidental losses or damages such as losses of profits
or of business opportunities), including the reasonable cost of legal
representation in respect thereof and any interest or penalty in
connection therewith ("Claims"), incurred or suffered by or imposed upon
any of the SGF Sante Indemnified Persons arising directly or indirectly
out of:
7.2.1 the breach of any representation or warranty of the Corporation
contained in Article 3 of this Agreement;
7.2.2 the breach or non-fulfillment of any agreement, covenant,
undertaking or obligation of the Corporation contained in this
Agreement;
7.2.3 any liability of the Corporation for Taxes with respect to a
taxation year preceding the Closing Date not disclosed in the
Financial Statements or in a schedule hereto;
7.2.4 any liability resulting from any actual or threatened litigation
with respect to an event, condition, action or omission occurring
prior to the Closing Date, whether or not the Corporation or Draxis
Health had knowledge thereof; and
7.2.5 any liability of the Corporation with respect to a work-related
accident or occupational disease on the part of an employee, past
or present, of the Corporation to the extent the liability arises
with respect to an event occurring before the Closing Date.
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7.3 INDEMNIFICATION BY SGF SANTE. SGF Sante shall be liable to each of the
Corporation and its directors, officers and employees (collectively, the
"Corporation Indemnified Persons" and singly, a "Corporation Indemnified
Person") and shall defend, indemnify and hold harmless all of the
Corporation Indemnified Persons against any and all loss, liability, cost,
fine or expense of any kind (other than indirect, consequential or
incidental losses or damages such as losses of profits or of business
opportunities), including the reasonable cost of legal representation in
respect thereof and any interest or penalty in connection therewith
("Claims"), incurred or suffered by or imposed upon any of the Corporation
Indemnified Persons arising directly or indirectly out of:
7.3.1 the breach of any representation or warranty of SGF Sante
contained in Article 4 of this Agreement; and
7.3.2 the breach or non-fulfillment of any agreement, covenant,
undertaking or obligation of SGF Sante contained in this Agreement.
7.4 INDEMNIFICATION AGAINST THIRD-PARTY CLAIMS
7.4.1 Promptly upon receipt by any of the SGF Sante Indemnified Persons
or the Corporation Indemnified Persons (in this section referred to
as the "Indemnitee") of notice of any demand or statement:
(a) by or on behalf of any Person or entity other than SGF Sante
or the Corporation; and
(b) which, if maintained or enforced, will or might result in any
Claim of the nature described in sections 7.2 or 7.3,
("Third-Party Claim") in respect of which the Indemnitee proposes
to demand indemnification from SGF Sante or the Corporation and
Draxis Health, as the case may be, (in this section referred to as
the "Indemnitor") pursuant to the provisions hereof, the Indemnitee
shall give written notice to that effect to the Indemnitor with
reasonable promptness.
7.4.2 The Indemnitor shall have the right by written notice to the
Indemnitee within 30 days of the giving of the notice described in
subsection 7.4.1 to assume the control of the defence, compromise
or settlement of the Third-Party Claim, without cost to the
Indemnitee and without limiting in any way the Indemnitee's right
to indemnification pursuant to the provisions hereof.
7.4.3 Upon the assumption of control by the Indemnitor as aforesaid,
the Indemnitor shall diligently proceed with the defence,
compromise or settlement of the Third-
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Party Claim at Indemnitor's sole expense, including retention of
counsel reasonably satisfactory to the Indemnitee. The Indemnitee
shall cooperate fully, but at the sole expense of the Indemnitor,
in making available to the Indemnitor all pertinent information
and witnesses under the Indemnitee's control and in taking such
other steps as in the reasonable opinion of counsel for the
Indemnitor are necessary to enable the Indemnitor to conduct such
defence. The Indemnitee shall be entitled to reasonable security
from the Indemnitor for any expense, costs or other liabilities
to which it may be or may become exposed by reason of such
cooperation.
7.4.4 The final determination of any such Third-Party Claim,
including all related costs and expenses, shall be binding and
conclusive upon the parties hereto, as to the validity or
invalidity, as the case may be, of such Third-Party Claim
against the Indemnitor hereunder. Notwithstanding any
provision of this section 7.4, the Indemnitor may not consent
to any settlement of a Third-Party Claim if the terms of such
settlement require the Indemnitee to act or refrain from
acting, without the prior written consent of the Indemnitee.
7.4.5 Should the Indemnitor fail to give notice to the Indemnitee as
provided in subsection 7.4.2, the Indemnitee shall be entitled
to make such settlement of the Third-Party Claim as in its
sole discretion may appear advisable, and such settlement or
any other final determination of the Third-Party Claim shall
be binding upon the Indemnitor.
7.5 INDEMNIFICATION TO BE AFTER INSURANCE, ETC. The amount of the
indemnification for any Claim shall be payable on demand and shall be
determined after giving effect to any insurance recoveries or recoveries
from third parties, other than the Corporation.
7.6 AMOUNT OF CLAIM. For purposes of determining the amount of any Claim
contemplated by section 7.2, SGF Sante shall be entitled, at its sole
option, to deem the amount of such Claim to be equal to 32.05% (the "SGF
Share of the Underlying Loss") of the actual loss or liability of the
Corporation (the "Underlying Loss") which gave rise to such Claim,
calculated as if section 7.5 applied, MUTATIS MUTANDIS, for the purposes
of this Article 7; all other provisions of this Article 7 shall thereupon
continue to apply as if the SGF Share of the Underlying Loss were the
Claim.
7.7 CURRENCY OF INDEMNIFICATION. If any Claim is based on an expense
incurred in, or a Third-Party Claim expressed in, currency other than
Canadian currency, it shall be converted into Canadian currency at the
rate of exchange prevailing as of the date of payment, or expenditure or
ascertainment of loss in the absence of direct payment, or at the date
of the Third-Party Claim, as the case may be, giving rise to the Claim.
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7.8 EXPIRY AND LIMIT OF LIABILITY.
7.8.1 The representations and warranties of the Corporation, Draxis
Health and SGF Sante herein (other than those of the
Corporation and DHI with respect to the matters set forth in
subsections 3.1.10 and 3.1.27 and except in the event of
fraud, gross negligence or deliberate misrepresentation) shall
continue in full force and effect for a period of three years
after the Closing Date and no Claim shall be made after such
termination date by any party based on or arising out of the
breach or non-fulfillment of any such representations or
warranties.
7.8.2 The representations and warranties of the Corporation and
Draxis Health with respect to the matters set forth in section
3.1.10 shall survive so long as any claim may be made in
respect of such matters under any applicable statute of
limitations.
7.8.3 The representations and warranties of the Corporation and
Draxis Health with respect to matters set forth in section
3.1.27 shall continue in full force and effect for a period of
four years after the Closing Date.
7.8.4 In the event of fraud or deliberate misrepresentation by
commission or omission, the representations and warranties of
the Corporation, Draxis Health and SGF Sante herein shall
continue in full force and effect indefinitely after the
Closing Date.
7.8.5 Notwithstanding the provisions of this section 7.8, no Claims
with respect to breaches or failures of representations and
warranties contemplated by subsections 7.2.1 and 7.3.1 which
would, were it not for this subsection 7.8.5, have occurred,
may be made against any of the SGF Indemnified Persons or the
Corporation Indemnified Persons hereunder, and no breach or
failure of representations and warranties contemplated by
subsections 7.2.1 and 7.3.1 shall be considered to have
occurred, unless and until the individual Claim or aggregate
of individual Claims which would, were it not for this
subsection 7.8.5, have arisen, exceeds $100,000, in which
event all breaches and failures of representations and
warranties contemplated in subsections 7.2.1 and 7.3.1 shall
be considered to have occurred as if this subsection 7.8.5 did
not exist and the amounts claimable shall be the aggregate of
the Claims then being asserted and not be limited to that
amount only in excess of the above limit.
7.9 SGF SANTE's RECOURSES. In the event of a Claim which, in accordance with
section 7.6, is deemed to be equal to the SGF Share of the Underlying
Loss, in settlement of the obligations of Draxis Health under this
Article 7, Draxis Health shall have the option of either:
7.9.1 Paying SGF Sante the amount of the SGF Share of the Underlying
Loss; or
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7.9.2 investing a sum of money in the Corporation, as a contribution
to capital and without any shares or debt issued to it in
consideration therefor, which is equal to the Underlying Loss
so as to put the Corporation in the same financial position it
would have been in, on a consolidated basis, if the event
giving rise to the Underlying Loss had not occurred.
7.10 FIRST SPECIAL COVENANT. Draxis Health shall be solely responsible for
all costs in excess of $40,000 incurred by the Corporation with respect
to the repair or replacement of the underground storage tank which
leaked in 1999 as more fully described in Schedule 3.1.27 and all
necessary remediation and clean-up resulting therefrom in complete
conformity with all Applicable Laws and Environmental Laws as well as
with respect to the replacement of the second underground storage tank as
may be required so as to be in complete conformity with all Applicable Laws
and Environmental Laws. Draxis Health shall immediately, upon written
demand by SGF Sante, remit to he Corporation any such excess. No such
costs, under or over $40,000, shall be included in the calculation of the
$100,000 limit referred to in subsection 7.8.5 provided Draxis Health is
not in default under this section 7.10.
7.11 SECOND SPECIAL COVENANT. Draxis Health shall be solely responsible for
any amounts payable by the Corporation after the Closing Date on account
of the purchase price (as that term is defined in the asset purchase
agreement entered into as of June 12, 1998 among Xxxxx Xxxxxxx Inc. as
vendor, Ivax Corporation, the Corporation as purchaser and Draxis Health).
Draxis Health shall, immediately upon written demand by SGF Sante, remit
to the Corporation the amount of any such payment. Such amount shall not
be included in the calculation of the $100,000 limit referred to in
subsection 7.8.5 provided Draxis Health is not in default under this
section 7.11.
7.12 DRAXIS HEALTH OBLIGATIONS. The obligations of Draxis Health hereunder
are as primary obligor and not as surety or guarantor and Draxis Health
agrees that it does not have any right of subrogation against the
Corporation with respect hereto.
7.13 OTHER RECOURSES. The provisions of this Article 7 constitute additional
remedies for SGF Sante Indemnified Persons and are in addition to any
other recourses they may have, including the right of SGF Sante to demand
resolution of this Agreement.
ARTICLE 8
ARBITRATION
8.1 CHOICE OF ARBITRATION. Subject to section 8.11 below, any Claim arising
in respect of this Agreement which is challenged, any controversy or
dispute regarding the execution of this Agreement, including its
annulment, as well as any dispute with regard to the interpretation
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or application of this Agreement must be submitted to arbitration to the
exclusion of the courts, the whole in accordance with the procedure
hereinafter established.
8.2 NOTICE TO ARBITRATE. Any party or parties to this Agreement wishing to
submit a Claim, conflict, dispute or disagreement (collectively a
"Dispute") to arbitration must forward to the other parties to the Dispute
a written notice (hereinafter referred to as "Notice to Arbitrate"),
containing a reasonably detailed description of the Claim, conflict,
dispute or disagreement and the nomination of an arbitrator.
8.3 CHOICE OF SECOND ARBITRATOR. Within 10 days of the receipt of Notice to
Arbitrate, the other party or parties involved in the Dispute shall name a
second arbitrator and send a notice to this effect to the party or parties
making the submission, the first-named arbitrator and to the second-named
arbitrator; in the absence of such a notice, the first-named arbitrator
shall be the sole arbitrator and sections 8.6 and 8.10 inclusively shall
apply MUTATIS MUTANDIS.
8.4 CHOICE OF THIRD ARBITRATOR. The two arbitrators appointed in accordance
with the above procedure shall, within 10 days following the appointment
of the second arbitrator, name a third arbitrator who shall be a member
in good standing of the Quebec Bar and will act as President of the
Arbitration Committee; if the first two arbitrators fail to agree on a
third arbitrator, either one or both may apply to a judge of the Superior
Court of the Province of Quebec, District of Montreal, to appoint the
third arbitrator.
8.5 CHOICE OF SINGLE ARBITRATOR. In order to minimize costs, the parties
involved in any dispute may agree, in writing, to appoint a single
arbitrator in which event a notice of such appointment shall be sent to
the arbitrator in question; sections 8.6 to 8.10 inclusively shall apply
MUTATIS MUTANDIS to such sole arbitrator.
8.6 HEARING AND AWARD. The hearing shall be held in Montreal. The date of
hearing must be held within 30 days of the appointment of the third
arbitrator. The award of the board of arbitrators must be rendered in
writing and served to the parties within 90 days following the hearing.
Any such award (including with respect to the payment of fees and
disbursements related to the arbitration) which is rendered shall be
final, binding and without appeal, and shall become executory as a
judgement against the parties upon homologation.
8.7 PROCEDURE AND EVIDENCE. Notice shall be given by the arbitrators, in
writing, of the time and place of any hearings except where such hearings
are adjourned by the arbitrators in the presence of both of the parties
hereto. In the conduct of the hearing and particularly in the taking of
testimony or other evidence in the course thereof, the arbitrators shall
be bound by the rules of law applying to the competence, relevance and
materiality of witnesses and testimony in the courts of the Province of
Quebec and the rules of procedure set out in the CODE OF CIVIL PROCEDURE
(Quebec). The arbitrators shall have full power and authority to
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permit, before or during any hearing, any amendment to the arbitration
submission requested by the parties so submitting as well as any
cross-demand by the other party or parties.
8.8 RESPECT OF DELAYS. In the event that the arbitration hearing is not
held, or the arbitration award is not rendered, within the respective
delays set out above, upon the receipt of a written notice to this effect
from any party to the arbitration, the arbitrators shall no longer have
jurisdiction to decide the matter submitted to them, and any party may
thereupon take all steps to submit the matter to arbitration once again
pursuant to these rules of procedure.
8.9 REPLACEMENT OF ARBITRATORS. In the event that one or more of such
arbitrators resigns, refuses to act, withdraws, dies or otherwise becomes
unable to fulfill the duties imposed upon him, then his place shall be
filled by the parties originally naming him or if named by the other
arbitrators, his place shall be filled by an appointment made by them; if
no replacement has been named within 15 days following the date upon which
the parties were advised of such failure to act, the vacancy may be filled
by a judge of the Superior Court of the Province of Quebec, District of
Montreal, upon motion by one of the parties.
8.10 SUPPLETIVE PROVISIONS. The parties to this Agreement agree that the
provisions presently in effect of the CODE OF CIVIL PROCEDURE (Quebec)
shall receive suppletive application to any arbitration proceeding
undertaken or held by virtue of the present Agreement. In the event of a
contradiction between the provisions of this Article 8 and the provisions
of the aforementioned sections of the CODE OF CIVIL PROCEDURE (Quebec),
the provisions of this Article 8 shall have precedence.
8.11 EXCEPTIONS TO ARBITRATION. Notwithstanding the provisions of this
Article 8, any party shall be entitled to commence procedures in a court
of law in order to obtain injunctive or attachment relief against a
defaulting party.
8.12 LANGUAGE. Each party to the arbitration shall be entitled to use English
or French at its or his sole discretion. The arbitrator(s) shall be
bilingual and able to communicate in both English and French.
ARTICLE 9
GENERAL PROVISIONS
9.1 SUCCESSORS AND PERMITTED ASSIGNS. The provisions of this Agreement
shall, except as otherwise provided herein, enure to the benefit of and be
binding upon the parties hereto and their respective representatives,
administrators, successors and permitted assigns and each and every Person
so bound shall make, execute and deliver all documents necessary to carry
out this Agreement.
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9.2 NO ASSIGNMENT. No party may assign its Rights or obligations under this
Agreement without the express written consent of all other parties.
9.3 NOTICES. All communications, notices and demands required or permitted
hereunder shall be in writing and shall be deemed to have been duly given
upon personal delivery, including delivery by courier or facsimile (with
proof of receipt) to the addresses as set forth below:
IF TO SGF SANTE:
SGF SANTE INC.
x/x XXXXXXX XXXXXXXX XX XXXXXXXXXXX XX XXXXXX
000 xx Xx Xxxxxxxxxxx Xxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: The Secretary
Fax: (000) 000-0000
IF TO THE CORPORATION:
DRAXIS PHARMA INC.
00000 XxxxxXxxxxx Xxxxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: President
Fax: (000) 000-0000
IF TO DRAXIS HEALTH:
DRAXIS HEALTH INC.
0000 Xxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxx
X0X 0X0
Attention: The Secretary
Fax: (000) 000-0000
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Each of the parties shall be entitled to specify different or additional
addresses by giving written notice to the other party in the manner set
forth herein.
9.4 BROKERAGE COMMISSIONS. The Corporation has not paid or become obligated
to pay any fee or commission to any broker, investment banker, finder or
the like in connection with the transactions contemplated by this
Agreement. SGF Sante has not paid or become obligated to pay any fee or
commission to any broker, investment banker, finder or the like in
connection with the transactions contemplated by this Agreement. Each
party hereby agrees to indemnify, defend and hold harmless the other
against any and all Claims of the above-mentioned brokers, investment
bankers, finders or the like, and against the Claims of all other parties
claiming any right to a commission or compensation by or through the acts
of that party or that party's partners, employees, agents or Affiliates in
connection with this Agreement. Each party's indemnification obligations
provided in Article 7 shall include all damages, losses, liabilities, and
expenses, including reasonable attorney's fees, incurred in connection with
any such claim for a broker's or finder's fee.
9.5 TIME OF THE ESSENCE. Time shall be of the essence of this Agreement.
9.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original,
and such counterparts shall together constitute but one and the same
Agreement.
9.7 SEPARABILITY. In the event that any provision of this Agreement is held
invalid or unenforceable, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement.
9.8 CONSENTS AND APPROVALS. Except as otherwise expressly set forth herein,
whenever any party's consent or approval must be obtained hereunder, such
consent or approval shall not be unreasonably withheld, delayed or
conditioned.
9.9 ANNOUNCEMENTS. SGF Sante reserves the right for itself or its
governmental representatives to publicly announce the following information
in connection with its investment: the name and address of the Corporation,
the nature of its business, the nature and amount of the investment and the
number of jobs to be created, the whole subject to the prior approval by
the Corporation of the content of such announcement. Draxis Health shall
also be entitled to publicly announce the completion of the transaction
contemplated herein, subject to the prior approval by SGF Sante of the
content of the announcement. It is also recognized that Draxis Health is
subject to certain disclosure obligations under Applicable Laws as a result
of the listing of its shares on the Toronto Stock Exchange and NASDAQ, and
it is agreed that the prior approval by SGF Sante of the content of all
such disclosures with respect to the transaction contemplated herein and
all accessory matters shall be required which approval shall not be
unreasonably withheld or delayed, it being agreed that if such approval is
not
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obtained in the required delay imposed by Applicable Laws then the
Corporation may process with same disclosure. In the event that the
Corporation organizes an official ceremony or press conference to
publicize the investment by SGF Sante, it shall obtain its prior written
approval which shall not be unreasonably withheld and advise it of such
ceremony at least 15 days prior thereto in order to permit SGF Sante or
its representatives or invitees to attend thereat.
9.10 LANGUAGE. This Agreement is executed by all the parties hereto in French
and in English. The parties hereto expressly agree that in the event of any
misunderstanding, dispute or controversy amongst them with respect to any
of the provisions of this Agreement, the French version and the English
version shall have equal value and neither of them shall prevail.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
SGF SANTE INC.
Per: /s/ Xxxxxxx Xxxxxxx
-------------------------
Xxxxxxx Xxxxxxx
Per: /s/ Xxxxxx Xxxxxx
-------------------------
Xxxxxx Xxxxxx
DRAXIS PHARMA INC.
Per: /s/ Xxxxxx Xxxxxx
-------------------------
Xxxxxx Xxxxxx
TABLE OF CONTENTS
Page
----
ARTICLE 1 DEFINITIONS AND INTERPRETATION ................................. 1
1.1 Definitions..................................................... 2
1.2 GAAP............................................................ 8
1.3 Interpretation Not Affected by Headings......................... 8
1.4 Extended Meanings............................................... 8
1.5 Entire Agreement................................................ 8
1.6 Amendment....................................................... 8
1.7 Waiver of Rights................................................ 8
1.8 Schedules....................................................... 8
1.9 Applicable Law.................................................. 9
1.10 Funds........................................................... 9
1.11 Business Day.................................................... 9
1.12 Third Party Beneficiaries....................................... 9
ARTICLE 2 SUBSCRIPTION, ALLOTMENT AND ISSUE OF SUBSCRIBED SHARES.......... 9
2.1 Subscription.................................................... 9
2.2 Subscription Price.............................................. 10
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
REGARDING THE CORPORATION....................................... 10
3.1 Representations and Warranties regarding the Corporation........ 10
3.1.1 Corporate Matters....................................... 10
3.1.2 Subsidiaries............................................ 11
3.1.3 Authorized and Issued Capital of the Corporation........ 11
3.1.4 No Violation............................................ 12
3.1.5 Consents, Approvals..................................... 12
3.1.6 Other Agreements of Officers............................ 13
3.1.7 Transactions with Related Parties....................... 13
3.1.8 Financial Statements.................................... 13
3.1.9 Changes in the Corporation's Business................... 13
3.1.10 Taxes................................................... 15
3.1.11 Existing Contracts...................................... 16
3.1.12 Compliance with Applicable Laws......................... 18
3.1.13 Employees............................................... 18
3.1.14 Collective Agreements................................... 19
3.1.15 Benefit Plans........................................... 19
3.1.16 Litigation.............................................. 20
3.1.17 Insurance............................................... 20
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3.1.18 Title to Assets ........................................ 21
3.1.19 Intellectual Property Rights ........................... 21
3.1.20 Immoveable Property .................................... 22
3.1.21 Suppliers and Customers ................................ 23
3.1.22 Licences ............................................... 23
3.1.23 Year 2000 Issues ....................................... 24
3.1.24 Bank Accounts .......................................... 24
3.1.25 Liabilities ............................................ 24
3.1.26 Corporate Records ...................................... 24
3.1.27 Environmental Protection ............................... 25
3.1.28 The plant .............................................. 26
3.1.29 Inventory .............................................. 26
3.1.30 Accounts Payable and Accounts Receivable ............... 26
3.1.31 Advances from Draxis Health ............................ 27
3.1.32 Disclosure ............................................. 27
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SGF Sante .................... 27
4.1 Representations and Warranties of SGF Sante ................... 27
4.1.1 Corporate Matters ...................................... 27
ARTICLE 5 COVENANTS ...................................................... 29
5.1 Reports ....................................................... 29
5.2 Ongoing obligations ........................................... 30
5.3 Actions to Satisfy Covenants .................................. 31
ARTICLE 6 CLOSING ........................................................ 31
6.1 Closing ....................................................... 31
ARTICLE 7 SURVIVAL AND RELIANCE ON REPRESENTATIONS
AND WARRANTIES AND INDEMNIFICATION ............................ 32
7.1 Survival Notwithstanding Investigation ........................ 32
7.2 Indemnification by the Corporation and Draxis Health .......... 32
7.3 Indemnification by SGF Sante .................................. 33
7.4 Indemnification Against Third-Party Claims .................... 33
7.5 Indemnification to be After Insurance, etc. ................... 34
7.6 Amount of Claim ............................................... 34
7.7 Currency of Indemnification ................................... 34
7.8 Expiry and Limit of Liability ................................. 35
7.9 SGF Sante's Recourses ......................................... 35
7.10 First Special Covenant ........................................ 36
7.11 Second Special Covenant ....................................... 36
7.12 Draxis Health Obligations ..................................... 36
7.13 Other Recourses ............................................... 36
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ARTICLE 8 ARBITRATION .................................................... 36
8.1 Choice of Arbitration ......................................... 36
8.2 Notice to Arbitrate ........................................... 37
8.3 Choice of Second Arbitrator ................................... 37
8.4 Choice of Third Arbitrator .................................... 37
8.5 Choice of Single Arbitrator ................................... 37
8.6 Hearing and Award ............................................. 37
8.7 Procedure and Evidence ........................................ 37
8.8 Respect of Delays ............................................. 38
8.9 Replacement of Arbitrators .................................... 38
8.10 Suppletive Provisions ......................................... 38
8.11 Exceptions to Arbitration ..................................... 38
ARTICLE 9 GENERAL PROVISIONS ............................................. 38
9.1 Successors and Permitted Assigns .............................. 38
9.2 No Assignment ................................................. 39
9.3 Notices ....................................................... 39
9.4 Brokerage Commissions ......................................... 40
9.5 Time of the Essence ........................................... 40
9.6 Counterparts .................................................. 40
9.7 Separability .................................................. 40
9.8 Consents and Approvals ........................................ 40
9.9 Announcements ................................................. 40
9.10 Language ...................................................... 41
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